Ramaco Resources, Inc. — Q2 2019 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2019. Ramaco produces and develops metallurgical coal in the Appalachian region, selling primarily to steel producers.
Financial performance
| Metric | Q2 2019 | Q2 2018 | Six months 2019 | Six months 2018 |
|---|---|---|---|---|
| Revenue | $65.8 million | $65.3 million | $123.2 million | $121.2 million |
| Operating income | $12.9 million | $10.6 million | $21.1 million | $16.3 million |
| Net income | $10.6 million | $10.2 million | $17.5 million | $15.5 million |
| Diluted EPS | $0.26 | $0.25 | $0.43 | $0.38 |
| Adjusted EBITDA | $19.1 million | $14.9 million | $32.8 million | $24.2 million |
Q2 operating margin was approximately 19.6% versus 16.3%; net margin was approximately 16.1% versus 15.6%. For the first half, operating margin was approximately 17.2% versus 13.4%, and net margin approximately 14.2% versus 12.8%. Adjusted EBITDA is a non-GAAP measure.
- Q2 company-produced coal sales were 499,000 tons versus 493,000; third-party purchased coal sales fell to 26,000 tons from 123,000. Total reported tons sold were 525,000 versus 616,000.
- Q2 domestic revenue increased to $39.5 million from $34.4 million, while export revenue declined to $26.2 million from $30.9 million. Company-reported total coal sales revenue rose modestly, primarily on higher realized prices, partly offset by lower purchased-coal sales.
- Produced-coal cash cost per ton sold (FOB mine) rose to about $71 in Q2 from $56; first-half cost was about $69 versus $60. Management cited higher sales-linked royalties and severance taxes, temporary adverse roof conditions at the Eagle mine, and a greater production share from the Berwind Development Mine.
Cash flow, debt and liquidity
- First-half operating cash flow was $13.1 million, compared with $8.1 million; capital expenditures were $19.7 million, compared with $27.5 million. Cash declined by $1.4 million to $5.5 million.
- At June 30, total debt carrying value was approximately $17.0 million: $7.0 million term debt and $8.0 million revolver borrowings, plus $2.0 million current portion shown on the balance sheet. The filing presents the term loan’s $7.0 million carrying amount and the balance-sheet debt split separately; verify the exact reconciliation. The term loan principal was $7.1 million.
- The KeyBank facility includes a $10 million term loan and a revolving facility of up to $30 million, with maturity November 2, 2021. The company reported compliance with covenants. Liquidity was $26.7 million, which management expected to support current plans along with operating cash flow and cash on hand.
- Current assets were $49.8 million and current liabilities $31.2 million. Accounts receivable was $26.1 million, up from $10.7 million at year-end, contributing to working-capital cash use.
Changes, outlook and risks
- Management targets production of more than 4.0 million clean tons annually over the next three to four years, depending on capital deployment; this is a plan, not firm guidance.
- Q2 production exceeded 476,000 clean tons. Following the November 2018 failure of an Elk Creek raw-coal storage silo, a bypass system was completed in February 2019 and silo remediation finished in July; the plant returned to full processing capacity in early August.
- Management said met-coal markets were strong in Q2, but China port restrictions and the U.S.-China trade dispute contributed to a meaningful price decline early in Q3. Longer-term market and global economic effects remained uncertain.
- Customer concentration remains notable: four customers represented about 55% of revenue in both Q2 and the first half, and approximately 69% of receivables at June 30. Take-or-pay transport and terminal commitments totaled about $2.3 million through March 2020.
- Asset retirement obligations were $13.2 million, supported by $12.8 million of reclamation surety bonds. The filing reported no material pending litigation, no material change in risk factors, and no material off-balance-sheet arrangements.
- Management expected 2019 cash taxes below $0.4 million, citing depletion and depreciation deductions and use of net operating loss carryforwards. No specific revenue or earnings forecast was provided.
Key facts for investors to verify
- How post-quarter China import restrictions, trade tensions, and falling met-coal prices affected realized prices, sales mix, and contract economics.
- Whether Elk Creek’s return to full capacity in August was sustained and whether Eagle mine roof conditions or mine-development mix continued to pressure unit costs.
- Receivable collections, customer concentration, remaining revolver availability, and compliance with credit-facility covenants.
- Progress and funding needs for the production-growth plan, including capital spending, project timing, and the ability to meet rail and export-terminal commitments.
- The reconciliation of reported balance-sheet debt classifications to the disclosed $7.1 million term-loan principal and $8.0 million revolving balance.