Warrior Met Coal Reports Third Quarter 2021 Results

Achieves largest Net Income and Adjusted EBITDA in over two years

Warrior Met Coal, Inc. (NYSE:HCC) (“Warrior” or the “Company”) today announced results for the third quarter of 2021. Warrior is the leading dedicated U.S. based producer and exporter of high quality metallurgical (“met”) coal for the global steel industry.

Warrior reported net income for the third quarter of 2021 of $38.4 million, or $0.74 per diluted share, compared to a net loss of $14.4 million, or $0.28 per diluted share, in the third quarter of 2020. Adjusted net income per share for the third quarter of 2021 was $0.97 per diluted share compared to adjusted net loss per share of $0.28 per diluted share in the third quarter of 2020. The Company reported Adjusted EBITDA of $104.9 million in the third quarter of 2021, compared to Adjusted EBITDA of $16.8 million in the third quarter of 2020.

“During the third quarter, we were pleased to deliver our most profitable results since the onset of the COVID-19 pandemic, driven by the resiliency and efficiency of our operational base,” commented Walt Scheller, CEO of Warrior. “We were ideally set to take advantage of the record high pricing we saw this quarter, enabling us to leverage the strong global economic recovery by increasing our average net selling prices and delivering strong production during the ongoing union strike. Despite the continued issues with supply chains around the world, we are finding that strong steel and met coal demand globally, as well as the Chinese ban on Australian coal imports, are providing tailwinds that play to our strengths. With a continued focus on managing expenses, enhancing liquidity, and increasing cash flows, Warrior is well positioned to continue meeting our customers’ long-term commitments in the face of any potential future market volatility.”

Mr. Scheller continued, "While we continue to negotiate in good faith to reach a new union contract, the UMWA unfortunately remains on strike. During this period, we continued to execute successfully on our business continuity plans, allowing us to continue to meet the needs of our valued customers. Despite incurring costs associated with the strike, we have been able to manage our working capital and spending to deliver strong results in this market.”

Operating Results

The Company produced 1.1 million short tons of met coal in the third quarter of 2021 compared to 1.9 million short tons in the third quarter of 2020. The tons produced in the third quarter of 2021 resulted from running both longwalls and four continuous miner units at Mine No. 7. By running the four continuous miner units, our lead days or float time has not materially changed since the strike commenced in April and are still several months out into the future. Mine No. 4 remained idled during the third quarter of 2021. Sales volume in the third quarter of 2021 was 1.1 million short tons compared to 1.9 million short tons in the third quarter of 2020. Inventory levels rose slightly to 590 thousand short tons at the end of September 30, 2021 from the 503 thousand short tons at the end of June 30, 2021.

Additional Financial Results

Total revenues were $202.5 million for the third quarter of 2021, including $199.7 million in mining revenues, which consisted of met coal sales of 1.1 million short tons at an average net selling price of $188.62 per short ton, net of demurrage and other charges. This compares to total revenues of $180.1 million in the third quarter of 2020. The average net selling price of the Company's met coal increased 108% from $90.65 per short ton in the third quarter of 2020 to $188.62 per short ton in the third quarter of 2021. During the third quarter of 2021, the Company's gross price realization was 81% of the quarterly Australian premium low-volatility hard coking coal (“HCC”) Platts Premium LV FOB Australian Index (the "Platts Index”) price, reflecting a rapidly rising price environment during the third quarter. The year-over-year increase in revenues is primarily attributed to improved met coal pricing, partially offset by lower sales volume.

Cost of sales for the third quarter of 2021 were $92.0 million compared to $151.4 million for the third quarter of 2020. Cash cost of sales (including mining, transportation and royalty costs) for the third quarter of 2021 were $91.0 million, or 45.6% of mining revenues, compared to $150.6 million, or 86.0% of mining revenues in the same period of 2020. Cash cost of sales (free-on-board port) per short ton increased to $85.92 in the third quarter of 2021 from $77.92 in the third quarter of 2020, reflecting higher met coal sales prices and its effect on Warrior's variable costs structure.

Selling, general and administrative expenses for the third quarter of 2021 were $7.4 million, or 3.7% of total revenues and were lower than the same period last year driven by lower employee related costs and professional service fees. Depreciation and depletion expenses for the third quarter of 2021 were $29.0 million, slightly higher than the prior year comparable quarter. Warrior incurred net interest expense of $8.8 million during the third quarter of 2021, which was higher than the same quarter last year primarily due to interest on new equipment financing leases.

Business interruption expenses were $6.9 million and represent non-recurring expenses that are directly attributable to the ongoing UMWA strike for incremental safety and security, labor negotiations and other expenses. Idle mine expenses were $9.3 million and represent expenses incurred with the idling of Mine 4 and reduced operations at Mine 7, such as electricity, insurance and maintenance labor.

Income tax expense was $5.4 million in the third quarter of 2021 due to income before income taxes of $43.9 million offset partially by an income tax benefit for depletion and additional marginal gas well credits. This compares to an income tax benefit of $8.2 million in the third quarter of 2020.

Cash Flow and Liquidity

The Company generated cash flows from operating activities in the third quarter of 2021 of $62.9 million, compared to $29.2 million in the third quarter of 2020. Capital expenditures for the third quarter of 2021 were $10.5 million. Free cash flow was $52.4 million in the third quarter of 2021, which was $51.1 million better than the third quarter of 2020, and reflected higher realized prices and our conscious management of expenses and spending.

Net working capital, excluding cash, for the third quarter of 2021 increased by $17.9 million from the second quarter of 2021, primarily reflecting an increase in inventory due to lower met coal sales volume.

Cash flows used in financing activities for the third quarter of 2021 were $50.9 million, primarily due to payments on the ABL Facility of $40.0 million, principal repayments of capital lease obligations of $8.3 million and the payment of dividends of $2.6 million.

The Company’s total liquidity as of September 30, 2021 was $355.7 million, consisting of cash and cash equivalents of $268.4 million and available liquidity under its ABL Facility of $87.3 million, which is net of outstanding letters of credit of $9.4 million.

Capital Allocation

On October 25, 2021, the board of directors declared a regular quarterly cash dividend of $0.05 per share, totaling approximately $2.6 million, which will be paid on November 12, 2021 to stockholders of record as of the close of business on November 5, 2021.

Collective Bargaining Agreement

The Company's Collective Bargaining Agreement ("CBA") contract with the United Mine Workers of America ("UMWA") expired on April 1, 2021, and the UMWA initiated a strike. The Company believes that it is well positioned to fulfill anticipated customer volume commitments for 2021 of approximately 4.9 to 5.5 million short tons through a combination of existing coal inventory of 590 thousand short tons and expected production for the remainder of the year. Even though Mine 4 remains idled, the Company expects production to continue at Mine 7, although at lower than usual rates. While the Company has business continuity plans in place, the strike may still cause disruption to production and shipment activities, and the plans may vary significantly from quarter to quarter for the remainder of the year.

In the current operating environment and without a new contract, we believe that our production and sales volume over a twelve-month period could be between 5.5 million and 6.5 million short tons, which volumes could possibly include restarting Mine 4. Similarly, with a new contract, we believe that our production and sales volume over a twelve-month period could ramp up to a run rate of approximately 7.5 million short tons within three to four months.

Company Outlook

Due to ongoing uncertainty related to negotiations with the UMWA, the Chinese ban on Australian coal and other potentially disruptive factors, Warrior will not be providing full year 2021 guidance at this time. The Company expects to return to providing guidance once there is further clarity on these issues.

Warrior continues to appropriately adjust its operational needs, including managing expenses, capital expenditures, working capital, liquidity and cash flows. The Company has delayed the development of the Blue Creek project and its Stock Repurchase Program also remains temporarily suspended, while it focuses on preserving cash and liquidity.

Use of Non-GAAP Financial Measures

This release contains the use of certain non-GAAP financial measures. These non-GAAP financial measures are provided as supplemental information for financial measures prepared in accordance with GAAP. Management believes that these non-GAAP financial measures provide additional insights into the performance of the Company, and they reflect how management analyzes Company performance and compares that performance against other companies. These non-GAAP financial measures may not be comparable to other similarly titled measures used by other entities. The definition of these non-GAAP financial measures and a reconciliation of non-GAAP to GAAP financial measures is provided in the financial tables section of this release.

Conference Call

The Company will hold a conference call to discuss its third quarter 2021 results today, November 2, 2021, at 4:30 p.m. ET. To listen to the event, live or access an archived recording, please visit http://investors.warriormetcoal.com/. Analysts and investors who would like to participate in the conference call should dial 1-844-340-9047 (domestic) or 1-412-858-5206 (international) 10 minutes prior to the start time and reference the Warrior Met Coal conference call. Telephone playback will also be available from 6:30 p.m. ET November 3, 2021 until 6:30 p.m. ET on November 9, 2021. The replay will be available by calling: 1-877-344-7529 (domestic) or 1-412-317-0088 (international) and entering passcode 10159683.

About Warrior

Warrior is a U.S.-based, environmentally and socially minded supplier to the global steel industry. It is dedicated entirely to mining non-thermal met coal used as a critical component of steel production by metal manufacturers in Europe, South America and Asia. Warrior is a large-scale, low-cost producer and exporter of premium met coal, also known as hard-coking coal (HCC), operating highly efficient longwall operations in its underground mines based in Alabama. The HCC that Warrior produces from the Blue Creek coal seam contains very low sulfur, has strong coking properties and is of a similar quality to coal referred to as the premium HCC produced in Australia. The premium nature of Warrior’s HCC makes it ideally suited as a base feed coal for steel makers and results in price realizations near the Platts Index price. For more information, please visit www.warriormetcoal.com.

Forward-Looking Statements

This press release contains, and the Company’s officers and representatives may from time to time make, forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of historical facts, included in this press release that address activities, events or developments that the Company expects, believes or anticipates will or may occur in the future are forward-looking statements, including statements regarding the impact of COVID-19 on its business and that of its customers, sales and production growth, ability to maintain cost structure, demand, the future direction of prices, management of liquidity, cash flows, expenses and expected capital expenditures and working capital, future effective income tax rates and payment of cash taxes, if any, as well as statements regarding production, our ability to fulfill expected customer orders and the outcome of negotiations with our labor union, including any potential changes to our production and sales volumes as a result of such outcome. The words “believe,” “expect,” “anticipate,” “plan,” “intend,” “estimate,” “project,” “target,” “foresee,” “should,” “would,” “could,” “potential,” “outlook,” “guidance” or other similar expressions are intended to identify forward-looking statements. However, the absence of these words does not mean that the statements are not forward-looking. These forward-looking statements represent management’s good faith expectations, projections, guidance or beliefs concerning future events, and it is possible that the results described in this press release will not be achieved. These forward-looking statements are subject to risks, uncertainties and other factors, many of which are outside of the Company’s control, that could cause actual results to differ materially from the results discussed in the forward-looking statements, including, without limitation, fluctuations or changes in the pricing or demand for the Company’s coal (or met coal generally) by the global steel industry; the impact of COVID-19 on its business and that of its customers, including the risk of a decline in demand for the Company's met coal due to the impact of COVID-19 on steel manufacturers, the inability of the Company to effectively operate its mines and the resulting decrease in production, the inability of the Company to ship its products to customers in the case of a partial or complete shut-down of the Port of Mobile; federal and state tax legislation; changes in interpretation or assumptions and/or updated regulatory guidance regarding the Tax Cuts and Jobs Act of 2017; legislation and regulations relating to the Clean Air Act and other environmental initiatives; regulatory requirements associated with federal, state and local regulatory agencies, and such agencies’ authority to order temporary or permanent closure of the Company’s mines; operational, logistical, geological, permit, license, labor and weather-related factors, including equipment, permitting, site access, operational risks and new technologies related to mining and labor strikes or slowdowns; the timing and impact of planned longwall moves; the Company’s obligations surrounding reclamation and mine closure; inaccuracies in the Company’s estimates of its met coal reserves; any projections or estimates regarding Blue Creek, including the expected returns from this project, if any, and the ability of Blue Creek to enhance the Company's portfolio of assets, the Company's expectations regarding its future tax rate as well as its ability to effectively utilize its NOLs to reduce or eliminate its cash taxes; the Company's ability to develop Blue Creek; the Company’s ability to develop or acquire met coal reserves in an economically feasible manner; significant cost increases and fluctuations, and delay in the delivery of raw materials, mining equipment and purchased components; competition and foreign currency fluctuations; fluctuations in the amount of cash the Company generates from operations, including cash necessary to pay any special or quarterly dividend; the Company’s ability to comply with covenants in its ABL Facility or indenture relating to its senior secured notes; integration of businesses that the Company may acquire in the future; adequate liquidity and the cost, availability and access to capital and financial markets; failure to obtain or renew surety bonds on acceptable terms, which could affect the Company’s ability to secure reclamation and coal lease obligations; costs associated with litigation, including claims not yet asserted; and other factors described in the Company’s Form 10-K for the year ended December 31, 2020 and other reports filed from time to time with the Securities and Exchange Commission (the “SEC”), which could cause the Company’s actual results to differ materially from those contained in any forward-looking statement. The Company’s filings with the SEC are available on its website at www.warriormetcoal.com and on the SEC's website at www.sec.gov.

Any forward-looking statement speaks only as of the date on which it is made, and, except as required by law, the Company does not undertake any obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. New factors emerge from time to time, and it is not possible for the Company to predict all such factors.

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