0001562762-20-000328.txt : 20200810 0001562762-20-000328.hdr.sgml : 20200810 20200810161003 ACCESSION NUMBER: 0001562762-20-000328 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 99 CONFORMED PERIOD OF REPORT: 20200630 FILED AS OF DATE: 20200810 DATE AS OF CHANGE: 20200810 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: 201089453 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 2020-06Form10-Q.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 June 30, 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 July 31, 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 June 30, 2020 and December 31, 2019

2

Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income for the three and six months ended June 30, 2020 and 2019

3

Unaudited Condensed Consolidated Statements of Stockholders’ Equity for the three and six months ended June 30, 2020 and 2019

4

Unaudited Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2020 and 2019

5

Notes to Unaudited Condensed Consolidated Financial Statements

6

Report of Independent Registered Public Accounting Firm

23

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

24

Item 3. Quantitative and Qualitative Disclosures About Market Risk

42

Item 4. Controls and Procedures

44

PART II – OTHER INFORMATION

 

Item 1. Legal Proceedings

45

Item 1A. Risk Factors

45

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

46

Item 3. Defaults Upon Senior Securities

46

Item 4. Mine Safety Disclosures

46

Item 5. Other Information

46

Item 6. Exhibits

47

SIGNATURES

48

 

i

 


PART I – FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

Condensed Consolidated Balance Sheets

(In US$ thousands, except share data)

 

Assets

 

Note

 

(Unaudited)

June 30, 2020

 

December 31, 2019

Current assets:

 

 

 

 

 

 

 

 

Cash and restricted cash

 

 

 

$

36,324

 

$

26,553

Trade receivables

 

6

 

 

116,110

 

 

133,297

Related party trade receivables

 

6

 

 

105,057

 

 

86,796

Income tax receivable

 

 

 

 

15,431

 

 

897

Inventories

 

7

 

 

138,624

 

 

162,170

Other current assets

 

 

 

 

46,831

 

 

44,109

Total current assets

 

 

 

 

458,377

 

 

453,822

Non-current assets:

 

 

 

 

 

 

 

 

Property, plant and equipment, net

 

8

 

 

1,532,736

 

 

1,632,788

Right of use asset – operating leases, net

 

11

 

 

23,313

 

 

62,566

Goodwill

 

9

 

 

28,008

 

 

28,008

Intangible assets, net

 

9

 

 

4,318

 

 

5,079

Deposits and reclamation bonds

 

 

 

 

12,152

 

 

12,227

Deferred income tax assets

 

 

 

 

27,586

 

 

2,852

Other non-current assets

 

 

 

 

14,819

 

 

17,512

Total assets

 

 

 

$

2,101,309

 

$

2,214,854

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

 

 

$

36,652

 

$

64,392

Accrued expenses and other current liabilities

 

10

 

 

251,660

 

 

238,788

Income tax payable

 

 

 

 

27,328

 

 

29,760

Asset retirement obligations

 

 

 

 

9,955

 

 

10,064

Contingent royalty consideration

 

17

 

 

 

 

688

Contract obligations

 

14

 

 

35,225

 

 

36,935

Lease liabilities

 

11

 

 

11,984

 

 

29,685

Other current financial liabilities

 

 

 

 

13,268

 

 

5,894

Total current liabilities

 

 

 

 

386,072

 

 

416,206

Non-current liabilities:

 

 

 

 

 

 

 

 

Asset retirement obligations

 

 

 

 

126,129

 

 

121,710

Contract obligations

 

14

 

 

186,091

 

 

204,877

Deferred consideration liability

 

15

 

 

181,400

 

 

174,605

Interest bearing liabilities

 

13

 

 

441,000

 

 

330,000

Other financial liabilities

 

 

 

 

457

 

 

1,546

Lease liabilities

 

11

 

 

23,678

 

 

48,165

Contingent royalty consideration

 

17

 

 

 

 

855

Deferred income tax liabilities

 

 

 

 

59,552

 

 

47,973

Other non-current liabilities

 

 

 

 

5,003

 

 

976

Total liabilities

 

 

 

 

1,409,382

 

 

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 June 30, 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 June 30, 2020 and December 31, 2019

 

 

 

 

 

 

Additional paid-in capital

 

 

 

 

820,643

 

 

820,247

Accumulated other comprehensive loss

 

18

 

 

(74,258)

 

 

(45,206)

(Accumulated losses) retained earnings

 

 

 

 

(55,642)

 

 

91,712

Coronado Global Resources Inc. stockholders’ equity

 

 

 

 

691,710

 

 

867,720

Noncontrolling interest

 

 

 

 

217

 

 

221

Total stockholders’ equity

 

 

 

 

691,927

 

 

867,941

Total liabilities and stockholders’ equity

 

 

 

$

2,101,309

 

$

2,214,854

See accompanying notes to unaudited condensed consolidated financial statements.

Coronado Global Resources Inc. Form 10-Q June 30, 20202


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

 

 

 

 

 

Three Months EndedJune 30,

 

Six Months EndedJune 30,

 

 

Note

 

2020

 

2019

 

2020

 

2019

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Coal revenues

 

3

 

$

286,206

 

$

495,385

 

$

605,699

 

$

919,329

Coal revenues from related parties

 

3, 6

 

 

9,000

 

 

135,305

 

 

89,118

 

 

293,158

Other revenues

 

3

 

 

9,142

 

 

11,767

 

 

18,849

 

 

21,848

Total revenues

 

 

 

 

304,348

 

 

642,457

 

 

713,666

 

 

1,234,335

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

224,459

 

 

264,137

 

 

481,345

 

 

533,696

Depreciation, depletion and amortization

 

 

 

 

41,547

 

 

45,508

 

 

86,849

 

 

85,279

Freight expenses

 

 

 

 

40,504

 

 

52,035

 

 

82,886

 

 

89,362

Stanwell rebate

 

 

 

 

24,787

 

 

45,847

 

 

57,415

 

 

94,674

Other royalties

 

 

 

 

19,157

 

 

49,073

 

 

43,455

 

 

93,422

Selling, general, and administrative expenses

 

 

 

 

7,158

 

 

9,242

 

 

13,353

 

 

18,311

Total costs and expenses

 

 

 

 

357,612

 

 

465,842

 

 

765,303

 

 

914,744

Operating income

 

 

 

 

(53,264)

 

 

176,615

 

 

(51,637)

 

 

319,591

Other income (expenses):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

 

 

 

(12,064)

 

 

(9,087)

 

 

(24,318)

 

 

(17,264)

Impairment of assets

 

4

 

 

(63,111)

 

 

 

 

(63,111)

 

 

Other, net

 

5

 

 

(8,537)

 

 

(2,989)

 

 

(4,485)

 

 

1,042

Total other income (expense), net

 

 

 

 

(83,712)

 

 

(12,076)

 

 

(91,914)

 

 

(16,222)

(Loss) income before tax

 

 

 

 

(136,976)

 

 

164,539

 

 

(143,551)

 

 

303,369

Income tax benefit (expense)

 

12

 

 

22,646

 

 

(47,033)

 

 

20,355

 

 

(89,043)

Net (loss) income

 

 

 

 

(114,330)

 

 

117,506

 

 

(123,196)

 

 

214,326

Less: Net loss attributable to noncontrolling interest

 

 

 

 

(2)

 

 

(4)

 

 

(4)

 

 

(4)

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

 

 

 

$

(114,328)

 

$

117,510

 

$

(123,192)

 

$

214,330

Other comprehensive income, net of income taxes:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustment

 

18

 

 

39,161

 

 

(508)

 

 

(14,406)

 

 

(1,066)

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

 

18

 

 

19,546

 

 

894

 

 

(14,646)

 

 

6,473

Total other comprehensive income (loss)

 

 

 

 

58,707

 

 

386

 

 

(29,052)

 

 

5,407

Total comprehensive (loss) income

 

 

 

 

(55,623)

 

 

117,892

 

 

(152,248)

 

 

219,733

Less: Net loss attributable to noncontrolling interest

 

 

 

 

(2)

 

 

(4)

 

 

(4)

 

 

(4)

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

 

 

 

$

(55,621)

 

$

117,896

 

$

(152,244)

 

$

219,737

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Loss) earnings per share of common stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

16

 

 

(1.18)

 

 

1.22

 

 

(1.27)

 

 

2.22

Diluted

 

16

 

 

(1.18)

 

 

1.22

 

 

(1.27)

 

 

2.22

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

Coronado Global Resources Inc. Form 10-Q June 30, 20203


Unaudited Condensed Consolidated Statements of Stockholders’ Equity

(In US$ thousands, except share data)

 

 

 

Common stock

 

Preferred stock

 

Additional

 

Accumulated other

 

(Accumulated

 

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

paid in

 

comprehensive

 

losses) 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

Net loss

 

 

 

 

 

 

 

 

(114,328)

 

(2)

 

(114,330)

Other comprehensive income (net of $6,534 tax)

 

 

 

 

 

 

 

58,707

 

 

 

58,707

Total comprehensive income (loss)

 

 

 

 

 

 

 

58,707

 

(114,328)

 

(2)

 

(55,623)

Share-based compensation for equity classified awards

 

 

 

 

 

 

248

 

 

 

 

248

Balance June 30, 2020

 

$

96,651,692

 

967

 

1

 

 

820,643

 

(74,258)

 

(55,642)

 

217

 

691,927

 

 

 

 

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

Net income (loss)

 

 

 

 

 

 

 

 

117,510

 

(4)

 

117,506

Other comprehensive income (net of $383 tax)

 

 

 

 

 

 

 

386

 

 

 

386

Total comprehensive income (loss)

 

 

 

 

 

 

 

386

 

117,510

 

(4)

 

117,892

Share-based compensation for equity classified awards

 

 

 

 

 

 

93

 

 

 

 

93

Balance June 30, 2019

 

$

96,651,692

 

967

 

1

 

 

1,108,041

 

(44,202)

 

108,868

 

278

 

1,173,952

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

Coronado Global Resources Inc. Form 10-Q June 30, 20204


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

 

 

Six Months Ended

 

 

June 30,

 

 

2020

 

2019

Cash flows from operating activities:

 

 

 

 

 

 

Net (loss) income

 

$

(123,196)

 

$

214,326

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

 

 

 

 

 

 

Depreciation, depletion and amortization

 

 

86,849

 

 

85,404

Impairment of assets

 

 

63,111

 

 

Amortization of right of use asset - operating leases

 

 

9,387

 

 

10,394

Amortization of deferred financing costs

 

 

2,751

 

 

2,060

Non-cash interest expense

 

 

10,266

 

 

9,711

Amortization of contract obligations

 

 

(14,794)

 

 

(17,550)

Loss on disposal of property, plant and equipment

 

 

208

 

 

39

Decrease in contingent royalty consideration

 

 

(1,543)

 

 

(7,143)

Gain on operating lease derecognition

 

 

(1,180)

 

 

Equity-based compensation expense

 

 

396

 

 

93

Deferred income taxes

 

 

(6,302)

 

 

17,026

Reclamation of asset retirement obligations

 

 

(1,574)

 

 

(2,552)

Change in estimate of asset retirement obligation

 

 

 

 

(125)

Changes in operating assets and liabilities:

 

 

 

 

 

 

Accounts receivable - including related party receivables

 

 

(6,223)

 

 

(23,105)

Inventories

 

 

21,133

 

 

(34,562)

Other current assets

 

 

5,425

 

 

(2,287)

Accounts payable

 

 

(27,984)

 

 

(1,832)

Accrued expenses and other current liabilities

 

 

3,938

 

 

15,585

Operating lease liabilities

 

 

(10,374)

 

 

(11,073)

Change in other liabilities

 

 

(17,930)

 

 

46,807

Net cash (used in) provided by operating activities

 

 

(7,636)

 

 

301,216

Cash flows from investing activities:

 

 

 

 

 

 

Capital expenditures

 

 

(61,927)

 

 

(66,430)

Purchase of deposits and reclamation bonds

 

 

(51)

 

 

(906)

Redemption of deposits and reclamation bonds

 

 

125

 

 

Net cash used in investing activities

 

 

(61,853)

 

 

(67,336)

Cash flows from financing activities:

 

 

 

 

 

 

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

 

 

145,000

 

 

109,008

Debt issuance costs and other financing costs

 

 

(2,423)

 

 

Principal payments on interest bearing liabilities and other financial liabilities

 

 

(39,515)

 

 

(108,073)

Principal payments on finance and capital lease obligations

 

 

(642)

 

 

(686)

Payment of contingent purchase consideration

 

 

 

 

(12,712)

Dividends paid

 

 

(24,162)

 

 

(299,682)

Net cash provided by (used in) financing activities

 

 

78,258

 

 

(312,145)

Net decrease in cash and restricted cash

 

 

8,769

 

 

(78,265)

Effect of exchange rate changes on cash and restricted cash

 

 

1,002

 

 

(365)

Cash and restricted cash at beginning of period

 

 

26,553

 

 

124,881

Cash and restricted cash at end of period

 

$

36,324

 

$

46,251

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

Cash payments for interest

 

$

10,981

 

$

1,148

Cash paid for taxes

 

$

2,029

 

$

35,873

See accompanying notes to unaudited condensed consolidated financial statements.

Coronado Global Resources Inc. Form 10-Q June 30, 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 Global Resources Inc., 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 and six months ended June 30, 2020 are not necessarily indicative of the results that may be expected for future quarters or for the year ending December 31, 2020.

COVID-19

The COVID-19 global pandemic has continued to result in a challenging working environment which has significantly impacted the demand and price for metallurgical coal. Authorities in many countries around the world have implemented numerous and varying measures to reduce the spread and limit the impact of COVID-19, including travel bans and restrictions, quarantines, curfews, stay-at-home orders, business shutdowns and closures. Many countries have also commenced implementing multi-stage policies with the goal of re-opening markets and boosting economic activity. These measures have impacted and will continue to impact our mining operations, our customers, employees, suppliers and other third parties with whom we do business. The U.S. and Australia, where our mining operations are located, are in varying stages of restrictions and re-opening in response to COVID-19. There is considerable uncertainty regarding how current and future health and safety measures implemented in response to the pandemic will impact our business, including whether they will result in further changes in demand for metallurgical coal, increases in operating costs or impacts to our supply chain, and whether measures will result in port closures or border restrictions, each or all of which can impact our ability to produce and sell our coal.

The safety and wellbeing of our workforce remains our highest priority and we continue to manage the potential threat of COVID-19 at our mines and offices. The Company formed a COVID-19 taskforce spanning its Australian and U.S. operations and proactively enacted stringent preventative measures to ensure the safety and well-being of employees and contractors during the pandemic. These procedures include increased screenings of employees as they arrive at the workplace as well as strict adherence to hygiene and social distancing guidelines while at work.

Coronado Global Resources Inc. Form 10-Q June 30, 20206


Table of Contents

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

 

Our U.S. Operations were idled in April and May 2020 due to the COVID-19 induced economic downturn and decline in demand from customers in Europe, Brazil and the U.S. While the mines were idled, the Company continued to make shipments to its customers from existing inventories which allowed the Company to meet all customer commitments. On June 1, 2020, the Company resumed operations at the Buchanan and Logan mines. Whilst production at these mines has been reduced in response to lower temporary demand, both mines are operationally well positioned to increase production quickly in the event demand increases rapidly. The Greenbrier mine remains idle and the Company will continue to monitor market developments to evaluate the duration for which the mine will remain idle. Subsequent to June 30, 2020 we have had a small number of our workforce at our U.S Operations who tested positive for the virus. We have taken all necessary steps to isolate the affected workers and protect the remaining workforce. To date these efforts have not adversely affected our production.

The global economic slowdown resulting from the effects of COVID-19 has sharply reduced the demand for steel in all markets except for China, where steel production remained elevated during the second quarter of 2020. In Australia, our sales profile has adjusted accordingly, with an increase in deliveries to the Chinese market in the quarter. Overall, the supply and demand constraints in respect of the global impacts of COVID-19 on our Australian Operations has been limited due to the unique position of the Curragh mine as a strategic supplier of ‘base load’ metallurgical coal for coke blends. While global demand remains uncertain, there are promising signs of recovery in Asia Pacific demand.

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 and managing operating costs in a disciplined manner. As of June 30, 2020, the Company reduced its net debt by $31.8 million to $404.9 million since March 31, 2020, and had $109.0 million undrawn and available under the Syndicated Facility Agreement, or SFA, subject to a liquidity buffer of $50.0 million, and cash balances (excluding restricted cash) of $36.1 million. See Note 13 “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, financial condition and ability to comply with financial covenants under the SFA.

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.

Coronado Global Resources Inc. Form 10-Q June 30, 20207


Table of Contents

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

 

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 its 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.

(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 the 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 not a measure of financial performance in accordance with U.S. GAAP. Investors should be aware that the Company’s presentation of Adjusted EBITDA may not be comparable to similarly titled financial measures used by other companies.

Coronado Global Resources Inc. Form 10-Q June 30, 20208


Table of Contents

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

 

Adjusted EBITDA is defined as earnings before interest, tax, depreciation, depletion and amortization and other foreign exchange losses. Adjusted EBITDA is also adjusted for certain discrete items that management exclude in analyzing each of our segments’ operating performance. “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 and six months ended June 30, 2020 and 2019 are presented below:

 

 

Australia

 

United States

 

Other and Corporate

 

Total

 

 

($ thousands)

Three months ended June 30, 2020

 

 

 

 

 

 

 

 

Total revenues

 

228,410

 

75,938

 

 

304,348

Adjusted EBITDA

 

(6,804)

 

3,490

 

(7,163)

 

(10,477)

Net loss

 

(16,933)

 

(74,006)

 

(23,391)

 

(114,330)

Total assets

 

1,043,222

 

975,045

 

83,042

 

2,101,309

Capital expenditures (1)

 

13,535

 

6,396

 

578

 

20,509

 

 

 

 

 

 

 

 

 

Three months ended June 30, 2019

 

 

 

 

 

 

 

 

Total revenues

 

412,810

 

229,647

 

 

642,457

Adjusted EBITDA

 

151,561

 

79,642

 

(8,912)

 

222,291

Net income (loss)

 

91,024

 

40,609

 

(14,127)

 

117,506

Total assets

 

1,182,652

 

972,193

 

63,638

 

2,218,483

Capital expenditures (1)

 

9,341

 

27,426

 

 

36,767

 

 

 

 

 

 

 

 

 

Six Months Ended June 30, 2020

 

 

 

 

 

 

 

 

Total revenues

 

473,555

 

240,111

 

 

713,666

Adjusted EBITDA

 

6,260

 

41,740

 

(13,056)

 

34,944

Net loss

 

(22,900)

 

(64,877)

 

(35,419)

 

(123,196)

Total assets

 

1,043,222

 

975,045

 

83,042

 

2,101,309

Capital expenditures (1)

 

18,804

 

41,917

 

1,206

 

61,927

 

 

 

 

 

 

 

 

 

Six Months Ended June 30, 2019

 

 

 

 

 

 

 

 

Total revenues

 

794,182

 

440,153

 

 

1,234,335

Adjusted EBITDA

 

271,709

 

151,611

 

(17,965)

 

405,355

Net income (loss)

 

159,758

 

77,409