UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

 

FORM 10-Q

 

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended: March 31, 2016

OR

 

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

Commission file number: 001-3473

 

“COAL KEEPS YOUR LIGHTS ON”   “COAL KEEPS YOUR LIGHTS ON”

HALLADOR ENERGY COMPANY

(www.halladorenergy.com)

 

Colorado

(State of incorporation)

 

84-1014610

(IRS Employer Identification No.)

 

1660 Lincoln Street, Suite 2700, Denver, Colorado

(Address of principal executive offices)

 

80264-2701

(Zip Code)

 

Issuer's telephone number: 303.839.5504

 

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. Yes þ No ¨

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes þ No ¨

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "larger accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

 

¨ Large accelerated filer þ Accelerated filer

¨ Non-accelerated filer

(do not check if a small reporting company)

¨ Smaller reporting company

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ¨ No þ

 

As of May 6, 2016, we had 29,251,000 shares outstanding.

 

 

 

  

PART I - FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

 

Consolidated Balance Sheet

(in thousands, except per share data)

 

    March 31,     December 31,  
    2016     2015  
ASSETS                
Current assets:                
Cash and cash equivalents   $ 13,751     $ 15,930  
Marketable securities     1,481       1,343  
Accounts receivable     19,239       16,675  
Prepaid income taxes     2,443       5,312  
Coal inventory     12,252       14,915  
Parts and supply inventory     11,793       11,255  
Other     1,315       1,185  
Total current assets     62,274       66,615  
Coal properties, at cost:                
Land and mineral rights     126,362       116,209  
Buildings and equipment     349,498       347,963  
Mine development     133,623       131,027  
      609,483       595,199  
Less - accumulated DD&A     (159,089 )      (149,964 ) 
      450,394     445,235
Investment in Savoy     10,237       12,365  
Investment in Sunrise Energy     4,672       4,747  
Other assets (Note 5)     20,010       11,416  
    $ 547,587     $ 540,378  
             
LIABILITIES AND STOCKHOLDERS' EQUITY                
Current liabilities:                
Current portion of bank debt   $ 24,258     $ 24,856  
Accounts payable and accrued liabilities     19,898       26,184  
Total current liabilities     44,156       51,040  
                 
Long-term liabilities:                
Bank debt     225,598       219,502  
Deferred income taxes     50,003       49,033  
Asset retirement obligations     12,480       12,231  
Other     2,904       1,752  
Total long-term liabilities     290,985       282,518  
Total liabilities     335,141       333,558  
                 
Commitments and contingencies                
Stockholders' equity:                
Preferred stock, $.10 par value, 10,000 shares authorized; none issued                
Common stock, $.01 par value, 100,000 shares authorized; 29,251 shares outstanding for both periods     292       292  
Additional paid-in capital     92,811       92,275  
Retained earnings     119,309       114,341  
Accumulated other comprehensive income (loss)     34       (88 )
Total stockholders’ equity     212,446       206,820  
    $ 547,587     $ 540,378  

 

 

See accompanying notes.

 

  2  

 

   

Consolidated Statement of Comprehensive Income

For the three months ended March 31,

(in thousands, except per share data)

 

    2016     2015  
             
Revenue:                
Coal sales   $ 75,795     $ 97,073  
Equity income (loss) – Savoy     (325 )     136  
Equity income  (loss) - Sunrise Energy     (75 )     40  
Other income     490       752  
      75,885       98,001  
Costs and expenses:                
Operating costs and expenses     49,777       66,152  
DD&A     9,182       11,338  
Coal exploration costs     419       708  
SG&A     2,762       3,344  
Interest (1)     5,845       5,456  
      67,985       86,998  
                 
Income before income taxes     7,900       11,003  
                 
Less income taxes:                
Current     768       1,416  
Deferred     970       1,996  
      1,738       3,412  
                 
Net income (2)   $ 6,162     $ 7,591  
                 
Net income per share:                
Basic and diluted   $ 0.21     $ 0.25  
                 
Weighted average shares outstanding:                
Basic and diluted     29,251       28,962  

 

 

(1) Interest expense for 2016 and 2015 includes $1.5 and $1.3 million, respectively for the net change in the estimated fair value of our interest rate swaps
   
(2) There is no material difference between net income and comprehensive income.

 

See accompanying notes.

  3  

 

  

Consolidated Condensed Statement of Cash Flows

For the three months ended March 31,

(in thousands)

 

    2016     2015  
Operating activities:            
Cash provided by operating activities   $ 19,113     $ 21,963  
                 
Investing activities:                
Purchase of Freelandville assets     (18,000 )        
Mining equipment     (6,053 )     (8,250 )
Other     (589 )     190  
Cash used in investing activities     (24,642 )     (8,060 )
                 
Financing activities:                
Bank borrowings     15,000          
Debt issuance cost     (2,090 )        
Dividends     (1,194 )     (1,200 )
Payments on bank debt     (8,366 )     (14,375 )
Cash provided by (used in) financing activities     3,350       (15,575 )
                 
Decrease in cash and cash equivalents     (2,179 )     (1,672 )
Cash and cash equivalents, beginning of period     15,930       13,469  
Cash and cash equivalents, end of period   $ 13,751     $ 11,797  

 

See accompanying notes.

 

  4  

 

  

Consolidated Statement of Stockholders’ Equity

(in thousands)

 

    Shares     Common
Stock 		    Additional
Paid-in
Capital 		    Retained
Earnings 		    AOCI*     Total  
Balance, January 1, 2016     29,251     $ 292     $ 92,275     $ 114,341     $ (88 )   $ 206,820  
                                                 
Stock-based compensation                     536                       536  
                                                 
Dividends                             (1,194 )             (1,194 )
                                                 
Net income                             6,162               6,162  
                                                 
Other                                     122       122  
                                                 
Balance, March 31, 2016     29,251     $ 292     $ 92,811     $ 119,309     $ 34     $ 212,446  

 

 

*Accumulated Other Comprehensive Income

 

See accompanying notes.

 

  5  

 

   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

(1) General Business

 

The interim financial data is unaudited; however, in our opinion, it includes all adjustments, consisting only of normal recurring adjustments necessary for a fair statement of the results for the interim periods. The financial statements included herein have been prepared pursuant to the SEC’s rules and regulations; accordingly, certain information and footnote disclosures normally included in GAAP financial statements have been condensed or omitted.

 

The results of operations and cash flows for the three months ended March 31, 2016 are not necessarily indicative of the results to be expected for future quarters or for the year ending December 31, 2016. To maintain consistency and comparability, certain 2015 amounts have been reclassified to conform to the 2016 presentation.

 

Our organization and business, the accounting policies we follow and other information, are contained in the notes to our consolidated financial statements filed as part of our 2015 Form 10-K. This quarterly report should be read in conjunction with such 10-K.

 

The consolidated financial statements include the accounts of Hallador Energy Company (the Company) and its wholly-owned subsidiary Sunrise Coal, LLC (Sunrise) and Sunrise’s wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated. We are engaged in the production of steam coal from mines located in western Indiana.  We own a 40% equity interest in Savoy Energy, L.P., a private oil and gas company, which has operations in Michigan and a 50% interest in Sunrise Energy, LLC, a private entity engaged in oil and gas operations in the same vicinity as the Carlisle mine.

 

Change in Estimate for Computing Depreciation

 

At the beginning of Q1 2016, we changed from the straight-line method to the units-of-production method in computing the depreciation for our underground mining equipment. This change in estimate reduced our DD&A expense for Q1 2016 by $1.6 million. As disclosed last year, we significantly curtailed the production at the Carlisle Mine. This change better reflects the usage of our underground mining equipment especially since Carlisle had limited production in Q1 2016.

 

(2) Bank Debt

 

On March 18, 2016, we executed an amendment to our credit agreement with PNC, as administrative agent for our lenders.  The primary purpose of the amendment was to increase liquidity and maintain compliance through the maturity of the agreement in August 2019.  The revolver was reduced from $250 million to $200 million and the term loan remains the same. Our debt at March 2016 was $256 million (term-$131, revolver-$125). In addition, a maximum annual capex of $30 million was included.   

 

Bank fees and other costs incurred in connection with the initial facility and the amendment were $9.1 million, which were deferred and are being amortized over five years. The credit facility is collateralized by substantially all of Sunrise’s assets and we are the guarantor.

 

The amended credit facility increased the maximum leverage ratio (total funded debt/ trailing 12 months EBITDA) from 2.75X to 4X at March 31, 2016. The maximum leverage ratio is calculated at the end of each fiscal quarter and shall not exceed the applicable ratios below.

 

Fiscal Periods Ending   Ratio
     
March 31, 2016   4X
June 30, 2016   4.25X
September 30, 2016 through March 31, 2017   4.5X
June 30, 2017 through March 31, 2018   4.25X
June 30, 2018 and September 30, 2018   4X
December 31, 2018   3.75X
March 31, 2019 and June 30, 2019   3.5X

  

  6  

 

  

The fixed charge coverage ratio was changed to the debt service coverage ratio and requires a minimum of 1.25X through the maturity of the credit facility. The amendment defines the debt service coverage as trailing 12 months EBITDA/annual debt service. As of March 31, 2016, we have additional borrowing capacity of $67 million.

 

At March 31, 2016, our maximum leverage ratio was 2.89X and our debt service coverage ratio was 2.40X.  Therefore, we were in compliance with these two ratios.

 
The interest rate on the facility ranges from LIBOR plus 2.25% to LIBOR plus 4%, depending on our maximum leverage ratio.

 

New accounting rules for 2016 require that our debt issues costs be presented as a direct reduction from the related debt rather than as an asset.  Our December 31, 2015 balance sheet was changed to reflect the new rule.

Debt less debt issuance cost at March 31 and December 31 are presented below (in thousands):

 

    2016     2015  
Current debt   $ 26,250     $ 26,250  
Less debt issuance cost     (1,992 )     (1,394 )
  Net current portion   $ 24,258     $ 24,856  
                 
Long-term debt   $ 229,854     $ 223,220  
Less debt issuance cost     (4,256 )     (3,718 )
   Net long-term portion   $ 225,598     $ 219,502  

   

(3) Equity Investment in Savoy

 

We currently own a 40% interest in Savoy Energy, L.P., a private company engaged in the oil and gas business primarily in the state of Michigan.  Savoy uses the successful efforts method of accounting. We account for our interest using the equity method of accounting.

 

Below (in thousands) to the 100% is a condensed balance sheet at March 31, and a condensed statement of operations for the three months ended March 31, 2016 and 2015.

 

Condensed Balance Sheet

 

    2016  
Current assets   $ 6,604  
Oil and gas properties, net     20,803  
Other     1,007  
    $ 28,414  
         
Total liabilities   $ 3,670  
Partners’ capital     24,744  
    $ 28,414  

 

Condensed Statement of Operations

            

    2016     2015  
Revenue   $ 2,148     $ 4,360  
Expenses     (2,943 )     (4,027 )
Net income (loss)   $ (795 )   $ 333  

 

  7  

 

   

(4) Equity Investment in Sunrise Energy

 

We own a 50% interest in Sunrise Energy, LLC, which owns gas reserves and gathering equipment with plans to develop and operate such reserves. Sunrise Energy also plans to develop and explore for oil, gas and coal-bed methane gas reserves on or near our underground coal reserves. They use the successful efforts method of accounting. We account for our interest using the equity method of accounting.

 

Below (in thousands) to the 100% is a condensed balance sheet at March 31, and a condensed statement of operations for the three months ended March 31, 2016 and 2015.

 

Condensed Balance Sheet

 

    2016  
Current assets   $ 2,204  
Oil and gas properties, net     7,844  
    $ 10,048  
         
Total liabilities   $ 716  
Members’ capital     9,332  
    $ 10,048  

 

Condensed Statement of Operations

 

    2016     2015  
Revenue   $ 458     $ 617  
Expenses     (607 )     (537 )
Net income (loss)   $ (149 )   $ 80  

 

(5) Other Long-Term Assets (in thousands)

 

    March 31,     December 31,  
    2016     2015  
Long-term assets:                
Advanced coal royalties   $ 8,432     $ 6,563  
Marketable equity securities available for sale, at fair value (restricted)*     1,826       1,763  
Purchased coal contract – See Note 9     6,407          
Other     3,345       3,090  
    $ 20,010     $ 11,416  

 

 

*Held by Sunrise Indemnity, Inc., our wholly-owned captive insurance company.

 

(6) Self Insurance

 

In late August 2010 we decided to terminate the property insurance on our underground mining equipment. Such equipment is allocated among 10 mining units spread out over 20 miles. The historical cost of such equipment is about $255 million.

  8  

 

  

(7) Net Income per Share

 

We compute net income per share using the two-class method, which is an allocation formula that determines net income per share for common stock and participating securities, which for us are our outstanding RSUs.

 

The following table sets forth the computation of net income per share for the three months ended March 31 (in thousands):

 

    2016     2015  
Numerator:                
Net income   $ 6,162     $ 7,591  
Less earnings allocated to RSUs     (125 )     (263 )
Net income allocated to common shareholders   $ 6,037     $ 7,328  

  

(8) Asset Realization

 

As disclosed last year, we significantly curtailed the production at the Carlisle mine and had a reduction in work force. Consequently, we conducted a review of those assets for recoverability and determined that no impairment charge was necessary. In conducting such review, we assumed (i) that natgas prices will start to increase in late 2017; (ii) Carlisle production will increase in 2018-2019, and (iii) sometime in 2020, the Carlisle Mine will return to its normal production capacity of 3.3 million tons per year. The Carlisle assets had an aggregate carrying value of $137 million at March 31, 2016. If, in later quarters, we reduce our estimate of the future net cash flows attributable to the Carlisle mine, it may result in future impairment of such assets and such charges could be significant.

 

(9) Freelandville Purchase

 

On March 22, 2016, we completed the purchase of the Freelandville coal reserves and coal sales agreement for $18 million. These reserves totaled 14.2 million tons of fee and leased coal and will be mined from our Oaktown 1 portal. This purchase also allows Sunrise access to another 1.6 million tons of our own leased reserves that were previously inaccessible. The purchased coal sales agreement totaled 1,435,000 tons (can be adjusted +/- 6,700 tons monthly) and will be delivered ratably in calendar year 2017. The preliminary purchase price allocation for the acquisition was as follows (in thousands):

 

Purchased coal contract   $ 6,407  
Advanced coal royalties     1,690  
Mineral rights and leases     9,903  
  Total   $ 18,000  

 

  9  

 

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Board of Directors and Stockholders

Hallador Energy Company

Denver, Colorado

 

We have reviewed the accompanying condensed consolidated balance sheet of Hallador Energy Company and subsidiaries (the “Company”) as of March 31, 2016, and the related condensed consolidated statements of comprehensive income, and cash flows, for the three month periods ended March 31, 2016 and March 31, 2015 and the statement of stockholders’ equity for the three month period ended March 31, 2016.  These financial statements are the responsibility of the Company’s management.

 

We conducted our reviews in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

 

Based on our reviews, we are not aware of any material modifications that should be made to the accompanying condensed consolidated interim financial information for it to be in conformity with accounting principles generally accepted in the United States of America.

 

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of the Company as of December 31, 2015, and the related consolidated statements of comprehensive income, cash flows, and stockholders’ equity for the year then ended (not presented herein); and in our report dated March 11, 2016, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 2015, is fairly stated, in all material respects, in relation to the balance sheet from which it has been derived.

 

/s/ EKS&H LLLP

 

May 6, 2016

 

Denver, Colorado

 

  10  

 

  

ITEM 2.   MD&A

 

The following discussion updates the MD&A section of our 2015 Form 10-K and should be read in conjunction therewith.

 

Our consolidated financial statements should also be read in conjunction with this discussion.

 

Our Coal Contracts

 

On March 22, 2016, we completed the purchase of certain underground coal reserves and a coal sales agreement associated with Triad Mining, LLC’s (Triad) Freelandville mining complex for $18 million.  Triad is a wholly-owned subsidiary of Blackhawk Mining, LLC based in Lexington, Kentucky. The Freelandville complex is located in Sullivan and Knox Counties, Indiana.  As part of the transaction, we also purchased 14.2 million tons of proven coal reserves and associated advanced royalties in addition to rights under a coal sales agreement that extends through 2017. See Note 9 to our financial statements.

 

The table below (in thousands, except prices) shows our contracted tons. Some of our contracts contain language that allow our customers to increase or decrease tonnages throughout the year. The table represents the minimum and maximum tonnages we could deliver under existing contracts. In some cases, our customers are required to purchase their additional tonnage needs from us. We fully anticipate making additional sales.

 

    Minimum Tons To Be Sold     Maximum Tons To Be Sold     Average  
    Priced     (Unpriced)     Total     Priced     (Unpriced)     Total     Estimated  
Year   Tons     Tons     Tons     Tons     Tons     Tons     Prices  
2016 (last nine months)     4,367               4,367       4,477               4,477     $ 40.92  
2017     4,175       389       4,564       5,985       581       6,566       42.87  
2018     1,560       1,199       2,759       2,210       1,791       4,001       44.03  
2019     1,300       2,009       3,309       1,550       3,001       4,551       44.55  
2020     1,000       2,009       3,009       1,000       3,001       4,001       46.91  
2021             2,009       2,009               3,001       3,001          
2022             2,009       2,009               3,001       3,001          
2023             1,620       1,620               2,420       2,420          
2024             810       810               1,210       1,210          
      12,402       12,054       24,456       15,222       18,006       33,228          

  

Unpriced tons are firm commitments, meaning we are required to ship and our customer is required to receive said tons through the duration of the contract. The contracts provide mechanisms for establishing a market-based price. As set forth in the table above, we have 12-18 million tons committed but unpriced through 2024. 

 

We expect to continue selling a significant portion of our coal under supply agreements with terms of one year or longer. Typically, customers enter into coal supply agreements to secure reliable sources of coal at predictable prices while we seek stable sources of revenue to support the investments required to open, expand and maintain, or improve productivity at the mines needed to supply these contracts. The terms of coal supply agreements result from competitive bidding and extensive negotiations with customers.  

 

Asset Realization

 

See Note 8 to our financial statements.

 

  11  

 

 

Liquidity and Capital Resources

 

As set forth in our Statement of Cash Flows, cash provided by operations was $19 million (includes a non-recurring $1.8 million cash distribution from Savoy) for Q1 2016. This amount was adequate to fund our capital expenditures for coal properties, our debt service requirements and our dividend. Our capex budget for the next nine months is $15 million, of which $8 million is for maintenance capex. Cash from operations for the next nine months should again fund our capital expenditures, debt service and our dividend.

 

Other than our surety bonds for reclamation, we have no material off-balance sheet arrangements. Our surety bonds total $23 million in the event we are not able to perform.

 

Capital Expenditures (capex)

 

Q1 2016 capex was $6 million allocated as follows (in thousands):

 

Oaktown - expansion   $ 3,041  
Oaktown - maintenance capex     2,984  
Other projects     28  
Capex per the Cash Flow Statement   $ 6,053  

 

Results of Operations

 

Oaktown’s cash costs for Q1 2016 were $27.87/ton. With our reduced coal sales in 2016, we see Oaktown’s costs ranging from $28 to $30 for 2016. Going forward we expect our SG&A to be $12 million annually and costs associated with Prosperity and Carlisle to be $9 million annually.

 

Quarterly coal sales and cost data (in thousands, except per ton data):

 

    2 nd   2015     3 rd 2015     4 th 2015     1 st   2016     T4Qs  
Tons sold     2,078       1,791       1,432       1,629       6,930  
Coal sales   $ 95,323     $ 81,332     $ 65,762     $ 75,795     $ 318,212  
Average price/ton     45.87       45.41       45.92       46.53       45.92  
Wash plant recovery in %     69       69       64       65          
Operating costs   $ 68,280     $ 56,995     $ 46,470     $ 49,777     $ 221,522  
Average cost/ton     32.86       31.82       32.45       30.56       31.97  
Margin     27,043       24,337       19,292       26,018       96,690  
Margin/ton     13.01       13.59       13.47       15.97       13.95  
Capex     14,789       4,070       4,058       6,053       28,970  
Maintenance capex     13,323       1,816       1,047       2,984       19,170  
Maintenance capex/ton     6.41       1.01       .73       1.83       2.77  
                                         

 

  12  

 

  

    2 nd   2014     3 rd 2014     4 th 2014     1 st   2015     T4Qs  
Tons sold     847       1,500       2,275       2,146       6,768  
Coal sales   $ 36,130     $ 64,764     $ 99,992     $ 97,073     $ 297,959  
Average price/ton     42.66       43.18       43.95       45.23       44.02  
Wash plant recovery in %     68       64       67       67          
Operating costs   $ 26,096     $ 52,588     $ 68,002     $ 66,152     $ 212,838  
Average cost/ton     30.81       35.06       29.89       30.83       31.45  
Margin     10,034       12,176       31,990       30,921       85,121  
Margin/ton     11.85       8.12       14.06       14.40       12.57  
Capex     6,190       5,200       11,509       8,250       31,149  
Maintenance capex     3,974       4,756       11,162       6,685       26,577  
Maintenance capex/ton     4.69       3.17       4.91       3.12       3.93  

  

2016 v. 2015

 

For 2016, we sold 1,629,000 tons at an average price of $46.53/ton. For 2015, we sold 2,146,000 tons at an average price of $45.23/ton.

 

Operating costs and expenses averaged $30.56/ton in 2016 compared to $30.83 in 2015.  Our Indiana employees totaled 721 at March 31, 2016 compared to 1,018 at March 31, 2015.

 

The reduction in DD&A is due to a change in estimate in computing the depreciation for our underground mining equipment. In the past, we used the straight-line method; beginning Q1 2016, we changed to the units-of-production method. This change in estimate reduced our DD&A expense for Q1 2016 by $1.6 million.

 

There was no material change in SG&A. We expect SG&A for the last nine months of 2016 to be around $9 million.

 

Earnings (loss) per Share

 

  2 nd  2015     3 rd  2015     4 th 2015     1 st 2016  
Basic and diluted   $ .23     $ .17     $ .02     $ .21  

 

    2 nd  2014     3 rd  2014     4 th 2014     1 st 2015  
Basic and diluted   $ .10     $ .(20 )   $ .31     $ .25  

 

40% Ownership in Savoy

 

Our share of Savoy’s operations dropped due to the precipitous drop in oil prices.  

 

Income Taxes

 

Our effective tax rate (ETR) for 2016 was 22% compared to 31% for 2015. We expect our ETR to be circa 22% for the remainder of 2016.

 

MSHA Reimbursements

 

Some of our legacy coal contracts allow us to pass on certain costs incurred resulting from changes in costs to comply with mandates issued by MSHA or other government agencies.  We do not recognize any revenue until customers have notified us that they accept the charges.

 

  13  

 

 

We submitted our incurred costs for 2011 in October 2012 for $3.7 million. $2.1 million in reimbursements were recorded in the first quarter 2013 and $1.6 million were recorded in the fourth quarter of 2013. We submitted our incurred costs for 2012 in June 2015 and expect to receive approximately $3 million for such costs during 2016. As stated above we do not record such reimbursements until they have been agreed to by our customers. Incurred costs for 2013 will be submitted during the second quarter of 2016.

 

Critical Accounting Estimates

 

We believe that the estimates of our coal reserves, our deferred tax accounts, and the estimates used in our impairment analysis are our only critical accounting estimates. The reserve estimates are used in the DD&A calculation and in our internal cash flow projections.  If these estimates turn out to be materially under or over-stated, our DD&A expense and impairment test may be affected.

 

We account for business combinations using the purchase method of accounting. The purchase method requires us to determine the fair value of all acquired assets, including identifiable intangible assets and all assumed liabilities. The total cost of acquisitions is allocated to the underlying identifiable net assets, based on their respective estimated fair values. Determining the fair value of assets acquired and liabilities assumed requires management's judgment and the utilization of independent valuation experts, and often involves the use of significant estimates and assumptions, including assumptions with respect to future cash inflows and outflows, discount rates and asset lives, among other items. The fair value of our interest rate swaps is determined using a discounted future cash flow model based on the key assumption of anticipated future interest rates.

 

We have analyzed our filing positions in all of the federal and state jurisdictions where we are required to file income tax returns, as well as all open tax years in these jurisdictions. We identified our federal tax return and our Indiana state tax return as “major” tax jurisdictions.  During 2012, the IRS completed an examination of our 2009 and 2010 federal tax returns and there were no significant adjustments.  During 2012, the State of Indiana completed their examination of our 2008-2010 returns and no adjustments were proposed.  We believe that our income tax filing positions and deductions will be sustained on audit and do not anticipate any adjustments that will result in a material change to our consolidated financial position. 

 

New Accounting Pronouncements

 

None of the recent FASB pronouncements will have any material effect.

 

Yorktown Distributions

 

As previously disclosed, Yorktown Energy Partners and its affiliated partnerships (Yorktown) have made 11 distributions to their numerous partners totaling 7.3 million shares since May 2011.  In the past, these distributions were made soon after we filed our Form 10-Qs and Form 10-Ks. Currently they own 7.8 million shares of our stock representing about 27% of total shares outstanding. Yorktown last distributed shares in August of 2015.

 

We have been informed by Yorktown that they have not made any determination as to the disposition of their remaining Hallador stock. While we do not know Yorktown’s ultimate strategy to realize the value of their Hallador investment for their partners, we expect that over time such distributions will increase our liquidity and float.

 

If we are advised of another Yorktown distribution, we will timely report such on a Form 8-K.

 

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

 

No material change from the disclosure in our 2015 Form 10-K.

 

ITEM 4. CONTROLS AND PROCEDURES

 

Disclosure Controls

 

We maintain a system of disclosure controls and procedures that are designed for the purposes of ensuring that information required to be disclosed in our SEC reports is recorded, processed, summarized, and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to our CEO and CFO as appropriate to allow timely decisions regarding required disclosure.

 

  14  

 

 

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our CEO and CFO, of the effectiveness of the design and operation of our disclosure controls and procedures. Based upon that evaluation, our CEO and CFO concluded that our disclosure controls and procedures are effective for the purposes discussed above.

 

There have been no changes to our internal control over financial reporting during the quarter ended March 31, 2016 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

PART II - OTHER INFORMATION

 

ITEM 4. MINE SAFETY DISCLOSURE

 

See Exhibit 95 to this Form 10-Q for a listing of our mine safety violations.

 

ITEM 6. EXHIBITS

 

10 First Amendment to the Second Amended and Restated Credit Agreement dated March 18, 2016
15 Letter Regarding Unaudited Interim Financial Information
31 SOX 302 Certifications
32 SOX 906 Certification
95 Mine Safety Report
101 Interactive Files

 

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

    HALLADOR ENERGY COMPANY
     
Date: May 6, 2016   /s/ Lawrence D. Martin
    Lawrence D. Martin, CFO and CAO

  

  15  

 

EXHIBIT 10

 

FIRST AMENDMENT TO THE SECOND AMENDED AND RESTATED CREDIT AGREEMENT

 

This FIRST AMENDMENT TO THE SECOND AMENDED AND RESTATED CREDIT AGREEMENT (this "Amendment"), dated as of March 18, 2016, by and among Sunrise Coal, LLC (the "Borrower"), the Guarantors party thereto, the lenders listed on the signature pages hereof (the "Lenders") and PNC BANK, NATIONAL ASSOCIATION , a national banking association, as administrative agent for the Lenders (the "Administrative Agent") under the Credit Agreement referred to below:

 

WlTNESSETH:

 

WHEREAS, the Borrower, the Lender and the Administrative Agent entered into the Second Amended and Restated Credit Agreement dated as of August 29, 2014 (the "Credit Agreement"), pursuant to which the Lenders have extended credit to the Borrower; and

 

WHEREAS, the Borrower has requested that certain amendments be made as set forth in more detail herein; and

 

WHEREAS, capitalized terms not otherwise defined herein shall have the meanings assigned thereto in the Credit Agreement.

 

NOW, THEREFORE, in consideration of their mutual covenants and agreements hereafter set forth, and intending to be legally bound, the parties hereto agree as follows:

 

Article I

 

Section 1.1 Commitment Reduction . Pursuant to Section 2.4 of the Credit Agreement, the Borrower hereby elects to reduce, effective as of the date hereof, the Revolving Credit Commitments to $200,000,000. The Administrative Agent and the Lenders hereby waive the requirement of three Business Days’ prior written notice required under Section 2.4 of the Credit Agreement with respect to such Revolving Credit Commitment reduction.

 

Section 1.2 Amendments to Section 1.1 [Certain Definitions] . The following definitions contained in Section 1.1 [Certain Definitions] of the Credit Agreement are hereby amended and restated in entirety as follows:

 

" Daily LIBOR Rate shall mean, for any day, the rate per annum determined by the Administrative Agent by dividing (x) the Published Rate by (y) a number equal to 1.00 minus the LIBOR Reserve Percentage on such day. Notwithstanding the foregoing, if the Daily LIBOR Rate as determined above would be less than zero (0.00), such rate shall be deemed to be zero (0.00) for purposes of this Agreement."

 

 

 

 

Section 1.3 Amendments to Section 1.1 [Certain Definitions] . Section 1.1 [Certain Definitions] of the Credit Agreement is hereby amended to insert the following new definitions in such section in alphabetical order:

 

" Debt Service Coverage Ratio shall mean, as of any date of determination, the ratio of (A) Consolidated EBITDA of the Loan Parties (other than Hallador), divided by (B) the sum of (i) scheduled principal reductions on the Term Loans and principal reductions on Indebtedness (other than principal reductions on the Revolving Credit Loans) of the Loan Parties (other than Hallador), plus (ii) interest expense of the Loan Parties (other than Hallador), each calculated as of the end of each fiscal quarter for the four fiscal quarters then ended."

 

" Freelandville Acquisition means the Acquisition by Borrower or another Loan Party (other than Hallador) of the coal reserves and coal supply agreement associated with the underground and/or surface coal mines known as the Freelandville Mine located in Knox County and Sullivan County, Indiana, and other related facilities and other assets."

 

Section 1.4 Amendments to Section 8.2.5 [Dividends and Related Distributions; Hallador Subordinated Debt Payments] . The last sentence of Section 8.2.5 [Dividends and Related Distributions; Hallador Subordinated Debt Payments] of the Credit Agreement is hereby amended and restated in entirety as follows:

 

"The Borrower shall not make or pay any principal payments with respect to the Hallador Subordinated Debt, except principal payments in an amount not to exceed $2,500,000 per calendar year, provided, that, at least five (5) Business Days prior to such payment, the Borrower shall provide a certificate to the Lenders certifying that prior to and immediately after making any such contemplated principal payment: (a) that the Leverage Ratio shall not exceed 2.50 to 1.00 on a pro forma basis, (b) that the amount of Availability shall not be less than $30,000,000 and (c) there shall exist no Event of Default."

 

Section 1.5 Amendments to Section 8.2.14 . Section 8.2.14 of the Credit Agreement is hereby amended and restated in entirety to include a new covenant as follows:

 

"8.2.14 Capital Expenditures and Leases. Each of the Loan Parties (other than Hallador) shall not, and shall not permit any of its Subsidiaries to make any payments on account of the purchase or lease of any assets which if purchased would constitute fixed assets or which if leased would constitute a capitalized lease to exceed $30,000,000 per fiscal year; provided, however, if such payments made by the Loan Parties (other than Hallador) in any fiscal year are less than the amounts permitted for such fiscal year, then the lesser of $5,000,000 or such unpaid amounts may be added by the Loan Parties (other than Hallador) to the amounts permitted to be used for payments in future years."

 

Section 1.6 Amendments to Section 8.2.15 . Section 8.2.15[Minimum Fixed Charge Coverage Ratio] of the Credit Agreement is hereby amended and restated in entirety as follows:

 

"8.2.15 Minimum Debt Service Coverage Ratio . The Loan Parties (other than Hallador) shall not at any time permit the Debt Service Coverage Ratio, calculated as of the end of each fiscal quarter for the four fiscal quarters then ended, to be less than the applicable amounts set forth below:

 

 

 

 

Fiscal Periods Ending   Ratio
March 31, 2016 through June 30, 2019   1.25 to 1.00"

 

Section 1.7 Amendments to Section 8.2.16 [Maximum Leverage Ratio] . Section 8.2.16 [Maximum Leverage Ratio] of the Credit Agreement is hereby amended and restated in entirety as follows:

 

"8.2.16 Maximum Leverage Ratio . The Loan Parties (other than Hallador) shall not at any time permit the Leverage Ratio, calculated as of the end of each fiscal quarter for the four fiscal quarters then ended, to exceed the applicable amounts set forth below:

 

Fiscal Periods Ending

  Ratio
March 31, 2016   4.00 to 1.00
June 30, 2016   4.25 to 1.00
September 30, 2016 through March 31, 2017   4.50 to 1.00
June 30, 2017 through March 31, 2018   4.25 to 1.00
June 30, 2018 and September 30, 2018   4.00 to 1.00
December 31, 2018   3.75 to 1.00
March 31, 2019 and June 30, 2019   3.50 to 1.00"

 

Section 1.8 Amendments to Certain Credit Agreement and Loan Document Schedules . Schedule 1.1(A) [Pricing Grid] shall be amended and restated to read as set forth on the Schedule attached to this Amendment bearing such name and numerical reference and Part 2 of Schedule 1.1(B) [Commitments of Lenders and Addresses for Notices to Lenders] shall be amended and restated to read as set forth on the Schedule attached to this Amendment bearing such name and numerical reference.

 

Article II

  

Waiver . Section 8.2.6(2) of the Credit Agreement requires that the Loan Parties comply with certain conditions prior to making a Permitted Acquisition, including, but not limited to the following: (1) the Borrower shall demonstrate that it will be in Pro Forma Compliance with the covenant contained in Section 8.2.16 [Maximum Leverage Ratio] for the four quarter period immediately after giving effect to such Permitted Acquisition by delivering at least five (5) Business Days prior to such Permitted Acquisition a calculation evidencing such compliance, except that for the sole purpose of measuring such Pro Forma Compliance, the maximum ratio set forth in Section 8.2.16 [Maximum Leverage Ratio] shall be deemed to be reduced by 0.25, and (2) the Borrower shall demonstrate that immediately after giving effect to such Permitted Acquisition that the amount of Availability shall not be less than $30,000,000. The Borrower intends to consummate the Freelandville Acquisition on the terms and conditions substantially similar to those contained in the Purchase Agreement and it has indicated that if it does so it will not be able to comply with the above conditions (the " Default Event "). The Borrower hereby requests that the Administrative Agent and the Lenders execute this Waiver to evidence their waiver of the Default Event and include the Freeland Acquisition as a Permitted Acquisition under the Credit Agreement. The Borrower further requests the consideration being paid in connection with the Freeland Acquisition be excluded from the restriction contained in Section 8.2.6(2)(vii) of the Credit Agreement (the " Waived Inclusion "). By signing below, the Lenders agree to waive the Default Event and agree to the Waived Inclusion so long as the Borrower complies with the remaining acquisition requirements of Section 8.2.6(2). Except as expressly waived hereby, the terms and provisions of the Credit Agreement remain unchanged, are and shall remain in full force and effect unless and until modified or amended in writing in accordance with their terms, and are hereby ratified and confirmed. Except as expressly provided herein, this Waiver shall not constitute an amendment, waiver, consent or release with respect to any provision of any Loan Document, a waiver of any Potential Default or Event of Default under any Loan Document, or a waiver or release of any of the Lenders' or Administrative Agent's rights and remedies (all of which are hereby reserved).

 

 

 

 

Article III

 

Section 3.1 No Other Amendments . Except as amended hereby, the terms and provisions of the Credit Agreement remain unchanged, are and shall remain in full force and effect unless and until modified or amended in writing in accordance with their terms, and are hereby ratified and confirmed. Except as expressly provided herein, this Amendment shall not constitute an amendment, waiver, consent or release with respect to any provision of any Loan Document, a waiver of any Potential Default or Event of Default under any Loan Document, or a waiver or release of any of the Lenders' or Administrative Agent's rights and remedies (all of which are hereby reserved).

 

Section 3.2 Representations and Warranties . The Borrower hereby represents and warrants to the Lenders and the Administrative Agent that the representations and warranties set forth in Article 6 of the Credit Agreement, are true and correct on and as of the date hereof (except for any representation or warranty which was expressly limited to an earlier date, in which case such representation and warranty shall be true and correct on and as of such date), and that no Event of Default, or Potential Default, has occurred or is continuing or exists on or as of the date hereof.

 

Section 3.3 Conditions to Effectiveness . This Amendment shall become effective upon execution and delivery to the Administrative Agent hereof by the Borrower, all of the Lenders and the Administrative Agent and the satisfaction of the following conditions precedents:

 

 

 

 

(a) Amendment . The Administrative Agent shall have received an executed counterpart of this Amendment from the Required Lenders, duly executed by a responsible officer of the Loan Parties.

 

(b) Officer's Certificate . The representations and warranties of the Loan Parties contained in Section 6 of the Credit Agreement including as amended by the modifications and additional representations and warranties of this Amendment, and of each Loan Party in each of the other Loan Documents shall be true and accurate on and as of the date hereof with the same effect as though such representations and warranties had been made on and as of such date (except representations and warranties which relate solely to an earlier date or time, which representations and warranties shall be true and correct on and as of the specific dates or times referred to therein), and each of the Loan Parties shall have performed and complied with all covenants and conditions hereof and thereof, no Event of Default or Potential Default shall have occurred and be continuing or shall exist; and there shall be delivered to the Administrative Agent for the benefit of each Lender a certificate of the Borrower dated the date hereof and signed by the Chief Executive Officer, President, or Chief Financial Officer of the Borrower to each such effect.

 

(c) Secretary's Certificate . There shall be delivered to the Administrative Agent for the benefit of each Lender a certificate dated the date hereof and signed by the Secretary or an Assistant Secretary of each of the Loan Parties, certifying as appropriate as to:

 

(i) all action taken by each Loan Party in connection with this Amendment and the other Loan Documents;

 

(ii) the names of the officer or officers authorized to sign this Amendment and the other Loan Documents and the true signatures of such officer or officers and specifying the Authorized Officers permitted to act on behalf of each Loan Party for purposes of this Amendment and the true signatures of such officers, on which the Administrative Agent and each Lender may conclusively rely; and

 

(iii) copies of its organizational documents, including its certificate of incorporation and bylaws, certificate of limited partnership and limited partnership agreement or limited liability company certificate and operating agreement, as the case may be, as in effect on the date hereof and, in the case of the certificate of incorporation of the Borrower, certified by the appropriate state official where such document is filed in a state office (or, in the event that no change has been made to such organizational documents previously delivered to the Administrative Agent, so certified by the Secretary or Assistant Secretary of such Loan Party), together with certificates from the appropriate state officials as to the continued existence and good standing of the Borrower in the state of its formation and the state of its principal place of business.

 

(d) Revolving Credit Commitment Reduction . After giving effect to reduction of Revolving Credit Commitments contemplated by this Amendment, on the effective date of this Amendment, the Revolving Facility Usage shall not exceed the aggregate Revolving Credit Commitments of the Lenders as so reduced.

 

 

 

 

(e) No Defaults under Other Obligations . No default under any note, credit agreement or other document relating to existing Indebtedness of any of the Loan Parties shall occur as a result of this Amendment.

 

(f) No Actions or Proceedings . No action, proceeding, investigation, regulation or legislation shall have been instituted, threatened or proposed before any court, governmental agency or legislative body to enjoin, restrain or prohibit, or to obtain damages in respect of, this Amendment, the other Loan Documents or the consummation of the transactions contemplated hereby or thereby or which, in the Administrative Agent's sole discretion, would make it inadvisable to consummate the transactions contemplated by this Amendment or any of the other Loan Documents.

 

(g) Consents . All material consents required to effectuate the transactions contemplated by this Amendment and the other Loan Documents and shall have been obtained.

 

(h) Confirmation of Guaranty . Each of the Guarantors confirms that they have read and understand the Amendment. In order to induce the Lenders, the Administrative Agent and the other Agents to enter into the Amendment, each of the Guarantors: (i) consents to the Amendment and the transactions contemplated thereby; (ii) ratifies and confirms each of the Loan Documents to which it is a party; (iii) ratifies, agrees and confirms that it has been a Guarantor and a Loan Party at all times since it became a Guarantor and a Loan Party and from and after the date hereof, each Guarantor shall continue to be a Guarantor and a Loan Party in accordance with the terms of the Loan Documents, as the same may be amended in connection with the Amendment and the transactions contemplated thereby; and (iv) hereby ratifies and confirms its obligations under each of the Loan Documents (including all exhibits and schedules thereto), as the same may be amended in connection with the Amendment and the transactions contemplated thereby, by signing below as indicated and hereby acknowledges and agrees that nothing contained in any of such Loan Documents is intended to create, nor shall it constitute an interruption, suspension of continuity, satisfaction, discharge of prior duties, novation or termination of the indebtedness, loans, liabilities, expenses, guaranty or obligations of any of the Loan Parties under the Credit Agreement or any other such Loan Document.

 

(i) Legal Details . All legal details and proceedings in connection with the transactions contemplated by this Amendment and the other Loan Documents shall be in form and substance satisfactory to the Administrative Agent and counsel for the Administrative Agent, and the Administrative Agent shall have received all such other counterpart originals or certified or other copies of such documents and proceedings in connection with such transactions, in form and substance satisfactory to the Administrative Agent and its counsel, as the Administrative Agent or its counsel may reasonably request.

 

(j) Fees . The Borrowers shall have paid to the Administrative Agent for itself and for the account of the applicable Lenders (a) all fees as required hereunder, including a fee to each Lender that consented to this Amendment in writing on or before 12:00 p.m. (Eastern time), March 18, 2016, equal to thirty-seven and one half (37.5) basis points of such Lender's Credit Revolving Credit Commitments and outstanding Term Loans as of the date hereof, after giving effect to the Revolving Credit Commitment reduction, and (b) all other fees payable to the Administrative Agent plus all costs and expenses for which the Administrative Agent is entitled to be reimbursed, including but not limited to the fees and expenses of the Administrative Agent's legal counsel.

 

 

 

 

Section 3.4 Miscellaneous .

 

(a) This Amendment shall become effective as provided in Section 3.3.

 

(b) The Credit Agreement, as amended by this Amendment, is in all respects ratified, approved and confirmed, and shall, as so amended, remain in full force and effect. From and after the date that the amendments herein described take effect, all reference to the "Agreement" in the Credit Agreement and in the other Loan Documents, shall be deemed to be references to the Credit Agreement as amended by this Amendment.

 

(c) This Amendment shall be deemed to be a contract under the laws of the Commonwealth of Pennsylvania, and for all purposes shall be governed by, construed and enforced in accordance with the laws of said Commonwealth.

 

(d) Except as amended hereby, all of the terms and conditions of the Credit Agreement and the other Loan Documents shall remain in full force and effect. Borrower, the other Loan Parties, each Lender, and Administrative Agent acknowledge and agree that this Amendment is not intended to constitute, nor does it constitute, a novation, interruption, suspension of continuity, satisfaction, discharge or termination of the obligations, loans, liabilities, or indebtedness under the Credit Agreement or the other Loan Documents.

 

(e) This Amendment may be executed in any number of counterparts by the different parties hereto on separate counterparts. Each of which, when so executed, shall be deemed an original, but all such counterparts shall constitute but one in the same instrument.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

 

 

 

[SIGNATURE PAGE 1 TO FIRST AMENDMENT TO CREDIT AGREEMENT]

 

IN WITNESS WHEREOF, the parties hereto, by their officers thereunto duly authorized, have executed this Agreement as of the day and year first above written.

 

  BORROWER:
     
  SUNRISE COAL, LLC
   
   
  By: /s/ Brent K. Bilsland
  Name:   Brent K. Bilsland
  Title:   President
     
     
  GUARANTORS:
   
  HALLADOR ENERGY COMPANY
   
   
  By: /s/ Brent K. Bilsland
  Name:    Brent K. Bilsland
  Title:   President

 

 

 

 

[SIGNATURE PAGE 2 TO FIRST AMENDMENT TO CREDIT AGREEMENT]

 

  SUNRISE LAND HOLDINGS, LLC
     
     
  By: /s/ Brent K. Bilsland
  Name:   Brent K. Bilsland
  Title:   President
     
     
  SFI COAL SALES, LLC
     
     
  By: /s/ Brent K. Bilsland
  Name:     Brent K. Bilsland
  Title:   President
     
     
  PROSPERITY MINE, LLC
     
     
  By: /s/ Brent K. Bilsland
  Name:   Brent K. Bilsland
  Title:   President

 

 

 

 

[SIGNATURE PAGE 3 TO FIRST AMENDMENT TO CREDIT AGREEMENT]

 

  OAKTOWN FUELS MINE NO. 1, LLC
     
     
  By: /s/ Brent K. Bilsland
  Name:   Brent K. Bilsland 
  Title:   President 
     
     
  OAKTOWN FUELS MINE NO. 2, LLC
     
     
  By: /s/ Brent K. Bilsland
  Name:   Brent K. Bilsland 
  Title:   President 
     
     
  SYCAMORE COAL, INC.
     
     
  By: /s/ Brent K. Bilsland
  Name: Brent K. Bilsland 
  Title:  President 
     
     
  SUNRISE ADMINISTRATIVE SERVICES, LLC
     
     
  By: /s/ Brent K. Bilsland
  Name:   Brent K. Bilsland 
  Title:   President 

 

 

 

 

[SIGNATURE PAGE 4 TO FIRST AMENDMENT TO CREDIT AGREEMENT]

 

  PNC BANK, NATIONAL ASSOCIATION , individually and as Administrative Agent
     
     
  By: /s/ James P. O’Brien
  Name:   James P. O’Brien
  Title: Vice President

 

 

 

 

[SIGNATURE PAGE 5 TO FIRST AMENDMENT TO CREDIT AGREEMENT]

   

  THE HUNTINGTON NATIONAL BANK
     
     
  By: /s/ Joshua D. Elsea
  Name:   Joshua D. Elsea
  Title: Vice President

 

 

 

 

[SIGNATURE PAGE 6 TO FIRST AMENDMENT TO CREDIT AGREEMENT]

 

  BRANCH BANKING AND TRUST COMPANY
     
     
  By: /s/ Max Greer
  Name:   Max Greer
  Title: Vice President

 

 

 

 

[SIGNATURE PAGE 7 TO FIRST AMENDMENT TO CREDIT AGREEMENT]

 

 

REGIONS BANK 

     
     
  By: /s/ Jerry Wells
  Name:   Jerry Wells
  Title: Director

  

 

 

 

[SIGNATURE PAGE 8 TO FIRST AMENDMENT TO CREDIT AGREEMENT]

 

  UMB BANK, N.A.
     
     
  By: /s/ David A. Walters
  Name:   David A. Walters
  Title: Senior Vice President

 

 

 

 

[SIGNATURE PAGE 9 TO FIRST AMENDMENT TO CREDIT AGREEMENT]

 

  KEYBANK, NATIONAL ASSOCIATION
     
     
  By: /s/ Brian D. Smith
  Name:    Brian D. Smith
  Title: Senior Vice President

 

 

 

 

[SIGNATURE PAGE 10 TO FIRST AMENDMENT TO CREDIT AGREEMENT]

 

  OLD NATIONAL BANK
     
     
  By: /s/ Dan Gmelich
  Name:    Dan Gmelich
  Title: Senior Vice President

 

 

 

 

[SIGNATURE PAGE 11 TO FIRST AMENDMENT TO CREDIT AGREEMENT]

 

  CITIZENS BANK OF PENNSYLVANIA
     
     
  By: /s/ Carl S. Tabacjar, Jr.
  Name:    Carl S. Tabacjar, Jr.
  Title: Vice President

 

 

 

 

[SIGNATURE PAGE 12 TO FIRST AMENDMENT TO CREDIT AGREEMENT]

 

  CAPITAL BANK CORPORATION
     
     
  By: /s/ Rebecca L. Hetzer
  Name:    Rebecca L. Hetzer
  Title: Senior Vice President

 

 

 

 

[SIGNATURE PAGE 13 TO FIRST AMENDMENT TO CREDIT AGREEMENT]

 

 

FIRST FINANCIAL BANK, N.A. 

     
     
  By: /s/ Steve Holliday
  Name:   Steve Holliday
  Title: Chief Credit Officer

 

 

 

 

[SIGNATURE PAGE 14 TO FIRST AMENDMENT TO CREDIT AGREEMENT]

 

  TALMER BANK AND TRUST
     
     
  By: /s/ Matthew P. Tuohey
  Name:   Matthew P. Tuohey
  Title: Managing Director

 

 

 

 

[SIGNATURE PAGE 15 TO FIRST AMENDMENT TO CREDIT AGREEMENT]

 

  FIRST MERCHANTS BANK, N.A.
     
     
  By: /s/ Adam M. Treibic
  Name:    Adam M. Treibic
  Title: Vice President

 

 

 

 

[SIGNATURE PAGE 16 TO FIRST AMENDMENT TO CREDIT AGREEMENT]

 

  BOKF, NA dba Colorado State Bank and Trust
     
     
  By: /s/ Matthew J. Mason
  Name:   Matthew J. Mason
  Title: Senior Vice President

 

 

 

 

[SIGNATURE PAGE 17 TO FIRST AMENDMENT TO CREDIT AGREEMENT]

 

  FIRST COMMONWEALTH BANK
     
     
  By: /s/ Stephen J. Orban
  Name:   Stephen J. Orban
  Title: Senior Vice President

 

 

 

 

[SIGNATURE PAGE 18 TO FIRST AMENDMENT TO CREDIT AGREEMENT]

 

  COMMUNITY BANKS OF COLORADO, A DIVISION OF NBH BANK, N.A.
     
     
  By: /s/ Ben W. Suh
  Name:   Ben W. Suh
  Title: Director / Vice President

 

 

 

 

[SIGNATURE PAGE 19 TO FIRST AMENDMENT TO CREDIT AGREEMENT]

 

  FIRSTMERIT BANK, N.A.
     
     
  By: /s/ Timothy Daniels
  Name:   Timothy Daniels
  Title: Senior Vice President

 

 

 

[SIGNATURE PAGE 20 TO FIRST AMENDMENT TO CREDIT AGREEMENT]

 

  IROQUOIS FEDERAL SAVINGS & LOAN ASSOCIATION
     
     
  By: /s/ Thomas J. Chamberlain
  Name:   Thomas J. Chamberlain
  Title: Executive Vice President & Chief Lending Officer

  

 

 

Exhibit 15 Letter Regarding Unaudited Interim Financial Information

 

Hallador Energy Company

 

We have reviewed, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the unaudited interim financial information of Hallador Energy Company for the periods ended March 31, 2016, and 2015, as indicated in our report dated May 6, 2016; because we did not perform an audit, we expressed no opinion on that information.

 

We are aware that our report referred to above, which is included in your Form 10-Q for the quarter ended March 31, 2016, is incorporated by reference in Registration Statement Nos. 333-163431 and 333-171778 of Hallador Energy Company on Form S-8.

 

We also are aware that the aforementioned report, pursuant to Rule 436(c) under the Securities Act of 1933, is not considered a part of the Registration Statement prepared or certified by an accountant or a report prepared or certified by an accountant within the meaning of Sections 7 and 11 of that Act.

 

/s/ EKS&H LLLP

 

May 6, 2016

 

Denver, Colorado

 

 

 

 

Exhibit 31.1

 

CERTIFICATION

 

I, Brent K. Bilsland, certify that:

 

1.   I have reviewed this quarterly report on Form 10-Q of Hallador Energy Company;

 

2.   Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.   Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4.   The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

 

5.   The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent function):

 

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

 

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

 

    /s/ Brent K. Bilsland
May 6,  2016   Brent K. Bilsland, President and CEO

 

 

  

 

Exhibit 31.2

 

CERTIFICATION

 

I, Lawrence D. Martin, certify that:

 

1.   I have reviewed this quarterly report on Form 10-Q of Hallador Energy Company;

 

2.   Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.   Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4.   The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

 

5.   The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent function):

 

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

 

  b)   Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

 

    /s/ Lawrence D. Martin
May 6, 2016   Lawrence D. Martin, CFO

 

 

 

 

Exhibit 32

 

 

CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with this Quarterly Report (the "Report"), of Hallador Energy Company (the "Company"), on Form 10-Q for the period ended March 31, 2016, as filed with the Securities and Exchange Commission on the date hereof the undersigned, in the capacities and date indicated below, each hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge:

     
  (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

     
  (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

  

May 6, 2016

 

By:

 

 

/s/ Brent K. Bilsland

Brent K. Bilsland, President and CEO 

         
       

/s/ Lawrence D. Martin

Lawrence D. Martin, CFO

 

 

 

 

Exhibit 95  Mine Safety Disclosure

 

Our principles are safety, honesty, and compliance. We firmly believe that these values compose a dedicated workforce and with that, come high production. The core to this is our strong training programs that include accident prevention, workplace inspection and examination, emergency response, and compliance. We work with the Federal and State regulatory agencies to help eliminate safety and health hazards from our workplace and increase safety and compliance awareness throughout the mining industry.  Sunrise has not had a fatality since its establishment in 2005.

 

Sunrise is regulated by MSHA under the Federal Mine Safety and Health Act of 1977 (“Mine Act”). MSHA inspects our mines on a regular basis and issues various citations and orders when it believes a violation has occurred under the Mine Act. We present information below regarding certain violations, which MSHA has issued with respect to our mine. While assessing this information please consider that the number and cost of violations will vary depending on the MSHA inspector and can be contested and appealed, and in that process, are often reduced in severity and amount, and are sometimes dismissed. We are currently contesting 18 MSHA citations.

 

Sunrise has not been issued written notice from MSHA of a pattern of, or the potential to have a pattern of, violations of mandatory health or safety standards that are of such a nature as could significantly and substantially cause and effect health or safety standards under section 104(e) of the Mine Act.

 

The table that follows outlines citations and orders issued to us by MSHA during the first three months of 2016. The citations and orders outlined below may differ from MSHA`s data retrieval system due to timing, special assessed citations, and other factors.

 

Definitions:

 

Section 104(a) Significant and Substantial Citations “S&S”: An alleged violation of a mining safety or health standard or regulation where there exists a reasonable likelihood that the hazard outlined will result in an injury or illness of a serious nature.

 

Section 104(b) Orders:   Failure to abate a 104(a) citation within the period of time prescribed by MSHA. The result of which is an order of immediate withdraw of non-essential persons from the affected area until MSHA determines the violation has been corrected.

 

Section 104(d) Citations and Orders: An alleged unwarrantable failure to comply with mandatory health and safety standards.

 

Section 107(a) Orders: An order of withdraw for situations where MSHA has determined that an imminent danger exists.

 

Section 110(b) (2) Violations: An alleged flagrant violation issued by MSHA under section 110(b) (2) of the Mine Act.

 

Pattern or Potential Pattern of Violations: A pattern of violations of mandatory health or safety standards that are of such a nature as could have significantly and substantially contributed to the cause and effect of coal mine health or safety hazards under section 104(e) of the Mine Act or a potential to have such a pattern.

 

Contest of Citations, Orders, or Proposed Penalties: A contest proceeding may be filed with the Commission by the operator or miners/miners representative to challenge the issuance or penalty of a citation or order issued by MSHA.

 

  1  

 

  

Carlisle Mine

 

    Section     Section     Section     Section     Section     Proposed  
    104(a)     104(b)     104(d)     107(a)     110(b)(2)     MSHA  
    Citations     Citations     Citations/Orders     Orders     Violations     Assessments  
                                  (In thousands)  
January     2       0       1       0       0     $ 5.50  
February     1       0       1       0       0       5.10  
March     2       0       0       0       0       3.55  
Totals     5       0       2       0       0     $ 14.15  

  

Ace in the Hole Mine

 

    Section     Section     Section     Section     Section     Proposed  
    104(a)     104(b)     104(d)     107(a)     110(b)(2)     MSHA  
    Citations     Citations     Citations/Orders     Orders     Violations     Assessments  
                                  (In thousands)  
January     0       0       0       0       0     $ 0.00  
February     0       0       0       0       0       0.00  
March     0       0       0       0       0       0.00  
Totals     0       0       0       0       0     $ 0.00  

 

Carlisle Preparation Plant

 

    Section     Section     Section     Section     Section     Proposed  
    104(a)     104(b)     104(d)     107(a)     110(b)(2)     MSHA  
    Citations     Citations     Citations/Orders     Orders     Violations     Assessments  
                                  (In thousands)  
January     0       0       0       0       0     $ 0.00  
February     1       0       0       0       0       0.65  
March     0       0       0       0       0       0.00  
Totals     1       0       0       0       0     $ 0.65  

 

 

  2  

 

  

Oaktown Fuels No. 1

 

    Section     Section     Section     Section     Section     Proposed  
    104(a)     104(b)     104(d)     107(a)     110(b)(2)     MSHA  
    Citations     Citations     Citations/Orders     Orders     Violations     Assessments  
                                  (In thousands)  
January     3       0       0       0       0     $ 3.90  
February     6       0       0       0       0       10.30  
March     4       0       0       0       0       7.45  
Totals     13       0       0       0       0     $ 21.65  

 

Oaktown Fuels No. 2

 

    Section     Section     Section     Section     Section     Proposed  
    104(a)     104(b)     104(d)     107(a)     110(b)(2)     MSHA  
    Citations     Citations     Citations/Orders     Orders     Violations     Assessments  
                                  (In thousands)  
January     2       0       0       0       0     $ 3.40  
February     8       0       0       0       0       10.70  
March     2       0       0       0       0       2.55  
Totals     12       0       0       0       0     $ 16.65  

 

Oaktown Fuels Preparation Plant

 

    Section     Section     Section     Section     Section     Proposed  
    104(a)     104(b)     104(d)     107(a)     110(b)(2)     MSHA  
    Citations     Citations     Citations/Orders     Orders     Violations     Assessments  
                                  (In thousands)  
January     1       0       0       0       0     $ 0.10  
February     0       0       0       0       0       0.00  
March     0       0       0       0       0       0.00  
Totals     1       0       0       0       0     $ 0.10  

 

Prosperity Mine: None

 

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