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Section 1: 10-Q (10-Q)

felp-10q_20180930.htm

 

 

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 September 30, 2018

OR

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

For the transition period from          to          

Commission File Number: 001-36503

 

Foresight Energy LP

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

 

80-0778894

(State or other jurisdiction

of incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

 

 

211 North Broadway, Suite 2600, Saint Louis, MO

 

63102

(Address of principal executive offices)

 

(Zip code)

Registrant’s telephone number, including area code: (314) 932-6160

 

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    

As of November 1, 2018, the registrant had 80,844,319 common units and 64,954,691 subordinated units outstanding.

 

 

 

 


 

 

 

TABLE OF CONTENTS

 

PART I

FINANCIAL INFORMATION

 

Item 1.Financial Statements

 

 

 

 

Unaudited Condensed Consolidated Balance Sheets

3

Unaudited Condensed Consolidated Statements of Operations

4

Unaudited Condensed Consolidated Statement of Partners’ Capital

5

Unaudited Condensed Consolidated Statements of Cash Flows

6

Notes to Unaudited Condensed Consolidated Financial Statements

7

Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations

21

Item 3.Quantitative and Qualitative Disclosures About Market Risk

32

Item 4.Controls and Procedures

32

PART II

 

OTHER INFORMATION

 

Item 1.Legal Proceedings

33

Item 1A.Risk Factors

33

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

33

Item 3.Defaults Upon Senior Securities

33

Item 4.Mine Safety Disclosures

33

Item 5.Other Information

33

Item 6. Exhibits

34

Signatures

35

 

 

2


PART I – FINANCIAL INFORMATION.

 

Item 1. Financial Statements.

 

Foresight Energy LP

Unaudited Condensed Consolidated Balance Sheets

(In Thousands)

 

 

(Successor)

 

 

 

(Successor)

 

 

September 30,

 

 

 

December 31,

 

 

2018

 

 

 

2017

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

$

43,070

 

 

 

$

2,179

 

Accounts receivable

 

38,583

 

 

 

 

35,158

 

Due from affiliates

 

32,055

 

 

 

 

37,685

 

Financing receivables - affiliate

 

3,327

 

 

 

 

3,138

 

Inventories, net

 

52,924

 

 

 

 

40,539

 

Prepaid royalties

 

 

 

 

 

4,000

 

Deferred longwall costs

 

14,172

 

 

 

 

9,520

 

Other prepaid expenses and current assets

 

8,139

 

 

 

 

10,844

 

Contract-based intangibles

 

1,430

 

 

 

 

11,268

 

Total current assets

 

193,700

 

 

 

 

154,331

 

Property, plant, equipment and development, net

 

2,168,348

 

 

 

 

2,378,605

 

Due from affiliates

 

 

 

 

 

947

 

Financing receivables - affiliate

 

61,514

 

 

 

 

64,097

 

Prepaid royalties, net

 

2,295

 

 

 

 

1,250

 

Other assets

 

4,640

 

 

 

 

5,358

 

Contract-based intangibles

 

1,058

 

 

 

 

2,052

 

Total assets

$

2,431,555

 

 

 

$

2,606,640

 

Liabilities and partners’ capital

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Current portion of long-term debt and capital lease obligations

$

41,498

 

 

 

$

109,532

 

Current portion of sale-leaseback financing arrangements

 

5,851

 

 

 

 

4,148

 

Accrued interest

 

26,342

 

 

 

 

13,410

 

Accounts payable

 

96,284

 

 

 

 

76,658

 

Accrued expenses and other current liabilities

 

80,662

 

 

 

 

62,442

 

Asset retirement obligations

 

4,416

 

 

 

 

4,416

 

Due to affiliates

 

23,384

 

 

 

 

13,324

 

Contract-based intangibles

 

16,844

 

 

 

 

28,688

 

Total current liabilities

 

295,281

 

 

 

 

312,618

 

Long-term debt and capital lease obligations

 

1,209,172

 

 

 

 

1,205,000

 

Sale-leaseback financing arrangements

 

192,298

 

 

 

 

196,496

 

Asset retirement obligations

 

51,686

 

 

 

 

39,655

 

Other long-term liabilities

 

29,857

 

 

 

 

32,330

 

Contract-based intangibles

 

69,027

 

 

 

 

144,715

 

Total liabilities

 

1,847,321

 

 

 

 

1,930,814

 

Limited partners' capital:

 

 

 

 

 

 

 

 

Common unitholders (80,844 and 77,644 units outstanding as of September 30, 2018 and December 31, 2017, respectively)

 

370,884

 

 

 

 

421,161

 

Subordinated unitholder (64,955 units outstanding as of September 30, 2018 and December 31, 2017)

 

213,350

 

 

 

 

254,665

 

Total partners' capital

 

584,234

 

 

 

 

675,826

 

Total liabilities and partners' capital

$

2,431,555

 

 

 

$

2,606,640

 

 

See accompanying notes.

3


 

Foresight Energy LP

Unaudited Condensed Consolidated Statements of Operations

(In Thousands, Except per Unit Data)

 

 

(Successor)

 

 

(Successor)

 

 

 

(Successor)

 

 

(Successor)

 

 

(Predecessor)

 

 

Three Months Ended

September 30, 2018

 

 

Three Months Ended

September 30, 2017

 

 

 

Nine Months Ended

September 30, 2018

 

 

Period From

April 1, 2017 through

September 30, 2017

 

 

Period From

January 1, 2017

through

March 31, 2017

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Coal sales

$

291,987

 

 

$

229,670

 

 

 

$

800,366

 

 

$

434,186

 

 

$

227,813

 

Other revenues

 

1,949

 

 

 

2,770

 

 

 

 

5,718

 

 

 

5,347

 

 

 

2,581

 

Total revenues

 

293,936

 

 

 

232,440

 

 

 

 

806,084

 

 

 

439,533

 

 

 

230,394

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of coal produced (excluding depreciation, depletion and amortization)

 

133,670

 

 

 

122,839

 

 

 

 

391,222

 

 

 

228,629

 

 

 

117,762

 

Cost of coal purchased

 

6,312

 

 

 

 

 

 

 

11,969

 

 

 

 

 

 

7,973

 

Transportation

 

61,239

 

 

 

39,414

 

 

 

 

166,716

 

 

 

67,672

 

 

 

37,726

 

Depreciation, depletion and amortization

 

52,780

 

 

 

53,754

 

 

 

 

159,512

 

 

 

103,291

 

 

 

39,298

 

Contract amortization and write-off

 

(4,855

)

 

 

(15,611

)

 

 

 

(76,699

)

 

 

(6,878

)

 

 

 

Accretion on asset retirement obligations

 

558

 

 

 

726

 

 

 

 

1,848

 

 

 

1,454

 

 

 

710

 

Selling, general and administrative

 

10,465

 

 

 

7,858

 

 

 

 

28,774

 

 

 

15,135

 

 

 

6,554

 

Long-lived asset impairments

 

 

 

 

 

 

 

 

110,689

 

 

 

 

 

 

 

Loss on commodity derivative contracts

 

 

 

 

1,101

 

 

 

 

 

 

 

2,218

 

 

 

1,492

 

Other operating (income) expense, net

 

24,849

 

 

 

(48

)

 

 

 

(18,782

)

 

 

(13,538

)

 

 

451

 

Operating income

 

8,918

 

 

 

22,407

 

 

 

 

30,835

 

 

 

41,550

 

 

 

18,428

 

Other expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

36,619

 

 

 

35,988

 

 

 

 

109,327

 

 

 

71,408

 

 

 

43,380

 

Change in fair value of warrants

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(9,278

)

Loss on early extinguishment of debt

 

 

 

 

 

 

 

 

 

 

 

 

 

 

95,510

 

Net loss

$

(27,701

)

 

$

(13,581

)

 

 

$

(78,492

)

 

$

(29,858

)

 

$

(111,184

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss available to limited partner units - basic and diluted:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common unitholders

$

(13,298

)

 

$

(5,097

)

 

 

$

(37,177

)

 

$

(13,887

)

 

$

(56,259

)

Subordinated unitholder

$

(14,403

)

 

$

(8,484

)

 

 

$

(41,315

)

 

$

(15,971

)

 

$

(54,925

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per limited partner unit - basic and diluted:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common unitholders

$

(0.17

)

 

$

(0.07

)

 

 

$

(0.47

)

 

$

(0.18

)

 

$

(0.85

)

Subordinated unitholder

$

(0.22

)

 

$

(0.13

)

 

 

$

(0.64

)

 

$

(0.25

)

 

$

(0.85

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average limited partner units outstanding - basic and diluted:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common units

 

80,505

 

 

 

77,510

 

 

 

 

79,737

 

 

 

76,893

 

 

 

66,533

 

Subordinated units

 

64,955

 

 

 

64,955

 

 

 

 

64,955

 

 

 

64,955

 

 

 

64,955

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Distributions declared per limited partner unit

$

0.0565

 

 

$

0.0647

 

 

 

$

0.1695

 

 

$

0.0647

 

 

$

 

 

See accompanying notes.

 

4


Foresight Energy LP

Unaudited Condensed Consolidated Statement of Partners’ Capital

(In Thousands, Except Unit Data)

 

 

Limited Partners

 

 

 

 

 

 

Common

 

 

Number of

 

 

Subordinated

 

 

Number of

 

 

Total Partners'

 

 

Unitholders

 

 

Common Units

 

 

Unitholder

 

 

Subordinated Units

 

 

Capital

 

Successor balance at January 1, 2018

$

421,161

 

 

 

77,644,489

 

 

$

254,665

 

 

 

64,954,691

 

 

$

675,826

 

Net loss attributable to successor

 

(37,177

)

 

 

 

 

 

(41,315

)

 

 

 

 

 

(78,492

)

Cash distributions

 

(13,574

)

 

 

 

 

 

 

 

 

 

 

 

(13,574

)

Conversion of warrants, net

 

 

 

 

3,107,951

 

 

 

 

 

 

 

 

 

 

Equity-based compensation

 

530

 

 

 

 

 

 

 

 

 

 

 

 

530

 

Issuance of equity-based awards

 

 

 

 

91,879

 

 

 

 

 

 

 

 

 

 

Distribution equivalent rights on LTIP awards

 

(56

)

 

 

 

 

 

 

 

 

 

 

 

(56

)

Successor balance at September 30, 2018

$

370,884

 

 

 

80,844,319

 

 

$

213,350

 

 

 

64,954,691

 

 

$

584,234

 

 

See accompanying notes.

 

5


Foresight Energy LP

Unaudited Condensed Consolidated Statements of Cash Flows

(In Thousands)

 

(Successor)

 

 

(Successor)

 

 

(Predecessor)

 

 

Nine Months Ended

September 30, 2018

 

 

Period From

April 1, 2017

through

September 30, 2017

 

 

Period From

January 1, 2017

through

March 31, 2017

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

 

 

 

Net loss

$

(78,492

)

 

$

(29,858

)

 

$

(111,184

)

Adjustments to reconcile net loss to net cash provided by operating activities:

 

 

 

 

 

 

 

 

 

 

 

Depreciation, depletion and amortization

 

159,512

 

 

 

103,291

 

 

 

39,298

 

Amortization of debt discount and deferred issuance costs

 

2,015

 

 

 

1,273

 

 

 

6,365

 

Contract amortization and write-off

 

(76,699

)

 

 

(6,878

)

 

 

 

Equity-based compensation

 

530

 

 

 

439

 

 

 

318

 

Loss on commodity derivative contracts

 

 

 

 

2,218

 

 

 

1,492

 

Settlements of commodity derivative contracts

 

 

 

 

320

 

 

 

3,724

 

Realized gains on coal derivatives included in investing activities

 

 

 

 

 

 

 

(3,520

)

Long-lived asset impairments

 

110,689

 

 

 

 

 

 

 

Insurance proceeds included in investing activities

 

(42,947

)

 

 

 

 

 

 

Change in fair value of warrants

 

 

 

 

 

 

 

(9,278

)

Debt extinguishment expense

 

 

 

 

 

 

 

95,510

 

Other

 

 

 

 

8,915

 

 

 

1,321

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

 

 

 

Accounts receivable

 

(3,425

)

 

 

9,450

 

 

 

19,695

 

Due from/to affiliates, net

 

16,637

 

 

 

6,923

 

 

 

(13,157

)

Inventories

 

(10,307

)

 

 

(22,159

)

 

 

(917

)

Prepaid expenses and other assets

 

(244

)

 

 

(4,759

)

 

 

(5,117

)

Prepaid royalties

 

2,955

 

 

 

6,240

 

 

 

(241

)

Commodity derivative assets and liabilities

 

 

 

 

266

 

 

 

(532

)

Accounts payable

 

19,626

 

 

 

(582

)

 

 

7,324

 

Accrued interest

 

12,932

 

 

 

22,493

 

 

 

(9,803

)

Accrued expenses and other current liabilities

 

18,667

 

 

 

1,188

 

 

 

(3,430

)

Other

 

2,155

 

 

 

1,300

 

 

 

1,782

 

Net cash provided by operating activities

 

133,604

 

 

 

100,080

 

 

 

19,650

 

Cash flows from investing activities

 

 

 

 

 

 

 

 

 

 

 

Investment in property, plant, equipment and development

 

(50,872

)

 

 

(36,960

)

 

 

(19,908

)

Return of investment on financing arrangements with Murray Energy (affiliate)

 

2,394

 

 

 

1,452

 

 

 

705

 

Insurance proceeds

 

42,947

 

 

 

 

 

 

 

Settlement of certain coal derivatives

 

 

 

 

 

 

 

3,520

 

Proceeds from sale of property, plant and equipment

 

 

 

 

 

 

 

1,898

 

Net cash used in investing activities

 

(5,531

)

 

 

(35,508

)

 

 

(13,785

)

Cash flows from financing activities

 

 

 

 

 

 

 

 

 

 

 

Borrowings under revolving credit facility

 

50,000

 

 

 

 

 

 

 

Payments on revolving credit facility

 

(22,000

)

 

 

 

 

 

(352,500

)

Net change in borrowings under A/R securitization program

 

 

 

 

(10,300

)

 

 

7,000

 

Proceeds from long-term debt and capital lease obligations

 

 

 

 

 

 

 

1,234,438

 

Payments on long-term debt and capital lease obligations

 

(93,877

)

 

 

(23,539

)

 

 

(970,721

)

Payments on short-term debt

 

(5,180

)

 

 

 

 

 

 

Proceeds from issuance of common units to Murray Energy (affiliate)

 

 

 

 

 

 

 

60,586

 

Distributions paid

 

(13,574

)

 

 

(5,026

)

 

 

 

Debt extinguishment costs

 

 

 

 

 

 

 

(57,645

)

Debt issuance costs paid

 

 

 

 

 

 

 

(27,328

)

Other

 

(2,551

)

 

 

(3,471

)

 

 

(1,892

)

Net cash used in financing activities

 

(87,182

)

 

 

(42,336

)

 

 

(108,062

)

Net increase (decrease) in cash, cash equivalents, and restricted cash

 

40,891

 

 

 

22,236

 

 

 

(102,197

)

Cash, cash equivalents, and restricted cash, beginning of period

 

2,179

 

 

 

14,724

 

 

 

116,921

 

Cash, cash equivalents, and restricted cash, end of period

$

43,070

 

 

$

36,960

 

 

$

14,724

 

 

See accompanying notes.

6


Foresight Energy LP

Notes to Unaudited Condensed Consolidated Financial Statements

 

1. Organization, Nature of Business and Basis of Presentation

 

Foresight Energy LLC (“FELLC”), a perpetual-term Delaware limited liability company, was formed in September 2006 for the development, mining, transportation and sale of coal. Prior to June 23, 2014, Foresight Reserves LP (“Foresight Reserves”) owned 99.333% of FELLC and a member of FELLC’s management owned 0.667%. On June 23, 2014, in connection with the initial public offering (“IPO”) of Foresight Energy LP (“FELP”), Foresight Reserves and a member of management contributed their ownership interests in FELLC to FELP for which they were issued common and subordinated units in FELP. FELP has been managed by Foresight Energy GP LLC (“FEGP”) subsequent to the IPO.

 

On April 16, 2015, Murray Energy Corporation and its affiliates (“Murray Energy”) and Foresight Reserves completed a transaction whereby Murray Energy acquired a 34% voting interest in FEGP and all of the outstanding subordinated units of FELP, representing a 50% ownership of the Partnership’s limited partner units outstanding at that time. On March 28, 2017, following the completion of a debt refinancing (the “March 2017 Refinancing Transactions”), Murray Energy exercised its option (the “FEGP Option”) to acquire an additional 46% voting interest in FEGP from Foresight Reserves and a former member of management pursuant to the terms of an option agreement, dated April 16, 2015, among Murray Energy, Foresight Reserves and a former member of management, as amended, thereby increasing Murray Energy’s voting interest in FEGP to 80%. The aggregate exercise price of the FEGP Option was $15 million. Murray Energy’s acquisition of the incremental ownership in FEGP resulted in its obtaining control of FELP. Per Accounting Standards Codification (“ASC”) 805-50-25-4, Murray Energy, as the acquirer of FELP through FEGP, had the option to apply pushdown accounting in the separate financial statements of the acquiree. Murray Energy elected to adopt pushdown accounting in our stand alone financial statements and therefore we have reflected the adjustment of our assets and liabilities to fair value required by pushdown accounting in our consolidated financial statements.

 

Due to the application of pushdown accounting, our condensed consolidated financial statements and certain footnote disclosures are presented in two distinct periods to indicate the application of two different bases of accounting between the periods presented. The periods prior to the acquisition date are identified as “Predecessor” and the periods after the acquisition date are identified as “Successor”. For accounting purposes, management has designated the acquisition date as March 31, 2017 (the “Acquisition Date”), as the operating results and change in financial position for the intervening period was not material.

 

As used hereafter in this report, the terms “Foresight Energy LP,” “FELP,” the “Partnership,” “we,” “us” or like terms, refer to the consolidated results of Foresight Energy LP and its consolidated subsidiaries and affiliates, unless the context otherwise requires or where otherwise indicated.

 

The Partnership operates in a single reportable segment and currently owns four underground mining complexes in the Illinois Basin: Williamson Energy, LLC (“Williamson”); Sugar Camp Energy, LLC (“Sugar Camp”); Macoupin Energy, LLC (“Macoupin”); and Hillsboro Energy, LLC (“Hillsboro”). Mining operations at our Hillsboro complex have been idled since March 2015 due to a combustion event. On April 11, 2018, we announced that our Hillsboro operation was closed (see Note 13). However, with the settlement of litigation related to the Hillsboro matters (see Note 12), we are currently evaluating our future mining options at the Hillsboro complex. Our mined coal is sold to a diverse customer base, including electric utility and industrial companies primarily in the eastern United States and overseas markets.

The accompanying condensed consolidated financial statements contain all significant adjustments (consisting of normal recurring accruals) that, in the opinion of management, are necessary to present fairly, the Partnership’s condensed consolidated financial position, results of operations and cash flows for all periods presented. In preparing the condensed consolidated financial statements, management used estimates and assumptions that may affect reported amounts and disclosures. To the extent there are material differences between the estimates and actual results, the impact to the Partnership’s financial condition or results of operations could be material. The unaudited condensed consolidated financial statements do not include footnotes and certain financial information as required annually under U.S. generally accepted accounting principles (“U.S. GAAP”) and, therefore, should be read in conjunction with the annual audited consolidated financial statements for the year ended December 31, 2017 included in our Annual Report on Form 10-K filed with the SEC on March 7, 2018. The results of operations for interim periods are not necessarily indicative of results that can be expected for any future period, including the year ending December 31, 2018. Intercompany transactions are eliminated in consolidation.

 

7


2. New Accounting Standards

In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU 2014-09, Revenue from Contracts with Customers (“ASC 606”), that introduces a new five-step revenue recognition model in which an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASC 606 also requires disclosures sufficient to enable users to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers, including qualitative and quantitative disclosures about contracts with customers, significant judgments and changes in judgments, and assets recognized from the costs to obtain or fulfill a contract. We adopted ASC 606 as of January 1, 2018 using the modified retrospective approach; therefore, the comparative information has not been adjusted and continues to be reported under previous revenue recognition guidance.  The adoption did not have a material effect on our financial position and results of operations as the timing of revenue recognition related to coal sales remains consistent between ASC 606 and previous revenue recognition guidance. Additionally, there was no cumulative adjustment to partners’ capital as of January 1, 2018. Refer to Note 3 for the additional financial statement disclosures required by ASC 606.

In November 2016, the FASB issued ASU 2016-18, which clarified the presentation requirements of restricted cash within the statement of cash flows. Under ASU 2016-18, the changes in restricted cash and restricted cash equivalents during the period should be included in the beginning and ending cash and cash equivalents balance reconciliation on the statement of cash flows. When cash, cash equivalents, restricted cash or restricted cash equivalents are presented in more than one line item within the statement of financial position, an entity shall calculate a total cash amount in a narrative or tabular format that agrees to the amount shown on the statement of cash flows. Details on the nature and amounts of restricted cash should also be disclosed. This standard is effective for fiscal years beginning after December 15, 2017, and is to be applied retrospectively. We adopted this update during the first quarter of 2018 and this new guidance required adjustments to the presentation of our condensed consolidated statement of cash flows. Refer to Note 4 for the additional financial statement disclosures required by this update.

In February 2016, the FASB issued ASU 2016-02, which updated guidance regarding the accounting for leases. This update requires lessees to recognize a lease liability and a lease asset for all leases, including operating leases, with a term greater than 12 months on its balance sheet. The update also expands the required quantitative and qualitative disclosures surrounding leases. This update is effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years, with earlier application permitted. This update will be applied using a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. We are currently evaluating the effect of this update on our consolidated financial statements and related disclosures. We disclosed our future minimum payments on our operating lease obligations in our Annual Report on Form 10-K filed with the SEC on March 7, 2018 and we will evaluate those contracts as well as other existing arrangements to determine if they qualify for lease accounting under the new standard. 

 

3. Revenue from Contracts with Customers

 

Significant Accounting Policy

 

Revenue is measured based on consideration specified in a contract with a customer. The Partnership recognizes revenue when it satisfies a performance obligation by transferring control over goods and services to a customer.

 

Shipping and handling costs (e.g., the application of anti-freezing agents) are accounted for as fulfillment costs. The Partnership includes any fulfillment costs billed to customers in revenue, with the corresponding expenses included in cost of coal produced and transportation.

 

Nature of Goods and Services

 

The Partnership’s primary source of revenue is from the sale of coal to domestic and international customers through short-term and long-term coal sales contracts. Coal sales revenue includes the sale to customers of coal produced and, from time to time, the re-sale of coal purchased from third-parties or from one of our affiliates. Performance obligations, consisting of individual tons of coal, are satisfied at a point in time when control is transferred to a customer.  For domestic coal sales, this generally occurs when coal is loaded onto railcars at the mine or onto barges at terminals.  For coal sales to international markets, this generally occurs when coal is loaded onto an ocean vessel.  

 

The Partnership’s coal sales contracts typically range in length from one to three years, however some agreements have terms of as little as one month. Coal sales contracts generally provide for either a fixed base price or a base price determined by a market index. The base price is subject to quality and weight adjustments. Quality and weight adjustments are recorded as necessary based on coal sales contract specifications as a reduction or increase to coal sales revenue. The coal sales contracts also may give the customer the

8


option to vary volumes, subject to certain minimums. Coal sales are generally invoiced upon shipment and payment is due from customers within standard industry credit timeframes.  

 

Disaggregation of Revenue

The following table disaggregates revenue by domestic and international markets:

 

 

(Successor)

 

 

(Successor)

 

 

Three Months Ended

September 30, 2018

 

 

Nine Months Ended

September 30, 2018

 

 

(In Thousands)

 

 

(In Thousands)

 

Coal sales - Domestic

$

151,196

 

 

$

440,593

 

Coal sales - International

 

140,791

 

 

 

359,773

 

Total coal sales

$

291,987

 

 

$

800,366

 

 

Contract Balances

 

The following table provides information about balances associated with contracts with customers:

 

 

(Successor)

 

 

 

 

September 30,

2018

 

 

 

 

(In Thousands)

 

 

 

Receivables - Included in 'Accounts receivable'

$

33,975

 

 

 

Receivables - Included in 'Due from affiliates - current'

 

22,974

 

 

 

Total contract balances

$

56,949

 

 

 

 

Contract Costs

 

The Partnership applies the practical expedient in ASC 340-40-25-4, whereby the Partnership recognizes the incremental costs of obtaining contracts as an expense when incurred if the amortization period of the assets that the Partnership would have recognized is one year or less. These costs are included in selling, general and administrative expenses.

 

Other Revenues

 

Other revenues consist primarily of a transport lease and overriding royalty agreements with Murray Energy (see Note 9). These arrangements are accounted for under guidance contained in ASC 310 Receivables, ASC 360 Property, Plant, and Equipment, and ASC 840 Leases and therefore are outside the scope of ASC 606.

 

 

 


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4. Supplemental Cash Flow Information

 

The following is supplemental information to the condensed consolidated statement of cash flows (in thousands):

 

 

(Successor)

 

 

(Successor)

 

 

(Predecessor)

 

 

Nine Months Ended

September 30, 2018

 

 

Period From

April 1, 2017

through

September 30, 2017

 

 

Period From

January 1, 2017

through

March 31, 2017

 

Supplemental disclosures of non-cash financing activities:

 

 

 

 

 

 

 

 

 

 

 

Short-term insurance financing

$

985

 

 

$

2,188

 

 

$

 

Reclassification of warrant liability to partners' capital

$

 

 

$

 

 

$

41,888

 

 

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the condensed consolidated balance sheets to the total of the same such amounts shown in the condensed consolidated statement of cash flows (in thousands):

 

 

(Successor)

 

 

(Successor)

 

 

(Successor)

 

 

(Successor)

 

 

 

(Predecessor)

 

 

September 30,

2018

 

 

December 31,

2017

 

 

September 30,

2017

 

 

March 31,

2017

 

 

 

December 31,

2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

$

43,070

 

 

$

2,179

 

 

$

24,899

 

 

$

4,235

 

 

 

$

103,690

 

Restricted cash - Included in 'Other prepaid expenses and current assets'

 

 

 

 

 

 

 

12,061

 

 

 

10,489

 

 

 

 

10,731

 

Restricted cash - Included in 'Other assets'

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,500

 

Total cash, cash equivalents, and restricted cash shown in the statement of cash flows

$

43,070

 

 

$

2,179

 

 

$

36,960

 

 

$

14,724

 

 

 

$

116,921

 

 

Restricted cash included in other prepaid expenses and current assets were amounts that were required to be temporarily held in a restricted cash account for a short duration related to our trade accounts receivable securitization program. The accounts receivable securitization program terminated in December 2017.  

 

Restricted cash included in other assets was cash collateral used to secure a letter of credit for one of our surety bond providers. During the three months ended March 31, 2017, the restriction was released.

 

5. Accounts Receivable

 

Accounts receivable consist of the following:

 

 

(Successor)

 

 

 

(Successor)

 

 

September 30,

2018

 

 

 

December 31,

2017

 

 

(In Thousands)

 

Trade accounts receivable

$

33,975

 

 

 

$

31,225

 

Other receivables

 

4,608

 

 

 

 

3,933

 

Total accounts receivable

$

38,583

 

 

 

$

35,158

 

 

 

 

 

 


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6. Inventories, Net

Inventories, net consist of the following:

 

 

 

(Successor)

 

 

 

(Successor)

 

 

September 30,

2018

 

 

 

December 31,

2017

 

 

(In Thousands)

 

Parts and supplies

$

17,103

 

 

 

$

17,196

 

Raw coal

 

6,787

 

 

 

 

5,577

 

Clean coal

 

29,034

 

 

 

 

17,766

 

Total inventories

$

52,924

 

 

 

$

40,539

 

 

 

7. Property, Plant, Equipment and Development, Net

Property, plant, equipment and development, net consist of the following:

 

 

(Successor)

 

 

 

(Successor)

 

 

September 30,

2018

 

 

 

December 31,

2017

 

 

(In Thousands)

 

Land, land rights and mineral rights

$

1,631,659

 

 

 

$

1,639,980

 

Machinery and equipment

 

566,364

 

 

 

 

580,649

 

Machinery and equipment under capital lease

 

127,064