The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the "Management's Discussion and Analysis of Financial Condition and Results of Operations" contained in our Annual Report, as well as the financial statements and related notes appearing elsewhere in this Quarterly Report. The following discussion contains forward-looking statements that reflect our future plans, estimates, beliefs and expected performance. The forward-looking statements are dependent upon events, risks and uncertainties that may be outside our control. We caution you that our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to such differences are discussed elsewhere in this Quarterly Report, particularly in the "Cautionary Note Regarding Forward-Looking Statements" and in our Annual Report under the heading "Item 1A. Risk Factors," all of which are difficult to predict. In light of these risks, uncertainties and assumptions, the forward-looking events discussed may not occur. We do not undertake any obligation to publicly update any forward-looking statements except as otherwise required by applicable law.
Overview
Our primary source of revenue is the sale of metallurgical coal. As of
The overall outlook of the metallurgical coal business is dependent on a variety
of factors such as pricing, regulatory uncertainties and global economic
conditions. Coal consumption and production in the
Our results for the second quarter of 2020 were impacted by the severe global
economic slowdown stemming from the novel coronavirus disease 2019 ("COVID-19")
outbreak. The global spread of COVID-19 has created significant volatility,
uncertainty and economic disruption during the first six months of 2020. In
response to the COVID-19 pandemic, governments worldwide have placed significant
restrictions on both domestic and international travel and have taken action to
restrict the movement of people and suspend some business operations, ranging
from targeted restrictions to full national lockdowns. These lockdown and
stay-at-home measures, coupled with the spread and impact of the COVID-19
pandemic, resulted in an increase in the
The Company has been adversely affected by the deterioration and increased uncertainty in the macroeconomic outlook as a result of the impact of COVID-19. Two customers have notified us that their contractual obligations for the purchase of metallurgical coal from us will be delayed or curtailed because of COVID-19. These delays or curtailments are expected to reduce our total contracted sales volumes for 2020 by up to 12%.
We are not able to estimate the impact of customer delays or curtailments of their contractual obligations or our ability to secure additional sales in spot markets. We have observed a declining demand for and reductions in the spot price of metallurgical coal as business and consumer activity decelerates across the globe. This weakness limited our ability to complete spot sales in the first and second quarters of 2020, leading to an increase in our inventories.
In response, we have taken certain actions to limit our production and reduce capital expenditures. These actions have included:
? a two week operational furlough of 203 employees at the
complex in
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temporary reductions in the salaries of certain executives, including our named
? executive officers, by 30% beginning
of cash bonuses for 2019 performance for these individuals;
? the partial closure of our
affecting approximately 44 jobs in
? a reduction or deferral of non-essential capital expenditures to adapt to the
current market conditions.
To date we have not had significant issues with any of our critical suppliers, but we continue to communicate with them and closely monitor their developments to ensure we have access to the goods and services required to maintain our operations.
The Company borrowed an additional
We continue to actively monitor the situation and may take further actions altering our business operations that we determine are in the best interests of our employees, customers, suppliers, and stakeholders, or as required by federal, state, or local authorities. Additional measures we may take could include extensions of operational furloughs and temporary salary reductions for certain executives, staffing reductions and idling or realignment of additional mines as conditions might dictate. It is not clear what the potential effects any such alterations or modifications may have on our business. The impact on our results in future periods could be much more significant and cannot currently be quantified.
As of
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