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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

☒Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended June 30, 2024

☐Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to .

Commission file number: 1-13105

Arch Resources, Inc.

(Exact name of registrant as specified in its charter)


Delaware		43-0921172
(State or other jurisdiction		(I.R.S. Employer
of incorporation or organization)		Identification Number)


One CityPlace Drive
Suite 300
St. Louis
Missouri		63141
(Address of principal executive offices)		(Zip code)
Registrant’s telephone number, including area code: (314) 994-2700 (Former name, former address and former fiscal year, if changed since last report)

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


Title of each class	Trading symbol	Name of each exchange on which registered
Common stock, $.01 par value	ARCH	New York Stock Exchange

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 ☒ No ☐

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

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


Large accelerated filer	☒	Accelerated filer	☐

Non-accelerated filer	☐	Smaller reporting company	☐

		Emerging growth company	☐

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

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

At July 22, 2024 there were 18,084,477 shares of the registrant’s common stock outstanding.

Table of Contents

TABLE OF CONTENTS


	Page
Part I FINANCIAL INFORMATION	3
Item 1. Financial Statements	3
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3. Quantitative and Qualitative Disclosures About Market Risk	41
Item 4. Controls and Procedures	41
Part II OTHER INFORMATION	42
Item 1. Legal Proceedings	42
Item 1A. Risk Factors	42
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	42
Item 4. Mine Safety Disclosures	42
Item 5. Other Information	43
Item 6. Exhibits	44
Signatures	50

Table of Contents

Part I

FINANCIAL INFORMATION

Item 1.Financial Statements.

Arch Resources, Inc. and Subsidiaries

Condensed Consolidated Income Statements

(in thousands, except per share data)



	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023

	(Unaudited)				(Unaudited)
Revenues	$	608,751	$	757,294	$	1,288,941	$	1,627,225
Costs, expenses and other operating
Cost of sales (exclusive of items shown separately below)		528,684		606,127		1,096,407		1,177,864
Depreciation, depletion and amortization		38,439		36,077		77,259		71,556
Accretion on asset retirement obligations		5,870		5,293		11,739		10,585
Selling, general and administrative expenses		22,518		22,791		48,105		48,813
Other operating income, net		(2,410)		(2,010)		(18,393)		(7,179)
		593,101		668,278		1,215,117		1,301,639

Income from operations		15,650		89,016		73,824		325,586

Interest expense, net
Interest expense		(3,933)		(3,537)		(8,249)		(7,663)
Interest and investment income		5,403		4,201		11,503		7,537
		1,470		664		3,254		(126)

Income before nonoperating expenses		17,120		89,680		77,078		325,460

Nonoperating expense
Non-service related pension and postretirement benefit (costs) credits		(285)		593		(571)		1,185
Net loss resulting from early retirement of debt		—		—		—		(1,126)
		(285)		593		(571)		59

Income before income taxes		16,835		90,273		76,507		325,519
Provision for income taxes		2,002		12,920		5,721		50,058
Net income	$	14,833	$	77,353	$	70,786	$	275,461

Net income per common share
Basic earnings per share	$	0.82	$	4.20	$	3.88	$	15.16
Diluted earnings per share	$	0.81	$	4.04	$	3.82	$	14.16
Weighted average shares outstanding
Basic weighted average shares outstanding		18,097		18,406		18,222		18,165
Diluted weighted average shares outstanding		18,295		19,135		18,535		19,459
Dividends declared per common share	$	1.11	$	2.45	$	2.76	$	5.56

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

Table of Contents

Arch Resources, Inc. and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income

(in thousands)



	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023

	(Unaudited)					(Unaudited)
Net income	$	14,833	$	77,353	$	70,786	$	275,461

Pension, postretirement and other post-employment benefits
Comprehensive loss before tax		(2,006)		(2,895)		(4,012)		(5,790)
Provision for income taxes		427		636		854		1,272
		(1,579)		(2,259)		(3,158)		(4,518)
Available-for-sale securities
Comprehensive income (loss) before tax		13		(24)		9		(39)
Provision for income taxes		(3)		5		(2)		8
		10		(19)		7		(31)

Total other comprehensive loss		(1,569)		(2,278)		(3,151)		(4,549)
Total comprehensive income	$	13,264	$	75,075	$	67,635	$	270,912

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

Table of Contents

Arch Resources, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(in thousands, except per share data)


	June 30, 2024		December 31, 2023
Assets
Current assets
Cash and cash equivalents	$	243,707	$	287,807
Short-term investments		35,583		32,724
Restricted cash		1,100		1,100
Trade accounts receivable (net of $0 allowance at June 30, 2024 and December 31, 2023)		241,910		273,522
Other receivables		6,005		13,700
Inventories		249,865		244,261
Other current assets		52,621		64,653
Total current assets		830,791		917,767
Property, plant and equipment, net		1,244,597		1,228,891
Other assets
Deferred income taxes		119,310		124,024
Equity investments		22,861		22,815
Fund for asset retirement obligations		146,010		142,266
Other noncurrent assets		46,999		48,410
Total other assets		335,180		337,515
Total assets	$	2,410,568	$	2,484,173

Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable	$	186,549	$	205,001
Accrued expenses and other current liabilities		111,062		127,617
Current maturities of debt		29,721		35,343
Total current liabilities		327,332		367,961
Long-term debt		101,661		105,252
Asset retirement obligations		263,098		255,740
Accrued pension benefits		832		878
Accrued postretirement benefits other than pension		46,800		47,494
Accrued workers’ compensation		157,663		154,650
Other noncurrent liabilities		62,617		72,742
Total liabilities		960,003		1,004,717
Stockholders' equity
Common stock, $0.01 par value, authorized 300,000 shares, issued 30,786 and 30,557 shares at June 30, 2024 and December 31, 2023, respectively		308		306
Paid-in capital		758,880		720,029
Retained earnings		1,849,622		1,830,018
Treasury stock, 12,701 and 12,197 shares at June 30, 2024 and December 31, 2023, respectively, at cost		(1,193,876)		(1,109,679)
Accumulated other comprehensive income		35,631		38,782
Total stockholders’ equity		1,450,565		1,479,456
Total liabilities and stockholders’ equity	$	2,410,568	$	2,484,173

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

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Arch Resources, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(in thousands)


	Six Months Ended June 30,
	2024		2023

Operating activities
Net income	$	70,786	$	275,461
Adjustments to reconcile to cash from operating activities:
Depreciation, depletion and amortization		77,259		71,556
Accretion on asset retirement obligations		11,739		10,585
Deferred income taxes		5,567		49,824
Employee stock-based compensation expense		10,445		13,206
Amortization relating to financing activities		1,441		884
Gain on disposals and divestitures, net		(150)		(393)
Reclamation work completed		(4,451)		(11,757)
Contribution to fund for asset retirement obligations		(3,745)		(2,664)
Changes in:
Receivables		39,306		(13,057)
Inventories		(5,604)		(40,295)
Accounts payable, accrued expenses and other current liabilities		(29,223)		(53,729)
Income taxes, net		(45)		(828)
Other		14,121		24,093
Cash provided by operating activities		187,446		322,886
Investing activities
Capital expenditures		(92,366)		(76,606)
Minimum royalty payments		(988)		(1,113)
Proceeds from disposals and divestitures		199		439
Purchases of short-term investments		(30,535)		(13,772)
Proceeds from sales of short-term investments		27,846		17,488
Investments in and advances to affiliates, net		(6,516)		(9,927)
Cash used in investing activities		(102,360)		(83,491)
Financing activities
Proceeds from issuance of term loan due 2025		20,000		—
Payments on term loan due 2025		(3,333)		—
Payments on term loan due 2024		(3,502)		(1,500)
Payments on convertible debt		—		(58,430)
Net payments on other debt		(21,992)		(24,849)
Debt financing costs		(1,516)		—
Purchases of treasury stock		(30,747)		(93,803)
Dividends paid		(63,757)		(111,913)
Payments for taxes related to net share settlement of equity awards		(24,339)		(27,217)
Proceeds from warrants exercised		—		43,750
Cash used in financing activities		(129,186)		(273,962)
Decrease in cash and cash equivalents, including restricted cash		(44,100)		(34,567)
Cash and cash equivalents, including restricted cash, beginning of period	$	288,907	$	237,159
Cash and cash equivalents, including restricted cash, end of period	$	244,807	$	202,592
Cash and cash equivalents, including restricted cash, end of period
SUPPLEMENTAL CASH FLOW INFORMATION
Cash and cash equivalents	$	243,707	$	201,492
Restricted Cash		1,100		1,100
Cash and cash equivalents, including restricted cash, end of period	$	244,807	$	202,592

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

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Arch Resources, Inc. and Subsidiaries

Condensed Consolidated Statements of Stockholders’ Equity

(Unaudited)


							Treasury		Accumulated Other
	Common		Paid-In		Retained		Stock at		Comprehensive
	Stock		Capital		Earnings		Cost		Income		Total

	(In thousands, except per share data)
Balances at January 1, 2024	$	306	$	720,029	$	1,830,018	$	(1,109,679)	$	38,782	$	1,479,456
Dividends on common shares		—		—		(30,671)		—		—		(30,671)
Dividend Equivalents earned on RSU grants		—		72		(679)		—		—		(607)
Purchase of 94,701 shares of common stock under share repurchase program		—		—		—		(16,432)		—		(16,432)
Receipt of 315,721 shares from the exercise of capped call		—		52,624		—		(52,624)		—		—
Employee stock-based compensation		—		5,588		—		—		—		5,588
Common stock withheld related to net share settlement of equity awards		—		(24,259)		—		—		—		(24,259)
Issuance of 227,981 shares of common stock under long-term incentive plan		2		—		—		—		—		2
Total comprehensive income (loss)		—		—		55,953		—		(1,582)		54,371
Balances at March 31, 2024	$	308	$	754,054	$	1,854,621	$	(1,178,735)	$	37,200	$	1,467,448

Dividends on common shares		—		—		(20,072)		—		—		(20,072)
Dividend equivalents earned on RSU grants		—		49		240		—		—		289
Purchase of 94,367 shares of common stock under share repurchase program		—		—		—		(15,141)		—		(15,141)
Employee stock-based compensation		—		4,857		—		—		—		4,857
Common stock withheld related to net share settlement of equity awards		—		(80)		—		—		—		(80)
Total comprehensive income (loss)		—		—		14,833		—		(1,569)		13,264
Balances at June 30, 2024	$	308	$	758,880	$	1,849,622	$	(1,193,876)	$	35,631	$	1,450,565

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Arch Resources, Inc. and Subsidiaries

Condensed Consolidated Statements of Stockholders’ Equity

(Unaudited)


							Treasury		Accumulated Other
	Common		Paid-In		Retained		Stock at		Comprehensive
	Stock		Capital		Earnings		Cost		Income		Total

	(In thousands, except per share data)
Balances at January 1, 2023	$	288	$	724,660	$	1,565,374	$	(986,171)	$	61,429	$	1,365,580
Dividends on common shares		—		—		(55,140)		—		—		(55,140)
Dividend Equivalents earned on RSU grants		—		120		(2,354)		—		—		(2,234)
Purchase of 131,156 shares of common stock under share repurchase program		—		(13)		—		(18,994)		—		(19,007)
Employee stock-based compensation		—		6,767		—		—		—		6,767
Cash paid for convertible debt repurchased		—		(44,486)		—		—		—		(44,486)
Issuance of 275,053 shares of common stock under long-term incentive plan		3		—		—		—		—		3
Common stock withheld related to net share settlement of equity awards		—		(27,055)		—		—		—		(27,055)
Issuance of 1,037,679 shares of common stock for warrants exercised		10		43,719		—		—		—		43,729
Total comprehensive income		—		—		198,108		—		(2,271)		195,837
Balances at March 31, 2023	$	301	$	703,712	$	1,705,988	$	(1,005,165)	$	59,158	$	1,463,994

Dividends on common shares		—		—		(45,011)		—		—		(45,011)
Dividend equivalents earned on RSU grants		—		98		(669)		—		—		(571)
Purchase of 623,304 shares of common stock under share repurchase program		—		—		—		(74,231)		—		(74,231)
Employee stock-based compensation		—		6,439		—		—		—		6,439
Common stock withheld related to net share settlement of equity awards		—		(162)		—		—		—		(162)
Issuance of 29,487 shares of common stock for warrants exercised		—		31		—		—		—		31
Total comprehensive income (loss)		—		—		77,353		—		(2,278)		75,075
Balances at June 30, 2023	$	301	$	710,118	$	1,737,661	$	(1,079,396)	$	56,880	$	1,425,564

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

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Arch Resources, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(unaudited)

1. Basis of Presentation

The accompanying unaudited condensed consolidated financial statements include the accounts of Arch Resources, Inc. (“Arch Resources”) and its subsidiaries and controlled entities (“Arch” or the “Company”). Unless the context indicates otherwise, the terms “Arch” and the “Company” are used interchangeably in this Quarterly Report on Form 10-Q. The Company’s primary business is the production of metallurgical and thermal coal from underground and surface mines located throughout the United States, for sale to steel producers, utility companies, and industrial accounts both in the United States and around the world. The Company currently operates mining complexes in West Virginia, Wyoming and Colorado. All subsidiaries are wholly owned. Intercompany transactions and accounts have been eliminated in consolidation.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial reporting and U.S. Securities and Exchange Commission regulations. In the opinion of management, all adjustments, consisting of normal, recurring accruals considered necessary for a fair presentation, have been included. Results of operations for the three and six months ended June 30, 2024 are not necessarily indicative of results to be expected for the year ending December 31, 2024. These financial statements should be read in conjunction with the audited financial statements and related notes as of and for the year ended December 31, 2023 included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 filed with the U.S. Securities and Exchange Commission.

2. Accounting Policies

Recently Adopted Accounting Guidance

There is no recently issued accounting guidance effective that is expected to have a material impact on the Company’s financial position, results of operations, or liquidity.

Recent Accounting Guidance Issued Not Yet Effective

In November 2023, the FASB issued ASU 2023-07 Segment Reporting – Improving Reportable Segment Disclosures (Topic 280). The update is intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant expenses. The ASU requires disclosure to include significant segment expenses that are regularly provided to the chief operating decision maker (CODM), a description of other segment items by reportable segment, and any additional measures of a segment’s profit or loss used by the CODM when deciding how to allocate resources. The ASU also requires all annual disclosures currently required by Topic 280 to be included in interim periods. The update is effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted and requires retrospective application to all prior periods presented in the financial statements. The Company is currently assessing the timing and impact of adopting the updated provisions.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which includes amendments that further enhance income tax disclosures, primarily through standardization and disaggregation of rate reconciliation categories and income taxes paid by jurisdiction. The amendments are effective for the Company’s annual periods beginning June 1, 2025, with early adoption permitted, and should be applied either prospectively or retrospectively. The Company is currently evaluating the ASU to determine its impact on the Company’s disclosures.

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3. Accumulated Other Comprehensive Income (Loss)

The following items are included in accumulated other comprehensive income (loss) (“AOCI”), net of tax:


	Pension,
	Postretirement				Accumulated
	and Other Post-				Other
	Employment		Available-for-		Comprehensive
	Benefits		Sale Securities		Income (loss)

Balances at December 31, 2023	$	38,783	$	(1)	$	38,782
Unrealized gains		—		17		17
Amounts reclassified from accumulated other comprehensive income		(4,012)		(8)		(4,020)
Tax effect		854		(2)		852
Balances at June 30, 2024	$	35,625	$	6	$	35,631

The following amounts were reclassified out of AOCI:


	Three Months Ended June 30,				Six Months Ended June 30,				Line Item in the Condensed Consolidated
Details About AOCI Components	2024		2023		2024		2023		Income Statements

	(In thousands)
Pension, postretirement and other post-employment benefits
Amortization of actuarial gains, net ¹	$	2,006	$	2,858	$	4,012	$	5,717	Non-service related pension and postretirement benefit credits
Amortization of prior service credits		—		37		—		73	Non-service related pension and postretirement benefit credits
		2,006		2,895		4,012		5,790	Total before tax
		(427)		(636)		(854)		(1,272)	Provision for income taxes
	$	1,579	$	2,259	$	3,158	$	4,518	Net of tax

Available-for-sale securities ²	$	(1)	$	1	$	8	$	(21)	Interest and investment income
		3		3		2		8	Provision for income taxes
	$	2	$	4	$	10	$	(13)	Net of tax

¹ Production-related benefits and workers’ compensation costs are included in costs of sales.

² The gains and losses on sales of available-for-sale-securities are determined on a specific identification basis.

4. Inventories

Inventories consist of the following:


	June 30,		December 31,
	2024		2023

	(In thousands)
Coal	$	99,776	$	99,174
Repair parts and supplies		150,089		145,087
	$	249,865	$	244,261

The repair parts and supplies are stated net of an allowance for slow-moving and obsolete inventories of $1.6 million at June 30, 2024 and December 31, 2023, respectively.

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5. Investments in Available-for-Sale Securities

The Company has invested in marketable debt securities, primarily highly liquid U.S. Treasury securities and investment grade corporate bonds. These investments are held in the custody of a major financial institution. These securities are classified as available-for-sale securities and, accordingly, the unrealized gains and losses are recorded through other comprehensive income.

The Company’s investments in available-for-sale marketable securities are as follows:


	June 30, 2024

			Gross					Allowance
			Unrealized					for - Credit	Fair
	Cost Basis		Gains		Losses			Losses	Value

	(In thousands)
Available-for-sale:
U.S. government and agency securities	$	17,326	$	10	$	(8)	$	—	$	17,328
Corporate notes and bonds		18,240		22		(7)		—		18,255
Total Investments	$	35,566	$	32	$	(15)	$	—	$	35,583


	December 31, 2023

			Gross					Allowance
			Unrealized					for - Credit	Fair
	Cost Basis		Gains			Losses		Losses	Value

	(In thousands)
Available-for-sale:
U.S. government and agency securities	$	28,764	$	14	$	(5)	$	—	$	28,773
Corporate notes and bonds		3,951		1		(1)		—		3,951
Total Investments	$	32,715	$	15	$	(6)	$	—	$	32,724

The aggregate fair value of investments with unrealized losses that had been owned for less than a year was $10.6 million and $2.2 million at June 30, 2024 and December 31, 2023, respectively. The aggregate fair value of investments with unrealized losses that were owned for over a year was $1.2 million and $2.3 million at June 30, 2024 and December 31, 2023, respectively. The unrealized losses in the Company’s portfolio at June 30, 2024 are the result of normal market fluctuations. The Company does not intend to sell these investments before recovery of their amortized cost base.

The debt securities outstanding at June 30, 2024 have maturity dates ranging from the third quarter of 2024 through the fourth quarter of 2025. The Company classifies its investments as current based on the nature of the investments and their availability to provide cash for use in current operations, if needed.

6. Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consist of the following:


	June 30,		December 31,
	2024		2023

	(In thousands)
Payroll and employee benefits	$	34,674	$	37,259
Taxes other than income taxes		36,043		51,155
Interest		2,468		2,395
Workers’ compensation		17,070		18,724
Asset retirement obligations		6,018		6,089
Other		14,789		11,995
	$	111,062	$	127,617

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7. Debt and Financing Arrangements


	June 30,		December 31,
	2024		2023

	(In thousands)
Term loan due 2025 ($16.7 million face value)	$	16,667	$	—
Term loan due 2024		—		3,502
Tax Exempt Bonds ($98.1 million face value)		98,075		98,075
Other		18,536		40,529
Debt issuance costs		(1,896)		(1,511)
		131,382		140,595
Less: current maturities of debt		29,721		35,343
Long-term debt	$	101,661	$	105,252

Term Loan Facility

On February 8, 2024, the Company entered into a new senior secured term loan credit agreement in the principal amount of $20.0 million (the “Term Loan”) with PNC Bank, National Association, as administrative and collateral agent. The Term Loan requires quarterly principal amortization payments of $3.3 million and matures on June 30, 2025. The interest rate on the facility is, at the option of Arch Resources, either (i) Secured Overnight Financing Rate (“SOFR”) plus a SOFR adjustment of .10% plus an applicable margin of 3.00%, subject to a SOFR floor of 0.00%, or (ii) a base rate plus an applicable margin of 2.00%.

The Term Loan is guaranteed by substantially all of the domestic subsidiaries of the Company. Additionally, the Term Loan is secured by substantially all the assets of the Company and the guarantors, subject to customary exceptions (including an exclusion for owned and leased real property).

The Term Loan contains the following financial maintenance covenants: (i) total net leverage not to exceed 2.00 to 1.00 for the trailing four fiscal quarters; (ii) the ratio of Consolidated EBITDA to Consolidated Interest Expense to be less than 3.50 to 1.00 for the trailing four fiscal quarters; and (iii) liquidity of not less than $100 million at any time.

The Term Loan is subject to certain usual and customary mandatory prepayment events, including 100% of net cash proceeds of debt issuances (other than debt permitted to be incurred under the terms of the Term Loan).

The Term Loan contains customary affirmative and negative covenants and representations; and customary events of default, subject to customary thresholds and exceptions. As of June 30, 2024, the Company was in compliance with the Term Loan debt covenants.

The proceeds from the Term Loan were used to pay off the $3.5 million balance of the term loan debt facility due 2024. Additionally, the Company incurred approximately $1.5 million in debt issuance costs related to the Term Loan.

Accounts Receivable Securitization Facility

On August 3, 2022, the Company amended and extended its existing trade accounts receivable securitization facility provided to Arch Receivable Company, LLC, a special-purpose entity that is a wholly owned subsidiary of Arch Resources (“Arch Receivable”) (the “Securitization Facility”), which supports the issuance of letters of credit and requests for cash advances. The amendment to the Securitization Facility increased the size of the facility from $110 million to $150 million of borrowing capacity and extended the maturity date to August 1, 2025.

Under the Securitization Facility, Arch Receivable, Arch Resources and certain of Arch Resources’ subsidiaries party to the Securitization Facility have granted to the administrator of the Securitization Facility a first priority security interest in eligible trade accounts receivable generated by such parties from the sale of coal and all proceeds thereof. As

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of June 30, 2024, letters of credit totaling $51.9 million were outstanding under the facility with $62.8 million available for borrowings.

Inventory-Based Revolving Credit Facility

On August 3, 2022, Arch Resources amended the senior secured inventory-based revolving credit facility in an aggregate principal amount of $50 million (the “Inventory Facility”). Availability under the Inventory Facility is subject to a borrowing base consisting of (i) 85% of the net orderly liquidation value of eligible coal inventory, plus (ii) the lesser of (x) 85% of the net orderly liquidation value of eligible parts and supplies inventory and (y) 35% of the amount determined pursuant to clause (i), plus (iii) 100% of Arch Resources’ Eligible Cash (defined in the Inventory Facility), subject to reduction for reserves imposed by Regions.

The amendment of the Inventory Facility extended the maturity of the facility to August 3, 2025; maintained the minimum liquidity requirement of $100 million and included provisions that reduce the advance rates for coal inventory and parts and supplies, depending on liquidity, as defined in the agreement.

The Inventory Facility contains certain customary affirmative and negative covenants; events of default, subject to customary thresholds and exceptions; and representations, including certain cash management and reporting requirements that are customary for asset-based credit facilities. The Inventory Facility also includes a requirement to maintain liquidity equal to or exceeding $100 million at all times. As of June 30, 2024, letters of credit totaling $26.2 million were outstanding under the facility with $23.8 million available for borrowings.

Equipment Financing

On July 29, 2021, the Company entered into an equipment financing arrangement accounted for as debt. The Company received $23.5 million in exchange for conveying an interest in certain equipment in operation at its Powder River Basin operations and entered into a master lease arrangement for that equipment. The financing arrangement contains customary terms and events of default and provides for 42 monthly payments with an average implied interest rate of 7.35% maturing on February 1, 2025. Upon maturity, the Company will have the option to purchase the equipment.

Tax Exempt Bonds

On July 2, 2020, the West Virginia Economic Development Authority (the “Issuer”) issued $53.1 million aggregate principal amount of Solid Waste Disposal Facility Revenue Bonds (Arch Resources Project), Series 2020 (the “Tax Exempt Bonds”) pursuant to an Indenture of Trust dated as of June 1, 2020 (the “Indenture of Trust”) between the Issuer and Citibank, N.A., as trustee (the “Trustee”). On March 4, 2021, the Issuer issued an additional $45.0 million of Series 2021 Tax Exempt Bonds. The proceeds of the Tax Exempt Bonds were loaned to the Company pursuant to a Loan Agreement dated as of June 1, as supplemented by a First Amendment to Loan Agreement dated as of March 1, 2021 (collectively, the “Loan Agreement”), each between the Issuer and the Company. The Tax Exempt Bonds are payable solely from payments to be made by the Company under the Loan Agreement as evidenced by a Note from the Company to the Trustee. The proceeds of the Tax Exempt Bonds have been used to finance certain costs of the acquisition, construction, reconstruction, and equipping of solid waste disposal facilities at the Company’s Leer South development, and for capitalized interest and certain costs related to issuance of the Tax Exempt Bonds.

The Tax Exempt Bonds bear interest payable each January 1 and July 1, commencing January 1, 2021 for the Series 2020 and July 1, 2021 for the Series 2021, and have a final maturity of July 1, 2045; however, the Tax Exempt Bonds are subject to mandatory tender on July 1, 2025 at a purchase price equal to 100% of the principal amount of the Tax Exempt Bonds, plus accrued interest to July 1, 2025. The Series 2020 and Series 2021 Tax Exempt Bonds bear interest of 5% and 4.125%, respectively.

Convertible Debt

On November 3, 2020, the Company issued $155.3 million in aggregate principal amount of 5.25% convertible senior notes due 2025 (“Convertible Notes ” or “Convertible Debt”). The net proceeds from the issuance of the

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Convertible Notes, after deducting offering related costs of $5.1 million and cost of a “Capped Call Transaction” as defined below of $17.5 million, were approximately $132.7 million.

During the six months ended June 30, 2023, the Company repurchased the remaining Convertible Notes with a principal amount of $13.2 million for aggregate consideration consisting of $58.4 million in cash. In connection with the repurchase, the Company recognized a loss of $1.1 million. This amount is included as “Net loss resulting from early retirement of debt” in the accompanying Condensed Consolidated Income Statements.

Capped Call Transactions

On February 16, 2024, Arch Resources, Inc. (the “Company”) agreed with each of Bank of Montreal, Goldman Sachs & Co. LLC and Jefferies International Limited (each a “Counterparty” and collectively, the “Counterparties”) to terminate and unwind certain capped call transactions by and between the Company and each Counterparty (such transactions, the “Capped Calls”). The Company entered into the Capped Calls in connection with the offering of its now-retired Convertible Notes, in order to reduce the potential dilution upon conversion of the notes. During the six months ended June 30, 2024, the Company retired 315,721 of its outstanding shares via the termination and unwinding of the capped calls.

8. Income Taxes

The Company's effective tax rate for six months ended June 30, 2024 is based on its estimated full year effective tax rate, adjusted for discrete items. The effective tax rate for the three and six months ended June 30, 2024 was 12% and 7.5%, respectively. The effective tax rate for the three and six months ended June 30, 2024 differ from the U.S. federal statutory rate of 21%, primarily due to the income tax benefit for excess percentage depletion. The effective tax rate for six months ended June 30, 2024 also includes the impact of discrete tax benefits related to equity compensation.

For the three and six months ended June 30, 2023, the Company's effective tax rate was 14.3% and 15.4%, respectively. The effective tax rate for the three and six months ended June 30, 2023 differs from the U.S. federal statutory rate of 21%, primarily due to the income tax benefit for excess percentage depletion and discrete tax benefits related to equity compensation.

9. Fair Value Measurements

The hierarchy of fair value measurements assigns a level to fair value measurements based on the inputs used in the respective valuation techniques. The levels of the hierarchy, as defined below, give the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs.

●

Level 1 is defined as observable inputs such as quoted prices in active markets for identical assets. Level 1 assets include U.S. Treasury securities.

●

Level 2 is defined as observable inputs other than Level 1 prices. These include quoted prices for similar assets or liabilities in an active market, quoted prices for identical assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. The Company’s Level 2 assets and liabilities include U.S. government agency securities, with fair values derived from quoted prices in over-the-counter markets or from prices received from direct broker quotes.

●

Level 3 is defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.

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The table below sets forth, by level, the Company’s financial assets and liabilities that are recorded at fair value in the accompanying Condensed Consolidated Balance Sheet:


	June 30, 2024
	Total		Level 1		Level 2		Level 3

	(In thousands)
Assets:
Investments in marketable securities	$	35,583	$	17,328	$	18,255	$	—
Fund for asset retirement obligations		146,010		146,010		—		—
Total assets	$	181,593	$	163,338	$	18,255	$	—


	December 31, 2023
	Total		Level 1		Level 2		Level 3

	(In thousands)
Assets:
Investments in marketable securities	$	32,724	$	28,773	$	3,951	$	—
Fund for asset retirement obligations		142,266		142,266		—		—
Total assets	$	174,990	$	171,039	$	3,951	$	—

Fair Value of Long-Term Debt

At June 30, 2024 and December 31, 2023, the fair value of the Company’s debt, including amounts classified as current, was $133.3 million and $142.1 million, respectively. Fair values are based upon observed prices in an active market, when available, or from valuation models using market information, which fall into Level 2 in the fair value hierarchy.

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10. Earnings per Common Share

The Company computes basic net income per share using the weighted average number of common shares outstanding during the period. Diluted net income per share is computed using the weighted average number of common shares and the effect of potentially dilutive securities outstanding during the period. Potentially dilutive securities may consist of warrants, restricted stock units, and convertible debt. The dilutive effect of outstanding warrants and restricted stock units is reflected in diluted earnings per share by application of the treasury stock method whereas the Convertible Debt uses the if converted method.

The following table provides the basic and diluted earnings per share by reconciling the numerators and denominators of the computations:



		Three Months Ended June 30,			Six Months Ended June 30,
		2024		2023	2024		2023

(In Thousands)
Net income attributable to common shares	$	14,833	$	77,353	$	70,786	$	275,461
Adjustment of interest expense attributable to Convertible Notes		—		—		—		108
Diluted net income attributable to common stockholders		14,833		77,353		70,786		275,569

Basic weighted average shares outstanding		18,097		18,406		18,222		18,165
Effect of dilutive securities		198		729		313		1,126
Convertible Notes (a)		—		—		—		168
Diluted weighted average shares outstanding		18,295		19,135		18,535		19,459

(a)

Diluted weighted average common shares outstanding includes the dilutive effect had the Company's Convertible Notes been converted at the beginning of the year ended December 31, 2023. If converted by the holder, the Company may settle in cash, shares of the Company's common stock or a combination thereof, at the Company's election. The Capped Call Transaction is anti-dilutive and is excluded from the calculation of diluted earnings per share.

11. Workers’ Compensation Expense

The Company is liable under the Federal Mine Safety and Health Act of 1969, as subsequently amended, to provide for pneumoconiosis (occupational disease) benefits to eligible employees, former employees and dependents. The Company currently provides for federal claims principally through a self-insurance program. The Company is also liable under various state workers’ compensation statutes for occupational disease benefits. The occupational disease benefit obligation represents the present value of the actuarially computed present and future liabilities for such benefits over the employees’ applicable years of service.

In October 2019, the Company filed an application with the Office of Workers’ Compensation Programs (“OWCP”) within the Department of Labor for reauthorization to self-insure federal black lung benefits. In February 2020, the Company received a reply from the OWCP confirming its status to remain self-insured contingent upon posting additional collateral of $71.1 million within 30 days of receipt of the letter. The Company is currently appealing the ruling from the OWCP and has received an extension to self-insure during the appeal process.

On January 18, 2023, the OWCP proposed revisions to regulations under the Black Lung Benefits Act governing authorization of self-insurers. The revisions seek to codify the practice of basing a self-insured operator’s security requirement on an actuarial assessment of its total present and future black lung liability. A material change to the regulations is the requirement that all self-insured operators must post security equal to 120% of their projected black lung liabilities.

The proposed regulations were posted to the Federal Register on January 19, 2023 with written comments to be accepted within 60 days of this date. A subsequent extended comment period expired on April 19, 2023. On May 10,

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2024, the OWCP forwarded its final rule establishing requirements for Black Lung Benefits Act self-insurance to the Office of Management and Budget (“OMB”) for review. OMB is charged by various executive orders to review significant regulations. OMB reviews are limited to 90 days and may be extended by an additional 30 days; however, OMB reviews often take longer. At this stage in the rulemaking process, no rule text is publicly available, and the final regulations have not yet been published.

If the above regulation is codified into law, the Company will be required to post additional collateral to maintain its self-insured status. The Company is evaluating alternatives to self-insurance, including the purchase of commercial insurance to cover these claims. Additionally, the Company is assessing additional sources of liquidity, and other items to satisfy the proposed regulations.

In addition, the Company is liable for workers’ compensation benefits for traumatic injuries which are calculated using actuarially-based loss rates, loss development factors and discounted based on a risk free rate. Traumatic workers’ compensation claims are insured with varying retentions/deductibles, or through state-sponsored workers’ compensation programs.

Workers’ compensation expense consists of the following components:



	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023

	(In thousands)
Self-insured occupational disease benefits:
Service cost	$	1,278	$	994	$	2,555	$	1,987
Interest cost⁽¹⁾		1,566		1,510		3,131		3,020
Net amortization⁽¹⁾		(3)		(241)		(6)		(482)
Total occupational disease	$	2,841	$	2,263	$	5,680	$	4,525
Traumatic injury claims and assessments		2,592		2,741		5,076		4,431
Total workers’ compensation expense	$	5,433	$	5,004	$	10,756	$	8,956

(1)

In accordance with the adoption of ASU 2017-07, “Compensation-Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost,” these costs are recorded within Nonoperating expenses in the Condensed Consolidated Income Statements on the line item “Non-service related pension and postretirement benefit (costs) credits.”

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12. Employee Benefit Plans

The following table details the components of pension benefit credit:


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023

	(In thousands)
Interest cost⁽¹⁾	$	11	$	1,533	$	22	$	3,067
Expected return on plan assets⁽¹⁾		—		(1,518)		—		(3,036)
Amortization of prior service credits ⁽¹⁾		—		(36)		—		(73)
Amortization of other actuarial (gains) ⁽¹⁾		(22)		(195)		(44)		(390)
Net benefit credit	$	(11)	$	(216)	$	(22)	$	(432)

The following table details the components of other postretirement benefit credit:


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023

	(In thousands)
Service cost	$	50	$	57	$	99	$	115
Interest cost⁽¹⁾		605		673		1,210		1,347
Amortization of other actuarial gains ⁽¹⁾		(1,981)		(2,423)		(3,962)		(4,845)
Net benefit credit	$	(1,326)	$	(1,693)	$	(2,653)	$	(3,383)

(1)

In February 2022, the Board of Directors approved the termination of the Company’s Cash Balance Pension Plan. The Company has executed plan amendments regarding the termination and filed an Application for Determination for Terminating Pension Plan with the Internal Revenue Service (“IRS”), which was approved by the IRS during the first quarter of 2023. The Company also prepared and filed appropriate notices and documents related to the Pension Plan's termination and wind-down with the Pension Benefit Guaranty Corporation (“PBGC”). The Company no longer administers or pays the retirement benefits of the Cash Balance Pension Plan.

(1)

13. Commitments and Contingencies

The Company accrues for costs related to contingencies when a loss is probable and the amount is reasonably determinable. Disclosure of contingencies is included in the financial statements when it is at least reasonably possible that a material loss or an additional material loss in excess of amounts already accrued may be incurred.

The Company is a party to numerous claims and lawsuits with respect to various matters. The ultimate resolution of any such legal matter could result in outcomes that may be materially different from amounts the Company has accrued for such matters. The Company believes it has recorded adequate reserves for these matters.

In the normal course of business, the Company is a party to certain financial instruments with off-balance sheet risk, such as bank letters of credit, performance or surety bonds, and other guarantees and indemnities related to the obligations of affiliated entities which are not reflected in the Company’s Condensed Consolidated Balance Sheets. However, the underlying liabilities that they secure, such as asset retirement obligations, workers’ compensation liabilities, and other obligations, are reflected in the Company’s Condensed Consolidated Balance Sheets.

As of June 30, 2024, the Company had outstanding surety bonds with a face amount of $488.8 million to secure various obligations and commitments and $78.1 million of letters of credit under its Securitization and Inventory

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Facilities used to collateralize certain obligations. The Company posted $5.6 million in cash collateral related to various obligations; this amount is recorded within “Other noncurrent assets” on the Condensed Consolidated Balance Sheets.

As of June 30, 2024, the Company’s reclamation-related obligations of $269.1 million were supported by surety bonds of $402.7 million. The Company has posted $0.6 million in cash collateral related to reclamation surety bonds. Additionally, in the first half of 2024, the Company contributed an additional $3.7 million representing interest earned to a fund that will serve to defease the long-term asset retirement obligation for its thermal asset base bringing the total to $146.0 million as of June 30, 2024. This amount is recorded as “Fund for asset retirement obligations” on the Condensed Consolidated Balance Sheets.

14. Segment Information

The Company’s reportable business segments are based on two distinct lines of business, metallurgical and thermal, and may include a number of mine complexes. The Company manages its coal sales by market and coal quality, not by individual mining complex. Geology, coal transportation routes to customers, and regulatory environments also have a significant impact on the Company’s marketing and operations management. Mining operations are evaluated based on Adjusted EBITDA, per-ton cash operating costs (defined as including all mining costs except depreciation, depletion, amortization, accretion on asset retirement obligations, and pass-through transportation expenses, divided by segment tons sold), and on other non-financial measures, such as safety and environmental performance. Adjusted EBITDA is not a measure of financial performance in accordance with generally accepted accounting principles, and items excluded from Adjusted EBITDA are significant in understanding and assessing the Company’s financial condition. Therefore, Adjusted EBITDA should not be considered in isolation, nor as an alternative to net income, income from operations, cash flows from operations or as a measure of our profitability, liquidity or performance under generally accepted accounting principles. The Company uses Adjusted EBITDA to measure the operating performance of its segments and allocate resources to the segments. Furthermore, analogous measures are used by industry analysts and investors to evaluate the Company’s operating performance. Investors should be aware that the Company’s presentation of Adjusted EBITDA may not be comparable to similarly titled measures used by other companies. The Company reports its results of operations primarily through the following reportable segments: Metallurgical (MET) segment, containing the Company’s metallurgical operations in West Virginia, and the Thermal segment containing the Company’s thermal operations in Wyoming and Colorado.

Reporting segment results for the three and six months ended June 30, 2024 and 2023 are presented below. The Corporate, Other, and Eliminations grouping includes these charges: idle operations; equity investments; change in fair value of coal derivatives, net; corporate overhead; land management activities; certain miscellaneous revenue; and the elimination of intercompany transactions.

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					Corporate,
					Other and
(In thousands)	MET		Thermal		Eliminations		Consolidated
Three Months Ended June 30, 2024
Revenues	$	375,958	$	232,793	$	—	$	608,751
Adjusted EBITDA		87,276		1,067		(28,384)		59,959
Depreciation, depletion and amortization		31,089		7,099		251		38,439
Accretion on asset retirement obligation		647		4,810		413		5,870
Capital expenditures		34,132		10,953		1,835		46,920

Three Months Ended June 30, 2023
Revenues	$	451,752	$	305,542	$	—	$	757,294
Adjusted EBITDA		132,839		29,179		(31,632)		130,386
Depreciation, depletion and amortization		28,228		7,648		201		36,077
Accretion on asset retirement obligation		615		4,314		364		5,293
Capital expenditures		35,639		10,042		325		46,006

Six Months Ended June 30, 2024
Revenues	$	793,023	$	495,918	$	—	$	1,288,941
Adjusted EBITDA		216,811		1,999		(55,988)		162,822
Depreciation, depletion and amortization		62,479		14,267		513		77,259
Accretion on asset retirement obligation		1,294		9,620		825		11,739
Capital expenditures		71,166		18,497		2,703		92,366

Six Months Ended June 30, 2023
Revenues	$	987,923	$	639,302	$	—	$	1,627,225
Adjusted EBITDA		395,896		75,434		(63,603)		407,727
Depreciation, depletion and amortization		56,082		15,056		418		71,556
Accretion on asset retirement obligation		1,229		8,628		728		10,585
Capital expenditures		60,459		15,535		612		76,606

A reconciliation of net income to Adjusted EBITDA and segment Adjusted EBITDA from coal operations follows:



	Three Months Ended June 30,				Six Months Ended June 30,
(In thousands)	2024		2023		2024		2023
Net income	$	14,833	$	77,353	$	70,786	$	275,461
Provision for income taxes		2,002		12,920		5,721		50,058
Interest expense, net		(1,470)		(664)		(3,254)		126
Depreciation, depletion and amortization		38,439		36,077		77,259		71,556
Accretion on asset retirement obligations		5,870		5,293		11,739		10,585
Non-service related pension and postretirement benefit costs (credits)		285		(593)		571		(1,185)
Net loss resulting from early retirement of debt		—		—		—		1,126
Adjusted EBITDA	$	59,959	$	130,386	$	162,822	$	407,727
EBITDA from idled or otherwise disposed operations		3,695		4,664		7,392		8,696
Selling, general and administrative expenses		22,518		22,791		48,105		48,813
Other		2,172		4,177		491		6,094
Segment Adjusted EBITDA from coal operations	$	88,344	$	162,018	$	218,810	$	471,330

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15. Revenue Recognition

ASC 606-10-50-5 requires that entities disclose disaggregated revenue information in categories (such as type of goods or services, geography, market, type of contract, etc.) that depict how the nature, amount, timing, and uncertainty of revenue and cash flow are affected by economic factors. ASC 606-10-55-89 explains that the extent to which an entity’s revenue is disaggregated depends on the facts and circumstances that pertain to the entity’s contracts with customers and that some entities may need to use more than one type of category to meet the objective for disaggregating revenue.

In general, the Company’s business segmentation is aligned according to the nature and economic characteristics of its coal and customer relationships and provides meaningful disaggregation of each segment’s results. The Company has further disaggregated revenue between North America and Seaborne revenues which depicts the pricing and contract differences between the two. North America revenue is characterized by contracts with a term of one year or longer and typically the pricing is fixed; whereas Seaborne revenue generally is derived from spot or short-term contracts with an index-based pricing mechanism.


					Corporate,
					Other and
	MET		Thermal		Eliminations		Consolidated

	(in thousands)
Three Months Ended June 30, 2024
North America revenues	$	67,213	$	184,083	$	—	$	251,296
Seaborne revenues		308,745		48,710		—		357,455

Total revenues	$	375,958	$	232,793	$	—	$	608,751

Three Months Ended June 30, 2023
North America revenues	$	93,715	$	247,092	$	—	$	340,807
Seaborne revenues		358,037		58,450		—		416,487

Total revenues	$	451,752	$	305,542	$	—	$	757,294

Six Months Ended June 30, 2024
North America revenues	$	102,797	$	389,746	$	—	$	492,543
Seaborne revenues		690,226		106,172		—		796,398

Total revenues	$	793,023	$	495,918	$	—	$	1,288,941

Six Months Ended June 30, 2023
North America revenues	$	165,122	$	534,352	$	—	$	699,474
Seaborne revenues		822,801		104,950		—		927,751

Total revenues	$	987,923	$	639,302	$	—	$	1,627,225

As of June 30, 2024, the Company has outstanding performance obligations for the remainder of 2024 of 29.1 million tons of fixed price contracts and 3.8 million tons of variable price contracts. Additionally, the Company has outstanding performance obligations beyond 2024 of approximately 78.6 million tons of fixed price contracts and 2.0 million tons of variable price contracts.

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16. Leases

The Company has operating and financing leases for mining equipment, office equipment, office space and transloading terminals with remaining lease terms ranging from less than one year to approximately three years. Some of these leases include both lease and non-lease components which are accounted for as a single lease component as the Company has elected the practical expedient to combine these components for all leases. As most of the leases do not provide an implicit rate, the Company calculated the “right-of-use” (“ROU”) assets and lease liabilities using its secured incremental borrowing rate at the lease commencement date.

As of June 30, 2024 and December 31, 2023, the Company had the following ROU assets and lease liabilities within its Condensed Consolidated Balance Sheets:


		June 30,		December 31,
		2024		2023
Assets	Balance Sheet Classification
Operating lease right-of-use assets	Other noncurrent assets	$	8,303	$	9,626
Financing lease right-of-use assets	Other noncurrent assets		973		1,621
Total Lease Assets		$	9,276	$	11,247

Liabilities	Balance Sheet Classification
Financing lease liabilities - current	Accrued expenses and other current liabilities	$	2,608	$	1,041
Operating lease liabilities - current	Accrued expenses and other current liabilities		2,843		2,789
Financing lease liabilities - long-term	Other noncurrent liabilities		-		2,079
Operating lease liabilities - long-term	Other noncurrent liabilities		5,909		7,351
		$	11,360	$	13,260

Weighted average remaining lease term in years
Operating leases			2.82		3.32
Finance leases			0.75		1.25

Weighted average discount rate
Operating leases			5.5%		5.5%
Finance leases			6.4%		6.4%

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Information related to leases was as follows:


	Three Months Ended June 30,					Six Months Ended June 30,
	2024		2023			2024		2023

	(In thousands)				(In thousands)
Operating lease information:
Operating lease cost	$	786	$	831		$	1,589	$	1,661
Operating cash flows from operating leases		788		876			1,654		1,704

ARCH RESOURCES, INC. 10-Q