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, 2022

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: 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 21, 2022 there were 18,553,129 shares of the registrant’s common stock outstanding.

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	27
Item 3. Quantitative and Qualitative Disclosures About Market Risk	45
Item 4. Controls and Procedures	46
Part II OTHER INFORMATION	46
Item 1. Legal Proceedings	46
Item 1A. Risk Factors	46
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	46
Item 4. Mine Safety Disclosures	47
Item 6. Exhibits	48
Signatures	53

2

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,
	2022		2021		2022		2021
	(Unaudited)				(Unaudited)
Revenues	$	1,133,358	$	450,389	$	2,001,294	$	807,932
Costs, expenses and other operating
Cost of sales (exclusive of items shown separately below)		639,760		355,329		1,147,985		665,235
Depreciation, depletion and amortization		32,780		27,884		64,990		53,681
Accretion on asset retirement obligations		4,430		5,437		8,860		10,874
Change in fair value of coal derivatives and coal trading activities, net		1,877		8,762		17,396		9,290
Selling, general and administrative expenses		26,516		24,119		53,164		45,599
Other operating expense (income), net		5,238		(4,347)		1,799		(9,615)
		710,601		417,184		1,294,194		775,064
Income from operations		422,757		33,205		707,100		32,868
Interest expense, net
Interest expense		(5,138)		(2,941)		(12,185)		(7,069)
Interest and investment income		528		147		552		474
		(4,610)		(2,794)		(11,633)		(6,595)
Income before nonoperating expenses		418,147		30,411		695,467		26,273
Nonoperating expenses
Non-service related pension and postretirement benefit costs		(459)		(539)		(1,332)		(2,066)
Net loss resulting from early retirement of debt		(9,629)		—		(13,749)		—
		(10,088)		(539)		(15,081)		(2,066)
Income before income taxes		408,059		29,872		680,386		24,207
Provision for income taxes		496		2,006		951		2,383
Net income	$	407,563	$	27,866	$	679,435	$	21,824
Net income per common share
Basic earnings per share	$	24.26	$	1.82	$	42.14	$	1.43
Diluted earnings per share	$	19.30	$	1.66	$	32.21	$	1.31
Weighted average shares outstanding
Basic weighted average shares outstanding		16,801		15,294		16,124		15,289
Diluted weighted average shares outstanding		21,452		16,756		21,362		16,598
Dividends declared per common share	$	8.11	$	—	$	8.36	$	—

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

3

Arch Resources, Inc. and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income

(in thousands)

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
	(Unaudited)					(Unaudited)
Net income	$	407,563	$	27,866	$	679,435	$	21,824
Derivative instruments
Comprehensive income before tax		—		637		1,763		1,327
Income tax benefit (provision)		—		—		—		—
		—		637		1,763		1,327
Pension, postretirement and other post-employment benefits
Comprehensive income (loss) before tax		(8,901)		3,963		(9,423)		4,510
Income tax benefit (provision)		—		—		—		—
		(8,901)		3,963		(9,423)		4,510
Available-for-sale securities
Comprehensive income (loss) before tax		—		(16)		182		84
Income tax benefit (provision)		—		—		—		—
		—		(16)		182		84
Total other comprehensive income (loss)		(8,901)		4,584		(7,478)		5,921
Total comprehensive income	$	398,662	$	32,450	$	671,957	$	27,745

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

4

Arch Resources, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(in thousands, except per share data)

	June 30, 2022		December 31, 2021
Assets	(Unaudited)
Current assets
Cash and cash equivalents	$	281,944	$	325,194
Short-term investments		—		14,463
Restricted cash		1,100		1,101
Trade accounts receivable (net of $0 allowance at June 30, 2022 and December 31, 2021)		457,883		324,304
Other receivables		12,847		8,271
Inventories		212,752		156,734
Other current assets		54,805		52,804
Total current assets		1,021,331		882,871
Property, plant and equipment, net		1,108,926		1,120,043
Other assets
Equity investments		16,786		15,403
Fund for asset retirement obligations		100,000		20,000
Other noncurrent assets		66,604		78,843
Total other assets		183,390		114,246
Total assets	$	2,313,647	$	2,117,160
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable	$	165,143	$	131,986
Accrued expenses and other current liabilities		191,125		167,304
Current maturities of debt		55,920		223,050
Total current liabilities		412,188		522,340
Long-term debt		127,107		337,623
Asset retirement obligations		194,249		192,672
Accrued pension benefits		591		1,300
Accrued postretirement benefits other than pension		74,300		73,565
Accrued workers’ compensation		222,289		224,105
Other noncurrent liabilities		94,215		81,689
Total liabilities		1,124,939		1,433,294
Stockholders' equity
Common stock, $0.01 par value, authorized 300,000 shares, issued 28,642 and 25,481 shares at June 30, 2022 and December 31, 2021, respectively		286		255
Paid-in capital		774,144		784,356
Retained earnings		1,234,979		712,478
Treasury stock, 10,088 shares at June 30, 2022 and December 31, 2021, respectively, at cost		(827,381)		(827,381)
Accumulated other comprehensive income		6,680		14,158
Total stockholders’ equity		1,188,708		683,866
Total liabilities and stockholders’ equity	$	2,313,647	$	2,117,160

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

5

Arch Resources, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(in thousands)

	Six Months Ended June 30,
	2022		2021
Operating activities		(Unaudited)
Net income	$	679,435	$	21,824
Adjustments to reconcile to cash from operating activities:
Depreciation, depletion and amortization		64,990		53,681
Accretion on asset retirement obligations		8,860		10,874
Deferred income taxes		—		11
Employee stock-based compensation expense		14,552		8,498
Amortization relating to financing activities		1,130		3,110
Gain on disposals and divestitures, net		(697)		(413)
Reclamation work completed		(8,204)		(28,218)
Contribution to fund for asset retirement obligations		(80,000)		—
Changes in:
Receivables		(138,155)		(49,568)
Inventories		(56,018)		(36,523)
Accounts payable, accrued expenses and other current liabilities		37,083		14,590
Income taxes, net		427		2,337
Coal derivative assets and liabilities, including margin account		17,710		381
Other		20,054		25,525
Cash provided by operating activities		561,167		26,109
Investing activities
Capital expenditures		(53,157)		(147,957)
Minimum royalty payments		(1,000)		(1,124)
Proceeds from disposals and divestitures		1,547		438
Proceeds from sales of short-term investments		14,450		68,986
Investments in and advances to affiliates, net		(4,027)		(1,114)
Cash used in investing activities		(42,187)		(80,771)
Financing activities
Payments on term loan due 2024		(272,288)		(1,500)
Proceeds from tax exempt bonds		—		44,985
Payments on convertible debt		(129,941)		—
Net payments on other debt		(19,939)		(18,795)
Debt financing costs		—		(1,537)
Dividends paid		(154,567)		—
Payments for taxes related to net share settlement of equity awards		(4,908)		(1,316)
Proceeds from warrants exercised		19,412		—
Cash (used in) provided by financing activities		(562,231)		21,837
Decrease in cash and cash equivalents, including restricted cash		(43,251)		(32,825)
Cash and cash equivalents, including restricted cash, beginning of period	$	326,295	$	193,445
Cash and cash equivalents, including restricted cash, end of period	$	283,044	$	160,620
Cash and cash equivalents, including restricted cash, end of period
Cash and cash equivalents	$	281,944	$	153,516
Restricted Cash		1,100		7,104
	$	283,044	$	160,620

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

6

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)
Balances at January 1, 2022	$	255	$	784,356	$	712,478	$	(827,381)	$	14,158	$	683,866
Cumulative effect of accounting change on convertible debt		—		(39,239)		6,718		—		—		(32,521)
Dividends on common shares ($0.25/share)		—		—		(3,851)		—		—		(3,851)
Dividend Equivalents earned on RSU grants		—		—		(420)		—		—		(420)
Total comprehensive income		—		—		271,872		—		1,423		273,295
Employee stock-based compensation		—		8,203		—		—		—		8,203
Issuance of 71,338 shares of common stock under long-term incentive plan		1		—		—		—		—		1
Common stock withheld related to net share settlement of equity awards		—		(4,827)		—		—		—		(4,827)
Issuance of 13,239 shares of common stock for warrants exercised		—		506		—		—		—		506
Balances at March 31, 2022	$	256	$	748,999	$	986,797	$	(827,381)	$	15,581	$	924,252
Dividends on common shares ($8.11/share)		—		—		(150,716)		—		—		(150,716)
Dividend equivalents earned on RSU grants		—		—		(8,665)		—		—		(8,665)
Employee stock-based compensation		—		6,349		—		—		—		6,349
Common stock withheld related to net share settlement of equity awards		—		(81)		—		—		—		(81)
Total comprehensive income (loss)		—		—		407,563		—		(8,901)		398,662
Issuance of 2,630,272 shares of common stock for convertible debt exchanged		26		(29)		—		—		—		(3)
Issuance of 445,497 shares of common stock for warrants exercised		4		18,906		—		—		—		18,910
Balances at June 30, 2022	$	286	$	774,144	$	1,234,979	$	(827,381)	$	6,680	$	1,188,708

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

7

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		(loss)		Total
	(In thousands)
Balances at January 1, 2021	$	253	$	767,484	$	378,906	$	(827,381)	$	(35,701)	$	283,561
Total comprehensive income (loss)		—		—		(6,042)		—		1,337		(4,705)
Employee stock-based compensation		—		3,885		18		—		—		3,903
Issuance of 59,166 shares of common stock under long-term incentive plan		1		—		—		—		—		1
Common stock withheld related to net share settlement of equity awards		—		(1,317)		—		—		—		(1,317)
Balances at March 31, 2021	$	254	$	770,052	$	372,882	$	(827,381)	$	(34,364)	$	281,443
Total comprehensive income		—		—		27,866		—		4,584		32,450
Employee stock-based compensation		—		4,613		23		—		—		4,636
Balances at June 30, 2021	$	254	$	774,665	$	400,771	$	(827,381)	$	(29,780)	$	318,529

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

8

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 (“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, 2022 are not necessarily indicative of results to be expected for the year ending December 31, 2022. 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, 2021 included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 filed with the U.S. Securities and Exchange Commission.

2. Accounting Policies

Recently Adopted Accounting Guidance

In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity's Own Equity (Subtopic 815-40)—Accounting for Convertible Instruments and Contracts in an Entity's Own Equity.  ASU 2020-06 reduces the number of accounting models for convertible debt instruments. Additionally, ASU 2020-06 amends the diluted earnings per share calculation for convertible instruments by requiring the use of the if-converted method. The if-converted method assumes the conversion of convertible instruments occurs at the beginning of the reporting period and diluted weighted average shares outstanding includes the common shares issuable upon conversion of the convertible instruments. ASU 2020-06 is effective for public business entities, for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. The Company adopted ASU 2020-06 on January 1, 2022 under the modified retrospective approach.

Upon issuance of the Company's $155.3 million principal amount of 5.25 % convertible senior notes due 2025 (the "Convertible Notes" or “Convertible Debt”) in November 2020, the Company bifurcated the debt and equity components of the Convertible Notes to long-term debt and additional paid-in capital in its consolidated balance sheet. The amount recorded to additional paid-in capital represented a debt discount that was being amortized to interest expense over the life of the Convertible Notes. As part of the adoption of ASU 2020-06, the Company (i) reversed the equity component recorded to additional paid-in capital of $39.2 million, (ii) recorded a cumulative effect of the adoption of ASU 2020-06 of $6.7 million to retained earnings, representing a reversal of the debt discount that was amortized to interest expense, and (iii) an offsetting increase in debt. See Note 8, “Debt and Financing Arrangements” for additional information.

Additionally, upon adoption of ASU 2020-06, the treasury stock method utilized by the Company to calculate earnings per share through December 31, 2021 is no longer permitted. Accordingly, the Company has transitioned to the if-converted method utilizing the modified retrospective approach.  For the three and six months ended June 30, 2022, under the previous treasury stock method, the diluted earnings per share would have been approximately $19.68 and $33.55, respectively. As a result of the adoption of ASU 2020-06, diluted earnings per share decreased by $0.38 and $1.34 for the three and six months ended June 30, 2022.

9

Recent Accounting Guidance Issued Not Yet Effective

There are no new pronouncements issued but not yet effective expected to have a material impact on the Company’s financial position, results of operations, or liquidity.

10

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
	Derivative		Employment		Available-for-		Comprehensive
	Instruments		Benefits		Sale Securities		Income (loss)
	(In thousands)
Balances at December 31, 2021	$	(1,763)	$	16,103	$	(182)	$	14,158
Unrealized gains (losses)		223		(7,963)		—		(7,740)
Amounts reclassified from accumulated other comprehensive income (loss)		1,540		(1,460)		182		262
Balances at June 30, 2022	$	—	$	6,680	$	—	$	6,680

The following amounts were reclassified out of AOCI:

	Three Months Ended June 30,				Six Months Ended June 30,				Line Item in the Consolidated
Details About AOCI Components	2022		2021		2022		2021		Income Statements
	(In thousands)
Interest rate hedges		—		(632)		(112)		(1,256)	Interest expense
Interest rate hedges (ineffective portion)						(1,428)		—	Net loss resulting from early retirement of debt
		—		—		—		—	Provision for income taxes
	$	—	$	(632)	$	(1,540)	$	(1,256)	Net of tax
Pension, postretirement and other post-employment benefits
Amortization of actuarial gains (losses), net 1	$	346	$	(590)	$	973	$	(1,181)	Non-service related pension and postretirement benefit (costs) credits
Amortization of prior service credits		177		43		73		87	Non-service related pension and postretirement benefit (costs) credits
Pension settlement		414		988		414		988	Non-service related pension and postretirement benefit (costs) credits
									Total before tax
		—		—		—		—	Provision for income taxes
	$	937	$	441	$	1,460	$	(106)	Net of tax
Available-for-sale securities 2	$	—	$	14	$	(182)	$	24	Interest and investment income
		—		—		—		—	Provision for income taxes
	$	—	$	14	$	(182)	$	24	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.

11

4. Inventories

Inventories consist of the following:

	June 30,		December 31,
	2022		2021
	(In thousands)
Coal	$	112,081	$	75,653
Repair parts and supplies		100,671		81,081
	$	212,752	$	156,734

The repair parts and supplies are stated net of an allowance for slow-moving and obsolete inventories of $2.4 million at June 30, 2022 and $2.3 million at December 31, 2021.

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. During the six months ended June 30, 2022, the Company liquidated its remaining investments.

The Company’s investments in available-for-sale marketable securities are as follows at December 31, 2021:

December 31, 2021
	Gross	Allowance