Quarterly Report (10-q)

Date : 08/14/2019 @ 11:48AM
Source : Edgar (US Regulatory)
Stock : Contura Energy Inc (CTRA)
Quote : 9.04  -0.34 (-3.62%) @ 1:00AM
Contura Energy share price Chart

Quarterly Report (10-q)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2019

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

Commission File Number 001-38735
IMAGE0A11.JPG
CONTURA ENERGY, INC.
(Exact name of registrant as specified in its charter)
Delaware
 
81-3015061
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification Number)
 
 
 
340 Martin Luther King Jr. Blvd.
Bristol, Tennessee 37620
(Address of principal executive offices, zip code)
(423) 573-0300
(Registrant’s telephone number, including area code)

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

Indicate by check mark whether the registrant has submitted electronically 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 (Sec.232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). x Yes    ¨ No

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

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

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




Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock
CTRA
New York Stock Exchange

Number of shares of the registrant’s Common Stock, $0.01 par value, outstanding as of July 31, 2019: 19,218,122






 
TABLE OF CONTENTS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

3



4


CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS

This report includes statements of our expectations, intentions, plans and beliefs that constitute “forward-looking statements”. These statements, which involve risks and uncertainties, relate to analyses and other information that are based on forecasts of future results and estimates of amounts not yet determinable and may also relate to our future prospects, developments and business strategies. We have used the words “anticipate”, “believe”, “could”, “estimate”, “expect”, “intend”, “may”, “plan”, “predict”, “project”, “should” and similar terms and phrases, including references to assumptions, in this report to identify forward-looking statements. 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.

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

the financial performance of the company following the Merger with Alpha Natural Resources Holdings, Inc. and ANR, Inc. (the “Merger” or the “Alpha Merger”);
our liquidity, results of operations and financial condition;
depressed levels or declines in coal prices;
worldwide market demand for coal, steel, and electricity, including demand for U.S. coal exports, and competition in coal markets;
the imposition or continuation of barriers to trade, such as tariffs;
utilities switching to alternative energy sources such as natural gas, renewables and coal from basins where we do not operate;
reductions or increases in customer coal inventories and the timing of those changes;
our production capabilities and costs;
inherent risks of coal mining beyond our control;
changes in, interpretations of, or implementations of domestic or international tax or other laws and regulations, including the Tax Cuts and Jobs Act and its related regulations;
changes in domestic or international environmental laws and regulations, and court decisions, including those directly affecting our coal mining and production, and those affecting our customers’ coal usage, including potential climate change initiatives;
our relationships with, and other conditions affecting, our customers, including the inability to collect payments from our customers if their creditworthiness declines;
changes in, renewal or acquisition of, terms of and performance of customers under coal supply arrangements and the refusal by our customers to receive coal under agreed contract terms;
our ability to obtain, maintain or renew any necessary permits or rights, and our ability to mine properties due to defects in title on leasehold interests;
attracting and retaining key personnel and other employee workforce factors, such as labor relations;
funding for and changes in employee benefit obligations;
any new or increased liabilities, including reclamation obligations, that we may incur in connection with the recent Chapter 11 bankruptcy filing by Blackjewel L.L.C.;
cybersecurity attacks or failures, threats to physical security, extreme weather conditions or other natural disasters;
reclamation and mine closure obligations;
our assumptions concerning economically recoverable coal reserve estimates;
our ability to negotiate new United Mine Workers of America wage agreements on terms acceptable to us, increased unionization of our workforce in the future, and any strikes by our workforce;
disruptions in delivery or changes in pricing from third party vendors of key equipment and materials that are necessary for our operations, such as diesel fuel, steel products, explosives, tires and purchased coal;
inflationary pressures on supplies and labor and significant or rapid increases in commodity prices;
railroad, barge, truck and other transportation availability, performance and costs;
disruption in third party coal supplies;
the consummation of financing or refinancing transactions, acquisitions or dispositions and the related effects on our business and financial position;
our indebtedness and potential future indebtedness;
our ability to generate sufficient cash or obtain financing to fund our business operations; and
our ability to obtain or renew surety bonds on acceptable terms or maintain our current bonding status; and
other factors, including the other factors discussed in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors” sections of this Report and the “ Management’s Discussion

5


and Analysis of Financial Condition and Results of Operations ” and “ Risk Factors ” sections of our Annual Report on Form 10-K for the year ended December 31, 2018.

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


6


Part I - Financial Information

Item 1. Financial Statements
CONTURA ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(Amounts in thousands, except share and per share data)

Three Months Ended June 30,
 
Six Months Ended June 30,
 
2019

2018
 
2019
 
2018
Revenues:
 




 
 

 
 

Coal revenues
$
653,828


$
525,168

 
$
1,260,788

 
$
1,003,533

Other revenues
2,378


3,750

 
4,532

 
7,717

Total revenues
656,206


528,918

 
1,265,320

 
1,011,250

Costs and expenses:
 


 

 
 

 
 

Cost of coal sales (exclusive of items shown separately below)
496,746


431,304

 
1,012,440

 
802,048

Depreciation, depletion and amortization
62,814


11,222

 
124,085

 
22,810

Accretion on asset retirement obligations
6,847

 
1,596

 
13,079

 
4,056

Amortization of acquired intangibles, net
(343
)

1,104

 
(7,026
)
 
11,310

Asset impairment
5,826

 

 
5,826

 

Selling, general and administrative expenses (exclusive of depreciation, depletion and amortization shown separately above)
14,783


11,951

 
35,734

 
31,108

Merger related costs
156

 
3,423

 
987

 
3,883

Total other operating (income) loss:





 
 
 
 
Mark-to-market adjustment for acquisition-related obligations
1,014



 
2,950

 

Other expenses (income)
1,414


(16,407
)
 
(7,485
)
 
(16,506
)
Total costs and expenses
589,257


444,193

 
1,180,590

 
858,709

Income from operations
66,949


84,725

 
84,730

 
152,541

Other income (expense):
 


 

 
 

 
 

Interest expense
(16,077
)

(8,779
)
 
(31,232
)
 
(17,984
)
Interest income
1,885


191

 
3,821

 
322

Loss on modification and extinguishment of debt
(26,459
)
 

 
(26,459
)
 

Equity loss in affiliates
(2,475
)
 
(1,170
)
 
(2,959
)
 
(1,233
)
Miscellaneous loss, net
(523
)

(270
)
 
(1,389
)
 
(583
)
Total other expense, net
(43,649
)

(10,028
)
 
(58,218
)
 
(19,478
)
Income from continuing operations before income taxes
23,300


74,697

 
26,512

 
133,063

Income tax benefit (expense)
1,000


(55
)
 
5,778

 
(121
)
Net income from continuing operations
24,300


74,642

 
32,290

 
132,942

Discontinued operations:





 
 
 
 
Loss from discontinued operations before income taxes
(163,867
)

(854
)
 
(165,457
)
 
(2,213
)
Income tax benefit from discontinued operations
25,906



 
26,321

 

Loss from discontinued operations
(137,961
)

(854
)
 
(139,136
)
 
(2,213
)
Net (loss) income
$
(113,661
)

$
73,788

 
$
(106,846
)
 
$
130,729







 
 
 
 
Basic income (loss) per common share:





 
 
 
 
Income from continuing operations
$
1.27


$
7.75

 
$
1.70

 
$
13.87

Loss from discontinued operations
(7.21
)

(0.08
)
 
(7.32
)
 
(0.23
)

7


Net (loss) income
$
(5.94
)

$
7.67

 
$
(5.62
)
 
$
13.64







 
 
 
 
Diluted income (loss) per common share





 
 
 
 
Income from continuing operations
$
1.25


$
7.24

 
$
1.66

 
$
12.91

Loss from discontinued operations
(7.10
)

(0.08
)
 
(7.14
)
 
(0.22
)
Net (loss) income
$
(5.85
)

$
7.16

 
$
(5.48
)
 
$
12.69







 
 
 
 
Weighted average shares - basic
19,123,705

 
9,625,874

 
19,009,643

 
9,587,457

Weighted average shares - diluted
19,420,471

 
10,306,043

 
19,480,183

 
10,299,539


Refer to accompanying Notes to Condensed Consolidated Financial Statements.


8


CONTURA ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited)
(Amounts in thousands)
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
Net (loss) income
$
(113,661
)
 
$
73,788

 
$
(106,846
)
 
$
130,729

Other comprehensive income (loss), net of tax:
 
 
 
 
 
 
 
Employee benefit plans:
 
 
 
 
 
 
 
Amortization of and adjustments to employee benefit costs
$
1,187

 
$
(87
)
 
$
1,426

 
$
(50
)
Income tax expense
(310
)
 

 
(372
)
 

Total other comprehensive income (loss), net of tax
$
877

 
$
(87
)
 
$
1,054

 
$
(50
)
Total comprehensive (loss) income
$
(112,784
)
 
$
73,701

 
$
(105,792
)
 
$
130,679

Refer to accompanying Notes to Condensed Consolidated Financial Statements.


9


CONTURA ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(Amounts in thousands, except share and per share data)
 
June 30, 2019
 
December 31, 2018
Assets
 

 
 

Current assets:
 

 
 

Cash and cash equivalents
$
249,597

 
$
233,599

Trade accounts receivable, net of allowance for doubtful accounts of $0 as of June 30, 2019 and December 31, 2018
280,025

 
292,617

Inventories, net
164,303

 
121,965

Prepaid expenses and other current assets
166,702

 
158,945

Current assets - discontinued operations
2,059

 
22,475

Total current assets
862,686

 
829,601

Property, plant, and equipment, net of accumulated depreciation and amortization of $220,260 and $106,766 as of June 30, 2019 and December 31, 2018
630,654

 
699,990

Owned and leased mineral rights, net of accumulated depletion and amortization of $18,769 and $11,390 as of June 30, 2019 and December 31, 2018
569,394

 
528,232

Goodwill
101,019

 
95,624

Other acquired intangibles, net of accumulated amortization of $32,634 and $20,267 as of June 30, 2019 and December 31, 2018
146,554

 
154,584

Long-term restricted cash
216,568

 
227,173

Deferred income taxes
54,466

 
27,179

Other non-current assets
198,449

 
183,675

Total assets
$
2,779,790

 
$
2,746,058

Liabilities and Stockholders’ Equity
 

 
 

Current liabilities:
 

 
 

Current portion of long-term debt
$
28,885

 
$
42,743

Acquisition-related obligations - current
33,060

 
27,334

Trade accounts payable
89,214

 
114,568

Accrued expenses and other current liabilities
157,948

 
148,699

Current liabilities - discontinued operations
17,298

 
21,892

Total current liabilities
326,405

 
355,236

Long-term debt
580,519

 
545,269

Acquisition-related obligations - long-term
67,049

 
72,996

Workers’ compensation and black lung obligations
245,972

 
249,294

Pension obligations
180,274

 
180,802

Asset retirement obligations
217,830

 
203,694

Deferred income taxes
6,908

 
15,118

Other non-current liabilities
40,596

 
52,415

Non-current liabilities - discontinued operations
147,016

 
94

Total liabilities
1,812,569

 
1,674,918

Commitments and Contingencies (Note 17)


 


Stockholders’ Equity
 
 
 
Preferred stock - par value $0.01, 5.0 million shares authorized, none issued

 

Common stock - par value $0.01, 50.0 million shares authorized, 20.4 million issued and 19.2 million outstanding at June 30, 2019 and 20.2 million issued and 19.1 million outstanding at December 31, 2018
204

 
202

Additional paid-in capital
768,046

 
761,301

Accumulated other comprehensive loss
(22,076
)
 
(23,130
)

10


Treasury stock, at cost: 1.2 million shares at June 30, 2019 and 1.1 million shares at December 31, 2018
(75,236
)
 
(70,362
)
Retained earnings
296,283

 
403,129

Total stockholders’ equity
967,221

 
1,071,140

Total liabilities and stockholders’ equity
$
2,779,790

 
$
2,746,058


Refer to accompanying Notes to Condensed Consolidated Financial Statements.


11


CONTURA ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(Amounts in thousands)
 
Six Months Ended June 30,
 
2019
 
2018
Operating activities:

 
 
Net (loss) income
$
(106,846
)
 
$
130,729

Adjustments to reconcile net income to net cash provided by (used in) operating activities:
 
 
 
Depreciation, depletion and amortization
269,997

 
22,810

Amortization of acquired intangibles, net
(7,026
)
 
11,310

Accretion of acquisition-related obligations discount
3,220

 
3,020

Amortization of debt issuance costs and accretion of debt discount
6,724

 
1,499

Mark-to-market adjustment for acquisition-related obligations
2,950

 

Loss (gain) on disposal of assets
1,372

 
(16,502
)
Gain on assets acquired in an exchange transaction
(9,083
)
 

Loss on modification and extinguishment of debt
26,459

 

Asset impairment
22,294

 

Accretion on asset retirement obligations
13,079

 
4,056

Employee benefit plans, net
9,564

 
5,324

Deferred income taxes
(33,623
)
 

Stock-based compensation
4,774

 
7,125

Equity loss in affiliates
2,959

 
1,233

Other, net
405

 
(292
)
Changes in operating assets and liabilities
(90,086
)
 
(54,706
)
Net cash provided by operating activities
117,133

 
115,606

Investing activities:
 
 
 
Capital expenditures
(83,882
)
 
(38,349
)
Payments on disposal of assets

 
(10,250
)
Proceeds on disposal of assets
1,048

 
464

Purchases of investment securities - held to maturity
(9,899
)
 
(1,446
)
Maturity of investment securities - held to maturity
21,316

 

Capital contributions to equity affiliates
(4,807
)
 
(525
)
Other, net
93

 

Net cash used in investing activities
(76,131
)
 
(50,106
)
Financing activities:
 
 
 
Proceeds from borrowings on debt
544,946

 

Principal repayments of debt
(550,000
)
 
(5,323
)
Principal repayments of notes payable
(821
)
 
(2,939
)
Principal repayments of financing lease obligations
(2,100
)
 
(139
)
Debt issuance costs
(5,839
)
 

Common stock repurchases and related expenses
(4,874
)
 
(4,838
)
Other, net
914

 
(49
)
Net cash used in financing activities
(17,774
)
 
(13,288
)
Net increase in cash and cash equivalents and restricted cash
23,228

 
52,212

Cash and cash equivalents and restricted cash at beginning of period
477,246

 
193,960

Cash and cash equivalents and restricted cash at end of period
$
500,474

 
$
246,172



12


The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the Condensed Consolidated Balance Sheets that sum to the total of the same such amounts shown in the Condensed Consolidated Statements of Cash Flows.
 
As of June 30,
 
2019
 
2018
Cash and cash equivalents
$
249,597

 
$
199,252

Short-term restricted cash (included in Prepaid expenses and other current assets)
34,309

 
11,680

Long-term restricted cash
216,568

 
35,240

Total cash and cash equivalents and restricted cash shown in the Condensed Consolidated Statements of Cash Flows
$
500,474

 
$
246,172


Refer to accompanying Notes to Condensed Consolidated Financial Statements.


13


CONTURA ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Unaudited)
(Amounts in thousands)
 
Common Stock
 
Additional Paid-in Capital
 
Accumulated
Other
Comprehensive Income (Loss)
 
Treasury Stock at Cost
 
Retained Earnings
 
Total Stockholders’ Equity
Balances, December 31, 2017
$
108

 
$
40,616

 
$
(1,948
)
 
$
(50,092
)
 
$
103,964

 
$
92,648

Net income

 

 

 

 
56,941

 
56,941

Other comprehensive income, net

 

 
37

 

 

 
37

Stock-based compensation and net issuance of common stock for share vesting

 
4,479

 

 

 

 
4,479

Common stock repurchases and related expenses

 

 

 
(4,835
)
 

 
(4,835
)
Balances, March 31, 2018
$
108


$
45,095


$
(1,911
)
 
$
(54,927
)

$
160,905


$
149,270

Net income

 

 

 

 
73,788

 
73,788

Other comprehensive loss, net

 

 
(87
)
 

 

 
(87
)
Stock-based compensation and net issuance of common stock for share vesting

 
2,114

 

 

 

 
2,114

Exercise of stock options

 
62

 

 

 

 
62

Warrant exercises

 
2

 

 
(3
)
 

 
(1
)
Balances, June 30, 2018
$
108

 
$
47,273

 
$
(1,998
)
 
$
(54,930
)
 
$
234,693

 
$
225,146

 
 
 
 
 
 
 
 
 
 
 
 
Balances, December 31, 2018
$
202

 
$
761,301

 
$
(23,130
)
 
$
(70,362
)
 
$
403,129

 
$
1,071,140

Net income

 

 

 

 
6,815

 
6,815

Other comprehensive income, net

 

 
177

 

 

 
177

Stock-based compensation and net issuance of common stock for share vesting

 
6,377

 

 

 

 
6,377

Exercise of stock options
1

 
305

 

 

 

 
306

Common stock repurchases and related expenses

 

 

 
(4,171
)
 

 
(4,171
)
Balances, March 31, 2019
$
203

 
$
767,983

 
$
(22,953
)
 
$
(74,533
)
 
$
409,944

 
$
1,080,644

Net loss

 

 

 

 
(113,661
)
 
(113,661
)
Other comprehensive income, net

 

 
877

 

 

 
877

Stock-based compensation and net issuance of common stock for share vesting

 
(545
)
 

 

 

 
(545
)
Exercise of stock options
1

 
589

 

 

 

 
590

Common stock repurchases and related expenses

 

 

 
(703
)
 

 
(703
)
Warrant exercises

 
19

 

 

 

 
19

Balances, June 30, 2019
$
204

 
$
768,046

 
$
(22,076
)
 
$
(75,236
)
 
$
296,283

 
$
967,221

Refer to accompanying Notes to Condensed Consolidated Financial Statements.

14

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


( 1 ) Business and Basis of Presentation
Basis of Presentation

Together, the condensed consolidated statements of operations, comprehensive (loss) income, balance sheet, cash flows and stockholders’ equity for the Company are referred to as the “Condensed Consolidated Financial Statements.” The Condensed Consolidated Financial Statements are also referenced across periods as “Condensed Consolidated Balance Sheets,” “Condensed Consolidated Statements of Operations,” and “Condensed Consolidated Statements of Cash Flows.”
The Condensed Consolidated Financial Statements include all wholly-owned subsidiaries’ results of operations for the three and six months ended June 30, 2019 and 2018 . All significant intercompany transactions have been eliminated in consolidation.

The accompanying interim Condensed Consolidated Financial Statements are unaudited and have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) and in accordance with the rules and regulations of the United States Securities and Exchange Commission (“SEC”) for Form 10-Q. Such rules and regulations allow the omission of certain information and footnote disclosures normally included in the financial statements prepared in accordance with U.S. GAAP as long as the financial statements are not misleading. In the opinion of management, these interim Condensed Consolidated Financial Statements reflect all normal and recurring adjustments necessary for a fair presentation of the results for the periods presented. Results of operations for the  three and six months ended June 30, 2019  are not necessarily indicative of the results to be expected for the year ending December 31, 2019 or any other period. These interim Condensed Consolidated Financial Statements should be read in conjunction with the Company’s Consolidated Financial Statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.
Reclassifications
Accretion on asset retirement obligations has been reclassified in the prior year from cost of coal sales to a separate line item in the Condensed Consolidated Statements of Operations to conform to the current year presentation. Freight and handling costs has been reclassified in the prior year from a separate line item into cost of coal sales in the Condensed Consolidated Statements of Operations to conform to the current year presentation.
New Accounting Pronouncements

Leases: In February 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2016-02 , Leases (“ASU 2016-02”) . ASU 2016-02, along with related amendments issued from 2017 to 2019 (collectively, the “New Leases Standard”), requires a lessee to recognize a right-of-use asset and a lease liability on the balance sheet. The Company adopted ASU 2016-02 effective January 1, 2019 and elected the option to not restate comparative periods in transition and also elected the package of practical expedients for all leases within the standard, which permits the Company not to reassess its prior conclusions about lease identification, lease classification and initial direct costs. Additionally, the Company elected the transition practical expedient to continue to account for existing and expired land easements at transition as executory contracts. Only land easements entered into or modified after the effective date of Accounting Standards Codification (“ASC”) 842 are accounted for as leases by the Company.

As a result of the adoption, the Company recorded operating lease right-of-use assets and lease liabilities on our Condensed Consolidated Balance Sheet. The following table summarizes the impact of the adoption of ASC 842 to the Company’s Condensed Consolidated Balance Sheet:

15

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

 
 
Balance at December 31, 2018 (1)
 
Adjustments
 
Balance at January 1, 2019
Assets
Balance Sheet Classification
 

 
 
 
 
Operating lease right-of-use assets
Other non-current assets
$

 
$
11,845

 
$
11,845

Financing lease assets
Property, plant, and equipment, net
9,786

 

 
9,786

Total lease assets
 
$
9,786

 
$
11,845

 
$
21,631

 
 
 
 
 
 
 
Liabilities
Balance Sheet Classification
 
 
 
 
 
Operating lease liabilities - current
Accrued expenses and other current liabilities
$

 
$
3,624

 
$
3,624

Financing lease liabilities - current
Current portion of long-term debt
2,110

 

 
2,110

Operating lease liabilities - long-term
Other non-current liabilities

 
8,221

 
8,221

Financing lease liabilities - long-term
Long-term debt
4,313

 

 
4,313

Total lease liabilities
 
$
6,423

 
$
11,845

 
$
18,268

(1) Balances do not include measurement-period adjustments recorded during the three months ended June 30, 2019. Refer to Note 2 for further details on measurement-period adjustments recorded during the period.

The adoption of ASC 842 did not have an impact on our Condensed Consolidated Statements of Operations, Condensed Consolidated Statements of Comprehensive Income, or Condensed Consolidated Statements of Cash Flows. Refer to Note 9 for further disclosure requirements under the new standard.

Credit Losses: In June 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2016-13, Credit Losses (“ASU 2016-13”). ASU 2016-13, along with related amendments and improvements issued in 2018 and 2019, replaces the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable supportable information to inform credit loss estimates. Management is currently evaluating the impact on the Company’s Condensed Consolidated Financial Statements and related disclosures.

Stock Compensation : In June 2018, the FASB issued ASU 2018-07, Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting (“ASU 2018-07”). The amendments in this update expand the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. The Company adopted ASU 2018-07 during the first quarter of 2019. The adoption of this ASU did not have a material impact on the Company's Condensed Consolidated Financial Statements and related disclosures.
( 2 ) Mergers and Acquisitions

A Merger with ANR, Inc. (“ANR”) and Alpha Natural Resources Holdings, Inc. (“Holdings”, and, together with ANR, the "Alpha Companies”) was completed on November 9, 2018 (the “Merger” or the “Alpha Merger”).

Preliminary Allocation of Purchase Price

There were no measurement-period adjustments recorded during the period from the acquisition date to June 30, 2019 that impacted the preliminary purchase price of $688,534 . As of June 30, 2019 , the fair value allocation for the acquisition is preliminary and will be finalized when the valuation and the related internal controls over financial reporting are completed. Differences between the preliminary and final allocation could be material. The Company’s estimates and assumptions are subject to change during the measurement period (up to one year from the closing of the acquisition), as the Company finalizes the accounting for the purchase price of the assets acquired and liabilities assumed. The primary areas of the purchase price allocation that are not yet finalized relate to the areas of property plant and equipment, owned and leased mineral rights, acquired intangibles, goodwill, asset retirement obligations, taxes, accounts payable, and other contingencies. The Company continues to review the significant amount of data and assumptions used in these areas which could cause a reallocation of the purchase price. The below table is a preliminary allocation of the assets acquired and the liabilities the Company assumed in the acquisition as of December 31, 2018, along with adjustments through the second quarter of 2019 resulting in the preliminary allocation as of June 30, 2019 .

16

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


The total purchase price has been preliminarily allocated to the net tangible and intangible assets of Alpha Companies as follows:
 
Provisional as of December 31, 2018
 
Adjustments
 
Provisional as of June 30, 2019
Cash and cash equivalents
$
29,939

 
$

 
$
29,939

Trade and other receivables
60,714

 

 
60,714

Inventories
85,635

 

 
85,635

Short-term restricted cash
10,592

 

 
10,592

Other current assets
38,495

 
7,929

 
46,424

Property, plant, and equipment
504,852

 
(33,930
)
 
470,922

Owned and leased mineral rights
516,201

 
39,031

 
555,232

Other intangible assets
154,041

 
4,453

 
158,494

Long-term restricted cash
182,049

 

 
182,049

Long-term restricted investments
28,809

 

 
28,809

Other non-current assets
68,022

 
(3,915
)
 
64,107

Total assets
$
1,679,349

 
$
13,568

 
$
1,692,917

 
 
 
 
 
 
Accounts payable
$
69,049

 
$
(2,711
)
 
$
66,338

Accrued expenses and other current liabilities
76,774

 
2,139

 
78,913

Long-term debt, including current portion
144,832

 
3,618

 
148,450

Acquisition related obligations
74,346

 
5,738

 
80,084

Pension obligations
158,005

 
3,596

 
161,601

Asset retirement obligation, including current portion
163,636

 
12,718

 
176,354

Deferred income taxes, including current portion
134,924

 
(2,246
)
 
132,678

Other intangible liabilities
57,219

 

 
57,219

Other non-current liabilities
207,654

 
(3,889
)
 
203,765

Total liabilities
$
1,086,439

 
$
18,963

 
$
1,105,402

 
 
 
 
 
 
Goodwill
$
95,624

 
$
5,395

 
$
101,019

 
 
 
 
 
 
Allocation of purchase price
$
688,534

 
$

 
$
688,534


During the six months ended June 30, 2019 , the Company recorded measurement-period adjustments to the provisional opening balance sheet as shown in the table above. Adjustments were made primarily to property, plant and equipment, owned and leased mineral rights and asset retirement obligations. There were no material measurement-period adjustments impacting current-period earnings that would have been recorded in the previous reporting period if the adjustments to the provisional amounts had been recognized as of the acquisition date.

In connection with the Merger, the Company originally recorded provisional goodwill of $95,624 , which represents the excess of the purchase price over the estimated fair value of tangible and intangible asset acquired, net of liabilities assumed. As a result of measurement-period adjustments recorded during the six months ended June 30, 2019 , the provisional amount of goodwill increased by $5,395 resulting in provisional goodwill of $101,019 as of June 30, 2019 . The goodwill is attributed primarily to the following factors: (i) anticipated operating and administrative synergies, and (ii) deferred income taxes arising from the differences between the preliminary purchase price allocated to the assets and liabilities acquired based on fair value and the tax basis of these assets and liabilities. The goodwill is not deductible for tax purposes. The Company’s provisional estimate of goodwill is not yet finalized and has been allocated to the Company’s CAPP-Met reportable segment.


17

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

The following table represents the intangible assets and the weighted-average amortization periods as of the acquisition date:
 
Provisional as of June 30, 2019
 
Weighted-Average Amortization Period
(
In Years )
Mining permits
$
157,645

 
12.62
Above-market coal supply agreements
849

 
1.03
Below-market coal supply agreements
(57,219
)
 
2.10
Total acquired intangibles:
$
101,275

 
10.46

The Condensed Consolidated Statements of Operations include acquisition related expenses (on a pre-tax basis) of $156 and $3,423 in Merger related costs for the three months ended June 30, 2019 and 2018, respectively. The Condensed Consolidated Statements of Operations include acquisition related expenses (on a pre-tax basis) of $987 and $3,883 in Merger related costs for the six months ended June 30, 2019 and 2018, respectively. Acquisition related expenses include professional fees related to legal, tax, advisory integration services and contract related matters.

The following unaudited pro forma information has been prepared for illustrative purposes only and assumes the Merger occurred on January 1, 2017. The unaudited pro forma results have been prepared based on estimates and assumptions, which the Company believes are reasonable; however, they are not necessarily indicative of the consolidated results of operations had the Merger occurred on January 1, 2017, or of future results of operations.

 
Three Months Ended June 30, 2018
 
Six Months Ended June 30, 2018
 
As reported
 
Pro forma
 
As reported
 
Pro forma
Total revenues
$
528,918

 
$
712,204

 
$
1,011,250

 
$
1,338,953

Income from continuing operations
$
74,642

 
$
105,117

 
$
132,942

 
$
179,646

 
 
 
 
 
 
 
 
Basic income per common share:
 
 
 
 
 
 
 
Income from continuing operations
$
7.75

 
$
5.53

 
$
13.87

 
$
9.47

Diluted income per common share:
 
 
 
 
 
 
 
Income from continuing operations
$
7.24

 
$
5.34

 
$
12.91

 
$
9.13

 
 
 
 
 
 
 
 
Weighted average shares - basic
9,625,874

 
19,004,073

 
9,587,457

 
18,965,656

Weighted average shares - diluted
10,306,043

 
19,684,242

 
10,299,539

 
19,677,738


These amounts have been calculated after applying the Company's accounting policies and adjusting the results of ANR to reflect the additional depreciation, amortization, depletion, and cost of coal sales that would have been charged assuming the fair value adjustments to property, plant and equipment, as well as intangibles, asset retirement obligations, and inventory had been applied at January 1, 2017, together with the consequential tax effects.

The pro forma results for the three and six months ended June 30, 2018 include $3,423 and $3,883 , respectively, of merger-related costs primarily related to professional service fees.

( 3 ) Discontinued Operations

The discontinued operations include the Company’s former PRB segment. On December 8, 2017, the Company closed a transaction (“PRB Transaction”) with Blackjewel L.L.C. (“Blackjewel” or the “Buyer”) to sell the Eagle Butte and Belle Ayr mines located in the PRB. During the anticipated permit transfer period, the Company maintained the required reclamation bonds and related collateral. As of June 30, 2019 , the Company had outstanding surety bonds with a total face amount of $237,310 to secure various obligations and commitments related to the PRB. As the permits associated with the PRB Transaction have not transferred due to the Blackjewel Chapter 11 bankruptcy filing on July 1, 2019, the Company no longer anticipates the related restricted cash and deposits will be returned in the near term to operating cash. Refer to Note 19 for

18

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

further details within subsequent event disclosures.

The major components of net income (loss) from discontinued operations in the Condensed Consolidated Statements of Operations are as follows:
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
Revenues:
 

 
 
 
 

 
 
Total revenues (1)
$
52

 
$
182

 
$
148

 
$
1,115

Costs and expenses:
 
 
 
 
 
 
 
Depreciation, depletion and amortization (2)
$
145,913

 
$

 
$
145,913

 
$

Asset impairment (3)
$
16,468

 
$

 
$
16,468

 
$

Other expenses
$
1,349

 
$
1,104

 
$
2,939

 
$
2,402

Other non-major expense (income) items, net
$
189

 
$
(68
)
 
$
285

 
$
926

(1) Total revenues for the three and six months ended June 30, 2019 and 2018 consisted entirely of other revenues.
(2) The depreciation, depletion and amortization is primarily related to an increase in the asset retirement obligation as a result of the Blackjewel Chapter 11 bankruptcy filing on July 1, 2019. The Company remeasured the liability based on the expectation that the mining permits will not transfer and Blackjewel is not expected to perform on their contractual obligation to reclaim the properties due to Blackjewel’s Chapter 11 bankruptcy filing. The increase in the asset retirement obligation was expensed in the three months ended June 30, 2019 as there are no related mining assets. The estimates and assumptions used to determine the asset retirement obligation as of June 30, 2019 will continue to be evaluated and updated as additional information becomes available in subsequent periods. Refer to Note 19 for further details within subsequent event disclosures.
(3) The asset impairment is primarily related to the write-off of a tax receivable. Refer to the disclosures below for further details.

Refer to Note 6 for net income (loss) per share information related to discontinued operations.

The major components of asset and liabilities that are classified as discontinued operations in the Condensed Consolidated Balance Sheets are as follows:
 
June 30, 2019
 
December 31, 2018
Assets:
 

 
 

Accounts receivable, net
$
1,060

 
$
5

Prepaid expenses and other current assets
$
999

 
$
22,470

 
 
 
 
Liabilities:
 

 
 

Trade accounts payable, accrued expenses and other current liabilities (1)
$
17,298

 
$
21,892

Asset retirement obligations (2)
$
146,921

 
$

Other non-current liabilities
$
95

 
$
94

(1) The liabilities are primarily comprised of taxes for which the Company is considered to be the primary obligor but for which the Buyer is contractually obligated to pay. During the three months ended June 30, 2019 , the Company recorded an impairment charge for the offsetting receivable from the Buyer as a result of the Blackjewel Chapter 11 bankruptcy filing on July 1, 2019. Refer to Note 19 for further details within subsequent event disclosures.
(2) Refer to discussion of asset retirement obligation in the table above.

The major components of cash flows related to discontinued operations are as follows:

19

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

 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
Other significant operating non-cash items related to discontinued operations:
 
 
 
 
 
 
 
Depreciation, depletion and amortization
$
145,913

 
$

 
$
145,913

 
$


Blackjewel Surety Bonding
During the third quarter of 2018, the Company recorded a guarantee within discontinued operations to account for the Blackjewel surety bonding arrangement with no material impact on the Company's Condensed Consolidated Financial Statements. During the three months ended June 30, 2019, the Company reversed the guarantee liability as a result of the Blackjewel Chapter 11 bankruptcy filing on July 1, 2019 and the expectation of the permits not transferring to Blackjewel. Refer to Note 19 for further details within subsequent event disclosures.

( 4 ) Revenue

Disaggregation of Revenue from Contracts with Customers

The following tables disaggregate the Company’s coal revenues by product category and by market to depict how the nature, amount, timing, and uncertainty of the Company’s coal revenues and cash flows are affected by economic factors:
 
Three Months Ended June 30, 2019
 
Met
 
Thermal
 
Total
Export coal revenues
$
345,576

 
$
17,262

 
$
362,838

Domestic coal revenues
156,053

 
134,937

 
290,990

Total coal revenues
$
501,629

 
$
152,199

 
$
653,828

 
Three Months Ended June 30, 2018
 
Met
 
Thermal
 
Total
Export coal revenues
$
453,581

 
$
7,909

 
$
461,490

Domestic coal revenues
14,940

 
48,738

 
63,678

Total coal revenues
$
468,521

 
$
56,647

 
$
525,168

 
Six Months Ended June 30, 2019
 
Met
 
Thermal
 
Total
Export coal revenues
$
679,762

 
$
26,382

 
$
706,144

Domestic coal revenues
292,311

 
262,333

 
554,644

Total coal revenues
$
972,073

 
$
288,715

 
$
1,260,788

 
Six Months Ended June 30, 2018
 
Met
 
Thermal
 
Total
Export coal revenues
$
867,259

 
$
15,786

 
$
883,045

Domestic coal revenues
22,864

 
97,624

 
120,488

Total coal revenues
$
890,123

 
$
113,410

 
$
1,003,533


Performance Obligations

The following table includes estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied as of June 30, 2019 .

20

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

 
Remainder of 2019
 
2020
 
2021
 
2022
 
2023
 
Total
Estimated coal revenues
$
129,558

 
$
269,340

 
$
117,590

 
$
69,943

 
$
84,268

 
$
670,699


Contract Balances

During the six months ended June 30, 2019 , the Company paid amounts under certain contracts related to the modification of contract terms. These payments were deferred and allocated to the remaining performance obligations after contract modification. The following table includes the opening and closing balances of contract assets from modifications with contracts with customers, which are included within prepaid expenses and other current assets on the Company’s Condensed Consolidated Balance Sheets:
 
June 30, 2019
 
December 31, 2018
Contract assets (1)
$
2,204

 
$
950

(1) Amounts primarily relate to payments made upon modification of coal contracts.

Of the December 31, 2018 contract asset balance, $293 and $517 was recognized within coal revenues in the Company’s Condensed Consolidated Statements of Operations during the three and six months ended June 30, 2019, respectively. During the three and six months ended June 30, 2018 , there were no contract balances as of December 31, 2017 recognized within the Company’s Condensed Consolidated Statements of Operations.

( 5 ) Accumulated Other Comprehensive Income (Loss)
The following tables summarize the changes to accumulated other comprehensive income (loss) during the six months ended June 30, 2019 and 2018 :
 
Balance January 1, 2019
 
Other comprehensive income (loss) before reclassifications
 
Amounts reclassified from accumulated other comprehensive income (loss)
 
Balance June 30, 2019
Employee benefit costs
$
(23,130
)
 
$
713

 
$
341

 
$
(22,076
)
 
Balance January 1, 2018
 
Other comprehensive income (loss) before reclassifications
 
Amounts reclassified from accumulated other comprehensive income (loss)
 
Balance June 30, 2018
Employee benefit costs
$
(1,948
)
 
$
(128
)
 
$
78

 
$
(1,998
)

The following table summarizes the amounts reclassified from accumulated other comprehensive income (loss) and the Condensed Consolidated Statements of Operations line items affected by the reclassification during the three and six months ended June 30, 2019 and 2018 :
Details about accumulated other comprehensive income (loss) components
Amounts reclassified from accumulated other comprehensive income (loss)
Affected line item in the Condensed Consolidated Statements of Operations
Three Months Ended June 30,
 
Six Months Ended June 30,
2019
 
2018
 
2019
 
2018
Employee benefit costs:
 
 
 
 
 
 
 
 
Amortization of actuarial loss
$
222

 
$
41

 
$
461

 
$
78

(1) Miscellaneous loss, net
Income tax expense
(58
)
 

 
(120
)
 

Income tax benefit (expense)
Total, net of income tax
$
164

 
$
41

 
$
341

 
$
78

 
(1) These accumulated other comprehensive income (loss) components are included in the computation of net periodic benefit costs for black lung and life insurance. Refer to Note 15 .

( 6 ) Net Income (Loss) Per Share

21

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

The number of shares used to calculate basic net income (loss) per common share is based on the weighted average number of the Company’s outstanding common shares during the respective period. The number of shares used to calculate diluted net income (loss) per common share is based on the number of common shares used to calculate basic net income (loss) per share plus the dilutive effect of stock options and other stock-based instruments held by the Company’s employees and directors during the period, and the Company’s outstanding Series A warrants. The warrants become dilutive for net income (loss) per common share calculations when the market price of the Company’s common stock exceeds the exercise price. For the three and six months ended June 30, 2019, 95,162 stock options and 131,707 restricted stock units were excluded from the computation of dilutive net income (loss) per share because they would have been anti-dilutive. For the three and six months ended June 30, 2018, 129,520 stock options were excluded from the computation of dilutive net income (loss) per share because they would have been anti-dilutive. These potential shares could dilute net income (loss) per share in the future.

The following table presents the net income (loss) per common share for the three and six months ended June 30, 2019 and 2018 :
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
Net income (loss)
 
 
 
 
 
 
 
Income from continuing operations
$
24,300

 
$
74,642

 
$
32,290

 
$
132,942

Loss from discontinued operations
(137,961
)
 
(854
)
 
(139,136
)
 
(2,213
)
Net (loss) income
$
(113,661
)
 
$
73,788

 
$
(106,846
)
 
$
130,729

 
 
 
 
 
 
 
 
Basic
 
 
 
 
 
 
 
Weighted average common shares outstanding - basic
19,123,705

 
9,625,874

 
19,009,643

 
9,587,457

 
 
 
 
 
 
 
 
   Basic income (loss) per common share:
 
 
 
 
 
 
 
  Income from continuing operations
$
1.27

 
$
7.75

 
$
1.70

 
$
13.87

Loss from discontinued operations
(7.21
)
 
(0.08
)
 
(7.32
)
 
(0.23
)
  Net (loss) income
$
(5.94
)
 
$
7.67

 
$
(5.62
)
 
$
13.64

 
 
 
 
 
 
 
 
Diluted
 
 
 
 
 
 
 
Weighted average common shares outstanding - basic
19,123,705

 
9,625,874

 
19,009,643

 
9,587,457

Diluted effect of warrants
143,571

 
260,919

 
179,807

 
253,795

Diluted effect of stock options
74,278

 
261,849

 
139,956

 
268,364

Diluted effect of restricted share units, restricted stock shares and performance-based restricted share units
78,917

 
157,401

 
150,777

 
189,923

Weighted average common shares outstanding - diluted
19,420,471

 
10,306,043

 
19,480,183

 
10,299,539

 
 
 
 
 
 
 
 
   Diluted income (loss) per common share:
 
 
 
 
 
 
 
   Income from continuing operations
$
1.25

 
$
7.24

 
$
1.66

 
$
12.91

Loss from discontinued operations
(7.10
)
 
(0.08
)
 
(7.14
)
 
(0.22
)
   Net (loss) income
$
(5.85
)
 
$
7.16

 
$
(5.48
)
 
$
12.69



22

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

( 7 ) Inventories, net
Inventories, net consisted of the following: 
 
June 30, 2019
 
December 31, 2018
Raw coal
$
34,288

 
$
33,607

Saleable coal
104,141

 
63,767

Materials, supplies and other, net
25,874

 
24,591

Total inventories, net
$
164,303

 
$
121,965


( 8 ) Goodwill and Acquired Intangibles
Goodwill

In connection with the Merger, the Company recorded provisional goodwill. Refer to Note 2 for information on goodwill.

Acquired Intangibles

The Company has recognized assets for acquired above market-priced coal supply agreements and acquired mine permits and liabilities for acquired below market-priced coal supply agreements. The coal supply agreements were valued based on the present value of the difference between the expected net contractual cash flows based on the stated contract terms, and the estimated net contractual cash flows derived from applying forward market prices at the Merger or acquisition date for new contracts of similar terms and conditions. The acquired mine permits were valued based on the replacement cost and lost profits method as of the Merger date. The balances and respective balance sheet classifications of such assets and liabilities as of June 30, 2019 and December 31, 2018, net of accumulated amortization, are set forth in the following tables:

 
June 30, 2019
 
Assets (1)
 
Liabilities (2)
 
Net Total
Coal supply agreements, net
$
3,923

 
$
(14,402
)
 
$
(10,479
)
Acquired mine permits, net
142,631

 

 
142,631

Total
$
146,554

 
$
(14,402
)
 
$
132,152

 
December 31, 2018
 
Assets (1)
 
Liabilities (2)
 
Net Total
Coal supply agreements, net
$
4,687

 
$
(33,912
)
 
$
(29,225
)
Acquired mine permits, net
149,897

 

 
149,897

Total
$
154,584

 
$
(33,912
)
 
$
120,672

(1) Included within other acquired intangibles, net of accumulated amortization on the Company’s Condensed Consolidated Balance Sheets.
(2) Included within other non-current liabilities on the Company’s Condensed Consolidated Balance Sheets.

The acquired mine permits are amortized over the estimated life of the associated mine. The coal supply agreement assets and liabilities are amortized over the actual number of tons shipped over the life of each contract. Amortization of mine permits acquired as a result of the Merger was $5,664 and $11,605 for the three and six months ended June 30, 2019 which is reported within amortization of acquired intangibles, net in the Condensed Consolidated Statements of Operations. Amortization of above-market coal supply agreements was $122 and $1,104 , and amortization of below-market coal supply agreements was ($6,129) and $0 , resulting in a net (income) expense of ($6,007) and $1,104 for the three months ended June 30, 2019 and 2018, respectively, which is reported within amortization of acquired intangibles, net in the Condensed Consolidated Statements of Operations. Amortization of above-market coal supply agreements was $879 and $11,310 , and amortization of below-market coal supply agreements was ($19,510) and $0 , resulting in a net (income) expense of ($18,631) and $11,310 for the six months ended June 30, 2019 and 2018, respectively, which is reported within amortization of acquired intangibles, net in the Condensed Consolidated Statements of Operations.

23

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


( 9 ) Leases

Subsequent to the adoption of ASC 842, the Company recognizes right of use assets and lease liabilities on the balance sheet for all leases with a term longer than 12 months. The discount rates used to determine the present value of the lease assets and liabilities are based on the Company’s incremental borrowing rate at the lease commencement date and commensurate with the remaining lease term. For leases with a term of 12 months or less, no right of use assets or liabilities are recognized on the balance sheet and the Company recognizes the lease expense on a straight-line basis over the lease term. Additionally, the Company recognizes variable lease payments as an expense in the period incurred.

The Company’s lease population consists primarily of vehicle and heavy equipment leases and leases for office equipment. The Company’s building and land leases relate to corporate office space and certain site offices. The Company determines whether a contract contains a lease based on whether the Company obtains the right to control the use of specifically identifiable property, plant, and equipment for a period of time in exchange for consideration. For the six months ended June 30, 2019 the Company identified no instances requiring significant judgment in determining whether any contract entered into during the period were or were not leases. Additionally, the Company had no material sublease agreements within the scope of ASC 842 or lease agreements for which the Company was the lessor for the six months ended June 30, 2019 .

Renewal options in the Company’s lease population primarily relate to month-to-month extensions on vehicle leases and are immaterial both individually and in the aggregate. The Company includes renewal options that are reasonably certain to be exercised in the measurement lease liabilities. As of June 30, 2019 , the Company does not intend to exercise any termination options on existing leases.
 
As of June 30, 2019 , the Company had the following right-of-use assets and lease liabilities within the Company’s Condensed Consolidated Balance Sheets:
 
 
June 30, 2019
Assets
Balance Sheet Classification
 
Financing lease assets
Property, plant, and equipment, net
$
11,134

Operating lease right-of-use assets
Other non-current assets
9,525

Total lease assets
 
$
20,659

 
 
 
Liabilities
Balance Sheet Classification
 
Financing lease liabilities - current
Current portion of long-term debt
$
3,038

Operating lease liabilities - current
Accrued expenses and other current liabilities
2,091

Financing lease liabilities - long-term
Long-term debt
5,649

Operating lease liabilities - long-term
Other non-current liabilities
7,434

Total lease liabilities
 
$
18,212


Total lease costs and other lease information for the three and six months ended June 30, 2019 included the following:
 
Three Months Ended June 30, 2019
 
Six Months Ended June 30, 2019
Lease cost (1)
 
 
 
Finance lease cost:
 
 
 
     Amortization of leased assets
$
1,013

 
$
1,653

     Interest on lease liabilities
214

 
258

Operating lease cost
191

 
1,330

Short-term lease cost
541

 
980

     Total lease cost
$
1,959

 
$
4,221

(1) The Company had no variable lease costs or sublease income for the six months ended June 30, 2019 .


24

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

 
Six Months Ended June 30, 2019
Other information
 
Cash paid for amounts included in the measurement of lease liabilities
$
4,154

     Operating cash flows from finance leases
$
258

     Operating cash flows from operating leases
$
2,310

     Financing cash flows from finance leases
$
1,586

Right-of-use assets obtained in exchange for new finance lease liabilities
$
750

 
 
Lease Term and Discount Rate
 
Weighted-average remaining lease term in months - finance leases
35.0

Weighted-average remaining lease term in months - operating leases
95.9

Weighted-average discount rate - finance leases
4.9
%
Weighted-average discount rate - operating leases
10.9
%

The Company has elected to show net instead of gross amounts for right-of-use assets and liabilities within its Condensed Consolidated Statements of Cash Flows.

The following table summarizes the maturity of our lease liabilities on an undiscounted cash flow basis and a reconciliation to the lease liabilities recognized in the Company’s Condensed Consolidated Balance Sheet as of June 30, 2019 :

 
Finance Leases
 
Operating Leases
Lease cost