SEC Filing | Arch Resources, Inc.

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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 June 30, 2023

☐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

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 ☒

At July 18, 2023 there were 18,127,302 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	26
Item 3. Quantitative and Qualitative Disclosures About Market Risk	43
Item 4. Controls and Procedures	43
Part II OTHER INFORMATION	44
Item 1. Legal Proceedings	44
Item 1A. Risk Factors	44
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	44
Item 4. Mine Safety Disclosures	44
Item 5. Other Information	45
Item 6. Exhibits	46
Signatures	52

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Part I

FINANCIAL INFORMATION

Item 1.Financial Statements.

Arch Resources, Inc. and Subsidiaries

Condensed Consolidated Income Statements

(in thousands, except per share data)



	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022

	(Unaudited)				(Unaudited)
Revenues	$	757,294	$	1,133,358	$	1,627,225	$	2,001,294
Costs, expenses and other operating
Cost of sales (exclusive of items shown separately below)		606,127		639,760		1,177,864		1,147,985
Depreciation, depletion and amortization		36,077		32,780		71,556		64,990
Accretion on asset retirement obligations		5,293		4,430		10,585		8,860
Change in fair value of coal derivatives, net		2,869		1,877		1,407		17,396
Selling, general and administrative expenses		22,791		26,516		48,813		53,164
Other operating (income) expense, net		(4,879)		5,238		(8,586)		1,799
		668,278		710,601		1,301,639		1,294,194

Income from operations		89,016		422,757		325,586		707,100

Interest income (expense), net
Interest expense		(3,537)		(5,138)		(7,663)		(12,185)
Interest and investment income		4,201		528		7,537		552
		664		(4,610)		(126)		(11,633)

Income before nonoperating expenses		89,680		418,147		325,460		695,467

Nonoperating expense
Non-service related pension and postretirement benefit credits (costs)		593		(459)		1,185		(1,332)
Net loss resulting from early retirement of debt		—		(9,629)		(1,126)		(13,749)
		593		(10,088)		59		(15,081)

Income before income taxes		90,273		408,059		325,519		680,386
Provision for income taxes		12,920		496		50,058		951
Net income	$	77,353	$	407,563	$	275,461	$	679,435

Net income per common share
Basic earnings per share	$	4.20	$	24.26	$	15.16	$	42.14
Diluted earnings per share	$	4.04	$	19.30	$	14.16	$	32.21
Weighted average shares outstanding
Basic weighted average shares outstanding		18,406		16,801		18,165		16,124
Diluted weighted average shares outstanding		19,135		21,452		19,459		21,362
Dividends declared per common share	$	2.45	$	8.11	$	5.56	$	8.36

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 Comprehensive Income

(in thousands)



	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022

	(Unaudited)					(Unaudited)
Net income	$	77,353	$	407,563	$	275,461	$	679,435

Derivative instruments
Comprehensive income before tax		—		—		—		1,763
Provision for income taxes		—		—		—		—
		—		—		—		1,763
Pension, postretirement and other post-employment benefits
Comprehensive loss before tax		(2,895)		(8,901)		(5,790)		(9,423)
Provision for income taxes		636		—		1,272		—
		(2,259)		(8,901)		(4,518)		(9,423)
Available-for-sale securities
Comprehensive (loss) income before tax		(24)		—		(39)		182
Provision for income taxes		5		—		8		—
		(19)		—		(31)		182

Total other comprehensive loss		(2,278)		(8,901)		(4,549)		(7,478)
Total comprehensive income	$	75,075	$	398,662	$	270,912	$	671,957

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

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Arch Resources, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(in thousands, except per share data)


	June 30, 2023		December 31, 2022
Assets		(Unaudited)
Current assets
Cash and cash equivalents	$	201,492	$	236,059
Short-term investments		33,607		36,993
Restricted cash		1,100		1,100
Trade accounts receivable (net of $0 allowance at June 30, 2023 and December 31, 2022)		250,479		236,999
Other receivables		18,440		18,301
Inventories		263,310		223,015
Other current assets		49,547		71,384
Total current assets		817,975		823,851
Property, plant and equipment, net		1,192,681		1,187,028
Other assets
Deferred income taxes		160,927		209,470
Equity investments		22,348		17,267
Fund for asset retirement obligations		138,657		135,993
Other noncurrent assets		54,313		59,499
Total other assets		376,245		422,229
Total assets	$	2,386,901	$	2,433,108

Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable	$	188,494	$	211,848
Accrued expenses and other current liabilities		121,043		157,043
Current maturities of debt		26,414		57,988
Total current liabilities		335,951		426,879
Long-term debt		109,216		116,288
Asset retirement obligations		234,842		235,736
Accrued pension benefits		1,076		1,101
Accrued postretirement benefits other than pension		50,802		49,674
Accrued workers’ compensation		152,942		155,756
Other noncurrent liabilities		76,508		82,094
Total liabilities		961,337		1,067,528
Stockholders' equity
Common stock, $0.01 par value, authorized 300,000 shares, issued 30,104 and 28,761 shares at June 30, 2023 and December 31, 2022, respectively		301		288
Paid-in capital		710,118		724,660
Retained earnings		1,737,661		1,565,374
Treasury stock, 11,905 and 11,207 shares at June 30, 2023 and December 31, 2022, respectively, at cost		(1,079,396)		(986,171)
Accumulated other comprehensive income		56,880		61,429
Total stockholders’ equity		1,425,564		1,365,580
Total liabilities and stockholders’ equity	$	2,386,901	$	2,433,108

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)


	Six Months Ended June 30,
	2023		2022

Operating activities		(Unaudited)
Net income	$	275,461	$	679,435
Adjustments to reconcile to cash from operating activities:
Depreciation, depletion and amortization		71,556		64,990
Accretion on asset retirement obligations		10,585		8,860
Deferred income taxes		49,824		—
Employee stock-based compensation expense		13,206		14,552
Amortization relating to financing activities		884		1,130
Gain on disposals and divestitures, net		(393)		(697)
Reclamation work completed		(11,757)		(8,204)
Contribution to fund for asset retirement obligations		(2,664)		(80,000)
Changes in:
Receivables		(13,057)		(138,155)
Inventories		(40,295)		(56,018)
Accounts payable, accrued expenses and other current liabilities		(53,729)		37,083
Income taxes, net		(828)		427
Coal derivative assets and liabilities, including margin account		1,407		17,710
Other		22,686		20,054
Cash provided by operating activities		322,886		561,167
Investing activities
Capital expenditures		(76,606)		(53,157)
Minimum royalty payments		(1,113)		(1,000)
Proceeds from disposals and divestitures		439		1,547
Purchases of short-term investments		(13,772)		—
Proceeds from sales of short-term investments		17,488		14,450
Investments in and advances to affiliates, net		(9,927)		(4,027)
Cash used in investing activities		(83,491)		(42,187)
Financing activities
Payments on term loan due 2024		(1,500)		(272,288)
Payments on convertible debt		(58,430)		(129,941)
Net payments on other debt		(24,849)		(19,939)
Purchases of treasury stock		(93,803)		—
Dividends paid		(111,913)		(154,567)
Payments for taxes related to net share settlement of equity awards		(27,217)		(4,908)
Proceeds from warrants exercised		43,750		19,412
Cash used in financing activities		(273,962)		(562,231)
Decrease in cash and cash equivalents, including restricted cash		(34,567)		(43,251)
Cash and cash equivalents, including restricted cash, beginning of period	$	237,159	$	326,295
Cash and cash equivalents, including restricted cash, end of period	$	202,592	$	283,044
Cash and cash equivalents, including restricted cash, end of period
Cash and cash equivalents	$	201,492	$	281,944
Restricted Cash		1,100		1,100
	$	202,592	$	283,044

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		Retained		Stock at		Comprehensive
	Stock		Capital		Earnings		Cost		Income		Total

	(In thousands, except per share data)
Balances at January 1, 2023	$	288	$	724,660	$	1,565,374	$	(986,171)	$	61,429	$	1,365,580
Dividends on common shares		—		—		(55,140)		—		—		(55,140)
Dividend Equivalents earned on RSU grants		—		120		(2,354)		—		—		(2,234)
Purchase of 131,156 shares of common stock under share repurchase program		—		(13)		—		(18,994)		—		(19,007)
Employee stock-based compensation		—		6,767		—		—		—		6,767
Cash paid for convertible debt repurchased		—		(44,486)		—		—		—		(44,486)
Issuance of 275,053 shares of common stock under long-term incentive plan		3		—		—		—		—		3
Common stock withheld related to net share settlement of equity awards		—		(27,055)		—		—		—		(27,055)
Issuance of 1,037,679 shares of common stock for warrants exercised		10		43,719		—		—		—		43,729
Total comprehensive income (loss)		—		—		198,108		—		(2,271)		195,837
Balances at March 31, 2023	$	301	$	703,712	$	1,705,988	$	(1,005,165)	$	59,158	$	1,463,994

Dividends on common shares		—		—		(45,011)		—		—		(45,011)
Dividend equivalents earned on RSU grants		—		98		(669)		—		—		(571)
Purchase of 623,304 shares of common stock under share repurchase program		—		—		—		(74,231)		—		(74,231)
Employee stock-based compensation		—		6,439		—		—		—		6,439
Common stock withheld related to net share settlement of equity awards		—		(162)		—		—		—		(162)
Issuance of 29,487 shares of common stock for warrants exercised		—		31		—		—		—		31
Total comprehensive income (loss)		—		—		77,353		—		(2,278)		75,075
Balances at June 30, 2023	$	301	$	710,118	$	1,737,661	$	(1,079,396)	$	56,880	$	1,425,564

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		Retained		Stock at		Comprehensive
	Stock		Capital		Earnings		Cost		Income		Total

	(In thousands, except per share data)
Balances at January 1, 2022	$	255	$	784,356	$	712,478	$	(827,381)	$	14,158	$	683,866
Cumulative effect of accounting change on convertible debt		—		(39,239)		6,718		—		—		(32,521)
Dividends on common shares		—		—		(4,271)		—		—		(4,271)
Total comprehensive income		—		—		271,872		—		1,423		273,295
Employee stock-based compensation		—		8,203		—		—		—		8,203
Issuance of 71,338 shares of common stock under long-term incentive plan		1		—		—		—		—		1
Common stock withheld related to net share settlement of equity awards		—		(4,827)		—		—		—		(4,827)
Issuance of 13,239 shares of common stock for warrants exercised		—		506		—		—		—		506
Balances at March 31, 2022	$	256	$	748,999	$	986,797	$	(827,381)	$	15,581	$	924,252

Dividends on common shares		—		—		(150,716)		—		—		(150,716)
Dividend equivalents earned on RSU grants		—		—		(8,665)		—		—		(8,665)
Employee stock-based compensation		—		6,349		—		—		—		6,349
Common stock withheld related to net share settlement of equity awards		—		(81)		—		—		—		(81)
Total comprehensive income (loss)		—		—		407,563		—		(8,901)		398,662
Issuance of 2,630,272 shares of common stock for convertible debt exchanged		26		(29)		—		—		—		(3)
Issuance of 445,497 shares of common stock for warrants exercised		4		18,906		—		—		—		18,910
Balances at June 30, 2022	$	286	$	774,144	$	1,234,979	$	(827,381)	$	6,680	$	1,188,708

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

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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 and controlled entities (“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 and six months ended June 30, 2023 are not necessarily indicative of results to be expected for the year ending December 31, 2023. 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, 2022 included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 filed with the U.S. Securities and Exchange Commission.

2. Accounting Policies

Recently Adopted Accounting Guidance

There is no recently issued accounting guidance effective that is expected to have a material impact on the Company’s financial position, results of operations, or liquidity.

Recent Accounting Guidance Issued Not Yet Effective

There are no new pronouncements issued but not yet effective that is expected to have a material impact on the Company’s financial position, results of operations, or liquidity.

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3. 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)
Balances at December 31, 2022	$	—	$	61,485	$	(56)	$	61,429
Unrealized (losses)		—		—		(60)		(60)
Amounts reclassified from accumulated other comprehensive income (loss)		—		(5,790)		21		(5,769)
Tax effect		—		1,272		8		1,280
Balances at June 30, 2023	$	—	$	56,967	$	(87)	$	56,880

The following amounts were reclassified out of AOCI:


	Three Months Ended June 30,				Six Months Ended June 30,				Line Item in the Condensed Consolidated
Details About AOCI Components	2023		2022		2023		2022		Income Statements

	(In thousands)
Interest rate hedges		—		—		—		(112)	Interest expense
Interest rate hedges (ineffective portion)		—		—		—		(1,428)	Net loss resulting from early retirement of debt
		—		—		—		—	Provision for income taxes
	$	—	$	—	$	—	$	(1,540)	Net of tax

Pension, postretirement and other post-employment benefits
Amortization of actuarial gains, net ¹	$	2,859	$	346	$	5,717	$	973	Non-service related pension and postretirement benefit credits (costs)
Amortization of prior service credits		36		177		73		73	Non-service related pension and postretirement benefit credits
Pension settlement		—		414		—		414	Non-service related pension and postretirement benefit credits (costs)