Ramaco Resources, Inc. — Q2 2021 Form 10-Q
Business and period: Ramaco develops and operates metallurgical coal properties in Appalachia. This unaudited report covers the three and six months ended June 30, 2021, compared with the same 2020 periods.
Financial results
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Revenue | $76.1 million | $36.4 million | $119.5 million | $78.3 million |
| Operating income (loss) | $7.0 million | $(4.3) million | $8.3 million | $(3.2) million |
| Net income | $9.9 million | $2.7 million | $14.1 million | $4.6 million |
| Diluted EPS | $0.23 | $0.06 | $0.32 | $0.11 |
| Adjusted EBITDA (non-GAAP) | $18.1 million | $10.8 million | $29.6 million | $19.2 million |
- Revenue increased 109% in Q2 and 53% in the first half, primarily on higher coal sales volumes. Q2 volume was 686,000 tons, up 90%; first-half volume was 1.108 million tons, up 42%.
- FOB-mine revenue per ton was $97 in Q2 (up from $91) and $93 for the first half (up from $92). Cash cost per ton was $70 in Q2 versus $74, and $66 for the first half versus $70.
- Reported operating margin was approximately 9.2% in Q2 and 6.9% for the first half; net margin was approximately 13.1% and 11.8%, respectively. Margins include other income items described below.
- Six-month operating cash flow was $32.9 million; investing cash outflow was $8.6 million, principally capital expenditures, and financing cash outflow was $10.9 million. Cash and cash equivalents were $19.4 million at June 30; cash plus restricted cash was $20.2 million.
Financial position and material changes
- At June 30, current assets were $57.8 million and current liabilities were $36.9 million, implying working capital of $20.8 million. Total assets were $247.1 million and stockholders’ equity was $185.4 million.
- Reported debt was $8.1 million, comprising $4.9 million current and $3.1 million long-term; financing lease obligations were $5.3 million. The company had no revolver borrowings and $30.0 million of availability. It reported compliance with debt covenants.
- After quarter-end, Ramaco issued $34.5 million aggregate principal amount of 9.00% senior unsecured notes due 2026. Proceeds were intended for general corporate purposes, including acquisitions, capital expenditures and working capital.
- Sales to two customers represented approximately 46% of Q2 revenue and 52% of first-half revenue. At June 30, remaining-2021 performance obligations included about 0.8 million tons at fixed prices averaging $86 per ton and 0.1 million tons under index-based pricing.
Outlook, risks and unusual items
- Management described recovering demand from primary customers and sharply higher U.S. steel prices amid the global economic recovery. Its longer-term plan is to grow production to more than 4–4.5 million clean tons, subject to market conditions, permitting and additional capital. The filing provides no specific near-term production or earnings guidance.
- First-half 2021 other income included $5.3 million from the CARES Act Employee Retention Tax Credit; the company said it did not expect to qualify in Q3. Q2 2020 and first-half 2020 other income included $7.3 million for anticipated PPP loan forgiveness. The $8.4 million PPP loan was subsequently approved for full forgiveness on July 29, 2021.
- After quarter-end, a jury awarded $7.7 million in compensatory damages and $25.0 million for inconvenience and aggravation in the Elk Creek silo insurance dispute. The verdict was not final and could face post-trial motions or appeal; no gain was recognized at June 30.
- Coal-market pricing and demand, COVID-19 effects, permitting and mine-development execution, transportation availability and costs, customer payments, operating costs, and access to financing remain risks. Transportation take-or-pay commitments totaled $6.3 million; reclamation bonding requirements were $15.7 million.
Important facts for investors to verify
- Whether the insurance verdict is sustained, collectible, and ultimately results in a recognized recovery, including any legal fees and costs.
- The realized benefit and duration of the employee-retention tax credit, and whether sales volumes and per-ton margins remain sustainable as markets evolve.
- The impact of the 9.00% notes on interest costs, leverage and liquidity, and the use of their net proceeds.
- Progress toward the production target, including permitting, capital needs, transportation access and performance under take-or-pay contracts.
- Customer concentration and the conversion of remaining-2021 sales obligations into revenue and cash collections.