Business context and reporting period
The supplied filing is Contura Energy, Inc.’s unaudited Form 10-Q for the quarter and six months ended June 30, 2020, filed August 7, 2020. It identifies the issuer as Contura Energy (NYSE: CTRA), not Alpha Metallurgical Resources, Inc.; verify that this is the intended filing. Contura mined and sold metallurgical and thermal coal in Central and Northern Appalachia.
Financial performance
Amounts below are in millions of dollars except per-share data, tons, and percentages.
| Metric | Q2 2020 | Q2 2019 | Six months 2020 | Six months 2019 |
|---|---|---|---|---|
| Total revenue | $411.8 | $656.2 | $882.3 | $1,265.3 |
| Operating income (loss) | $(224.1) | $66.9 | $(247.8) | $84.7 |
| Net income (loss) | $(238.3) | $(113.7) | $(278.1) | $(106.8) |
| Adjusted EBITDA | $16.9 | $140.8 | $77.1 | $224.1 |
| Operating cash flow | Not separately presented here | $78.9 | $117.1 | |
| Capital expenditures | Not separately presented here | $91.1 | $83.9 |
- Q2 coal sales were 5.15 million tons, down 19.1%; six-month sales were 10.60 million tons, down 13.5%. Q2 average non-GAAP coal realization fell 25.8% to $67.15 per ton; the six-month average fell 21.6% to $71.13.
- Q2 GAAP coal margin was a loss of $31.0 million, versus a $88.1 million margin in Q2 2019. Non-GAAP coal margin was $35.1 million, or $6.83 per ton, versus $162.5 million, or $25.52 per ton.
- Q2 basic and diluted loss per share was $13.02. The 2019 Q2 net loss included $138.0 million of discontinued-operations losses; continuing operations had income of $24.3 million.
- Cash and cash equivalents were $238.4 million at June 30, 2020, versus $212.8 million at year-end 2019. Total liquidity was $240.2 million, including only $1.8 million of unused ABL commitments. Operating cash flow less capital expenditures was negative $12.2 million for the first half.
- Balance-sheet debt was $628.1 million, including $30.4 million current and $597.7 million long-term. Cash was partly offset by $109.9 million of long-term restricted cash. Total liabilities were $1.63 billion and stockholders’ equity $409.4 million.
Changes, outlook, and risks
- Revenue declined 37.2% in Q2 and 30.3% in the first half, reflecting weaker pricing and lower demand amid COVID-19, customer shutdowns or deferrals, and high utility inventories. Management said metallurgical markets might not improve until late 2020 or early 2021; timing and extent of demand recovery remained uncertain. No formal earnings guidance is provided in the supplied text.
- Q2 included $161.7 million of long-lived asset impairment and $22.4 million of restructuring charges. First-half charges totaled $195.4 million of impairment and $22.4 million of restructuring. Strategic measures included idling a West Virginia underground mine and preparation plant in Q3, ending Cumberland mine production after 2022, and marketing Cumberland for sale.
- Most operations were temporarily idled for about 30 days beginning April 3; all sites were near normal staffing and capacity by May 4. Customers issued force-majeure, curtailment, reduced-volume, and deferral notices; the company expected some missed shipments could be made up but could not reliably forecast demand.
- Management believed liquidity would cover requirements for the next 12 months, but also warned continued weak prices could cause further operating losses and cash outflows and that additional financing might not be available. ABL borrowing capacity was reduced by covenant limitations, although the company reported covenant compliance and said it was not in a Liquidity Period at quarter-end.
- Contura appealed a Department of Labor proposed $65.7 million collateral requirement for self-insured black-lung obligations, versus approximately $2.6 million previously provided. An unsuccessful appeal could materially reduce liquidity. Surety bonds had a $395.9 million face amount; $95.9 million of collateral supported reclamation obligations.
- The company expected $68.3 million of AMT credits to be refunded in 2020, but disclosed that the federal government might seek to offset some or all of certain tax refunds against bankruptcy claims. The six-month deferred-tax valuation allowance increased by $74.7 million.
- Disclosure controls were deemed ineffective at June 30 because of previously identified material weaknesses in coal-inventory controls and the risk-assessment process; remediation and validation were ongoing.
Investor verification priorities
- Confirm the issuer and filing match the intended company: this document is Contura Energy’s 2020 Q2 10-Q, not a filing under the Alpha Metallurgical Resources name.
- Track realized coal prices, volumes, margins, customer deferrals, force-majeure claims, and any rescheduling of missed shipments.
- Verify available borrowing capacity, ABL covenant headroom, cash burn, debt service, and access to refinancing or other capital.
- Follow the black-lung collateral appeal, surety and letter-of-credit availability, reclamation funding needs, and tax-refund collection or offset risk.
- Assess whether impairment assumptions, planned mine idling and closure, Cumberland sale efforts, and internal-control remediation develop as described.