0001562762-20-000179.txt : 20200508 0001562762-20-000179.hdr.sgml : 20200508 20200508062126 ACCESSION NUMBER: 0001562762-20-000179 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 92 CONFORMED PERIOD OF REPORT: 20200331 FILED AS OF DATE: 20200508 DATE AS OF CHANGE: 20200508 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Coronado Global Resources Inc. CENTRAL INDEX KEY: 0001770561 STANDARD INDUSTRIAL CLASSIFICATION: BITUMINOUS COAL & LIGNITE MINING [1220] IRS NUMBER: 831780608 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-56044 FILM NUMBER: 20858557 BUSINESS ADDRESS: STREET 1: 100 BILL BAKER WAY CITY: BECKLEY STATE: WV ZIP: 25801 BUSINESS PHONE: (681) 207-7263 MAIL ADDRESS: STREET 1: 100 BILL BAKER WAY CITY: BECKLEY STATE: WV ZIP: 25801 10-Q 1 c561-20200331.htm 10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 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 March 31, 2020

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: 1-16247

___________________________________________________

Coronado Global Resources Inc.

(Exact name of registrant as specified in its charter)

___________________________________________________

Delaware

 

83-1780608

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

Level 33, Central Plaza One, 345 Queen Street

Brisbane, Queensland, Australia 4000

(Address of principal executive offices) (Zip Code)

(617 3031 7777

(Registrant’s telephone number, including area code)

N/A

(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(s)

 

Name of each exchange on which registered

None

 

None

 

None

 

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, 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  

The registrant’s common stock is publicly traded on the Australian Securities Exchange in the form of CHESS Depositary Interests, or CDIs, convertible at the option of the holders into shares of the registrant’s common stock on a 10-for-1 basis. The total number of shares of the registrant's common stock, par value $0.01 per share, outstanding on April 30, 2020, including shares of common stock underlying CDIs, was 96,651,692.

 

 


 

TABLE OF CONTENTS

 

 

Page

PART I – FINANCIAL INFORMATION

 

Item 1. Financial statements

 

Condensed Consolidated Balance Sheets as of March 31, 2020 and December 31, 2019

2

Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income for the three months ended March 31, 2020 and 2019

3

Unaudited Condensed Consolidated Statements of Stockholders’ Equity for the three months ended March 31, 2020 and 2019

4

Unaudited Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2020 and 2019

5

Notes to Unaudited Condensed Consolidated Financial Statements

6

Report of Independent Registered Public Accounting Firm

21

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

22

Item 3. Quantitative and Qualitative Disclosures About Market Risk

35

Item 4. Controls and Procedures

37

PART II – OTHER INFORMATION

 

Item 1. Legal Proceedings

38

Item 1A. Risk Factors

38

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

39

Item 3. Defaults Upon Senior Securities

39

Item 4. Mine Safety Disclosures

39

Item 5. Other Information

39

Item 6. Exhibits

40

SIGNATURES

41

 

i

 


PART I – FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

Condensed Consolidated Balance Sheets

(In US$ thousands, except share data)

 

Assets

 

Note

 

(Unaudited)

March 31, 2020

 

December 31, 2019

Current assets:

 

 

 

 

 

 

 

 

Cash and restricted cash

 

 

 

$

18,443

 

$

26,553

Trade receivables

 

5

 

 

161,640

 

 

133,297

Related party trade receivables

 

5

 

 

149,410

 

 

86,796

Income tax receivable

 

 

 

 

 

 

897

Inventories

 

6

 

 

139,601

 

 

162,170

Other current assets

 

 

 

 

31,512

 

 

44,109

Total current assets

 

 

 

 

500,606

 

 

453,822

Non-current assets:

 

 

 

 

 

 

 

 

Property, plant and equipment, net

 

7

 

 

1,529,468

 

 

1,632,788

Right of use asset – operating leases, net

 

10

 

 

25,067

 

 

62,566

Goodwill

 

8

 

 

28,008

 

 

28,008

Intangible assets, net

 

8

 

 

5,009

 

 

5,079

Deposits and reclamation bonds

 

 

 

 

12,255

 

 

12,227

Deferred income tax assets

 

 

 

 

21,634

 

 

2,852

Other non-current assets

 

 

 

 

16,032

 

 

17,512

Total assets

 

 

 

$

2,138,079

 

$

2,214,854

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

 

 

$

73,118

 

$

64,392

Accrued expenses and other current liabilities

 

9

 

 

238,299

 

 

238,788

Income tax payable

 

 

 

 

25,501

 

 

29,760

Asset retirement obligations

 

 

 

 

9,679

 

 

10,064

Contingent royalty consideration

 

16

 

 

492

 

 

688

Contract obligations

 

13

 

 

30,213

 

 

36,935

Lease liabilities

 

10

 

 

13,049

 

 

29,685

Other current financial liabilities

 

 

 

 

3,161

 

 

5,894

Total current liabilities

 

 

 

 

393,512

 

 

416,206

Non-current liabilities:

 

 

 

 

 

 

 

 

Asset retirement obligations

 

 

 

 

116,788

 

 

121,710

Contract obligations

 

13

 

 

178,927

 

 

204,877

Deferred consideration liability

 

14

 

 

158,317

 

 

174,605

Interest bearing liabilities

 

12

 

 

455,000

 

 

330,000

Other financial liabilities

 

 

 

 

988

 

 

1,546

Lease liabilities

 

10

 

 

25,205

 

 

48,165

Contingent royalty consideration

 

16

 

 

 

 

855

Deferred income tax liabilities

 

 

 

 

53,492

 

 

47,973

Other non-current liabilities

 

 

 

 

8,548

 

 

976

Total liabilities

 

 

 

 

1,390,777

 

 

1,346,913

Common stock $0.01 par value; 1,000,000,000 shares authorized, 96,651,692 shares are issued and outstanding as of March 31, 2020 and December 31, 2019

 

 

 

 

967

 

 

967

Series A Preferred stock $0.01 par value; 100,000,000 shares authorized, 1 Share issued and outstanding as of March 31, 2020 and December 31, 2019

 

 

 

 

 

 

Additional paid-in capital

 

 

 

 

820,395

 

 

820,247

Accumulated other comprehensive loss

 

17

 

 

(132,965)

 

 

(45,206)

Retained earnings

 

 

 

 

58,686

 

 

91,712

Coronado Global Resources Inc. stockholders’ equity

 

 

 

 

747,083

 

 

867,720

Noncontrolling interest

 

 

 

 

219

 

 

221

Total stockholders’ equity

 

 

 

 

747,302

 

 

867,941

Total liabilities and stockholders’ equity

 

 

 

$

2,138,079

 

$

2,214,854

See accompanying notes to unaudited condensed consolidated financial statements.

Coronado Global Resources Inc. Form 10-Q March 31, 20202


Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income
(In US$ thousands, except share data)

 

 

 

 

 

Three Months EndedMarch 31,

 

 

Note

 

2020

 

2019

Revenues:

 

 

 

 

 

 

 

 

Coal revenues

 

3

 

$

319,492

 

$

423,945

Coal revenues from related parties

 

3, 5

 

 

80,118

 

 

157,853

Other revenues

 

3

 

 

9,707

 

 

10,081

Total revenues

 

 

 

 

409,317

 

 

591,879

Costs and expenses:

 

 

 

 

 

 

 

 

Cost of coal revenues (exclusive of items shown separately below)

 

 

 

 

256,887

 

 

269,559

Depreciation, depletion and amortization

 

 

 

 

45,302

 

 

39,771

Freight expenses

 

 

 

 

42,381

 

 

37,327

Stanwell rebate

 

 

 

 

32,628

 

 

48,827

Other royalties

 

 

 

 

24,298

 

 

44,348

Selling, general, and administrative expenses

 

 

 

 

6,195

 

 

9,069

Total costs and expenses

 

 

 

 

407,691

 

 

448,901

Operating income

 

 

 

 

1,626

 

 

142,978

Other income (expenses):

 

 

 

 

 

 

 

 

Interest expense, net

 

 

 

 

(12,253)

 

 

(8,179)

Other, net

 

4

 

 

4,053

 

 

4,031

Total other income (expense), net

 

 

 

 

(8,200)

 

 

(4,148)

(Loss) income before tax

 

 

 

 

(6,574)

 

 

138,830

Income tax expense

 

11

 

 

(2,291)

 

 

(42,010)

Net (loss) income

 

 

 

 

(8,865)

 

 

96,820

Less: Net loss attributable to noncontrolling interest

 

 

 

 

(2)

 

 

Net (loss) income attributable to Coronado Global Resources Inc.

 

 

 

$

(8,863)

 

$

96,820

Other comprehensive income, net of income taxes:

 

 

 

 

 

 

 

 

Foreign currency translation adjustment

 

17

 

 

(53,567)

 

 

(558)

Net (loss) gain on cash flow hedges, net of tax

 

17

 

 

(34,192)

 

 

5,579

Total other comprehensive (loss) income

 

 

 

 

(87,759)

 

 

5,021

Total comprehensive (loss) income

 

 

 

 

(96,624)

 

 

101,841

Less: Net loss attributable to noncontrolling interest

 

 

 

 

(2)

 

 

Total comprehensive (loss) income attributable to Coronado Global Resources Inc.

 

 

 

$

(96,622)

 

$

101,841

 

 

 

 

 

 

 

 

 

Earnings per share of common stock

 

 

 

 

 

 

 

 

Basic

 

15

 

 

(0.09)

 

 

1.00

Diluted

 

15

 

 

(0.09)

 

 

1.00

 

 

 

 

 

 

 

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

Coronado Global Resources Inc. Form 10-Q March 31, 20203


Unaudited Condensed Consolidated Statements of Stockholders’ Equity

(In US$ thousands, except share data)

 

 

 

Common stock

 

Preferred stock

 

Additional

 

Accumulated other

 

 

 

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

paid in

 

comprehensive

 

Retained

 

Noncontrolling

 

stockholders

 

 

 

Shares

 

Amount

 

Series A

 

Amount

 

capital

 

loss

 

earnings

 

interest

 

equity

Balance December 31, 2019

 

$

96,651,692

 

967

 

1

 

 

820,247

 

(45,206)

 

91,712

 

221

 

867,941

Net loss

 

 

 

 

 

 

 

 

(8,863)

 

(2)

 

(8,865)

Other comprehensive loss (net of $13,781 tax)

 

 

 

 

 

 

 

(87,759)

 

 

 

(87,759)

Total comprehensive loss

 

 

 

 

 

 

 

(87,759)

 

(8,863)

 

(2)

 

(96,624)

Share-based compensation for equity classified awards

 

 

 

 

 

 

148

 

 

 

 

148

Dividends paid

 

 

 

 

 

 

 

 

(24,163)

 

 

(24,163)

Balance March 31, 2020

 

$

96,651,692

 

967

 

1

 

 

820,395

 

(132,965)

 

58,686

 

219

 

747,302

 

 

 

 

Common stock

 

Preferred stock

 

Additional

 

Accumulated other

 

 

 

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

paid in

 

comprehensive

 

Retained

 

Noncontrolling

 

stockholders

 

 

 

Shares

 

Amount

 

Series A

 

Amount

 

capital

 

loss

 

earnings

 

interest

 

equity

Balance December 31, 2018

 

$

96,651,692

 

967

 

1

 

 

1,107,948

 

(49,609)

 

194,220

 

282

 

1,253,808

Net income

 

 

 

 

 

 

 

 

96,820

 

 

96,820

Other comprehensive income (net of $2,391 tax)

 

 

 

 

 

 

 

5,021

 

 

 

5,021

Total comprehensive income

 

 

 

 

 

 

 

5,021

 

96,820

 

 

101,841

Dividends paid

 

 

 

 

 

 

 

 

(299,682)

 

 

(299,682)

Balance March 31, 2019

 

$

96,651,692

 

967

 

1

 

 

1,107,948

 

(44,588)

 

(8,642)

 

282

 

1,055,967

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

Coronado Global Resources Inc. Form 10-Q March 31, 20204


Unaudited Condensed Consolidated Statements of Cash Flows
(In US$ thousands)

 

 

Three Months Ended

 

 

March 31,

 

 

2020

 

2019

Cash flows from operating activities:

 

 

 

 

 

 

Net (loss) income

 

$

(8,865)

 

$

96,820

Adjustments to reconcile net income to cash and restricted cash provided by operating activities:

 

 

 

 

 

 

Depreciation, depletion and amortization

 

 

45,302

 

 

40,032

Amortization of right of use asset - operating leases

 

 

7,074

 

 

4,055

Amortization of deferred financing costs

 

 

1,364

 

 

1,024

Non-cash interest expense

 

 

5,060

 

 

6,201

Amortization of contract obligations

 

 

(6,530)

 

 

(8,925)

Loss on disposal of property, plant and equipment

 

 

75

 

 

59

Decrease in contingent royalty consideration

 

 

(1,051)

 

 

(5,179)

Gain on operating lease derecognition

 

 

(1,180)

 

 

Equity-based compensation expense

 

 

148

 

 

Deferred income taxes

 

 

(176)

 

 

9,414

Reclamation of asset retirement obligations

 

 

(759)

 

 

(1,752)

Change in estimate of asset retirement obligation

 

 

 

 

(125)

Changes in operating assets and liabilities:

 

 

 

 

 

 

Accounts receivable - including related party receivables

 

 

(103,280)

 

 

18,820

Inventories

 

 

11,522

 

 

(2,447)

Other current assets

 

 

5,187

 

 

(1,360)

Accounts payable

 

 

10,262

 

 

(7,549)

Accrued expenses and other current liabilities

 

 

(8,481)

 

 

116

Operating lease liabilities

 

 

(7,512)

 

 

(7,024)

Change in other liabilities

 

 

(8,147)

 

 

(672)

Net cash (used in) provided by operating activities

 

 

(59,987)

 

 

141,508

Cash flows from investing activities:

 

 

 

 

 

 

Capital expenditures

 

 

(41,420)

 

 

(28,344)

Purchase of deposits and reclamation bonds

 

 

(27)

 

 

(34)

Net cash used in investing activities

 

 

(41,447)

 

 

(28,378)

Cash flows from financing activities:

 

 

 

 

 

 

Proceeds from interest bearing liabilities and other financial liabilities, net of debt discount

 

 

145,000

 

 

84,000

Debt issuance costs and other financing costs

 

 

(72)

 

 

Principal payments on interest bearing liabilities and other financial liabilities

 

 

(23,156)

 

 

(2,344)

Principal payments on finance and capital lease obligations

 

 

(319)

 

 

(382)

Payment of contingent purchase consideration

 

 

 

 

(6,958)

Dividends paid

 

 

(24,162)

 

 

(299,682)

Net cash provided by (used in) financing activities

 

 

97,291

 

 

(225,366)

Net decrease in cash and restricted cash

 

 

(4,143)

 

 

(112,236)

Effect of exchange rate changes on cash and restricted cash

 

 

(3,967)

 

 

(351)

Cash and restricted cash at beginning of period

 

 

26,553

 

 

124,881

Cash and restricted cash at end of period

 

$

18,443

 

$

12,294

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

Cash payments for interest

 

$

5,906

 

$

56

Cash paid for taxes

 

$

1,448

 

$

7,006

See accompanying notes to unaudited condensed consolidated financial statements.

Coronado Global Resources Inc. Form 10-Q March 31, 20205


NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1.Description of Business, Basis of Presentation

(a)Description of the Business

Coronado Global Resources Inc. (together with its subsidiaries, the “Company” or “Coronado”) is a global producer, marketer, and exporter of a full range of metallurgical coals, an essential element in the production of steel. The Company has a portfolio of operating mines and development projects in Queensland, Australia and in the states of Pennsylvania, Virginia and West Virginia in the USA.

 

(b)Basis of Presentation

The interim unaudited condensed consolidated financial statements have been prepared in accordance with the requirements of the U.S. Generally Accepted Accounting Principles, or U.S. GAAP, and with the instructions to Form 10-Q and Article 10 of Regulation S-X related to interim financial reporting issued by the Securities and Exchange Commission, or the SEC. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements and should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K filed with the SEC and the Australian Securities Exchange, or the ASX, on February 24, 2020.

The interim unaudited condensed consolidated financial statements are presented in U.S. dollars, unless otherwise stated. They include the accounts of Coronado Global Resources Inc. and its affiliates. References to “US$” or “USD” are references to U.S. dollars. References to “A$” or “AUD” are references to Australian dollars, the lawful currency of the Commonwealth of Australia. The Company, or Coronado, are used interchangeably to refer to Coronado Global Resources Inc. and its subsidiaries, or to Coronado Group LLC, as appropriate to the context. Interests in subsidiaries controlled by the Company are consolidated with any outside stockholder interests reflected as noncontrolling interests. All intercompany balances and transactions have been eliminated in consolidation.

In the opinion of management, these interim financial statements reflect all normal, recurring adjustments necessary for the fair presentation of the Company’s financial position, results of operations, comprehensive income, cash flows and changes in equity for the periods presented. Balance sheet information presented herein as of December 31, 2019 has been derived from the Company’s audited consolidated balance sheet at that date. The Company’s results of operations for the three months ended March 31, 2020 is not necessarily indicative of the results that may be expected for the year ending December 31, 2020.

COVID-19

In December 2019, a novel strain of coronavirus, or COVID-19, was reported to have emerged in Wuhan, China and subsequently spread to other countries, including the United States and Australia. The World Health Organization has declared COVID-19 a pandemic resulting in federal, state and local governments and private entities implementing various restrictions, including travel restrictions, restrictions on public gatherings, stay at home orders and advisories and quarantining of people who may have been exposed to COVID-19. Accordingly, the Company has taken action to protect at risk employees from COVID-19 at its operations and corporate offices by implementing preventative measures such as social distancing and strict hygiene protocols which may have some impact on operating efficiencies and costs.

In response to the COVID-19 induced economic downturn in Europe, Brazil and the United States, effective March 30, 2020, the Company temporarily idled its operations in the United States, or U.S. Operations, with the exception of running the Buchanan longwall in a limited capacity. The Company continues to make shipments to its customers from existing inventories which should allow the Company to meet all current customer contractual commitments as well as deliver on potential new sales opportunities. The Company has also furloughed all hourly employees at its U.S. Operations. The Company continues to monitor developments, including government requirements and recommendations at the international, national, state and local level to evaluate the duration for which the U.S. Operations will remain idle.

In Australia, the Curragh mine is expected to continue to operate and meet the metallurgical coal export requirements of its key customers in India, Japan, Korea and Europe. The Curragh mine also continues to satisfy its obligation, under a long-term contract, by supplying coal to the Stanwell Power Station, a Queensland government owned entity.

In response to the global impacts of COVID-19 on the demand for steel and the resulting impact on the price and demand for metallurgical coal, the Company has taken steps to safeguard its operations, strengthen its balance sheet and increase liquidity by reducing capital expenditures, implementing the sale of non-core equipment and managing operating costs in a disciplined manner. As of March 31, 2020, the Company had $95.0 million undrawn and available limit under the SFA and cash of $18 million. See Note 12 “Interest Bearing Liabilities”.

As the COVID-19 pandemic continues to evolve, the Company cannot currently predict the extent of this pandemic, which could have a material adverse impact to its business, results of operations and financial condition.

Coronado Global Resources Inc. Form 10-Q March 31, 20206


Table of Contents

 

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2.Summary of Significant Accounting Policies

Please see Note 2 “Summary of Significant Accounting Policies” contained in the audited consolidated financial statements for the year ended December 31, 2019 included in Coronado Global Resources Inc.’s Annual Report on Form 10-K filed with the SEC and ASX on February 24, 2020.

(a)Newly Adopted Accounting Standards

Financial Instruments - Credit Losses. In June 2016, the FASB issued ASU 2016-13 related to the measurement of credit losses on financial instruments. The pronouncement replaces the incurred loss methodology to record credit losses with a methodology that reflects the expected credit losses for financial assets not accounted for at fair value with gains and losses recognized through net income.

On January 1, 2020, the Company adopted ASU 2016-13. The cumulative-effect adjustment upon adoption was not material to the Company’s results of operations and its cash flows. Changes to the Company’s accounting policies as a result of adoption are discussed below.

The Company assesses on a forward-looking basis the expected credit loss associated with its financial assets carried at amortized cost. The amount of expected credit losses is updated at each reporting date to reflect changes in credit risk since initial recognition of the respective financial instrument. The Company recognizes the lifetime expected credit losses for financial assets carried at amortized cost. The expected credit losses on these financial assets are estimated based on the Company’s historic credit loss experience, adjusted for factors that are specific to the financial asset, general economic conditions, financial asset type, term and an assessment of both the current as well as forecast conditions at the reporting date.

Fair Value Measurement. In August 2018, the FASB issued ASU 2018-13, which amended the fair value measurement guidance by removing and modifying certain disclosure requirements, while also adding new disclosure requirements.

On January 1, 2020, the Company adopted ASU 2018-13. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements and the narrative description of measurement uncertainty were applied prospectively for only the most recent interim period presented. All other amendments were applied retrospectively to all periods presented. The adoption of ASU 2018-13 did not have a material impact on the Company’s unaudited condensed consolidated financial statements.

Intangibles – Goodwill and Other: Simplifying the Test for Goodwill Impairment. In January 2018, the FASB issued ASU 2017-04, which eliminates step two from the goodwill impairment test. Under ASU 2017-04, an entity should recognize an impairment charge for the amount by which the carrying amount of a reporting unit exceeds its fair value up to the amount of goodwill allocated to that reporting unit.

On January 1, 2020, the Company adopted ASU 2017-04. Changes to the Company’s accounting policies as a result of adoption are discussed below.

Goodwill is an asset representing the future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognized. Goodwill is not amortized but is reviewed for impairment annually or when circumstances or other events indicate that impairment may have occurred.

The Company makes a qualitative assessment of whether it is more likely than not that a reporting unit’s fair value is less than its carrying amount. Circumstances that are considered as part of the qualitative assessment and could trigger a quantitative impairment test include but are not limited to: a significant adverse change in the business climate; a significant adverse legal judgment; adverse cash flow trends; an adverse action or assessment by a government agency; unanticipated competition; and a significant restructuring charge within a reporting unit. If a quantitative assessment is determined to be necessary, the Company compares the fair value of a reporting unit with it carrying amount, including goodwill. If the carrying amount of a reporting unit exceeds its fair value, the Company recognizes an impairment charge for the amount by which the carrying amount exceeds its fair value to the extent of the amount of goodwill allocated to that reporting unit.

The Company defines reporting units at the business unit level. For purposes of testing goodwill for impairment, goodwill has been allocated to the reporting units to the extent it relates to each reporting unit.

Coronado Global Resources Inc. Form 10-Q March 31, 20207


Table of Contents

 

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(b) Accounting Standards Not Yet Implemented

“Income Taxes - Simplifying the Accounting for Income Taxes” - In December 2019, the FASB issued ASU 2019-12, which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and clarifies and amends existing guidance to improve consistent application. ASU 2019-12 will be effective for interim and annual periods beginning after December 15, 2020. The Company is currently evaluating the impact the adoption of ASU 2019-12 will have on its consolidated financial statements.

(c)Reclassification

Certain amounts in the prior period Condensed Consolidated Balance Sheet have been reclassified to conform to the presentation of the current period financial statements. These related to the reclassification of four reportable segments into the current two reportable segments discussed in Note 3 “Segment information”. These reclassifications had no effect on the previously reported net income.

3.Segment Information

The Company has a portfolio of operating mines and development projects in Queensland, Australia and in the states of Pennsylvania, Virginia and West Virginia in the USA. The Company operates four coal mine complexes: Curragh, Buchanan, Logan and Greenbrier. Commencing on January 1, 2020, the Company updated its reportable segments to be the country in which they operate, that is Australia and the United States, in order to align with the manner in which its Chief Operating Decision Maker, or CODM, views the Company’s business for purposes of reviewing performance and allocating resources.

Factors affecting and differentiating the financial performance of each of these two reporting segments generally include coal quality, geology, and coal marketing opportunities, mining and transportation methods and regulatory issues. This is the basis on which internal financial and operational reports are currently prepared and provided to the CODM and reflects how the CODM manages performance and determines allocation of resources within the Company. The Company believes this method of segment reporting reflects both the way its business segments are currently managed and the way the performance of each segment is evaluated. Comparative disclosures have been restated to a consistent basis.

The CODM uses Adjusted EBITDA as the primary metric to measure each segment’s operating performance.

Adjusted EBITDA is defined as earnings before interest, tax, depreciation, depletion and amortization and other foreign exchange losses. “Other and corporate” relates to additional financial information for the corporate function such as accounting, treasury, legal, human resources, compliance, and tax. As such, the corporate function is not determined to be a reportable segment but is discretely disclosed for purposes of reconciliation to the Company’s consolidated financials.

Reportable segment results as of and for the three months ended March 31, 2020 and 2019 are presented below:

 

 

Australia

 

United States

 

Other and Corporate

 

Total

 

 

($ thousands)

Three months ended March 31, 2020

 

 

 

 

 

 

 

 

Total revenues

 

245,142

 

164,175

 

 

409,317

Adjusted EBITDA

 

13,065

 

38,250

 

(5,893)

 

45,422

Net (loss) income

 

(5,967)

 

9,130

 

(12,028)

 

(8,865)

Total assets

 

967,809

 

1,122,521

 

47,749

 

2,138,079

Capital expenditures (1)

 

5,269

 

35,522

 

629

 

41,420

 

 

 

 

 

 

 

 

 

Three months ended March 31, 2019

 

 

 

 

 

 

 

 

Total revenues

 

381,375

 

210,504

 

 

591,879

Adjusted EBITDA

 

120,149

 

71,969

 

(9,052)

 

183,066

Net income (loss)

 

68,732

 

36,801

 

(8,713)

 

96,820

Total assets

 

1,142,356

 

946,766

 

49,784

 

2,138,906

Capital expenditures (1)

 

6,090

 

23,570

 

5

 

29,665

 

 

 

 

 

 

 

 

 

(1) Capital expenditures includes financing fees incurred through other financial liabilities for the purchase of certain equipment.

Coronado Global Resources Inc. Form 10-Q March 31, 20208


Table of Contents

 

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The reconciliation of Adjusted EBITDA to net income attributable to the Company for the three months ended March 31, 2020 and 2019 are as follows:

 

 

Three months ended

 

 

March 31,

 

 

2020

 

2019

 

 

(US$ thousands)

Net (loss) income

 

$

(8,865)

 

$

96,820

Depreciation, depletion and amortization

 

 

45,302

 

 

39,771

Interest expense (net of income)

 

 

12,253

 

 

8,179

Other foreign exchange (gains) losses

 

 

(5,559)

 

 

(3,714)

Income tax expense

 

 

2,291

 

 

42,010

Consolidated adjusted EBITDA

 

$

45,422

 

$

183,066

 

Disaggregation of Revenue

The Company disaggregates the revenue from contracts with customers by major product group for each of the Company’s reportable segments, as the company believes it best depicts the nature, amount, timing and uncertainty of revenues and cash flows. All revenue is recognized at a point in time.

 

 

Three months ended March 31, 2020

 

 

Australia

 

United States

 

Other and Corporate

 

Total

 

 

($ thousands)

Product Groups:

 

 

 

 

 

 

 

 

Metallurgical coal

 

212,922

 

159,361

 

 

372,283

Thermal coal

 

25,606

 

1,721

 

 

27,327

Total coal revenue

 

238,528

 

161,082

 

 

399,610

Other1

 

6,614

 

3,093

 

 

9,707

Total

 

245,142

 

164,175

 

 

409,317

 

 

 

Three months ended March 31, 2019

 

 

Australia

 

United States

 

Other and Corporate

 

Total

 

 

($ thousands)

Product Groups:

 

 

 

 

 

 

 

 

Metallurgical coal

 

350,948

 

195,878

 

 

546,826

Thermal coal

 

21,294

 

13,678

 

 

34,972

Total coal revenue

 

372,242

 

209,556

 

 

581,798

Other1

 

9,133

 

948

 

 

10,081

Total

 

381,375

 

210,504

 

 

591,879

 

(1) Other revenue for Curragh includes the amortization of the Stanwell non-market coal supply contract obligation liability.

 

4.Expenses

Other, Net

 

 

 

Three months ended

 

 

March 31,

 

 

2020

 

2019

 

 

(US$ thousands)

Other foreign exchange gains

 

 

5,559

 

 

3,714

Other (expenses) income

 

 

(1,506)

 

 

317

Total Other, net

 

$

4,053

 

$

4,031

 

Coronado Global Resources Inc. Form 10-Q March 31, 20209


Table of Contents

 

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

5. Trade and related party receivables

The Company extends trade credit to its customers in the ordinary course of business. Trade receivables and related party receivables are recorded initially at fair value and subsequently at amortized cost, less any expected credit losses, or ECL. Trade receivables from provisionally priced sales are carried at fair value to profit or loss.

For trade and related party receivables carried at amortized cost, the Company determines ECL on a forward-looking basis. The amount or ECL is updated at each reporting date to reflect changes in credit risk since initial recognition of the respective financial instrument. The Company recognizes the lifetime ECL. The ECL is estimated based on the Company’s historic credit loss experience, adjusted for factors that are specific to the financial asset, general economic conditions, financial asset type, term and an assessment of both the current as well as forecast conditions at the reporting date, modified for credit enhancements such as letters of credit obtained. To measure ECL, trade and related party receivables have been grouped based on shared credit risks characteristics and the days past due.

The Company considers an event of default has occurred when a financial asset is significantly past due or external sources indicate that the debtor is unlikely to pay its creditors, including the Company. A financial asset is credit impaired when there is evidence that the counterparty is in significant financial difficulty or a breach of contract, such as default or past due event has occurred. The Company writes off a financial asset when there is information indicating the counterparty is in severe financial difficulty and there is no realistic prospect of recovery. The amount of the impairment loss is recognised in the consolidated statement of operations and other comprehensive income within “other, net”. Subsequent recoveries of amounts previously written off are credit against “other, net” in the consolidated statement of operations and other comprehensive income.

 

(US$ thousands)

 

March 31,

2020

 

December 31,2019

Trade receivables - at amortized cost

 

$

157,406

 

$

118,572

Trade receivables - at fair value

 

 

4,234

 

 

14,725

Total trade receivables

 

 

161,640

 

 

133,297

Related party receivables

 

 

149,410

 

 

86,796

Total trade and related party receivables

 

$

311,050

 

$

220,093

 

No provision has been recognized on the ECL on trade and related party receivables as at March 31, 2020. The Company has not recognised any bad debt expense from trading counterparties in the three months ended March 31, 2020 and 2019.

Related party receivables - Xcoal

During the three months ended March 31, 2020, the Company sold coal to Xcoal Energy and Resources, or Xcoal, an entity associated with Non-Executive director, Mr. Ernie Thrasher. Revenues from Xcoal of $80.1 million and $157.9 million, respectively, are recorded as coal revenues in the unaudited Condensed Consolidated Statement of Operations and Comprehensive Income for the three months ended March 31, 2020 and 2019. At March 31, 2020, amounts due from Xcoal in respect of coal sales were $149.4 million. At December 31, 2019, amounts due from Xcoal in respect of coal sales were $86.8 million.

 

6.Inventories

(US$ thousands)

 

March 31,

2020

 

December 31,2019

Raw coal

 

$

20,949

 

$

41,127

Saleable coal

 

 

67,687

 

 

63,006

Total coal inventories

 

 

88,636

 

 

104,133

Supplies inventory

 

 

50,965

 

 

58,037

Total inventories

 

$

139,601

 

$

162,170

 

Coronado Global Resources Inc. Form 10-Q March 31, 202010


Table of Contents

 

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

7.Property, Plant and Equipment

(US$ thousands)

 

March 31,

2020

 

December 31,2019

Land

 

$

25,484

 

$

27,037

Buildings and improvements

 

 

72,726

 

 

80,658

Plant, machinery, mining equipment and transportation vehicles

 

 

882,634

 

 

896,392

Mineral rights and reserves

 

 

469,233

 

 

464,710

Office and computer equipment

 

 

4,858

 

 

3,977

Mine development

 

 

463,790

 

 

497,439

Asset retirement obligation asset

 

 

75,504

 

 

81,520

Construction in process

 

 

58,541

 

 

80,646

 

 

 

2,052,770

 

 

2,132,379

Less accumulated depreciation, depletion and amortization

 

 

523,302

 

 

499,591

Net property, plant and equipment

 

$

1,529,468

 

$

1,632,788

 

8.Goodwill and Other Intangible Assets

(a)Acquired Intangible Assets

 

 

March 31, 2020

(US$ thousands)

 

Weighted average amortization period (years)

 

Gross carrying amount

 

Accumulated amortization

 

Net carrying amount

Intangible assets:

 

 

 

 

 

 

 

 

 

 

 

Amortizing intangible assets:

 

 

 

 

 

 

 

 

 

 

 

Mining permits - Greenbrier

 

14

 

$

1,500

 

$

860

 

$

640

Mining permits - Logan

 

15

 

 

1,642

 

 

776

 

 

866

Mining permits - Buchanan

 

28

 

 

4,000

 

 

497

 

 

3,503

Total intangible assets

 

 

 

$

7,142

 

$

2,133

 

$

5,009

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2019

(US$ thousands)

 

Weighted average amortization period (years)

 

Gross carrying amount

 

Accumulated amortization

 

Net carrying amount

Intangible assets:

 

 

 

 

 

 

 

 

 

 

 

Amortizing intangible assets:

 

 

 

 

 

 

 

 

 

 

 

Mining permits - Greenbrier

 

14

 

$

1,500

 

$

840

 

$

660

Mining permits - Logan

 

15

 

 

1,642

 

 

756

 

 

886

Mining permits - Buchanan

 

28

 

 

4,000

 

 

467

 

 

3,533

Total intangible assets

 

 

 

$

7,142

 

$

2,063

 

$

5,079

 

Amortization expense is charged using the straight-line method over the useful lives of the respective intangible asset. The aggregate amount of amortization expense for amortizing intangible assets for the three months ended March 31, 2020 and 2019 was $0.1 million and $0.1 million, respectively.

(b)Goodwill

In connection with the Buchanan acquisition on March 31, 2016, the Company recorded goodwill in the amount of $28.0 million. The balance of goodwill as at both March 31, 2020 and December 31, 2019 was $28.0 million.

Coronado Global Resources Inc. Form 10-Q March 31, 202011


Table of Contents

 

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

9.Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consist of the following:

(US$ thousands)

 

March 31,

2020

 

December 31,2019

Wages and employee benefits

 

$

52,551

 

$

61,008

Taxes other than income taxes

 

 

5,752

 

 

3,899

Accrued royalties

 

 

28,379

 

 

43,468

Accrued freight costs

 

 

30,585

 

 

30,416

Accrued mining fees

 

 

44,702

 

 

49,027

Cash flow hedge derivative liability

 

 

34,535