UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q

ý
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2018
or
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                    to                  
G501786G98Y70.JPG
Commission File Number: 001-38061
Warrior Met Coal, Inc.
(Exact name of registrant as specified in its charter)
 
Delaware
(State or other jurisdiction of
incorporation or organization)
 
81-0706839
(I.R.S Employer
Identification No.)
16243 Highway 216
Brookwood, Alabama
(Address of principal executive offices)
 
35444
(Zip Code)
(205) 554-6150
(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. Yes ý     No o

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 (§ 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). Yes  ý     No  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or 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  o
 
Accelerated filer  o
 
Non-accelerated filer  ý
 (Do not check if a
smaller reporting company)
 
Smaller reporting company  o
Emerging growth company  o

 
 
 
 
 
 
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. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  o     No  ý
Number of shares of common stock outstanding as of July 31, 2018: 52,789,885
 




TABLE OF CONTENTS
 
 

 
 
 
 




FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (this "Form 10-Q") includes statements of our expectations, intentions, plans and beliefs that constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and are intended to come within the safe harbor protection provided by those sections. 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,” “approximately,” “assume,” “believe,” “could,” “contemplate,” “continue,” “estimate,” “expect,” “target,” “future,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should” and similar terms and phrases, including in references to assumptions, in this report to identify forward-looking 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 matters expressed in or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to:
 

successful implementation of our business strategies;

a substantial or extended decline in pricing or demand for met coal;

global steel demand and the downstream impact on met coal prices;

inherent difficulties and challenges in the coal mining industry that are beyond our control;

geologic, equipment, permitting, site access, operational risks and new technologies related to mining;

impact of weather and natural disasters on demand and production;

our relationships with, and other conditions affecting, our customers;

unavailability of, or price increases in, the transportation of our met coal;

competition and foreign currency fluctuations;

our ability to comply with covenants in our asset-based revolving credit facility (the “ABL Facility”) and our Indenture (as defined in Note 5);

our substantial indebtedness and debt service requirements;

significant cost increases and fluctuations, and delay in the delivery of raw materials, mining equipment and purchased components;

work stoppages, negotiation of labor contracts, employee relations and workforce availability;

adequate liquidity and the cost, availability and access to capital and financial markets;

any consequences related to our transfer restrictions under our certificate of incorporation;

our obligations surrounding reclamation and mine closure;

inaccuracies in our estimates of our met coal reserves;

our ability to develop or acquire met coal reserves in an economically feasible manner;

our expectations regarding our future cash tax rate as well as our ability to effectively utilize our net operating loss carry forwards ("NOLs");

challenges to our licenses, permits and other authorizations;

1




challenges associated with environmental, health and safety laws and regulations;

regulatory requirements associated with federal, state and local regulatory agencies, and such agencies’ authority to order temporary or permanent closure of our mines;

climate change concerns and our operations’ impact on the environment;

failure to obtain or renew surety bonds on acceptable terms, which could affect our ability to secure reclamation and coal lease obligations;

costs associated with our pension and benefits, including post-retirement benefits;

costs associated with our workers’ compensation benefits;

litigation, including claims not yet asserted;

our ability to continue paying our quarterly dividend or pay any special dividend;

the timing and amount of any stock repurchases we make under our Stock Repurchase Program (as defined below) or otherwise; and

terrorist attacks or security threats, including cybersecurity threats;

These forward-looking statements involve a number of risks and uncertainties that could cause actual results to differ materially from those suggested by the forward-looking statements. Forward-looking statements should, therefore, be considered in light of various factors, including those set forth under “Part II, Item 1A. Risk Factors,” “Part I, Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this Form 10-Q, and those set forth from time to time in our other filings with the Securities and Exchange Commission (the “SEC”). These documents are available through our website or through the SEC's Electronic Data Gathering and Analysis Retrieval system at http://www.sec.gov. In light of such risks and uncertainties, we caution you not to place undue reliance on these forward-looking statements.

When considering forward-looking statements made by us in this Form 10-Q, or elsewhere, such statements speak only as of the date on which we make them. New risks and uncertainties arise from time to time, and it is impossible for us to predict these events or how they may affect us. We have no duty to, and do not intend to, update or revise the forward-looking statements in this Form 10-Q after the date of this Form 10-Q, except as may be required by law. In light of these risks and uncertainties, you should keep in mind that any forward-looking statement made in this Form 10-Q or elsewhere might not occur.


2



EXPLANATORY NOTE
On April 12, 2017, Warrior Met Coal, LLC, a Delaware limited liability company, converted into Warrior Met Coal, Inc., a Delaware corporation, as described under “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Factors Affecting the Comparability of our Financial Statements-Corporate Conversion and Initial Public Offering.” We refer to this transaction herein as the “corporate conversion.” As used in this Form 10-Q, unless the context otherwise requires, references to the “Company,” “Warrior,” “we,” “us,” or “our” refer to Warrior Met Coal, LLC, a Delaware limited liability company, and its subsidiaries for periods beginning as of April 1, 2016 and ending immediately before the completion of our corporate conversion and to Warrior Met Coal, Inc., a Delaware corporation and its subsidiaries for periods beginning with the completion of our corporate conversion and thereafter. In the corporate conversion, 3,832,139 units of Warrior Met Coal, LLC converted into 53,442,532 shares of common stock of Warrior Met Coal, Inc. using an approximate 13.9459-to-one conversion ratio. For the convenience of the reader, except as the context otherwise requires, all information included in this Form 10-Q about the Company is presented giving effect to the corporate conversion.


3



PART I - FINANCIAL INFORMATION



4



WARRIOR MET COAL, INC.
CONDENSED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(Unaudited)
 
 
For the three months ended
June 30,
 
For the six months ended June 30,
 
2018
 
2017
 
2018
 
2017
 
 
 
 
 
 
Revenues:

 
 
 
 
 
 
Sales
$
315,045

 
$
351,788

 
$
727,924

 
$
592,844

Other revenues
7,510

 
11,582

 
16,419

 
24,490

Total revenues
322,555

 
363,370

 
744,343

 
617,334

Costs and expenses:
 
 
 
 
 
 
 
Cost of sales (exclusive of items shown separately below)
178,543

 
160,152

 
369,219

 
266,296

Cost of other revenues (exclusive of items shown separately below)
7,338

 
7,795

 
15,122

 
15,974

Depreciation and depletion
21,127

 
19,650

 
45,679

 
34,232

Selling, general and administrative
13,465

 
8,660

 
21,699

 
13,830

Transaction and other expenses
986

 
3,837

 
4,274

 
12,873

Total costs and expenses
221,459

 
200,094

 
455,993

 
343,205

Operating income
101,096

 
163,276

 
288,350

 
274,129

Interest expense, net
(9,784
)
 
(642
)
 
(18,344
)
 
(1,250
)
Income before income taxes
91,312

 
162,634

 
270,006

 
272,879

Income tax expense

 
32,769

 

 
34,706

Net income
$
91,312

 
$
129,865

 
$
270,006

 
$
238,173

Basic and diluted net income per share:
 
 
 
 
 
 
 
Net income per share—basic and diluted
$
1.72

 
$
2.46

 
$
5.10

 
$
4.52

Weighted average number of shares outstanding—basic
53,053

 
52,721

 
52,976

 
52,702

Weighted average number of shares outstanding—diluted
53,079

 
52,721

 
53,007

 
52,702

Dividends per share:
$
6.58

 
$
0.05

 
$
6.63

 
$
3.61

The accompanying notes are an integral part of these condensed financial statements.


5



WARRIOR MET COAL, INC.
CONDENSED BALANCE SHEETS
(in thousands)
 
 
June 30, 2018 (Unaudited)
 
December 31, 2017
 
 
 
 
 
ASSETS
 
 
 
 
Current assets:
 
 
 
 
Cash and cash equivalents
 
$
55,087

 
$
35,470

Short-term investments
 
17,501

 
17,501

Trade accounts receivable
 
129,946

 
117,746

Other receivables
 
10,274

 
14,482

Inventories, net
 
59,446

 
54,294

Prepaid expenses
 
20,750

 
29,376

Total current assets
 
293,004

 
268,869

Mineral interests, net
 
125,000

 
130,004

Property, plant and equipment, net
 
551,205

 
536,745

Income tax receivable
 
39,255

 
39,255

Other long-term assets
 
21,319

 
18,442

Total assets
 
$
1,029,783

 
$
993,315

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
 
Current liabilities:
 
 
 
 
Accounts payable
 
$
40,124

 
$
28,076

Accrued expenses
 
66,475

 
66,704

Other current liabilities
 
6,837

 
10,475

Current portion of long-term debt
 
2,257

 
2,965

Total current liabilities
 
115,693

 
108,220

Long-term debt
 
465,860

 
342,948

Asset retirement obligations
 
98,282

 
96,096

Other long-term liabilities
 
35,078

 
33,028

Total liabilities
 
714,913

 
580,292

Commitments and contingencies (Note 8)
 

 

Stockholders’ Equity:
 
 
 
 
Common stock, $0.01 par value per share (Authorized -140,000,000 shares, 53,287,079 issued and 52,787,079 outstanding as of June 30, 2018 and 53,284,470 issued and outstanding as of December 31, 2017)
 
534

 
534

Preferred stock, $0.01 par value per share (10,000,000 shares authorized, no shares issued and outstanding)
 

 

Treasury stock, at cost
 
(12,100
)
 

Additional paid in capital
 
238,162

 
329,993

Retained earnings
 
88,274

 
82,496

Total stockholders’ equity
 
314,870

 
413,023

Total liabilities and stockholders’ equity
 
$
1,029,783

 
$
993,315

The accompanying notes are an integral part of these condensed financial statements.

6



WARRIOR MET COAL, INC.
CONDENSED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
(in thousands)
 
 

 
Common Stock
 
Preferred Stock
 
Treasury Stock
 
Additional Paid in Capital
 
Retained Earnings
 
Total
Stockholders’
Equity
Balance at December 31, 2017
$
534

 
$

 
$

 
$
329,993

 
$
82,496

 
$
413,023

Net income

 

 

 

 
270,006

 
270,006

Dividends paid ($6.63 per share)

 

 

 
(91,122
)
 
(264,228
)
 
(355,350
)
Stock compensation

 

 

 
4,679

 

 
4,679

Treasury stock purchase

 

 
(12,100
)
 

 

 
(12,100
)
Other

 

 

 
(5,388
)
 

 
(5,388
)
Balance at June 30, 2018 (Unaudited)
$
534

 
$

 
$
(12,100
)
 
$
238,162

 
$
88,274

 
$
314,870

The accompanying notes are an integral part of these condensed financial statements.


7



WARRIOR MET COAL, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
 
For the six months ended June 30,
 
2018
 
2017
 
 
 
 
OPERATING ACTIVITIES
 
 
 
Net income
$
270,006

 
$
238,173

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and depletion
45,679

 
34,232

Stock based compensation expense
4,679

 
922

Amortization of debt issuance costs and debt discount/premium, net
1,396

 
889

Accretion of asset retirement obligations
2,310

 
1,899

Changes in operating assets and liabilities:
 
 
 
Trade accounts receivable
(12,200
)
 
(26,655
)
Other receivables
4,208

 
1,200

Inventories
(5,390
)
 
(32,931
)
Prepaid expenses
8,626

 
(4,674
)
Accounts payable
15,469

 
7,778

Accrued expenses and other current liabilities
(3,723
)
 
10,017

Other
(4,803
)
 
(3,893
)
Net cash provided by operating activities
326,257

 
226,957

INVESTING ACTIVITIES
 
 
 
Purchase of property, plant and equipment
(55,419
)
 
(28,263
)
Net cash used in investing activities
(55,419
)
 
(28,263
)
FINANCING ACTIVITIES
 
 
 
Dividends paid
(355,350
)
 
(192,673
)
Proceeds from issuance of debt
126,875

 

Retirements of debt
(1,513
)
 
(1,531
)
Debt issuance costs paid
(3,713
)
 

Common shares repurchased
(12,100
)
 

Other
(5,388
)
 

Net cash used in financing activities
(251,189
)
 
(194,204
)
Net increase in cash and cash equivalents and restricted cash
19,649

 
4,490

Cash and cash equivalents and restricted cash at beginning of period
36,264

 
152,656

Cash and cash equivalents and restricted cash at end of period
$
55,913

 
$
157,146


The accompanying notes are an integral part of these condensed financial statements.

8



WARRIOR MET COAL, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 2018 (UNAUDITED)
Note 1—Business and Basis of Presentation
Description of the Business
Warrior Met Coal, LLC (the “Company”) was formed on September 3, 2015 by certain Walter Energy, Inc. (“Walter Energy”) lenders under the 2011 Credit Agreement, dated as of April 1, 2011, and the noteholders under the 9.50% Senior Secured Notes due 2019 in connection with the acquisition by the Company of certain core operating assets of Walter Energy (the "Asset Acquisition") under section 363 under Chapter 11 of Title 11 of the U.S. Bankruptcy Code in the Northern District of Alabama, Southern Division (the "Bankruptcy Court"). On January 8, 2016, the Bankruptcy Court approved the Asset Acquisition, which closed on March 31, 2016.
The Company is a U.S. based producer and exporter of metallurgical (“met”) coal for a diversified customer base of blast furnace steel producers located primarily in Europe, South America and Asia. The Company also generates ancillary revenues from the sale of natural gas extracted as a byproduct from the underground coal mines and royalty revenues from leased properties.
Corporate Conversion and Initial Public Offering
On April 12, 2017, in connection with the Company’s initial public offering (“IPO”), Warrior Met Coal, LLC filed a certificate of conversion, whereby Warrior Met Coal, LLC effected a corporate conversion from a Delaware limited liability company to a Delaware corporation and changed its name to Warrior Met Coal, Inc. In connection with this corporate conversion, the Company filed a certificate of incorporation. Pursuant to the Company’s certificate of incorporation, the Company is authorized to issue up to 140,000,000 shares of common stock $ 0.01 par value per share and 10,000,000 shares of preferred stock $ 0.01 par value per share. All references in the unaudited interim condensed financial statements to the number of shares and per share amounts of common stock have been retroactively recast to reflect the corporate conversion.
On April 19, 2017, the Company completed its IPO whereby the selling stockholders named in the Registration Statement on Form S-1 (File No. 333-216499) sold 16,666,667 shares of common stock at a price to the public of $ 19.00 per share. The Company did not receive any proceeds from the sale of common stock in the IPO. All of the net proceeds from the IPO were received by the selling stockholders.
The aggregate net proceeds to the selling stockholders in the IPO were $296.9 million , net of underwriting discounts and commissions of $19.8 million . The Company has paid cumulative offering expenses of $15.9 million on behalf of the selling stockholders. Upon the closing of the IPO, 53,442,532 shares of common stock were outstanding. On April 13, 2017, our common stock began trading on the New York Stock Exchange under the ticker symbol "HCC" and on April 19, 2017, we closed our IPO.
Basis of Presentation
The accompanying financial statements are presented in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In our opinion the financial statements include all adjustments (consisting of normal recurring accruals) necessary in order to make the financial statements not misleading. Operating results for the three and six months ended June 30, 2018 and June 30, 2017 are not necessarily indicative of the final results that may be expected for the year ended December 31, 2018 . The balance sheet at December 31, 2017 has been derived from the audited consolidated financial statements for the year ended December 31, 2017 included in the Company's Annual Report on Form 10-K for the year ended December 31, 2017 (the "2017 Annual Report").

9


WARRIOR MET COAL, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (Continued)
SIX MONTHS ENDED JUNE 30, 2018 (UNAUDITED)



Note 2—Summary of Significant Accounting Policies
Our significant accounting policies are consistent with those disclosed in Note 2 to our audited financial statements included in the 2017 Annual Report, except for changes related to new accounting pronouncements described below.
Cash and Cash Equivalents and Restricted Cash
The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the Condensed Balance Sheets that sum to the total of the same such amounts shown in the Condensed Statements of Cash Flows (in thousands):
 
June 30, 2018
 
December 31, 2017
Cash and cash equivalents
$
55,087

 
$
35,470

Restricted cash included in other long-term assets
826

 
794

Total cash and cash equivalents and restricted cash included in the Statements of Cash Flows
$
55,913

 
$
36,264

Cash and cash equivalents include short-term deposits and highly liquid investments that have original maturities of three months or less when purchased and are stated at cost, which approximates fair value. As of June 30, 2018 , restricted cash included in other long-term assets in the Condensed Balance Sheet represents amounts invested in certificate of deposits as financial assurance for post mining reclamation obligations. As of December 31, 2017 , restricted cash included in other long-term assets in the Condensed Balance Sheet represents amounts funded to an escrow account as collateral for coal royalties due under certain underground coal mining lease contracts.
Short-Term Investments
Instruments with maturities greater than three months, but less than twelve months, are included in short-term investments. The Company purchases United States Treasury bills with maturities ranging from six to twelve months which are classified as held to maturity and are carried at amortized cost, which approximates fair value. Securities classified as held to maturity securities are those securities that management has the intent and ability to hold to maturity.
As of June 30, 2018 and December 31, 2017 , the Company’s short-term investments consisted of $17.5 million in Treasury bills with a maturity of six months . These Treasury bills were posted as collateral for the self-insured black lung related claims asserted by or on behalf of former employees of Walter Energy and its subsidiaries, which were assumed in the Asset Acquisition and relate to periods prior to March 31, 2016.
Revenue Recognition
The Company adopted Accounting Standards Update (“ASU”) No. 2014-09, “Revenue from Contracts with Customers”, as of January 1, 2018, using the modified retrospective approach. The Company will apply the standard to all customer contracts entered into as of the date of initial application. The Company has concluded that the adoption did not change the timing at which the Company has historically recognized revenue nor did it have a material impact on its consolidated financial statements.
For periods prior to January 1, 2018, revenue is recognized when the following criteria have been met: (i) persuasive evidence of an arrangement exists; (ii) the price to the buyer is fixed or determinable; (iii) delivery has occurred; and (iv) collectability is reasonably assured. Delivery is considered to have occurred at the time title and risk of loss transfers to the customer. For coal shipments to domestic customers via rail, delivery occurs when the railcar is loaded. For coal shipments to international customers via ocean vessel, delivery occurs when the vessel is loaded at the Port of Mobile, Alabama. For natural gas sales, delivery occurs when the gas has been transferred to the pipeline.

For periods subsequent to January 1, 2018, revenue is recognized when performance obligations under the terms of a contract with our customers are satisfied; for all contracts this occurs when control of the promised goods have been transferred to our customers. For coal shipments to domestic customers via rail, control is transferred when the railcar is loaded. For coal

10


WARRIOR MET COAL, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (Continued)
SIX MONTHS ENDED JUNE 30, 2018 (UNAUDITED)



shipments to international customers via ocean vessel, control is transferred when the vessel is loaded at the Port of Mobile, Alabama. For natural gas sales, control is transferred when the gas has been transferred to the pipeline.

Revenue is disaggregated between coal sales within the Company's mining segment and natural gas sales included in all other revenues, as disclosed in Note 12. For the three months ended June 30, 2018, our geographic customer mix was 63% in Europe, 24% in South America and 13% in Asia. For the three months ended June 30, 2017, our geographic customer mix was 67% in Europe, 21% in South America and 12% in Asia. For the six months ended June 30, 2018, our geographic customer mix was 55% in Europe, 25% in South America and 20% in Asia. For the six months ended June 30, 2017, our geographic customer mix was 70% in Europe, 17% in South America and 13% in Asia.

Since February 2017, we have had an arrangement with XCoal Energy & Resource ("XCoal") to serve as XCoal's strategic partner for exports of low-volatility HCC. Under this arrangement, XCoal takes title to and markets coal that we would historically have sold on the spot market, in an amount of the greater of (i) 10% of our total production during the applicable term of the arrangement or (ii) 250,000 metric tons. During the three months ended June 30, 2018 and 2017, XCoal accounted for approximately $42.2 million , or 13% of total revenues, and $74.7 million , or 21% of total revenues, respectively. During the six months ended June 30, 2018 and 2017, XCoal accounted for approximately $144.9 million , or 19% of total revenues, and $90.0 million , or 15% of total revenues, respectively.
New Accounting Pronouncements
 In February 2016, the Financial Accounting Standards Board ("FASB") issued ASU No. 2016-02, "Leases (Topic 842)". ASU 2016-02 contains accounting guidance that will require a lessee to recognize a right of use asset and lease liability on the balance sheet for all leases, with the exception of short-term leases. Additional qualitative disclosures along with specific quantitative disclosures will also be required. The Company plans to adopt this standard on January 1, 2019. The Company is currently evaluating whether this standard will have a material impact on the Company's consolidated financial position and results of operations.
Note 3—Inventories, net
Inventories, net are summarized as follows (in thousands):
 
June 30, 2018
 
December 31, 2017
Coal
$
37,221

 
$
32,422

Raw materials, parts, supplies and other, net
22,225

 
21,872

Total inventories, net
$
59,446

 
$
54,294

Note 4—Income Taxes
For the three and six months ended June 30, 2018 , the Company estimated its annual effective tax rate and applied this effective tax rate to its year-to-date pretax income at the end of the interim reporting period. The tax effect of unusual or infrequently occurring items, including effects of changes in tax laws or rates and changes in judgment about the realizability of deferred tax assets, are reported in the interim period in which they occur.
The Company had no income tax expense for the three and six months ended June 30, 2018 due to the utilization of NOLs to offset taxable income. The Company recognized income tax expense of $ 32.8 million and $34.7 million for the three and six months ended June 30, 2017 , respectively.

11


WARRIOR MET COAL, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (Continued)
SIX MONTHS ENDED JUNE 30, 2018 (UNAUDITED)



Note 5—Debt
Debt consisted of the following (in thousands):
 
 
June 30, 2018
 
December 31, 2017
 
Weighted Average Interest Rate at June 30, 2018
 
Final Maturity
Senior secured notes
 
$
475,000

 
$
350,000

 
8%
 
2024
Promissory note
 
2,257

 
3,725

 
4%
 
2019
Debt discount/premium, net
 
(9,140
)
 
(7,812
)
 
 
 
 
Total debt
 
468,117

 
345,913

 
 
 
 
Less: current debt
 
(2,257
)
 
(2,965
)
 
 
 
 
Total long-term debt
 
$
465,860

 
$
342,948

 
 
 
 
The Company's minimum debt repayment schedule, excluding interest, as of June 30, 2018 is as follows (in thousands):
 
 
Payments Due
 
 
2018
 
2019
 
2020
 
2021
 
2022
 
Thereafter
Senior secured notes

 
$

 
$

 
$

 
$

 
$

 
$475,000
Promissory note
 
1,497

 
760

 

 

 

 

Total
 
$
1,497

 
$
760

 
$

 
$

 
$

 
$
475,000

Senior Secured Notes
On March 1, 2018, the Company issued $125.0 million in aggregate principal amount of its 8.00% Senior Secured Notes due 2024 to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the "Securities Act"), and to certain non-U.S. persons in transactions outside the United States in accordance with Regulation S under the Securities Act ("Regulation S"). The New Notes were issued at 103.00% of the aggregate principal amount thereof, plus accrued interest from November 2, 2017. The New Notes were issued as "Additional Notes" under the indenture dated as of November 2, 2017 (the "Original Indenture") among the Company, the subsidiary guarantors party thereto and Wilmington Trust, National Association, as trustee (the "Trustee") and priority lien collateral trustee (the "Priority Lien Collateral Trustee"), as supplemented by the First Supplemental Indenture, dated as of March 1, 2018 (the "First Supplemental Indenture" and, the Original Indenture as supplemented thereby, the "Indenture"). The New Notes have not been and will not be registered under the Securities Act, and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of the Securities Act.
In connection with the issuance of the $125.0 million senior secured notes, the Company incurred transaction costs of approximately $3.3 million , which consists of legal fees and structuring fees, and is included in transaction and other expenses in the Condensed Statements of Operations. In addition, the Company incurred debt issuance costs of approximately $3.7 million , which consists of consent solicitation fees paid to holders of the Existing Notes (as defined below), and is included in long-term debt in the Condensed Balance Sheet.
The New Notes and the $350.0 million in aggregate principal amount of the Company’s existing 8.00% Senior Secured Notes due 2024 (the “Existing Notes”), which were issued under the Original Indenture on November 2, 2017, rank  pari passu  in right of payment and constitute a single class of securities for all purposes under the Indenture, including, without limitation, waivers, amendments, redemptions, offers to purchase and collateral matters, and are fungible (except that the New Notes issued pursuant to Regulation S traded separately under different CUSIP/ISIN numbers until 40 days after the issue date, but thereafter any such holders may transfer their New Notes pursuant to Regulation S into the same CUSIP/ISIN numbers as the Existing Notes issued pursuant to Regulation S).

12


WARRIOR MET COAL, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (Continued)
SIX MONTHS ENDED JUNE 30, 2018 (UNAUDITED)



The Notes will mature on November 1, 2024 and interest is payable on May 1 and November 1 of each year, commencing on May 1, 2018.
The Company used the net proceeds of the offering of the $125.0 million senior secured notes, together with cash on hand of $225.0 million , to pay a special dividend of approximately $350.0 million , or $6.53 per share, to all of its stockholders on a pro rata basis on April 20, 2018 (the "April Special Dividend"). 
Note 6—Net Income per Share
Basic and diluted net income per share was calculated as follows (in thousands, except per share data):
 
For the three months ended
June 30,
 
For the six months ended
June 30,
 
2018
 
2017
 
2018
 
2017
Numerator:
 
 
 
 
 
 
 
Net income
$
91,312

 
$
129,865

 
$
270,006

 
$
238,173

Denominator:
 
 
 
 
 
 
 
Weighted-average shares used to compute net income per share—basic
53,053

 
52,721

 
52,976

 
52,702

Dilutive restrictive stock awards
26

 

 
31

 

Weighted-average shares used to compute net income per share—diluted
53,079

 
52,721

 
53,007

 
52,702

Net income per share—basic and diluted
$
1.72

 
$
2.46

 
$
5.10

 
$
4.52

On March 5, 2018, the Company awarded 186,916 restricted stock unit awards under the Company's 2017 Equity Incentive Plan (the "2017 Equity Plan"). These awards have certain service-based, performance-based and market-based vesting conditions and vest over a period of three years. The Company recognized approximately $0.6 million and $0.8 million in stock compensation expense associated with these awards for the three and six months ended June 30, 2018 , respectively. As of June 30, 2018, neither the service, performance nor market-based vesting conditions were met as of the measurement date and as such have been excluded from basic and diluted earnings per share.

As of June 30, 2018 , there were 152,807 shares of common stock issued and outstanding under the Company's 2016 Equity Incentive Plan (the "2016 Equity Plan") to certain directors and employees, for which the service vesting condition was not met as of the measurement date. During the second quarter of 2018, certain stockholders of the Company sold in two separate transactions an aggregate of 13,000,000 shares of the Company's common stock in a public secondary offerings (see Note 9). In connection with the first of these secondary offerings, a performance-based vesting condition was met resulting in approximately $3.6 million of incremental stock compensation expense.

As of June 30, 2018 , there were 43,580 shares of our common stock contingently issuable upon the settlement of a vested phantom unit award under our 2016 Equity Plan and 13,157 shares of our common stock contingently issuable upon the settlement of a vested restricted stock unit award under our 2017 Equity Plan. The settlement date is the earlier of a change in control as described in our 2016 Equity Plan and 2017 Equity Plan or five years from the grant date. These awards are vested and as such have been included in the weighted-average shares used to compute basic and diluted net income per share. As of June 30, 2018 , there were 99,829 vested shares of common stock and 205,566 unvested awards issued under the 2017 Equity Plan to certain directors and employees.
Note 7—Related Party Transactions
In connection with the Asset Acquisition, the Company acquired a 50% interest in Black Warrior Methane (“BWM”) and Black Warrior Transmission (“BWT”), which are accounted for under the proportionate consolidation method and equity method, respectively. The Company has granted the rights to produce and sell methane gas from its coal mines to BWM and BWT. The Company’s net investments in, advances to/from BWT and equity in earnings or loss of BWT are not material to the Company. The Company supplied labor to BWM and incurred costs, including property and liability insurance, to support the joint venture. The Company charged the joint venture for such costs on a monthly basis, which were $0.7 million and $1.5

13


WARRIOR MET COAL, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (Continued)
SIX MONTHS ENDED JUNE 30, 2018 (UNAUDITED)



million for the three and six months ended June 30, 2018 , respectively, and $0.1 million and $0.8 million for the three and six months ended June 30, 2017 , respectively.
Note 8—Commitments and Contingencies
Environmental Matters
The Company is subject to a wide variety of laws and regulations concerning the protection of the environment, both with respect to the construction and operation of its plants, mines and other facilities and with respect to remediating environmental conditions that may exist at its own and other properties.
The Company believes that it is in substantial compliance with federal, state and local environmental laws and regulations. The Company accrues for environmental expenses resulting from existing conditions that relate to past operations when the costs are probable and can be reasonably estimated. As of June 30, 2018 and December 31, 2017 , there were no accruals for environmental matters other than asset retirement obligations for mine reclamation.
Miscellaneous Litigation
From time to time, the Company is party to a number of lawsuits arising in the ordinary course of their businesses. The Company records costs relating to these matters when a loss is probable and the amount can be reasonably estimated. The effect of the outcome of these matters on the Company’s future results of operations cannot be predicted with certainty as any such effect depends on future results of operations and the amount and timing of the resolution of such matters. As of June 30, 2018 and December 31, 2017 , there were no items accrued for miscellaneous litigation.
Commitments and Contingencies—Other
The Company is party to various transportation and throughput agreements with rail and barge transportation providers and the Alabama State Port Authority. These agreements contain annual minimum tonnage guarantees with respect to coal transported from the mine sites to the Port of Mobile, Alabama, unloading of rail cars or barges, and the loading of vessels. If the Company does not meet its minimum throughput obligations, which are based on annual minimum amounts, it is required to pay the transportation providers or the Alabama State Port Authority a contractually specified amount per metric ton for the difference between the actual throughput and the minimum throughput requirement. At June 30, 2018 and December 31, 2017 , the Company had no liability recorded for minimum throughput requirements.
Royalty and Lease Obligations
The Company’s leases are primarily for mining equipment and automobiles. At June 30, 2018 and December 31, 2017 , the Company had no future minimum payments due under non-cancellable operating leases.
A substantial amount of the coal that the Company mines is produced from mineral reserves leased from third-party land owners. These leases convey mining rights to the Company in exchange for royalties to be paid to the land owner as either a fixed amount per ton or as a percentage of the sales price. Although coal leases have varying renewal terms and conditions, they generally last for the economic life of the reserves. Coal royalty expense was $23.3 million and $54.2 million for the three and six months ended June 30, 2018 , respectively, and $30.7 million and $52.2 million for the three and six months ended June 30, 2017 , respectively.
Note 9—Stockholders' Equity

Pursuant to the Company's certificate of incorporation, the Company is authorized to issue up to 140,000,000 shares of common stock $0.01 par value per share and 10,000,000 shares of preferred stock $0.01 par value per share.

On March 31, 2017, the board of managers declared a cash distribution payable to holders of our then outstanding Class A Units, Class B Units and Class C Units as of March 27, 2017, resulting in distributions to such holders in the aggregate amount of $190.0 million (the “March Special Distribution”). In connection with the conversion of Warrior Met Coal, LLC into Warrior Met Coal, Inc., the Class C Units, which were issued pursuant to the 2016 Equity Plan, were converted into restricted shares (the "Restricted Shares") of common stock of the Company, par value $0.01 per share, and the March Special

14


WARRIOR MET COAL, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (Continued)
SIX MONTHS ENDED JUNE 30, 2018 (UNAUDITED)



Distribution with respect to such Restricted Shares was not paid but held in trust pending their vesting. As of June 30, 2018 , approximately $5.7 million is held in the trust and is included within other long-term assets in the accompanying Condensed Balance Sheets.

Stock Repurchase Program

On May 2, 2018, the Board approved a stock repurchase program (the “Stock Repurchase Program”) that authorizes repurchases of up to an aggregate of $40.0 million of the Company's outstanding common stock. The Stock Repurchase Program does not require the Company to repurchase a specific number of shares or have an expiration date. The Stock Repurchase Program may be suspended or discontinued by the Board at any time without prior notice.

Under the Stock Repurchase Program, the Company may repurchase shares of its common stock from time to time, in amounts, at prices and at such times as the Company deems appropriate, subject to market and industry conditions, share price, regulatory requirements as determined from time to time by the Company and other considerations. The Company’s repurchases may be executed using open market purchases or privately negotiated transactions in accordance with applicable securities laws and regulations, including Rule 10b-18 of the Exchange Act and repurchases may be executed pursuant to Rule 10b5-1 under the Exchange Act. Repurchases will be subject to limitations in the ABL Facility and the Indenture. The Company intends to fund repurchases under the Stock Repurchase Program from cash on hand and/or other sources of liquidity.

Secondary Equity Offerings

On May 10, 2018 certain stockholders of the Company sold 8,000,000 shares of the Company's common stock in a public secondary offering at a price to the underwriter of $24.20 per share. The Company did not receive any of the proceeds from this offering. In connection with this offering, the Company repurchased 500,000 shares of common stock under the Stock Repurchase Program, funded with cash on hand for the aggregate amount of $12.1 million (the "Stock Repurchase"). The shares repurchased by the Company in the Stock Repurchase are reflected as Treasury Stock on the Condensed Balance Sheets.

On June 14, 2018, certain stockholders of the Company sold 5,000,000 shares of the Company's common stock in a public secondary offering at a price to the underwriter of $28.35 per share. The Company did not receive any of the proceeds from the offering.

We refer to these two offerings herein as the "Secondary Equity Offerings."
Note 10—Derivative Instruments
The Company enters into natural gas swap contracts to hedge the exposure to variability in expected future cash flows associated with the fluctuations in the price of natural gas related to the Company’s forecasted sales. As of June 30, 2018 and December 31, 2017 , the Company had natural gas swap contracts outstanding with notional amounts totaling 5,700 million and 8,400 million British thermal units, respectively, maturing in the first quarter of 2019, respectively.
The Company’s natural gas swap contracts economically hedge certain risk but are not designated as hedges for financial reporting purposes. All changes in the fair value of these derivative instruments are recorded as other revenues in the Condensed Statements of Operations. The Company records all derivative instruments at fair value and had an asset of $0.3 million and $1.7 million related to natural gas swap contracts outstanding as of June 30, 2018 and December 31, 2017 , respectively, included in prepaid expenses in the accompanying Condensed Balance Sheets.

15


WARRIOR MET COAL, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (Continued)
SIX MONTHS ENDED JUNE 30, 2018 (UNAUDITED)



Note 11—Fair Value of Financial Instruments
The following table presents information about the Company’s financial liabilities measured at fair value on a recurring basis and indicate the level of the fair value hierarchy utilized to determine such fair values (in thousands):
 
 
Fair Value Measurements as of June 30, 2018 Using:
 
 
Level 1        
 
Level 2        
 
Level 3        
 
Total        
Assets:
 
 
 
 
 
 
 
 
Natural gas swap contracts
 
$

 
$
278

 
$

 
$
278

 

Fair Value Measurements as of December 31, 2017 Using:
 

Level 1        

Level 2        

Level 3        

Total        
Assets:








Natural gas swap contracts

$


$
1,644


$


$
1,644

  The Company has no assets or any other liabilities measured at fair value on a recurring basis as of June 30, 2018 or December 31, 2017 . During the three and six months ended June 30, 2018 , there were no transfers between Level 1, Level 2 and Level 3. The Company uses quoted dealer prices for similar contracts in active over-the-counter markets for determining fair value of Level 2 liabilities. There were no changes to the valuation techniques used to measure liability fair values on a recurring basis during the three and six months ended June 30, 2018 .
The following methods and assumptions were used to estimate the fair value for which the fair value option was not elected:
Cash and cash equivalents, short-term investments, restricted cash, receivables and accounts payable— The carrying amounts reported in the Condensed Balance Sheet approximate fair value due to the short-term nature of these assets and liabilities.
Debt— The Company's outstanding debt is carried at cost. As of June 30, 2018, there were no borrowings outstanding under the ABL Facility, with $95.4 million available, net of outstanding letters of credit of $4.6 million . There were no borrowings or outstanding letters of credit as of December 31, 2017. The estimated fair value of the Notes is approximately $491.6 million based upon observable market data (Level 2). The carrying value of the Company's outstanding promissory note approximates its fair value.

16


WARRIOR MET COAL, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (Continued)
SIX MONTHS ENDED JUNE 30, 2018 (UNAUDITED)



Note 12—Segment Information
The Company identifies a business as an operating segment if: i) it engages in business activities from which it may earn revenues and incur expenses; ii) its operating results are regularly reviewed by the Chief Operating Decision Maker (“CODM”), who is the Company’s Chief Executive Officer, to make decisions about resources to be allocated to the segment and assess its performance; and iii) it has available discrete financial information. The Company has determined that its two underground mining operations are its operating segments. The CODM reviews financial information at the operating segment level to allocate resources and to assess the operating results and financial performance for each operating segment. Operating segments are aggregated into a reportable segment if the operating segments have similar quantitative economic characteristics and if the operating segments are similar in the following qualitative characteristics: i) nature of products and services; ii) nature of production processes; iii) type or class of customer for their products and services; iv) methods used to distribute the products or provide services; and v) if applicable, the nature of the regulatory environment.
The Company has determined that the two operating segments are similar in both quantitative and qualitative characteristics and thus the two operating segments have been aggregated into one reportable segment. The Company has determined that its natural gas and royalty businesses did not meet the criteria in ASC 280 to be considered as operating or reportable segments. Therefore, the Company has included their results in an “all other” category as a reconciling item to consolidated amounts.
The Company does not allocate all of its assets, or its depreciation and depletion expense, selling, general and administrative expenses, other post-retirement benefits, transactions costs, restructuring costs, interest expense, reorganization items, net and income tax expense by segment.
The following tables include reconciliations of segment information to consolidated amounts (in thousands):
 
For the three months ended
June 30,
 
For the six months ended June 30,
 
2018
 
2017
 
2018
 
2017
Revenues
 
 
 
 
 
 
 
Mining
$
315,045

 
$
351,788

 
$
727,924

 
$
592,844

All other
7,510

 
11,582

 
16,419

 
24,490

Total revenues
$
322,555

 
$
363,370

 
$
744,343

 
$
617,334

 
 
For the three months ended
June 30,
 
For the six months ended June 30,
 
2018
 
2017
 
2018
 
2017
Capital Expenditures
 
 
 
 
 
 
 
Mining
32,402

 
$
16,093

 
$
53,498

 
$
26,586

All other
475

 
792

 
1,921

 
1,677

Total capital expenditures
32,877

 
$
16,885

 
$
55,419

 
$
28,263


17


WARRIOR MET COAL, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (Continued)
SIX MONTHS ENDED JUNE 30, 2018 (UNAUDITED)



  The Company evaluates the performance of its segment based on Segment Adjusted EBITDA, which is defined as net income adjusted for other revenues, cost of other revenues, depreciation and depletion, selling, general and administrative, net interest expense, income tax expense, and certain transactions or adjustments that the CODM does not consider for the purposes of making decisions to allocate resources among segments or assessing segment performance. Segment Adjusted EBITDA does not represent and should not be considered as an alternative to cost of sales under GAAP and may not be comparable to other similarly titled measures used by other companies. Below is a reconciliation of Segment Adjusted EBITDA to net income, which is its most directly comparable financial measure calculated and presented in accordance with GAAP (in thousands):  
 
For the three months ended
June 30,
 
For the six months ended June 30,
 
2018
 
2017
 
2018
 
2017
Segment Adjusted EBITDA
$
136,502

 
$
191,636

 
$
358,705


$
326,548

Other revenues
7,510

 
11,582

 
16,419

 
24,490

Cost of other revenues
(7,338
)
 
(7,795
)
 
(15,122
)
 
(15,974
)
Depreciation and depletion
(21,127
)
 
(19,650
)
 
(45,679
)
 
(34,232
)
Selling, general and administrative
(13,465
)
 
(8,660
)
 
(21,699
)
 
(13,830
)
Transaction and other expenses
(986
)
 
(3,837
)
 
(4,274
)
 
(12,873
)
Interest expense, net
(9,784
)
 
(642
)
 
(18,344
)
 
(1,250
)
Income tax expense

 
(32,769
)
 

 
(34,706
)
Net income
$
91,312

 
$
129,865

 
$
270,006

 
$
238,173

Note 13—Subsequent Events

Regular Quarterly Dividend

On July 24, 2018, the Board declared a regular quarterly cash dividend of $0.05 per share, totaling approximately $2.7 million , which will be paid on August 10, 2018 to stockholders of record as of the close of business on August 3, 2018.



18



ITEM 2. MANAGEMENT’S 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, 2018 and June 30, 2017. You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and related notes appearing in this Form 10-Q and the audited financial statements for the year ended December 31, 2017 included in the 2017 Annual Report. Some of the information contained in this discussion and analysis or set forth elsewhere in this Form 10-Q, including information with respect to our plans and strategy for our business and related financing, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, our actual results could differ materially from the results described in, or implied by, the forward-looking statements contained in the following discussion and analysis. Please see Forward-Looking Statements.
Overview
We are a large scale, low cost U.S.-based producer and exporter of premium met coal operating two highly productive underground mines in Alabama.
As of December 31, 2017, Mine No. 4 and Mine No. 7, our two operating mines, had approximately 110.0 million metric tons of recoverable reserves and our undeveloped Blue Creek Energy Mine contained 103.0 million metric tons of recoverable reserves. Our hard coking coal (“HCC”), mined from the Southern Appalachian region of the United States, is characterized by low-to-medium volatile matter (“VM”) and high coke strength after reaction (“CSR”). These qualities make our coal ideally suited as a coking coal for the manufacture of steel. As a result of our high quality coal, our realized price has historically been in line with, or at a slight discount to, the Australian premium low-volatility ("LV") HCC benchmark (“Australian HCC Benchmark”). Coal from Mine No. 7 is classified as a premium LV HCC and coal from Mine No. 4 is classified as premium LV to mid-volatility ("MV") HCC. In contrast, coal produced in the Central Appalachian region of the United States is typically characterized by medium-to-high VM and a CSR that is below the requirements of the Australian HCC Benchmark.
The Australian HCC Benchmark pricing methodology was replaced in the second quarter of 2017 by a new average index pricing methodology, which varies by supplier, but is based on the three-month average of the Platts premium low-volatile (“low-vol”) index, the Steel Index (“TSI”) premium coking coal index and the Argus Index on a one-month lag during each quarter (the "Australian LV Index"). In the first quarter of 2018, we changed our gross price realization calculation to no longer be based on the Australian LV Index. Due to the inherent nature of the Australian LV Index, specifically the fact that this index is on a one-month lag basis and did not closely correlate with the timing of our shipments, since January 2018, we began comparing our price realization to the Platts Premium LV Free-On-Board ("FOB") Australia Index price (the "Platts Index"). Our gross price realization now represents a volume weighted-average calculation of our daily realized price per ton based on the blended gross sales of our LV and MV coal, excluding demurrage and quality specification adjustments, as a percentage of the Platts Index price.
We sell substantially all of our met coal production to steel producers. Met coal, which is converted to coke, is a critical input in the steel production process. Met coal is both consumed domestically in the countries where it is produced and exported by several of the largest producing countries, such as China, Australia, the United States, Canada and Russia. Therefore, demand for our coal will be highly correlated to conditions in the global steelmaking industry. The steelmaking industry’s demand for met coal is affected by a number of factors, including the cyclical nature of that industry’s business, technological developments in the steelmaking process and the availability of substitutes for steel such as aluminum, composites and plastics. A significant reduction in the demand for steel products would reduce the demand for met coal, which would have a material adverse effect upon our business. Similarly, if alternative ingredients are used in substitution for met coal in the integrated steel mill process, the demand for met coal would materially decrease, which could also materially adversely affect demand for our met coal.
Factors Affecting the Comparability of our Financial Statements
Corporate Conversion and Initial Public Offering
On April 12, 2017, in connection with the IPO, Warrior Met Coal, LLC filed a certificate of conversion, whereby Warrior Met Coal, LLC effected a corporate conversion from a Delaware limited liability company to a Delaware corporation and changed its name to Warrior Met Coal, Inc. As part of the corporate conversion, holders of Class A, Class B Units (which included the Class B Units which had converted into Class A Units) and Class C Units of Warrior Met Coal, LLC received

19



shares of our common stock for each unit held immediately prior to the corporate conversion using an approximate 13.9459-to-one conversion ratio. In connection with this corporate conversion, the Company filed a certificate of incorporation. Pursuant to the Company’s certificate of incorporation, the Company is authorized to issue up to 140,000,000 shares of common stock $0.01 par value per share and 10,000,000 shares of preferred stock $0.01 par value per share.
On April 19, 2017, the Company completed its IPO whereby the selling stockholders named in the Registration Statement on Form S-1 sold 16,666,667 shares of common stock at a price to the public of $19.00 per share. The Company did not receive any proceeds from the sale of common stock in the IPO. All of the net proceeds from the IPO were received by the selling stockholders.
The aggregate net proceeds to the selling stockholders in the IPO were $296.9 million, net of underwriting discounts and commissions of $19.8 million. The Company paid the offering expenses of $15.9 million on behalf of the selling stockholders. Upon the closing of the IPO, 53,442,532 shares of common stock were outstanding. On April 13, 2017, our common stock began trading on the New York Stock Exchange under the ticker symbol "HCC" and on April 19, 2017, we closed our IPO.
How We Evaluate Our Operations
Our primary business, the mining and exporting of met coal for the steel industry, is conducted in one business segment: Mining. All other operations and results are reported under the “All Other” category as a reconciling item to consolidated amounts, which includes the business results from our sale of natural gas extracted as a byproduct from our underground coal mines and royalties from our leased properties. Our natural gas and royalty businesses do not meet the criteria in ASC 280, Segment Reporting , to be considered as operating or reportable segments.
Our management uses a variety of financial and operating metrics to analyze our performance. These metrics are significant factors in assessing our operating results and profitability and include: (i) Segment Adjusted EBITDA; (ii) sales volumes and average selling price, which drive coal sales revenue; (iii) cash cost of sales, a non-GAAP financial measure; and (iv) Adjusted EBITDA, a non-GAAP financial measure.
 
For the three months ended
June 30,
 
For the six months ended June 30,
 
2018
 
2017
 
2018
 
2017
(in thousands)

 
 
Segment Adjusted EBITDA
$
136,502

 
$
191,636

 
$
358,705

 
$
326,548

Metric tons sold
1,711

 
1,762

 
3,631

 
2,784

Metric tons produced
1,750

 
1,732

 
3,654

 
3,195

Gross price realization (1)
100
%
 
105
%
 
99
%
 
95
%
Average selling price per metric ton
$
184.13

 
$
199.65

 
$
200.47

 
$
212.94

Cash cost of sales per metric ton
$
103.51

 
$
90.62

 
$
101.12

 
$
95.30

Adjusted EBITDA
$
128,845

 
$
188,482

 
$
345,292

 
$
323,948

(1) For the three and six months ended June 30, 2018, our gross price realization represents a volume weighted-average calculation of our daily realized price per ton based on gross sales, which excludes demurrage and other charges, as a percentage of the Platts Index price. For the three and six months ended June 30, 2017, gross price realization represents gross sales, excluding demurrage and other charges, divided by tons sold as a percentage of the Australian LV Index.
Segment Adjusted EBITDA
We define Segment Adjusted EBITDA as net income adjusted for other revenues, cost of other revenues, depreciation and depletion, selling, general and administrative, and certain transactions or adjustments that the Chief Executive Officer, our Chief Operating Decision Maker, does not consider for the purposes of making decisions to allocate resources among segments or assessing segment performance. Segment Adjusted EBITDA is used as a supplemental financial measure by management and by external users of our financial statements, such as investors, industry analysts, lenders and ratings agencies, to assess:  
our operating performance as compared to the operating performance of other companies in the coal industry, without regard to financing methods, historical cost basis or capital structure;

20



the ability of our assets to generate sufficient cash flow to pay dividends;
our ability to incur and service debt and fund capital expenditures; and
the viability of acquisitions and other capital expenditure projects and the returns on investment of various investment opportunities.
Sales Volumes, Gross Price Realization and Average Net Selling Price
We evaluate our operations based on the volume of coal we can safely produce and sell in compliance with regulatory standards, and the prices we receive for our coal. Our sales volume and sales prices are largely dependent upon the terms of our annual coal sales contracts, for which prices generally are set on daily index averages or a quarterly basis. The volume of coal we sell is also a function of the pricing environment in the international met coal markets and the amounts of LV and MV coal that we sell. We evaluate the price we receive for our coal on two primary metrics: first, our gross price realization and second, our average net selling price per metric ton.
In the first quarter of 2018, we changed our gross price realization calculation to no longer be based on the Australian LV Index due to this index being on a one-month lag basis and not closely correlating with the timing of our shipments. Our gross price realization now represents a volume weighted-average calculation of our daily realized price per ton based on the blended gross sales of our LV and MV coal, excluding demurrage and quality specification adjustments, as a percentage of the Platts Index price. Our gross price realizations reflect the premiums and discounts we achieve on our LV and MV coal versus the Platts Index price because of the high quality premium products we sell into the export markets. In addition, the premiums and discounts in a quarter or year can be impacted by a rising or falling price environment.
On a quarterly basis, our blended gross selling price per metric ton may differ from the Platts Index price per metric ton, primarily due to our gross sales price per ton being based on a blended average of gross sales price on our LV and MV coals as compared to the Platts Index price and due to the fact that many of our met coal supply agreements are based on a variety of indices.
Our average net selling price per metric ton represents our coal net sales revenue divided by total metric tons of coal sold. In addition, our average net selling price per metric ton is net of the previously mentioned demurrage and quality specification adjustments.
Cash Cost of Sales
We evaluate our cash cost of sales on a cost per metric ton basis. Cash cost of sales is based on reported cost of sales and includes items such as freight, royalties, manpower, fuel and other similar production and sales cost items, and may be adjusted for other items that, pursuant to GAAP, are classified in the Condensed Statements of Operations as costs other than cost of sales, but relate directly to the costs incurred to produce met coal and sell it free-on-board at the Port of Mobile. Our cash cost of sales per metric ton is calculated as cash cost of sales divided by the metric tons sold. Cash cost of sales is used as a supplemental financial measure by management and by external users of our financial statements, such as investors, industry analysts, lenders and ratings agencies, to assess:  
our operating performance as compared to the operating performance of other companies in the coal industry, without regard to financing methods, historical cost basis or capital structure; and
the viability of acquisitions and other capital expenditure projects and the returns on investment of various investment opportunities.
We believe that this non-GAAP financial measure provides additional insight into our operating performance, and reflects how management analyzes our operating performance and compares that performance against other companies on a consistent basis for purposes of business decision making by excluding the impact of certain items that management does not believe are indicative of our core operating performance. We believe that cash costs of sales presents a useful measure of our controllable costs and our operational results by including all costs incurred to produce met coal and sell it free-on-board at the Port of Mobile. Period-to-period comparisons of cash cost of sales are intended to help management identify and assess additional trends potentially impacting our Company that may not be shown solely by period-to-period comparisons of cost of sales. Cash cost of sales should not be considered an alternative to cost of sales or any other measure of financial performance or liquidity presented in accordance with GAAP. Cash cost of sales excludes some, but not all, items that affect cost of sales,

21



and our presentation may vary from the presentations of other companies. As a result, cash cost of sales as presented below may not be comparable to similarly titled measures of other companies.
The following table presents a reconciliation of cash cost of sales to total cost of sales, the most directly comparable GAAP financial measure, on a historical basis for each of the periods indicated.
 
For the three months ended
June 30,
 
For the six months ended June 30,
 
2018
 
2017
 
2018
 
2017
(in thousands)

 
 
Cost of sales
$
178,543

 
$
160,152

 
$
369,219

 
$
266,296

Asset retirement obligation accretion
(560
)
 
(401
)
 
(1,120
)
 
(882
)
Stock compensation expense
(879
)
 
(75
)
 
(946
)
 
(75
)
Cash cost of sales
$
177,104

 
$
159,676

 
$
367,153

 
$
265,339



Adjusted EBITDA
We define Adjusted EBITDA as net income before net interest expense, income tax expense, depreciation and depletion, non-cash stock compensation expense, non-cash asset retirement obligation accretion and transaction and other expenses. Adjusted EBITDA is used as a supplemental financial measure by management and by external users of our financial statements, such as investors, industry analysts, lenders and ratings agencies, to assess:  
our operating performance as compared to the operating performance of other companies in the coal industry, without regard to financing methods, historical cost basis or capital structure; and
the viability of acquisitions and other capital expenditure projects and the returns on investment of various investment opportunities.
We believe that the presentation of Adjusted EBITDA in this report provides information useful to investors in assessing our financial condition and results of operations. The GAAP measure most directly comparable to Adjusted EBITDA is net income. Adjusted EBITDA should not be considered an alternative to net income or loss or any other measure of financial performance or liquidity presented in accordance with GAAP. Adjustments excludes some, but not all, items that affect net loss and our presentation of Adjusted EBITDA may vary from that presented by other companies.
The following table presents a reconciliation of Adjusted EBITDA to net income, the most directly comparable GAAP financial measure, on a historical basis for each of the periods indicated.
 
For the three months ended
June 30,
 
For the six months ended June 30,
 
2018
 
2017
 
2018
 
2017
Net income
$
91,312

 
$
129,865

 
$
270,006

 
$
238,173

Interest expense, net
9,784

 
642

 
18,344

 
1,250

Income tax expense

 
32,769

 

 
34,706

Depreciation and depletion
21,127

 
19,650

 
45,679

 
34,232

Asset retirement obligation accretion (1)
1,155

 
797

 
2,310

 
1,792

Stock compensation expense (2)
4,481

 
922

 
4,679

 
922

Transaction and other expenses (3)
986

 
3,837

 
4,274

 
12,873

Adjusted EBITDA
$
128,845

 
$
188,482

 
$
345,292

 
$
323,948


(1)
Represents non-cash accretion expense associated with our asset retirement obligations.
(2)
Represents non-cash stock compensation expense associated with equity awards.
(3)
Represents non-recurring costs incurred by the Company in connection with the offering of our $125.0 million senior secured notes, the Secondary Equity Offerings and our IPO (See Notes 1 and 9 to the condensed financial statements).


22



Results of Operations
Three Months Ended June 30, 2018 and 2017
The following table summarizes certain unaudited financial information for the three months ended June 30, 2018 and 2017 .
 
For the three months ended
June 30,
(in thousands)
2018
 
2017
Revenues:
 
 
 
Sales
$
315,045

 
$
351,788

Other revenues
7,510

 
11,582

Total revenues
322,555

 
363,370

Costs and expenses:
 
 
 
Cost of sales (exclusive of items shown separately below)
178,543

 
160,152

Cost of other revenues (exclusive of items shown separately below)
7,338

 
7,795

Depreciation and depletion
21,127

 
19,650

Selling, general and administrative
13,465

 
8,660

Transaction and other expenses
986

 
3,837

Total costs and expenses
221,459

 
200,094

Operating income
101,096

 
163,276

Interest expense, net
(9,784
)
 
(642
)
Income before income taxes
91,312

 
162,634

Income tax expense

 
32,769

Net income
$
91,312

 
$
129,865

Sales and cost of sales components on a per unit basis for the three months ended June 30, 2018 and 2017 were as follows:  
 
For the three months ended
June 30,
 
2018
 
2017
Met Coal (metric tons in thousands)
 
 
 
Metric tons sold
1,711

 
1,762

Metric tons produced
1,750

 
1,732

Gross price realization (1)
100
%
 
105
%
Average selling price per metric ton
$
184.13

 
$
199.65

Cash cost of sales per metric ton
$
103.51

 
$
90.62

(1) For the three months ended June 30, 2018, our gross price realization represents a volume weighted-average calculation of our daily realized price per ton based on gross sales, which excludes demurrage and other charges, as a percentage of the Platts Index price. For the three months ended June 30, 2017, gross price realization represents gross sales, excluding demurrage and other charges, divided by tons sold as a percentage of the Australian LV Index.
Sales for the three months ended June 30, 2018 were $315.0 million compared to $351.8 million for the three months ended June 30, 2017 . The $36.7 million decrease in revenues was primarily driven by a $26.6 million decrease in revenue related to a $15.52 decrease in the average selling price per metric ton of met coal and a $10.2 million decrease in revenue due to a 51 thousand metric ton decrease in met coal sales volume.
Other revenues for the three months ended June 30, 2018 were $7.5 million compared to $11.6 million for the three months ended June 30, 2017 . Other revenues are comprised of revenue derived from our natural gas operations, as well as

23



earned royalty revenue. The $4.1 million decrease in other revenues is primarily due to a decrease in the average selling price of natural gas, a decrease in natural gas sales volume and includes a $1.9 million loss recognized on our natural gas swap contract. Cost of other revenues remained consistent for the period.
Cost of sales (exclusive of items shown separately below) for the three months ended June 30, 2018 was $178.5 million compared to $160.2 million for the three months ended June 30, 2017 . The $18.4 million increase is primarily driven by a $22.1 million increase due to a $12.89 increase in average cash cost of sales per metric ton offset partially by a $4.6 million decrease related to a decrease in met coal sales. The increase in cash cost of sales per metric ton is primarily due to increased spending associated with the continued ramp up of mining activities and incremental costs associated with a scheduled week of maintenance in the second quarter of 2018.
Depreciation and depletion for the three months ended June 30, 2018 were $21.1 million compared to $19.7 million for the three months ended June 30, 2017 , driven primarily by an increase in capital expenditures combined with an increase in depletion due to an increase in metric tons produced.
Selling, general and administrative expenses for the three months ended June 30, 2018 were $13.5 million compared to $8.7 million for the three months ended June 30, 2017 , driven primarily by $3.0 million of incremental non-cash stock compensation expense associated with the vesting of shares in connection with the first of the Secondary Equity Offerings that was not in our in the Company's prior guidance.
Interest expense for the three months ended June 30, 2018 was $9.8 million compared to $0.6 million for the three months ended June 30, 2017 and was comprised of interest on our senior secured notes, security agreement and promissory note, and amortization of our ABL Facility and senior secured notes debt issuance costs. The increase in interest expense is primarily due to the issuance of $350.0 million and $125.0 million of our senior secured notes in November 2017 and March 2018, respectively.
For the three months ended June 30, 2018 , we did not have income tax expense due to the utilization of our NOLs. Income tax expense for the three months ended June 30, 2017 was $32.8 million . The utilization of our NOLS in the second quarter of 2017 was limited in the amount that could be used under Internal Revenue Code ("IRC") Section 382 as we had not yet received the private letter ruling from the Internal Revenue Service ("IRS") pursuant to which we have concluded that there is no current limitation under Section 382. We subsequently received this private letter ruling on September 18, 2017

24



Six Months Ended June 30, 2018 and 2017
The following table summarizes certain unaudited financial information for the six months ended June 30, 2018 and 2017 .
 
For the six months ended June 30,
(in thousands)
2018
 
2017
Revenues:
 
 
 
Sales
$
727,924

 
592,844

Other revenues
16,419

 
24,490

Total revenues
744,343

 
617,334

Costs and expenses:
 
 
 
Cost of sales (exclusive of items shown separately below)
369,219

 
266,296

Cost of other revenues (exclusive of items shown separately below)
15,122

 
15,974

Depreciation and depletion
45,679

 
34,232

Selling, general and administrative
21,699

 
13,830

Transaction and other expenses
4,274

 
12,873

Total costs and expenses
455,993

 
343,205

Operating income
288,350

 
274,129

Interest expense, net
(18,344
)
 
(1,250
)
Income before income taxes
270,006

 
272,879

Income tax expense

 
34,706

Net income
$
270,006

 
238,173

Sales and cost of sales components on a per unit basis for the six months ended June 30, 2018 and 2017 were as follows:  
 
For the six months ended June 30,
 
2018
 
2017
Met Coal (metric tons in thousands)
 
 
 
Metric tons sold
3,631

 
2,784

Metric tons produced
3,654

 
3,195

Gross price realization (1)
99
%
 
95
%
Average selling price per metric ton
$
200.47

 
$
212.94

Cash cost of sales per metric ton
$
101.12

 
$
95.30

(1) For the six months ended June 30, 2018, our gross price realization represents a volume weighted-average calculation of our daily realized price per ton based on gross sales, which excludes demurrage and other charges, as a percentage of the Platts Index price. For the six months ended June 30, 2017, gross price realization represents gross sales, excluding demurrage and other charges, divided by tons sold as a percentage of the Australian LV Index.
Sales for the six months ended June 30, 2018 were $727.9 million compared to $592.8 million for the six months ended June 30, 2017 . The $135.1 million increase in revenues was primarily driven by a $180.4 million increase in revenue due to an 847 thousand metric ton increase in met coal sales volume offset partially by a $45.3 million decrease in revenue related to a $12.47 decrease in the average selling price per metric ton of met coal.
Other revenues for the six months ended June 30, 2018 were $16.4 million compared to $24.5 million for the six months ended June 30, 2017 . Other revenues are comprised of revenue derived from our natural gas operations, as well as earned royalty revenue. The $8.1 million decrease in other revenues is primarily due to a decrease in the average selling price

25



of natural gas, a decrease in natural gas sales volume and includes a $4.2 million loss recognized on our natural gas swap contract. Cost of other revenues remained consistent for the period.
Cost of sales (exclusive of items shown separately below) for the six months ended June 30, 2018 was $369.2 million compared to $266.3 million for the six months ended June 30, 2017 . The $102.9 million increase is primarily driven by a $80.7 million increase due to an 847 thousand increase in met coal sales volumes coupled with a $21.1 million increase due to a $5.82 increase in the average cash cost of sales per metric ton primarily due to the continued ramp up of mining activities and incremental costs associated with a scheduled week of maintenance in the second quarter of 2018.
Depreciation and depletion for the six months ended June 30, 2018 were $45.7 million compared to $34.2 million for the six months ended June 30, 2017 , driven primarily by an increase in capital expenditures combined with an increase in depletion due to an increase in metric tons produced.
Selling, general and administrative expenses for the six months ended June 30, 2018 were $21.7 million compared to $13.8 million for the six months ended June 30, 2017 , driven primarily by an increase in costs associated with being a publicly traded company and $3.0 million of incremental non-cash stock compensation expense associated with the vesting of shares in connection with the first of the Secondary Equity Offerings that was not in the Company's prior guidance.
Interest expense for the six months ended June 30, 2018 was $18.3 million compared to $1.3 million for the six months ended June 30, 2017 and is comprised of interest on our senior secured notes, security agreement and promissory note, and amortization of our ABL Facility and senior secured notes debt issuance costs. The increase in interest expense is primarily due to the issuance of $350.0 million and $125.0 million of our senior secured notes in November 2017 and March 2018, respectively.
For the six months ended June 30, 2018 , we did not have income tax expense due to the utilization of our NOLs. Income tax expense for the six months ended June 30, 2017 was $34.7 million . The utilization of our NOLs in the six months ended June 30, 2017 was limited in the amount that could be used under IRC Section 382 as we had not yet received the private letter ruling from the IRS pursuant to which we have concluded that there is no current limitation under Section 382. We subsequently received this private letter ruling on September 18, 2017.
Liquidity and Capital Resources
Overview
Our sources of cash have been coal and natural gas sales to customers, proceeds received from the senior secured notes offerings and access to our ABL Facility. Historically, our primary uses of cash have been for funding the operations of our coal and natural gas production operations, our capital expenditures, our reclamation obligations, professional fees and other costs incurred in connection with the Asset Acquisition, the Secondary Equity Offerings and our IPO. In addition, we have used available cash on hand to repurchase shares of common stock, pay our quarterly dividend, pay the March Special Distribution, pay a portion of the November Special Dividend (as defined below), and pay a portion of the April Special Dividend, each of which reduces or reduced cash and cash equivalents.
Going forward, we will use cash to fund debt service payments on our senior secured notes and our other indebtedness and to fund operating activities, working capital, capital expenditures, and strategic investments. Our ability to fund our capital needs going forward will depend on our ongoing ability to generate cash from operations and borrowing availability under the ABL Facility, and, in the case of any future strategic investments, capital expenditures, or special dividends financed partially or wholly with debt financing, our ability to access the capital markets to raise additional capital. We believe that our future cash flow from operations, together with cash on our balance sheet and borrowing availability under our ABL Facility, will provide adequate resources to fund our debt service payments and planned operating and capital expenditure needs for at least the next twelve months.
If our cash flows from operations are less than we require, we may need to incur additional debt or issue additional equity. From time to time we may need to access the long-term and short-term capital markets to obtain financing. Although we believe we can currently finance our operations on acceptable terms and conditions, our access to, and the availability of, financing on acceptable terms and conditions in the future will be affected by many factors, including: (i) our credit ratings, (ii) the liquidity of the overall capital markets, (iii) the current state of the global economy and (iv) restrictions in our ABL Facility, the Indenture, and any other existing or future debt agreements. There can be no assurance that we will have or continue to have access to the capital markets on terms acceptable to us or at all.

26



Our available liquidity as of June 30, 2018 was $150.5 million , consisting of cash and cash equivalents of $55.1 million and $95.4 million available under our ABL Facility. As of June 30, 2018 , there were no borrowings outstanding under the ABL Facility, with $95.4 million available, net of outstanding letters of credit of $4.6 million. For the six months ended June 30, 2018 , cash flows provided by operating activities were $326.3 million , cash flows used in investing activities were $55.4 million and cash flows used in financing activities were $251.2 million .
Statements of Cash Flows
Cash balances were $55.1 million and $35.5 million at June 30, 2018 and December 31, 2017, respectively.
The following table sets forth, a summary of the net cash provided by (used in) operating, investing and financing activities for the period (in thousands):  
 
For the six months ended
June 30,
 
2018
 
2017
Net cash provided by operating activities
$
326,257

 
$
226,957

Net cash used in investing activities
(55,419
)
 
(28,263
)
Net cash used in financing activities
(251,189
)
 
(194,204
)
Net increase in cash and cash equivalents and restricted cash
$
19,649

 
$
4,490

Operating Activities
Net cash flows from operating activities consist of net income adjusted for noncash items, such as depreciation and depletion of property, plant and equipment and mineral interests, stock-based compensation, amortization of debt issuance costs and debt discount/premium, accretion of asset retirement obligations and changes in net working capital. The timing between the conversion of our billed and unbilled receivables into cash from our customers and disbursements to our vendors is the primary driver of changes in our working capital.
Net cash provided by operating activities was $326.3 million for the six months ended June 30, 2018 , and was primarily attributed to net income of $270.0 million adjusted for depreciation and depletion expense of $45.7 million , stock based compensation expense of $4.7 million , amortization of debt issuance costs and debt discount/premium of $1.4 million and accretion of asset retirement obligations of $2.3 million , coupled with a net decrease in our working capital of $7.0 million . The decrease in our working capital was primarily driven by an increase in trade accounts payable and a decrease in prepaid expenses offset partially by an increase in trade accounts receivable and inventories. The increase in our trade accounts payable is primarily driven by the timing of payments, the decrease in prepaid expenses is primarily due to the amortization of capitalized costs associated with longwall moves as these costs are being amortized over the life of the panels, and the increase in trade accounts receivable and inventories is driven by an increase in production and sales volumes.
Net cash provided by operating activities was $227.0 million for the six months ended June 30, 2017 , and was primarily attributed to net income of $238.2 million adjusted for depreciation and depletion expense of $34.2 million , amortization of debt issuance costs and debt discount of $0.9 million , and accretion of asset retirement obligations of $0.9 million , offset by a net increase in our working capital of $45.3 million . The increase in our working capital was primarily driven by an increase in trade accounts receivable, an increase in inventories offset partially by an increase in accounts payable and accrued expenses and other current liabilities. The increase in our accounts receivable was primarily driven by an increase in the average selling price per metric ton of our coal coupled with an increase in metric tons sold and the increase in inventories is primarily driven by an increase in metric tons produced.
Investing Activities
Net cash used in investing activities was $55.4 million and $28.3 million for the six months ended June 30, 2018 and June 30, 2017 , respectively, primarily due to purchases of property, plant and equipment.

27



Financing Activities
Net cash used in financing activities was $251.2 million for the six months ended June 30, 2018 , primarily due to the payment of dividends of $355.4 million , which includes the April Special Dividend of $350.0 million, and the repurchase of 500,000 shares of common stock in the aggregate amount for $12.1 million , offset partially by $126.9 million in proceeds received from the $125.0 million issuance of senior secured notes. Net cash used in financing activities was $194.2 million for the six months ended June 30, 2017 , primarily due to the March Special Distribution of $190.0 million, which was paid on March 31, 2017. 

Stock Repurchase Program

On May 2, 2018, the Board approved the Stock Repurchase Program that authorizes repurchases of up to an aggregate of $40.0 million of the Company's outstanding common stock. The Stock Repurchase Program does not require the Company to repurchase a specific number of shares or have an expiration date. The Company is not obligated to purchase any specific number of shares under its Stock Repurchase Program, and the Stock Repurchase Program may be suspended or discontinued by the Board at any time without prior notice. On May 10, 2018, in connection with the sale by certain stockholders of the Company of 8,000,000 shares of common stock in a public secondary offering, the Company repurchased 500,000 shares of common stock under the Stock Repurchase Program, funded with cash on hand for the aggregate amount of $12.1 million. These shares are reflected as Treasury Stock on the Condensed Balance Sheets.

Under the Stock Repurchase Program, the Company may repurchase shares of its common stock from time to time, in amounts, at prices and at such times as the Company deems appropriate, subject to market and industry conditions, share price, regulatory requirements as determined from time to time by the Company and other considerations. The Company’s repurchases may be executed using open market purchases or privately negotiated transactions in accordance with applicable securities laws and regulations, including Rule 10b-18 of the Exchange Act and repurchases may be executed pursuant to Rule 10b5-1 under the Exchange Act. Repurchases will be subject to limitations in the ABL Facility and the Indenture. We intend to fund repurchases under the Stock Repurchase Program from cash on hand and/or other sources of liquidity.

Dividend Policy
On May 17, 2017, the Board adopted the Dividend Policy of paying a quarterly cash dividend of $0.05 per share. The Dividend Policy also states the following: In addition to the regular quarterly dividend and to the extent that the Company generates excess cash that is beyond the then current requirements of the business, the Board may consider returning all or a portion of such excess cash to stockholders through a special dividend or repurchase of common stock pursuant to a stock repurchase program. Any future dividends or stock repurchases will be at the discretion of the Board and subject to consideration of a number of factors, including business and market conditions, future financial performance and other strategic investment opportunities. The Company will also seek to optimize its capital structure to improve returns to stockholders while allowing flexibility for the Company to pursue very selective strategic growth opportunities that can provide compelling stockholder returns.

On February 13, 2018, the Board declared a regular quarterly cash dividend of $0.05 per share, totaling $2.7 million, which was paid on March 2, 2018, to stockholders of record as of the close of business on February 23, 2018.

On April 24, 2018, the Board declared a regular quarterly cash dividend of $0.05 per share, totaling approximately $2.7 million, which was paid on May 11, 2018, to stockholders of record as of the close of business on May 4, 2018.

On July 24, 2018, the Board declared a regular quarterly cash dividend of $0.05 per share, totaling approximately $2.7 million, which will be paid on August 10, 2018, to stockholders of record as of the close of business on August 3, 2018.

April 2018 Special Dividend
On April 3, 2018, the Board declared the April Special Dividend of approximately $350.0 million, which was funded with the net proceeds from the offering of $125.0 million in aggregate principal amount of our 8.00% senior secured notes due 2024, together with cash on hand of approximately $225.0 million, and was paid on April 20, 2018 to stockholders of record as of the close of business on April 13, 2018.

28



March 2017 Special Distribution
On March 31, 2017, our board of managers declared a cash distribution payable to holders of our Class A Units, Class B Units and Class C Units as of March 27, 2017, resulting in distributions to such holders in the aggregate amount of $190.0 million. The March Special Distribution was funded with available cash on hand and was paid to Computershare Trust Company, N.A., as disbursing agent, on March 31, 2017.
Public Company Transaction Expenses
On April 19, 2017, we completed our IPO. In connection with becoming a publicly traded company, we began to incur additional general and administrative expenses. General and administrative expenses related to being a publicly traded company include: Exchange Act reporting expenses; expenses associated with listing on the NYSE; incremental independent auditor fees; incremental legal fees; investor relations expenses; registrar and transfer agent fees; incremental director and officer liability insurance costs; and director compensation.
ABL Facility
    
Under the ABL Facility, up to $10.0 million of the commitments may be used to incur swingline loans from Citibank and up to $50.0 million of the commitments may be used to issue letters of credit. The ABL Facility will mature on April 1, 2019. As of June 30, 2018 , no amounts were outstanding under the ABL Facility and there were $4.6 million of outstanding letters of credit. At June 30, 2018 , we had $95.4 million of availability under the ABL Facility.

The ABL Facility contains customary covenants for asset-based credit agreements of this type, including among other things: (i) requirements to deliver financial statements, other reports and notices; (ii) restrictions on the existence or incurrence of certain indebtedness; (iii) restrictions on the existence or incurrence of certain liens; (iv) restrictions on making certain restricted payments; (v) restrictions on making certain investments; (vi) restrictions on certain mergers, consolidations and asset dispositions; (vii) restrictions on certain transactions with affiliates; and (viii) restrictions on modifications to certain indebtedness. Additionally, the ABL Facility contains a springing fixed charge coverage ratio of not less than 1.00 to 1.00, which ratio is tested if availability under the ABL Facility is less than a certain amount. As of June 30, 2018 , we were not subject to this covenant. Subject to customary grace periods and notice requirements, the ABL Facility also contains customary events of default.
We were in compliance with all applicable covenants under the ABL Facility as of June 30, 2018 .
Senior Secured Notes
On March 1, 2018, we issued $125.0 million in aggregate principal amount of our 8.00% senior secured notes due 2024 to qualified institutional buyers pursuant to Rule 144A under the Securities Act and to certain non-U.S. persons in transactions outside the United States in accordance with Regulation S under the Securities Act ("Regulation S"). The senior secured notes were issued at 103.00% of the aggregate principal amount thereof, plus accrued interest from November 2, 2017. The senior secured notes were issued as "Additional Notes" under the indenture dated as of November 2, 2017 (the "Original Indenture") among the Company, the subsidiary guarantors party thereto and Wilmington Trust National Association, as trustee, and priority lien collateral trustee, as supplemented by the First Supplemental Indenture, dated as of March 1, 2018. The senior secured notes have not been and will not be registered under the Securities Act, and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of the Securities Act.
We used the net proceeds of the offering of the senior secured notes, together with cash on hand of approximately $225.0 million, to pay a special cash dividend of $350.0 million, or $6.53 per share, to all of our stockholders on a pro rata basis on April 20, 2018. 
The senior secured notes and the $350.0 million in aggregate principal amount of our 8.00% senior secured notes due 2024, which were issued under the Original Indenture on November 2, 2017, rank  pari passu  in right of payment and constitute a single class of securities for all purposes under the Indenture, including, without limitation, waivers, amendments, redemptions, offers to purchase and collateral matters, and are fungible (except that the senior secured notes issued on March 1, 2018 pursuant to Regulation S traded separately under different CUSIP/ISIN numbers until 40 days after the issue date, but thereafter any such holders may transfer their senior secured notes pursuant to Regulation S into the same CUSIP/ISIN numbers as the senior secured notes issued on November 2, 2017 pursuant to Regulation S).

29



The senior secured notes issued on March 1, 2018 accrue interest at a rate of 8.00% per year from November 2, 2017. Interest on the senior secured notes are payable on May 1 and November 1 of each year, commencing on May 1, 2018. The senior secured notes will mature on November 1, 2024.

Promissory Note
As of June 30, 2018 , we had debt outstanding of $2.3 million , of which all was classified as current, which represents a security agreement and promissory note assumed in the Asset Acquisition. The promissory note matures on March 31, 2019 and bears a fixed interest rate of 4.00% per annum. We are required to make periodic payments of principal and interest over the term of the promissory note. The promissory note is secured by the underground mining equipment it was used to purchase.
Restricted Cash
As of June 30, 2018 , restricted cash included $0.8 million in other long-term assets in the Condensed Balance Sheet which represents amounts invested in certificate of deposits as financial assurance for post mining reclamation obligations.
Capital Expenditures
Our mining operations require investments to maintain, expand, upgrade or enhance our operations and to comply with environmental regulations. Maintaining and expanding mines and related infrastructure is capital intensive and oftentimes involves long lead times. Specifically, the exploration, permitting and development of met coal reserves, mining costs, the maintenance of machinery and equipment and compliance with applicable laws and regulations require ongoing capital expenditures. While a significant amount of the capital expenditures required at our mines has been spent, we must continue to invest capital to maintain our production. In addition, any decisions to increase production at our mines or to develop the high-quality met coal recoverable reserves at our Blue Creek Energy Mine in the future could also affect our capital needs or cause future capital expenditures to be higher than in the past and/or higher than our estimates.
To fund our capital expenditures, we may be required to use cash from our operations, incur debt or sell equity securities. Our ability to obtain bank financing or our ability to access the capital markets for future equity or debt offerings may be limited by our financial condition at the time of any such financing or offering and the covenants in our current or future debt agreements, as well as by general economic conditions, contingencies and uncertainties that are beyond our control.
Our capital expenditures were $55.4 million and $28.3 million for the six months ended June 30, 2018 and June 30, 2017 , respectively. Capital expenditures for these periods primarily related to investments required to maintain our property, plant and equipment. We evaluate our spending on an ongoing basis in connection with our mining plans and the prices of met coal taking into consideration the funding available to maintain our operations at optimal production levels.
We are continuing to make significant investments in our capital expenditures program during high coal price environments which will provide us flexibility to reduce spending in periods when met coal pricing is low. Our capital spending is expected to range from $100.0 to $120.0 million for the full year 2018, consisting of sustaining capital expenditures of approximately $70.0 to $83.0 million and discretionary capital expenditures of approximately $30.0 to $37.0 million. Our sustaining capital expenditures include expenditures related to longwall operations, safety upgrades and our natural gas business. Our discretionary capital expenditures include the completion of a new portal for Mine No. 7 and other various operational improvements, which we expect will increase efficiency, increase production and lower costs over time. Because of the long lead times on the discretionary capital spending, we expect to realize the benefits of those projects primarily in 2019 and beyond. These amounts set forth above do not include any potential spending associated with our Blue Creek Energy Mine should we decide to develop it for production in the future.
Off-Balance Sheet Arrangements
In the ordinary course of our business, we are required to provide surety bonds and letters of credit to provide financial assurance for certain transactions and business activities. Federal and state laws require us to obtain surety bonds or other acceptable security to secure payment of certain long-term obligations including mine closure or reclamation costs and other miscellaneous obligations. As of June 30, 2018 , we had outstanding surety bonds and letters of credit with parties for post-mining reclamation at all of our U.S. mining operations totaling $ 44.7 million , and $ 2.1 million , respectively, for miscellaneous purposes.

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Recently Adopted Accounting Standards
A summary of recently adopted accounting pronouncements is included in Note 2 to our unaudited interim condensed financial statements included elsewhere in this Form 10-Q.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Commodity Price Risk
We are exposed to commodity price risk on sales of coal. We sell most of our met coal under contracts primarily with pricing terms of three months and volume terms of up to one year. Sales commitments in the met coal market are typically not long-term in nature, and we are, therefore, subject to fluctuations in market pricing.
We enter into natural gas swap contracts to hedge the exposure to variability in expected future cash flows associated with the fluctuations in the price of natural gas related to our forecasted sales. As of June 30, 2018 , we had natural gas swap contracts outstanding with notional amounts totaling 5,700 million British thermal units maturing in the first quarter of 2019. Our natural gas swap contracts economically hedge certain risk but are not designated as hedges for financial reporting purposes. All changes in the fair value of these derivative instruments are recorded as other revenues in the Condensed Statements of Operations. All of our derivative instruments were entered into for hedging purposes rather than speculative trading.
We have exposure to price risk for supplies that are used directly or indirectly in the normal course of production, such as diesel fuel, steel, explosives and other items. We manage our risk for these items through strategic sourcing contracts in normal quantities with our suppliers. We historically have not entered into any derivative commodity instruments to manage the exposure to changing price risk for supplies.
Credit Risk
Financial instruments that potentially subject us to a concentration of credit risk consist principally of trade receivables. We provide our products to customers based on an evaluation of the financial condition of our customers. In some instances, we require letters of credit, cash collateral or prepayments from our customers on or before shipment to mitigate the risk of loss. Exposure to losses on receivables is principally dependent on each customer’s financial condition. We monitor the exposure to credit losses and maintain allowances for anticipated losses. As of June 30, 2018 and December 31, 2017, we did not have any allowance for credit losses associated with our trade accounts receivables.
Interest Rate Risk
On November 2, 2017 and subsequently on March 1, 2018, we issued $475.0 million aggregate principal amount of senior secured notes. The senior secured notes have a fixed rate of 8.00% per annum and are payable semi-annually in arrears on May 1 and November 1 of each year.
On April 1, 2016, we entered into the ABL Facility, as amended, that bears an interest rate equal to LIBOR plus an applicable margin, which is based on the average availability of the commitments under the ABL Facility, ranging currently from 200 bps to 250 bps. Any debt that we incur under the ABL Facility will expose us to interest rate risk. If interest rates increase significantly in the future, our exposure to interest rate risk will increase. As of June 30, 2018 , assuming we had $100.0 million outstanding under our ABL Facility, a 100 bps point increase or decrease in interest rates would increase or decrease our annual interest expense under the ABL Facility by approximately $1.0 million.

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ITEM 4. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
As required by Rule 13a-15(b) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), our management, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) under the Exchange Act) as of June 30, 2018 . Based on the evaluation of our disclosure controls and procedures as of June 30, 2018 , our Chief Executive Officer and Chief Financial Officer have concluded that, as of June 30, 2018 , our disclosure controls and procedures were effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is (1) recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms and (2) accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosures.
Changes in Internal Control Over Financial Reporting
There have been no changes in our internal control over financial reporting that occurred during our most recently completed fiscal quarter that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Limitations on the Effectiveness of Disclosure Controls and Procedures
In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.






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PART II - OTHER INFORMATION

Item 1. Legal Proceedings.
See Note 8 of the “Notes to Condensed Financial Statements” in this Form 10-Q for a description of current legal proceedings, which is incorporated by reference in this Part II, Item 1.
We and our subsidiaries are parties to a number of other lawsuits arising in the ordinary course of our business. We record costs relating to these matters when a loss is probable and the amount can be reasonably estimated. The effect of the outcome of these matters on our future results of operations cannot be predicted with certainty as any such effect depends on future results of operations and the amount and timing of the resolution of such matters. While the results of litigation cannot be predicted with certainty, we believe that the final outcome of such litigation will not have a material adverse effect on our financial statements.
Item 1A. Risk Factors.

There have been no material changes to the risk factors disclosed in "Risk Factors" in "Part 1, Item 1A. Risk Factors" in our 2017 Annual Report and Part II, "Item 1A." of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2018. Our business, financial condition, operating results and cash flows can be impacted by a number of factors, any one of which could cause actual results to vary materially from recent results or from anticipated future results. In addition to the other information set forth in this report, you should carefully consider the risks discussed in "Part I, "Item 1A. Risk Factors" in our 2017 Annual Report and "Part II, Item 1A." of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2018, which could materially affect our business, financial condition or future results. However, the risks described in our 2017 Annual Report and our Quarterly Report on Form 10-Q for the quarter ended March 31, 2018 are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially adversely affect our business, financial condition and/or operating results.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

The following sets forth information with respect to repurchases by the Company of its shares of common stock during the second quarter of 2018.
Period
Total number of shares purchased
Average price paid per share
Total number of shares purchased as part of publicly announced plans or programs
Approximate dollar value of shares that may yet be purchased under the plans or programs(1)
April 1 - 30
May 1 - 31
500,000
24.2
500,000
$27,900,000
June 1 - 30
$27,900,000
(1)
On May 2, 2018, the Board approved a Stock Repurchase Program that authorizes repurchases of up to an aggregate of $40.0 million of our outstanding common stock. The Stock Repurchase Program does not require us to repurchase a specific number of shares or have an expiration date.

Item 3. Defaults on Senior Securities.
None.
Item 4. Mine Safety Disclosures.
The information concerning mine safety violations and other regulatory matters is filed as Exhibit 95 to this Form 10-Q pursuant to the requirements of Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K (17 CFR 229.104).
Item 5. Other Information.

None.

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Item 6. Exhibits
 
Exhibit
Number
 
Description
 
 
 
3.1
 
 
 
 
3.2
 
 
 
 
4.1
 
 
 
 
4.2
 

 
 
 
10.1*†
 
 
 
 
 
10.3
 
 
 
 
10.4
 

 
 
 
31.1*
 
 
 
 
31.2*
 
 
 
 
32.1**
 
 
 
 
95*
 
 
 
 
101*
 
XBRL (Extensible Business Reporting Language) - The following materials from Warrior Met Coal, Inc.'s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2018, formatted in XBRL (eXtensible Business Reporting Language): (i) the Condensed Balance Sheets, (ii) the Condensed Statements of Operations, (iii) the Condensed Statements of Changes in Stockholders' Equity, (v) the Condensed Statements of Cash Flows, and (vi) Notes to Condensed Financial Statements.
 
 
*
Filed herewith.
**
Furnished herewith.
Management contract, compensatory plan or arrangement.

 


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SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
Warrior Met Coal, Inc.
 
 
 
 
By:
 
/s/ Dale W. Boyles
 
 
 
Dale W. Boyles
 
 
 
Chief Financial Officer (on behalf of the registrant and as Principal Financial and Accounting Officer)
 
 
 
 
 
 
 
Date: August 1, 2018


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Exhibit 10.1

EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT by and between Warrior Met Coal, Inc. (the “ Company ”), and Phillip C. Monroe (“ Executive ”) (collectively, the “ Parties ”) is entered into as of March 5, 2018 (the “ Effective Date ”).
WHEREAS , the Company and Executive desire to enter into this employment agreement (this “ Agreement ”) pursuant to the terms, provisions and conditions set forth herein, which will govern the terms of Executive’s employment with the Company.
NOW, THEREFORE , in consideration of the premises and of the mutual covenants, understandings, representations, warranties, undertakings and promises hereinafter set forth, intending to be legally bound thereby, the Parties agree as follows:
1.
Employment Period .
Executive shall be employed by the Company for a period commencing as of the Effective Date and continuing until such time as Executive’s employment is terminated in accordance with Section 3 hereof (the “ Employment Period ”). Upon Executive’s termination of employment with the Company for any reason, Executive shall immediately resign all positions with the Company and any of its subsidiaries and affiliates, including any position as a member of the Company’s Board of Directors (the “ Board ”). The Company and its subsidiaries and affiliates are herein referred to collectively as the “Company Group.”
2.
Terms of Employment .
(a)      Position . During the Employment Period, Executive shall serve as General Counsel of the Company and will perform such duties and exercise such supervision with regard to the business of the Company as are commensurate with such position, including such duties as may be prescribed from time to time by the Chief Executive Officer of the Company (the “ CEO ”). Executive shall report directly to the CEO and, if reasonably requested by the Board, Executive hereby agrees to serve (without additional compensation) as an officer and director of the Company Group.
(b)      Duties .     During the Employment Period, Executive shall have such responsibilities, duties and authority that are commensurate with Executive’s position, subject at all times to the control of the CEO, and shall perform such services as customarily are provided by an executive of a corporation with Executive’s position and such other services consistent with Executive’s position, as shall be assigned to Executive from time to time by the CEO. During the Employment Period, and excluding any periods of vacation and sick leave to which Executive is entitled, Executive agrees to devote all of Executive’s business time to the business and affairs of the Company and to use Executive’s commercially reasonable efforts to perform faithfully, effectively and efficiently Executive’s responsibilities and obligations hereunder. Executive shall be entitled to engage in charitable and educational activities and to manage Executive’s personal and family investments, to the extent such activities are not competitive with the business of the Company, do not interfere with the performance of Executive’s duties for the Company and are otherwise consistent with the Company’s governance policies.

04315491.2    


(c)      Compensation .
(i)      Base Salary . During the Employment Period, Executive shall receive an annual base salary in an amount equal to two hundred ninety thousand dollars ($290,000), less all applicable withholdings, which shall be paid in accordance with the customary payroll practices of the Company and prorated for partial calendar years of employment (as in effect from time to time, the “ Annual Base Salary ”). The Annual Base Salary shall be subject to annual review by the Board, in its sole discretion, for possible increase and any such increased Annual Base Salary documented in the form of a resolution adopted by the Board or an amendment to this Agreement shall constitute “Annual Base Salary” for purposes of this Agreement.
(ii)      Annual Bonus . During the Employment Period, with respect to each completed fiscal year of the Company, Executive shall be eligible to receive a bonus (the “ Bonus ”) with a target amount equal to seventy-five percent (75%) of Annual Base Salary contingent upon the achievement of qualitative and quantitative performance goals approved by the Board. The Bonus, if any, shall be paid in accordance with the terms of the applicable bonus plan as in effect from time to time, and shall require that Executive be employed with the Company on the date of payment of such Bonus.
(iii)      Equity Awards . During the Employment Period, Executive shall be entitled to receive equity awards under the Warrior Met Coal, Inc. 2017 Equity Incentive Plan and any other incentive compensation plan or arrangement adopted by the Company from time to time in which similarly situated executives of the Company are eligible to participate, in amounts and at times determined by and subject to approval of the Board.
(iv)      Benefits . During the Employment Period, Executive shall be eligible to participate in all retirement, compensation and employee benefit plans, practices, policies and programs provided by the Company to the extent applicable generally to other similarly situated executives of the Company (except severance plans, policies, practices or programs) subject to the eligibility criteria set forth therein, as such may be amended or terminated from time to time.
(v)      Expenses . During the Employment Period, Executive shall be entitled to receive reimbursement for all reasonable business expenses incurred by Executive in performance of Executive’s duties hereunder provided that Executive provides all necessary documentation in accordance with the Company’s policies.
(vi)      The Company shall indemnify Executive, to the fullest extent permitted by applicable law, against all costs, charges and expenses incurred or sustained by Executive, including the cost and expenses of legal counsel, in connection with any action, suit or proceeding (collectively a “ Proceeding ”) to which Executive may be made a party by reason of Executive being or having been an officer, director or employee of the Company Group. Notwithstanding the preceding sentence, Executive shall not be entitled to indemnification in connection with any gross negligence or willful misconduct of Executive. Executive shall be covered during the entire term of this Agreement and thereafter for at least six (6) years by officer and director liability insurance in amounts and on terms similar to that afforded to other executives and/or directors of the Company Group.

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3.
Termination of Employment .
(a)      Death or Disability . Executive’s employment shall terminate automatically upon Executive’s death. If Executive becomes subject to a Disability (as defined below) during the Employment Period, the Company may give Executive written notice in accordance with Sections 3(f) and 10(g) of its intention to terminate Executive’s employment. For purposes of this Agreement, “ Disability ” means Executive’s inability to perform Executive’s duties hereunder by reason of any medically determinable physical or mental impairment for a period of six (6) months or more in any twelve (12) month period.
(b)      Cause . Executive’s employment may be terminated at any time by the Company for Cause. For purposes of this Agreement, “ Cause ” means Executive’s (i) commission of, conviction for, plea of guilty or nolo contendere to a felony or a crime involving moral turpitude, or other material act or omission involving dishonesty or fraud, (ii) engaging in conduct that constitutes fraud or embezzlement, (iii) engaging in conduct that constitutes gross negligence or willful gross misconduct that results or could reasonably be expected to result in harm to the Company Group’s business or reputation, (iv) breach of any material terms of Executive’s employment, which results or could reasonably be expected to result in harm to the Company Group’s business or reputation, (v) continued willful failure to substantially perform Executive’s duties or (vi) breach of any material policy of the Company Group that is applicable to employees generally that is reasonably likely to result in demonstrable harm to the Company Group. Executive’s employment shall not be terminated for “Cause” within the meaning of clauses (iv), (v) or (vi) above unless Executive has been given written notice stating the basis for such termination and Executive is given fifteen (15) days to cure, to the extent curable, the act or omission that is the basis of any such claim.
(c)      Termination Without Cause . The Company may terminate Executive’s employment hereunder without Cause at any time.
(d)      Good Reason . Executive’s employment may be terminated at any time by Executive for Good Reason upon thirty (30) days’ prior written notice following the occurrence of the event giving rise to the termination for Good Reason. For purposes of this Agreement, “ Good Reason ” means voluntary resignation after any of the following actions taken by the Company without Executive’s written consent: (i) a material diminution in Executive’s title or authority, (ii) any material failure to pay compensation when due, (iii) a reduction in base pay or bonus opportunity other than reductions applicable to senior executives generally, (iv) relocation of Executive’s principal place of business by more than 50 miles that materially increases Executive’s commute or (v) any other material breach of this Agreement by the Company. Executive’s employment shall not be terminated for “Good Reason” unless Executive has given the Company written notice stating the condition that is the basis for such termination within thirty (30) days following the initial occurrence of the event or condition allegedly constituting Good Reason and the Company fails to cure such condition within fifteen (15) days following receipt of such notice.
(e)      Voluntary Termination. Executive’s employment may be terminated at any time by Executive without Good Reason upon thirty (30) days’ prior written notice.

3


(f)      Notice of Termination. Any termination by the Company for Cause or without Cause, or by Executive for Good Reason or without Good Reason, shall be communicated by Notice of Termination (as defined below) to the other party hereto given in accordance with Section 10(g). For purposes of this Agreement, a “ Notice of Termination ” means a written notice that (i) indicates the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive’s employment under the provision so indicated and (iii) if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the termination date. The failure by Executive or the Company to set forth in the Notice of Termination any fact or circumstance that contributes to a showing of Good Reason or Cause shall not waive any right of Executive or the Company hereunder or preclude Executive or the Company from asserting such fact or circumstance in enforcing Executive’s or the Company’s rights hereunder.
(g)      Date of Termination . For purposes of this Agreement, “ Date of Termination ” means (i) if Executive’s employment is terminated by the Company for Cause, without Cause or by reason of Disability, the date of receipt of the Notice of Termination in accordance with Section 3(a), Section 3(b) or Section 3(c) or any later date specified therein pursuant to Section 3(f), as the case may be, (ii) if Executive’s employment is terminated by Executive for Good Reason or without Good Reason, the date specified in the Notice of Termination in accordance with Section 3(d) or Section 3(e) or any later date specified therein pursuant to Section 3(f), as the case may be, and (iii) if Executive’s employment is terminated by reason of death, the date of death.
4.
Obligations of the Company upon Termination .
(a)      Without Cause; For Good Reason . If during the Employment Period, the Company shall terminate Executive’s employment without Cause or Executive shall terminate Executive’s employment for Good Reason, then the Company will provide Executive with the following payments and/or benefits:
(i)      the Company shall pay to Executive as soon as reasonably practicable but no later than the 15th day of the third month following the end of the calendar year that contains the Date of Termination in a lump sum to the extent not previously paid, (A) the Annual Base Salary through the Date of Termination, (B) the amount of any unpaid expense reimbursements to which Executive may be entitled pursuant to Section 2(c)(v) hereof, and (C) any other vested payments or benefits to which Executive or Executive’s estate may be entitled to receive under any of the Company’s benefit plans or applicable law, in accordance with the terms of such plans or law (clauses (A)-(C), the “ Accrued Obligations ”);
(ii)      subject to Section 4(e) below, the Company shall pay Executive an amount equal to one times (lx) Executive’s Annual Base Salary as in effect as of the Date of Termination in substantially equal installments in accordance with the Company’s customary payroll practices, commencing on the first payroll date occurring on or after the date that is sixty (60) days following the Date of Termination (with the first installment inclusive of the installments that would have otherwise been payable during such initial sixty (60) day period) and ending on the first anniversary of the Date of Termination (the “ Severance Payment ”); and

4


(iii)      subject to Section 4(e) below, after a Date of Termination occurring following the third quarter of the Company’s fiscal year, the Company shall pay Executive as soon as reasonably practicable but no later than the 15th day of the third month following the end of the calendar year that contains the Date of Termination a prorated bonus for the year of termination based on the number of days in such year elapsed through the Date of Termination, with the amount thereof determined based on the actual result of the Company for such year and payable when bonuses for such year are generally paid to employees of the Company (the “ Prorated Bonus ”).
(b)      Without Cause; For Good Reason following a Change in Control . If during the Employment Period, a Change in Control (as defined below) occurs and within twelve (12) months following the occurrence of such Change in Control, the Company shall terminate Executive’s employment without Cause or Executive shall terminate Executive’s employment for Good Reason, then, in lieu of the payments and benefits described in Section 4(a) above, the Company will provide Executive with the following payments and/or benefits:
(i)      the Company shall pay to Executive as soon as reasonably practicable but no later than the 15th day of the third month following the end of the calendar year that contains the Date of Termination a lump sum amount equal to the Accrued Obligations; and
(ii)      subject to Section 4(e) below, the Company shall pay to Executive as soon as reasonably practicable but no later than the 15th day of the third month following the end of the calendar year that contains the Date of Termination a lump sum amount equal to one and one-half times (1.5x) Executive’s Annual Base Salary as in effect as of the Date of Termination (the “ Enhanced Severance Payment ”).
For purposes of this Agreement, “ Change in Control ” means, with respect to the Company, the first to occur of any of the following: (i) the acquisition by any person or “group” (as defined in section 13(d) of the Securities Exchange Act of 1934, as amended), other than by (A) the Company Group; (B) any employee benefit plan of the Company Group; or (C) any holder of the Company’s equity securities issued in connection with the Company’s 2016 reorganization, through one transaction or a series of related transactions of more than 50% of the combined voting power of the then outstanding voting securities of the Company; (ii) the merger or consolidation of the Company as a result of which persons who were holders of the Company’s equity securities immediately prior to such merger or consolidation, do not, immediately thereafter, own, directly or indirectly, 50% or more of the combined voting power entitled to vote generally in the election of directors of the merged or consolidated company; or (iii) the sale, transfer or other disposition of all or substantially all of the assets of the Company and its subsidiaries (determined on a consolidated basis) through one transaction or a series of related transactions occurring during any period of twelve (12) consecutive months to one or more persons who are not, immediately prior to such sale, transfer or other disposition, holders of the Company’s securities or affiliates of the Company.
Notwithstanding the foregoing, a “Change of Control” shall not be deemed to occur (i) unless such transaction satisfies the requirements of Treasury Regulation Section 1.409A-3(i)(5)(v) or (vii) or (ii) upon the occurrence of any liquidation or dissolution of the Company, including if the Company files for bankruptcy, liquidation or reorganization under the United States Bankruptcy Code.

5


(c)      Death or Disability . If Executive’s employment shall be terminated by reason of Executive’s death or Disability, then the Company will provide Executive with the Accrued Obligations within ninety (90) days of the date of receipt of the Notice of Termination. Thereafter, the Company shall have no further obligation to Executive or Executive’s legal representatives.
(d)      Cause; Other than for Good Reason . If Executive’s employment shall be terminated by the Company for Cause or by Executive without Good Reason, then the Company shall have no further obligations to Executive other than for payment of the Accrued Obligations.
(e)      Separation Agreement and General Release . The Company’s obligation to provide the Severance Payment, the Enhanced Severance Payment or the Prorated Bonus is conditioned on Executive’s or Executive’s legal representative’s executing a separation agreement and general release of claims related to or arising from Executive’s employment with the Company or the termination of employment, against the Company Group (and their respective officers and directors) in a form reasonably determined by the Company, which shall be provided by the Company to Executive within five (5) days following the Date of Termination; provided, that, if Executive should fail to execute (or revokes) such release within sixty (60) days following the Date of Termination, the Company shall not have any obligation to provide the Severance Payment, the Enhanced Severance Payment or the Prorated Bonus. If Executive executes the release within such sixty (60) day period and does not revoke the release within seven (7) days following the execution of the release, the Severance Payment, the Enhanced Severance Payment or the Prorated Bonus will be provided in accordance with Section 4(a)(ii), Section 4(a)(iii) or Section 4(b)(ii), as applicable.
5.
Restrictive Covenants .
(a)      Non-Solicitation . In consideration of Executive’s employment and receipt of payments hereunder, during the period commencing on the Effective Date and ending twenty-four (24) months after the Date of Termination, Executive shall not directly, or indirectly through another person, (x) induce or attempt to induce any employee, representative, agent or consultant of the Company Group to leave the employ or services of the Company Group, or in any way interfere with the relationship between the Company Group and any employee, representative, agent or consultant thereof, (y) hire any person who was an employee, representative, agent or consultant of the Company Group at any time during the twelve-month period immediately prior to the date on which such hiring would take place or (z) directly or indirectly call on, solicit or service any customer, supplier, licensee, licensor, representative, agent or other business relation of the Company Group in order to induce or attempt to induce such person to cease doing business with, or reduce the amount of business conducted with, the Company Group, or in any way interfere with the relationship between any such customer, supplier, licensee, licensor, representative, agent or business relation of the Company Group. No action by another person or entity shall be deemed to be a breach of this provision unless Executive directly or indirectly assisted, encouraged or otherwise counseled such person or entity to engage in such activity.
(b)      Non-Competition . Executive hereby acknowledges that it is familiar with the Confidential Information (as defined below) of the Company and its subsidiaries. Executive acknowledges and agrees that the Company would be irreparably damaged if Executive were to provide services to any person competing with the Company Group engaged in a similar business

6


and that such competition by Executive would result in a significant loss of goodwill by the Company. Therefore, Executive agrees that during the period commencing on the Effective Date and ending twelve (12) months after the Date of Termination, Executive shall not (and shall cause each of Executive’s or its affiliates not to) directly or indirectly own any interest in, manage, control, participate in (whether as an officer, director, manager, employee, partner, equity holder, member, agent, representative or otherwise), consult with, render services for, or in any other manner engage in any business engaged directly or indirectly, in the Geographic Area (as defined below), in the business of the Company or any of its subsidiaries as currently conducted or proposed to be conducted as of the Date of Termination; provided, that nothing herein shall prohibit Executive from being a passive owner of not more than 5% of the outstanding stock of any class of a corporation which is publicly traded so long as Executive does not have any active participation in the business of such corporation. For purposes of this Agreement, the “ Geographic Area ” shall mean North America.
(c)      Non-Disclosure; Non-Use of Confidential Information . Executive shall not disclose or use at any time, either during Executive’s employment with the Company or at any time thereafter, any Confidential Information of which Executive is or becomes aware, whether or not such information is developed by Executive, except to the extent that such disclosure or use is directly related to and required by Executive’s performance in good faith of duties assigned to Executive by the Company. Executive will take all appropriate steps to safeguard Confidential Information in Executive’s possession and to protect it against disclosure, misuse, espionage, loss and theft. Executive shall deliver to the Company at the termination of Executive’s employment with the Company, or at any time the Company may request, all memoranda, notes, plans, records, reports, computer tapes and software and other documents and data (and copies thereof) relating to the Confidential Information or the Work Product (as defined below) of the business of the Company Group that Executive may then possess or have under Executive’s control.
(d)      Proprietary Rights . Executive recognizes that the Company Group possesses a proprietary interest in all Confidential Information and Work Product and has the exclusive right and privilege to use, protect by copyright, patent or trademark, or otherwise exploit the processes, ideas and concepts described therein to the exclusion of Executive, except as otherwise agreed between the Company Group and Executive in writing. Executive expressly agrees that any Work Product made or developed by Executive or Executive’s agents during the course of Executive’s employment, including any Work Product which is based on or arises out of Work Product, shall be the property of and inure to the exclusive benefit of the Company Group. Executive further agrees that all Work Product developed by Executive (whether or not able to be protected by copyright, patent or trademark) during the course of Executive’s employment with the Company, or involving the use of the time, materials or other resources of the Company Group, shall be promptly disclosed to the Company Group and shall become the exclusive property of the Company Group, and Executive shall execute and deliver any and all documents necessary or appropriate to implement the foregoing.
(e)      Certain Definitions .
(i)      For purposes of this Agreement, “ Confidential Information ” means information that is not generally known to the public (but for purposes of clarity, Confidential

7


Information shall never exclude any such information that becomes known to the public because of Executive’s unauthorized disclosure) and that is used, developed or obtained by the Company Group in connection with its business, including, but not limited to, information, observations and data obtained by Executive while employed by the Company Group concerning (A) the business or affairs of the Company Group, (B) products or services, (C) fees, costs and pricing structures, (D) designs, (E) analyses, (F) drawings, photographs and reports, (G) computer software, including operating systems, applications and program listings, (H) flow charts, manuals and documentation, (I) databases, (J) accounting and business methods, (K) inventions, devices, new developments, methods and processes, whether patentable or unpatentable and whether or not reduced to practice, (L) customers and clients and customer or client lists, (M) other copyrightable works, (N) all production methods, processes, technology and trade secrets, and (0) all similar and related information in whatever form. Confidential Information will not include any information that has been published in a form generally available to the public (except as a result of Executive’s unauthorized disclosure) prior to the date Executive proposes to disclose or use such information. Confidential Information will not be deemed to have been published or otherwise disclosed merely because individual portions of the information have been separately published, but only if all material features comprising such information have been published in combination.
(ii)      For purposes of this Agreement, “ Work Product ” means all inventions, innovations, improvements, technical information, systems, software developments, methods, designs, analyses, drawings, reports, service marks, trademarks, trade names, logos and all similar or related information (whether patentable or unpatentable) that relates to the Company Group’s actual or anticipated business, research and development or existing or future products or services and that are conceived, developed or made by Executive (whether or not during usual business hours and whether or not alone or in conjunction with any other person) while employed by the Company together with all patent applications, letters patent, trademark, trade name and service mark applications or registrations, copyrights and reissues thereof that may be granted for or upon any of the foregoing.
(f)      Enforcement . If Executive commits a breach of any of the provisions of this Section 5 or Section 6 below, the Company shall have the right and remedy to have the provisions specifically enforced by any court having jurisdiction, it being acknowledged and agreed by Executive that the services being rendered hereunder to the Company Gruop are of a special, unique and extraordinary character and that any such breach will cause irreparable injury to the Company Group and that money damages will not provide an adequate remedy to the Company Group. Such right and remedy shall be in addition to, and not in lieu of, any other rights and remedies available to the Company at law or in equity. Accordingly, Executive consents to the issuance of an injunction, whether preliminary or permanent, consistent with the terms of this Agreement (without posting a bond or other security) if the Company establishes a violation of Section 5 or Section 6 of this Agreement.
(g)      Blue Pencil . If, at any time, the provisions of this Section 5 shall be determined to be invalid or unenforceable under any applicable law, by reason of being vague or unreasonable as to area, duration or scope of activity, this Agreement shall be considered divisible and shall become and be immediately amended to only such area, duration and scope of activity as shall be determined to be reasonable and enforceable by the court or other body having jurisdiction over the matter and

8


Executive and the Company agree that this Agreement as so amended shall be valid and binding as though any invalid or unenforceable provision had not been included herein.
(h)      Tolling . The periods during which the covenants set forth in this Section 5 shall survive shall be tolled during (and shall be deemed automatically extended by) any period during which Executive is in violation of any such covenants, to the extent permitted by applicable law.
(i)      Severance Payment .     In addition to the foregoing, and not in any way in limitation of any right or remedy otherwise available to the Company, if Executive violates Section 5 or Section 6 hereof, any Severance Payment or Enhanced Severance Payment then or thereafter due from the Company to Executive shall be terminated immediately and the Company’s obligation to pay and Executive’s right to receive such Severance Payment or Enhanced Severance Payment shall terminate and be of no further force or effect.
(j)      EXECUTIVE ACKNOWLEDGES THAT EXECUTIVE HAS CAREFULLY READ THIS SECTION 5 AND HAS HAD THE OPPORTUNITY TO REVIEW ITS PROVISIONS WITH ANY ADVISORS AS EXECUTIVE CONSIDERED NECESSARY AND THAT EXECUTIVE UNDERSTANDS THIS AGREEMENT’S CONTENTS AND SIGNIFIES SUCH UNDERSTANDING AND AGREEMENT BY SIGNING BELOW.
6.
Non-Disparagement .
During the Employment Period and at all times thereafter, neither Executive nor Executive’s agents, on the one hand, nor the Company formally, or its executives or Board, on the other hand, shall directly or indirectly issue or communicate any public statement, or statement likely to become public, that maligns, denigrates or disparages the other (including, in the case of communications by Executive or Executive’s agents, the Company Group, any of Company Group’s officers, directors or employees, Apollo, GSO, KKR, or Franklin or any affiliate thereof). The foregoing shall not be violated by truthful responses to (i) legal process or governmental inquiry or (ii) by private statements to the Company Group or any of the Company Group’s officers, directors or employees; provided, that, in the case of Executive, with respect to clause (ii), such statements are made in the course of carrying out Executive’s duties pursuant to this Agreement.
7.
Confidentiality of Agreement .
The Parties agree that the consideration furnished under this Agreement, the discussions and correspondence that led to this Agreement, and the terms and conditions of this Agreement are private and confidential. Except as may be required by applicable law, regulation or stock exchange requirement, neither Party may disclose the above information to any other person or entity without the prior written approval of the other.
8.
Compensation Recovery Policy .
If any of the Company’s financial statements are required to be restated due to errors, omissions, fraud or misconduct (including, but not limited to, circumstances where the Company has been required to prepare an accounting restatement due to material non-compliance with any

9


financial reporting requirement, as enforced by the Securities and Exchange Commission), the Compensation Committee of the Board or the Board may, in its sole discretion but acting in good faith, direct that the Company recover all or a portion of any cash incentive, equity compensation or severance disbursements paid to Executive with respect to any fiscal year of the Company for which the financial results are negatively affected by such restatement.
9.
Executive’s Representations, Warranties and Covenants .
Executive hereby represents and warrants to the Company that:
(i)      Executive has all requisite power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby, and this Agreement has been duly executed by Executive;
(ii)      the execution, delivery and performance of this Agreement by Executive does not and will not, with or without notice or the passage of time, conflict with, breach, violate or cause a default under any agreement, contract or instrument to which Executive is a party or any judgment, order or decree to which Executive is subject;
(iii)      Executive is not a party to or bound by any employment agreement, consulting agreement, non-compete agreement, fee for services agreement, confidentiality agreement or similar agreement with any other person;
(iv)      upon the execution and delivery of this Agreement by the Company and Executive, this Agreement will be a legal, valid and binding obligation of Executive, enforceable in accordance with its terms;
(v)      Executive understands that the Company will rely upon the accuracy and truth of the representations and warranties of Executive set forth herein and Executive consents to such reliance; and
(vi)      as of the date of execution of this Agreement, Executive is not in breach of any of its terms, including having committed any acts that would form the basis for a Cause termination if such act had occurred after the Effective Date.
10.
General Provisions .
(a)      Severability . It is the desire and intent of the Parties hereto that the provisions of this Agreement be enforced to the fullest extent permissible under the laws and public policies applied in each jurisdiction in which enforcement is sought. Accordingly, if any particular provision of this Agreement shall be adjudicated by a court of competent jurisdiction to be invalid, prohibited or unenforceable under any present or future law, and if the rights and obligations of any party under this Agreement will not be materially and adversely affected thereby, such provision, as to such jurisdiction, shall be ineffective, without invalidating the remaining provisions of this Agreement or affecting the validity or enforceability of such provision in any other jurisdiction; furthermore, in lieu of such invalid or unenforceable provision there will be added automatically as a part of this

10


Agreement, a legal, valid and enforceable provision as similar in terms to such invalid or unenforceable provision as may be possible. Notwithstanding the foregoing, if such provision could be more narrowly drawn so as not to be invalid, prohibited or unenforceable in such jurisdiction, it shall, as to such jurisdiction, be so narrowly drawn, without invalidating the remaining provisions of this Agreement or affecting the validity or enforceability of such provision in any other jurisdiction.
(b)      Entire Agreement and Effectiveness . Effective as of the Effective Date, this Agreement embodies the complete agreement and understanding among the Parties hereto with respect to the subject matter hereof and supersedes and preempts any prior understandings, agreements or representations by or among the Parties, written or oral, which may have related to the subject matter hereof in any way.
(c)      Successors and Assigns .
(i)      This Agreement is personal to Executive and without the prior written consent of the Company shall not be assignable by Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by Executive’s legal representatives.
(ii)      This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns. The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, “ Company ” means the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid that assumes and agrees to perform this Agreement by operation of law, or otherwise.
(d)      Governing Law . THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW OR CONFLICTING PROVISION OR RULE THAT WOULD CAUSE THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF DELAWARE TO BE APPLIED. IN FURTHERANCE OF THE FOREGOING, THE INTERNAL LAW OF THE STATE OF DELAWARE WILL CONTROL THE INTERPRETATION AND CONSTRUCTION OF THIS AGREEMENT, EVEN IF UNDER SUCH JURISDICTION’S CHOICE OF LAW OR CONFLICT OF LAW ANALYSIS, THE SUBSTANTIVE LAW OF SOME OTHER JURISDICTION WOULD ORDINARILY APPLY.
(e)      Enforcement .
(i)      Arbitration . Except for disputes arising under Section 5 or Section 6 of this Agreement (including, without limitation, any claim for injunctive relief), any controversy, dispute or claim arising out of or relating to this Agreement, or its interpretation, application, implementation, breach or enforcement which the Parties are unable to resolve by mutual agreement, shall be settled by submission by either Executive or the Company of the controversy, claim or

11


dispute to binding arbitration in Alabama (unless the Parties agree in writing to a different location), before a single arbitrator in accordance with the Employment Dispute Resolution Rules of the American Arbitration Association then in effect. In any such arbitration proceeding, the Parties agree to provide all discovery deemed necessary by the arbitrator. The decision and award made by the arbitrator shall be accompanied by a reasoned opinion, and shall be final, binding and conclusive on all Parties hereto for all purposes, and judgment may be entered thereon in any court having jurisdiction thereof. The Company will bear the totality of the arbitrator’s and administrative fees and costs. Each Party shall bear its or his or her litigation costs and expenses; provided, however, that the arbitrator shall have the discretion to award the prevailing party reimbursement of its or his or her reasonable attorney’s fees and costs. Upon the request of any of the Parties, at any time prior to the beginning of the arbitration hearing, the Parties may attempt in good faith to settle the dispute by mediation administered by the American Arbitration Association. The Company will bear the totality of the mediator’s and administrative fees and costs.
(ii)      Remedies . All remedies hereunder are cumulative, are in addition to any other remedies provided for by law and may, to the extent permitted by law, be exercised concurrently or separately, and the exercise of any one remedy shall not be deemed to be an election of such remedy or to preclude the exercise of any other remedy.
(iii)      Waiver of Jury Trial . EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT.
(f)      Amendment and Waiver . The provisions of this Agreement may be amended and waived only with the prior written consent of the Company and Executive and no course of conduct or failure or delay in enforcing the provisions of this Agreement shall be construed as a waiver of such provisions or affect the validity, binding effect or enforceability of this Agreement or any provision hereof.
(g)      Notices . Any notice provided for in this Agreement must be in writing and must be either personally delivered, transmitted via telecopier, mailed by first class mail (postage prepaid and return receipt requested) or sent by reputable overnight courier service (charges prepaid) to the recipient at the address below indicated or at such other address or to the attention of such other person as the recipient party has specified by prior written notice to the sending party. Notices will be deemed to have been given hereunder and received when delivered personally, when received if transmitted via telecopier, five (5) days after deposit in the U.S. mail and one day after deposit for overnight delivery with a reputable overnight courier service.
If to the Company, to:
Warrior Met Coal, Inc.
16243 Highway 216
Brookwood, AL 35444
Attention: Chief Executive Officer

with a copy (which shall not constitute notice) to:

12



Maynard, Cooper & Gale, P.C.
1901 Sixth Ave. North
Suite 2400
Birmingham, AL 35203
Facsimile: (205) 254-1999
Attention: Timothy W. Gregg

If to Executive, to:

Executive’s home address most recently on file with the Company.
(h)      Withholdings Taxes . The Company may withhold from any amounts payable under this Agreement such federal, state and local taxes as may be required to be withheld pursuant to any applicable law or regulation.
(i)      Survival of Representations, Warranties and Agreements . All representations, warranties and agreements contained herein shall survive the consummation of the transactions contemplated hereby indefinitely.
(j)      Descriptive Headings . The descriptive headings of this Agreement are inserted for convenience only and do not constitute a part of this Agreement. All references to a “Section” in this Agreement are to a section of this Agreement unless otherwise noted.
(k)      Construction . Where specific language is used to clarify by example a general statement contained herein, such specific language shall not be deemed to modify, limit or restrict in any manner the construction of the general statement to which it relates. The language used in this Agreement shall be deemed to be the language chosen by the Parties to express their mutual intent, and no rule of strict construction shall be applied against any Party.
(l)      Counterparts . This Agreement may be executed in separate counterparts, each of which is deemed to be an original and all of which taken together constitute one and the same agreement.
(m)      Section 409A . Notwithstanding anything herein to the contrary, this Agreement is intended to be interpreted and applied so that the payment of the benefits set forth herein either shall either be exempt from the requirements of Section 409A of the Internal Revenue Code of 1986, as amended (the “ Code ”), or shall comply with the requirements of such provision. Notwithstanding anything in this Agreement or elsewhere to the contrary, distributions upon termination of Executive’s employment may only be made upon a “separation from service” as determined under Section 409A of the Code. Each payment under this Agreement or otherwise shall be treated as a separate payment for purposes of Section 409A of the Code. In no event may Executive, directly or indirectly, designate the calendar year of any payment to be made under this Agreement or otherwise which constitutes a “deferral of compensation” within the meaning of Section 409A of the Code. All reimbursements and in-kind benefits provided under this Agreement shall be made or provided in accordance with the requirements of Section 409A of the Code. To

13


the extent that any reimbursements pursuant to this Agreement or otherwise are taxable to Executive, any reimbursement payment due to Executive shall be paid to Executive on or before the last day of Executive’s taxable year following the taxable year in which the related expense was incurred; provided, that, Executive has provided the Company written documentation of such expenses in a timely fashion and such expenses otherwise satisfy the Company’ expense reimbursement policies. Reimbursements pursuant to this Agreement or otherwise are not subject to liquidation or exchange for another benefit and the amount of such reimbursements that Executive receives in one taxable year shall not affect the amount of such reimbursements that Executive receives in any other taxable year. Notwithstanding any provision in this Agreement to the contrary, if on the date of his termination from employment with the Company, Executive is deemed to be a “specified employee” within the meaning of Code Section 409A and the Final Treasury Regulations using the identification methodology selected by the Company from time to time, or if none, the default methodology under Code Section 409A, any payments or benefits due upon a termination of Executive’s employment under any arrangement that constitutes a “deferral of compensation” within the meaning of Code Section 409A shall be delayed and paid or provided (or commence, in the case of installments) on the first payroll date on or following the earlier of (i) the date which is six (6) months and one (1) day after Executive’s termination of employment for any reason other than death, and (ii) the date of Executive’s death, and any remaining payments and benefits shall be paid or provided in accordance with the normal payment dates specified for such payment or benefit. Notwithstanding any of the foregoing to the contrary, the Company and its officers, directors, employees or agents make no guarantee that the terms of this Agreement as written comply with, or are exempt from, the provisions of Code Section 409A, and none of the foregoing shall have any liability for the failure of the terms of this Agreement as written to comply with, or be exempt from, the provisions of Code Section 409A.
[SIGNATURE PAGE FOLLOWS]


14



IN WITNESS WHEREOF , the Parties hereto have executed this Agreement as of the date first written above.
WARRIOR MET COAL, INC.
By: /s/ Kelli K. Gant                    
Name: Kelli K. Gant                    
Title: Chief Administrative Officer            


EXECUTIVE
/s/ Phillip C. Monroe                    
Name: Phillip C. Monroe                
Title: General Counsel                
 
 



15


EXHIBIT 31.1

CERTIFICATIONS

I, Walter J. Scheller, III, Chief Executive Officer, certify that:
1.
I have reviewed this Quarterly Report on Form 10-Q of Warrior Met Coal, Inc. (the “registrant”);
 
 
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(s) 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)) 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(s) 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 functions):
 
 
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.
 
 
 
 
 
 
 
 
WARRIOR MET COAL, INC.
Date:  August 1, 2018
By:
 
/s/ Walter J. Scheller, III
 
 
 
Walter J. Scheller, III
 
 
 
Chief Executive Officer





EXHIBIT 31.2

CERTIFICATIONS

I, Dale W. Boyles, Chief Financial Officer, certify that:
1.
I have reviewed this Quarterly Report on Form 10-Q of Warrior Met Coal, Inc. (the “registrant”);
 
 
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(s) 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)) 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(s) 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 functions):
 
 
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.
 
 
 
 
 
 
 
 
WARRIOR MET COAL, INC.
Date:  August 1, 2018
By:
 
/s/ Dale W. Boyles
 
 
 
Dale W. Boyles
 
 
 
Chief Financial Officer




EXHIBIT 32.1

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officers of Warrior Met Coal, Inc. (the “Company”), do hereby certify, to such officer’s knowledge, that:
The Quarterly Report on Form 10-Q for the quarter ended June 30, 2018 (the “Form 10-Q”) of the Company fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 and information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.  
 
 
 
WARRIOR MET COAL, INC.
 
 
 
 
 Date: August 1, 2018
By:
 
/s/ Walter J. Scheller, III
 
 
 
Walter J. Scheller, III
 
 
 
Chief Executive Officer
 
 
 
 
 Date: August 1, 2018
By:
 
/s/ Dale W. Boyles
 
 
 
Dale W. Boyles
 
 
 
Chief Financial Officer
 
 
 
 
 
This certification accompanies the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability under that section. This certification shall not be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended or the Exchange Act, except to the extent that the Company specifically incorporates it by reference.







Exhibit 95

Item 4. Mine Safety Disclosures
Mine Safety and Health Administration Safety Data
The Company is committed to the safety of its employees and to achieving a goal of providing a workplace that is incident free. In achieving this goal the Company has in place health and safety programs that include regulatory-based training, accident prevention, workplace inspection, emergency preparedness response, accident investigations and program auditing. These programs are designed to comply with regulatory mining-related coking coal safety and environmental standards. Additionally, the programs provide a basis for promoting a best-in-industry safety practice.
The operation of our mines is subject to regulation by the Mine Safety and Health Administration (“MSHA”) under the Federal Mine Safety and Health Act of 1977 (the “Mine Act”). MSHA inspects our mines on a continual basis and issues various citations and orders when it believes a violation has occurred under the Mine Act. As required by Section 1503 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, each operator of a coal or other mine is required to include certain mine safety results in its periodic reports filed with the Securities and Exchange Commission. Within this disclosure, we present information regarding certain mining safety and health citations which MSHA has issued with respect to our mining operations. In evaluating this information, consideration should be given to factors such as: (i) the number of citations and orders will vary depending on the size of the coal mine, (ii) the number of citations issued will vary from inspector to inspector and mine to mine, and (iii) citations and orders can be contested and appealed and, in that process, are sometimes dismissed and remaining citations are often reduced in severity and amount.
During the quarter ended June 30, 2018 none of the Company’s mining complexes received written notice from MSHA of (i) a pattern of violations of mandatory health or safety standards that are of such nature as could have significantly and substantially contributed to the cause and effect of coal or other mine health or safety hazards under section 104(e) of the Mine Act or (ii) the potential to have such a pattern.
The first table below presents the total number of specific citations and orders issued by MSHA to Warrior Met Coal, Inc., and its subsidiaries, together with the total dollar value of the proposed MSHA civil penalty assessments received, during the quarter ended June 30, 2018. The second table presents legal actions pending before the Federal Mine Safety and Health Review Commission (“FMSHRC”) for each of our mining complexes as of June 30, 2018 together with the number of legal actions initiated and the number of legal actions resolved during the quarter ended June 30, 2018.

Mining Complex (1) (3)
 
Section 104
S&S Citations
 
Section 104(b) Orders
 
Section 104(d) Citations and Orders
 
Section 110(b)(2) Violations
 
Section 107(a) Orders
 
Proposed MSHA Assessments (2)
($ in thousands)
 
Fatalities
Warrior Met Coal Mining, LLC, No. 4
 
32
 
 
 
 
 
29.0
 
Warrior Met Coal Mining, LLC, No. 7
 
23
 
 
1
 
 
 
70.0
 

(1)
MSHA assigns an identification number to each coal mine and may or may not assign separate identification numbers to related facilities such as preparation plants. We are providing the information in the table by mining complex rather than MSHA identification number because we believe that this presentation is more useful to investors. For descriptions of each of these mining operations, please refer to the descriptions under “Part 1, Item 1. Business—Description of Our Business” in our Annual Report on Form 10-K for the year ended December 31, 2017. Idle facilities are not included in the table above unless they received a citation, order or assessment by MSHA during the current quarterly reporting period or are subject to pending legal actions.
(2)
Amounts listed under this heading include proposed assessments received from MSHA in the current quarterly reporting period for alleged violations, regardless of the issuance date of the related citation or order.




(3)
The table includes references to specific sections of the Mine Act as follows:
Section 104 S&S Citations include citations for health or safety standards that could significantly and substantially contribute to serious injury if left unabated.
Section 104(b) Orders represent failures to abate a citation under 104(a) within the period of time prescribed by MSHA and that the period of time prescribed for the abatement should not be further extended. This results in an order of immediate withdrawal from the area of the mine affected by the condition until MSHA determines that the violation has been abated.
Section 104(d) Citations and Orders are for unwarrantable failure to comply with mandatory health and safety standards where such violation is of such a nature as could significantly or substantially contribute to the cause and effect of a coal or other mine safety or health hazard.
Section 110(b)(2) Violations are for flagrant violations.
Section 107(a) Orders are for situations in which MSHA determined an imminent danger existed.



Mining Complex Legal Actions (1)
 
Pending as of
June 30, 2018
 
Initiated During Q2 2018
 
Resolved During Q2 2018
 
 
 
 
 
 
 
Warrior Met Coal Mining, LLC, No. 4
 
 
 
 
 
 
29 CFR Part 2700, Subpart B
 
 
 
29 CFR Part 2700, Subpart C
 
6
 
3
 
7
29 CFR Part 2700, Subpart D
 
 
 
29 CFR Part 2700, Subpart E
 
 
 
29 CFR Part 2700, Subpart F
 
 
 
29 CFR Part 2700, Subpart H
 
 
 
 
 
 
 
 
 
 
Warrior Met Coal Mining, LLC, No. 7
 
 
 
 
 
 
29 CFR Part 2700, Subpart B
 
 
 
29 CFR Part 2700, Subpart C
 
2
 
3
 
9
29 CFR Part 2700, Subpart D
 
 
 
29 CFR Part 2700, Subpart E
 
 
 
1
29 CFR Part 2700, Subpart F
 
 
 
29 CFR Part 2700, Subpart H
 
 
 
(1)
Effective January 27, 2011, SEC adopted amendments to its rules to implement Section 1503 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “final rule”). The final rule modified previous reporting requirements and requires that the total number of legal actions pending before the FMSHRC as of the last day of the time period covered by the report be categorized according to type of proceeding, in accordance with the categories established in the Procedural Rules of FMSHRC. SEC rules require that six different categories of pending legal actions be disclosed. Categories for which there is no pending litigation for the respective mine are not listed in the table. The types of proceedings are listed as follows:
“29 CFR Part 2700, Subpart B” These legal actions include proceedings initiated under FMSHRC Procedural Rule 29 CFR Part 2700, Subpart B such as contests of citations and orders filed prior to receipt of a proposed penalty assessment from MSHA, contests related to orders for which penalties are not assessed (such as imminent danger orders under Section 107 of the Mine Act), and emergency response plan dispute proceedings.
“29 CFR Part 2700, Subpart C” These legal actions include proceedings initiated under FMSHRC Procedural Rule 29 CFR Part 2700, Subpart C and are contests of citations and orders after receipt of proposed penalties.
“29 CFR Part 2700, Subpart D” These legal actions include proceedings initiated under FMSHRC Procedural Rule 29 CFR Part 2700, Subpart D and are complaints for compensation, which are cases under section 111 of the Mine Act.
“29 CFR Part 2700, Subpart E” These legal actions include proceedings initiated under FMSHRC Procedural Rule 29 CFR Part 2700, Subpart E and are complaints of discharge, discrimination or interference and temporary reinstatement under section 105 of the Mine Act.
“29 CFR Part 2700, Subpart F” These legal actions include proceedings initiated under FMSHRC Procedural Rule 29 CFR Part 2700, Subpart F such as applications for temporary relief under section 105(b)(2) of the Mine Act from any modification or termination of any




order issued thereunder, or from any order issued under section 104 of the Mine Act (other than citations issued under section 104(a) or (f) of the Mine Act).
“29 CFR Part 2700, Subpart H” These legal actions include proceedings initiated under FMSHRC Procedural Rule 29 CFR Part 2700, Subpart H and are appeals of judges’ decisions or orders to FMSHRC, including petitions for discretionary review and review by FMSHRC on its own motion.