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What changed in HALLADOR ENERGY CO's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of HALLADOR ENERGY CO's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+361 added−254 removedSource: 10-K (2024-03-14) vs 10-K (2023-03-16)

Top changes in HALLADOR ENERGY CO's 2023 10-K

361 paragraphs added · 254 removed · 213 edited across 4 sections

Item 1. Business

Business — how the company describes what it does

108 edited+43 added−19 removed27 unchanged
Biggest changeFINANCIAL STATEMENTS Hallador Energy Company Consolidated Balance Sheets As of December 31, (in thousands) 2022 2021 ASSETS Current assets: Cash and cash equivalents $ 3,009 $ 2,546 Restricted cash 3,417 3,283 Accounts receivable 29,889 13,584 Inventory 49,796 7,699 Parts and supplies 28,295 10,015 Contract asset - coal purchase agreement 19,567 — Prepaid expenses 4,546 2,112 Total current assets 138,519 39,239 Property, plant and equipment: Land and mineral rights 115,595 115,837 Buildings and equipment 534,129 342,782 Mine development 140,108 112,575 Total property, plant and equipment 789,832 571,194 Less - accumulated depreciation, depletion and amortization (309,370 ) (268,370 ) Total property, plant and equipment, net 480,462 302,824 Investment in Sunrise Energy 3,988 3,545 Other assets 7,585 8,372 Total assets $ 630,554 $ 353,980 LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS, AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of bank debt, net $ 33,031 $ 23,098 Accounts payable and accrued liabilities 82,972 41,528 Deferred revenue 35,485 — Contract liability - power purchase agreement and capacity payment reduction 88,114 — Total current liabilities 239,602 64,626 Long-term liabilities: Bank debt, net 49,713 84,667 Convertible notes payable 10,000 — Convertible notes payable - related party 9,000 — Deferred income taxes 4,606 2,850 Asset retirement obligations 17,254 14,025 Contract liability - power purchase agreement 84,096 — Other 1,259 1,577 Total long-term liabilities 175,928 103,119 Total liabilities 415,530 167,745 Commitments and contingencies Redeemable noncontrolling interests — 4,000 Stockholders' equity: Preferred stock, $ .10 par value, 10,000 shares authorized; none issued — — Common stock, $ .01 par value, 100,000 shares authorized; 32,983 and 30,785 issued and outstanding, respectively 330 308 Additional paid-in capital 118,788 104,126 Retained earnings 95,906 77,801 Total stockholders’ equity 215,024 182,235 Total liabilities, redeemable noncontrolling interests, and stockholders’ equity $ 630,554 $ 353,980 The accompanying notes are an integral part of these Consolidated Financial Statements 47 Table of Contents Hallador Energy Company Consolidated Statements of Operations For the years ended December 31, (in thousands, except per share data) 2022 2021 SALES AND OPERATING REVENUES: Coal sales $ 289,376 $ 243,903 Electric sales 66,252 — Other revenues 6,363 3,763 Total sales and operating revenues 361,991 247,666 OPERATING EXPENSES: Operating expenses 266,608 198,840 Depreciation, depletion and amortization 46,875 39,973 Asset impairment — 1,588 Asset retirement obligations accretion 1,010 1,504 Asset retirement obligations change in estimate — (3,510 ) Exploration costs 651 482 General and administrative 16,417 14,833 Total operating expenses 331,561 253,710 INCOME (LOSS) FROM OPERATIONS 30,430 (6,044 ) Interest expense (1) (11,012 ) (8,048 ) Gain on extinguishment of debt — 10,000 Equity method investment income 443 364 INCOME (LOSS) BEFORE INCOME TAXES 19,861 (3,728 ) INCOME TAX EXPENSE: Current — — Deferred 1,756 26 Total income tax expense 1,756 26 NET INCOME (LOSS) $ 18,105 $ (3,754 ) NET INCOME (LOSS) PER SHARE: Basic $ 0.57 $ (0.12 ) Diluted $ 0.55 $ (0.12 ) WEIGHTED AVERAGE SHARES OUTSTANDING: Basic 32,043 30,614 Diluted 33,649 30,614 (1) Interest Expense: Interest on bank debt $ 7,563 $ 8,510 Other interest 715 — Amortization and swap related interest: Payments on interest rate swap, net of changes in value (867 ) (3,026 ) Amortization of debt issuance costs 3,601 2,564 Total amortization and swap related interest 2,734 (462 ) Total interest expense $ 11,012 $ 8,048 The accompanying notes are an integral part of these Consolidated Financial Statements 48 Table of Contents Hallador Energy Company Consolidated Statements of Cash Flows For the years ended December 31, (in thousands) 2022 2021 CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ 18,105 $ (3,754 ) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Deferred income taxes 1,756 26 Equity income – Sunrise Energy (443 ) (364 ) Depreciation, depletion and amortization 46,875 39,973 Asset impairment — 1,588 Gain on extinguishment of debt — (10,000 ) Loss (gain) on sale of assets (264 ) 317 Payments on interest rate swap, net of changes in value (867 ) (3,026 ) Change in fair value of fuel hedge — (297 ) Amortization of debt issuance costs 3,601 2,564 Asset retirement obligations accretion 1,010 1,504 Asset retirement obligations change in estimate — (3,510 ) Cash paid on asset retirement obligation reclamation (3,162 ) — Stock-based compensation 1,269 1,004 Provision for loss on customer contracts 159 — Amortization of contract asset and contract liabilities (19,731 ) — Change in current assets and liabilities: Accounts receivable (16,305 ) 830 Inventory (25,863 ) 16,964 Parts and supplies (6,271 ) (1,112 ) Prepaid expenses (5,941 ) (5,215 ) Accounts payable and accrued liabilities 24,037 10,844 Deferred revenue 35,485 — Other 719 (362 ) Net cash provided by operating activities $ 54,169 $ 47,974 49 Table of Contents Hallador Energy Company Consolidated Statements of Cash Flows For the years ended December 31, (in thousands) (continued) 2022 2021 CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures $ (54,020 ) $ (28,050 ) Proceeds from sale of equipment 655 525 Net cash used in investing activities (53,365 ) (27,525 ) CASH FLOWS FROM FINANCING ACTIVITIES: Payments on bank debt (78,225 ) (46,249 ) Borrowings of bank debt 51,700 20,250 Issuance of convertible notes payable 11,000 — Issuance of related party convertible notes payable 18,000 — Debt issuance costs (2,097 ) (418 ) Distributions to redeemable noncontrolling interests (585 ) — Taxes paid on vesting of RSUs — (274 ) Net cash used in financing activities (207 ) (26,691 ) Increase (decrease) in cash, cash equivalents, and restricted cash 597 (6,242 ) Cash, cash equivalents, and restricted cash, beginning of year 5,829 12,071 Cash, cash equivalents, and restricted cash, end of year $ 6,426 $ 5,829 CASH, CASH EQUIVALENTS, AND RESTRICTED CASH: Cash and cash equivalents $ 3,009 $ 2,546 Restricted cash 3,417 3,283 $ 6,426 $ 5,829 SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid for interest $ 8,123 $ 8,720 SUPPLEMENTAL NON-CASH FLOW INFORMATION: Change in capital expenditures included in accounts payable and prepaid expenses $ 3,440 $ 8,520 The accompanying notes are an integral part of these Consolidated Financial Statements 50 Table of Contents Hallador Energy Company Consolidated Statement of Stockholders’ Equity (in thousands) Additional Total Common Stock Issued Paid-in Retained Stockholders' Shares Amount Capital Earnings Equity BALANCE, DECEMBER 31, 2020 30,610 $ 306 $ 103,399 $ 81,555 $ 185,260 Stock-based compensation — — 1,004 — 1,004 Stock issued on vesting of RSUs 296 3 (3 ) — — Taxes paid on vesting of RSUs (121 ) (1 ) (274 ) — (275 ) Net loss — — — (3,754 ) (3,754 ) BALANCE, DECEMBER 31, 2021 30,785 308 104,126 77,801 182,235 Stock-based compensation — — 1,269 — 1,269 Cancellation of redeemable noncontrolling interests — — 3,415 — 3,415 Stock issued on redemption of convertible note 232 2 998 — 1,000 Stock issued on redemption of related party convertible notes 1,966 20 8,980 — 9,000 Net income — — — 18,105 18,105 BALANCE, DECEMBER 31, 2022 32,983 330 118,788 95,906 215,024 The accompanying notes are an integral part of these Consolidated Financial Statements 51 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021 ( 1 ) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation and Consolidation The consolidated financial statements include the accounts of Hallador Energy Company (hereinafter known as, “we, us, or our”) and its wholly owned subsidiaries Sunrise Coal, LLC ("Sunrise"), Hallador Power Company, LLC ("Hallador Power") and Hourglass Sands, LLC ("Hourglass"), as well as Sunrise and Hallador Power's wholly owned subsidiaries.
Biggest changeFINANCIAL STATEMENTS Hallador Energy Company Consolidated Balance Sheets As of December 31, (in thousands) 2023 2022 ASSETS Current assets: Cash and cash equivalents $ 2,842 $ 3,009 Restricted cash 4,281 3,417 Accounts receivable 19,937 29,889 Inventory 23,075 49,796 Parts and supplies 38,877 28,295 Contract asset - coal purchase agreement — 19,567 Prepaid expenses 2,262 4,546 Total current assets 91,274 138,519 Property, plant and equipment: Land and mineral rights 115,486 115,595 Buildings and equipment 537,131 534,129 Mine development 158,642 140,108 Finance lease right-of-use assets 12,346 — Total property, plant and equipment 823,605 789,832 Less - accumulated depreciation, depletion and amortization (334,971 ) (309,370 ) Total property, plant and equipment, net 488,634 480,462 Investment in Sunrise Energy 2,811 3,988 Other assets 7,061 7,585 Total assets $ 589,780 $ 630,554 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of bank debt, net $ 24,438 $ 33,031 Accounts payable and accrued liabilities 62,908 82,972 Current portion of lease financing 3,933 — Deferred revenue 23,062 35,485 Contract liability - power purchase agreement and capacity payment reduction 43,254 88,114 Total current liabilities 157,595 239,602 Long-term liabilities: Bank debt, net 63,453 49,713 Convertible notes payable 10,000 10,000 Convertible notes payable - related party 9,000 9,000 Long-term lease financing 8,157 — Deferred income taxes 9,235 4,606 Asset retirement obligations 14,538 17,254 Contract liability - power purchase agreement 47,425 84,096 Other 1,789 1,259 Total long-term liabilities 163,597 175,928 Total liabilities 321,192 415,530 Commitments and contingencies Stockholders' equity: Preferred stock, $ .10 par value, 10,000 shares authorized; none issued — — Common stock, $ .01 par value, 100,000 shares authorized; 34,052 and 32,983 issued and outstanding, respectively 341 330 Additional paid-in capital 127,548 118,788 Retained earnings 140,699 95,906 Total stockholders’ equity 268,588 215,024 Total liabilities and stockholders’ equity $ 589,780 $ 630,554 The accompanying notes are an integral part of these Consolidated Financial Statements 46 Table of Contents Hallador Energy Company Consolidated Statements of Operations For the years ended December 31, (in thousands, except per share data) 2023 2022 SALES AND OPERATING REVENUES: Coal sales $ 361,926 $ 289,376 Electric sales 267,927 66,252 Other revenues 4,627 6,363 Total sales and operating revenues 634,480 361,991 OPERATING EXPENSES: Operating expenses 473,390 266,608 Depreciation, depletion and amortization 67,211 46,875 Asset retirement obligations accretion 1,804 1,010 Exploration costs 904 651 General and administrative 26,159 16,417 Total operating expenses 569,468 331,561 INCOME FROM OPERATIONS 65,012 30,430 Interest expense (1) (13,711 ) (11,012 ) Loss on extinguishment of debt (1,491 ) — Equity method investment (loss) income (552 ) 443 INCOME BEFORE INCOME TAXES 49,258 19,861 INCOME TAX EXPENSE (BENEFIT): Current (164 ) — Deferred 4,629 1,756 Total income tax expense 4,465 1,756 NET INCOME $ 44,793 $ 18,105 NET INCOME PER SHARE: Basic $ 1.35 $ 0.57 Diluted $ 1.25 $ 0.55 WEIGHTED AVERAGE SHARES OUTSTANDING: Basic 33,133 32,043 Diluted 36,827 33,649 (1) Interest Expense: Interest on bank debt $ 8,636 $ 7,563 Other interest 1,842 715 Amortization and swap related interest: Payments on interest rate swap, net of changes in value — (867 ) Amortization of debt issuance costs 3,233 3,601 Total amortization and swap related interest 3,233 2,734 Total interest expense $ 13,711 $ 11,012 The accompanying notes are an integral part of these Consolidated Financial Statements 47 Table of Contents Hallador Energy Company Consolidated Statements of Cash Flows For the years ended December 31, (in thousands) 2023 2022 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 44,793 $ 18,105 Adjustments to reconcile net income to net cash provided by operating activities: Deferred income taxes 4,629 1,756 Equity income (loss) – Sunrise Energy 552 (443 ) Cash distribution - Sunrise Energy 625 — Depreciation, depletion and amortization 67,211 46,875 Loss on extinguishment of debt 1,491 — Loss (gain) on sale of assets 398 (264 ) Payments on interest rate swap, net of changes in value — (867 ) Amortization of debt issuance costs 3,233 3,601 Asset retirement obligations accretion 1,804 1,010 Cash paid on asset retirement obligation reclamation (3,384) (3,162) Stock-based compensation 3,554 1,269 Provision for loss on customer contracts — 159 Amortization of contract asset and contract liabilities (39,791 ) (19,731 ) Change in current assets and liabilities: Accounts receivable 9,952 (16,305 ) Inventory 15,548 (25,863 ) Parts and supplies (10,582 ) (6,271 ) Prepaid expenses 1,186 (5,941 ) Accounts payable and accrued liabilities (18,992 ) 24,037 Deferred revenue (23,423 ) 35,485 Other 610 719 Net cash provided by operating activities $ 59,414 $ 54,169 48 Table of Contents Hallador Energy Company Consolidated Statements of Cash Flows For the years ended December 31, (in thousands) (continued) 2023 2022 CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures $ (75,352 ) $ (54,020 ) Proceeds from sale of equipment 62 655 Net cash used in investing activities (75,290 ) (53,365 ) CASH FLOWS FROM FINANCING ACTIVITIES: Payments on bank debt (59,713 ) (78,225 ) Borrowings of bank debt 66,000 51,700 Proceeds from sale and leaseback arrangement 11,082 — Issuance of convertible notes payable — 11,000 Issuance of related party convertible notes payable — 18,000 Debt issuance costs (6,013 ) (2,097 ) Distributions to redeemable noncontrolling interests — (585 ) ATM offering 7,318 — Taxes paid on vesting of RSUs (2,101 ) — Net cash provided by (used in) financing activities 16,573 (207 ) Increase in cash, cash equivalents, and restricted cash 697 597 Cash, cash equivalents, and restricted cash, beginning of year 6,426 5,829 Cash, cash equivalents, and restricted cash, end of year $ 7,123 $ 6,426 CASH, CASH EQUIVALENTS, AND RESTRICTED CASH: Cash and cash equivalents $ 2,842 $ 3,009 Restricted cash 4,281 3,417 $ 7,123 $ 6,426 SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid for interest $ 9,966 $ 8,123 SUPPLEMENTAL NON-CASH FLOW INFORMATION: Change in capital expenditures included in accounts payable and finance lease $ 1,882 $ 3,440 The accompanying notes are an integral part of these Consolidated Financial Statements 49 Table of Contents Hallador Energy Company Consolidated Statement of Stockholders’ Equity (in thousands) Additional Total Common Stock Issued Paid-in Retained Stockholders' Shares Amount Capital Earnings Equity BALANCE, DECEMBER 31, 2021 30,785 $ 308 $ 104,126 $ 77,801 182,235 Stock-based compensation — — 1,269 — 1,269 Cancellation of redeemable noncontrolling interests — — 3,415 — 3,415 Stock issued on redemption of convertible note 232 2 998 — 1,000 Stock issued on redemption of related party convertible notes 1,966 20 8,980 — 9,000 Net income — — — 18,105 18,105 BALANCE, DECEMBER 31, 2022 32,983 330 118,788 95,906 215,024 Stock-based compensation — — 3,554 — 3,554 Stock issued on vesting of RSUs 473 5 (5 ) — — Taxes paid on vesting of RSUs (198 ) (2 ) (2,099 ) — (2,101 ) Stock issued in ATM offering 794 8 7,310 — 7,318 Net income — — — 44,793 44,793 BALANCE, DECEMBER 31, 2023 34,052 341 127,548 140,699 268,588 The accompanying notes are an integral part of these Consolidated Financial Statements 50 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022 ( 1 ) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation and Consolidation The consolidated financial statements include the accounts of Hallador Energy Company (hereinafter, “we”, “our” or “us”) and our wholly owned subsidiaries Sunrise Coal, LLC (“Sunrise”), Hallador Power Company, LLC (“Hallador Power”) and Hourglass Sands, LLC (“Hourglass”), as well as Sunrise and Hallador Power's wholly owned subsidiaries.
Under the APA, Hallador acquired the Merom power plant, along with: equipment and machinery in the power plant; materials inventory; a coal purchase agreement; a coal combustion certified coal ash landfill, certain Generation Interconnection Agreements, and coal inventory (collectively, the “Acquired Assets”).
Under the APA, Hallador Power acquired the Merom power plant, along with: equipment and machinery in the power plant; materials inventory; a coal purchase agreement; a coal combustion certified coal ash landfill, certain generation interconnection agreements, and coal inventory (collectively, the “Acquired Assets”).
These interest rate swaps have not been designated as hedging instruments and are accounted for as an asset or a liability in the accompanying Consolidated Balance Sheets at their fair value. Realized and unrealized gains and losses are classified as operating activities in the accompanying Consolidated Statements of Cash Flows.
These interest rate swaps have not been designated as hedging instruments and were accounted for as an asset or a liability in the accompanying consolidated balance sheets at their fair value. Realized and unrealized gains and losses are classified as operating activities in the accompanying consolidated statements of cash flows.
The primary purpose of the amendment was to return the allowable leverage ratio and debt service coverage ratio to their December 31, 2021 levels through September 30, 2022, with the debt service coverage waived for March 31, 2022. On May 20, 2022, we executed an additional amendment to our credit agreement with PNC.
The primary purpose of the amendment was to return the allowable leverage ratio and debt service coverage ratio to December 31, 2021 levels through September 30, 2022, with the debt service coverage waived for March 31, 2022. On May 20, 2022, we executed an additional amendment to our credit agreement with PNC.
We believe that our income tax filing positions and deduction will be sustained on audit and do not anticipate any adjustments that will result in a material change to our consolidated financial position. While not material, we record any penalties and interest as general and administrative expense.
We believe that our income tax filing positions and deduction will be sustained on audit and do not anticipate any adjustments that will result in a material change to its consolidated financial position. While not material, we record any penalties and interest as general and administrative expense.
On July 29, 2022, we issued $5 million of a senior unsecured convertible note to a related party affiliated with an independent member of our board of directors. The note carries an interest rate of 8% per annum with a maturity date of December 29, 2028.
On July 29, 2022, we issued an additional $5 million senior unsecured convertible note to a related party affiliated with an independent member of our board of directors. The Note carries an interest rate of 8% per annum with a maturity date of December 29, 2028.
In June 2022, the four holders of the $9 million related party Notes converted them into 1,965,841 shares of common stock of the Company and the one holder of the $1 million Note converted it into 231,697 shares of common stock pursuant to the terms of the notes and their related agreements.
In June 2022, the four holders of the $9 million related party notes converted them into 1,965,841 shares of common stock of the Company and the one holder of the $1 million Notes converted it into 231,697 shares of common stock pursuant to the terms of the Notes and their related agreements.
We recognize revenue when we satisfy a performance obligation by transferring control of a good or service to a customer. Coal operations Our coal revenue is derived from sales to customers of coal produced at our facilities.
We recognize revenue when we satisfy a performance obligation by transferring control of a good or service to a customer. Coal operations Our coal revenue is derived from sales to customers of coal produced at its facilities.
Benefits and coverage are mandated by each state which includes disability ratings, medical claims, rehabilitation services, and death and survivor benefits. We are partially self-insured for such claims, however, our operations are protected from these perils through stop-loss insurance policies. Our maximum annual exposure is limited to $1 million per occurrence with a $4 million aggregate deductible.
Benefits and coverage are mandated by each state which includes disability ratings, medical claims, rehabilitation services, and death and survivor benefits. We are partially self-insured for such claims, however, its operations are protected from these perils through stop-loss insurance policies. Our maximum annual exposure is limited to $1.0 million per occurrence with a $4.0 million aggregate deductible.
Prepaid Expenses Prepaid expenses include prepaid insurance and other prepaid balances with vendors for various services paid for in advance of use. 52 Table of Contents Advanced Royalties Coal leases that require minimum annual or advance payments and are recoverable from future production are generally deferred and charged to expense as the coal is subsequently produced.
Prepaid Expenses Prepaid expenses include prepaid insurance and other prepaid balances with vendors for various services paid for in advance of use. 51 Table of Contents Advanced Royalties Coal leases that require minimum annual or advance payments and are recoverable from future production are generally deferred and charged to expense as the coal is subsequently produced.
Most surface and underground mining equipment is depreciated using estimated useful lives ranging from three to twenty-five years. The values of the property, plant and equipment acquired as part of the Merom Acquisition are recorded at relative fair value based on the consideration paid upon closing of the acquisition of the plant in October 2022.
Most surface and underground mining equipment is depreciated using estimated useful lives ranging from three to twenty-five years. The values of the property, plant and equipment acquired as part of the Merom Acquisition were recorded at relative fair value based on the consideration paid upon closing of the acquisition of the plant in October 2022.
Invoices typically include customary adjustments for the resolution of price variability, such as coal quality thresholds. Payments are generally received within thirty days of invoicing. Historically, credit losses have been insignificant. No charges for credit losses were recognized during the years ended December 31, 2022 or 2021.
Invoices typically include customary adjustments for the resolution of price variability, such as coal quality thresholds. Payments are generally received within thirty days of invoicing. Historically, credit losses have been insignificant. No charges for credit losses were recognized during the years ended December 31, 2023 or 2022.
After receipt of such redemption notice from the Company, the holder may, at its option, elect to convert the principal balance and accrued interest into the Company's common stock by giving written notice of such election to the Company no later than 5 days prior to the date fixed for redemption.
After receipt of such redemption notice from us, the holder may, at its option, elect to convert the principal balance and accrued interest into the Company's common stock by giving written notice of such election to us no later than 5 days prior to the date fixed for redemption.
Consideration: (in thousands) Direct transaction costs $ 2,855 Contract liability - PPA 184,500 Contract liability - Capacity payment reduction 11,000 Contract asset - Coal purchase agreement (34,300 ) Coal inventory purchased 5,400 Deferred coal inventory payment 11,600 Total consideration $ 181,055 Relative fair value of assets acquired: Plant $ 165,816 Materials and supplies 12,009 Coal inventory 10,460 Amount attributable to assets acquired $ 188,285 Fair value of liabilities assumed: Asset retirement obligations $ 7,230 Amount attributable to liabilities assumed $ 7,230 65 Table of Contents ( 17 ) CONVERTIBLE NOTES On May 2, 2022, and May 20, 2022, we issued senior unsecured convertible notes (the "Notes") to five parties, in the aggregate principal amount of $10 million, with $9 million being issued to related parties affiliated with independent members of our board of directors and the remainder to a non-affiliated party.
Consideration: (in thousands) Direct transaction costs $ 2,855 Contract liability - PPA 184,500 Contract liability - Capacity payment reduction 11,000 Contract asset - Coal purchase agreement (34,300 ) Coal inventory purchased 5,400 Deferred coal inventory payment 11,600 Total consideration $ 181,055 Relative fair value of assets acquired: Plant $ 165,816 Materials and supplies 12,009 Coal inventory 10,460 Amount attributable to assets acquired $ 188,285 Fair value of liabilities assumed: Asset retirement obligations $ 7,230 Amount attributable to liabilities assumed $ 7,230 64 Table of Contents ( 16 ) CONVERTIBLE NOTES On May 2, 2022, and May 20, 2022, we issued senior unsecured convertible notes (the “Notes”) to five parties, in the aggregate principal amount of $10 million, with $9 million being issued to related parties affiliated with independent members of our board of directors and the remainder to a non-affiliated party.
We also agreed to a reduction in future capacity payments as part of the acquisition consideration. These agreements were entered into as consideration in the Merom Acquisition. The power purchase agreement liability is amortized to electric sales revenue pro-rata over the term of the agreement as the contract is fulfilled.
Hallador Power also agreed to a reduction in future capacity payments as part of the acquisition consideration. These agreements were entered into as consideration in the Merom Acquisition. The power purchase agreement liability is amortized to electric sales revenue pro-rata over the term of the agreement as the contract is fulfilled.
Diluted EPS attributable to common shareholders is computed by adjusting net earnings by the weighted average number of common shares and potential common shares outstanding (if dilutive) during each period. Potential common shares include shares of restricted stock units as if the units issued by the Company were vested and convertible debt.
Diluted EPS attributable to common shareholders is computed by adjusting net earnings by the weighted average number of common shares and potential common shares outstanding (if dilutive) during each period. Potential common shares include shares of restricted stock units as if the units issued by us were vested and convertible debt.
As such, the total purchase consideration (which includes $2.9 million of transaction costs) are allocated to the assets acquired on a relative fair value basis. The following table summarizes the final relative fair value allocation of assets acquired and liabilities assumed and incurred as of the Merom acquisition date.
As such, the total purchase consideration (which includes $2.9 million of transaction costs) is allocated to the assets acquired on a relative fair value basis. The following table summarizes the final relative fair value allocation of assets acquired and liabilities assumed and incurred as of the Merom Acquisition date.
Deferred tax assets and liabilities are recognized for the future expected tax consequences of temporary differences between income tax and financial reporting and principally relate to differences in the tax basis of assets and liabilities and their reported amounts, using enacted tax rates in effect for the year in which differences are expected to reverse. 54 Table of Contents Net Income (Loss) per Share Basic earnings (loss) per share (“EPS”) are computed by dividing net earnings (loss) by the weighted average number of common shares outstanding for the period.
Deferred tax assets and liabilities are recognized for the future expected tax consequences of temporary differences between income tax and financial reporting and principally relate to differences in the tax basis of assets and liabilities and their reported amounts, using enacted tax rates in effect for the year in which differences are expected to reverse. 53 Table of Contents Net Income per Share Basic earnings per share (“EPS”) are computed by dividing net earnings by the weighted average number of common shares outstanding for the period.
Prior to the latest amendment, bank debt was comprised of term debt ($5.5 million as of December 31, 2022) and a $120 million revolver ($79.7 million borrowed as of December 31, 2022). The term debt amortization was to conclude with the final payment in March 2023. The revolver was to mature in September 2023.
Prior to the March 13, 2023 amendment, bank debt was comprised of term debt ($5.5 million as of December 31, 2022) and a $120 million revolver ($79.7 million borrowed as of December 31, 2022). The term debt amortization was to conclude with the final payment of $5.5 million in March 2023. The revolver was to mature in September 2023.
(“Hoosier”) on October 21, 2022 ( the “Merom Acquisition”), as further described in Note 16, beginning in the fourth quarter of 2022 we began to strategically view and manage our operations through two reportable segments: Coal Operations and Electric Operations.
(“Hoosier”) on October 21, 2022 ( the “Merom Acquisition”), as further described in Note 15, beginning in the fourth quarter of 2022, we began to strategically view and manage our operations through two reportable segments: Coal Operations and Electric Operations.
Contract liabilities also arise when consideration is received in advance of performance. ( 8 ) INCOME TAXES Our income tax is different than the expected amount computed using the applicable federal statutory income tax rate of 21%.
Contract liabilities also arise when consideration is received in advance of performance. ( 7 ) INCOME TAXES Our income tax is different than the expected amount computed using the applicable federal statutory income tax rate of 21%.
The primary purpose of the amendment is to convert $35 million of the outstanding balance on the revolver into a new term loan with a maturity of March 31, 2024 and extend the maturity date of the revolver to May 31, 2024.
The primary purpose of the amendment was to convert $35 million of the outstanding balance on the revolver into a new term loan with a maturity date of March 31, 2024, and extend the maturity date of the revolver to May 31, 2024.
Restricted cash of $3.4 million and $3.3 million as of December 31, 2022 , and December 31, 2021 , respectively, represents cash held and controlled by a third party and is restricted for future workers’ compensation claim payments.
Restricted cash of $4.3 million and $3.4 million as of December 31, 2023 and 2022, respectively, represents cash held and controlled by a third party and is restricted for future workers’ compensation claim payments.
For the period August 18, 2022 through August 17, 2024, the holder has the option to convert the note into shares of the Company's common stock at a conversion price of $6.254.
For the period August 18, 2022 through August 17, 2024, the holder has the option to convert the Note into shares of our common stock at a conversion price of $6.254.
At any time on or after June 1, 2025, the Company may, at its option and upon 30 days' written notice provided to the holders, elect to redeem the Notes (in whole and not in part) and the holders shall be obligated to surrender the Notes, at a redemption price equal to 100% of the outstanding principal balance, together with any accrued but unpaid interest thereon to the redemption date.
At any time on or after June 1, 2025, we may, at our option and upon 30 days' written notice provided to the holders, elect to redeem the Notes (in whole and not in part) and the holders shall be obligated to surrender the Notes, at a redemption price equal to 100% of the outstanding principal balance, together with any accrued but unpaid interest thereon to the redemption date.
The remainder of our operations, which are not significant enough on a stand-alone basis to warrant treatment as an operating segment, are presented as "Corporate and Other" and primarily are comprised of unallocated corporate costs and activities, including a 50% interest in Sunrise Energy, LLC, a private gas exploration company with operations in Indiana, which we account for using the equity method, and our wholly-owned subsidiary Summit Terminal LLC, a logistics transport facility located on the Ohio River.
The remainder of our operations, which are not significant enough on a stand-alone basis to warrant treatment as an operating segment, are presented as “Corporate and Other” and primarily are comprised of unallocated corporate costs and activities, including a 50% interest in Sunrise Energy, LLC (“Sunrise Energy”), a private gas exploration company with operations in Indiana, which we account for using the equity method, and our wholly-owned subsidiary Summit Terminal LLC, a logistics transport facility located on the Ohio River.
The purchase price for the Acquired Assets also consists of the assumption of the power plant’s closure and post-closure remediation, valued at approximately $7.2 million; no cash will be paid by Hallador to Hoosier to effectuate the APA other than payments totaling approximately $17.0 million for coal inventory on hand, with an initial payment of $5.4 million and subsequent periodic payments over time, subject to post-close adjustments based on actual on-site inventories.
The purchase price for the Acquired Assets also consisted of the assumption of the power plant’s closure and post-closure remediation, valued at approximately $7.2 million; no cash was paid by Hallador Power to Hoosier to effectuate the APA other than payments totaling approximately $17.0 million for coal inventory on hand, with an initial payment of $5.4 million and subsequent periodic payments over time, subject to post-close adjustments based on actual on-site inventories.
Additionally, contemporaneous with entering into the APA, Hallador entered into three other agreements with Hoosier comprised of ( 1 ) a Power Purchase Agreement (the "PPA”), ( 2 ) a Coal Supply Purchase Agreement (the "Coal Purchase Agreement"), and ( 3 ) a Closing Side Letter agreeing to a reduction in future capacity payments of $15.0 million (“Capacity Payment Reduction”).
Additionally, contemporaneous with entering into the APA, Hallador Power entered into three other agreements with Hoosier comprised of ( 1 ) a Power Purchase Agreement (the “PPA”), ( 2 ) a Coal Supply Purchase Agreement (the “Coal Purchase Agreement”), and ( 3 ) a Closing Side Letter agreeing to a reduction in future capacity payments of $15.0 million (“Capacity Payment Reduction”).
Our customers are typically domestic utility companies. Our coal sales agreements with our customers are fixed-priced, fixed-volume supply contracts, or include a pre-determined escalation in price for each year. Price re-opener and index provisions may allow either party to commence a renegotiation of the contract price at a pre-determined time.
Our coal sales agreements with our customers are fixed-priced, fixed-volume supply contracts, or include a pre-determined escalation in price for each year. Price re-opener and index provisions may allow either party to commence a renegotiation of the contract price at a pre-determined time.
Coal operations 74% and 73% of our coal revenue for the years ended December 31, 2022 and 2021, respectively, was sold to customers in the State of Indiana with the remainder sold to customers in Florida, North Carolina, Georgia, and Alabama.
Coal operations For the years ended December 31, 2023 and 2022, 33% and 74%, respectively, of our coal revenue was sold to customers in the State of Indiana with the remainder sold to customers in Florida, North Carolina, Georgia, and Alabama.
The amendment also reduced the total capacity under the revolver to $85 million and waives the maximum annual capital expenditure covenant for 2022 and increases the covenant for 2023 to $75 million. Subsequent to December 31, 2022, and prior to the effective date of this amendment, we had borrowed an additional $17.0 million under the revolver.
The amendment also reduced the total capacity under the revolver to $85 million and waived the maximum annual capital expenditure covenant for 2022 and increased the covenant for 2023 to $75 million. Subsequent to December 31, 2022, and prior to the effective date of this amendment, we had borrowed an additional $17 million under the revolver.
( 11 ) LEASES We have operating leases for office space and processing facilities with remaining lease terms ranging from less than one year to approximately five years. As most of the leases do not provide an implicit rate, we calculated the right-of-use assets and lease liabilities using our secured incremental borrowing rate at the lease commencement date.
We have 2 operating leases for office space and processing facilities with remaining lease terms ranging from less than one year to approximately five years. As most of the leases do not provide an implicit rate, we calculate the ROU assets and lease liabilities using our secured incremental borrowing rate at the lease commencement date.
The Company applied the treasury stock method to account for the dilutive impact of its restricted stock units and the if converted method for its convertible notes. Anti-dilutive securities are excluded from diluted EPS.
We apply the treasury stock method to account for the dilutive impact of its restricted stock units and the if converted method for its convertible notes. Anti-dilutive securities are excluded from diluted EPS.
As of December 31, 2022, the Company is not a party to any interest rate swaps. Commitments and Contingencies From time to time the Company is involved in legal proceedings and/or may be subject to industry rulings that could bring rise to claims in the ordinary course of business.
As of December 31, 2023 and 2022, we were not a party to any interest rate swaps. Commitments and Contingencies From time to time, we are involved in legal proceedings and/or may be subject to industry rulings that could bring rise to claims in the ordinary course of business.
We have remaining performance obligations relating to coal sales contracts with price reopeners of approximately $166 million, which represents our estimate of the expected re-opener price on committed contracts as of December 31, 2022 . We expect to recognize all of this coal sales revenue beginning in 2024 .
We have remaining performance obligations relating to coal sales contracts with price reopeners of approximately $155 million, which represents our estimate of the expected re-opener price on committed contracts as of December 31, 2023. We expect to recognize all of this coal sales revenue beginning in 2024 through 2027.
Electric operations The Company concluded that each megawatt hour ("MWh") of delivered energy is capable of being distinct as a customer could benefit from each on its own by using/consuming it as a part of its operations.
Electric operations We concluded that each megawatt hour (“MWh”) of delivered energy is capable of being distinct as a customer could benefit from each on its own by using/consuming it as a part of its operations.
The acquisition closed on October 21, 2022. The acquisition is being accounted for as an asset acquisition under ASC 805 - 50 as substantially all of the fair value of the gross assets acquired are concentrated in a group of similar identifiable assets.
The acquisition closed on October 21, 2022. The acquisition was accounted for as an asset acquisition under ASC Topic 805 - 50, Business Combinations as substantially all of the fair value of the gross assets acquired are concentrated in a group of similar identifiable assets.
If this review indicates that the carrying value of the asset will not be recoverable through estimated undiscounted future net cash flows related to the asset over its remaining life, then an impairment loss is recognized by reducing the carrying value of the asset to its estimated fair value. See Note 2 for further discussion of impairments.
If this review indicates that the carrying value of the asset will not be recoverable through estimated undiscounted future net cash flows related to the asset over its remaining life, then an impairment loss is recognized by reducing the carrying value of the asset to its estimated fair value.
Disaggregation of Revenue Revenue is disaggregated by primary geographic markets, as we believe this best depicts how the nature, amount, timing, and uncertainty of our revenue and cash flows are affected by economic factors.
Disaggregation of Revenue Revenue is disaggregated by primary geographic markets for our coal operations and by revenue source for our electric operations, as we believe this best depicts how the nature, amount, timing, and uncertainty of its revenue and cash flows are affected by economic factors.
During the year ended December 31, 2022, amortization of the power purchase agreement contract liability totaled $23.3 million. The Power Purchase Agreement term is from October 22, 2022 to December 31, 2025. The Capacity Payment Reductions occur on May 31, 2023 and November 30, 2023 in the amount of $7.5 million each.
During the years ended December 31, 2023 and 2022, amortization of the power purchase agreement contract liability totaled $70.5 million and $23.3 million, respectively. The Power Purchase Agreement term is from October 21, 2022 to December 31, 2025. The Capacity Payment Reductions occurred on May 31, 2023 and November 30, 2023 in the amount of $7.5 million each.
Tax returns filed with the IRS and state entities generally remain subject to examination for three years after filing.
Tax returns filed with the Internal Revenue Service and state entities generally remain subject to examination for three years after filing.
Under our RSU plan, participants are allowed to relinquish shares to pay for their required statutory income taxes. The outstanding RSUs have a valu e of $8.1 million based on the March 1, 2023 closing stock price of $7.65. For the years ended December 31, 2022 and 2021 stock-based compensation was $1.3 million and $1.0 million, respectively.
Under our RSU plan, participants are allowed to relinquish shares to pay for their required statutory income taxes. The outstanding RSUs have a value of $7.2 million based on the March 8, 2024 closing stock price of $8.39. For the years ended December 31, 2023 and 2022, stock-based compensation was $3.6 million and $1.3 million, respectively.
The carrying value of the investment included in our consolidated balance sheets as of December 31, 2022 and 2021 was $4.0 million and $3.5 million, respectively. 64 Table of Contents ( 16 ) MEROM ACQUISITION On February 14, 2022, Hallador Power signed an Asset Purchase Agreement (“APA”), with Hoosier, a rural electric membership corporation organized and existing under the laws of the state of Indiana.
The carrying value of the investment included in the consolidated balance sheets as of December 31, 2023 and 2022 was $2.8 million and $4.0 million, respectively. 63 Table of Contents ( 15 ) MEROM ACQUISITION On February 14, 2022, Hallador Power signed an Asset Purchase Agreement (“APA”), with Hoosier, a rural electric membership corporation organized and existing under the laws of the state of Indiana.
Our mine employees are also covered by workers’ compensation and such costs for 2022 and 2021 , were approximately $4.9 million and $2.9 million, respectively, and are recorded in operating expenses. Workers’ compensation is a no -fault system by which individuals who sustain work-related injuries or occupational diseases are compensated.
Our mine employees are also covered by workers’ compensation and such costs were approximately $4.9 million for 2023 and 2022, and are recorded in operating expenses in the consolidated statements of operations. Workers’ compensation is a no -fault system by which individuals who sustain work-related injuries or occupational diseases are compensated.
Our customers typically purchase coal directly from our mine sites or our rail facility in Princeton, Indiana, where the sale occurs and where title, risk of loss, and control pass to the customer at that point. Our customers arrange for and bear the costs of transporting their coal from our mines to their plants or other specified discharge points.
Our customers typically purchase coal directly from our mine sites where the sale occurs and where title, risk of loss, and control pass to the customer at that point. Our customers arrange for and bear the costs of transporting their coal from our mines to their plants or other specified discharge points. Our customers are typically domestic utility companies.
The tax rate for the years ended December 31, 2022 and 2021 are not predictive of future tax rates. Our ETR differs from the statutory rate due to statutory depletion in excess of tax basis, PPP loan forgiveness, return to provision adjustments, and changes in the valuation allowance.
The tax rate for the years ended December 31, 2023 and 2022 are not predictive of future tax rates. Our ETR differs from the statutory rate due to statutory depletion in excess of tax basis, return to provision adjustments, stock-based compensation and changes in the valuation allowance.
The remainder of our operations, which are not significant enough on a stand-alone basis to warrant treatment as an operating segment, are presented as "Corporate and Other and Eliminations" and primarily are comprised of unallocated corporate costs and activities, including a 50% interest in Sunrise Energy, LLC, a private gas exploration company with operations in Indiana, which we account for using the equity method and our wholly-owned subsidiary Summit Terminal LLC, a logistics transport facility located on the Ohio River.
The remainder of our operations, which are not significant enough on a stand-alone basis to warrant treatment as an operating segment, are presented as “Corporate and Other and Eliminations” and primarily are comprised of unallocated corporate costs and activities, including a 50% interest in Sunrise Energy, which is accounted for using the equity method and our wholly-owned subsidiary Summit Terminal LLC, a logistics transport facility located on the Ohio River.
As of December 31, 2022 , and December 31, 2021 , coal inventory includes NRV adjustments of $4.9 million and $3.8 million, respectively. 55 Table of Contents ( 4 ) OTHER LONG-TERM ASSETS (IN THOUSANDS) December 31, 2022 2021 Advanced coal royalties $ 5,967 $ 6,678 Other 1,618 1,694 Total other assets $ 7,585 $ 8,372 ( 5 ) BANK DEBT On March 25, 2022, we executed an amendment to our credit agreement with PNC Bank, National Association (in its capacity as administrative agent, "PNC"), administrative agent for our lenders under our credit agreement.
As of December 31, 2023 , and 2022, coal inventory includes NRV adjustments of $2.0 million and $4.9 million, respectively. 54 Table of Contents ( 3 ) OTHER LONG-TERM ASSETS (IN THOUSANDS) December 31, 2023 2022 Advanced coal royalties $ 5,521 $ 5,967 Other 1,540 1,618 Total other assets $ 7,061 $ 7,585 ( 4 ) BANK DEBT On March 25, 2022, we executed an amendment to our credit agreement with PNC Bank, National Association (in its capacity as administrative agent, “PNC”), administrative agent for its lenders under its credit agreement.
For 2022 , we derived 90% of our coal sales from five customers, each representing at least 10% of our coal sales. 86% of our coal operations accounts receivable was from four customers, each representing more than 10% of the December 31, 2022 balance. 100% of our electric sales and accounts receivable were with one customer.
At December 31, 2022, 86% of our coal operations accounts receivable was from four customers, each representing more than 10%. For the year ended December 31, 2022, 100% of our electric sales and accounts receivable was with one customer.
Price adjustments are made and billed in the month the coal sale was recognized based on quality standards that are specified in the coal sales agreement, such as Btu factor, moisture, ash, and sulfur content, and can result in either increases or decreases in the value of the coal shipped. 58 Table of Contents Electric operations The Company concluded that the definition of a contract and the criteria in ASC 606, Revenue from Contracts with Customers ("ASC 606" ), was met at the time the PPA was executed by the parties, as this is the point at which enforceable rights and obligations were established.
Price adjustments are made and billed in the month the coal sale was recognized based on quality standards that are specified in the coal sales agreement, such as British thermal unit (“Btu”) factor, moisture, ash, and sulfur content, and can result in either increases or decreases in the value of the coal shipped. 57 Table of Contents Electric operations We concluded that for a Power Purchase Agreement (“PPA”) that is not determined to be a lease or derivative, the definition of a contract and the criteria in ASC 606, Revenue from Contracts with Customers (“ASC 606” ), is met at the time a PPA is executed by the parties, as this is the point at which enforceable rights and obligations are established.
( 13 ) NET INCOME (LOSS) PER SHARE The following table (in thousands, except per share amounts) sets forth the computation of basic net income (loss) per share: Year Ended December 31, 2022 2021 Basic earnings per common share: Net income (loss) - basic $ 18,105 $ (3,754 ) Weighted average shares outstanding - basic 32,043 30,614 Basic earnings (loss) per common share $ 0.57 $ (0.12 ) The following table (in thousands, except per share amounts) sets forth the computation of diluted net income (loss) per share: Year Ended December 31, 2022 2021 Diluted earnings per common share: Net income (loss) - basic $ 18,105 $ (3,754 ) Add: Convertible Notes interest expense, net of tax 527 - Net income (loss) - diluted $ 18,632 $ (3,754 ) Weighted average shares outstanding - basic $ 32,043 $ 30,614 Add: Dilutive effects of if converted Convertible Notes 1,398 - Add: Dilutive effects of Restricted Stock Units 208 - Weighted average shares outstanding - diluted 33,649 30,614 Diluted net income (loss) per share $ 0.55 $ (0.12 ) 63 Table of Contents ( 14 ) FAIR VALUE MEASUREMENTS We account for certain assets and liabilities at fair value.
( 12 ) NET INCOME PER SHARE The following table (in thousands, except per share amounts) sets forth the computation of basic earnings per share for the periods presented: Year Ended December 31, 2023 2022 Basic earnings per common share: Net income - basic $ 44,793 $ 18,105 Weighted average shares outstanding - basic 33,133 32,043 Basic earnings per common share $ 1.35 $ 0.57 The following table (in thousands, except per share amounts) sets forth the computation of diluted net income per share: Year Ended December 31, 2023 2022 Diluted earnings per common share: Net income - basic $ 44,793 $ 18,105 Add: Convertible Notes interest expense, net of tax 1,201 527 Net income - diluted $ 45,994 $ 18,632 Weighted average shares outstanding - basic 33,133 32,043 Add: Dilutive effects of if converted Convertible Notes 3,164 1,398 Add: Dilutive effects of Restricted Stock Units 530 208 Weighted average shares outstanding - diluted 36,827 33,649 Diluted net earnings per share $ 1.25 $ 0.55 62 Table of Contents ( 13 ) FAIR VALUE MEASUREMENTS We account for certain assets and liabilities at fair value.
The most significant estimates included in the preparation of the financial statements relate to: (i) deferred income tax accounts, (ii) coal reserves, (iii) depreciation, depletion, and amortization, (iv) estimates related to the Merom Acquisition, (v) estimates used in our impairment analysis and measurement of impairments, and (vi) estimates used in the calculation of our asset retirement obligations.
Actual amounts could differ from those estimates. The most significant estimates included in the preparation of the financial statements relate to: (i) deferred income tax accounts, (ii) coal reserves, (iii) depreciation, depletion, and amortization, (iv) estimates related to the Merom Acquisition, (v) estimates used in our impairment analysis, and (vi) estimates used in the calculation of ARO.
We have remaining coal sales performance obligations relating to fixed priced contracts of approximately $593 million, which represent the average fixed prices on our committed contracts as of December 31, 2022 . We expect to recognize approximately 75% of this coal sales revenue in 2023, with the remainder recognized thereafter.
We have remaining coal sales performance obligations relating to fixed priced contracts to third -party customers of approximately $324 million, which represent the average fixed prices on our committed contracts as of December 31, 2023. We expect to recognize approximately 55% of this coal sales revenue in 2024, with the remainder recognized through 2027.
The federal NOLs generated in post 2017 years of $60.7 million can offset 80% of future years' taxable income. The pre- 2018 federal NOLs will expire in varying amounts from 2035 to 2037 if they are not utilized. Indiana NOLs have a 20 -year carryforward period and will expire in the years 2034 to 2041 if they are not utilized.
The federal NOLs generated in pre- 2018 years and remaining of $13.4 million can offset 100% of future years' taxable income. The federal NOLs generated in post 2017 years of $60.7 million can offset 80% of future years' taxable income. The pre- 2018 federal NOLs will expire in varying amounts from 2035 to 2037 if they are not utilized.
As of January 1, 2021, accounts receivable for coal sales billed to customers was $12.8 million. We do not current ly have any other contracts in place where we would transfer coal, electricity or capacity in advance of knowing the final price, and thus do not have any other contract assets recorded.
As of December 31, 2023, accounts receivable for coal sales billed to customers was $14.3 million. We do not currently have any other contracts in place where it would transfer coal, electricity or capacity in advance of knowing the final price, and thus do not have any other contract assets recorded.
Interest Rate Swaps The Company generally utilizes derivative instruments to manage exposures to interest rate risk on long-term debt. The Company enters interest rate swaps in order to achieve a mix of fixed and variable rate debt that it deems appropriate.
Interest Rate Swaps We have historically utilized derivative instruments to manage exposures to interest rate risk on long-term debt. We enter interest rate swaps in order to achieve a mix of fixed and variable rate debt that it deems appropriate.
The deferred revenue for each will be reversed to revenue on a monthly pro-rata basis for the capacity payments and as coal is delivered for the coal prepayments based upon the underlying contractual terms. All deferred revenue is expected to be recognized in revenue within one year.
Deferred Revenue Deferred revenue includes advance payments on electric capacity payments and prepayments on coal deliveries. The deferred revenue for each will be reversed to revenue on a monthly pro-rata basis for the capacity payments and as coal is delivered for the coal prepayments based upon the underlying contractual terms.
Due to historical cumulative earnings over the prior 3 years as well as projected earnings into the future, the Company believes that it is more likely than not that the benefit from certain federal and state deferred tax assets will be realized. As such, the Company has released a portion of its valuation allowance in the current year.
Due to historical cumulative earnings over the prior three years as well as projected earnings into the future, we believe that it is more likely than not that the benefit from certain federal and state deferred tax assets will be realized. As such, we released the valuation allowance as of December 31, 2023.
Contract Asset - Coal Purchase Agreement Contract Asset - Coal Purchase Agreement is the result of a coal purchase agreement with Hoosier whereby we are purchasing coal from Hoosier through May 31, 2023 at fixed prices which were below market prices at the date we entered into the agreement. This agreement was entered into as consideration in the Merom Acquisition.
Contract Asset - Coal Purchase Agreement Contract Asset - Coal Purchase Agreement (as defined in Note 15 ) is the result of a coal purchase agreement with Hoosier whereby we purchased coal from Hoosier through May 31, 2023, at fixed prices which were below market prices at the date of entry into the agreement.
Beginning August 18, 2025, the Company may elect to redeem the note and the holder shall be obligated to surrender the note at 100% of the outstanding principal balance together with any accrued unpaid interest.
Beginning August 18, 2025, we may elect to redeem the Note and the holder shall be obligated to surrender the note at 100% of the outstanding principal balance together with any accrued unpaid interest. Upon receipt of the redemption notice from us, the holder may elect to convert the principal balance and accrued interest into the Company's common stock.
Beginning August 12, 2025, the Company may elect to redeem the note and the holder shall be obligated to surrender the note at 100% of the outstanding principal balance together with any accrued unpaid interest.
Beginning August 12, 2025, we may elect to redeem the Note and the holder shall be obligated to surrender the Note at 100% of the outstanding principal balance together with any accrued unpaid interest. Upon receipt of the redemption notice from us, the holder may elect to convert the principal balance and accrued interest into the Company's common stock.
( 10 ) EMPLOYEE BENEFITS Our employee benefit expenses for the years ended December 31 are below (in thousands): 2022 2021 Health benefits, including premiums $ 14,607 $ 13,084 401(k) matching 2,549 1,946 Deferred bonus plan 809 698 Total $ 17,965 $ 15,728 Of the amounts in the above table, $17.4 million and $15.2 million are recorded in operating expenses for 2022 and 2021 , respectively with the remainder in general and administrative.
( 9 ) EMPLOYEE BENEFITS Our employee benefit expenses for the years ended December 31 are below (in thousands): 2023 2022 Health benefits, including premiums $ 18,483 $ 14,607 401(k) matching 2,910 2,549 Deferred bonus plan 687 809 Total $ 22,080 $ 17,965 Of the amounts in the above table, $21.5 million and $17.4 million are recorded in operating expenses in the consolidated statements of operations for the years ended December 31, 2023 and 2022, respectively, with the remainder in general and administrative.
( 6 ) ACCOUNTS PAYABLE AND ACCRUED LIABILITIES (IN THOUSANDS) December 31, 2022 2021 Accounts payable $ 62,306 $ 27,835 Accrued property taxes 1,917 2,529 Accrued payroll 5,933 2,413 Workers' compensation reserve 3,440 2,560 Group health insurance 2,250 1,800 Fair value of interest rate swaps — 867 Asset retirement obligation - current portion 3,580 100 Other 3,546 3,424 Total accounts payable and accrued liabilities $ 82,972 $ 41,528 ( 7 ) REVENUE Revenue from Contracts with Customers We account for a contract with a customer when the parties have approved the contract and are committed to performing their respective obligations, the rights of each party are identified, payment terms are identified, the contract has commercial substance, and it is probable substantially all of the consideration will be collected.
Future Maturities (in thousands): 2024 26,000 2025 26,000 2026 39,500 Total $ 91,500 56 Table of Contents ( 5 ) ACCOUNTS PAYABLE AND ACCRUED LIABILITIES (IN THOUSANDS) December 31, 2023 2022 Accounts payable $ 43,636 $ 62,306 Accrued property taxes 2,987 1,917 Accrued payroll 6,575 5,933 Workers' compensation reserve 3,629 3,440 Group health insurance 2,300 2,250 Asset retirement obligation - current portion 2,150 3,580 Other 1,631 3,546 Total accounts payable and accrued liabilities $ 62,908 $ 82,972 ( 6 ) REVENUE Revenue from Contracts with Customers We account for a contract with a customer when the parties have approved the contract and are committed to performing their respective obligations, the rights of each party are identified, payment terms are identified, the contract has commercial substance, and it is probable substantially all of the consideration will be collected.
Our additional borrowing capacity is net of $11.2 million in outstanding letters of credit as of December 31, 2022 that were required to maintain surety bonds. Liquidity consists of our additional borrowing capacity and cash and cash equivalents.
Liquidity As of December 31, 2023, we had additional borrowing capacity of $23.4 million under the revolver and total liquidity of $26.2 million. Our additional borrowing capacity is net of $18.6 million in outstanding letters of credit as of December 31, 2023 that were required to maintain surety bonds. Liquidity consists of additional borrowing capacity and cash and cash equivalents.
( 9 ) STOCK COMPENSATION PLANS Restricted Stock Units (RSUs) The table below shows the number of RSUs available for issuance at December 31, 2022 : Total authorized RSUs in Plan approved by shareholders 4,850,000 Stock issued out of the Plan from vested grants (3,265,829 ) Non-vested grants (1,056,937 ) RSUs available for future issuance 527,234 Non-vested grants at December 31, 2020 324,250 Granted – weighted average share price on grant date was $ 2.46 173,000 Vested – weighted average share price on vesting date was $ 2.27 (296,250 ) Forfeited (18,000 ) Non-vested grants at December 31, 2021 183,000 Granted – weighted average share price on grant date was $ 6.74 881,437 Vested — Forfeited (7,500 ) Non-vested grants at December 31, 2022 1,056,937 RSU Vesting Schedule Vesting Year RSUs Vesting 2023 457,721 2024 299,608 2025 299,608 61 Table of Contents Vested shares had a value of $0.7 million for 2021 , on their vesting dates.
( 8 ) STOCK COMPENSATION PLANS Restricted Stock Units (RSUs) The table below shows the number of RSUs available for issuance at December 31, 2023 : Total authorized RSUs in Plan approved by shareholders 4,850,000 Stock issued out of the Plan from vested grants (3,540,178 ) Non-vested grants (858,363 ) RSUs available for future issuance 451,459 Non-vested grants at December 31, 2021 183,000 Granted – weighted average share price on grant date was $6.74 881,437 Vested — Forfeited (7,500 ) Non-vested grants at December 31, 2022 1,056,937 Granted – weighted average share price on grant date was $9.30 312,147 Vested (472,721 ) Forfeited (38,000 ) Non-vested grants at December 31, 2023 858,363 RSU Vesting Schedule Vesting Year RSUs Vesting 2024 319,419 2025 538,944 60 Table of Contents Shares vested in 2023 had a value of $5.0 million based on the share price of $10.69 on their vesting dates.
Under the provision of the latest amendment, bank debt is comprised of term debt ($40.5 million as of December 31, 2022) and a $85 million revolver ($44.7 million borrowed as of December 31, 2022). The term debt requires payment of $5.5 million in March 2023 and $10 million each quarter thereafter in 2023 and $5.0 million by March 31, 2024.
Under the provision of the March 13, 2023 amendment, bank debt was comprised of term debt ($35.0 million as of March 13, 2023) and an $85 million revolver ($40.2 million borrowed as of March 13, 2023). The term debt required payment of $10 million in June 2023 each quarter thereafter in 2023 and $5.0 million by March 31, 2024.
As of December 31, 2022 , our Debt Service Coverage Ratio of 1.49 was in compliance with the requirements of the credit agreement. Interest Rate The interest rate on the facility ranges from LIBOR plus 2.75% to LIBOR plus 4.00%, depending on our Leverage Ratio, with a LIBOR floor of 0.50%.
As of December 31, 2023 , our Debt Service Coverage Ratio of 3.30 was in compliance with the requirements of the credit agreement. Interest Rate The interest rate on the facility ranges from SOFR plus 4.00% to SOFR plus 5.00%, depending on our Leverage Ratio.
( 12 ) SELF INSURANCE We self-insure our underground mining equipment. Such equipment is allocated among seven mining units dispersed over 10 miles. The historical cost of such equipment was approximately $280 million and $260 million as of December 31, 2022 and December 31, 2021 , respectively.
Such equipment is allocated among seven mining units dispersed over 11 miles. The historical cost of such equipment was approximately $262 million and $280 million as of December 31, 2023 and 2022, respectively.
Certain properties' asset retirement obligation liabilities use Level 3 non-recurring fair value measures as further discussed in Note 1. Lastly, Level 3 fair value measurements were also used in the determination of the fair values of assets acquired, liabilities assumed and considerations exchanged as part of the Merom Acquisition.
Lastly, Level 3 fair value measurements were also used in the determination of the fair values of assets acquired, liabilities assumed, and considerations exchanged as part of the Merom Acquisition.
The note carries an interest rate of 8% per annum with a maturity date of December 31, 2026. For the period August 18, 2022 through the maturity date, the holder has the option to convert the notes into shares of the Company's common stock at a conversion price of $6.15.
For the period August 18, 2022, through the maturity date, the holder has the option to convert the Note into shares of our common stock at a conversion price of $6.15.
The Electric Operations reportable segment includes electric power generation facilities of the Merom Power Plant. Accounts Receivable The timing of revenue recognition, billings and cash collections results in accounts receivable from customers. Customers are invoiced as coal is shipped or as power is delivered or at periodic intervals in accordance with contractual terms.
The Company has not experienced any material losses in such accounts. Accounts Receivable The timing of revenue recognition, billings and cash collections results in accounts receivable from customers. Customers are invoiced as coal is shipped or as power is delivered or at periodic intervals in accordance with contractual terms.
Beginning August 8, 2025, the Company may elect to redeem the note and the holder shall be obligated to surrender the note at 100% of the outstanding principal balance together with any accrued unpaid interest.
Beginning August 8, 2025, we may elect to redeem the Notes and the holder shall be obligated to surrender the Notes at 100% of the outstanding principal balance together with any accrued unpaid interest. Upon receipt of the redemption notice from us, the holder may elect to convert the principal balance and accrued interest into the Company's common stock.
The notes carry an interest rate of 8% per annum with a maturity date of December 29, 2028. For the period August 18, 2022 through August 17, 2024, the holder has the option to convert the notes into shares of the Company's common stock at a conversion price of $6.254.
For the period August 18, 2022 through August 17, 2024, the holder has the option to convert the Notes into shares of our common stock at a conversion price of $6.254.
Income Taxes Income taxes are provided based on the liability method of accounting. The provision for income taxes is based on pretax financial income.
The provision for income taxes is based on pretax financial income.
As of December 31, 2022, unrecognized stock compensation expense is $5.1 million, and we had 527,234 RSUs available for future issuance. RSUs are not allocated earnings and losses as they are considered non-participating securities. Stock Options We have no stock options outstanding. Stock Bonus Plan Our stock bonus plan was authorized in late 2009 with 250,000 shares.
As of December 31, 2023, unrecognized stock compensation expense was $4.1 million, and we had 451,459 RSUs available for future issuance. RSUs are not allocated earnings and losses as they are considered non-participating securities. Stock Options We have no stock options outstanding.
Level 3: Measured based on prices or valuation models that require inputs that are both significant to the fair value measurement and less observable from objective sources (i.e., supported by little or no market activity). Our Level 3 instruments are comprised of interest rate swaps and impairment measurements.
Level 3: Measured based on prices or valuation models that require inputs that are both significant to the fair value measurement and less observable from objective sources (i.e., supported by little or no market activity). ARO liabilities use Level 3 non-recurring fair value measures as further discussed in Note 1.
Long-term Contracts As of December 31, 2022 , we are committed to supplying our customers up to a maximum of 14.8 million tons of coal through 2027 of which 10.8 million tons are priced.
Long-term Contracts As of December 31, 2023 , we are committed to supplying third -party customers up to a maximum of 9.2 million tons of coal through 2027, of which 6.2 million tons are priced. We are committed to supplying coal to Merom Power Plant up to a maximum of 10.7 million tons of coal through 2028.
Unamortized costs as of December 31, 2022, and December 31, 2021, were $2.5 million and $4.0 million, respectively. 56 Table of Contents Bank debt, less debt issuance costs, is presented below (in thousands): December 31, 2022 2021 Current bank debt $ 35,500 $ 25,725 Less unamortized debt issuance cost (2,469 ) (2,627 ) Net current portion $ 33,031 $ 23,098 Long-term bank debt $ 49,713 $ 86,013 Less unamortized debt issuance cost — (1,346 ) Net long-term portion $ 49,713 $ 84,667 Total bank debt $ 85,213 $ 111,738 Less total unamortized debt issuance cost (2,469 ) (3,973 ) Net bank debt $ 82,744 $ 107,765 Covenants The credit facility includes a Maximum Leverage Ratio (consolidated funded debt / trailing twelve months adjusted EBITDA), calculated as of the end of each fiscal quarter for the trailing twelve months, not to exceed the amounts below: Fiscal Periods Ending Ratio December 31, 2022 2.50 to 1.00 March 31, 2023, and each fiscal quarter thereafter 2.25 to 1.00 As of December 31, 2022 , our Leverage Ratio of 2.05 was in compliance with the requirements of the credit agreement.
Unamortized costs as of December 31, 2023, and December 31, 2022 were $3.6 million and $2.5 million, respectively. 55 Table of Contents Bank debt, less debt issuance costs, is presented below (in thousands): December 31, 2023 2022 Current bank debt $ 26,000 $ 35,500 Less unamortized debt issuance cost (1,562 ) (2,469 ) Net current portion $ 24,438 $ 33,031 Long-term bank debt $ 65,500 $ 49,713 Less unamortized debt issuance cost (2,047 ) — Net long-term portion $ 63,453 $ 49,713 Total bank debt $ 91,500 $ 85,213 Less total unamortized debt issuance cost (3,609 ) (2,469 ) Net bank debt $ 87,891 $ 82,744 Covenants The credit facility includes a Maximum Leverage Ratio (consolidated funded debt / trailing twelve months adjusted EBITDA), calculated as of the end of each fiscal quarter for the trailing twelve months, not to exceed 2.25 to 1.00.
Fees Unamortized bank fees and other costs incurred in connection with the initial facility and subsequent amendments totaled $4.0 million as of December 31, 2021. Additional costs incurred with the March 25, 2022, May 20, 2022, and August 5, 2022 amendments totaled $2.1 million. These costs were deferred and are being amortized over the term of the loan.
Fees Unamortized bank fees and other costs incurred in connection with the initial facility and subsequent amendments totaled $2.5 million as of December 31, 2022. Additional costs incurred with the March 13, 2023 and August 2, 2023 amendments totaled $1.6 million and $4.3 million, respectively.
For substantially all of our customers, this is supported by the fact that title and risk of loss transfer to the customer upon loading of the truck or railcar at the mine.
We recognize revenue at a point in time as the customer does not have control over the asset at any point during the fulfillment of the contract. For substantially all of our customers, this is supported by the fact that title and risk of loss transfer to the customer upon loading of the truck or railcar at the mine.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeAny adverse change in these factors could result in weaker demand and lower prices for our products. A substantial or extended decline in coal prices could materially and adversely affect us by decreasing our revenues to the extent we are not protected by the terms of existing coal supply agreements.
Biggest changeWith respect to our coal operations, a substantial or extended decline in coal prices could materially and adversely affect us by decreasing our revenues to the extent we are not protected by the terms of existing coal supply agreements (although the adverse impact of a decline in coal prices may in some cases be offset by lower coal prices we pay in our electric operations).
Such events could include labor disputes, mechanical malfunctions and changes in government regulations, including changes in environmental regulations rendering use of our coal inconsistent with the customer’s environmental compliance strategies. Additionally, most of our long-term contracts contain provisions requiring us to deliver coal within stated ranges for specific coal characteristics.
Such events could include labor disputes, mechanical malfunctions and changes in government regulations, including changes in environmental regulations rendering use of our coal inconsistent with the customer’s environmental compliance strategies. Additionally, most of our long-term coal contracts contain provisions requiring us to deliver coal within stated ranges for specific coal characteristics.
In addition, if a customer refuses to accept shipments of our coal for which they have an existing contractual obligation, our revenues will decrease, and we may have to reduce production at our mines until our customer’s contractual obligations are honored. Although none of our employees are members of unions, our workforce may not remain union-free in the future.
In addition, if a customer refuses to accept shipments of our coal for which they have an existing contractual obligation, our revenues will decrease, and we may have to reduce production at our mines until our customer’s contractual obligations are honored. Although none of our coal employees are members of unions, our workforce may not remain union-free in the future.
The Company entered into the Asset Purchase Agreement with the expectation that the acquisition of Merom would result in various benefits, including, among other things, securing future demand for a material portion of the Company’s coal production and also providing a path for Merom’s transition to renewable energy when the coal plant is eventually retired.
The Company entered into the Asset Purchase Agreement with the expectation that the acquisition of Merom would result in various benefits, including, among other things, securing future demand for a material portion of the Company’s coal production and also providing a path for Merom’s possible transition to renewable energy when the coal plant is eventually retired.
In addition, certain organizations that provide corporate governance and other corporate risk information to investors have developed scores and ratings to evaluate companies and investment funds based upon ESG or "sustainability" metrics. Currently, there are no universal standards for such scores or ratings, but consideration of sustainability evaluations is becoming more broadly accepted by investors.
In addition, certain organizations that provide corporate governance and other corporate risk information to investors have developed scores and ratings to evaluate companies and investment funds based upon ESG or “sustainability” metrics. Currently, there are no universal standards for such scores or ratings, but consideration of sustainability evaluations is becoming more broadly accepted by investors.
Further, as cyber incidents continue to evolve, we could be required to expend additional resources to continue to modify or enhance our protective measures or to investigate and remediate any vulnerability to cyber incidents. 17 Table of Contents We may not recover our investments in our mining and other assets, which may require us to recognize impairment charges related to those assets.
Further, as cyber incidents continue to evolve, we could be required to expend additional resources to continue to modify or enhance our protective measures or to investigate and remediate any vulnerability to cyber incidents. 17 Table of Contents We may not recover our investments in our mining, power and other assets, which may require us to recognize impairment charges related to those assets.
Some of our long-term sales contracts contain provisions that allow for the purchase price to be renegotiated at periodic intervals. These price reopener provisions may automatically set a new price based on the prevailing market price or, in some instances, require the parties to the contract to agree on a new price.
Some of our long-term coal sales contracts contain provisions that allow for the purchase price to be renegotiated at periodic intervals. These price reopener provisions may automatically set a new price based on the prevailing market price or, in some instances, require the parties to the contract to agree on a new price.
The geological characteristics of some of our coal reserves, such as depth of overburden and coal seam thickness, make them difficult and costly to mine. As mines become depleted, replacement reserves may not be available when required or, if available, may not be mineable at costs comparable to those characteristic of the depleting mines.
The geological characteristics of some of our coal reserves, such as depth of overburden and coal seam thickness, make them difficult and costly to mine. As mines become depleted, replacement reserves may not be available when required or, if available, may not be mineable at costs comparable to those characteristics of the depleting mines.
On October 21, 2022, the Company, through its subsidiary Hallador Power Company, LLC, completed its acquisition of the one Gigawatt Merom Generating Station located in Sullivan County, Indiana pursuant to an Asset Purchase Agreement with Hoosier Energy.
On October 21, 2022, the Company, through its subsidiary Hallador Power, completed its acquisition of the one Gigawatt Merom Generating Station located in Sullivan County, Indiana pursuant to an Asset Purchase Agreement with Hoosier Energy.
In late 2020, the Federal Reserve announced it had joined the Network for Greening the Financial System ("NGFS"), a consortium of financial regulators focused on addressing climate-related risks in the financial sector, and, in September 2022, announced that six of the U.S.' largest banks will participate in a pilot climate scenario analysis to enhance the ability of firms and supervisors to measure and manage climate-related financial risk.
In late 2020, the Federal Reserve announced it had joined the Network for Greening the Financial System (“NGFS”), a consortium of financial regulators focused on addressing climate-related risks in the financial sector, and, in September 2022, announced that six of the U.S.’ largest banks will participate in a pilot climate scenario analysis to enhance the ability of firms and supervisors to measure and manage climate-related financial risk.
Supreme Court finding that GHG emissions constitute a pollutant under the CAA, the EPA has adopted regulations that, among other things, establish construction and operating permit reviews for GHG emissions from certain large stationary sources, require the monitoring and annual reporting of GHG emissions from certain sources in the United States, or constrain the emissions of power plants (though such emissions restraints have been subject to challenge.) Separately, various states and groups of states have adopted or are considering adopting legislation, regulations, or other regulatory initiatives that are focused on such areas as GHG cap-and-trade programs, carbon taxes, reporting and tracking programs, and restriction of emissions.
Supreme Court finding that GHG emissions constitute a pollutant under the CAA, the EPA has adopted regulations that, among other things, establish construction and operating permit reviews for GHG emissions from certain large stationary sources, require the monitoring and annual reporting of GHG emissions from certain sources in the U.S., or constrain the emissions of power plants (though such emissions restraints have been subject to challenge.) Separately, various states and groups of states have adopted or are considering adopting legislation, regulations, or other regulatory initiatives that are focused on such areas as GHG cap-and-trade programs, carbon taxes, reporting and tracking programs, and restriction of emissions.
These factors may trigger the recognition of additional impairment charges in the future, which could have a substantial impact on our results of operations.
These factors may trigger the recognition of additional impairment charges in the future, which could have a substantial impact on our results of coal operations.
Indeed, many investment funds focus on positive ESG business practices and sustainability scores when making investments, whereas other funds may use certain ESG criteria to "screen" certain sectors, such as coal or fossil fuels more generally, out of their investments.
Indeed, many investment funds focus on positive ESG business practices and sustainability scores when making investments, whereas other funds may use certain ESG criteria to “screen” certain sectors, such as coal or fossil fuels more generally, out of their investments.
The prices we receive for our production depends upon factors beyond our control, including: ● the supply of and demand for domestic and foreign coal; ● weather conditions and patterns that affect demand for or our ability to produce coal; ● the proximity to and capacity of transportation facilities; ● supply chain and cost of raw materials for coal operations; ● competition from other coal suppliers; ● domestic and foreign governmental regulations and taxes; ● the price and availability of alternative fuels; ● the effect of worldwide energy consumption, including the impact of technological advances on energy consumption; ● overall domestic and global economic conditions; ● the adverse impact of the COVID-19 pandemic due to the reduction in demand; ● international developments impacting supply of coal; and ● the impact of domestic and foreign governmental laws and regulations, including environmental and climate change regulations and regulations affecting the coal mining industry and coal-fired power plants, and delays in the receipt of, failure to receive, failure to maintain or revocation of necessary governmental permits.
These prices depend upon factors beyond our control, including: ● the supply of and demand for domestic and foreign coal; ● weather conditions and patterns that affect demand for or our ability to produce coal; ● the proximity to and capacity of transportation facilities; ● supply chain and cost of raw materials for coal operations; ● competition from other coal suppliers; ● domestic and foreign governmental regulations and taxes; ● the price and availability of alternative fuels; ● the effect of worldwide energy consumption, including the impact of technological advances on energy consumption; ● overall domestic and global economic conditions; ● the adverse impact of the COVID-19 pandemic due to the reduction in demand; ● international developments impacting supply of coal; and ● the impact of domestic and foreign governmental laws and regulations, including environmental and climate change regulations and regulations affecting the coal mining industry and coal-fired power plants, and delays in the receipt of, failure to receive, failure to maintain or revocation of necessary governmental permits.
The value of our assets has from time to time been adversely affected by numerous uncertain factors, some of which are beyond our control, including unfavorable changes in the economic environments in which we operate, lower-than-expected coal pricing, technical and geological operating difficulties, an inability to economically extract our coal reserves and unanticipated increases in operating costs.
The value of our assets has from time to time been adversely affected by numerous uncertain factors, some of which are beyond our control, including, but not limited to unfavorable changes in the economic environments in which we operate, lower-than-expected coal pricing, technical and geological operating difficulties, an inability to economically extract our coal reserves and unanticipated increases in operating costs.
Public statements with respect to ESG matters, such as emission reduction goals, other environmental targets, or other commitments addressing certain social issues, are becoming increasingly subject to heightened scrutiny from public and governmental authorities related to the risk of potential "greenwashing," i.e., misleading information or false claims overstating potential ESG benefits.
Public statements with respect to ESG matters, such as emission reduction goals, other environmental targets, or other commitments addressing certain social issues, are becoming increasingly subject to heightened scrutiny from public and governmental authorities related to the risk of potential “greenwashing,” i.e., misleading information or false claims overstating potential ESG benefits.
For example, at COP26, the Glasgow Financial Alliance for Net Zero ("GFANZ") announced that commitments from over 450 firms across 45 countries had resulted in over $130 trillion in capital committed to net zero goals.
For example, at COP26, the Glasgow Financial Alliance for Net Zero (“GFANZ”) announced that commitments from over 450 firms across 45 countries had resulted in over $130 trillion in capital committed to net zero goals.
From time to time industry conditions could make it more difficult for us to enter into long-term contracts with our electric utility customers, and if supply exceeds demand in the coal industry, electric utilities may become less willing to lock in price or quantity commitments for an extended period of time.
From time to time industry conditions could make it more difficult for us to enter into long-term contracts with our electric utility customers, and if supply exceeds demand in the coal and power industries, our customers may become less willing to lock in price or quantity commitments for an extended period of time.
While tariffs and other retaliatory trade measures imposed by other countries on United States goods have not yet had a significant impact on our business or results of operations, we cannot predict further developments, and such existing or future tariffs could have a material adverse effect on our results of operations, financial position and cash flows and could reduce our revenues and cash available for distribution.
While tariffs and other retaliatory trade measures imposed by other countries on U.S. goods have not yet had a significant impact on our business or results of operations, we cannot predict further developments, and such existing or future tariffs could have a material adverse effect on our results of operations, financial position and cash flows and could reduce our revenues and cash available for distribution.
The United States, European Union and other large economies have recently experienced inflation at a rate significantly higher than recent years. Current and future inflationary effects may be driven by, among other things, governmental stimulus and monetary policies, supply chain disruptions and geopolitical instability, including the ongoing military conflict between Ukraine and Russia.
The U.S., European Union and other large economies have recently experienced inflation at a rate significantly higher than recent years. Current and future inflationary effects may be driven by, among other things, governmental stimulus and monetary policies, supply chain disruptions and geopolitical instability, including the ongoing military conflict between Ukraine and Russia.
Although we have not experienced any material adverse effect on our results of operations, financial condition or cash flows as a result of the war or the resulting volatility, such volatility, may significantly affect prices for our coal or the cost of supplies and equipment, as well as the prices of competing sources of energy for our electric power plant customers. 28 Table of Contents The war, trade and monetary sanctions, as well as any escalation of the conflict and future developments, could significantly affect worldwide market prices and demand for our coal and cause turmoil in the capital markets and generally in the global financial system.
Although we have not experienced any material adverse effect on our results of operations, financial condition or cash flows as a result of the war or conflict or the resulting volatility from such events, such volatility, may significantly affect prices for our coal or the cost of supplies and equipment, as well as the prices of competing sources of energy for our electric power plant customers. 28 Table of Contents These events, along with trade and monetary sanctions, as well as any escalation of the conflicts and future developments, could significantly affect worldwide market prices and demand for our coal and cause turmoil in the capital markets and generally in the global financial system.
The new tariffs, along with any additional tariffs or trade restrictions that may be implemented by the United States or retaliatory trade measures or tariffs implemented by other countries, could result in reduced economic activity, increased costs in operating our business, reduced demand and changes in purchasing behaviors for thermal coal, limits on trade with the United States or other potentially adverse economic outcomes.
The new tariffs, along with any additional tariffs or trade restrictions that may be implemented by the U.S. or retaliatory trade measures or tariffs implemented by other countries, could result in reduced economic activity, increased costs in operating our business, reduced demand and changes in purchasing behaviors for thermal coal, limits on trade with the U.S. or other potentially adverse economic outcomes.
While most government-imposed shut-downs in the United States and abroad have been phased out, there is a possibility that such shut-downs may be reinstated if COVID-19 or another pandemic were to again become an acute, severe risk.
While most government-imposed shut-downs in the U.S. and abroad have been phased out, there is a possibility that such shut-downs may be reinstated if COVID-19 or another pandemic were to again become an acute, severe risk.
In the United States, no comprehensive climate change legislation has been implemented at the federal level. However, following the U.S.
In the U.S., no comprehensive climate change legislation has been implemented at the federal level. However, following the U.S.
Although the United States had withdrawn from the Paris Agreement, following President Biden’s executive order in January 2021, the United States rejoined the Agreement and, in April 2021, established a goal of reducing economy-wide net GHG emissions 50-52% below levels by 2030.
Although the U.S. had withdrawn from the Paris Agreement, following President Biden’s executive order in January 2021, the U.S. rejoined the Agreement and, in April 2021, established a goal of reducing economy-wide net GHG emissions 50-52% below levels by 2030.
Further, far-reaching federal regulations promulgated by the EPA in the last several years, such as CSAPR and MATS, have led to the premature retirement of coal-fired generating units and a significant reduction in the amount of coal-fired generating capacity in the United States.
Further, far-reaching federal regulations promulgated by the EPA in the last several years, such as CSAPR and MATS, have led to the premature retirement of coal-fired generating units and a significant reduction in the amount of coal-fired generating capacity in the U.S.
New tariffs and other trade measures could adversely affect our results of operations, financial position and cash flows. In response to the tariffs imposed by the United States, the European Union, Canada, Mexico and China have imposed tariffs on United States goods and services.
New tariffs and other trade measures could adversely affect our results of operations, financial position and cash flows. In response to the tariffs imposed by the U.S., the European Union, Canada, Mexico and China have imposed tariffs on U.S. goods and services.
The United States also announced, in conjunction with the European Union and other partner countries, that it would develop standards for monitoring and reporting methane emissions to help create a market for low methane-intensity natural gas.
The U.S. also announced, in conjunction with the European Union and other partner countries, that it would develop standards for monitoring and reporting methane emissions to help create a market for low methane-intensity natural gas.
Additionally, the geopolitical and macroeconomic consequences of the war and associated sanctions cannot be predicted, but could severely impact the world economy.
Additionally, the geopolitical and macroeconomic consequences of these events and associated sanctions cannot be predicted, but could severely impact the world economy.
Based on our current variable debt level of $85.2 million as of December 31, 2022, comprised of funds drawn on our outstanding bank debt, an increase of one percentage point in the interest rate will result in an increase in annual interest expense of slightly less than $1 million.
Based on our current variable debt level of $91.5 million as of December 31, 2023, comprised of funds drawn on our outstanding bank debt, an increase of one percentage point in the interest rate will result in an increase in annual interest expense of slightly less than $1 million.
Additionally, at COP26 in Glasgow in November 2021, the United States and the European Union jointly announced the launch of a Global Methane Pledge committing to a collective goal of reducing global methane emissions by at least 30% from 2020 levels by 2030, including "all feasible reductions" in the energy sector.
Additionally, at COP26 in Glasgow in November 2021, the U.S. and the European Union jointly announced the launch of a Global Methane Pledge committing to a collective goal of reducing global methane emissions by at least 30% from 2020 levels by 2030, including “all feasible reductions” in the energy sector.
Our results of operations are primarily dependent upon the prices we receive for our coal, as well as our ability to improve productivity and control costs.
Our results of operations are primarily dependent upon the prices we receive for our coal in our coal operations, or the price we pay for our coal in the case of our electric operations, as well as our ability to improve productivity and control costs.
Competition within the coal industry could adversely affect our ability to sell coal. We compete with other coal producers for domestic coal sales in various regions of the U.S.
Competition within the coal industry could adversely affect our financial results. In our coal operations, we compete with other coal producers for domestic coal sales in various regions of the U.S.
We are dependent upon vendors to supply mining equipment, safety equipment, supplies, and materials.
We are dependent upon vendors to supply mining equipment, equipment within our power plant, safety equipment, supplies, and materials.
The Federal Reserve raised the federal funds interest rate throughout 2022 in its effort to take action against domestic inflation, and is expected to continue to raise these rates in 2023. We have exposure to these past increases in interest rates, and may be affected further in the future.
The Federal Reserve raised the federal funds interest rate throughout December 31, 2023, in its effort to take action against domestic inflation, and rates are expected to remain higher throughout 2024. We have exposure to these past increases in interest rates and may be affected further in the future.
As disclosed in Note 5 to our financial statements, there are two key ratio covenants stated in our credit agreeme nt: (i) a Minimum Debt Service Coverage Ratio (consolidated adjusted EBITDA/annual debt service) of 1.25 to 1.00 and (ii) a Maximum Leverage Ratio (consolidated funded debt/trailing twelve months adjusted EBITDA) not to exceed 2.50 to 1.00, which also decreases for March 31, 2023 and each fiscal quarter thereafter to 2.25 to 1.00.
As disclosed in Note 4 to our financial statements, there are two key ratio covenants stated in our credit agreeme nt: (i) a Minimum Debt Service Coverage Ratio (consolidated adjusted EBITDA/annual debt service) of 1.25 to 1.00 and (ii) a Maximum Leverage Ratio (consolidated funded debt/trailing twelve months adjusted EBITDA) not to exceed 2.25 to 1.00.
On December 31, 2022 , our debt service coverage ratio was 1.49, and our leverage ratio was 2.05. The refore, we were in compliance with these two ratios. Our indebtedness may limit our ability to borrow additional funds or capitalize on business opportunities.
On December 31, 2023 , our debt service coverage ratio was 3.30, and our leverage ratio was 1.32. Therefore, we were in compliance with these two ratios. Our indebtedness may limit our ability to borrow additional funds or capitalize on business opportunities.
Various limitations in our debt agreements may reduce our ability to incur additional indebtedness, to engage in some transactions, and capitalize on business opportunities. Any subsequent refinancing of our current indebtedness or any new indebtedness could have similar or greater restrictions.
Various limitations in our debt agreements may reduce our ability to incur additional indebtedness, to engage in some transactions, and capitalize on business opportunities. Any subsequent refinancing of our current indebtedness or any new indebtedness could have similar or greater restrictions. If our financial condition deteriorates, certain credit assurance provisions in our power contracts could require additional collateral.
We depend on a few customers for a significant portion of our revenue, and the loss of one or more significant customers could affect our ability to maintain the sales volume and price of the coal we produce. During 2022, we derived 90% of our coal revenue from five customers, e ach representing at least 10% of our coal sales.
We depend on a few customers for a significant portion of our revenue, and the loss of one or more significant customers could affect our ability to maintain the sales volume and price of our products. During 2023, we derived 93% of our coal revenue from four third-party customers, each representing at least 10% of our coal sales.
We have not been made a party to these other suits, but it is possible that we could be included in similar future lawsuits initiated by state and local governments as well as private claimants. Litigation resulting from disputes with our customers could result in substantial costs, liabilities, and loss of revenues.
We have not been made a party to these other suits, but it is possible that we could be included in similar future lawsuits initiated by state and local governments as well as private claimants.
The stability and profitability of our operations could be adversely affected if our customers do not honor existing contracts or do not extend existing or enter into new long-term contracts for coal or electric power. In 2022, the vast majority of our sales were under contracts having a term greater than one year, which we refer to as long-term contracts.
The stability and profitability of our operations could be adversely affected if our customers do not honor existing contracts or do not extend existing or enter into new long-term contracts for coal or electric power.
We could be deemed ineligible for the Paycheck Protection Program (PPP) loan we received in 2020 upon audit by the United States Small Business Administration (SBA) upon completion of an SBA audit. The PPP loan application required us to certify that the current economic uncertainty made the PPP loan request necessary to support our ongoing operations.
We could be deemed ineligible for the Paycheck Protection Program ( “ PPP ” ) loan we received in 2020 upon audit by the United States Small Business Administration ( “ SBA ” ) upon completion of an SBA audit.
Our electric operations revenue for 2022 was generated entirely by one customer as a condition of the Asset Purchase Agreement upon the closing of the acquisition of Hoosier Energy's Merom Generation Station ("Merom") in October 2022.
Our electric operations revenue for the first half of 2023 was generated largely by one customer as required by the terms of the Asset Purchase Agreement for our acquisition of Hoosier Energy's Merom Generation Station ("Merom").
Some competitors could have, among other things, larger financial and operating resources, lower per ton cost of production, or relationships with specific transportation providers.
Some competitors could have, among other things, larger financial and operating resources, lower per ton cost of production, or relationships with specific transportation providers. The competition among coal producers could impact our ability to retain or attract customers and could adversely impact our revenues and cash from operations.
The competition among coal producers could impact our ability to retain or attract customers and could adversely impact our revenues and cash from operations. 20 Table of Contents Changes in taxes or tariffs and other trade measures could adversely affect our results of operations, financial position and cash flows. We pay certain taxes and fees related to our operations.
In our electric operations, similar risks apply with respect to our ability to purchase coal on attractive terms relative to other competitors in the market. 20 Table of Contents Changes in taxes or tariffs and other trade measures could adversely affect our results of operations, financial position and cash flows. We pay certain taxes and fees related to our operations.
On December 31, 2022, our funded bank debt wa s $85.2 millio n, we had outstanding convertible notes totaling $19 million, and held letters of credit totaling $11.2 million.
On December 31, 2023, our funded bank debt was $91.5 million, we had outstanding convertible notes totaling $19 million, and held letters of credit totaling $18.6 million.
In addition to potential cost increases, inflation could cause a decline in global or regional economic conditions that reduce demand for our coal and could adversely affect our results of operations. The Russian-Ukrainian conflict, and sanctions brought against Russia, have caused significant market disruptions that may lead to increased volatility in the price of commodities.
In addition to potential cost increases, inflation could cause a decline in global or regional economic conditions that reduce demand for our coal or electric power and could adversely affect our results of operations.
The extent to which COVID-19 or another future pandemic may adversely impact our results of operations, cash flows and financial condition depends on future developments, which are highly uncertain and unpredictable. Risks Related to our Industry A substantial or extended decline in coal prices could negatively impact our results of operations.
The extent to which COVID-19 or another future pandemic may adversely impact our results of operations, cash flows and financial condition depends on future developments, which are highly uncertain and unpredictable. Enhanced data privacy and data protection laws and regulations or any non-compliance with such laws and regulations, could adversely affect our business and financial results.
In addition, even if we remain union-free, our operations could still be adversely affected by work stoppages at unionized companies, particularly if union workers were to orchestrate boycotts against our operations. 16 Table of Contents Our recent acquisition of Merom may not achieve its intended results.
In addition, even if we remain union-free, our operations could still be adversely affected by work stoppages at unionized companies, particularly if union workers were to orchestrate boycotts against our operations. Contractors that we use to provide employees at our power plant may experience work stoppages, slowdowns, lockouts or other labor disputes.
Steel prices and the prices of scrap steel, natural gas and coking coal consumed in the production of iron and steel fluctuate significantly and could change unexpectedly. Inflationary pressures have and could continue to lead to price increases affecting many of the components of our operating expenses such as fuel, steel, and maintenance expense.
Steel prices and the prices of scrap steel, natural gas and coking coal consumed in the production of iron and steel fluctuate significantly and could change unexpectedly.
There could be acts of nature or terrorist attacks or threats that could also impact the future costs of raw materials.
Inflationary pressures have and could continue to lead to price increases affecting many of the components of our operating expenses such as fuel, steel, other materials and maintenance expense. There could be acts of nature or terrorist attacks or threats that could also impact the future costs of raw materials.
These contracts have historically provided a relatively secure market for the amount of production committed under the terms of the contracts.
In 2023, a significant portion of our coal, capacity and energy sales were under contracts having a term greater than one year, which we refer to as long-term contracts. These contracts have historically provided a relatively secure market for the amount of production committed under the terms of the contracts.
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These events have caused volatility in the aforementioned commodity markets.
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While we have subsequently added additional electric power customers and purchasers of accredited capacity, the loss of one or more of these material customers could have a material adverse effect on our business, financial condition and results of operations.
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At our power plant, our operator, Consolidated Asset Management Services (CAMS), employs represented workers.
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While these workers are not Hallador Power employees, work stoppages, slowdowns, lockouts or other labor disputes within the CAMS workforce could adversely affect and disrupt our productivity and operations at the plant. 16 Table of Contents Our recent acquisition of Merom may not achieve its intended results.
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In October 2023, the Merom facilities experienced a transformer failure causing one unit to be offline for the month of October; the failed transformer has since been replaced. We may experience similar failures in the future.
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Additionally, supply chain shortages or delays on key operating components, including but not limited to, transformers, boiler equipment and chemicals or catalysts could materially and adversely impact our operations and reduce revenues or expose the company to significant cover damages related to longer term contracts.
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Under our outstanding Form S-3 “universal shelf” registration statement, we have the ability, subject to market conditions, to access the debt and equity capital markets as needed, including through the use of our outstanding “at the market” (ATM) offering program. If we raise additional funds by issuing equity securities under our ATM program or otherwise, our stockholders may experience dilution.
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In the future as investments in Merom become more significant, the value of those assets could be adversely affected by numerous uncertain factors, some of which are beyond our control, including, but not limited to unfavorable changes in the economic environments in which we operate, environmental, litigation, weather, and regulatory and/or legal changes.
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These factors may trigger the recognition of additional impairment charges in the future, which could have a substantial impact on our results of power operations.
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Certain of our power contracts contain credit assurance provisions tied to our financial condition. Should our financial condition deteriorate, these provisions may require substantial collateral that may have a materially adverse effect on our financial condition.
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The PPP loan application required us to certify that the current economic uncertainty made the PPP loan request necessary to support our ongoing operations.
Added
The consumer privacy landscape continues to experience momentum for greater privacy protection and reform at the state and federal level in response to precedents set forth by the General Data Protection Regulation (the “GDPR”) and the California Consumer Privacy Act (the “CCPA”).
Added
The development and evolving nature of domestic and international privacy regulation and enforcement could impact and potentially limit how Hallador processes personally identifiable information.
Added
Beginning January 1, 2023, California residents have increased access rights (including the right to limit the use and disclosure of sensitive personal information), which are enforced by a new state privacy regulator, resulting in more scrutiny of business practices and disclosures.
Added
Additional states including Virginia, Utah, Connecticut, Colorado, and Nevada have similarly adopted enhanced data privacy legislation effective in 2023 and patterned after the standards set forth by CCPA, including broader data access rights, with Virginia going a step further requiring businesses to perform data protection assessments for certain processing activities.
Added
As new laws and regulations are created, requiring businesses to implement processes to enable customer access to their data and enhanced data protection and management standards, we cannot forecast the impact that they may have on the Company’s business. Any non-compliance with laws may result in proceedings or actions against the Company by 35 governmental entities or individuals.
Added
Moreover, any inquiries or investigations, government penalties or sanctions, or civil actions by individuals may be costly to comply with, resulting in negative publicity, increased operating costs, significant management time and attention, and may lead to remedies that harm the business, including fines, demands or orders that existing business practices be modified or terminated.
Added
The Company ’ s trading and hedging activities do not cover certain risks and may expose it to earnings volatility and other risks. The Company’s trading and hedging activities do not cover certain risks and may expose it to earnings volatility and other risks.
Added
In addition to overall price volatility, the Company is currently subject to price volatility on diesel fuel and other commodities utilized in its operations. The Company has entered into certain hedging arrangements to address these risks and may continue in the future to enter into hedging arrangements, including economic hedging arrangements, to manage these risks or other exposures.
Added
Since the Company’s existing hedging arrangements do not receive cash flow hedge accounting treatment, all changes in fair value are reflected in current earnings. Some of these hedging arrangements may require the Company to post margin based on the value of the related instruments and other credit factors.
Added
If the fair value of its hedge portfolio moves significantly, or if laws, regulations, or exchange rules are passed requiring all hedge arrangements to be exchange-traded or exchange-cleared, the Company could be required to post additional margin, which could negatively impact its liquidity.
Added
Risks Related to our Industry Substantial or extended volatility in coal prices could negatively impact our results of operations.
Added
Any adverse change in these factors could result in weaker demand and lower prices for our products.
Added
Additionally, on March 6, 2024, the SEC adopted new rules relating to the disclosure of a range of climate-related data risks and opportunities, including financial impacts, physical and transition risks, related governance and strategy and GHG emissions, for certain public companies.
Added
We are currently assessing this rule but at this time we cannot predict the ultimate impact of the rule on our business or those of our customers. As a result of these final rules, we or our customers could incur increased costs related to the assessment and disclosure of climate-related risks and certain emissions metrics.
Added
In addition, enhanced climate disclosure requirements could accelerate the trend of certain stakeholders and lenders restricting or seeking more stringent conditions with respect to their investments in certain carbon intensive sectors.
Added
Our operations may impact the environment or cause exposure to hazardous substances, and our properties may have environmental contamination, which could result in liabilities to us. In addition, government inspectors, under certain circumstances, have the ability to order our operations to be shut down based on environmental considerations.
Added
Our operations currently use hazardous materials and generate limited quantities of hazardous wastes from time to time.

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Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

2 edited+0 added−0 removed0 unchanged
Biggest changeAt March 10, 2023, we had 249 shareholders of record of our common stock; this number does not include the shareholders holding stock in "street name.” We estimate we have over 5,000 street name holders. Equity Compensation Plan Information See Note 9 to our consolidated financial statements.
Biggest changeOn March 8, 2024, we had 215 shareholders of record of our common stock; this number does not include the shareholders holding stock in “street name.” We estimate we have over 5,000 street name holders. Equity Compensation Plan Information See Note 8 to our consolidated financial statements. ITEM 6. [RESERVED]
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. Stock Price Information Our common stock trades on the NASDAQ Capital Market under the symbol HNRG, and 31.7% is held by our officers, directors, and their affiliates.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. Stock Price Information Our common stock trades on the NASDAQ Capital Market under the symbol HNRG, and 30.5% is held by our officers, directors, and their affiliates.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

51 edited+68 added−21 removed32 unchanged
Biggest changeMar-31 Jun-30 Sep-30 Dec-31 2022 2022 2022 2022 Total 2022 SALES AND OPERATING REVENUES: Coal sales $ 57,010 $ 64,161 $ 83,562 $ 84,643 $ 289,376 Electric sales — 0 — 66,252 66,252 Other revenues 1,897 1,768 1,522 1,176 6,363 Total revenue 58,907 65,929 85,084 152,071 361,991 EXPENSES: Operating expenses 54,601 51,394 64,557 96,056 266,608 Depreciation, depletion and amortization 9,531 11,164 11,187 14,993 46,875 Asset retirement obligations accretion 246 250 255 259 1,010 Exploration costs 57 215 121 258 651 General and administrative 3,149 3,722 3,569 5,977 16,417 Total operating expenses 67,584 66,745 79,689 117,543 331,561 INCOME (LOSS) FROM OPERATIONS (8,677 ) (816 ) 5,395 34,528 30,430 Bank debt and other interest (1,710 ) (1,770 ) (2,360 ) (2,438 ) (8,278 ) Amortization and swap related interest (74 ) (567 ) (995 ) (1,098 ) (2,734 ) Equity method investment income 150 188 168 (63 ) 443 INCOME (LOSS) BEFORE INCOME TAXES (10,311 ) (2,965 ) 2,208 30,929 19,861 INCOME TAX EXPENSE (BENEFIT): Current — — — — — Deferred (177 ) 421 596 916 1,756 Total income tax expense (benefit) (177 ) 421 596 916 1,756 NET INCOME (LOSS) $ (10,134 ) $ (3,386 ) $ 1,612 $ 30,013 $ 18,105 NET INCOME (LOSS) PER SHARE: Basic $ (0.33 ) $ (0.11 ) $ 0.05 $ 0.91 $ 0.57 Diluted $ (0.33 ) $ (0.11 ) $ 0.05 $ 0.83 $ 0.55 WEIGHTED AVERAGE SHARES OUTSTANDING: Basic 30,785 30,785 32,983 32,983 32,043 Diluted 30,785 30,809 33,268 36,428 33,649 39 Table of Contents Mar-31 Jun-30 Sep-30 Dec-31 2021 2021 2021 2021 Total 2021 SALES AND OPERATING REVENUES: Coal sales $ 45,879 $ 54,600 $ 79,036 $ 64,388 $ 243,903 Other revenues 816 1,038 786 1,123 3,763 Total revenue 46,695 55,638 79,822 65,511 247,666 EXPENSES: Operating expenses 34,009 42,456 67,792 54,583 198,840 Depreciation, depletion and amortization 10,307 9,715 9,842 10,109 39,973 Asset impairment — — — 1,588 1,588 Asset retirement obligations accretion 363 373 380 388 1,504 Asset retirement obligations change in estimate — — — (3,510 ) (3,510 ) Exploration costs 58 159 96 169 482 General and administrative 2,821 3,383 3,067 5,562 14,833 Total operating expenses 47,558 56,086 81,177 68,889 253,710 LOSS FROM OPERATIONS (863 ) (448 ) (1,355 ) (3,378 ) (6,044 ) Bank debt and other interest (2,135 ) (2,307 ) (2,167 ) (1,901 ) (8,510 ) Amortization and swap related interest 237 125 59 41 462 Gain on extinguishment of debt — — 10,000 — 10,000 Equity method investment income — 63 90 211 364 INCOME (LOSS) BEFORE INCOME TAXES (2,761 ) (2,567 ) 6,627 (5,027 ) (3,728 ) INCOME TAX EXPENSE (BENEFIT): Current — — — — — Deferred (1,729 ) 397 (1,359 ) 2,717 26 Total income tax expense (benefit) (1,729 ) 397 (1,359 ) 2,717 26 NET INCOME (LOSS) $ (1,032 ) $ (2,964 ) $ 7,986 $ (7,744 ) $ (3,754 ) NET INCOME (LOSS) PER SHARE: Basic and diluted $ (0.03 ) $ (0.10 ) $ 0.26 $ (0.25 ) $ (0.12 ) 40 Table of Contents Quarterly coal sales and cost data follow (in 000’s, except for per ton data and wash plant recovery percentage): All Mines 1st 2022 2nd 2022 3rd 2022 4th 2022 T4Qs Tons produced 1,397 1,762 1,663 1,721 6,543 Tons sold 1,377 1,595 1,705 1,664 6,341 Coal sales $ 57,010 $ 64,161 $ 83,563 $ 84,641 $ 289,375 Average price per ton $ 41.40 $ 40.23 $ 49.01 $ 50.87 $ 45.64 Wash plant recovery in % 67 % 71 % 69 % 68 % Operating costs $ 54,443 $ 50,776 $ 63,876 $ 67,319 $ 236,414 Average cost per ton $ 39.54 $ 31.83 $ 37.46 $ 40.46 $ 37.28 Margin $ 2,567 $ 13,385 $ 19,687 $ 17,322 $ 52,961 Margin per ton $ 1.86 $ 8.39 $ 11.55 $ 10.41 $ 8.35 Capex $ 9,082 $ 13,821 $ 15,096 $ 12,368 $ 50,367 Maintenance capex $ 4,481 $ 7,600 $ 6,625 $ 5,748 $ 24,454 Maintenance capex per ton $ 3.25 $ 4.76 $ 3.89 $ 3.45 $ 3.86 All Mines 1st 2021 2nd 2021 3rd 2021 4th 2021 T4Qs Tons produced 1,592 1,292 1,440 1,447 5,771 Tons sold 1,174 1,403 2,042 1,554 6,173 Coal sales $ 45,879 $ 54,600 $ 79,036 $ 64,388 $ 243,903 Average price per ton $ 39.08 $ 38.92 $ 38.71 $ 41.43 $ 39.51 Wash plant recovery in % 74 % 69 % 73 % 70 % Operating costs $ 33,907 $ 42,364 $ 67,694 $ 54,583 $ 198,548 Average cost per ton $ 28.88 $ 30.20 $ 33.15 $ 35.12 $ 32.16 Margin $ 11,972 $ 12,236 $ 11,342 $ 9,805 $ 45,355 Margin per ton $ 10.20 $ 8.72 $ 5.55 $ 6.31 $ 7.35 Capex $ 5,720 $ 5,117 $ 7,238 $ 9,975 $ 28,050 Maintenance capex $ 2,343 $ 1,049 $ 2,324 $ 3,302 $ 9,018 Maintenance capex per ton $ 2.00 $ 0.75 $ 1.14 $ 2.12 $ 1.46 Critical Accounting Estimates We believe that the estimates of our coal reserves, our asset retirement obligation liabilities, our deferred tax accounts, our valuation of inventory, our treatment of business combinations, and the estimates used in our impairment analysis are our critical accounting estimates.
Biggest changeMar-31 Jun-30 Sep-30 Dec-31 2023 2023 2023 2023 Total 2023 SALES AND OPERATING REVENUES: Coal sales $ 94,602 $ 88,574 $ 97,420 $ 81,330 $ 361,926 Electric sales 92,392 71,017 67,403 37,115 267,927 Other revenues 1,340 1,603 945 739 4,627 Total revenue 188,334 161,194 165,768 119,184 634,480 EXPENSES: Operating expenses 133,521 115,420 119,042 105,407 473,390 Depreciation, depletion and amortization 17,976 17,169 16,230 15,836 67,211 Asset retirement obligations accretion 451 461 468 424 1,804 Exploration costs 206 305 171 222 904 General and administrative 6,947 5,595 6,054 7,563 26,159 Total operating expenses 159,101 138,950 141,965 129,452 569,468 INCOME (LOSS) FROM OPERATIONS 29,233 22,244 23,803 (10,268 ) 65,012 Bank debt and other interest (3,899 ) (3,541 ) (3,030 ) (3,241 ) (13,711 ) Loss on extinguishment of debt — — (1,491 ) — (1,491 ) Equity method investment income 69 (217 ) (177 ) (227 ) (552 ) INCOME (LOSS) BEFORE INCOME TAXES 25,403 18,486 19,105 (13,736 ) 49,258 INCOME TAX EXPENSE (BENEFIT): Current 432 61 (178 ) (479 ) (164 ) Deferred 2,920 1,510 3,208 (3,009 ) 4,629 Total income tax expense (benefit) 3,352 1,571 3,030 (3,488 ) 4,465 NET INCOME (LOSS) $ 22,051 $ 16,915 $ 16,075 $ (10,248 ) $ 44,793 NET INCOME (LOSS) PER SHARE: Basic $ 0.67 $ 0.51 $ 0.49 $ (0.31 ) $ 1.35 Diluted $ 0.61 $ 0.47 $ 0.44 $ (0.31 ) $ 1.25 WEIGHTED AVERAGE SHARES OUTSTANDING: Basic 32,983 33,137 33,140 33,245 33,133 Diluted 36,740 36,708 36,848 33,245 36,827 39 Table of Contents Mar-31 Jun-30 Sep-30 Dec-31 2022 2022 2022 2022 Total 2022 SALES AND OPERATING REVENUES: Coal sales $ 57,010 $ 64,161 $ 83,562 $ 84,643 $ 289,376 Electric sales — — — 66,252 66,252 Other revenues 1,897 1,768 1,522 1,176 6,363 Total revenue 58,907 65,929 85,084 152,071 361,991 EXPENSES: Operating expenses 54,601 51,394 64,557 96,056 266,608 Depreciation, depletion and amortization 9,531 11,164 11,187 14,993 46,875 Asset retirement obligations accretion 246 250 255 259 1,010 Exploration costs 57 215 121 258 651 General and administrative 3,149 3,722 3,569 5,977 16,417 Total operating expenses 67,584 66,745 79,689 117,543 331,561 INCOME (LOSS) FROM OPERATIONS (8,677 ) (816 ) 5,395 34,528 30,430 Bank debt and other interest (1,710 ) (1,770 ) (2,360 ) (2,438 ) (8,278 ) Amortization and swap related interest (74 ) (567 ) (995 ) (1,098 ) (2,734 ) Equity method investment income 150 188 168 (63 ) 443 INCOME (LOSS) BEFORE INCOME TAXES (10,311 ) (2,965 ) 2,208 30,929 19,861 INCOME TAX EXPENSE (BENEFIT): Current — — — — — Deferred (177 ) 421 596 916 1,756 Total income tax expense (benefit) (177 ) 421 596 916 1,756 NET INCOME (LOSS) $ (10,134 ) $ (3,386 ) $ 1,612 $ 30,013 $ 18,105 NET INCOME (LOSS) PER SHARE: Basic $ (0.33 ) $ (0.11 ) $ 0.05 $ 0.91 $ 0.57 Diluted $ (0.33 ) $ (0.11 ) $ 0.05 $ 0.83 $ 0.55 WEIGHTED AVERAGE SHARES OUTSTANDING: Basic 30,785 30,785 32,983 32,983 32,043 Diluted 30,785 30,809 33,268 36,428 33,649 40 Table of Contents Quarterly coal sales and cost data follow on a segment basis (in 000’s, except for per ton data and wash plant recovery percentage): All Mines 1st 2023 2nd 2023 3rd 2023 4th 2023 T4Qs Tons produced 2,006 1,723 1,594 1,331 6,654 Tons sold 1,693 1,714 2,054 1,461 6,922 Coal sales $ 94,602 $ 112,171 $ 134,400 $ 91,714 $ 432,887 Average price per ton $ 55.88 $ 65.44 $ 65.43 $ 62.77 $ 62.54 Wash plant recovery in % 70 % 67 % 65 % 62 % Operating costs $ 65,700 $ 71,168 $ 95,592 $ 78,581 $ 311,041 Average cost per ton $ 38.81 $ 41.52 $ 46.54 $ 53.79 $ 44.94 Margin $ 28,902 $ 41,003 $ 38,808 $ 13,133 $ 121,846 Margin per ton $ 17.07 $ 23.92 $ 18.89 $ 8.99 $ 17.60 Capex $ 12,639 $ 14,445 $ 11,570 $ 17,867 $ 56,521 Maintenance capex $ 7,778 $ 9,754 $ 7,938 $ 13,567 $ 39,037 Maintenance capex per ton $ 4.59 $ 5.69 $ 3.86 $ 9.29 $ 5.64 All Mines 1st 2022 2nd 2022 3rd 2022 4th 2022 T4Qs Tons produced 1,397 1,762 1,663 1,721 6,543 Tons sold 1,377 1,595 1,705 1,664 6,341 Coal sales $ 57,010 $ 64,161 $ 83,563 $ 84,641 $ 289,375 Average price per ton $ 41.40 $ 40.23 $ 49.01 $ 50.87 $ 45.64 Wash plant recovery in % 67 % 71 % 69 % 68 % Operating costs $ 54,443 $ 50,776 $ 63,876 $ 67,319 $ 236,414 Average cost per ton $ 39.54 $ 31.83 $ 37.46 $ 40.46 $ 37.28 Margin $ 2,567 $ 13,385 $ 19,687 $ 17,322 $ 52,961 Margin per ton $ 1.86 $ 8.39 $ 11.55 $ 10.41 $ 8.35 Capex $ 9,082 $ 13,821 $ 15,096 $ 12,368 $ 50,367 Maintenance capex $ 4,481 $ 7,600 $ 6,625 $ 5,748 $ 24,454 Maintenance capex per ton $ 3.25 $ 4.76 $ 3.89 $ 3.45 $ 3.86 Quarterly electric sales and cost data (in thousands, except per MWh data) are provided below.
Access to the Oaktown Fuels No. 1 Mine is via a 90-foot-deep box cut and a 2,200-foot slope, which facilitates the egress of coals being mined in excess of 375 feet below the surface.
Access to the Oaktown Fuels No. 1 Mine is via a 90-foot-deep box cut and a 2,200-foot long slope, which facilitates the egress of coals being mined in excess of 375 feet below the surface.
Access to the Oaktown Fuels No. 2 Mine is via an 80-foot-deep box cut and 2,600-foot slope, which facilitates the egress of coals being mined in excess of 400 feet below the surface.
Access to the Oaktown Fuels No. 2 Mine is via an 80-foot-deep box cut and 2,600-foot long slope, which facilitates the egress of coals being mined in excess of 400 feet below the surface.
The complex is configured to operate up to 7 CM sections, with an annual production target of approximately 7 million product tons. The Oaktown Complex Coal Preparation Plant serves as the coal washing and shipment facility for the Oaktown Mining Complex’s two R&P mines. The plant was commissioned in 2009 to wash coal by the Oaktown Fuels No. 1 Mine.
The complex is configured to operate up to 7 CM sections, with an annual production target of approximately 4.5 million product tons. The Oaktown Complex Coal Preparation Plant serves as the coal washing and shipment facility for the Oaktown Mining Complex’s two R&P mines. The plant was commissioned in 2009 to wash coal by the Oaktown Fuels No. 1 Mine.
The remainder of our operations, which are not significant enough on a stand-alone basis to warrant treatment as an operating segment, are presented as "Corporate and Other" within the Notes to the Consolidated Financial Statements and primarily are comprised of unallocated corporate costs and activities, including a 50% interest in Sunrise Energy, LLC, a private gas exploration company with operations in Indiana, which we account for using the equity method, and our wholly-owned subsidiary Summit Terminal LLC, a logistics transport facility located on the Ohio River.
The remainder of our operations, which are not significant enough on a stand-alone basis to warrant treatment as an operating segment, are presented as “Corporate and Other” within the Notes to the Consolidated Financial Statements and primarily are comprised of unallocated corporate costs and activities, including a 50% interest in Sunrise Energy, LLC, a private gas exploration company with operations in Indiana, which we account for using the equity method, and our wholly-owned subsidiary Summit Terminal LLC, a logistics transport facility located on the Ohio River.
Historical production for our Oaktown Mining Complex during the years ended December 31, 2022, 2021, and 2020 is provided in the following table: Annual Saleable Production Tons (Million Tons) Mine/Reserve 2022 2021 2020 Oaktown Mining Complex Oaktown Fuels No. 1 Mine 3.9 3.5 3.4 Oaktown Fuels No. 2 Mine 2.5 2.1 1.8 Total Oaktown Mining Complex Production 6.4 5.6 5.2 34 Table of Contents Other Properties The Company holds other recoverable coal reserves in the ILB, which are not deemed individually material.
Historical production for our Oaktown Mining Complex during the years ended December 31, 2023, 2022, and 2021 is provided in the following table: Annual Saleable Production Tons (Million Tons) Mine/Reserve 2023 2022 2021 Oaktown Mining Complex Oaktown Fuels No. 1 Mine 3.9 3.9 3.5 Oaktown Fuels No. 2 Mine 2.5 2.5 2.1 Total Oaktown Mining Complex Production 6.4 6.4 5.6 34 Table of Contents Other Properties The Company holds other recoverable coal reserves in the ILB, which are not deemed individually material.
Prosperity (surface) – Assigned The Prosperity mine contains approximately 0.3 million tons of low sulfur coal needed to blend with our Oaktown coal to reduce the sulfur content to a salable level for Southeastern US markets. The mine opened in the summer of 2022.
Prosperity (surface) – Assigned The Prosperity mine contains approximately 0.2 million tons of low sulfur coal needed to blend with our Oaktown coal to reduce the sulfur content to a salable level for Southeastern US markets. The mine opened in the summer of 2022.
See Note 5 to our consolidated financial statements for additional discussion about our bank debt and related liquidity. 36 Table of Contents Off-Balance Sheet Arrangements Other than our surety bonds for reclamation, we have no material off-balance sheet arrangements.
See Note 4 to our consolidated financial statements for additional discussion about our bank debt and related liquidity. 36 Table of Contents Off-Balance Sheet Arrangements Other than our surety bonds for reclamation, we have no material off-balance sheet arrangements.
The tables present our unaudited quarterly results of operations for the eight quarters ended December 31, 2022, and include all adjustments, consisting only of normal recurring adjustments, that we consider necessary for fair presentation of our consolidated operating results for the quarters presented.
The tables present our unaudited quarterly results of operations for the eight quarters ended December 31, 2023, and include all adjustments, consisting only of normal recurring adjustments, that we consider necessary for fair presentation of our consolidated operating results for the quarters presented.
Among other differences, subpart 1300 of Regulation S-K requires us to disclose our mineral (coal) resources, which we have none, in addition to our mineral (coal) reserves, as of the end of our most recently completed fiscal year both in the aggregate and for each of our individually material mining properties.
Subpart 1300 of Regulation S-K requires us to disclose our mineral (coal) resources, which we have none, in addition to our mineral (coal) reserves, as of the end of our most recently completed fiscal year both in the aggregate and for each of our individually material mining properties.
These metrics are significant factors in assessing our operating results and profitability. OVERVIEW Hallador Energy Company (the "Company" or "Hallador") is an energy company operating in the state of Indiana.
These metrics are significant factors in assessing our operating results and profitability. OVERVIEW Hallador Energy Company (the “Company” or “Hallador”) is an energy company operating in the state of Indiana.
Since beginning first commercial coal production in 2013 the mines workings have substantially grown and, during 2021, an additional mine access (elevator) has been constructed for employee and supply ingress/egress closer to the active production faces.
Since beginning first commercial coal production in 2013 the mines workings have substantially grown and, during 2021, an additional mine access (elevator) was constructed for employee and supply ingress/egress closer to the active production faces.
This mining method is highly productive and commercially demonstrated; it has been one of the primary approaches to underground mining the Indiana V Seam for decades. Oaktown Mining Complex has utilized this mining method since the inception of each operation. To date, Oaktown Mining Complex has produced a combi ned 64.7 millio n tons of clean coal.
This mining method is highly productive and commercially demonstrated; it has been one of the primary approaches to underground mining the Indiana V Seam for decades. Oaktown Mining Complex has utilized this mining method since the inception of each operation. To date, Oaktown Mining Complex has produced a combi ned 71.1 millio n tons of clean coal.
The following figure shows the general location of the Oaktown Mining Complex: 32 Table of Contents Comprising 118 square miles within the ILB coal-producing region of the mid-western United States, the Oaktown Mining Complex is one of the largest underground Room-and-Pillar (R&P) coal mining complexes in North America.
The following figure shows the general location of the Oaktown Mining Complex: 32 Table of Contents Comprising 118 square miles within the ILB coal-producing region of the mid-western U.S., the Oaktown Mining Complex is one of the largest underground Room-and-Pillar (R&P) coal mining complexes in North America.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. Our consolidated financial statements should be read in conjunction with this discussion. The following analysis includes a discussion of metrics on a per ton basis derived from the condensed consolidated financial statements, which are considered non-GAAP measurements.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. Our consolidated financial statements should be read in conjunction with this discussion. The following analysis includes a discussion of metrics on a per ton and per mega-watt hour (MWh) basis as derived from the condensed consolidated financial statements, which are considered non-GAAP measurements.
The reserve contains saleable tons which average heating content of approximately 11,522 Btu per pound with approximately 6.1 pounds of sulfur dioxide per MMBtu on an as-received basis.
The reserve contains saleable tons which average heating content of approximately 11,527 Btu per pound with approximately 6.0 pounds of sulfur dioxide per MMBtu on an as-received basis.
The reserve contains saleable tons which average heating content of approximately 11,534 Btu per pound with approximately 5.7 pounds of sulfur dioxide per MMBtu on an as-received basis.
The reserve contains saleable tons which average heating content of approximately 11,518 Btu per pound with approximately 5.4 pounds of sulfur dioxide per MMBtu on an as-received basis.
The Oaktown Complex Coal Preparation Plant's processing capacity is in the process of being upgraded to 1,800 raw tons-per-hour (TPH) from its current 1,600 raw TPH. Product coal from the Oaktown Mining Complex is transported to its customer base via rail, truck, or a combination of both.
The Oaktown Complex Coal Preparation Plant's processing capacity was upgraded to 1,800 raw tons-per-hour (TPH) from its previous 1,600 raw TPH. Product coal from the Oaktown Mining Complex is transported to its customer base via rail, truck, or a combination of both.
We anticipate our mines will need to produce at a 7 million-ton annualized pace for the foreseeable future to meet the Merom plant and third party market demand. We expect to continue selling a significant portion of our coal under supply agreements with terms of one year or longer.
Based on the contracted tons described above, we anticipate our mines will need to produce at a 4.5 million ton annualized pace for the foreseeable future to meet the Merom plant and third-party market demand. We expect to continue selling a significant portion of our coal under supply agreements with terms of one year or longer.
Capital Expenditures (capex) For the year ended December 31, 2022, our capex was $54.0 million allocated as follows (in millions): Oaktown – maintenance capex $ 21.0 Oaktown – investment 22.1 Prosperity mine 3.6 Freelandville mine 2.5 Merom plant 3.7 Other 1.1 Capex per the Consolidated Statements of Cash Flows $ 54.0 Results of Operations Presentation of Segment Information Our operations are divided into two primary reportable segments: coal operations and electric operations.
Capital Expenditures (capex) For the year ended December 31, 2023, our capex was $75.4 million allocated as follows (in millions): Oaktown – maintenance capex $ 36.2 Oaktown – investment 18.3 Prosperity mine 0.8 Freelandville mine 1.2 Merom plant 18.8 Other 0.1 Capex per the Consolidated Statements of Cash Flows $ 75.4 Results of Operations Presentation of Segment Information Our operations are divided into two primary reportable segments: Coal Operations and Electric Operations.
We have recorded the present value of reclamation obligations of $20.8 million, including $7.2 million at Merom, presented as asset retirement obligations (ARO) in our accompanying balance sheets. In the event we are not able to perform reclamation, we have surety bonds in place totaling $36.9 million to cover ARO.
We have recorded the present value of reclamation obligations of $16.6 million, including $5.2 million at Merom, presented as asset retirement obligations (ARO) in our accompanying balance sheets. In the event we are not able to perform reclamation, we have surety bonds in place totaling $37.5 million to cover ARO.
In addition to our reportable segments, the remainder of our operations are presented as "Corporate and Other" and primarily are comprised of unallocated corporate costs in addition to activities such as a 50% interest in Sunrise Energy, LLC, a private gas exploration company with operations in Indiana, accounted for using the equity method, and our wholly-owned subsidiary Summit Terminal LLC, a logistics transport facility located on the Ohio River.
In addition to our reportable segments, the remainder of our operations are presented as “Corporate and Other” and primarily are comprised of unallocated corporate costs in addition to activities such as a 50% interest in Sunrise Energy, LLC, a private gas exploration company with operations in Indiana, accounted for using the equity method, and our wholly-owned subsidiary Summit Terminal LLC, a logistics transport facility located on the Ohio River. 2023 was the first whole year in which Hallador Power operated Merom.
During 2022, we derived 90% of our revenue from five customers (10 power plants), with each of the five customers representing at least 10% of our coal sales. During 2021, we derived 95% of our revenue from five customers (10 power plants), with each of the five customers representing at least 10% of our coal sales.
During 2022, on a segment basis we derived 90% of our revenue from five customers (10 power plants), with each of the five customers representing at least 10% of our coal sales.
Boyd Company as of the end of the fiscal year ended December 31, 2022: SUMMARY MINERAL RESERVES AT END OF THE FISCAL YEAR ENDED DECEMBER 31, 2022 Mineral Reserves (tons in millions) Proven Probable Total Oaktown Mining Complex Oaktown Fuels No. 1 Mine 36.2 0.5 36.7 Oaktown Fuels No. 2 Mine 28.5 1.1 29.6 Total 64.7 1.6 66.3 31 Table of Contents Oaktown Mining Complex The Oaktown Mining Complex is a coal mining and processing operation located in Knox and Sullivan counties, Indiana, and Crawford and Lawrence counties, Illinois.
Boyd Company as of the end of the fiscal year ended December 31, 2023: SUMMARY MINERAL RESERVES AT END OF THE FISCAL YEAR ENDED DECEMBER 31, 2023 Mineral Reserves (tons in millions) Proven Probable Total Oaktown Mining Complex Oaktown Fuels No. 1 Mine 29.9 4.2 34.1 Oaktown Fuels No. 2 Mine 20.4 6.2 26.6 Total 50.3 10.4 60.7 31 Table of Contents Oaktown Mining Complex The Oaktown Mining Complex is a coal mining and processing operation located in Knox and Sullivan counties, Indiana, and Crawford and Lawrence counties, Illinois.
On March 13, 2023, we executed an amendment to our credit agreement with PNC Bank, National Association (in its capacity as administrative agent, "PNC"), administrative agent for our lenders under our credit agreement.
As of December 31, 2023, our bank debt was $91.5 million. On March 13, 2023, we executed an amendment to our credit agreement with PNC Bank, National Association (in its capacity as administrative agent, “PNC”), administrative agent for our lenders under our credit agreement.
As a result, higher priced contracts sold in the summer of 2022 and delivered in Q4 of 2022 increased our average sales price by over $6 per ton from 2021. We also sold 168,000 additional tons over 2022 at the higher average price due to lower inventories and the higher gas prices. Operating expenses increased, however, by ~$5 per ton.
As a result, higher priced contracts sold in the summer of 2022 and delivered in Q4 of 2022 through all of 2023 increased our average sales price by $16.90 per ton from 2022. We also sold 581,000 additional tons over 2022 at the higher average price due to lower inventories and the higher gas prices.
Significant customers in 2022 include Vectren Corporation, a wholly-owned subsidiary of CenterPoint Energy (NYSE: CNP), Orlando Utility Commission (OUC), Alcoa Power Generating, Inc., a subsidiary of Alcoa Corporation (NYSE: AA), Indianapolis Power & Light Company (IPL), a wholly-owned subsidiary of The AES Corporation (NYSE: AES), and Duke Energy Corporation (NYSE: DUK).
Significant customers in 2023 include Vectren Corporation, a wholly-owned subsidiary of CenterPoint Energy (NYSE: CNP), Orlando Utility Commission (OUC), Alcoa Power Generating, Inc., a subsidiary of Alcoa Corporation (NYSE: AA), Alabama Power, a subsidiary of Southern Company (NYSE: SO), and Duke Energy Corporation (NYSE: DUK).
For the year ended December 31, 2022, we recorded $3.6 million in additional operating expense for coal purchased and used and an additional $11.2 million to inventory for coal purchased and unused as a result of amortizing the contract asset. 38 Table of Contents The following tables presenting our quarterly results of operations should be read in conjunction with the consolidated financial statements and related notes included in Item 8 of this Form 10-K.
For the years ended December 31, 2023 and 2022, we recorded $30.7 million and $3.6 million respectively in additional operating expense for coal purchased and used. 38 Table of Contents The following tables presenting our quarterly results of operations should be read in conjunction with the consolidated financial statements and related notes included in Item 8 of this Form 10-K.
Those obligations are currently estimated at $6.8 million. 33 Table of Contents Additional information is provided in the following table regarding the Oaktown Mining Complex mineral reserves: OAKTOWN MINING COMPLEX Recoverable Coal Reserves as of December 31, 2022 and 2021 As Received As Received Heat SO2 Value Content (Btu/lb) (lbs/MMBtu) Owned Leased Recoverable Coal Reserves (As-Received) Mine/Reserve Approximate Approximate (%) (%) Proven Probable 12/31/2022 12/31/2021 Oaktown Mining Complex Oaktown Fuels No. 1 Mine 11,522 6.1 — 100.0 36.2 0.5 36.7 40.5 Oaktown Fuels No. 2 Mine 11,534 5.7 — 100.0 28.5 1.1 29.6 30.9 Total 64.7 1.6 66.3 71.4 Oaktown Fuels No. 1 Mine The assigned and accessible reserve base for the Oaktown Fuels No. 1 Mine contains 36.7 million tons of recoverable Indiana V seam coal, of which 36.7 million tons are currently permitted.
We hold surety bonds of $9.9 million to cover obligations relating to mining and reclamation, road repair, etc. at the Oaktown Mining Complex. 33 Table of Contents Additional information is provided in the following table regarding the Oaktown Mining Complex mineral reserves: OAKTOWN MINING COMPLEX Recoverable Coal Reserves as of December 31, 2023 and 2022 As Received As Received Heat SO2 Value Content (Btu/lb) (lbs/MMBtu) Owned Leased Recoverable Coal Reserves (As-Received) Mine/Reserve Approximate Approximate (%) (%) Proven Probable 12/31/2023 12/31/2022 Oaktown Mining Complex Oaktown Fuels No. 1 Mine 11,527 6.0 — 100.0 29.9 4.2 34.1 36.7 Oaktown Fuels No. 2 Mine 11,518 5.4 — 100.0 20.4 6.2 26.6 29.6 Total 50.3 10.4 60.7 66.3 Oaktown Fuels No. 1 Mine As of December 31, 2023, the assigned and accessible reserve base for the Oaktown Fuels No. 1 Mine contains 34.1 million tons of recoverable Indiana V seam coal, of which 34.1 million tons are currently permitted.
Electric Operations 2022 2021 OPERATING REVENUES: $ 66,316 $ — EXPENSES: Operating expenses 29,608 — Depreciation, depletion and amortization 3,117 — General and administrative 2,086 — Total operating expenses 34,811 — INCOME (LOSS) FROM OPERATIONS 31,505 — A comparative discussion is not relevant as the Electric Operations did not begin until the Merom Acquisition closed in October 2022.
Electric Operations 2023 2022 OPERATING REVENUES: $ 268,341 $ 66,316 EXPENSES: Operating expenses 231,560 29,608 Depreciation, depletion and amortization 18,739 3,117 Asset retirement obligations accretion 576 — General and administrative 4,914 2,086 Total operating expenses 255,789 34,811 INCOME FROM OPERATIONS $ 12,552 $ 31,505 A comparative discussion is not relevant as the Electric Operations did not begin until the Merom Acquisition closed in October 2022.
Oaktown Fuels No. 2 Mine The assigned and accessible reserve base for the Oaktown Fuels No. 2 Mine contains 29.7 million tons of recoverable Indiana V seam coal, of which 23.8 million tons are currently permitted.
Oaktown Fuels No. 2 Mine As of December 31, 2023, the assigned and accessible reserve base for the Oaktown Fuels No. 2 Mine contains 26.6 million tons of recoverable Indiana V seam coal, of which 21.3 million tons are currently permitted.
Ace in the Hole Mine (Ace) (surface) – Assigned Ace Mine is now depleted. Remaining inventory of coal and base is scheduled to be moved to our Carlisle and Oaktown wash plants in early 2023. Reclamation will resume in the Spring of 2023. We expect Phase 1 reclamation should be substantially complete by the end of 2023.
Ace in the Hole Mine (Ace) (surface) – Assigned Ace Mine is now depleted. Remaining inventory of coal and base was moved to our Carlisle and Oaktown wash plants in early 2023. Reclamation resumed in the Spring of 2023. Phase 1 and 2 reclamation is substantially complete as of December 31, 2023.
The NRV adjustments are subject to change as our costs may fluctuate due to higher or lower production and our NRV may fluctuate based on sales contracts we enter into from time to time.
Anticipated utilization of low sulfur, higher-cost coal from our Freelandville, and Prosperity mines has the potential to create NRV adjustments as our estimated needs change. The NRV adjustments are subject to change as our costs may fluctuate due to higher or lower production and our NRV may fluctuate based on sales contracts we enter into from time to time.
Operating revenue is derived from a power purchase agreement signed with Hoosier in conjunction with the Merom Acquisition at fixed prices which were below market prices at the date we entered into the agreement. The power purchase agreement expires in 2025 and requires us to provide a fixed amount of power over the term of the agreement.
Operating revenue is derived from sales to the Midcontinent Independent System Operator ("MISO") wholesale market and a power purchase agreement (PPA) signed with Hoosier in conjunction with the Merom Acquisition. The PPA included sales at fixed prices which were below market prices at the date we entered into the agreement.
The information that follows is derived, for the most part, from, and in some instances is extracted from, the Oaktown Mining Complex technical report summary (“TRS”) that was filed with our 2021 Annual Report on form 10-K and a subsequent update letter from John T. Boyd Company.
The information that follows is derived, for the most part, from, and in some instances is extracted from, the Oaktown Mining Complex technical report summary (“TRS”) from John T.
As a result of the below market contract, we recorded a contract asset at the close of the acquisition totaling $34.3 million that will be amortized over the term of the agreement as the contract is fulfilled.
The coal purchase agreement expired in May 2023 and required us to purchase a fixed amount of coal over the term of the agreement. As a result of the below market contract, we recorded a contract asset at the close of the acquisition totaling $34.3 million that was amortized over the term of the agreement as the contract was fulfilled.
Contracted Estimated tons price Year (millions)* per ton 2023 7.5 $ 58.70 2024 - 2027 (total) 7.3 ** Total 14.8 ______________________ * Contracted tons are subject to adjustment in instances of force majeure and exercise of customer options to either take additional tons or reduce tonnage if such option exists in the customer contract. ** Unpriced or partially priced tons As of December 31, 2022, we are committed to supplying our customers up to a maximum of 14.8 million tons of coal through 2027 of which 10.8 million tons are priced.
Of our 2023 sales, on a segment basis 33%, excluding Merom Power Plant, were derived to locations in the State of Indiana. 35 Table of Contents Our future coal commitments are as follows: 3rd Party Merom Power Plant Contracted Contracted Estimated tons tons Priced Year (millions)* (millions)* Total per ton 2024 3.4 1.5 4.9 $ 53.91 2025 - 2028 (total) 5.8 9.2 15.0 ** Total 9.2 10.7 19.9 ______________________ * Contracted tons are subject to adjustment in instances of force majeure and exercise of customer options to either take additional tons or reduce tonnage if such option exists in the customer contract. ** Unpriced or partially priced committed tons As of December 31, 2023, we are committed to supplying third-party customers up to a maximum of 9.2 million tons of coal through 2027 of which 6.2 million tons are priced.
Coal Operations 2022 2021 OPERATING REVENUES: $ 293,344 $ 246,396 EXPENSES: Operating expenses 236,416 198,442 Depreciation, depletion and amortization 43,612 39,829 Asset impairment — 1,588 Asset retirement obligations accretion 1,010 1,504 Asset retirement obligations change in estimate — (3,510 ) Exploration costs 651 482 General and administrative 7,919 6,069 Total operating expenses 289,608 244,404 INCOME (LOSS) FROM OPERATIONS 3,736 1,992 Operating revenues from coal operations increased 19% over 2021 due in large part to unprecedented increases in natural gas prices.
Coal Operations 2023 2022 OPERATING REVENUES: $ 435,425 $ 293,344 EXPENSES: Operating expenses 311,041 236,416 Depreciation, depletion and amortization 48,365 43,612 Asset retirement obligations accretion 1,228 1,010 Exploration costs 904 651 General and administrative 10,287 7,919 Total operating expenses 371,825 289,608 INCOME (LOSS) FROM OPERATIONS $ 63,600 $ 3,736 Operating revenues from coal operations increased 48% over 2022 due in large part to unprecedented increases in natural gas prices.
Subsequent to the amendment, the current portion of our outstanding debt as of December 31, 2022 is $35.5 million. We expect cash from operations generated primarily by our expected higher coal margins in 2023 to fund our capital expenditures and our debt service.
The effect of the amendment on our future cash flow is to extend the maturity date of $65.0 million of our outstanding debt to May 31, 2026, and our revolver to July 31, 2026. We expect cash from operations generated primarily by our expected higher coal margins in 2023 to fund our capital expenditures and our debt service.
Liquidity and Capital Resources As set forth in our Consolidated Statements of Cash Flows, cash provided by operations was $54.2 million and $48.0 million for the years ended December 31, 2022 and 2021 respectively.
Liquidity and Capital Resources As set forth in our Consolidated Statements of Cash Flows, cash provided by operations was $59.4 million and $54.2 million for the years ended December 31, 2023 and 2022 respectively. Operating cash flow increased due to an increase in operating margins at our coal mines brought on by the addition of higher priced contracts.
As a result of the below market contract, we recorded a contract liability at the close of the acquisition totaling $184.5 million that will be amortized over the term of the agreement as the contract is fulfilled. For the year ended December 31, 2022, we recorded $23.3 million of revenue as a result of amortizing the contract liability.
The power purchase agreement expires in 2025 and requires us to provide a fixed amount of power over the term of the agreement. As a result of the below market contract, we recorded a contract liability at the close of the acquisition totaling $184.5 million that will be amortized over the term of the agreement as the contract is fulfilled.
The primary purpose of the amendment is to convert $35 million of the revolver into a new term loan with a maturity of March 31, 2024 (with principal payments of $10.0 million due by June 30, 2023; $10.0 million by September 30, 2023; $10.0 million by December 31, 2023, and $5.0 million by March 31, 2024), and extend the maturity date of the revolver to May 31, 2024.
The primary purpose of the amendment was to convert $35 million of the revolver into a new term loan with a maturity of March 31, 2024, and extend the maturity date of the revolver to May 31, 2024. On August 2, 2023, we executed an additional amendment with PNC.
As a result of the Merom acquisition, commencing with this Form 10-K, the Company has two reportable segments: coal operations (operated by Sunrise Coal, LLC) and electric operations (operated by Hallador Power Company, LLC).
We believe this acquisition is the catalyst that began Hallador's transition from a producer of coal to a vertically integrated independent power producer ("IPP"). As a result of the Merom acquisition the Company has two reportable segments: coal operations (operated by Sunrise Coal, LLC) and electric operations (operated by Hallador Power).
Operating expenses include coal purchased under an agreement signed with Hoosier in conjunction with the Merom acquisition at fixed prices which were below market prices at the date we entered into the agreement. The coal purchase agreement expires in May 2023 and requires us to purchase a fixed amount of coal over the term of the agreement.
For the years ended December 31, 2023, we recorded $70.5 million and $23.3 million, respectively of revenue as a result of amortizing the contract liability. Operating expenses include coal purchased under an agreement signed with Hoosier in conjunction with the Merom acquisition at fixed prices which were below market prices at the date we entered into the agreement.
Freelandville (surface) – Assigned Sunrise is a contract miner at the Freelandville East Mine Center Pit, Permit No. S 358. Sunrise has an option through May 31, 2023 to assume the permit. The permit contains approximately 1.7 million tons of salable coal with an additional 0.6 million available. Mining started in the fall of 2022.
Sunrise had an option through May 31, 2023 to assume the permit that contained approximately 1.7 million tons of salable coal with an additional 0.6 million available. Mining started in the fall of 2022 and continued through April 2023. In February 2024, this mine was idled.
There were no material adjustments to the coal resources and reserves necessitating the filing of an amended or revised TRS. The Oaktown Mining Complex is the Company’s individually material property. Sections of the following information provided herein do not fully describe assumptions, qualifications, and procedures.
Boyd Company providing an update of estimated coal reserves at the Oaktown Mining Complex as of December 31, 2023, attached as Exhibit 99.2 to this Form 10-K. The Oaktown Mining Complex is the Company’s individually material property. Sections of the following information provided herein do not fully describe assumptions, qualifications, and procedures.
On October 21, 2022, the Company, through its subsidiary Hallador Power Company, LLC, completed its acquisition of the one Gigawatt ("GW") Merom Generating Station ("Merom") located in Sullivan County, Indiana pursuant to an Asset Purchase Agreement (the "Purchase Agreement") with Hoosier Energy (the "Seller").
On October 21, 2022, the Company, through its wholly owned subsidiary Hallador Power, acquired the Merom Generating Energy Station ("Merom"), a one gigawatt (“GW”) power plant located in Sullivan County, Indiana. Merom is located in the Midcontinent Independent System Operator's ("MISO") footprint.
The addition of the higher cost Freelandville and Prosperity surface mines as well as significant inflationary pressures contributed significantly to the increased costs.
Operating expenses increased, however, by ~$7.50 per ton. The addition of the higher cost Freelandville and Prosperity surface mines as well as significant inflationary pressures and geological conditions contributed significantly to the increased costs. 37 Table of Contents Depreciation, depletion, and amortization increased 11%. The majority of this change is due to significant capital additions in the coal division.
The mine is producing coal and also reclaiming the slurry pond and refuse pile left by the Prosperity underground mine. Additional reserves are in the area that may extend the life of this mine. Currently the mine is projected to produce approximately 20,000 tons per month until mid-2024.
The mine produced coal and reclaimed the slurry pond and refuse pile left by the Prosperity underground mine. Additional reserves are in the area that may extend the life of this mine. In February 2024, this mine was temporarily idled. Freelandville (surface) – Assigned Sunrise is a contract miner at the Freelandville East Mine Center Pit, Permit No. S 358.
Our capital expenditure budget for 2023 is $69 million, of which $35 million is for maintenance capex. Of the $69 million, the budget for coal operations is $34 million and the budget for electric operations is $35 million. We paid down debt of $26.5 million in 2022. As of December 31, 2022, our bank debt was $85.2 million.
This was offset by lower margins from our power plant and a decrease in working capital. Our capital expenditure budget for 2024 is $43 million, of which the majority is for maintenance capex. Of the $43 million, the budget for coal operations is $25 million and the budget for electric operations is $18 million.
Mining Properties The following information concerning our mining properties has been prepared in accordance with the requirements of subpart 1300 of Regulation S-K, which first became applicable to us for the fiscal year ended December 31, 2021. These requirements differ from the previously applicable disclosure requirements of SEC Industry Guide 7.
Boyd Company, attached as Exhibit 99.1 to this Form 10-K. The following figure shows the general location of All Mining Properties discussed above: Individual Mining Properties The following information concerning our mining properties has been prepared in accordance with the requirements of subpart 1300 of Regulation S-K.
Removed
Fiscal year 2022 was a transitional year for Hallador. The market price for coal approached all-time highs.
Added
In accordance with the Purchase and Sale Agreement associated with the Merom acquisition, for the first five months of 2023, all fuel consumed at Merom was delivered from a third party and all energy produced was sold at $34 per MWh. Beginning in June 2023, approximately seventy percent of Merom’s energy became available to sell on the open market.
Removed
We were successful in signing 2.2 million tons of new coal sales contracts at an average price of ~$125 per ton in the summer of 2022, of which a small percentage of deliveries were completed in 2022 and will continue through 2025 with the majority contracted to be delivered in 2023.
Added
However, despite spot prices for electricity at Merom averaging $39 in 2021 and $69 in 2022, generally milder weather and depressed natural gas prices drove down the average spot price for electricity to $31 in 2023. Despite near record margins at our coal division for the full year, the fourth quarter was a particularly challenging quarter for Hallador Power.
Removed
To fulfill these obligations, we invested substantially in 2022 to expand our coal production capacity from ~6 million tons annually to ~7.5 million tons in 2023.
Added
A failure in Merom’s main Generator Step-Up Transformer (GSU) coupled with a scheduled maintenance outage took half of the plant offline for nearly the entire quarter. The planned maintenance resulted in $12.6 million in expenditures and the transformer replacement resulted in an additional $0.7 million in unplanned capital expenditures.
Removed
In addition to our acquisition of Merom in Q4 2022 described above, we also expanded our coal production capacity by adding more units of production at our Oaktown Mining Complex, opening a small surface mine pit near Freelandville, Indiana ("Freelandville"), and moving our Ace in the Hole production to a small surface mine pit near Petersburg, Indiana ("Prosperity").
Added
Additionally, natural gas prices, which have great influence on overall electricity price, remained low throughout the second half of 2023 and dropped to an inflation adjusted all-time low in the first quarter of 2024.
Removed
Freelandville and Prosperity production began in Q3 2022. Volumes from these new pits are expected to be higher cost, and our newer workforce and surface pits will require a ramp to reach peak productivity.
Added
The acquisition of Merom, brought with it additional capex spending requirements to maintain and return the power plant to top condition, which we expected to pay for with fourth quarter free cash flow from in-quarter power sales.
Removed
We will continue to evaluate the productivity of these mines in connection with market conditions to determine the appropriate operational balance. 30 Table of Contents To help fund our investment in expanded mine production, improve our liquidity, and position us to efficiently operate Merom, we issued $29 million of convertible notes, $10 million in Q2 2022 and $19 million in Q3 2022.
Added
However, with fourth quarter challenges at both Merom and in our coal division, Sunrise Coal, we took steps to protect liquidity and to increase the efficiency of our operations. Thus, in December and early January we improved liquidity and provided operational flexibility through an At-The-Market (ATM) offering.
Removed
The $10 million of notes issued in Q2 2022 have been converted into the Company's common stock, bringing our outstanding share count to 33.0 million shares as of December 31, 2022.
Added
Under the ATM, we sold approximately 800,000 shares of Hallador stock in December 2023 and raised approximately $7.3 million of equity resulting in 34,051,154 shares outstanding at December 31, 2023. Approximately 700,000 shares of Hallador stock was sold in January 2024 raising an additional $6.6 million of equity.
Removed
If the additional notes issued in Q3 2022 were to also convert, our outstanding share count would increase to approximately 36.1 million shares, representing an approximate 17% increase in share count.
Added
Hallador’s share count stands at 34.9 million shares as of March 8, 2024. Liquidity at year end was $26.2 million. Subsequently, in February 2024, we further added to liquidity as several members of Hallador's Board of Directors loaned the company a total of $5 million through an unsecured one year note at an interest rate of 12% per annum.
Removed
Bank debt was reduced during the year by $26.5 million bringing the balance owed at the end of fiscal 2022 to $85.2 million, bringing the Debt to EBITDA covenant under our credit agreement to 2.05X at the end of fiscal 2022. See Note 5 to our consolidated financial statements for additional discussion about our bank debt and related liquidity.
Added
Receipt of roughly $36 million in capacity revenue for the 2024-2025 planning year will begin in the first quarter of 2024, further strengthening our financial position. See Note 4 to our consolidated financial statements for additional discussion about our bank debt and related liquidity.
Removed
We hold surety bonds to cover obligations relating to mining and reclamation, road repair, etc.
Added
On February 23, 2024, our Coal Operations Segment undertook an initiative designed to strengthen our financial and operational efficiency and to create significant operational savings and higher margins in our coal segment. This step will advance our transition from a company primarily focused on coal production to a more resilient and diversified vertically integrated IPP.
Removed
Ace in the Hole Mine #2 Reserves (surface) – Unassigned In 2018, we leased property giving us 1.0 million controlled, saleable tons at a new location 2 miles southwest of our Ace in the Hole mine. Future mine development is being reviewed along with other opportunities.
Added
As part of this initiative, we idled production at our higher cost Prosperity Mine, and substantially idled production at Freelandville Mine with minimal production. This should reduce our capital reinvestment for coal production in 2024 by approximately $10 million. We also focused our seven units of underground equipment on four units of our lowest cost production at our Oaktown Mine.
Removed
Once the mine reaches full capacity in March of 2023 the mine is expected to produce approximately 40,000 salable tons per month. Our Coal Contracts In 2022, Sunrise sold 6.3 million tons of coal to 14 power plants in five different states across nine different customers.
Added
As part of the initiative, we reduced our workforce by approximately 110 employees. Historically, Sunrise Coal has generated approximately six million tons of coal annually. Following the restructuring, we expect Sunrise to produce roughly 4.5 million tons of coal annually at improved margins to our former structure.
Removed
Of our 2022 sales, 74% were shipped to locations in the State of Indiana. 35 Table of Contents In the summer of 2022, customer coal inventories and natural gas (a competitor to coal) inventory levels were lower than normal. Customers paid near record prices in 2022 to secure limited fuel supply.
Added
Additionally, in 2024, we have secured supplemental coal from third party suppliers at favorable prices. This allows us to diversify self-production supply risk and provides us with additional flexibility in our sales portfolio.
Removed
We invested in expanding our mining production to meet the demand. As discussed above we have opened the Prosperity and Freelandville surface mines to meet the demand resulting in contracts being signed raising our estimated average sales price for 2023 to $58.70 per ton.
Added
The optionality to obtain low-cost tons either internally or from third parties while capturing upward swings in the commodities markets for coal should further maximize margins while optimizing fuels costs at Merom. In addition to the expected improvements in coal margins, Merom has the capability to provide revenue on up to 6 million mega-watt-hours (MWh) annually.
Removed
Beginning in 2024, with the acquisition of the Merom power plant, we have the optionality to sell up to 3.0 million tons of our coal directly to the Merom plant, which would be in addition to the contracted tons to our third party customers described above.

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