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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2022

OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from           to

Commission File Number 001-38735
amr-20220630_g1.jpg
ALPHA METALLURGICAL RESOURCES, INC.
(Exact name of registrant as specified in its charter)
Delaware 81-3015061
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification Number)
340 Martin Luther King Jr. Blvd.
Bristol, Tennessee 37620
(Address of principal executive offices, zip code)
(423) 573-0300
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes   ¨ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Sec.232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). x Yes   ¨ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer Accelerated filer
Non-accelerated filer Smaller reporting company
Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) ☐ Yes   x No

Securities registered pursuant to Section 12(b) of the Act:



Title of each class Trading Symbol(s) Name of each exchange on which registered
Common Stock AMR New York Stock Exchange

Number of shares of the registrant’s Common Stock, $0.01 par value, outstanding as of July 31, 2022: 17,324,096






TABLE OF CONTENTS
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This report includes statements of our expectations, intentions, plans and beliefs that constitute “forward-looking statements.” These statements, which involve risks and uncertainties, relate to analyses and other information that are based on forecasts of future results and estimates of amounts not yet determinable and may also relate to our future prospects, developments and business strategies. We have used the words “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “should” and similar terms and phrases, including references to assumptions, in this report to identify forward-looking statements, but these terms and phrases are not the exclusive means of identifying such statements. These forward-looking statements are made based on expectations and beliefs concerning future events affecting us and are subject to uncertainties and factors relating to our operations and business environment, all of which are difficult to predict and many of which are beyond our control, that could cause our actual results to differ materially from those expressed in or implied by these forward-looking statements.

The following factors are among those that may cause actual results to differ materially from our forward-looking statements:

the financial performance of the company;
our liquidity, results of operations and financial condition;
our ability to generate sufficient cash or obtain financing to fund our business operations;
depressed levels or declines in coal prices;
changes in domestic or international environmental laws and regulations, and court decisions, including those directly affecting our coal mining and production, and those affecting our customers’ coal usage, including potential climate change initiatives;
worldwide market demand for coal and steel, including demand for U.S. coal exports, and competition in coal markets;
our ability to pay dividends on our common stock and execute our share repurchase program;
our ability to obtain or renew surety bonds on acceptable terms or maintain our current bonding status;
inflationary pressures on supplies and labor and significant or rapid increases in commodity prices;
our indebtedness and potential future indebtedness;
our ability to meet collateral requirements;
the effects of the COVID-19 pandemic on our operations and the world economy;
the imposition or continuation of barriers to trade, such as tariffs;
increased market volatility and uncertainty on worldwide markets and our customers as a result of developments in and around Ukraine and the consequent export controls and financial and economic sanctions;
railroad, barge, truck and other transportation availability, performance and costs;
reductions or increases in customer coal inventories and the timing of those changes;
our production capabilities and costs;
attracting and retaining key personnel and other employee workforce factors, such as labor relations;
disruptions in delivery or changes in pricing from third-party vendors of key equipment and materials that are necessary for our operations, such as diesel fuel, steel products, explosives, tires and purchased coal;
inherent risks of coal mining, including those that are beyond our control;
changes in the ownership of our equity, which may significantly further reduce the annual amount of the net operating loss and other carryforwards available to be utilized;
changes in, interpretations of, or implementations of domestic or international tax or other laws and regulations, including the Tax Cuts and Jobs Act and its related regulations;
our ability to consummate financing or refinancing transactions, and other services, and the form and degree of these services available to us, which may be significantly limited by the lending, investment and similar policies of financial institutions and insurance companies regarding carbon energy producers and the environmental impacts of coal combustion;
our ability to self-insure certain of our black lung obligations without a significant increase in required collateral;
our relationships with, and other conditions affecting, our customers, including the inability to collect payments from our customers if their creditworthiness declines;
changes in, renewal or acquisition of, terms of and performance of customers under coal supply arrangements and the refusal by our customers to receive coal under agreed-upon contract terms;
our ability to obtain, maintain or renew any necessary permits or rights, and our ability to mine properties due to defects in title on leasehold interests;
funding for and changes in employee benefit obligations;
cybersecurity attacks or failures, threats to physical security, extreme weather conditions or other natural disasters;
reclamation and mine closure obligations;
4

utilities switching to alternative energy sources such as natural gas, renewables and coal from basins where we do not operate;
our assumptions concerning economically recoverable coal reserve estimates;
failures in performance, or non-performance, of services by third-party contractors, including contract mining and reclamation contractors;
disruption in third-party coal supplies; and
other factors, including the other factors discussed in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors” sections included elsewhere in this Quarterly Report on Form 10-Q and the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors” sections contained in our Annual Report on Form 10-K for the year ended December 31, 2021.

The list of factors identified above is not exhaustive. We caution readers not to place undue reliance on any forward-looking statements, which are based on information currently available to us and speak only as of the dates on which they are made. When considering these forward-looking statements, you should keep in mind the cautionary statements in this report. We do not undertake any responsibility to publicly revise these forward-looking statements to take into account events or circumstances that occur after the date of this report. Additionally, except as expressly required by federal securities laws, we do not undertake any responsibility to update you on the occurrence of any unanticipated events, which may cause actual results to differ from those expressed or implied by the forward-looking statements contained in this report.

5

Part I - Financial Information

Item 1. Financial Statements

ALPHA METALLURGICAL RESOURCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(Amounts in thousands, except share and per share data)
Three Months Ended June 30, Six Months Ended June 30,
  2022 2021 2022 2021
Revenues:      
Coal revenues $ 1,334,258  $ 393,458  $ 2,403,996  $ 778,910 
Other revenues 2,154  1,817  4,380  2,618 
Total revenues 1,336,412  395,275  2,408,376  781,528 
Costs and expenses:        
Cost of coal sales (exclusive of items shown separately below) 625,892  346,763  1,181,209  694,191 
Depreciation, depletion and amortization 27,730  27,304  55,765  55,742 
Accretion on asset retirement obligations 5,947  6,648  11,901  13,296 
Amortization of acquired intangibles, net 5,747  2,553  11,495  6,422 
Asset impairment and restructuring —  —  —  (561)
Selling, general and administrative expenses (exclusive of depreciation, depletion and amortization shown separately above) 18,158  14,645  33,244  29,627 
Total other operating loss (income):
Mark-to-market adjustment for acquisition-related obligations 4,208  3,157  13,569  6,333 
Other income (1,516) (3,608) (2,144) (4,833)
Total costs and expenses 686,166  397,462  1,305,039  800,217 
Income (loss) from operations 650,246  (2,187) 1,103,337  (18,689)
Other (expense) income:        
Interest expense (5,218) (17,962) (18,301) (35,952)
Interest income 164  104  348  268 
Equity loss in affiliates (2,136) (384) (3,497) (518)
Miscellaneous income, net 1,385  1,847  3,182  3,613 
Total other expense, net (5,805) (16,395) (18,268) (32,589)
Income (loss) from continuing operations before income taxes 644,441  (18,582) 1,085,069  (51,278)
Income tax expense (69,012) (8) (108,636) (3)
Net income (loss) from continuing operations 575,429  (18,590) 976,433  (51,281)
Discontinued operations:
Loss from discontinued operations before income taxes (1,652) (401) (1,798) (638)
Income tax benefit from discontinued operations 380  —  413  — 
Loss from discontinued operations (1,272) (401) (1,385) (638)
Net income (loss) $ 574,157  $ (18,991) $ 975,048  $ (51,919)
Basic income (loss) per common share:
Income (loss) from continuing operations $ 31.31  $ (1.01) $ 52.85  $ (2.78)
Loss from discontinued operations (0.07) (0.02) (0.08) (0.04)
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Net income (loss) $ 31.24  $ (1.03) $ 52.77  $ (2.82)
Diluted income (loss) per common share:
Income (loss) from continuing operations $ 30.03  $ (1.01) $ 50.46  $ (2.78)
Loss from discontinued operations (0.06) (0.02) (0.07) (0.04)
Net income (loss) $ 29.97  $ (1.03) $ 50.39  $ (2.82)
Weighted average shares – basic
18,380,114  18,438,699  18,476,534  18,416,946 
Weighted average shares – diluted
19,158,848  18,438,699  19,349,209  18,416,946 

Refer to accompanying Notes to Condensed Consolidated Financial Statements.
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ALPHA METALLURGICAL RESOURCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited)
(Amounts in thousands)
Three Months Ended June 30, Six Months Ended June 30,
2022 2021 2022 2021
Net income (loss) $ 574,157  $ (18,991) $ 975,048  $ (51,919)
Other comprehensive income (loss), net of tax:
Employee benefit plans:
Amortization of and adjustments to employee benefit costs $ (3,976) $ 10,180  $ (3,201) $ 11,664 
Income tax expense —  —  —  — 
Total other comprehensive (loss) income, net of tax $ (3,976) $ 10,180  $ (3,201) $ 11,664 
Total comprehensive income (loss) $ 570,181  $ (8,811) $ 971,847  $ (40,255)
Refer to accompanying Notes to Condensed Consolidated Financial Statements.

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ALPHA METALLURGICAL RESOURCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(Amounts in thousands, except share and per share data)
June 30, 2022 December 31, 2021
Assets    
Current assets:    
Cash and cash equivalents $ 161,732  $ 81,211 
Trade accounts receivable, net of allowance for doubtful accounts of $473 and $393 as of June 30, 2022 and December 31, 2021, respectively
721,830  489,241 
Inventories, net 167,192  129,382 
Prepaid expenses and other current assets 57,853  47,690 
Current assets - discontinued operations 70  462 
Total current assets 1,108,677  747,986 
Property, plant, and equipment, net of accumulated depreciation and amortization of $478,210 and $443,856 as of June 30, 2022 and December 31, 2021, respectively
392,074  362,218 
Owned and leased mineral rights, net of accumulated depletion and amortization of $66,891 and $52,444 as of June 30, 2022 and December 31, 2021, respectively
429,854  444,302 
Other acquired intangibles, net of accumulated amortization of $45,716 and $34,221 as of June 30, 2022 and December 31, 2021, respectively
62,702  74,197 
Long-term restricted investments 94,794  28,443 
Long-term restricted cash 24,920  89,426 
Other non-current assets 94,617  102,614 
Non-current assets - discontinued operations 8,508  8,526 
Total assets $ 2,216,146  $ 1,857,712 
Liabilities and Stockholders’ Equity    
Current liabilities:    
Current portion of long-term debt $ 1,927  $ 2,989 
Trade accounts payable 100,957  90,090 
Acquisition-related obligations – current
36,211  22,405 
Accrued expenses and other current liabilities 200,268  174,607 
Current liabilities - discontinued operations 6,104  5,838 
Total current liabilities 345,467  295,929 
Long-term debt 2,762  445,562 
Acquisition-related obligations - long-term —  19,000 
Workers’ compensation and black lung obligations 202,402  208,193 
Pension obligations 155,467  159,930 
Asset retirement obligations 133,946  132,013 
Deferred income taxes 12,934  317 
Other non-current liabilities 20,274  26,176 
Non-current liabilities - discontinued operations 23,321  23,683 
Total liabilities 896,573  1,310,803 
Commitments and Contingencies (Note 16)
Stockholders’ Equity
Preferred stock - par value $0.01, 5.0 million shares authorized, none issued
—  — 
Common stock - par value $0.01, 50.0 million shares authorized, 21.6 million issued and 17.7 million outstanding at June 30, 2022 and 20.8 million issued and 18.4 million outstanding at December 31, 2021
216  208 
Additional paid-in capital 807,603  784,743 
Accumulated other comprehensive loss (61,704) (58,503)
9

Treasury stock, at cost: 3.9 million shares at June 30, 2022 and 2.4 million shares at December 31, 2021
(322,874) (107,800)
Retained earnings (accumulated deficit) 896,332  (71,739)
Total stockholders’ equity 1,319,573  546,909 
Total liabilities and stockholders’ equity $ 2,216,146  $ 1,857,712 

Refer to accompanying Notes to Condensed Consolidated Financial Statements.
10

ALPHA METALLURGICAL RESOURCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(Amounts in thousands)
Six Months Ended June 30,
2022 2021
Operating activities:
Net income (loss) $ 975,048  $ (51,919)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation, depletion and amortization 55,765  55,742 
Amortization of acquired intangibles, net 11,495  6,422 
Amortization of debt issuance costs and accretion of debt discount 7,231  6,480 
Mark-to-market adjustment for acquisition-related obligations 13,569  6,333 
Gain on disposal of assets (2,172) (4,878)
Accretion on asset retirement obligations 11,901  13,296 
Employee benefit plans, net 232  5,744 
Deferred income taxes 12,617 
Stock-based compensation 2,583  3,162 
Equity loss in affiliates 3,497  518 
Other, net 567  (58)
Changes in operating assets and liabilities (290,277) (66,296)
Net cash provided by (used in) operating activities 802,056  (25,451)
Investing activities:
Capital expenditures (70,012) (38,039)
Proceeds on disposal of assets 2,511  6,801 
Purchases of investment securities (127,831) (15,470)
Maturity of investment securities 60,945  7,766 
Capital contributions to equity affiliates (8,525) (1,895)
Other, net (4,237) 35 
Net cash used in investing activities (147,149) (40,802)
Financing activities:
Principal repayments of long-term debt (450,362) (7,521)
Principal repayments of financing lease obligations (1,098) (1,002)
Debt issuance costs —  (226)
Common stock repurchases and related expenses (194,950) (680)
Proceeds from exercise of stock options 903  — 
Proceeds from exercise of warrants 4,486  — 
Net cash used in financing activities (641,021) (9,429)
Net increase (decrease) in cash and cash equivalents and restricted cash 13,886  (75,682)
Cash and cash equivalents and restricted cash at beginning of period 182,614  244,571 
Cash and cash equivalents and restricted cash at end of period $ 196,500  $ 168,889 
The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the Condensed Consolidated Balance Sheets that sum to the total of the same such amounts shown in the Condensed Consolidated Statements of Cash Flows.
11

As of June 30,
  2022 2021
Cash and cash equivalents $ 161,732  $ 72,337 
Short-term restricted cash (included in Prepaid expenses and other current assets) 9,848  3,794 
Long-term restricted cash 24,920  92,758 
Total cash and cash equivalents and restricted cash shown in the Condensed Consolidated Statements of Cash Flows $ 196,500  $ 168,889 

Refer to accompanying Notes to Condensed Consolidated Financial Statements.

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ALPHA METALLURGICAL RESOURCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Unaudited)
(Amounts in thousands)
Common Stock Additional Paid-in Capital Accumulated Other Comprehensive Loss Treasury Stock at Cost (Accumulated Deficit) Retained Earnings Total Stockholders’ Equity
Balances, December 31, 2020 $ 206  $ 779,424  $ (111,985) $ (107,014) $ (360,529) $ 200,102 
Net loss —  —  —  —  (32,928) (32,928)
Other comprehensive income, net —  —  1,484  —  —  1,484 
Stock-based compensation and issuance of common stock for share vesting 2,182  —  —  —  2,183 
Common stock repurchases and related expenses —  —  —  (680) —  (680)
Balances, March 31, 2021 $ 207  $ 781,606  $ (110,501) $ (107,694) $ (393,457) $ 170,161 
Net loss —  —  —  —  (18,991) (18,991)
Other comprehensive income, net —  —  10,180  —  —  10,180 
Stock-based compensation and issuance of common stock for share vesting 980  —  —  —  981 
Balances, June 30, 2021 $ 208  $ 782,586  $ (100,321) $ (107,694) $ (412,448) $ 162,331 
Balances, December 31, 2021 $ 208  $ 784,743  $ (58,503) $ (107,800) $ (71,739) $ 546,909 
Net income —  —  —  —  400,891  400,891 
Other comprehensive income, net —  —  775  —  —  775 
Stock-based compensation, issuance of common stock for share vesting, and common stock reissuances (391) —  1,572  —  1,182 
Exercise of stock options —  891  —  —  —  891 
Warrants exercises 3,038  —  —  —  3,039 
Common stock repurchases and related expenses —  —  —  (23,840) —  (23,840)
Balances, March 31, 2022 $ 210  $ 788,281  $ (57,728) $ (130,068) $ 329,152  $ 929,847 
Net income —  —  —  —  574,157  574,157 
Other comprehensive loss, net —  —  (3,976) —  —  (3,976)
Stock-based compensation, issuance of common stock for share vesting, and common stock reissuances —  1,249  —  152  —  1,401 
Exercise of stock options —  11  —  —  —  11 
Warrants exercises 18,062  —  —  —  18,068 
Common stock repurchases and related expenses —  —  —  (192,958) —  (192,958)
Cash dividend and dividend equivalents declared ($0.375 per share)
—  —  —  —  (6,977) (6,977)
Balances, June 30, 2022 $ 216  $ 807,603  $ (61,704) $ (322,874) $ 896,332  $ 1,319,573 
Refer to accompanying Notes to Condensed Consolidated Financial Statements.
13

ALPHA METALLURGICAL RESOURCES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited, amounts in thousands except share and per share data)

(1) Business and Basis of Presentation
Business

Alpha Metallurgical Resources, Inc. (“Alpha” or the “Company”) is a Tennessee-based mining company with operations across Virginia and West Virginia. With customers across the globe, high-quality reserves and significant port capacity, Alpha is a leading U.S. supplier of metallurgical coal products for the steel industry.

Basis of Presentation

Together, the condensed consolidated statements of operations, comprehensive income (loss), balance sheets, cash flows and stockholders’ equity for the Company are referred to as the “Condensed Consolidated Financial Statements.” The Condensed Consolidated Financial Statements are also referenced across periods as “Condensed Consolidated Statements of Operations,” “Condensed Consolidated Statements of Comprehensive Income (Loss),” “Condensed Consolidated Balance Sheets,” “Condensed Consolidated Statements of Cash Flows,” and “Condensed Consolidated Statements of Stockholders’ Equity.” The Company’s former Northern Appalachia (“NAPP”) operations results of operations and financial position are reported as discontinued operations in the Condensed Consolidated Financial Statements. Refer to Note 2 for further information on discontinued operations.
The Condensed Consolidated Financial Statements include all wholly-owned subsidiaries’ results of operations for the three and six months ended June 30, 2022 and 2021. All significant intercompany transactions have been eliminated in consolidation.

The accompanying interim Condensed Consolidated Financial Statements are unaudited and have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) and in accordance with the rules and regulations of the United States Securities and Exchange Commission (“SEC”) for Form 10-Q. Such rules and regulations allow the omission of certain information and footnote disclosures normally included in the financial statements prepared in accordance with U.S. GAAP as long as the financial statements are not misleading. In the opinion of management, these interim Condensed Consolidated Financial Statements reflect all normal and recurring adjustments necessary for a fair presentation of the results for the periods presented. Results of operations for the three and six months ended June 30, 2022 are not necessarily indicative of the results to be expected for the year ending December 31, 2022 or any other period. These interim Condensed Consolidated Financial Statements should be read in conjunction with the Company’s Consolidated Financial Statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.
Reclassifications

Certain amounts in the prior year Condensed Consolidated Statements of Cash Flows have been reclassified to conform to the current year presentation.
COVID-19 Pandemic

In the first quarter of 2020, the COVID-19 virus was declared a pandemic by the World Health Organization. The COVID-19 pandemic has had negative impacts on the Company’s business, results of operations, financial condition and cash flows. The Company experienced an increase in employee absences due to COVID-19. Indirectly, through some of the Company’s third-party vendors, the Company and the Company’s customers have experienced some supply chain disruptions due to the COVID-19 pandemic. The full extent of the impact of the COVID-19 pandemic on the Company’s operational and financial performance will depend on certain developments, including the duration of the virus, its impact on the Company’s customers and suppliers, and the range of governmental and community reactions to the pandemic, which cannot be fully predicted. Health and safety are core values of the Company and are the foundation for how the Company manages every aspect of its business. The Company continues to monitor developments closely and adjust as necessary, including with respect to the Company’s implemented policies, procedures, and prevention measures to protect the safety and health of its employees.

Recently Adopted Accounting Guidance

Fair Value Measurement: In June 2022, the Financial Accounting Standards Board (the “FASB”) issued Accounting
14

ALPHA METALLURGICAL RESOURCES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited, amounts in thousands except share and per share data)
Standards Update (“ASU”) 2022-03, Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions (“ASU 2022-03”). This update clarifies how the fair value of equity securities subject to contractual sale restrictions is determined. Per the update, a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and is not considered in measuring fair value. Additionally, the update requires entities with investments in equity securities subject to contractual sale restrictions to disclose certain qualitative and quantitative information about such securities. The amendments are effective for fiscal years beginning after December 15, 2023, with early application permitted. The Company adopted ASU 2022-03 during the second quarter of 2022. The adoption of this ASU did not have a material impact on the Company’s Condensed Consolidated Financial Statements and related disclosures.

Financial Instruments: In March 2022, the FASB issued ASU 2022-02, Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures (“ASU 2022-02”). This update eliminates the troubled debt restructuring model for creditors that have adopted Topic 326. All loan modifications will now be accounted for under general loan modification guidance and, on a prospective basis, entities will be subject to new disclosure requirements covering modifications of receivables to borrowers experiencing financial difficulty. In addition, entities will be required to prospectively disclose current-period gross write-off information by year of origination. The amendments are effective for fiscal years beginning after December 15, 2022, with early application permitted. The Company adopted ASU 2022-02 during the first quarter of 2022. The adoption of this ASU did not have a material impact on the Company’s Condensed Consolidated Financial Statements and related disclosures.

(2) Discontinued Operations

Discontinued operations consist of activity related to the Company’s former NAPP operations.

Major Financial Statement Components of Discontinued Operations

The loss from discontinued operations before income taxes for the three months ended June 30, 2022 and 2021 was $1,652 and $401, respectively. The loss from discontinued operations before income taxes for the six months ended June 30, 2022 and 2021 was $1,798 and $638, respectively. Refer to the Condensed Consolidated Statements of Operations and Note 5 for loss per share information related to discontinued operations.

The major components of assets and liabilities that are classified as discontinued operations in the Condensed Consolidated Balance Sheets are as follows:
June 30, 2022 December 31, 2021
Assets:
Prepaid expenses and other current assets $ 70  $ 462 
Other non-current assets (1)
$ 8,508  $ 8,526 
Liabilities:
Trade accounts payable, accrued expenses and other current liabilities $ 6,104  $ 5,838 
Workers’ compensation and black lung obligations, non-current $ 23,321  $ 23,683 
(1) Comprised of workers’ compensation insurance receivable and long-term restricted investments collateralizing workers’ compensation obligations.

(3) Revenue

Disaggregation of Revenue from Contracts with Customers

The Company earns revenues primarily through the sale of coal produced at Company operations and coal purchased from third parties. The Company extracts, processes and markets met and thermal coal from deep and surface mines for sale to steel and coke producers, industrial customers, and electric utilities.

The Company has disaggregated revenue between met coal and thermal coal and export and domestic revenues which depicts the pricing and contract differences between the two. Export revenue generally is derived by spot or short term contracts
15

ALPHA METALLURGICAL RESOURCES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited, amounts in thousands except share and per share data)
with pricing determined at the time of shipment or based on a market index; whereas domestic revenue is characterized by contracts that typically have a term of one year or longer and typically the pricing is fixed. The following tables disaggregate the Company’s coal revenues by product category and by market to depict how the nature, amount, timing, and uncertainty of the Company’s coal revenues and cash flows are affected by economic factors:
Three Months Ended June 30, 2022
Met Coal Thermal Coal Total
Export coal revenues $ 1,135,757  $ 10,246  $ 1,146,003 
Domestic coal revenues 162,483  25,772  188,255 
Total coal revenues $ 1,298,240  $ 36,018  $ 1,334,258 

Three Months Ended June 30, 2021
Met Coal Thermal Coal Total
Export coal revenues $ 250,324  $ 5,693  $ 256,017 
Domestic coal revenues 105,235  32,206  137,441 
Total coal revenues $ 355,559  $ 37,899  $ 393,458 

Six Months Ended June 30, 2022
Met Coal Thermal Coal Total
Export coal revenues $ 2,023,763  $ 16,765  $ 2,040,528 
Domestic coal revenues 322,470  40,998  363,468 
Total coal revenues $ 2,346,233  $ 57,763  $ 2,403,996 

Six Months Ended June 30, 2021
Met Coal Thermal Coal Total
Export coal revenues $ 493,076  $ 6,724  $ 499,800 
Domestic coal revenues 205,477  73,633  279,110 
Total coal revenues $ 698,553  $ 80,357  $ 778,910 

Performance Obligations

The following table includes estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied as of June 30, 2022:
Remainder of 2022 2023 2024 2025 2026 Total
Estimated coal revenues $ 23,281  $ 32,919  $ 37,250  $ —  $ —  $ 93,450 

(4) Accumulated Other Comprehensive Loss
The following tables summarize the changes to accumulated other comprehensive loss during the six months ended June 30, 2022 and 2021:
Balance January 1, 2022
Other comprehensive income (loss) before reclassifications
Amounts reclassified from accumulated other comprehensive loss
Balance June 30, 2022
Employee benefit costs $ (58,503) $ (4,837) $ 1,636  $ (61,704)

16

ALPHA METALLURGICAL RESOURCES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited, amounts in thousands except share and per share data)
Balance January 1, 2021
Other comprehensive income (loss) before reclassifications
Amounts reclassified from accumulated other comprehensive loss
Balance June 30, 2021
Employee benefit costs $ (111,985) $ 8,838  $ 2,826  $ (100,321)

The following table summarizes the amounts reclassified from accumulated other comprehensive loss and the Condensed Consolidated Statements of Operations line items affected by the reclassification during the three and six months ended June 30, 2022 and 2021:
Details about accumulated other comprehensive loss components Amounts reclassified from accumulated other comprehensive loss Affected line item in the Condensed Consolidated Statements of Operations
Three Months Ended June 30, Six Months Ended June 30,
2022 2021 2022 2021
Employee benefit costs:
Amortization of net actuarial loss (1)
$ 871  $ 1,342  $ 1,655  $ 2,826  Miscellaneous income, net
Settlement (1)
(10) —  (19) —  Miscellaneous income, net
Total before income tax $ 861  $ 1,342  $ 1,636  $ 2,826 
Income tax —  —  —  —  Income tax expense
Total, net of income tax $ 861  $ 1,342  $ 1,636  $ 2,826 
(1) These accumulated other comprehensive loss components are included in the computation of net periodic benefit costs for certain employee benefit plans. Refer to Note 14.

(5) Net Income (Loss) Per Share
The number of shares used to calculate basic net income (loss) per common share is based on the weighted average number of the Company’s outstanding common shares during the respective period. The number of shares used to calculate diluted net income (loss) per common share is based on the number of common shares used to calculate basic net income (loss) per common share plus the dilutive effect of stock options and other stock-based instruments held by the Company’s employees and directors during the period, and the Company’s outstanding warrants. The dilutive effect of outstanding stock-based instruments is determined by application of the treasury stock method. The stock options and warrants become dilutive for diluted net income (loss) per common share calculations when the market price of the Company’s common stock exceeds the exercise price. As discussed below, dilutive securities are not included in the computation of diluted net loss per common share for the three and six months ended June 30, 2021 as the impact would be anti-dilutive.

For the three months ended June 30, 2022 and 2021, 0 and 942,549 warrants and stock options, respectively, were excluded from the computation of dilutive net income (loss) per common share because they would have been anti-dilutive. For six months ended June 30, 2022 and 2021, 0 and 948,398 warrants, stock options, and other stock-based instruments, respectively, were excluded from the computation of dilutive net loss per common share because they would have been anti-dilutive. When applying the treasury stock method, anti-dilution generally occurs when the exercise prices or unrecognized compensation cost per share are higher than the Company’s average stock price during an applicable period.

Anti-dilution also occurs in periods of a net loss, and the dilutive impact of all share-based compensation awards are excluded. For the three months ended June 30, 2021 the weighted average share impact of stock options and other stock-based instruments that were excluded from the calculation of diluted shares due to the Company incurring a net loss for the period was 313,640. For the six months ended June 30, 2021, the weighted average share impact of stock options and other-stock-based instruments that were excluded from the calculation of diluted shares due to the Company incurring a net loss for the period was 301,684.

The following table presents the net income (loss) per common share for the three and six months ended June 30, 2022 and 2021:

17

ALPHA METALLURGICAL RESOURCES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited, amounts in thousands except share and per share data)
Three Months Ended June 30, Six Months Ended June 30,
2022 2021 2022 2021
Net income (loss)
Income (loss) from continuing operations $ 575,429  $ (18,590) $ 976,433  $ (51,281)
Loss from discontinued operations (1,272) (401) (1,385) (638)
Net income (loss) $ 574,157  $ (18,991) $ 975,048  $ (51,919)
Basic
Weighted average common shares outstanding - basic 18,380,114  18,438,699  18,476,534  18,416,946 
Basic income (loss) per common share:
Income (loss) from continuing operations $ 31.31  $ (1.01) $ 52.85  $ (2.78)
Loss from discontinued operations (0.07) (0.02) (0.08) (0.04)
Net income (loss) $ 31.24  $ (1.03) $ 52.77  $ (2.82)
Diluted
Weighted average common shares outstanding - basic 18,380,114  18,438,699  18,476,534  18,416,946 
Diluted effect of warrants 323,087  —  383,180  — 
Diluted effect of stock options 5,544  —  6,331  — 
Diluted effect of other stock-based instruments 450,103  —  483,164  — 
Weighted average common shares outstanding - diluted 19,158,848  18,438,699  19,349,209  18,416,946 
Diluted income (loss) per common share:
Income (loss) from continuing operations $ 30.03  $ (1.01) $ 50.46  $ (2.78)
Loss from discontinued operations (0.06) (0.02) (0.07) (0.04)
Net income (loss) $ 29.97  $ (1.03) $ 50.39  $ (2.82)

(6) Inventories, net
Inventories, net consisted of the following: 
  June 30, 2022 December 31, 2021
Raw coal $ 35,078  $ 20,347 
Saleable coal 96,009  81,240 
Materials, supplies and other, net
36,105  27,795 
Total inventories, net $ 167,192  $ 129,382 

18

ALPHA METALLURGICAL RESOURCES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited, amounts in thousands except share and per share data)
(7) Capital Stock

Share Repurchase Program

On March 4, 2022, the Company’s Board of Directors (the “Board”) adopted a share repurchase program that permitted the Company to repurchase up to an aggregate amount of $150,000 of the Company's common stock. On May 3, 2022, the Company’s Board amended the share repurchase program to increase the aggregate amount the Company is permitted to repurchase to an aggregate amount of up to $600,000 of the Company's common stock. Share repurchases may be made from time to time through open market transactions, block trades, tender offers, or otherwise, and has no expiration date. The share repurchase program does not obligate the Company to acquire any particular amount of common stock or to acquire shares on any particular timetable, and the program may be suspended at any time at the Company’s discretion. Repurchases under the program are subject to market and business conditions, levels of available liquidity, the Company’s cash needs, restrictions under agreements or obligations, legal or regulatory requirements or restrictions and other relevant factors. As of June 30, 2022, the Company had repurchased an aggregate of 1,309,362 shares under the plan for an aggregate purchase price of approximately $192,859 (comprised of $192,820 of share repurchases and $39 of related fees).

Dividend Program

On May 3, 2022, the Company‘s Board adopted a dividend policy. Pursuant to this policy, the Board initially intended to pay aggregate cash dividends of $1.50 per share of common stock per year, with $0.375 per share paid each quarter. Refer to Note 18 for subsequent event disclosures related to the Company’s dividend program including an increase to the declared cash dividend per share for the subsequent quarter. The first quarterly dividend payment became payable on July 1, 2022 for holders of record as of June 15, 2022. In addition, pursuant to the terms of certain stock-based compensation awards under the Company’s Management Incentive Plan and Long-Term Incentive Plan, dividend equivalent amounts will become payable at various vesting dates with respect to each share underlying outstanding award.

As of June 30, 2022, the Company recorded a $6,977 dividend payable for the first quarterly dividend declaration, including dividend equivalents, with a reduction to the Company’s retained earnings. Of this dividend payable amount, $6,836 and $141 were included within Accrued expenses and other current liabilities and Other non-current liabilities, respectively, on the Company’s Condensed Consolidated Balance Sheets. We expect any future dividend payments will be targeted to be paid in the first month of each calendar quarter. Any decision to pay future cash dividends will, however, be made by the Board and depend on Alpha’s future earnings and financial condition and other relevant factors.

Warrants

On July 26, 2016, the Company issued 810,811 warrants, which are classified as equity instruments. Pursuant to the underlying warrants agreement, the warrants are exercisable for cash or on a cashless basis at any time until July 26, 2023, and no fractional shares shall be issued upon warrant exercises. Pursuant to the underlying warrants agreement, the exercise price was adjusted as a result of the occurrence of the dividend declaration during the three months ended June 30, 2022. The exercise price was adjusted from $46.911 per share to $46.804 per share as of the June 15, 2022 dividend record date. The warrant share number remained unchanged, at 1.15. Refer to Note 18 for subsequent event disclosures related to the Company’s dividend program which could result in an adjustment to the warrants exercise price and warrants share number.

As of June 30, 2022, 263,718 warrants remained outstanding, with a total of 303,276 shares underlying the un-exercised warrants. For the three and six months ended June 30, 2022, the Company issued 553,296 and 618,157 shares of common stock, respectively, resulting from exercises of its warrants and, pursuant to the terms of the underlying warrants agreement, withheld 168,155 and 168,246 of the issued shares, respectively, in satisfaction of the warrant exercise price and in lieu of fractional shares, which were subsequently reclassified as treasury stock in the amounts of $16,644 and $16,651, respectively.

As of June 30, 2021, 801,370 warrants were outstanding, with a total of 921,576 shares underlying the un-exercised warrants. For the three and six months ended June 30, 2021, there were no warrants exercised.

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ALPHA METALLURGICAL RESOURCES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited, amounts in thousands except share and per share data)
(8) Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following: 
June 30, 2022 December 31, 2021
Wages and benefits $ 73,083  $ 52,310 
Workers’ compensation 10,582  10,582 
Black lung 7,235  7,235 
Taxes other than income taxes 32,876  30,734 
Asset retirement obligations 32,668  32,159 
Accrued interest and fees 1,412  14,489 
Freight accrual 20,911  15,085 
Dividend payable 6,836  — 
Other 14,665  12,013 
Total accrued expenses and other current liabilities $ 200,268  $ 174,607 

(9) Long-Term Debt
Long-term debt consisted of the following: 
  June 30, 2022 December 31, 2021
Term Loan Credit Facility - due June 2024 $ —  $ 449,435 
Other (1)
4,689  5,311 
Debt discount and issuance costs —  (6,195)
Total long-term debt $ 4,689  $ 448,551 
Less current portion (1,927) (2,989)
Long-term debt, net of current portion $ 2,762  $ 445,562 
(1) Includes financing leases.

Term Loan Credit Facility - due June 2024
On June 14, 2019, the Company entered into a Credit Agreement that provided for a senior secured term loan facility with a maturity date of June 14, 2024 (the “Term Loan Credit Facility”). As of June 30, 2022, there were no outstanding borrowings under the Term Loan Credit Facility as a result of the Company’s voluntary prepayments of $449,435 of outstanding principal borrowings during the first and second quarters of 2022. Effective with the final voluntary prepayment on June 3, 2022, the Credit Agreement was terminated, and the Company was released of all underlying obligations including the Credit Agreement covenants. As December 31, 2021, the carrying value of the Term Loan Credit Facility was $443,241, all of which was classified as long-term within the Condensed Consolidated Balance Sheets.

Second Amended and Restated Asset-Based Revolving Credit Agreement

The Second Amended and Restated Asset-Based Revolving Credit Agreement (“ABL Agreement”) includes a senior secured asset-based revolving credit facility (the “ABL Facility”). Under the ABL Facility, the Company may borrow cash or obtain letters of credit, on a revolving basis, in an aggregate amount of up to $155,000, of which no more than $150,000 may represent outstanding letters of credit ($125,000 on a committed basis and another $25,000 on an uncommitted cash collateralized basis) with any borrowings having a maturity date of December 6, 2024. As of June 30, 2022 and December 31, 2021, there were no outstanding borrowings under the ABL Facility. As of June 30, 2022 and December 31, 2021, the Company had $63,898 and $121,037 letters of credit outstanding under the ABL Facility, respectively.

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ALPHA METALLURGICAL RESOURCES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited, amounts in thousands except share and per share data)
The ABL Agreement provides that a specified percentage of billed and unbilled receivables and raw and clean inventory meeting certain criteria are eligible to be counted for purposes of collateralizing the amount of financing available, subject to certain terms and conditions. Availability under the ABL Facility is calculated on a monthly basis and fluctuates based on qualifying amounts of coal inventory and trade accounts receivable (the “Borrowing Base”) and the facility's covenant limitations related to the Fixed Charge Coverage Ratio (as defined in therein). In accordance with terms of the ABL Facility, the Company may be required to collateralize the ABL Facility to the extent outstanding borrowings and letters of credit under the ABL Facility exceed the Borrowing Base after considering covenant limitations.

The ABL Facility is guaranteed by substantially all of Alpha’s direct and indirect subsidiaries (together with Alpha, the “Loan Parties”) and secured by all or substantially all assets of the Loan Parties, including equity in Alpha’s direct domestic subsidiaries, as collateral for the obligations under the ABL Facility. The ABL Facility has a first lien on ABL priority collateral and a second lien on Term Loan Priority Collateral. As noted above, the Term Loan Credit Facility was voluntarily prepaid in full on June 3, 2022, and in connection therewith, the Term Loan Priority Collateral has been released in connection therewith, and the ABL Facility’s lien on the Term Loan Priority Collateral is no longer second. The ABL Agreement, as amended, and related documents contain negative and affirmative covenants including certain financial covenants. The Company is in compliance with all covenants under these agreements as of June 30, 2022.

(10) Acquisition-Related Obligations
Acquisition-related obligations consisted of the following:
June 30, 2022 December 31, 2021
Contingent Revenue Obligation $ 32,408  $ 35,005 
Environmental Settlement Obligations 3,849  6,633 
Discount (46) (233)
Total acquisition-related obligations $ 36,211  $ 41,405 
Less current portion (36,211) (22,405)
Acquisition-related obligations, net of current portion $ —  $ 19,000 

Contingent Revenue Obligation

As of June 30, 2022 and December 31, 2021, the carrying value of the Contingent Revenue Obligation was $32,408 and $35,005, with $32,408 and $16,005 classified as current, respectively, classified as an acquisition-related obligation in the Condensed Consolidated Balance Sheets. Refer to Note 12 for further disclosures related to the fair value assignment and methods used.

(11) Asset Retirement Obligations

The following table summarizes the changes in asset retirement obligations for the six months ended June 30, 2022:
Total asset retirement obligations at December 31, 2021 $ 164,172 
Accretion for the period 11,901 
Revisions in estimated cash flows (881)
Expenditures for the period (8,578)
Total asset retirement obligations at June 30, 2022 166,614 
Less current portion (1)
(32,668)
Long-term portion $ 133,946 
(1) Included within Accrued expenses and other current liabilities on the Company’s Condensed Consolidated Balance Sheets. Refer to Note 8.

(12) Fair Value of Financial Instruments and Fair Value Measurements
The estimated fair values of financial instruments are determined based on relevant market information. These estimates involve uncertainty and cannot be determined with precision.
21

ALPHA METALLURGICAL RESOURCES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited, amounts in thousands except share and per share data)
The carrying amounts for cash and cash equivalents, trade accounts receivable, net, prepaid expenses and other current assets, short-term and long-term restricted cash, short-term and long-term deposits, trade accounts payable, short-term and long-term dividend payable, and accrued expenses and other current liabilities approximate fair value as of June 30, 2022 and December 31, 2021 due to the short maturity of these instruments.
The following tables set forth by level, within the fair value hierarchy, the Company’s long-term debt and acquisition-related obligations at fair value as of June 30, 2022 and December 31, 2021:
June 30, 2022
Carrying
     Amount (1)
Total Fair Value Quoted Prices in Active Markets
(Level 1)
Significant Other Observable Inputs
(Level 2)
Significant Unobservable Inputs
(Level 3)
Environmental Settlement Obligations $ 3,803  $ 3,757  $ —  $ —  $ 3,757 

December 31, 2021
Carrying
     Amount (1)
Total Fair Value Quoted Prices in Active Markets
(Level 1)
Significant Other Observable Inputs
(Level 2)
Significant Unobservable Inputs
(Level 3)
Term Loan Credit Facility - due June 2024 $ 443,241  $ 447,561  $ —  $ 447,561  $ — 
Environmental Settlement Obligations $ 6,400  $ 6,270  $ —  $ —  $ 6,270 
(1) Net of debt discounts and debt issuance costs.

The following table sets forth by level, within the fair value hierarchy, the Company’s financial and non-financial assets and liabilities that were accounted for at fair value on a recurring basis as of June 30, 2022 and December 31, 2021. Financial and non-financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment, and may affect the determination of fair value for assets and liabilities and their placement within the fair value hierarchy levels.
  June 30, 2022
Total Fair Value Quoted Prices in Active Markets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3)
Contingent Revenue Obligation $ 32,408  $ —  $ —  $ 32,408 
Trading securities $ 94,794  $ —  $ 94,794  $ — 

  December 31, 2021
Total Fair Value Quoted Prices in Active Markets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3)
Contingent Revenue Obligation $ 35,005  $ —  $ —  $ 35,005 
Trading securities $ 28,443  $ 27,075  $ 1,368  $ — 

The following tables present a reconciliation of the financial and non-financial assets and liabilities that were accounted for at fair value on a recurring basis and that were categorized within Level 3 of the fair value hierarchy:
December 31, 2021 Payments
Loss (Gain) Recognized in Earnings (1)
Transfer In (Out) of Level 3 Fair Value Hierarchy June 30, 2022
Contingent Revenue Obligation $ 35,005  $ (16,166) $ 13,569  $ —  $ 32,408 
(1) The loss recognized in earnings resulted primarily from an increase in forecasted future revenue as of June 30, 2022.
22

ALPHA METALLURGICAL RESOURCES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited, amounts in thousands except share and per share data)

December 31, 2020
Payments
Loss (Gain) Recognized in Earnings (1)
Transfer In (Out) of Level 3 Fair Value Hierarchy June 30, 2021
Contingent Revenue Obligation $ 28,967  $ (11,396) $ 6,333  $ —  $ 23,904 
(1) The loss recognized in earnings resulted primarily from a decrease in the annual risk-free interest rate as of June 30, 2021.

The following methods and assumptions were used to estimate the fair values of the assets and liabilities in the tables above:
Level 1 Fair Value Measurements
Trading Securities - Typically includes money market funds and other cash equivalents. The fair value is based on observable market data.

Level 2 Fair Value Measurements
Term Loan Credit Facility - due June 2024 - The fair value was based on the average between bid and ask prices provided by a third-party. As the fair value was based on observable market inputs and due to limited trading volume in the Term Loan Credit Facility, the Company had classified the fair value within Level 2 of the fair value hierarchy. Effective June 3, 2022, the Term Loan Credit Facility was terminated. Refer to Note 9 for additional information.

Trading Securities - Typically includes certificates of deposit, mutual funds, corporate debt securities, and U.S. treasury and agency securities. The fair values of the Company’s trading securities are obtained from a third-party pricing service provider. The fair values provided by the pricing service provider are based on observable market inputs including credit spreads and broker-dealer quotes, among other inputs. The Company classifies the prices obtained from the pricing services within Level 2 of the fair value hierarchy because the underlying inputs are directly observable from active markets. However, the pricing models used entail a certain amount of subjectivity and therefore differing judgments in how the underlying inputs are modeled could result in different estimates of fair value.

Level 3 Fair Value Measurements

Environmental Settlement Obligations - Observable transactions are not available to aid in determining the fair value of these items. Therefore, the fair value was derived by using the expected present value approach in which estimated cash flows are discounted using a risk-free interest rate adjusted for credit risk (discount rates of approximately 14% and 13% as of June 30, 2022 and December 31, 2021, respectively).

Contingent Revenue Obligation - The fair value of the contingent revenue obligation was estimated using a Black-Scholes pricing model and is marked to market at each reporting period with changes in value reflected in earnings. The inputs included in the Black-Scholes pricing model are the Company's forecasted future revenue, the stated royalty rate, the remaining periods in the obligation, annual risk-free interest rate based on the U.S. Constant Maturity Treasury Curve and annualized volatility. The annualized volatility was calculated by observing volatilities for comparable companies with adjustments for the Company's size and leverage. The range of significant unobservable inputs used to value the Contingent Revenue Obligation as of June 30, 2022 and December 31, 2021, are set forth in the following table:
  June 30, 2022 December 31, 2021
Forecasted future revenue
$3.5 billion
$1.5 - $2.0 billion
Stated royalty rate
1.0% - 1.5%
1.0% - 1.5%
Annualized volatility
22.1% - 42.2% (34.9%)
18.4% - 39.3% (29.9%)

(13) Income Taxes

For the six months ended June 30, 2022, the Company recorded income tax expense of $108,636 on income from continuing operations before income taxes of $1,085,069. The income tax expense differs from the expected statutory amount primarily due to the decrease in the valuation allowance and the permanent impact of percentage depletion and foreign-derived
23

ALPHA METALLURGICAL RESOURCES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited, amounts in thousands except share and per share data)
intangible income deductions, partially offset by the impact of state income taxes, net of federal impact. For the six months ended June 30, 2021, the Company recorded income tax expense of $3 on a loss from continuing operations before income taxes of $51,278. The income tax expense differs from the expected statutory amount primarily due to the increase in the valuation allowance and the impact of state income taxes, net of federal impact, partially offset by the permanent impact of percentage depletion deductions.

As a result of generating income before income taxes during the six months ended June 30, 2022, the Company recorded a decrease of $47,365 to its deferred tax asset valuation allowance recorded as of December 31, 2021. The decrease in the valuation allowance results in part from a decrease in deferred tax assets since the prior reporting date of December 31, 2021. The Company currently is relying primarily on the reversal of taxable temporary differences, along with consideration of taxable income via carryback to prior years and tax planning strategies, to support the realization of deferred tax assets. For each reporting period, the Company updates its assessment regarding the realizability of its deferred tax assets, including scheduling the reversal of its deferred tax assets and liabilities, to determine the amount of valuation allowance needed. Scheduling the reversal of deferred tax asset and liability balances requires judgment and estimation. The Company believes the deferred tax liabilities relied upon as future taxable income in its assessment will reverse in the same period and jurisdiction and are of the same character as the temporary differences giving rise to the deferred tax assets that will be realized. The valuation allowance recorded represents the portion of deferred tax assets for which the Company is unable to support realization through the methods described above.

During the six months ended June 30, 2022, the Company paid estimated federal and state income taxes of $109,074. As of June 30, 2022, the Company has recorded a current federal income taxes receivable of $12,064, classified as Prepaid expenses and other current assets in the Condensed Consolidated Balance Sheets.

(14) Employee Benefit Plans
The components of net periodic benefit (credit) cost other than the service cost component for black lung are included in the line item miscellaneous income, net in the Condensed Consolidated Statements of Operations.
Pension

The following table details the components of the net periodic benefit credit for pension obligations:
Three Months Ended June 30, Six Months Ended June 30,
2022 2021 2022 2021
Interest cost $ 4,006  $ 3,362  $ 7,990  $ 6,784 
Expected return on plan assets (7,181) (7,119) (14,366) (14,366)
Amortization of net actuarial loss 571  734  1,055  1,609 
Net periodic benefit credit $ (2,604) $ (3,023) $ (5,321) $ (5,973)
During the three months ended June 30, 2022, an annual census data actuarial revaluation of pension obligations was performed, which resulted in an increase in the liability for pension obligations of approximately $4,837 with the offset to accumulated other comprehensive gain and a slight decrease in net periodic benefit to be recognized subsequent to the revaluation date. An annual census data actuarial revaluation of pension obligations was also performed during the three months ended June 30, 2021, which resulted in a decrease in the liability for pension obligations of approximately $8,838 with the offset to accumulated other comprehensive gain and a slight increase in net periodic benefit to be recognized subsequent to the revaluation date.

Black Lung

The following table details the components of the net periodic benefit cost for black lung obligations:
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ALPHA METALLURGICAL RESOURCES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited, amounts in thousands except share and per share data)
Three Months Ended June 30, Six Months Ended June 30,
2022 2021 2022 2021
Service cost $ 654  $ 739  $ 1,308  $ 1,478 
Interest cost 665  607  1,330  1,214 
Expected return on plan assets (13) (14) (26) (28)
Amortization of net actuarial loss 209  522  418  1,044 
Net periodic benefit cost $ 1,515  $ 1,854  $ 3,030  $ 3,708 

(15) Related Party Transactions
There were no material related party transactions for the six months ended June 30, 2022 or 2021.

(16) Commitments and Contingencies
(a) General
Estimated losses from loss contingencies are accrued by a charge to income when information available indicates that it is probable that an asset has been impaired or a liability has been incurred and the amount of the loss can be reasonably estimated.
If a loss contingency is not probable or reasonably estimable, disclosure of the loss contingency is made in the Condensed Consolidated Financial Statements when it is at least reasonably possible that a loss may be incurred and that the loss could be material.
(b) Commitments and Contingencies
Commitments
The Company leases coal mining and other equipment under long-term financing and operating leases with varying terms. In addition, the Company leases mineral interests and surface rights from landowners under various terms and royalty rates.

Coal royalty expense was $72,627 and $21,281 for the three months ended June 30, 2022 and 2021, respectively. Coal royalty expense was $129,970 and $40,039 for the six months ended June 30, 2022 and 2021, respectively.

Other Commitments

As of June 30, 2022, the Company has obligations under certain coal purchase agreements that contain minimum quantities to be purchased in the remainder of 2022 and 2023 totaling an estimated $82,185 and $12,099, respectively. The Company also has obligations under certain unconditional purchase obligations totaling $62,095, $59,319, and $86,850 in the remainder of 2022, 2023, and 2024, respectively.

Contingencies

Extensive regulation of the impacts of mining on the environment and of maintaining workplace safety has had, and is expected to continue to have, a significant effect on the Company’s costs of production and results of operations. Further regulations, legislation or litigation in these areas may also cause the Company’s sales or profitability to decline by increasing costs or by hindering the Company’s ability to continue mining at existing operations or to permit new operations.
During the normal course of business, contract-related matters arise between the Company and its customers. When a loss related to such matters is considered probable and can reasonably be estimated, the Company records a liability.
As of June 30, 2022, per terms of the Cumberland Back-to-Back Coal Supply Agreements, the Company is required to purchase and sell 1,342 tons of coal in the remainder of 2022 totaling $51,860. For the three months ended June 30, 2022 and 2021, the Company purchased and sold 258 and 760 tons, respectively, totaling $9,936 and $29,487, respectively, under the Cumberland Back-to-Back Coal Supply Agreements. For the six months ended June 30, 2022 and 2021, the Company
25

ALPHA METALLURGICAL RESOURCES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited, amounts in thousands except share and per share data)
purchased and sold 677 and 1,460 tons, respectively, totaling $26,121 and $56,553, respectively, under the Cumberland Back-to-Back Coal Supply Agreements. As of June 30, 2022, the Cumberland Back-to-Back Coal Supply Agreements are scheduled to be fully performed by December 31, 2022.
(c) Guarantees and Financial Instruments with Off-Balance Sheet Risk
In the normal course of business, the Company is a party to certain guarantees and financial instruments with off-balance sheet risk, such as bank letters of credit, performance or surety bonds, and other guarantees and indemnities related to the obligations of affiliated entities which are not reflected in the Company’s Condensed Consolidated Balance Sheets. However, the underlying liabilities that they secure, such as asset retirement obligations, workers’ compensation liabilities, and royalty obligations, are reflected in the Company’s Condensed Consolidated Balance Sheets.
The Company is required to provide financial assurance in order to perform the post-mining reclamation required by its mining permits, pay workers’ compensation claims under workers’ compensation laws in various states, pay federal black lung benefits, and perform certain other obligations. In order to provide the required financial assurance, the Company generally uses surety bonds for post-mining reclamation and workers’ compensation obligations. The Company can also use bank letters of credit to collateralize certain obligations.

As of June 30, 2022, the Company had $63,898 letters of credit outstanding under the Second Amended and Restated Asset-Based Revolving Credit Agreement. Additionally, as of June 30, 2022, the Company had $50 in letters of credit outstanding under the Credit and Security Agreement dated June 30, 2017, and related amendments, between ANR, Inc. and First Tennessee Bank National Association.

As of June 30, 2022, the Company had outstanding surety bonds with a total face amount of $162,339 to secure various obligations and commitments. To secure the Company’s reclamation-related obligations, the Company has $34,678 of collateral in the form of restricted cash, restricted investments, and deposits supporting these obligations as of June 30, 2022.

The Company meets frequently with its surety providers and has discussions with certain providers regarding the extent of and the terms of their participation in the program. These discussions may cause the Company to shift surety bonds between providers or to alter the terms of their participation in our program. To the extent that surety bonds become unavailable or the Company’s surety bond providers require additional collateral, the Company would seek to secure its obligations with letters of credit, cash deposits or other suitable forms of collateral. The Company’s failure to maintain, or inability to acquire, surety bonds or to provide a suitable alternative would have a material adverse effect on its liquidity. These failures could result from a variety of factors including lack of availability, higher cost or unfavorable market terms of new surety bonds, and the exercise by third-party surety bond issuers of their right to refuse to renew the surety.

Amounts included in restricted cash provide collateral to secure the following obligations:
  June 30, 2022 December 31, 2021
Workers’ compensation and black lung obligations $ 15,755  $ 70,637 
Reclamation-related obligations 929  10,449 
Financial payments and other performance obligations 8,236  8,340 
Contingent Revenue Obligation escrow 9,848  11,977 
Total restricted cash 34,768  101,403 
Less current portion (1)
(9,848) (11,977)
Restricted cash, net of current portion $ 24,920  $ 89,426 
(1) Included within Prepaid expenses and other current assets on the Company’s Condensed Consolidated Balance Sheets.

Amounts included in restricted investments provide collateral to secure the following obligations:
26

ALPHA METALLURGICAL RESOURCES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited, amounts in thousands except share and per share data)
  June 30, 2022 December 31, 2021
Workers’ compensation obligations $ 59,195  $ 210 
Reclamation-related obligations 33,639  26,225 
Financial payments and other performance obligations 1,960  2,008 
Total restricted investments (1)
$ 94,794  $ 28,443 
(1) Classified as trading securities as of June 30, 2022 and December 31, 2021.

Amounts included in deposits provide collateral to secure the following obligations:
  June 30, 2022 December 31, 2021
Reclamation-related obligations $ 110  $ 118 
Financial payments and other performance obligations 391  403 
Other operating agreements 865  873 
Total deposits (1)
$ 1,366  $ 1,394 
(1) Included within Prepaid expenses and other current assets and Other non-current assets on the Company’s Condensed Consolidated Balance Sheets.

DCMWC Reauthorization Process

In July 2019, the U.S. Department of Labor (Division of Coal Mine Workers’ Compensation or “DCMWC”) began implementing a new authorization process for all self-insured coal mine operators. As requested by the DCMWC, the Company filed an application and supporting documentation for reauthorization to self-insure certain of its black lung obligations in October 2019. As a result of this application, the DCMWC notified the Company in a letter dated February 21, 2020 that the Company was reauthorized to self-insure certain of its black lung obligations for a period of one-year from February 21, 2020. The DCMWC reauthorization is contingent, however, upon the Company’s providing collateral of $65,700 to secure certain of its black lung obligations. This proposed collateral requirement is an increase from the approximate $2,600 in collateral that the Company currently provides to secure these self-insured black lung obligations. The reauthorization process provided the Company with the right to appeal the security determination in writing within 30 days of the date of the notification, which appeal period the DCMWC agreed to extend to May 22, 2020. The Company exercised this right of appeal in connection with the substantial increase in the amount of required collateral. In February 2021, the U.S. Department of Labor (“DOL”) withdrew its Federal Register notice seeking comments on its bulletin describing its new method of calculating collateral requirements. The Department removed the bulletin from its website in May 2021. On February 10, 2022, a telephone conference was held with DCMWC and DOL decision makers wherein the Company presented facts and arguments in support of its appeal. No ruling has been made on the appeal, but during the call the Company indicated that it would be willing to allocate an additional $10,000 in collateral. If the Company’s appeal is unsuccessful, the Company may be required to provide additional letters of credit to receive the self-insurance reauthorization from the DCMWC or alternatively insure these black lung obligations through a third party provider that would likely also require the Company to provide additional collateral. Either of these outcomes could potentially reduce the Company’s liquidity.

(d) Legal Proceedings 

The Company is party to legal proceedings from time to time. These proceedings, as well as governmental examinations, could involve various business units and a variety of claims including, but not limited to, contract disputes, personal injury claims, property damage claims (including those resulting from blasting, trucking and flooding), environmental and safety issues, securities-related matters and employment matters. While some legal matters may specify the damages claimed by the plaintiffs, many seek an unquantified amount of damages. Even when the amount of damages claimed against the Company or its subsidiaries is stated, (i) the claimed amount may be exaggerated or unsupported; (ii) the claim may be based on a novel legal theory or involve a large number of parties; (iii) there may be uncertainty as to the likelihood of a class being certified or the ultimate size of the class; (iv) there may be uncertainty as to the outcome of pending appeals or motions; and/or (v) there may be significant factual issues to be resolved. As a result, if such legal matters arise in the future, the Company may be unable to estimate a range of possible loss for matters that have not yet progressed sufficiently through discovery and development of important factual information and legal issues. The Company records accruals based on an estimate of the ultimate outcome of these matters, but these estimates can be difficult to determine and involve significant judgment.

27

ALPHA METALLURGICAL RESOURCES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited, amounts in thousands except share and per share data)
(17) Segment Information
The Company extracts, processes and markets met and thermal coal from deep and surface mines for sale to steel and coke producers, industrial customers, and electric utilities. The Company conducts mining operations only in the United States with mines in Central Appalachia (“CAPP”). The Company has one reportable segment: Met, which consists of five active mines and two preparation plants in Virginia, fourteen active mines and five preparation plants in West Virginia, as well as expenses associated with certain idled/closed mines.

In addition to the one reportable segment, the All Other category includes general corporate overhead and corporate assets and liabilities, the former CAPP - Thermal operations consisting of one active mine and one preparation plant in West Virginia, and the elimination of certain intercompany activity, as well as expenses associated with certain idled/closed mines.

Reportable segment operating results are regularly reviewed by the Chief Operating Decision Maker (“CODM”), who is the Chief Executive Officer of the Company.

Segment operating results and capital expenditures for the three months ended June 30, 2022 and 2021 were as follows: 
Three Months Ended June 30, 2022
Met All Other Consolidated
Total revenues $ 1,319,941  $ 16,471  $ 1,336,412 
Depreciation, depletion, and amortization $ 27,203  $ 527  $ 27,730 
Amortization of acquired intangibles, net $ 4,795  $ 952  $ 5,747 
Adjusted EBITDA $ 706,232  $ (11,704) $ 694,528 
Capital expenditures $ 40,059  $ 1,807  $ 41,866 
 
Three Months Ended June 30, 2021
Met All Other Consolidated
Total revenues $ 377,937  $ 17,338  $ 395,275 
Depreciation, depletion, and amortization $ 25,686  $ 1,618  $ 27,304 
Amortization of acquired intangibles, net $ 2,635  $ (82) $ 2,553 
Adjusted EBITDA $ 46,786  $ (6,869) $ 39,917 
Capital expenditures $ 17,203  $ 441  $ 17,644 

Segment operating results and capital expenditures for the six months ended June 30, 2022 and 2021 were as follows:
Six Months Ended June 30, 2022
Met All Other Consolidated
Total revenues $ 2,375,630  $ 32,746  $ 2,408,376 
Depreciation, depletion, and amortization $ 54,263  $ 1,502  $ 55,765 
Amortization of acquired intangibles, net $ 9,591  $ 1,904  $ 11,495 
Adjusted EBITDA $ 1,219,533  $ (21,198) $ 1,198,335 
Capital expenditures $ 67,356  $ 2,656  $ 70,012 
Six Months Ended June 30, 2021
Met All Other Consolidated
Total revenues $ 737,815  $ 43,713  $ 781,528 
Depreciation, depletion, and amortization $ 52,222  $ 3,520  $ 55,742 
Amortization of acquired intangibles, net $ 6,686  $ (264) $ 6,422 
Adjusted EBITDA $ 79,368  $ (10,568) $ 68,800 
Capital expenditures $ 37,526  $ 513  $ 38,039 
28

ALPHA METALLURGICAL RESOURCES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited, amounts in thousands except share and per share data)

The following tables present a reconciliation of net income (loss) to Adjusted EBITDA for the three months ended June 30, 2022 and 2021:
Three Months Ended June 30, 2022
Met All Other Consolidated
Net income (loss) from continuing operations $ 670,801  $ (95,372) $ 575,429 
Interest expense 43  5,175  5,218 
Interest income —  (164) (164)
Income tax expense —  69,012  69,012 
Depreciation, depletion and amortization 27,203  527  27,730 
Non-cash stock compensation expense —  1,401  1,401 
Mark-to-market adjustment - acquisition-related obligations —  4,208  4,208 
Accretion on asset retirement obligations 3,390  2,557  5,947 
Amortization of acquired intangibles, net 4,795  952  5,747 
Adjusted EBITDA $ 706,232  $ (11,704) $ 694,528 

Three Months Ended June 30, 2021
Met All Other Consolidated
Net income (loss) from continuing operations $ 15,042  $ (33,632) $ (18,590)
Interest expense 40  17,922  17,962 
Interest income —  (104) (104)
Income tax expense — 
Depreciation, depletion and amortization 25,686  1,618  27,304 
Non-cash stock compensation expense 973  979 
Mark-to-market adjustment - acquisition-related obligations —  3,157  3,157 
Accretion on asset retirement obligations 3,377  3,271  6,648 
Amortization of acquired intangibles, net 2,635  (82) 2,553 
Adjusted EBITDA $ 46,786  $ (6,869) $ 39,917 

29

ALPHA METALLURGICAL RESOURCES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited, amounts in thousands except share and per share data)
The following tables present a reconciliation of net income (loss) to Adjusted EBITDA for the six months ended June 30, 2022 and 2021:

Six Months Ended June 30, 2022
Met All Other Consolidated
Net income (loss) from continuing operations $ 1,148,968  $ (172,535) $ 976,433 
Interest expense 92  18,209  18,301 
Interest income (172) (176) (348)
Income tax expense —  108,636  108,636 
Depreciation, depletion and amortization 54,263  1,502  55,765 
Non-cash stock compensation expense 2,580  2,583 
Mark-to-market adjustment - acquisition-related obligations —  13,569  13,569 
Accretion on asset retirement obligations 6,788  5,113  11,901 
Amortization of acquired intangibles, net 9,591  1,904  11,495 
Adjusted EBITDA $ 1,219,533  $ (21,198) $ 1,198,335 

Six Months Ended June 30, 2021
Met All Other Consolidated
Net income (loss) from continuing operations $ 13,604  $ (64,885) $ (51,281)
Interest expense 83  35,869  35,952 
Interest income (5) (263) (268)
Income tax expense — 
Depreciation, depletion and amortization 52,222  3,520  55,742 
Non-cash stock compensation expense 16  3,146  3,162 
Mark-to-market adjustment - acquisition-related obligations —  6,333  6,333 
Accretion on asset retirement obligations 6,762  6,534  13,296 
Asset impairment and restructuring
—  (561) (561)
Amortization of acquired intangibles, net 6,686  (264) 6,422 
Adjusted EBITDA $ 79,368  $ (10,568) $ 68,800 

No asset information has been disclosed as the CODM does not regularly review asset information by reportable segment.

The Company markets produced, processed and purchased coal to customers in the United States and in international markets. Revenue is tracked within the Company’s accounting records based on the product destination. The following tables present additional information on our revenues and top customers:
Three Months Ended June 30, Six Months Ended June 30,
  2022 2021 2022 2021
Total coal revenues $ 1,334,258  $ 393,458  $ 2,403,996  $ 778,910 
Export coal revenues $ 1,146,003  $ 256,017  $ 2,040,528  $ 499,800 
Export coal revenues as % of total coal revenues 86  % 65  % 85  % 64  %
Countries with export coal revenue exceeding 10% of total revenue India India India India, Brazil
Top customer as % of total revenue 33  % 13  % 31  % 12  %
Top 10 customers as % of total revenue 77  % 69  % 74  % 64  %
Number of customers exceeding 10% of total revenue 1 1 1 2
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ALPHA METALLURGICAL RESOURCES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited, amounts in thousands except share and per share data)
As of June 30,
  2022 2021
Number of customers exceeding 10% of total trade accounts receivable, net 2 2

(18) Subsequent Events

On August 4, 2022, the Company’s Board declared a quarterly cash dividend payment of $0.392 per share which will become payable on October 3, 2022 for holders of record as of September 15, 2022. The quarterly cash dividend payment was increased to $0.392 from the previously announced estimate of $0.375. Refer to Note 7 for information regarding the Company’s dividend program.
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GLOSSARY
Alpha. Alpha Metallurgical Resources, Inc. (the “Company”) (previously named Contura Energy, Inc.).
Ash. Impurities consisting of iron, alumina and other incombustible matter that are contained in coal. Since ash increases the weight of coal, it adds to the cost of handling and can affect the burning characteristics of coal.

Bituminous coal. Coal used primarily to generate electricity and to make coke for the steel industry with a heat value ranging between 10,500 and 15,500 BTU’s per pound.

British Thermal Unit or BTU. A measure of the thermal energy required to raise the temperature of one pound of pure liquid water one degree Fahrenheit at the temperature at which water has its greatest density (39 degrees Fahrenheit).

Central Appalachia or CAPP. Coal producing area in eastern Kentucky, Virginia, southern West Virginia and a portion of eastern Tennessee.

Coal reserves. The economically mineable part of a measured or indicated coal resource, which includes diluting materials and allowances for losses that may occur when coal is mined or extracted.

Coal resources. Coal deposits in such form, quality, and quantity that there are reasonable prospects for economic extraction.

Coal seam. Coal deposits occur in layers. Each layer is called a “seam.”

Coke. A hard, dry carbon substance produced by heating coal to a very high temperature in the absence of air. Coke is used in the manufacture of iron and steel. Its production results in a number of useful byproducts.

Cumberland Back-to-Back Coal Supply Agreement. Certain agreements with Iron Senergy under which Iron Senergy will sell to the Company all of the coal that the Company is obligated to sell to customers under Cumberland coal supply agreements (“Cumberland CSAs”) which existed as of the transaction closing date but did not transfer to Iron Senergy at closing (each, a “Cumberland Back-to-Back Coal Supply Agreement”). Each Cumberland Back-to-Back Coal Supply Agreement has economic terms identical to, but offsetting, the related Cumberland CSA. If a Cumberland customer subsequently consents to assign a Cumberland CSA to Iron Senergy after closing, the related Cumberland CSA will immediately and automatically transfer to Iron Senergy and the related Cumberland Back-to-Back Coal Supply Agreements executed by the parties shall thereupon terminate as set forth therein.

ESG. Environmental, social and governance sustainability criteria.

Indicated coal resource. That part of a coal resource for which quantity and quality are estimated on the basis of adequate geological evidence and sampling sufficient to establish geological and quality continuity with reasonable certainty.

In situ coal resources. Coal resources stated on an in-seam dry basis (excluding surface and inherent moisture) with no consideration for dilution or losses that may occur when coal is mined or extracted.

Measured coal resource. That part of a coal resource for which quantity and quality are estimated on the basis of conclusive geological evidence and sampling sufficient to test and confirm geological and quality continuity.

Merger. Merger with ANR, Inc. and Alpha Natural Resources Holdings, Inc. completed on November 9, 2018.

Metallurgical coal. The various grades of coal suitable for carbonization to make coke for steel manufacture. Also known as “met” coal, its quality is primarily differentiated based on volatility or its percent of volatile matter. Met coal typically has a particularly high BTU but low ash and sulfur content.

Northern Appalachia or NAPP. Coal producing area in Maryland, Ohio, Pennsylvania and northern West Virginia.

Operating Margin. Coal revenues less cost of coal sales.

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Preparation plant. A preparation plant is a facility for crushing, sizing and washing coal to remove impurities and prepare it for use by a particular customer. The washing process has the added benefit of removing some of the coal’s sulfur content. A preparation plant is usually located on a mine site, although one plant may serve several mines.

Probable mineral reserve. The economically mineable part of an indicated and, in some cases, a measured coal resource.

Productivity. As used in this report, refers to clean metric tons of coal produced per underground man hour worked, as published by the MSHA.

Proven mineral reserve. The economically mineable part of a measured coal resource.

Reclamation. The process of restoring land and the environment to their original state following mining activities. The process commonly includes “recontouring” or reshaping the land to its approximate original appearance, restoring topsoil and planting native grass and ground covers. Reclamation operations are usually underway before the mining of a particular site is completed. Reclamation is closely regulated by both state and federal law.

Roof. The stratum of rock or other mineral above a coal seam; the overhead surface of a coal working place.

Sulfur. One of the elements present in varying quantities in coal that contributes to environmental degradation when coal is burned. Sulfur dioxide is produced as a gaseous by-product of coal combustion.

Surface mine. A mine in which the coal lies near the surface and can be extracted by removing the covering layer of soil.

Thermal coal. Coal used by power plants and industrial steam boilers to produce electricity, steam or both. It generally is lower in BTU heat content and higher in volatile matter than metallurgical coal.

Tons. A “short” or net ton is equal to 2,000 pounds. A “long” or British ton is equal to 2,240 pounds; a “metric” ton (or “tonne”) is approximately 2,205 pounds. Tonnage amounts in this report are stated in short tons, unless otherwise indicated.

Underground mine. Also known as a “deep” mine. Usually located several hundred feet below the earth’s surface, an underground mine’s coal is removed mechanically and transferred by shuttle car and conveyor to the surface.



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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis provides a narrative of our results of operations and financial condition for the three and six months ended June 30, 2022 and 2021. The following discussion and analysis contains forward-looking statements and should be read in conjunction with our Condensed Consolidated Financial Statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and our Consolidated Financial Statements and related notes and risk factors contained in our Annual Report on Form 10-K for the year ended December 31, 2021. See “Cautionary Note Regarding Forward-Looking Statements” included elsewhere herein.
Market Overview

Concern regarding global steel demand has caused metallurgical coal markets to soften. Indices have retreated from their record highs down to levels that are still considered strong relative to historical averages. Overall weakening of the global economy, the ongoing war between Russia and Ukraine, inflation concerns, and recession fears have all influenced the pricing and movement of coal across the globe. Trade irregularities resulting from the Russian war have created inefficiencies in trade flows as well as an imbalance in the typical pricing hierarchy for coal qualities. The war has created an energy crisis in Europe, which has caused certain thermal coals to command a higher price than premium coking coals in some markets, further challenging pre-pandemic coal market norms.

The Australian Premium Low Volatile index dropped from $480 per metric ton on April 1, 2022, to $302 per metric ton at the end of the second quarter. The U.S. East Coast indices followed a similar downward trajectory, with the High Volatile A index starting the quarter at $480 per metric ton and declining to $330 per metric ton at quarter close on June 30, 2022. U.S. East Coast High Volatile B fell from $455 per metric ton to $320 over the course of the second quarter. Lastly, among the U.S. East Coast indices, the Low Volatile index represented the largest decline of the quarter from $485 per metric ton at the start to $317.50 per metric ton at the end of June. As of late July, all four indices have continued to decrease from their levels at second quarter close.

Global economic indicators reveal slowing growth patterns and demonstrate the effects of the Russian war on certain regions of the world and specific industries. While still in positive territory, Purchasing Managers’ Index (“PMI”) rates for the world, the United States and Europe all ended the quarter at their lowest levels in 22 months or more. The world manufacturing PMI dropped to 52.2 in June, its lowest level in 22 months. The United States PMI index registered its lowest level since July 2020, dropping significantly to 52.7 in June 2022 from a May level of 57.0. Europe’s PMI decreased from 54.6 in May to 52.1 in June, the bottom in a 22-month span. In contrast to the U.S., Europe, and the world average, certain of Alpha’s key markets have remained stable or shown steadier growth. India’s June PMI of 53.9 is down from 54.6 in May but roughly flat as compared to its first quarter levels. After rebounding from contractionary territory at the start of the year, Brazil’s PMI continued to improve in recent months to 54.2 in May and held virtually the same at 54.1 in June. China’s easing of COVID-19 lockdowns resulted in a sharp increase from a contractionary PMI of 48.1 in May to 51.7 in June.

The World Steel Association’s global crude steel production was 158.1 million metric tons in June 2022, a 5.9% decrease as compared to the year-ago period of June 2021. All regions represented in the analysis posted a decline against their June 2021 levels. Among Alpha’s key markets, the European Union’s June 2022 crude steel production of 11.8 million metric tons represented the largest percentage decline (12.2%) in comparison to its year-ago levels. South American production of 3.7 million metric tons was down 4.9% against June 2021. Steel production in North America of 9.6 million metric tons for the month represented a 2.4% decrease as compared to the year-ago period. China produced 90.7 million metric tons in June 2022, a 3.3% decline as compared to June 2021.

The American Iron and Steel Institute’s capacity utilization rate for U.S. steel mills was 78.4% for the week ending July 30, 2022. This is down in comparison to the year-ago period of July 30, 2021 when the capacity utilization rate was 84.4%.

The seaborne thermal coal market has experienced significant volatility since Russia invaded Ukraine in February. The war has affected energy trade flows, especially related to Europe, as many countries have imposed sanctions to ban or curtail imports of Russian oil and coal. As a result, the price of thermal coal has increased substantially above historical averages. The API2 index started the second quarter at $260 per metric ton on April 1, 2022 and rose to $370.35 per metric ton as of quarter close on June 30, 2022. In addition to our existing thermal coal contracts, Alpha sold some incremental domestic thermal shipments in the quarter.

Our realizations and overall financial results depend upon the market prices of our products. As discussed above, prices for metallurgical coal, while still robust, have declined from historic highs in recent months. We therefore expect a commensurate decrease in our coal revenues and margins in the second half of 2022 compared to the first half. If coal prices were to decline further, our future results would be additionally affected.

COVID-19 Pandemic

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The COVID-19 pandemic has had negative impacts on our business, results of operations, financial condition and cash flows. Our Company experienced an increase in employee absences due to COVID-19. Indirectly, through some of our third-party vendors, we and our customers have experienced some supply chain disruptions due to the COVID-19 pandemic. The full extent of the impact of the COVID-19 pandemic on our operational and financial performance will depend on certain developments, including the duration of the virus, its impact on our customers and suppliers, and the range of governmental and community reactions to the pandemic, which cannot be fully predicted. Health and safety are core values of our Company and are the foundation for how we manage every aspect of our business. We continue to monitor developments closely and adjust as necessary, including with respect to our implemented policies, procedures, and prevention measures to protect the safety and health of our employees.

Business Overview

We are a Tennessee-based mining company with operations across Virginia and West Virginia. With customers across the globe, high-quality reserves and significant port capacity, we reliably supply metallurgical coal products to the steel industry. We operate high-quality, cost-competitive coal mines across the CAPP coal basin. As of June 30, 2022, our operations consisted of twenty active mines and eight coal preparation and load-out facilities, with approximately 3,560 employees. We produce, process, and sell met coal and thermal coal. We also sell coal produced by others, some of which is processed and/or blended with coal produced from our mines prior to resale, with the remainder purchased for resale. As of December 31, 2021, we had 351.1 million tons of reserves, including 335.8 million tons of proven and probable metallurgical reserves and 15.3 million tons of proven and probable thermal reserves. Additionally, we had approximately 381.7 million tons of in situ bituminous coal resources.

For the three months ended June 30, 2022 and 2021, sales of met coal were 3.8 million tons and 3.3 million tons, respectively, and accounted for approximately 87% and 83%, respectively, of our coal sales volume. Sales of thermal coal were 0.5 million tons and 0.7 million tons, respectively, and accounted for approximately 13% and 17%, respectively, of our coal sales volume. For the six months ended June 30, 2022 and 2021, sales of met coal were 7.3 million tons and 6.7 million tons, respectively, and accounted for approximately 88% and 83%, respectively, of our coal sales volume. Sales of thermal coal were 1.0 million tons and 1.4 million tons, respectively, and accounted for approximately 12% and 17%, respectively, of our coal sales volume.

Our sales of met coal were made primarily to steel companies in the northeastern and midwestern regions of the United States and in several countries in Asia, Europe, and the Americas. Our sales of thermal coal were made primarily to large utilities and industrial customers throughout the United States. For the three months ended June 30, 2022 and 2021 approximately 86% and 65%, respectively, of our coal revenues were derived from coal sales made to customers outside the United States. For the six months ended June 30, 2022 and 2021 approximately 85% and 64%, respectively, of our total coal revenues were derived from coal sales made to customers outside the United States.

In addition, we generate other revenues from equipment sales, rentals, terminal and processing fees, coal and environmental analysis fees, royalties and the sale of natural gas. We also record freight and handling fulfillment revenue within coal revenues for freight and handling services provided in delivering coal to certain customers, which are a component of the contractual selling price.

As of June 30, 2022, we have one reportable segment: Met. Our Met segment operations consist of high-quality met coal mines, including Deep Mine 41, Road Fork 52, Black Eagle, and Lynn Branch. The coal produced by our Met segment operations is predominantly met coal with some amounts of thermal coal being produced as a byproduct of mining. In addition to the one reportable segment, our All Other category includes general corporate overhead and corporate assets and liabilities, our former CAPP - Thermal operations consisting of one active mine and one preparation plant in West Virginia, and the elimination of certain intercompany activity, as well as expenses associated with certain idled/closed mines. Refer to Note 17 to our Condensed Consolidated Financial Statements for additional disclosures on reportable segments, geographic areas, and export coal revenue information.

The disposition of our former NAPP operations during the fourth quarter of 2020 accelerated our strategic exit from thermal coal production to shift our focus toward met coal production. The former NAPP operations results of operations and financial position are reported as discontinued operations in the Condensed Consolidated Financial Statements. Refer to Note 2 for further information on discontinued operations.

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Factors Affecting Our Results of Operations

Sales Agreements. We manage our commodity price risk for coal sales through the use of coal supply agreements. As of July 22, 2022, we had sales commitments for 2022 as follows:
Tons % Priced Average Realized Price per Ton
Met - Domestic $189.87 
Met - Export $303.51 
Met Total 14.5 million 69  % $260.69 
Thermal 1.2 million 100  % $89.91 
Met Segment 15.7 million 73  % $240.42 
All Other 0.7 million 100  % $83.38 

Realized Pricing. Our realized price per ton of coal is influenced by many factors that vary by region, including (i) coal quality, which includes energy (heat content), sulfur, ash, volatile matter and moisture content; (ii) differences in market conventions concerning transportation costs and volume measurement; and (iii) regional supply and demand.
Costs. Our results of operations are dependent upon our ability to maximize productivity and control costs. Our primary expenses are for operating supply costs, repair and maintenance expenditures, cost of purchased coal, royalties, wages and benefits, freight and handling costs and taxes incurred in selling our coal. Principal goods and services we use in our operations include maintenance and repair parts and services, electricity, fuel, roof control and support items, explosives, tires, conveyance structures, ventilation supplies and lubricants. Our management strives to aggressively control costs and improve operating performance to mitigate external cost pressures. We experience volatility in operating costs related to fuel, explosives, steel, tires, contract services and healthcare, among others, and take measures to mitigate the increases in these costs at all operations. We have a centralized sourcing group for major supplier contract negotiation and administration, for the negotiation and purchase of major capital goods, and to support the business units. We promote competition between suppliers and seek to develop relationships with suppliers that focus on lowering our costs. We seek suppliers who identify and concentrate on implementing continuous improvement opportunities within their area of expertise. To the extent upward pressure on costs exceeds our ability to realize sales increases, or if we experience unanticipated operating or transportation difficulties, our operating margins would be negatively impacted. We may also experience difficult geologic conditions, delays in obtaining permits, labor shortages, unforeseen equipment problems, and unexpected shortages of critical materials such as tires, fuel and explosives that may result in adverse cost increases and limit our ability to produce at forecasted levels.

Results of Operations

Our results of operations for the three months ended June 30, 2022 and 2021 are discussed in these “Results of Operations” presented below.

Three Months Ended June 30, 2022 Compared to the Three Months Ended June 30, 2021

Revenues

The following table summarizes information about our revenues during the three months ended June 30, 2022 and 2021:
Three Months Ended June 30, Increase (Decrease)
(In thousands, except for per ton data) 2022 2021 $ or Tons %
Coal revenues $ 1,334,258  $ 393,458  $ 940,800  239.1  %
Other revenues 2,154  1,817  337  18.5  %
Total revenues $ 1,336,412  $ 395,275  $ 941,137  238.1  %