NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
NOTE 1—SIGNIFICANT ACCOUNTING POLICIES:
A summary of the significant accounting policies of CONSOL Energy Inc. and its subsidiaries (“we,” “our,” “us,” “our Company,” “the Company” and “CONSOL Energy”) is presented below. These, together with the other notes that follow, are an integral part of the Consolidated Financial Statements.
Basis of Consolidation
The Consolidated Financial Statements include the accounts of CONSOL Energy Inc. and its wholly-owned and majority-owned and/or controlled subsidiaries. The portion of these entities that is not owned by the Company is presented as non-controlling interest. All significant intercompany transactions and accounts have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, as well as various disclosures. Actual results could differ from those estimates. The most significant estimates included in the preparation of the consolidated financial statements are related to other postretirement benefits, coal workers' pneumoconiosis, workers' compensation, salary retirement benefits, stock-based compensation, asset retirement obligations, deferred income tax assets and liabilities, contingencies and the values of coal properties.
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand and on deposit at banking institutions as well as all highly liquid short-term securities with original maturities of three months or less.
Restricted Cash
Restricted cash represents cash collateral supporting the Company's surety bond portfolio and letters of credit issued under the Company's accounts receivable securitization program. As of December 31, 2020 and 2019, the Company had no restricted cash.
Trade Receivables and Allowance for Credit Losses
Trade receivables are recorded at the invoiced amount and do not bear interest. Trade credit is extended based upon evaluations of each customer's ability to perform its obligations, which is assessed regularly. See Note 7 - Credit Losses for additional information regarding the Company's measurement of expected credit losses. There were no material financing receivables with a contractual maturity greater than one year at December 31, 2020 and 2019.
Inventories
Inventories are stated at the lower of cost or net realizable value. The cost of coal inventories is determined by the first-in, first-out (FIFO) method. Coal inventory costs include labor, supplies, equipment costs, operating overhead, depreciation, depletion, amortization, and other related costs. The cost of supplies inventory is determined by the average cost method and includes operating and maintenance supplies to be used in the Company's coal operations.
Property, Plant and Equipment
Property, plant and equipment is recorded at cost upon acquisition. Expenditures which extend the useful lives of existing plant and equipment are capitalized. Interest costs applicable to major asset additions are capitalized during the construction period. Costs of additional mine facilities required to maintain production after a mine reaches the production stage, generally referred to as “receding face costs,” are expensed as incurred; however, the costs of additional airshafts and new portals are capitalized. Planned major maintenance costs which do not extend the useful lives of existing plant and equipment are expensed as incurred.
Coal exploration costs are expensed as incurred. Coal exploration costs include those incurred to ascertain existence, location, extent or quality of ore or minerals before beginning the development stage of the mine. Costs of developing new underground mines and certain underground expansion projects are capitalized. Underground development costs, which are costs incurred to make the mineral physically accessible, include costs to prepare property for shafts, driving main entries for ventilation, haulage, personnel, construction of airshafts, roof protection and other facilities.
Airshafts and capitalized mine development associated with a coal reserve are amortized on a units-of-production basis as the coal is produced so that each ton of coal is assigned a portion of the unamortized costs. The Company employs this method to match costs with the related revenues realized in a particular period. Rates are updated when revisions to coal reserve estimates are made. Coal reserve estimates are reviewed when information becomes available that indicates a reserve change is needed, or at a minimum once a year. Any material effect from changes in estimates is disclosed in the period the change occurs. Amortization of development costs begins when the development phase is complete and the production phase begins. At an underground mine, the end of the development phase and the beginning of the production phase takes place when construction of the mine for economic extraction is substantially complete. Coal extracted during the development phase is incidental to the mine’s production capacity and is not considered to shift the mine into the production phase.
Coal reserves are either owned in fee or controlled by lease. The duration of the leases vary; however, the lease terms are generally extended automatically to the exhaustion of economically recoverable reserves, as long as active mining continues. Coal interests held by lease provide the same rights as fee ownership for mineral extraction and are legally considered real property interests. Depletion of leased coal interests is computed using the units-of-production method over recoverable coal reserves. The Company also makes advance payments (advanced mining royalties) to lessors under certain lease agreements that are recoupable against future production, and it makes payments that are generally based upon a specified rate per ton or a percentage of gross realization from the sale of the coal. The Company evaluates its properties for impairment issues whenever events or circumstances indicate that the carrying amount may not be recoverable.
Costs to obtain coal lands are capitalized based on the cost at acquisition and are amortized using the units-of-production method over all estimated recoverable reserve tons assigned and accessible to the mine. Recoverable coal reserves are estimated on a clean coal ton equivalent, which excludes non-recoverable coal reserves and anticipated central preparation plant processing refuse. Rates are updated when revisions to coal reserve estimates are made. Coal reserve estimates are reviewed when events and circumstances indicate a reserve change is needed, or at a minimum once a year. Amortization of coal interests begins when the coal reserve is produced. At an underground mine, a ton is considered produced once it reaches the surface area of the mine. Any material effect from changes in estimates is disclosed in the period the change occurs.
Advance mining royalties are advance payments made to lessors under terms of mineral lease agreements that are recoupable against future production using the units-of-production method. Depletion of leased coal interests is computed using the units-of-production method over recoverable coal reserves. Advance mining royalties and leased coal interests are evaluated for impairment issues whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Any revisions are accounted for prospectively as changes in accounting estimates.
When properties are retired or otherwise disposed, the related cost and accumulated depreciation are removed from the respective accounts and any profit or loss on disposition is recognized in Gain on Sale of Assets in the Consolidated Statements of Income.
Depreciation of plant and equipment is calculated using the straight-line method over the estimated useful lives or lease terms, generally as follows:
|
|
Years
|
|
Buildings and improvements
|
|
|
10 to 45
|
|
Machinery and equipment
|
|
|
3 to 25
|
|
Leasehold improvements
|
|
|
Life of Lease
|
|
Capitalization of Interest
Interest costs associated with the development of significant properties and projects are capitalized until the project is substantially complete and ready for its intended use. A weighted average cost of borrowing rate is used. For the years ended December 31, 2020, 2019 and 2018, capitalized interest totaled $1,911, $6,686 and $6,033, respectively.
Impairment of Long-lived Assets
Impairment of long-lived assets is recorded when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets' carrying value. The carrying value of the assets is then reduced to its estimated fair value which is usually measured based on an estimate of future discounted cash flows. There were no indicators of impairment and, therefore, no impairment losses were recorded during the years ended December 31, 2020, 2019 and 2018.
Income Taxes
The Company files a consolidated federal income tax return and utilizes the asset and liability method to account for income taxes. The provision for income taxes represents amounts paid or estimated to be payable, net of amounts refunded or estimated to be refunded, for the current year and the change in deferred taxes, exclusive of amounts recorded in Other Comprehensive Income (Loss). Any refinements to prior years’ taxes made due to subsequent information are reflected as adjustments in the current period.
Deferred income tax assets and liabilities are determined based on temporary differences between the financial reporting and tax bases of assets and liabilities and are recognized using enacted tax rates for the effect of such temporary differences. Deferred tax assets are reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred tax asset will not be realized.
In accounting for uncertainty in income taxes of a tax position taken or expected to be taken in a tax return, the Company utilizes a recognition threshold and measurement attribute for the financial statement recognition and measurement. The recognition threshold requires the Company to determine whether it is more likely than not that a tax position will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position in order to record any financial statement benefit. If it is more likely than not that a tax position will be sustained, then the Company must measure the tax position to determine the amount of benefit to recognize in the financial statements. The tax position is measured at the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement.
Postretirement Benefits Other Than Pensions
Postretirement benefit obligations established by the Coal Industry Retiree Health Benefit Act of 1992 (the Coal Act) are treated as a multi-employer plan which requires expense to be recorded for the associated obligations as payments are made. Postretirement benefits other than pensions, except for those established pursuant to the Coal Act, are accounted for in accordance with the Retirement Benefits Compensation and Non-retirement Postemployment Benefits Compensation Topics of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification, which requires employers to accrue the cost of such retirement benefits for the employees' active service periods. Such liabilities are determined on an actuarial basis and CONSOL Energy administers these liabilities through a combination of self-insured and fully insured agreements. Differences between actual and expected results or changes in the value of obligations are recognized through Other Comprehensive Income (Loss).
Pneumoconiosis Benefits and Workers' Compensation
CONSOL Energy is required by federal and state statutes to provide benefits to certain current and former totally disabled employees or their dependents for awards related to coal workers' pneumoconiosis. CONSOL Energy is also required by various state statutes to provide workers' compensation benefits for employees who sustain employment-related physical injuries or some types of occupational disease. Workers' compensation benefits include compensation for disability, medical costs, and on some occasions, the cost of rehabilitation. CONSOL Energy is primarily self-insured for these benefits. Provisions for estimated benefits are determined on an actuarial basis.
Asset Retirement Obligations
Mine closing costs and costs associated with dismantling and removing de-gasification facilities are accrued using the accounting treatment prescribed by the Asset Retirement and Environmental Obligations Topic of the FASB Accounting Standards Codification. This topic requires the fair value of an asset retirement obligation be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. For active locations, the present value of the estimated asset retirement obligation is capitalized as part of the carrying amount of the long-lived asset. For locations that have been fully depleted or closed, the present value of the change is recorded directly to the consolidated statements of income. Generally, the capitalized asset retirement obligation is depreciated on a units-of-production basis. Accretion of the asset retirement obligation is recognized over time and generally will escalate over the life of the producing asset. Accretion is included in Depreciation, Depletion and Amortization on the Consolidated Statements of Income. Asset retirement obligations primarily relate to the closure of mines, which includes treatment of water and the reclamation of land upon exhaustion of coal reserves. Accrued mine closing costs, perpetual care costs, reclamation and costs associated with dismantling and removing de-gasification facilities are regularly reviewed by management and are revised for changes in future estimated costs and regulatory requirements.
Subsidence
Subsidence occurs when there is sinking or shifting of the ground surface due to the removal of underlying coal. Areas affected may include, although are not limited to, streams, property, roads, pipelines and other land and surface structures. Total estimated subsidence claims are recognized in the period when the related coal has been extracted and are included in Operating and Other Costs on the Consolidated Statements of Income and Other Accrued Liabilities on the Consolidated Balance Sheets. On occasion, CONSOL Energy prepays the estimated damages prior to undermining the property, in return for a release of liability. Prepayments are included as assets and either recognized as Prepaid Expenses and Other Assets or in Other Assets on the Consolidated Balance Sheets if the payment is made less than or greater than one year, respectively, prior to undermining the property.
Retirement Plans
CONSOL Energy has non-contributory defined benefit retirement plans. Effective December 31, 2015, CONSOL's qualified defined benefit retirement plan was frozen. The benefits for these plans are based primarily on years of service and employees' pay. These plans are accounted for using the guidance outlined in the Compensation - Retirement Benefits Topic of the FASB Accounting Standards Codification. The costs of these retiree benefits are recognized over the employees' service periods. CONSOL Energy uses actuarial methods and assumptions in the valuation of defined benefit obligations and the determination of expense. Differences between actual and expected results or changes in the value of obligations and plan assets are recognized through Other Comprehensive Income (Loss).
Stock-Based Compensation
Eligible CONSOL Energy employees have historically participated in equity-based compensation plans. CONSOL Energy recognizes compensation expense for all stock-based compensation awards based on the grant date fair value estimated in accordance with the provisions of the Stock Compensation Topic of the FASB Accounting Standards Codification. CONSOL Energy recognizes these compensation costs on a straight-line basis over the requisite service period of the award, which is generally the award's vesting term.
Under the CCR 2015 Long-Term Incentive Plan (the “LTIP”), the General Partner issued long-term equity-based awards intended to compensate the recipients thereof based on the performance of CCR’s common units and the recipients' continued service during the vesting period, as well as to align CCR’s long-term interests with those of the unitholders. The LTIP limits the number of units that may be delivered pursuant to vested awards to 2,300,000 common units, subject to proportionate adjustment in the event of unit splits and similar events. Common units subject to awards that are canceled, forfeited, withheld to satisfy exercise prices or tax withholding obligations or otherwise terminated without delivery of the common units will be available for delivery pursuant to other awards.
The General Partner has also granted equity-based phantom units that vest over a period of a director’s continued service. The phantom units will be paid in common units or an amount of cash equal to the fair market value of a unit based on the vesting date. The awards accelerated upon completion of the CCR Merger (see Note 2 - Major Transactions for additional information). Compensation expense is recognized on a straight-line basis over the requisite service period, which is generally the vesting term.
Revenue Recognition
Revenues are generally recognized when title passes to the customers and the price is fixed and determinable. Generally, title passes when coal is loaded at the central preparation facility and, on occasion, at terminal locations or other customer destinations. The Company's coal contract revenue per ton is fixed and determinable and adjusted for nominal quality adjustments. Some coal contracts also contain positive electric power price-related adjustments in addition to a fixed base price per ton. The Company’s coal contracts generally do not allow for retroactive adjustments to pricing after title to the coal has passed. See Note 3 - Revenue for additional information.
Freight Revenue and Expense
Shipping and handling costs invoiced to coal customers and paid to third-party carriers are recorded as Freight Revenue and Freight Expense, respectively.
Contingencies
From time to time, CONSOL Energy, or its subsidiaries, is subject to various lawsuits and claims with respect to such matters as personal injury, wrongful death, damage to property, exposure to hazardous substances, governmental regulations (including environmental remediation), employment and contract disputes, and other claims and actions arising out of the normal course of business. Liabilities are recorded when it is probable that obligations have been incurred and the amounts can be reasonably estimated. Estimates are developed through consultation with legal counsel involved in the defense of these matters and are based upon the nature of the lawsuit, progress of the case in court, view of legal counsel, prior experience in similar matters and management's intended response. Environmental liabilities are not discounted or reduced by possible recoveries from third-parties. Legal fees associated with defending these various lawsuits and claims are expensed when incurred.
Derivative Instruments
The Company generally utilizes derivative instruments to manage exposures to interest rate risk on long-term debt. The Company enters into interest rate swaps in order to achieve a mix of fixed and variable rate debt that it deems appropriate. These interest rate swaps have been designated as cash flow hedges of future variable interest payments and are accounted for as an asset or a liability in the accompanying Consolidated Balance Sheets at their fair value (see Note 21 - Fair Value of Financial Instruments for additional information).
In a cash flow hedge, the Company hedges the risk of changes in future cash flows related to the underlying item being hedged. Changes in the fair value of the derivative instrument used as a hedge instrument in a cash flow hedge are recorded in other comprehensive income or loss. Amounts in other comprehensive income or loss are reclassified to earnings when the hedged transaction affects earnings and are classified in a manner consistent with the transaction being hedged. The Company evaluates the effectiveness of its hedging relationships both at the hedge's inception and on an ongoing basis. Any ineffective portion of the change in fair value of a derivative instrument used as a hedge instrument in a cash flow hedge is recognized immediately in earnings.
Earnings per Share
Basic earnings per share are computed by dividing net (loss) income attributable to CONSOL Energy Inc. shareholders by the weighted average shares outstanding during the reporting period. Dilutive earnings per share are computed similarly to basic earnings per share, except that the weighted average shares outstanding are increased to include additional shares from restricted stock units and performance share units, if dilutive. The number of additional shares is calculated by assuming that outstanding restricted stock units and performance share units were released, and that the proceeds from such activities were used to acquire shares of common stock at the average market price during the reporting period.
The table below sets forth the share-based awards that have been excluded from the computation of diluted earnings per share because their effect would be anti-dilutive:
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|
For the Years Ended
|
|
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
2018
|
|
Anti-Dilutive Restricted Stock Units
|
|
|
1,400,950
|
|
|
|
175,752
|
|
|
|
620
|
|
Anti-Dilutive Performance Share Units
|
|
|
110,470
|
|
|
|
20,202
|
|
|
|
6,363
|
|
|
|
|
1,511,420
|
|
|
|
195,954
|
|
|
|
6,983
|
|
The computations for basic and dilutive (loss) earnings per share are as follows:
|
|
For the Years Ended
|
|
Dollars in thousands, except per share data
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
2018
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (Loss) Income
|
|
$
|
(13,214
|
)
|
|
$
|
93,558
|
|
|
$
|
178,785
|
|
Less: Net (Loss) Income Attributable to Noncontrolling Interest
|
|
|
(3,459
|
)
|
|
|
17,557
|
|
|
|
25,809
|
|
Net (Loss) Income Attributable to CONSOL Energy Inc. Shareholders
|
|
$
|
(9,755
|
)
|
|
$
|
76,001
|
|
|
$
|
152,976
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average shares of common stock outstanding
|
|
|
26,066,971
|
|
|
|
26,938,339
|
|
|
|
27,928,245
|
|
Effect of dilutive shares *
|
|
|
—
|
|
|
|
132,769
|
|
|
|
491,517
|
|
Weighted-average diluted shares of common stock outstanding
|
|
|
26,066,971
|
|
|
|
27,071,108
|
|
|
|
28,419,762
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) Earnings per Share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.37
|
)
|
|
$
|
2.82
|
|
|
$
|
5.48
|
|
Dilutive
|
|
$
|
(0.37
|
)
|
|
$
|
2.81
|
|
|
$
|
5.38
|
|
* During periods in which the Company incurs a net loss, diluted weighted average shares outstanding are equal to basic weighted average shares outstanding because the effect of all equity awards is anti-dilutive.
As of December 31, 2020, CONSOL Energy has 500,000 shares of preferred stock, none of which are issued or outstanding.
Shares of common stock outstanding were as follows:
|
|
2020
|
|
|
2019
|
|
|
2018
|
|
Balance, Beginning of Year
|
|
|
25,932,618
|
|
|
|
27,437,844
|
|
|
|
27,973,281
|
|
Issuance Related to CCR Merger (1)
|
|
|
7,967,690
|
|
|
|
—
|
|
|
|
—
|
|
Retirement Related to Stock Repurchase (2)
|
|
|
—
|
|
|
|
(1,717,497
|
)
|
|
|
(708,245
|
)
|
Issuance Related to Stock-Based Compensation (3)
|
|
|
131,066
|
|
|
|
212,271
|
|
|
|
172,808
|
|
Balance, End of Year
|
|
|
34,031,374
|
|
|
|
25,932,618
|
|
|
|
27,437,844
|
|
(1)
|
See Note 2 - Major Transactions for additional information.
|
(2)
|
See Note 5 - Stock, Unit and Debt Repurchases for additional information.
|
(3)
|
See Note 18 - Stock-Based Compensation for additional information.
|
Recent Accounting Pronouncements
In January 2021, the FASB issued Accounting Standards Update (“ASU”) 2021-01 - Reference Rate Reform (Topic 848) to clarify that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition. Specifically, certain provisions in Topic 848, if elected by an entity, apply to derivative instruments that use an interest rate for margining, discounting, or contract price alignment that is modified as a result of reference rate reform. Amendments in this Update to the expedients and exceptions in Topic 848 capture the incremental consequences of the scope clarification and tailor the existing guidance to derivative instruments affected by the discounting transition. Management has elected to apply this Update subsequent to March 12, 2020. Management is currently evaluating the impact of this guidance, but does not expect this update to have a material impact on the Company's financial statements.
In March 2020, the FASB issued ASU 2020-04 - Reference Rate Reform (Topic 848) - Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The amendments in this Update provide optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. In response to concerns about structural risks of interbank offered rates (IBORs), and, particularly, the risk of cessation of the London Interbank Offered Rate (LIBOR), regulators in several jurisdictions around the world have undertaken reference rate reform initiatives to identify alternative reference rates that are more observable or transaction based and less susceptible to manipulation. This Update also provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments in this Update apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The amendments in this Update are effective for all entities as of March 12, 2020 through December 31, 2022. An entity may elect to apply the amendments for contract modifications by Topic or Industry Subtopic as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020, or prospectively from a date within an interim period that includes or is subsequent to March 12, 2020, up to the date that the financial statements are available to be issued. Once elected for a Topic or an Industry Subtopic, the amendments in this Update must be applied prospectively for all eligible contract modifications for that Topic or Industry Subtopic. Management has elected to apply this Update subsequent to March 12, 2020. Management is currently evaluating the impact of this guidance, but does not expect this update to have a material impact on the Company's financial statements.
In January 2020, the FASB issued ASU 2020-01 - Investments - Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815). The amendments in this Update clarify certain interactions between the guidance to account for certain equity securities under Topic 321, the guidance to account for investments under the equity method of accounting in Topic 323, and the guidance in Topic 815, which could change how an entity accounts for an equity security under the measurement alternative or a forward contract or purchased option to purchase securities that, upon settlement of the forward contract or exercise of the purchased option, would be accounted for under the equity method of accounting or the fair value option in accordance with Topic 825, Financial Instruments. These amendments improve current GAAP by reducing diversity in practice and increasing comparability of the accounting for these interactions. The amendments in this Update are effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. Early adoption is permitted. Management does not expect this update to have a material impact on the Company's financial statements.
In December 2019, the FASB issued ASU 2019-12 - Income Taxes (Topic 740) to reduce the complexity of accounting for income taxes while maintaining or improving the usefulness of the information provided to users of financial statements. The amendments in Update 2019-12 will remove the following exceptions: (1) the exception to the incremental approach for intra-period tax allocation; (2) exceptions to accounting for basis differences when there are ownership changes in foreign investments; and (3) the exception to the general methodology for calculating income taxes in an interim period when a year-to-date loss exceeds the anticipated loss for the year. The amendments in Update 2019-12 will also simplify the accounting for income taxes in the areas of franchise tax, step up in the tax basis of goodwill associated with a business combination, allocation of current and deferred tax expense to a legal entity that is not subject to tax in its separate financial statements, and presentation of the effect of an enacted change in tax laws or rates in the annual effective tax rate computation in the interim period that includes the enactment date. The Update adds minor codification improvements for income taxes related to employee stock ownership plans and investments in qualified affordable housing projects accounted for using the equity method. These changes will be effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. Early adoption is permitted. Management does not expect this update to have a material impact on the Company's financial statements.
In August 2018, the FASB issued ASU 2018-14 - Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20) to improve the effectiveness of disclosures in the notes to the financial statements by facilitating clear communication of the information required by GAAP. The amendments modify the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. These changes will be effective for fiscal years ending after December 15, 2020, including interim periods within those fiscal years. The Company adopted this guidance in 2020, and there was no material impact on the Company's financial statements.
Reclassifications
During the year ended December 31, 2020, the Company added the CONSOL Marine Terminal to its reportable segments disclosed in Note 23 - Segment Information. As a result, certain reclassifications of 2019 and 2018 segment information have been made to conform to the 2020 presentation. During the year ended December 31, 2019, certain 2018 amounts were reclassified to conform with the report classifications of 2019, including the reclassification of amortization of debt issuance costs and loss on debt extinguishment within the Operating Activities section of the Consolidated Statements of Cash Flows. These reclassifications had no effect on previously reported total assets, net income, stockholders' equity or cash flow from operating activities.
NOTE 2—MAJOR TRANSACTIONS:
Merger with CONSOL Coal Resources LP
On October 22, 2020, CONSOL Energy, the Partnership, the General Partner, a wholly-owned subsidiary of CONSOL Energy and one of its wholly-owned subsidiaries (“Merger Sub”) entered into a definitive merger agreement (the “Merger Agreement”) pursuant to which Merger Sub merged with and into the Partnership, with the Partnership surviving as an indirect, wholly-owned subsidiary of CONSOL Energy (the “Merger”). On December 30, 2020, the Merger was completed and CONSOL Energy issued 7,967,690 shares of common stock to acquire the 10,912,138 common units of CCR not owned by CONSOL Energy prior to the Merger at a fixed exchange ratio of 0.73 shares of CONSOL Energy common stock for each CCR unit, for total implied consideration of $51,710. As a result of the Merger, CCR's common units are no longer publicly traded.
Except for the Partnership's incentive distribution rights, which were automatically canceled immediately prior to the effective time of the Merger for no consideration in accordance with CCR's partnership agreement, the interests in CCR owned by CONSOL Energy and its subsidiaries remain outstanding as limited partner interests in the surviving entity. The General Partner will continue to own the non-economic general partner interest in the surviving entity.
Since CONSOL Energy controlled CCR prior to the Merger and continues to control CCR after the Merger, CONSOL Energy accounted for the change in its ownership interest in CCR as an equity transaction, which was reflected as a reduction of noncontrolling interest with corresponding increases to common stock and capital in excess of par value. No gain or loss was recognized in CONSOL Energy's Consolidated Statements of Income as a result of the Merger. The tax effects of the Merger were reported as adjustments to deferred income taxes and capital in excess of par value.
Prior to the effective date of the Merger, public unitholders held a 39.3% equity interest in CCR's outstanding common units and CONSOL Energy owned the remaining 60.7% equity interest. The earnings of CCR that were attributed to its common units held by the public prior to the Merger are reflected in Net (Loss) Income Attributable to Noncontrolling Interest in the Consolidated Statements of Income.
We incurred $9,822 of transaction costs directly attributable to the Merger during the year ended December 31, 2020, including financial advisory, legal service and other professional fees, which were recorded to Selling, General and Administrative Costs in the Consolidated Statements of Income.
Settlement Transaction with Murray Energy
On September 16, 2020, CONSOL entered into a settlement transaction with (i) Murray Energy Holdings Co., Murray Energy Corporation, and their direct and indirect subsidiaries (such entities that are debtors in possession in Murray Energy Holdings Co.’s jointly administered Chapter 11 cases, the “Debtors”) and (ii) ACNR Holdings, Inc. (together with its direct and indirect subsidiaries, “Murray NewCo”) to fully and finally resolve the disputes raised in the CONSOL Adversary Case and any and all other disputes, controversies, or causes of action between and among them related to (a) the Debtors’ rejection of the 2013 stock purchase agreement (“SPA”) and CONSOL’s waiver of any objection thereto; (b) the Debtors’ assumption and assignment to Murray NewCo (or its designated direct or indirect subsidiaries) and payment of certain cure and other amounts relating to the First Overriding Royalty Agreement, as amended, the Second Overriding Royalty Agreement, as amended, the Water Treatment Cost Sharing Agreement, as amended, and the Master Entry Driver Lease Agreement; (c) the Debtors’ assumption and assignment to Murray NewCo (or its designated direct or indirect subsidiaries) of the Cooperation and Safety Agreement, the Surface Use Agreement, the Substation and Power Line Agreement, the Substation and Power Line Rights-of-Way, the McMillian Assignment, the Partial Powerline Assignment, the 2013 Well Plugging Consent Order and Agreement, and the 2020 Well Plugging Agreement; (d) the Debtors’ and CONSOL’s continued cooperation about certain matters consistent with historical practice, including (i) with respect to each parties’ payment obligations related to certain claims relating to certain worker’s compensation, Black Lung, and long-term disability and (ii) with respect to easements and boundaries as set forth in the 2013 SPA and the Closing Land Letter Agreement; (e) the Debtors’ assumption of, and CONSOL’s payment of certain amounts relating to, the Split Leases; (f) CONSOL’s transfer to Murray NewCo (or its designated direct or indirect subsidiaries), and Murray NewCo’s (or its designated direct or indirect subsidiaries’) payment for, certain coalbed methane wells, gas wells, and land; (g) the usage by CONSOL of the power structure of Murray NewCo (or its designated direct or indirect subsidiaries) on agreed upon terms and the Debtors’ and Murray NewCo’s release of the alleged claim for CONSOL’s prior usage; (h) CONSOL’s dismissal of CONSOL Energy Inc. v Murray Energy Holdings Co., et al., Adversary Case 2:20-ap-02036, with prejudice, which dismissal will be contingent upon (1) the Debtors’ assumption and assignment to Murray NewCo (or its designated direct or indirect subsidiaries) of the Assumed CONSOL Agreements and (2) the Debtors’ compliance with the terms of the CONSOL Term Sheets and other agreements consistent with these transactions; and (i) certain other terms and conditions consistent with the foregoing. The foregoing agreements and compromises, which have been memorialized in definitive documentation, shall be treated as a single, integrated transaction. The effect of the agreements, as amended, in the normal course of business resulted in CONSOL recognizing (a) Miscellaneous Other Income of $18,561 related to the Sale of Certain Coal Lease Contracts and other income, (b) Gain on Sale of Assets of $6,230 related to the sale of certain gas wells and equipment, and (c) a reduction of Operating and Other Costs of $1,940 as a result of expense rebates offset with various cure costs, all of which are included in the Consolidated Statements of Income for the year ended December 31, 2020. As of December 31, 2020, the various transactions between the parties resulted in $4,867 of Other Receivables, net, and $22,055 of Other Assets, net, included in the Consolidated Balance Sheets. As of December 31, 2019, various transactions between the parties resulted in $13,567 of Other Receivables, net, included in the Consolidated Balance Sheets. See Note 22 - Commitments and Contingent Liabilities with respect to additional information relating to certain liabilities of the Company under the Coal Act (as defined below).
NOTE 3—REVENUE:
The following table disaggregates CONSOL Energy's revenue from contracts with customers to depict how the nature, amount, timing and uncertainty of the Company's revenues and cash flows are affected by economic factors:
|
|
For the Year Ended
|
|
|
For the Year Ended
|
|
|
For the Year Ended
|
|
|
|
December 31, 2020
|
|
|
December 31, 2019
|
|
|
December 31, 2018
|
|
Coal Revenue
|
|
$
|
772,662
|
|
|
$
|
1,288,529
|
|
|
$
|
1,364,292
|
|
Terminal Revenue
|
|
|
66,810
|
|
|
|
67,363
|
|
|
|
64,926
|
|
Freight Revenue
|
|
|
39,990
|
|
|
|
19,667
|
|
|
|
43,572
|
|
Total Revenue from Contracts with Customers
|
|
$
|
879,462
|
|
|
$
|
1,375,559
|
|
|
$
|
1,472,790
|
|
Coal Revenue
CONSOL Energy's coal revenue is generally recognized when title passes to the customer and the price is fixed and determinable. Generally, title passes when coal is loaded at the central preparation facility and, on occasion, at terminal locations or other customer destinations. The Company's coal contract revenue per ton is fixed and determinable and adjusted for nominal quality adjustments. Some coal contracts also contain positive electric power price-related adjustments, which represent market-driven price adjustments, wherein no additional value is exchanged, in addition to a fixed base price per ton. The Company’s coal contracts generally do not allow for retroactive adjustments to pricing after title to the coal has passed. The Company's coal supply contracts and other sales and operating revenue contracts vary in length from short-term to long-term contracts and do not typically have significant financing components.
The estimated transaction price from each of the Company's contracts is based on the total amount of consideration to which the Company expects to be entitled under the contract. Included in the transaction price for certain coal supply contracts is the impact of variable consideration, including quality price adjustments, handling services, per ton price fluctuations based on certain coal sales price indices and anticipated payments in lieu of shipments. The estimated transaction price for each contract is allocated to the Company's performance obligations based on relative stand-alone selling prices determined at contract inception. The Company has determined that each ton of coal represents a separate and distinct performance obligation. Some of the Company's contracts span multiple years and have annual pricing modifications, based upon market-driven or inflationary adjustments, where no additional value is exchanged. Management believes that the invoice price is the most appropriate rate at which to recognize revenue.
While CONSOL Energy does, from time to time, experience costs of obtaining coal customer contracts with amortization periods greater than one year, those costs are generally immaterial to the Company's net (loss) income. At December 31, 2020, 2019 and 2018, the Company did not have any capitalized costs to obtain customer contracts on its Consolidated Balance Sheets. As of and for the years ended December 31, 2020, 2019 and 2018, the Company has not recognized any amortization of previously existing capitalized costs of obtaining customer contracts. Further, the Company has not recognized any coal revenue in the current period that is not a result of current period performance.
Terminal Revenue
Terminal revenues are attributable to the Company's CONSOL Marine Terminal and include revenues earned from providing receipt and unloading of coal from rail cars, transporting coal from the receipt point to temporary storage or stockpile facilities located at the Terminal, stockpiling, blending, weighing, sampling, redelivery, and loading of coal onto vessels. Revenues for these services are generally earned on a rateable basis, and performance obligations are considered fulfilled as the services are performed.
The CONSOL Marine Terminal does not normally experience material costs of obtaining customer contracts with amortization periods greater than one year. At December 31, 2020, 2019 and 2018, the Company did not have any capitalized costs to obtain customer contracts on its Consolidated Balance Sheets. As of and for the years ended December 31, 2020, 2019 and 2018, the Company has not recognized any amortization of previously existing capitalized costs of obtaining Terminal customer contracts. Further, the Company has not recognized any revenue in the current period that is not a result of current period performance.
Freight Revenue
Some of CONSOL Energy's coal contracts require that the Company sell its coal at locations other than its central preparation plant. The cost to transport the Company's coal to the ultimate sales point is passed through to the Company's customers and CONSOL Energy recognizes the freight revenue equal to the transportation costs when title of the coal passes to the customer.
Contract Balances
Contract assets are recorded separately from trade receivables in the Company's Consolidated Balance Sheets and are reclassified to trade receivables as title passes to the customer and the Company's right to consideration becomes unconditional. Payments for coal shipments are typically due within two to four weeks from the invoice date. CONSOL Energy typically does not have material contract assets that are stated separately from trade receivables since the Company's performance obligations are satisfied as control of the goods or services passes to the customer, thereby granting the Company an unconditional right to receive consideration. Contract liabilities relate to consideration received in advance of the satisfaction of the Company's performance obligations. Contract liabilities are recognized as revenue at the point in time when control of the good passes to the customer, or over time when services are provided.
NOTE 4—MISCELLANEOUS OTHER INCOME:
|
|
For the Years Ended December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
2018
|
|
Contract Buyout
|
|
$
|
44,703
|
|
|
$
|
9,959
|
|
|
$
|
350
|
|
Sale of Certain Mining Rights
|
|
|
39,437
|
|
|
|
—
|
|
|
|
—
|
|
Sale of Certain Coal Lease Contracts
|
|
|
17,847
|
|
|
|
—
|
|
|
|
—
|
|
Royalty Income - Non-Operated Coal
|
|
|
12,032
|
|
|
|
22,208
|
|
|
|
24,722
|
|
Litigation Proceeds
|
|
|
8,624
|
|
|
|
—
|
|
|
|
—
|
|
Rental Income
|
|
|
1,314
|
|
|
|
2,517
|
|
|
|
3,804
|
|
Interest Income
|
|
|
1,230
|
|
|
|
2,937
|
|
|
|
2,146
|
|
Property Easements and Option Income
|
|
|
907
|
|
|
|
1,631
|
|
|
|
5,644
|
|
Purchased Coal Sales
|
|
|
—
|
|
|
|
12,385
|
|
|
|
19,152
|
|
Other
|
|
|
792
|
|
|
|
1,712
|
|
|
|
2,842
|
|
Miscellaneous Other Income
|
|
$
|
126,886
|
|
|
$
|
53,349
|
|
|
$
|
58,660
|
|
Contract buyout income was primarily the result of partial contract buyouts that involved negotiations to reduce coal quantities several customers were otherwise obligated to purchase under contracts in exchange for payment of certain fees to the Company, and do not impact forward contract terms.
The sale of certain mining rights was a transaction in connection with future coal reserves completed in the year ended December 31, 2020.
The sale of certain coal lease contracts was in connection with one of several transactions completed in the year ended December 31, 2020 related to the Company's non-operating surface and mineral assets outside of the Pennsylvania Mining Complex.
Royalty income represents earned revenue related to overriding royalty agreements or coal reserve leases between the Company and third-party operators.
Litigation proceeds were received during the year ended December 31, 2020 as a result of positive developments in legal matters in which the Company is the plaintiff.
Purchased coal sales include earned revenue related to coal purchased externally by the Company to blend and resell in order to fulfill various contracts.
NOTE 5— STOCK, UNIT AND DEBT REPURCHASES:
In December 2017, CONSOL Energy’s Board of Directors approved a program to repurchase, from time to time, the Company's outstanding shares of common stock or its 11.00% Senior Secured Second Lien Notes due 2025, in an aggregate amount of up to $50 million through the period ending June 30, 2019. The program was subsequently amended by CONSOL Energy’s Board of Directors in July 2018 to allow up to $100 million of repurchases of the Company’s common stock or its 11.00% Senior Secured Second Lien Notes due 2025, subject to certain limitations in the Company’s current credit agreement and the TMA. The Company’s Board of Directors also authorized the Company to use up to $25 million of the program to purchase CONSOL Coal Resources LP’s outstanding common units in the open market. In May 2019, CONSOL Energy's Board of Directors approved an expansion of the program in the amount of $75 million, bringing the aggregate limit of the program to $175 million. The May 2019 expansion also increased the aggregate limit of the amount of CCR's common units that could be purchased under the program to $50 million, which was consistent with the Company's credit facility covenants that prohibited the Company from using more than $50 million for the purchase of CCR's outstanding common units. The Company's Board of Directors also approved extending the termination date of the program from June 30, 2019 to June 30, 2020. In July 2019, CONSOL Energy's Board of Directors approved an expansion of the program in the amount of $25 million, bringing the aggregate limit of the Company's stock, unit and debt repurchase program to $200 million. In May 2020, CONSOL Energy's Board of Directors approved an expansion of the program in the amount of $70 million, bringing the aggregate limit of the Company's stock, unit and debt repurchase program to $270 million. The Company's Board of Directors also approved extending the termination date of the program from June 30, 2020 to June 30, 2022. As a result of the Merger, CCR's common units are no longer publicly traded. See Note 2 - Major Transactions for additional information regarding the CCR Merger.
Under the terms of the program, CONSOL Energy is permitted to make repurchases in the open market, in privately negotiated transactions, accelerated repurchase programs or in structured share repurchase programs. CONSOL Energy is also authorized to enter into one or more 10b5-1 plans with respect to any of the repurchases. Any repurchases of common stock or notes are to be funded from available cash on hand or short-term borrowings. The program does not obligate CONSOL Energy to acquire any particular amount of its common stock and notes, and can be modified or suspended at any time at the Company’s discretion. The program is conducted in compliance with applicable legal requirements and within the limits imposed by any credit agreement, receivables purchase agreement, indenture, or the TMA, and is subject to market conditions and other factors.
During the years ended December 31, 2020, 2019 and 2018, the Company repurchased approximately $54,481, $52,648 and $25,724 of its 11.00% Senior Secured Second Lien Notes due 2025, respectively. No common shares were repurchased and no common Partnership units were purchased under this program during the year ended December 31, 2020. During the years ended December 31, 2019 and 2018, the Company repurchased and retired 1,717,497 and 708,245 shares of the Company's common stock at an average price of $19.06 and $36.48 per share, respectively. During the years ended December 31, 2019 and 2018, 26,297 and 167,958 of the Partnership's common units were purchased at an average price of $14.05 and $18.33 per unit, respectively.
NOTE 6—INCOME TAXES:
The components of income tax expense (benefit) were as follows:
|
|
For The Years Ended December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
2018
|
|
Current:
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Federal
|
|
$
|
(5,933
|
)
|
|
$
|
15,905
|
|
|
$
|
20,634
|
|
U.S. State
|
|
|
(2,294
|
)
|
|
|
4,717
|
|
|
|
3,240
|
|
Non-U.S.
|
|
|
514
|
|
|
|
1,336
|
|
|
|
1,436
|
|
|
|
|
(7,713
|
)
|
|
|
21,958
|
|
|
|
25,310
|
|
Deferred:
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Federal
|
|
|
10,936
|
|
|
|
(9,386
|
)
|
|
|
(7,509
|
)
|
U.S. State
|
|
|
749
|
|
|
|
(8,033
|
)
|
|
|
(8,973
|
)
|
|
|
|
11,685
|
|
|
|
(17,419
|
)
|
|
|
(16,482
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Income Tax Expense
|
|
$
|
3,972
|
|
|
$
|
4,539
|
|
|
$
|
8,828
|
|
A reconciliation of income tax expense (benefit) and the amount computed by applying the statutory federal income tax rate of 21% to (loss) income from operations before income tax is:
|
|
For the Years Ended December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
2018
|
|
|
|
Amount
|
|
|
Percent
|
|
|
Amount
|
|
|
Percent
|
|
|
Amount
|
|
|
Percent
|
|
Statutory U.S. federal income tax rate
|
|
$
|
(1,941
|
)
|
|
|
21.0
|
%
|
|
$
|
20,600
|
|
|
|
21.0
|
%
|
|
$
|
39,399
|
|
|
|
21.0
|
%
|
State income taxes, net of federal tax benefit
|
|
|
(1,109
|
)
|
|
|
12.0
|
|
|
|
3,125
|
|
|
|
3.2
|
|
|
|
3,240
|
|
|
|
1.7
|
|
Effect of foreign income taxes
|
|
|
406
|
|
|
|
(4.4
|
)
|
|
|
1,336
|
|
|
|
1.4
|
|
|
|
28
|
|
|
|
—
|
|
Excess tax depletion
|
|
|
—
|
|
|
|
—
|
|
|
|
(13,141
|
)
|
|
|
(13.4
|
)
|
|
|
(20,873
|
)
|
|
|
(11.1
|
)
|
Effect of change in U.S. tax law
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,777
|
|
|
|
1.5
|
|
Compensation
|
|
|
1,310
|
|
|
|
(14.2
|
)
|
|
|
1,799
|
|
|
|
1.8
|
|
|
|
935
|
|
|
|
0.5
|
|
Valuation allowance
|
|
|
1,479
|
|
|
|
(16.0
|
)
|
|
|
1,400
|
|
|
|
1.4
|
|
|
|
(1,379
|
)
|
|
|
(0.7
|
)
|
Tax credits
|
|
|
1,150
|
|
|
|
(12.4
|
)
|
|
|
(2,536
|
)
|
|
|
(2.6
|
)
|
|
|
(980
|
)
|
|
|
(0.5
|
)
|
Non-controlling interest
|
|
|
726
|
|
|
|
(7.9
|
)
|
|
|
(3,687
|
)
|
|
|
(3.8
|
)
|
|
|
(5,420
|
)
|
|
|
(2.9
|
)
|
State rate change and prior period adjustments
|
|
|
1,797
|
|
|
|
(19.4
|
)
|
|
|
(4,565
|
)
|
|
|
(4.6
|
)
|
|
|
(9,448
|
)
|
|
|
(5.0
|
)
|
Other
|
|
|
154
|
|
|
|
(1.6
|
)
|
|
|
208
|
|
|
|
0.2
|
|
|
|
549
|
|
|
|
0.3
|
|
Income Tax Expense / Effective Rate
|
|
$
|
3,972
|
|
|
|
(42.9
|
)%
|
|
$
|
4,539
|
|
|
|
4.6
|
%
|
|
$
|
8,828
|
|
|
|
4.8
|
%
|
Significant components of deferred tax assets and liabilities were as follows:
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Deferred Tax Asset:
|
|
|
|
|
|
|
|
|
Postretirement benefits other than pensions
|
|
$
|
101,673
|
|
|
$
|
110,504
|
|
Pneumoconiosis benefits
|
|
|
60,284
|
|
|
|
52,521
|
|
Asset retirement obligations
|
|
|
56,779
|
|
|
|
60,260
|
|
Workers' compensation
|
|
|
17,493
|
|
|
|
16,750
|
|
Mine subsidence
|
|
|
17,271
|
|
|
|
17,110
|
|
Operating lease liability
|
|
|
11,377
|
|
|
|
14,757
|
|
Salary retirement
|
|
|
9,446
|
|
|
|
14,761
|
|
State bonus, net of Federal
|
|
|
6,918
|
|
|
|
7,042
|
|
Net operating loss
|
|
|
6,134
|
|
|
|
—
|
|
Compensation
|
|
|
5,158
|
|
|
|
3,841
|
|
Long-term disability
|
|
|
2,757
|
|
|
|
3,031
|
|
Financing
|
|
|
2,077
|
|
|
|
16,806
|
|
Foreign tax credits
|
|
|
—
|
|
|
|
1,400
|
|
Other
|
|
|
4,175
|
|
|
|
2,456
|
|
Total Deferred Tax Asset
|
|
|
301,542
|
|
|
|
321,239
|
|
Valuation Allowance
|
|
|
(2,879
|
)
|
|
|
(1,400
|
)
|
Net Deferred Tax Asset
|
|
|
298,663
|
|
|
|
319,839
|
|
|
|
|
|
|
|
|
|
|
Deferred Tax Liability:
|
|
|
|
|
|
|
|
|
Property, plant and equipment
|
|
|
(172,026
|
)
|
|
|
(173,849
|
)
|
Equity Partnerships
|
|
|
(35,570
|
)
|
|
|
(17,028
|
)
|
Right of use assets
|
|
|
(11,338
|
)
|
|
|
(14,757
|
)
|
Advance mining royalties
|
|
|
(10,908
|
)
|
|
|
(10,700
|
)
|
Total Deferred Tax Liability
|
|
|
(229,842
|
)
|
|
|
(216,334
|
)
|
|
|
|
|
|
|
|
|
|
Net Deferred Tax Asset
|
|
$
|
68,821
|
|
|
$
|
103,505
|
|
Certain provisions of the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), which was signed into law by the President of the United States in March 2020, impact the Company and are therefore contemplated in the 2020 income tax provision computations. The CARES Act contained modifications on the limitation of business interest such that the Company anticipates full utilization of all interest expense for federal income tax purposes.
At December 31, 2020, the Company has net operating loss carryforwards of approximately $15,135 and $40,032 for federal and state income tax purposes, respectively, which will be available to offset future taxable income. Approximately $25,180 will not expire and the remaining amount, if unused, will expire between 2030 and 2040.
As required by U.S. GAAP, a valuation allowance is required when it is more likely than not that all or a portion of a deferred tax asset will not be realized. Management must review all available evidence, both positive and negative, in determining the need for a valuation allowance. After considering all available evidence, management has determined that a valuation allowance in the amount of $2,879 is appropriate to establish for certain state tax attributes not anticipated to be utilized before expiration.
The Company utilizes the “more likely than not” standard in recognizing a tax benefit in its financial statements. For the years ended December 31, 2020 and 2019, the Company did not have any unrecognized tax benefits.
The Company is subject to taxation in the United States and its various states, as well as Canada and its various provinces. Under the provisions of the Tax Matters Agreement between the Company and its former parent, certain subsidiaries of the Company are subject to examination for tax years beginning December 31, 2016 through November 28, 2017. Furthermore, the Company is subject to examination for the period November 28, 2017 through December 31, 2020 for federal and state returns.
NOTE 7—CREDIT LOSSES:
Effective January 1, 2020, the Company adopted ASU 2016-013, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments using a modified retrospective approach. This ASU replaces the incurred loss impairment model with an expected credit loss impairment model for financial instruments, including trade and other receivables. The amendment requires entities to consider forward-looking information to estimate expected credit losses, resulting in earlier recognition of losses for receivables that are current or not yet due, which were not considered under previous accounting guidance. The Company recorded a cumulative-effect adjustment to retained earnings in the amount of $3,298, net of $1,109 of income taxes, for expected credit losses on financial assets at the adoption date.
The following table illustrates the impact of ASC 326.
|
|
January 1, 2020
|
|
|
|
As Reported Under ASC 326
|
|
|
Pre-ASC 326 Adoption
|
|
|
Impact of ASC 326 Adoption
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade Receivables
|
|
$
|
3,051
|
|
|
$
|
2,100
|
|
|
$
|
951
|
|
Other Receivables
|
|
|
3,372
|
|
|
|
711
|
|
|
|
2,661
|
|
Other Assets
|
|
|
795
|
|
|
|
—
|
|
|
|
795
|
|
Allowance for Credit Losses on Receivables
|
|
$
|
7,218
|
|
|
$
|
2,811
|
|
|
$
|
4,407
|
|
The Company is exposed to credit losses primarily through sales of products and services. The Company's expected loss allowance methodology for accounts receivable is developed using historical collection experience, current and future economic and market conditions and a review of the current status of customers' trade and other accounts receivables. Due to the short-term nature of such receivables, the estimate of the amount of accounts receivable that may not be collected is based on an aging of the accounts receivable balances and the financial condition of customers. Additionally, specific allowance amounts are established to record the appropriate provision for customers that have a higher probability of default. The Company's monitoring activities include timely account reconciliations, dispute resolution, payment confirmation, consideration of customers' financial condition and macroeconomic conditions.
Balances are written off when determined to be uncollectible. The Company considered the current and expected future economic and market conditions surrounding the novel coronavirus (COVID-19) pandemic and determined that the estimate of credit losses was not significantly impacted.
Management estimates the allowance balance using relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. Historical credit loss experience provides the basis for the estimation of expected credit losses. Adjustments to historical loss information are made for changes to the assessment of anticipated payment, changes in economic conditions, current industry trends in the markets the Company serves, and changes in the financial health of the Company's counterparties.
The following table provides a roll-forward of the allowance for credit losses by portfolio segment that is deducted from the amortized cost basis of accounts receivable to present the net amount expected to be collected.
|
|
Trade Receivables
|
|
|
Other Receivables
|
|
|
Other Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning Balance, January 1, 2020
|
|
$
|
2,100
|
|
|
$
|
711
|
|
|
$
|
—
|
|
Adoption of ASU 2016-13, cumulative-effect adjustment to retained earnings
|
|
|
951
|
|
|
|
2,661
|
|
|
|
795
|
|
Provision for expected credit losses
|
|
|
1,375
|
|
|
|
1,338
|
|
|
|
866
|
|
Ending Balance, December 31, 2020
|
|
$
|
4,426
|
|
|
$
|
4,710
|
|
|
$
|
1,661
|
|
NOTE 8—ASSET RETIREMENT OBLIGATIONS:
CONSOL Energy accrues for mine closing costs, perpetual water care costs, and costs associated with the plugging of degasification wells using the accounting treatment prescribed by the Asset Retirement and Environmental Obligations Topic of the FASB Accounting Standards Codification. CONSOL Energy recognizes capitalized asset retirement obligations by increasing the carrying amount of related long-lived assets.
The reconciliation of changes in the Company's asset retirement obligations at December 31, 2020 and 2019 is as follows:
|
|
As of December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Balance at Beginning of Period
|
|
$
|
271,952
|
|
|
$
|
267,001
|
|
Accretion Expense
|
|
|
17,905
|
|
|
|
20,116
|
|
Payments
|
|
|
(13,529
|
)
|
|
|
(13,030
|
)
|
Revisions in Estimated Cash Flows
|
|
|
(9,248
|
)
|
|
|
(2,135
|
)
|
Other
|
|
|
(18,311
|
)
|
|
|
—
|
|
Balance at End of Period
|
|
$
|
248,769
|
|
|
$
|
271,952
|
|
For the year ended December 31, 2020, Other includes $(18,311) related to the disposition of degasification wells.
NOTE 9—INVENTORIES:
Inventory components consist of the following:
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Coal
|
|
$
|
7,163
|
|
|
$
|
2,484
|
|
Supplies
|
|
|
49,037
|
|
|
|
51,647
|
|
Total Inventories
|
|
$
|
56,200
|
|
|
$
|
54,131
|
|
NOTE 10—PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment consists of the following:
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Plant and Equipment
|
|
$
|
3,134,149
|
|
|
$
|
3,028,514
|
|
Coal Properties and Surface Lands
|
|
|
874,567
|
|
|
|
872,909
|
|
Airshafts
|
|
|
452,976
|
|
|
|
437,003
|
|
Mine Development
|
|
|
354,691
|
|
|
|
342,706
|
|
Advance Mining Royalties
|
|
|
327,313
|
|
|
|
327,048
|
|
Total Property, Plant and Equipment
|
|
|
5,143,696
|
|
|
|
5,008,180
|
|
Less: Accumulated Depreciation, Depletion and Amortization
|
|
|
3,094,634
|
|
|
|
2,916,015
|
|
Total Property, Plant and Equipment - Net
|
|
$
|
2,049,062
|
|
|
$
|
2,092,165
|
|
As of December 31, 2020 and 2019, property, plant and equipment includes gross assets under finance leases of $112,334 and $52,729, respectively. Accumulated amortization for finance leases was $56,761 and $31,373 at December 31, 2020 and 2019, respectively. Amortization expense for assets under finance leases approximated $24,066, $15,691 and $13,148 for the years ended December 31, 2020, 2019 and 2018, respectively, and is included in Depreciation, Depletion and Amortization in the accompanying Consolidated Statements of Income. See Note 14 - Leases for further discussion of finance leases.
NOTE 11—ACCOUNTS RECEIVABLE SECURITIZATION:
CONSOL Energy and certain of its U.S. subsidiaries are parties to a trade accounts receivable securitization facility with financial institutions for the sale on a continuous basis of eligible trade accounts receivable. In March 2020, the securitization facility was amended to, among other things, extend the maturity date from August 30, 2021 to March 27, 2023.
Pursuant to the securitization facility, CONSOL Thermal Holdings LLC sells current and future trade receivables to CONSOL Pennsylvania Coal Company LLC. CONSOL Marine Terminals LLC and CONSOL Pennsylvania Coal Company LLC sell and/or contribute current and future trade receivables (including receivables sold to CONSOL Pennsylvania Coal Company LLC by CONSOL Thermal Holdings LLC) to CONSOL Funding LLC (the “SPV”). The SPV, in turn, pledges its interests in the receivables to PNC Bank, which either makes loans or issues letters of credit on behalf of the SPV. The maximum amount of advances and letters of credit outstanding under the securitization facility may not exceed $100 million.
Loans under the securitization facility accrue interest at a reserve-adjusted LIBOR market index rate equal to the one-month Eurodollar rate. Loans and letters of credit under the securitization facility also accrue a program fee and a letter of credit participation fee, respectively, ranging from 2.00% to 2.50% per annum depending on the total net leverage ratio of CONSOL Energy. In addition, the SPV paid certain structuring fees to PNC Capital Markets LLC and pays other customary fees to the lenders, including a fee on unused commitments equal to 0.60% per annum.
At December 31, 2020, the Company's eligible accounts receivable yielded $31,868 of borrowing capacity. At December 31, 2020, the facility had no outstanding borrowings and $31,218 of letters of credit outstanding, leaving available borrowing capacity of $650. At December 31, 2019, the Company's eligible accounts receivable yielded $41,282 of borrowing capacity. At December 31, 2019, the facility had no outstanding borrowings and $41,211 of letters of credit outstanding, leaving available borrowing capacity of $71. Costs associated with the receivables facility totaled $1,156, $1,441 and $2,593 for the years ended December 31, 2020, 2019 and 2018, respectively. These costs have been recorded as financing fees which are included in Operating and Other Costs in the Consolidated Statements of Income. The Company has not derecognized any receivables due to its continued involvement in the collections efforts.
NOTE 12—OTHER ACCRUED LIABILITIES:
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Subsidence Liability
|
|
$
|
89,554
|
|
|
$
|
90,645
|
|
Accrued Payroll and Benefits
|
|
|
21,179
|
|
|
|
21,102
|
|
Accrued Other Taxes
|
|
|
7,126
|
|
|
|
4,753
|
|
Accrued Equipment Obligations
|
|
|
6,698
|
|
|
|
—
|
|
Accrued Interest
|
|
|
6,236
|
|
|
|
6,281
|
|
Other
|
|
|
23,845
|
|
|
|
16,281
|
|
Current Portion of Long-Term Liabilities:
|
|
|
|
|
|
|
|
|
Postretirement Benefits Other than Pensions
|
|
|
26,073
|
|
|
|
31,833
|
|
Asset Retirement Obligations
|
|
|
20,587
|
|
|
|
21,741
|
|
Operating Lease Liability
|
|
|
20,241
|
|
|
|
19,479
|
|
Pneumoconiosis Benefits
|
|
|
12,203
|
|
|
|
12,331
|
|
Workers' Compensation
|
|
|
9,653
|
|
|
|
11,323
|
|
Total Other Accrued Liabilities
|
|
$
|
243,395
|
|
|
$
|
235,769
|
|
NOTE 13—DEBT:
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Debt:
|
|
|
|
|
|
|
|
|
Term Loan B due in September 2024 (Principal of $270,188 and $272,938 less Unamortized Discount of $938 and $1,187, respectively, 4.65% and 6.30% Weighted Average Interest Rate, respectively)
|
|
$
|
269,250
|
|
|
$
|
271,751
|
|
11.00% Senior Secured Second Lien Notes due November 2025
|
|
|
167,147
|
|
|
|
221,628
|
|
MEDCO Revenue Bonds in Series due September 2025 at 5.75%
|
|
|
102,865
|
|
|
|
102,865
|
|
Term Loan A due in March 2023 (5.50% and 5.55% Weighted Average Interest Rate, respectively)
|
|
|
66,250
|
|
|
|
88,750
|
|
Other Asset-Backed Financing Arrangements
|
|
|
2,813
|
|
|
|
9,289
|
|
Advance Royalty Commitments (13.68% and 10.78% Weighted Average Interest Rate, respectively)
|
|
|
2,185
|
|
|
|
1,895
|
|
Less: Unamortized Debt Issuance Costs
|
|
|
9,921
|
|
|
|
10,323
|
|
|
|
|
600,589
|
|
|
|
685,855
|
|
Less: Amounts Due in One Year*
|
|
|
33,731
|
|
|
|
32,053
|
|
Long-Term Debt
|
|
$
|
566,858
|
|
|
$
|
653,802
|
|
*Excludes current portion of Finance Lease Obligations of $20,115 and $18,219 at December 31, 2020 and 2019, respectively.
Annual undiscounted maturities on long-term debt during the next five years and thereafter are as follows:
Year ended December 31,
|
|
Amount
|
|
2021
|
|
$
|
33,731
|
|
2022
|
|
|
36,348
|
|
2023
|
|
|
12,526
|
|
2024
|
|
|
257,891
|
|
2025
|
|
|
270,184
|
|
Thereafter
|
|
|
768
|
|
Total Long-Term Debt Maturities
|
|
$
|
611,448
|
|
In November 2017, CONSOL Energy entered into a revolving credit facility with commitments up to $300 million (the “Revolving Credit Facility”), a Term Loan A Facility of up to $100 million (the “TLA Facility”) and a Term Loan B Facility of up to $400 million (the “TLB Facility”, and together with the Revolving Credit Facility and the TLA Facility, the “Senior Secured Credit Facilities”). On March 28, 2019, the Company amended the Senior Secured Credit Facilities to increase the borrowing commitment of the Revolving Credit Facility to $400 million and reallocate the principal amounts outstanding under the TLA Facility and TLB Facility. On June 5, 2020, the Company amended the Senior Secured Credit Facilities (the “amendment”) to provide eight quarters of financial covenant relaxation, effect an increase in the rate at which borrowings under the Revolving Credit Facility and the TLA Facility bear interest, and add an anti-cash hoarding provision. Borrowings under the Company's Senior Secured Credit Facilities bear interest at a floating rate which can be, at the Company's option, either (i) LIBOR plus an applicable margin or (ii) an alternate base rate plus an applicable margin. The applicable margin for the Revolving Credit Facility and TLA Facility depends on the total net leverage ratio, whereas the applicable margin for the TLB Facility is fixed. The amendment increased the applicable margin by 50 basis points on both the Revolving Credit Facility and the TLA Facility. The maturity date of the Revolving Credit and TLA Facilities is March 28, 2023. The TLB Facility's maturity date is September 28, 2024. Obligations under the Senior Secured Credit Facilities (Term Loan B and Term Loan A, together with the Revolving Credit Facility, on which there were no outstanding borrowings at December 31, 2020) are guaranteed by (i) all owners of the PAMC held by the Company, (ii) any other members of the Company’s group that own any portion of the collateral securing the Revolving Credit Facility, and (iii) subject to certain customary exceptions and agreed materiality thresholds, all other existing or future direct or indirect wholly-owned restricted subsidiaries of the Company. The obligations are secured by, subject to certain exceptions (including a limitation of pledges of equity interests in certain subsidiaries and certain thresholds with respect to real property), a first-priority lien on (i) the Company’s interest in the PAMC, (ii) the limited partner units of the Partnership held by the Company, (iii) the equity interests in CONSOL Coal Resources GP LLC held by the Company, (iv) the CONSOL Marine Terminal and (v) the 1.5 billion tons of Greenfield Reserves.
The Senior Secured Credit Facilities contain a number of customary affirmative covenants. In addition, the Senior Secured Credit Facilities contain a number of negative covenants, including (subject to certain exceptions) limitations on (among other things): indebtedness, liens, investments, acquisitions, dispositions, restricted payments and prepayments of junior indebtedness. The amendment added additional conditions to be met for the covenants relating to investments in joint ventures, general investments, share repurchases, dividends and repurchases of Second Lien Notes. The additional conditions require no outstanding borrowings and no more than $200 million of outstanding letters of credit on the Revolving Credit Facility. Further restrictions apply to investments in joint ventures, share repurchases and dividends that require the total net leverage ratio shall not be greater than 2.00 to 1.00.
The Revolving Credit Facility and TLA Facility also include covenants relating to (i) a maximum first lien gross leverage ratio, (ii) a maximum total net leverage ratio, and (iii) a minimum fixed charge coverage ratio. The maximum first lien gross leverage ratio is calculated as the ratio of Consolidated First Lien Debt to Consolidated EBITDA. Consolidated EBITDA, as used in the covenant calculation, excludes non-cash compensation expenses, non-recurring transaction expenses, extraordinary gains and losses, gains and losses on discontinued operations, non-cash charges related to legacy employee liabilities and gains and losses on debt extinguishment, and subtracts cash payments related to legacy employee liabilities. The maximum total net leverage ratio is calculated as the ratio of Consolidated Indebtedness, minus Cash on Hand, to Consolidated EBITDA. The minimum fixed charge coverage ratio is calculated as the ratio of Consolidated EBITDA to Consolidated Fixed Charges. Consolidated Fixed Charges, as used in the covenant calculation, include cash interest payments, cash payments for income taxes, scheduled debt repayments, dividends paid and Maintenance Capital Expenditures. The amendment revised the financial covenants applicable to the Revolving Credit Facility and TLA Facility relating to the maximum first lien gross leverage ratio, maximum total net leverage ratio and minimum fixed charge coverage ratio, so that for the fiscal quarters ending June 30, 2020 through March 31, 2021, the maximum first lien gross leverage ratio shall be 2.50 to 1.00, the maximum total net leverage ratio shall be 3.75 to 1.00 and the minimum fixed charge coverage ratio shall be 1.00 to 1.00; for the fiscal quarters ending June 30, 2021 through September 30, 2021, the maximum first lien gross leverage ratio shall be 2.25 to 1.00 and the maximum total net leverage ratio shall be 3.50 to 1.00; for the fiscal quarters ending June 30, 2021 through March 31, 2022, the minimum fixed charge coverage ratio shall be 1.05 to 1.00; for the fiscal quarters ending December 31, 2021 through March 31, 2022, the maximum first lien gross leverage ratio shall be 2.00 to 1.00 and the maximum total net leverage ratio shall be 3.25 to 1.00; and for the fiscal quarters ending on or after June 30, 2022, the maximum first lien gross leverage ratio shall be 1.75 to 1.00, the maximum total net leverage ratio shall be 2.75 to 1.00 and the minimum fixed charge coverage ratio shall be 1.10 to 1.00. The maximum first lien gross leverage ratio was 1.64 to 1.00 at December 31, 2020. The maximum total net leverage ratio was 2.54 to 1.00 at December 31, 2020. The minimum fixed charge coverage ratio was 1.56 to 1.00 at December 31, 2020. The Company was in compliance with all of its financial covenants under the Senior Secured Credit Facilities as of December 31, 2020. The Company is continuing to actively monitor the effects of the ongoing COVID-19 pandemic on its liquidity.
The TLB Facility also includes a financial covenant that requires the Company to repay a certain amount of its borrowings under the TLB Facility within ten business days after the date it files its Form 10-K with the Securities and Exchange Commission if the Company has excess cash flow (as defined in the credit agreement for the Senior Secured Credit Facilities) during the year covered by the applicable Form 10-K. As of December 31, 2020, the required repayment of approximately $5 million has been classified as Current Portion of Long-Term Debt in the Consolidated Balance Sheets. During the year ended December 31, 2019, CONSOL Energy made the required repayment of approximately $110 million based on the amount of the Company's excess cash flow as of December 31, 2018. For fiscal year 2018, such repayment was equal to 75% of the Company’s excess cash flow less any voluntary prepayments of its borrowings under the TLB Facility made by the Company during 2018. For all subsequent fiscal years, the required repayment is equal to a certain percentage of the Company’s excess cash flow for such year, ranging from 0% to 75% depending on the Company’s total net leverage ratio, less the amount of certain voluntary prepayments made by the Company, if any, under the TLB Facility during such fiscal year. Based on the Company's excess cash flow calculation, no repayment was required with respect to the year ended December 31, 2019.
At December 31, 2020, the Revolving Credit Facility had no borrowings outstanding and $125,938 of letters of credit outstanding, leaving $274,062 of unused capacity. At December 31, 2019, the Revolving Credit Facility had no borrowings outstanding and $69,588 of letters of credit outstanding, leaving $330,412 of unused capacity. From time to time, CONSOL Energy is required to post financial assurances to satisfy contractual and other requirements generated in the normal course of business. Some of these assurances are posted to comply with federal, state or other government agencies' statutes and regulations. CONSOL Energy sometimes uses letters of credit to satisfy these requirements and these letters of credit reduce the Company's borrowing facility capacity.
In November 2017, CONSOL Energy issued $300 million in aggregate principal amount of 11.00% Senior Secured Second Lien Notes due 2025 (the “Second Lien Notes”) pursuant to an indenture (the “Indenture”) dated as of November 13, 2017, by and between the Company and UMB Bank, N.A., a national banking association, as trustee and collateral trustee (the “Trustee”). On November 28, 2017, certain subsidiaries of the Company executed a supplement to the Indenture and became party to the Indenture as a guarantor (the “Guarantors”). The Second Lien Notes are secured by second priority liens on substantially all of the assets of the Company and the Guarantors that are pledged and on a first-priority basis as collateral securing the Company’s obligations under the Senior Secured Credit Facilities (described above), subject to certain exceptions under the Indenture. The Indenture contains covenants that will limit the ability of the Company and the Guarantors, to (i) incur, assume or guarantee additional indebtedness or issue preferred stock; (ii) create liens to secure indebtedness; (iii) declare or pay dividends on the Company’s common stock, redeem stock or make other distributions to the Company’s stockholders; (iv) make investments; (v) restrict dividends, loans or other asset transfers from the Company’s restricted subsidiaries; (vi) merge or consolidate, or sell, transfer, lease or dispose of substantially all of the Company’s assets; (vii) sell or otherwise dispose of certain assets, including equity interests in subsidiaries; (viii) enter into transactions with affiliates; and (ix) create unrestricted subsidiaries. These covenants are subject to important exceptions and qualifications. If the Second Lien Notes achieve an investment grade rating from both Standard & Poor’s Ratings Services and Moody’s Investors Service, Inc. and no default under the Indenture exists, many of the foregoing covenants will terminate and cease to apply.
The only non-guarantor subsidiary of the Senior Secured Credit Facilities is CONSOL Funding LLC (the “SPV”) which holds the assets pledged to the Accounts Receivable Securitization Facility. CONSOL Funding LLC had total assets of $123,468 and $135,629, comprising mainly of $122,639 and $134,766 trade receivables, as of December 31, 2020 and 2019, respectively. For the years ended December 31, 2020, 2019 and 2018, net income attributable to the SPV was $2,854, $4,841 and $4,212, respectively, which primarily reflected intercompany fees related to purchasing the receivables, which are eliminated in the Consolidated Financial Statements contained within this Form 10-K. During the years ended December 31, 2020, 2019 and 2018, there were no borrowings or payments under the Accounts Receivable Securitization Facility. See Note 11 - Accounts Receivable Securitization in the Notes to the Consolidated Financial Statements in Item 8 of this Form 10-K for additional information. All other subsidiaries are guarantors of the Senior Secured Credit Facilities.
During the year ended December 31, 2020, the Company repurchased $54,481 of its outstanding 11.00% Senior Secured Second Lien Notes due in 2025. During the year ended December 31, 2019, the Company made a required repayment of approximately $110 million on the TLB Facility (discussed above) and amended the Senior Secured Credit Facilities. The Company also repurchased $52,648 of its outstanding 11.00% Senior Secured Second Lien Notes due in 2025 during the year ended December 31, 2019. As part of these transactions, $21,352 was included in Gain on Debt Extinguishment on the Consolidated Statements of Income for the year ended December 31, 2020, and $24,455 was included in Loss on Debt Extinguishment on the Consolidated Statements of Income for the year ended December 31, 2019.
During the year ended December 31, 2019, the Company entered into asset-backed financing arrangements related to certain equipment. The equipment, which had an approximate value of $2,813 and $9,289 at December 31, 2020 and 2019, respectively, fully collateralizes the loans. As of December 31, 2020, the total outstanding loan of $2,813 matures in September 2024. The loans had a weighted average interest rate of 3.61% and 5.07% at December 31, 2020 and 2019, respectively.
During the year ended December 31, 2019, the Company entered into interest rate swaps, which effectively converted $150,000 of the TLB Facility's floating interest rate to a fixed interest rate for the twelve months ending December 31, 2020 and 2021, and $50,000 of the TLB Facility's floating interest rate to a fixed interest rate for the twelve months ending December 31, 2022. The interest rate swaps qualify for cash flow hedge accounting treatment and as such, the change in the fair value of the interest rate swaps is recorded on the Company's Consolidated Balance Sheets as an asset or liability. The effective portion of the gains or losses is reported as a component of accumulated other comprehensive loss and the ineffective portion is reported in earnings. At December 31, 2020 and 2019, the interest rate swap contracts were reflected in the Consolidated Balance Sheets at their fair value of $2,834 and $154, respectively, which is recorded in Other Accrued Liabilities and Other Liabilities. The fair value of the interest rate swaps reflected an unrealized loss of $2,004 (net of $674 tax) and $117 (net of $37 tax) at December 31, 2020 and 2019, respectively. The unrealized loss is included on the Consolidated Statements of Stockholders' Equity as part of accumulated other comprehensive loss, as well as on the Consolidated Statements of Comprehensive Income as unrealized loss on cash flow hedges. Some of the Company's interest rate swaps reached their effective date in the year ended December 31, 2020. As such, a loss of $1,587 was recognized in interest expense in the Consolidated Statements of Income for the year ended December 31, 2020. No gains or losses were recognized in interest expense in the Consolidated Statements of Income in the year ended December 31, 2019. During 2021, notional amounts of $150,000 will become effective. Based on the fair value of the Company's cash flow hedges at December 31, 2020, the Company expects expense of approximately $2,067 to be reclassified into earnings in the next 12 months.
NOTE 14—LEASES:
On January 1, 2019, the Company adopted ASC Topic 842 using the transition option, “Comparatives Under 840 Option,” established by ASU 2018-11, Leases (Topic 842), Targeted Improvements. As allowed under this guidance, the Company elected not to recast the comparative periods presented when transitioning to ASC 842. As most of the Company's leases do not provide an implicit rate, CONSOL Energy has taken a portfolio approach of applying its incremental borrowing rate based on the information available at the adoption date to calculate the present value of lease payments over the lease term. CONSOL Energy has elected the package of practical expedients permitted under the transition guidance within the standard, which allows the Company (1) to not reassess whether any expired or existing contracts are or contain leases, (2) to not reassess the lease classification for any expired or existing leases, and (3) to not reassess initial direct costs for any existing leases. CONSOL Energy has also elected the practical expedient to not evaluate land easements that existed or expired before the Company’s adoption of Topic 842 and the practical expedient to not separate lease and non-lease components; that is, to account for lease and non-lease components in a contract as a single lease component for all classes of underlying assets. Further, the Company made an accounting policy election to keep leases with an initial term of twelve months or less off the balance sheet. CONSOL Energy will recognize those lease payments in the Consolidated Statements of Income over the lease term. For the years ended December 31, 2020 and 2019, these short-term lease expenses were not material to the Company's financial statements.
Based on the Company's lease portfolio, the standard had a material impact on the Company’s Consolidated Balance Sheet but did not have a significant impact on the Company’s consolidated net earnings and cash flows. The most significant impact was the recognition of Right of Use (“ROU”) assets and lease liabilities for operating leases, while the accounting for finance leases remained substantially unchanged. The Company's bank covenants were not affected by this update. The Company recorded operating lease ROU assets and operating lease liabilities of approximately $92 million as of January 1, 2019, primarily related to mining equipment, based on the present value of the future lease payments on the date of adoption.
The Company determines if an arrangement is an operating or finance lease at inception of the applicable lease. For leases where the Company is the lessee, ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent an obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. As most of the Company’s leases do not provide an implicit interest rate, the Company uses its incremental borrowing rate based on the information available on the commencement date in determining the present value of lease payments. The ROU asset also consists of any prepaid lease payments, lease incentives received, and costs which will be incurred in exiting a lease. The lease terms used to calculate the ROU asset and related lease liability include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for operating leases is recognized on a straight-line basis over the lease term as an operating expense while the expense for finance leases is recognized as depreciation expense and interest expense using the interest method of recognition.
The Company has operating leases for mining and other equipment used in operations and office space. Many leases include one or more options to renew, some of which include options to extend, the leases, and some leases include options to terminate or buy out the leases within a set period of time. In certain of the Company’s lease agreements, the rental payments are adjusted periodically to reflect actual charges incurred for inflation and/or changes in other indexes. Many of the Company's operating lease payments for mining equipment contain a variable component which is calculated based upon production metrics such as feet of advance or raw tonnage mined. While most of the Company's leases contain clauses regarding the general condition of the equipment upon lease termination, they do not contain residual value guarantees.
For the years ended December 31, 2020 and 2019, the components of operating lease expense were as follows:
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Fixed operating lease expense
|
|
$
|
24,359
|
|
|
$
|
25,875
|
|
Variable operating lease expense
|
|
|
3,835
|
|
|
|
11,445
|
|
Total operating lease expense
|
|
$
|
28,194
|
|
|
$
|
37,320
|
|
Supplemental cash flow information related to the Company's operating leases for the years ended December 31, 2020 and 2019 was as follows:
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Cash paid for amounts included in the measurement of operating lease liabilities
|
|
$
|
24,293
|
|
|
$
|
25,675
|
|
ROU assets obtained in exchange for operating lease obligations
|
|
|
—
|
|
|
|
—
|
|
The following table presents the lease balances within the Consolidated Balance Sheets, weighted average lease term, and the weighted average discount rate related to the Company's operating leases at December 31, 2020 and 2019:
|
|
|
December 31,
|
|
Lease Assets and Liabilities
|
Classification
|
|
2020
|
|
|
2019
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
Operating Lease ROU Assets
|
Other Assets
|
|
$
|
53,436
|
|
|
$
|
72,632
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
Current:
|
|
|
|
|
|
|
|
|
|
Operating Lease Liabilities
|
Other Accrued Liabilities
|
|
$
|
20,241
|
|
|
$
|
19,479
|
|
Long-Term:
|
|
|
|
|
|
|
|
|
|
Operating Lease Liabilities
|
Operating Lease Liabilities
|
|
$
|
35,655
|
|
|
$
|
55,413
|
|
Total Operating Lease Liabilities
|
|
$
|
55,896
|
|
|
$
|
74,892
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average remaining lease term (in years)
|
|
|
4.65
|
|
|
|
5.02
|
|
Weighted average discount rate
|
|
|
6.84
|
%
|
|
|
6.79
|
%
|
The Company also enters into finance leases for mining equipment and automobiles. Assets arising from finance leases are included in property, plant and equipment-net and the liabilities are included in current portion of long-term debt and long-term debt in the accompanying Consolidated Balance Sheets.
For the years ended December 31, 2020 and 2019, the components of finance lease expense were as follows:
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Amortization of right of use assets
|
|
$
|
24,066
|
|
|
$
|
15,691
|
|
Interest expense
|
|
|
2,375
|
|
|
|
1,878
|
|
Total finance lease expense
|
|
$
|
26,441
|
|
|
$
|
17,569
|
|
The following table presents the weighted average lease term and weighted average discount rate related to the Company's finance leases as of December 31, 2020 and 2019:
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Weighted average remaining lease term (in years)
|
|
|
2.68
|
|
|
|
1.69
|
|
Weighted average discount rate
|
|
|
5.79
|
%
|
|
|
5.20
|
%
|
The following table presents the future maturities of the Company's operating and finance lease liabilities, together with the present value of the net minimum lease payments, at December 31, 2020:
|
|
Finance
|
|
|
Operating
|
|
|
|
Leases
|
|
|
Leases
|
|
2021
|
|
$
|
22,557
|
|
|
$
|
23,358
|
|
2022
|
|
|
18,074
|
|
|
|
13,450
|
|
2023
|
|
|
16,623
|
|
|
|
6,395
|
|
2024
|
|
|
3,595
|
|
|
|
6,115
|
|
2025
|
|
|
320
|
|
|
|
4,619
|
|
Thereafter
|
|
|
—
|
|
|
|
11,339
|
|
Total minimum lease payments
|
|
|
61,169
|
|
|
|
65,276
|
|
Less amount representing interest
|
|
|
4,851
|
|
|
|
9,380
|
|
Present value of minimum lease payments
|
|
$
|
56,318
|
|
|
$
|
55,896
|
|
As of December 31, 2020, the Company had no additional significant operating or finance leases that had not yet commenced.
NOTE 15—PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS:
Pension
CONSOL Energy has non-contributory defined benefit retirement plans. The benefits for these plans are based primarily on years of service and employees' pay. CONSOL Energy's qualified pension plan (the “Pension Plan”) allows for lump-sum distributions of benefits earned up until December 31, 2005, at the employees' election. Pursuant to the Separation and Distribution Agreement that provided for the separation and distribution (the “SDA”) and related ancillary agreements, the sponsorship of the qualified pension plan was transferred to the Company.
According to the Defined Benefit Plans Topic of the FASB Accounting Standards Codification, if the lump sum distributions made during a plan year, which for CONSOL Energy is January 1 to December 31, exceed the total of the projected service cost and interest cost for the plan year, settlement accounting is required. Lump sum payments did not exceed this threshold during the years ended December 31, 2020, 2019 and 2018.
Other Postretirement Benefit Plan
Certain subsidiaries of CONSOL Energy provide medical and prescription drug benefits to retired employees covered by either the Coal Industry Retiree Health Benefit Act of 1992 (the Coal Act) or the National Bituminous Coal Wage Agreement of 2011.
The reconciliation of changes in the benefit obligation, plan assets and funded status of these plans at December 31, 2020 and 2019 is as follows:
|
|
Pension Benefits
|
|
|
Other Postretirement Benefits
|
|
|
|
at December 31, 2020
|
|
|
at December 31, 2019
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
Change in benefit obligation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit obligation at beginning of period
|
|
$
|
720,098
|
|
|
$
|
644,142
|
|
|
$
|
464,329
|
|
|
$
|
473,591
|
|
Service cost
|
|
|
1,183
|
|
|
|
3,950
|
|
|
|
—
|
|
|
|
—
|
|
Interest cost
|
|
|
20,176
|
|
|
|
25,101
|
|
|
|
12,795
|
|
|
|
18,320
|
|
Actuarial loss (gain)
|
|
|
84,663
|
|
|
|
95,078
|
|
|
|
(38,455
|
)
|
|
|
4,761
|
|
Benefits and other payments
|
|
|
(47,252
|
)
|
|
|
(48,173
|
)
|
|
|
(24,959
|
)
|
|
|
(32,343
|
)
|
Benefit obligation at end of period
|
|
$
|
778,868
|
|
|
$
|
720,098
|
|
|
$
|
413,710
|
|
|
$
|
464,329
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in plan assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets at beginning of period
|
|
$
|
668,481
|
|
|
$
|
578,347
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Actual return on plan assets
|
|
|
118,403
|
|
|
|
136,976
|
|
|
|
—
|
|
|
|
—
|
|
Company contributions
|
|
|
1,346
|
|
|
|
1,331
|
|
|
|
24,959
|
|
|
|
32,343
|
|
Benefits and other payments
|
|
|
(47,252
|
)
|
|
|
(48,173
|
)
|
|
|
(24,959
|
)
|
|
|
(32,343
|
)
|
Fair value of plan assets at end of period
|
|
$
|
740,978
|
|
|
$
|
668,481
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funded status:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
$
|
(2,531
|
)
|
|
$
|
(1,687
|
)
|
|
$
|
(26,073
|
)
|
|
$
|
(31,833
|
)
|
Noncurrent liabilities
|
|
|
(35,359
|
)
|
|
|
(49,930
|
)
|
|
|
(387,637
|
)
|
|
|
(432,496
|
)
|
Net obligation recognized
|
|
$
|
(37,890
|
)
|
|
$
|
(51,617
|
)
|
|
$
|
(413,710
|
)
|
|
$
|
(464,329
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts recognized in accumulated other comprehensive loss consist of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net actuarial loss
|
|
$
|
256,988
|
|
|
$
|
255,830
|
|
|
$
|
132,203
|
|
|
$
|
179,937
|
|
Prior service credit
|
|
|
—
|
|
|
|
—
|
|
|
|
(18,544
|
)
|
|
|
(20,949
|
)
|
Net amount recognized (before tax effect)
|
|
$
|
256,988
|
|
|
$
|
255,830
|
|
|
$
|
113,659
|
|
|
$
|
158,988
|
|
The components of net periodic benefit (credit) cost are as follows:
|
|
Pension Benefits
|
|
|
Other Postretirement Benefits
|
|
|
|
For the Years Ended December 31,
|
|
|
For the Years Ended December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
2018
|
|
|
2020
|
|
|
2019
|
|
|
2018
|
|
Components of net periodic benefit (credit) cost:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost
|
|
$
|
1,183
|
|
|
$
|
3,950
|
|
|
$
|
1,150
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Interest cost
|
|
|
20,176
|
|
|
|
25,101
|
|
|
|
23,505
|
|
|
|
12,795
|
|
|
|
18,320
|
|
|
|
18,706
|
|
Expected return on plan assets
|
|
|
(41,821
|
)
|
|
|
(40,457
|
)
|
|
|
(40,370
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Amortization of prior service credits
|
|
|
—
|
|
|
|
(367
|
)
|
|
|
(502
|
)
|
|
|
(2,405
|
)
|
|
|
(2,405
|
)
|
|
|
(2,405
|
)
|
Recognized net actuarial loss
|
|
|
6,922
|
|
|
|
5,958
|
|
|
|
8,715
|
|
|
|
9,277
|
|
|
|
9,262
|
|
|
|
16,205
|
|
Net periodic benefit (credit) cost
|
|
$
|
(13,540
|
)
|
|
$
|
(5,815
|
)
|
|
$
|
(7,502
|
)
|
|
$
|
19,667
|
|
|
$
|
25,177
|
|
|
$
|
32,506
|
|
CONSOL Energy utilizes a corridor approach to amortize actuarial gains and losses that have been accumulated under the Pension Plan. Cumulative gains and losses that are in excess of 10% of the greater of either the projected benefit obligation (PBO) or the market-related value of plan assets are amortized over the expected remaining future lifetime of all plan participants for the Pension Plan.
CONSOL Energy also utilizes a corridor approach to amortize actuarial gains and losses that have been accumulated under the OPEB Plan. Cumulative gains and losses that are in excess of 10% of the greater of either the accumulated postretirement benefit obligation (APBO) or the market-related value of plan assets are amortized over the average future remaining lifetime of the current inactive population for the OPEB Plan.
The following table provides information related to pension plans with an accumulated benefit obligation in excess of plan assets:
|
|
As of December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Projected benefit obligation
|
|
$
|
778,868
|
|
|
$
|
720,098
|
|
Accumulated benefit obligation
|
|
$
|
778,618
|
|
|
$
|
719,985
|
|
Fair value of plan assets
|
|
$
|
740,978
|
|
|
$
|
668,481
|
|
Assumptions:
The weighted-average assumptions used to determine benefit obligations are as follows:
|
|
Pension Obligations
|
|
|
Other Postretirement Obligations
|
|
|
|
at December 31,
|
|
|
at December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
Discount rate
|
|
|
2.36
|
%
|
|
|
3.28
|
%
|
|
|
2.39
|
%
|
|
|
3.27
|
%
|
Rate of compensation increase
|
|
|
3.76
|
%
|
|
|
3.68
|
%
|
|
|
—
|
|
|
|
—
|
|
The discount rates are determined using a Company-specific yield curve model (above-mean) developed with the assistance of an external actuary. The Company-specific yield curve models (above-mean) use a subset of the expanded bond universe to determine the Company-specific discount rate. Bonds used in the yield curve are rated AA by Moody's or Standard & Poor's as of the measurement date. The yield curve models parallel the plans' projected cash flows, and the underlying cash flows of the bonds included in the models exceed the cash flows needed to satisfy the Company's plans.
The weighted-average assumptions used to determine net periodic benefit costs are as follows:
|
|
Pension Benefits
|
|
|
Other Postretirement Benefits
|
|
|
|
For the Years Ended
|
|
|
For the Years Ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
2018
|
|
|
2020
|
|
|
2019
|
|
|
2018
|
|
Discount rate
|
|
|
3.35
|
%
|
|
|
4.37
|
%
|
|
|
3.69
|
%
|
|
|
3.27
|
%
|
|
|
4.34
|
%
|
|
|
3.65
|
%
|
Expected long-term return on plan assets
|
|
|
6.48
|
%
|
|
|
6.90
|
%
|
|
|
6.90
|
%
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Rate of compensation increase
|
|
|
3.68
|
%
|
|
|
3.73
|
%
|
|
|
3.73
|
%
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
The long-term rate of return is the sum of the portion of total assets in each asset class held multiplied by the expected return for that class, adjusted for expected expenses to be paid from the assets. The expected return for each class is determined using the plan asset allocation at the measurement date and a distribution of compound average returns over a twenty year time horizon. The model uses asset class returns, variances and correlation assumptions to produce the expected return for each portfolio. The return assumptions used forward-looking gross returns influenced by the current Treasury yield curve. These returns recognize current bond yields, corporate bond spreads and equity risk premiums based on current market conditions.
The assumed health care cost trend rates are as follows:
|
|
At December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Health care cost trend rate for next year
|
|
|
5.43
|
%
|
|
|
5.65
|
%
|
Rate to which the cost trend is assumed to decline (ultimate trend rate)
|
|
|
4.50
|
%
|
|
|
4.50
|
%
|
Year that the rate reaches ultimate trend rate
|
|
2038
|
|
|
2038
|
|
Plan Assets:
The Company’s overall investment strategy is to meet current and future benefit payment needs through diversification across asset classes, fund strategies and fund managers to achieve an optimal balance between risk and return and between income and growth of assets through capital appreciation. Consistent with the objectives of the pension trust (the “Trust”) and in consideration of the Trust’s current funded status and the current level of market interest rates, the Retirement Board, as appointed by the CONSOL Energy Board of Directors (the “Retirement Board”) has approved an asset allocation strategy that will change over time in response to future improvements in the Trust’s funded status and/or changes in market interest rates. Such changes in asset allocation strategy are intended to allocate additional assets to the fixed income asset class should the Trust’s funded status improve. In this framework, the current target allocation for plan assets is 21% U.S. equity securities, 13% non-U.S. equity securities, 6% global equity securities and 60% fixed income. Both the equity and fixed income portfolios are comprised of both active and passive investment strategies. The Trust is primarily invested in Mercer Common Collective Trusts. Equity securities consist of investments in large and mid/small cap companies; non-U.S. equities are derived from both developed and emerging markets. Fixed income securities consist primarily of U.S. long duration fixed income corporate and U.S. Treasury instruments. The average quality of the fixed income portfolio must be rated at least “investment grade” by nationally recognized rating agencies. Within the fixed income asset class, investments are invested primarily across various strategies such that the overall profile strongly correlates with the interest rate sensitivity of the Trust’s liabilities in order to reduce the volatility resulting from the risk of changes in interest rates and the impact of such changes on the Trust’s overall financial status. Derivatives, interest rate swaps, options and futures are permitted investments for the purpose of reducing risk and to extend the duration of the overall fixed income portfolio; however, they may not be used for speculative purposes. All or a portion of the assets may be invested in mutual funds or other commingled vehicles so long as the pooled investment funds have an adequate asset base relative to their asset class; are invested in a diversified manner; and have management and/or oversight by an Investment Advisor registered with the SEC. The Retirement Board reviews the investment program on an ongoing basis including asset performance, current trends and developments in capital markets, changes in Trust liabilities and ongoing appropriateness of the overall investment policy.
The fair values of plan assets at December 31, 2020 and 2019 by asset category are as follows:
|
|
Fair Value Measurements at December 31, 2020
|
|
|
Fair Value Measurements at December 31, 2019
|
|
|
|
|
|
|
|
Quoted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quoted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prices in
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prices in
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Active
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Active
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Markets for
|
|
|
Significant
|
|
|
Significant
|
|
|
|
|
|
|
Markets for
|
|
|
Significant
|
|
|
Significant
|
|
|
|
|
|
|
|
Identical
|
|
|
Observable
|
|
|
Unobservable
|
|
|
|
|
|
|
Identical
|
|
|
Observable
|
|
|
Unobservable
|
|
|
|
|
|
|
|
Assets
|
|
|
Inputs
|
|
|
Inputs
|
|
|
|
|
|
|
Assets
|
|
|
Inputs
|
|
|
Inputs
|
|
|
|
Total
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
|
Total
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
Asset Category
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash/Accrued Income
|
|
$
|
100
|
|
|
$
|
100
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
97
|
|
|
$
|
97
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Mercer Common Collective Trusts (a)
|
|
|
740,878
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
668,384
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Total
|
|
$
|
740,978
|
|
|
$
|
100
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
668,481
|
|
|
$
|
97
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
(a)
|
Certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy but are included in the total.
|
There are no investments in CONSOL Energy stock held by these plans at December 31, 2020 or 2019.
There are no assets in the other postretirement benefit plan at December 31, 2020 or 2019.
Cash Flows:
If necessary, CONSOL Energy intends to contribute to the pension trust using prudent funding methods. However, the Company does not expect to contribute to the pension plan trust in 2021. Pension benefit payments are primarily funded from the Trust. CONSOL Energy expects to pay benefits of $2,531 from the non-qualified pension plan in 2021. CONSOL Energy does not expect to contribute to the other postretirement benefit plan in 2021 and intends to pay benefit claims as they become due.
The following benefit payments, reflecting expected future service, are expected to be paid:
|
|
|
|
|
|
Other
|
|
|
|
Pension
|
|
|
Postretirement
|
|
|
|
Benefits
|
|
|
Benefits
|
|
2021
|
|
$
|
44,391
|
|
|
$
|
26,073
|
|
2022
|
|
$
|
43,639
|
|
|
$
|
25,250
|
|
2023
|
|
$
|
43,112
|
|
|
$
|
24,455
|
|
2024
|
|
$
|
42,755
|
|
|
$
|
23,581
|
|
2025
|
|
$
|
41,291
|
|
|
$
|
23,249
|
|
Year 2026-2030
|
|
$
|
196,850
|
|
|
$
|
110,456
|
|
NOTE 16—COAL WORKERS’ PNEUMOCONIOSIS AND WORKERS’ COMPENSATION:
Coal Workers' Pneumoconiosis
Under the Federal Coal Mine Health and Safety Act of 1969, as amended, CONSOL Energy is responsible for medical and disability benefits to employees and their dependents resulting from occurrences of coal workers' pneumoconiosis (CWP) disease. CONSOL Energy is also responsible under various state statutes for pneumoconiosis benefits. CONSOL Energy primarily provides for these claims through a self-insurance program. The calculation of the actuarial present value of the estimated pneumoconiosis obligation is based on an annual actuarial study by independent actuaries and uses assumptions regarding disability incidence, medical costs, indemnity levels, mortality, death benefits, dependents and interest rates which are derived from actual company experience and outside sources. Actuarial gains or losses can result from discount rate changes, differences in incident rates and severity of claims filed as compared to original assumptions. Recent legislative changes have not been favorable for CWP. Based upon the law change that contained a 15-year presumption and permitted that chronic obstructive pulmonary disease (COPD) is a symptom of coal workers’ pneumoconiosis, there has been a surge in entitled claims for CONSOL, both from new applicants and previously denied applicants over the past years.
Former miners and their family members asserting claims for pneumoconiosis benefits have generally been more successful asserting such claims in recent years as a result of the presumption within the PPACA that a coal miner with fifteen or more years of underground coal mining experience (or the equivalent) who develops a respiratory condition and meets the requirements for total disability under the Federal Act is presumed to be disabled due to coal dust exposure, thereby shifting the burden of proof from the employee to the employer/insurer to establish that this disability is not due to coal dust.
Workers' Compensation
CONSOL Energy must also compensate individuals who sustain employment-related physical injuries or some types of occupational diseases and, on some occasions, for costs of their rehabilitation. Workers' compensation programs will also compensate survivors of workers who suffer employment-related deaths. Workers' compensation laws are administered by state agencies, and each state has its own set of rules and regulations regarding compensation owed to an employee that is injured in the course of employment. CONSOL Energy primarily provides for these claims through a self-insurance program. CONSOL Energy recognizes an actuarial present value of the estimated workers' compensation obligation calculated by independent actuaries. The calculation is based on claims filed and an estimate of claims incurred but not yet reported as well as various assumptions, including discount rate, future healthcare trend rate, benefit duration and recurrence of injuries. Actuarial gains or losses associated with workers' compensation have resulted from discount rate changes and differences in claims experience and incident rates as compared to prior assumptions.
The reconciliation of changes in the benefit obligation and funded status of these plans at December 31, 2020 and 2019 is as follows:
|
|
CWP
|
|
|
Workers' Compensation
|
|
|
|
at December 31,
|
|
|
at December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
Change in benefit obligation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit obligation at beginning of period
|
|
$
|
214,473
|
|
|
$
|
177,188
|
|
|
$
|
71,480
|
|
|
$
|
70,986
|
|
State administrative fees and insurance bond premiums
|
|
|
—
|
|
|
|
—
|
|
|
|
1,996
|
|
|
|
2,157
|
|
Service cost
|
|
|
4,603
|
|
|
|
3,791
|
|
|
|
6,276
|
|
|
|
5,685
|
|
Interest cost
|
|
|
6,206
|
|
|
|
7,001
|
|
|
|
1,844
|
|
|
|
2,585
|
|
Actuarial loss
|
|
|
29,510
|
|
|
|
39,827
|
|
|
|
1,897
|
|
|
|
1,536
|
|
Benefits paid
|
|
|
(12,869
|
)
|
|
|
(13,334
|
)
|
|
|
(10,052
|
)
|
|
|
(11,469
|
)
|
Benefit obligation at end of period
|
|
$
|
241,923
|
|
|
$
|
214,473
|
|
|
$
|
73,441
|
|
|
$
|
71,480
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funded status:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
602
|
|
|
$
|
1,037
|
|
Current liabilities
|
|
|
(12,203
|
)
|
|
|
(12,331
|
)
|
|
|
(9,653
|
)
|
|
|
(11,323
|
)
|
Noncurrent liabilities
|
|
|
(229,720
|
)
|
|
|
(202,142
|
)
|
|
|
(64,390
|
)
|
|
|
(61,194
|
)
|
Net obligation recognized
|
|
$
|
(241,923
|
)
|
|
$
|
(214,473
|
)
|
|
$
|
(73,441
|
)
|
|
$
|
(71,480
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts recognized in accumulated other comprehensive loss consist of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net actuarial loss (gain)
|
|
$
|
71,259
|
|
|
$
|
47,352
|
|
|
$
|
(8,866
|
)
|
|
$
|
(11,250
|
)
|
Net amount recognized (before tax effect)
|
|
$
|
71,259
|
|
|
$
|
47,352
|
|
|
$
|
(8,866
|
)
|
|
$
|
(11,250
|
)
|
The components of net periodic benefit cost are as follows:
|
|
CWP
|
|
|
Workers’ Compensation
|
|
|
|
For the Years Ended
|
|
|
For the Years Ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
2018
|
|
|
2020
|
|
|
2019
|
|
|
2018
|
|
Service cost
|
|
$
|
4,603
|
|
|
$
|
3,791
|
|
|
$
|
6,650
|
|
|
$
|
6,276
|
|
|
$
|
5,685
|
|
|
$
|
6,230
|
|
Interest cost
|
|
|
6,206
|
|
|
|
7,001
|
|
|
|
5,245
|
|
|
|
1,844
|
|
|
|
2,585
|
|
|
|
2,283
|
|
Recognized net actuarial loss (gain)
|
|
|
5,604
|
|
|
|
1,016
|
|
|
|
(853
|
)
|
|
|
(488
|
)
|
|
|
(774
|
)
|
|
|
(79
|
)
|
State administrative fees and insurance bond premiums
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,996
|
|
|
|
2,157
|
|
|
|
2,671
|
|
Net periodic benefit cost
|
|
$
|
16,413
|
|
|
$
|
11,808
|
|
|
$
|
11,042
|
|
|
$
|
9,628
|
|
|
$
|
9,653
|
|
|
$
|
11,105
|
|
CONSOL Energy utilizes a corridor approach to amortize actuarial gains and losses that have been accumulated under the Workers’ Compensation and CWP plans. Cumulative gains and losses that are in excess of 10% of the greater of either the estimated liability or the market-related value of plan assets are amortized over the expected average remaining future service of the current active membership of the Workers’ Compensation and CWP plans.
Assumptions:
The weighted-average discount rates used to determine benefit obligations and net periodic benefit costs are as follows:
|
|
CWP
|
|
|
Workers' Compensation
|
|
|
|
For the Years Ended
|
|
|
For the Years Ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
2018
|
|
|
2020
|
|
|
2019
|
|
|
2018
|
|
Benefit obligations
|
|
|
2.53
|
%
|
|
|
3.41
|
%
|
|
|
4.42
|
%
|
|
|
2.35
|
%
|
|
|
3.25
|
%
|
|
|
4.26
|
%
|
Net periodic benefit costs
|
|
|
3.41
|
%
|
|
|
4.42
|
%
|
|
|
3.75
|
%
|
|
|
3.25
|
%
|
|
|
4.26
|
%
|
|
|
3.57
|
%
|
Discount rates are determined using a Company-specific yield curve model (above-mean) developed with the assistance of an external actuary. The Company-specific yield curve models (above-mean) use a subset of the expanded bond universe to determine the Company-specific discount rate. Bonds used in the yield curve are rated AA by Moody's or Standard & Poor's as of the measurement date. The yield curve models parallel the plans' projected cash flows, and the underlying cash flows of the bonds included in the models exceed the cash flows needed to satisfy the Company's plans.
Cash Flows:
CONSOL Energy does not intend to make contributions to the CWP or Workers' Compensation plans in 2021, but it intends to pay benefit claims as they become due.
The following benefit payments, which reflect expected future claims as appropriate, are expected to be paid:
|
|
|
|
|
|
Workers' Compensation
|
|
|
|
CWP
|
|
|
Total
|
|
|
Actuarial
|
|
|
Other
|
|
|
|
Benefits
|
|
|
Benefits
|
|
|
Benefits
|
|
|
Benefits
|
|
2021
|
|
$
|
12,203
|
|
|
$
|
10,580
|
|
|
$
|
9,051
|
|
|
$
|
1,529
|
|
2022
|
|
$
|
11,923
|
|
|
$
|
10,392
|
|
|
$
|
8,824
|
|
|
$
|
1,568
|
|
2023
|
|
$
|
11,762
|
|
|
$
|
10,212
|
|
|
$
|
8,605
|
|
|
$
|
1,607
|
|
2024
|
|
$
|
11,439
|
|
|
$
|
10,151
|
|
|
$
|
8,504
|
|
|
$
|
1,647
|
|
2025
|
|
$
|
11,304
|
|
|
$
|
10,015
|
|
|
$
|
8,327
|
|
|
$
|
1,688
|
|
Year 2026-2030
|
|
$
|
57,386
|
|
|
$
|
50,445
|
|
|
$
|
41,350
|
|
|
$
|
9,095
|
|
NOTE 17—OTHER EMPLOYEE BENEFIT PLANS:
UMWA Benefit Trusts
The Coal Act created two multi-employer benefit plans: (1) the United Mine Workers of America Combined Benefit Fund (the “Combined Fund”) into which the former UMWA Benefit Trusts were merged, and (2) the United Mine Workers of America 1992 Benefit Plan (the “1992 Benefit Plan”). CONSOL Energy accounts for required contributions to these multi-employer trusts as expense when incurred.
The Combined Fund provides medical and death benefits for all beneficiaries of the former UMWA Benefit Trusts who were actually receiving benefits as of July 20, 1992. The 1992 Benefit Plan provides medical and death benefits to orphan UMWA-represented members eligible for retirement on February 1, 1993 and for those who retired between July 20, 1992 and September 30, 1994. The Coal Act provides for the assignment of beneficiaries to former employers and the allocation of unassigned beneficiaries (referred to as orphans) to companies using a formula set forth in the Coal Act. The Coal Act requires that responsibility for funding the benefits to be paid to beneficiaries be assigned to their former signatory employers or related companies. This cost is recognized when contributions are assessed. CONSOL Energy's total contributions under the Coal Act were $5,383, $6,042 and $6,829 for the years ended December 31, 2020, 2019 and 2018, respectively. Based on available information at December 31, 2020, CONSOL Energy's gross obligation for the Combined Fund and 1992 Benefit Plan is estimated to be approximately $56,039.
Pursuant to the provisions of the Tax Relief and Healthcare Act of 2006 (the “2006 Act”) and the 1992 Benefit Plan, CONSOL Energy is required to provide security in an amount based on the annual cost of providing health care benefits for all individuals receiving benefits from the 1992 Benefit Plan who are attributable to CONSOL Energy, plus all individuals receiving benefits from an individual employer plan maintained by CONSOL Energy who are entitled to receive such benefits. In accordance with the terms of the 2006 Act and the 1992 Benefit Plan, CONSOL Energy must secure its obligations by posting letters of credit, which were $17,421, $18,669 and $19,860 at December 31, 2020, 2019 and 2018, respectively. The 2020, 2019 and 2018 security amounts were based on the annual cost of providing health care benefits and included a reduction in the number of eligible employees.
Investment Plan
CONSOL Energy has an investment plan available to most non-represented employees. Eligible employees of CONSOL Pennsylvania Coal Company began participation in the CONSOL Pennsylvania Coal Company Investment Plan (the “CPCC 401(k) Plan”) on September 1, 2017, the CPCC 401(k) Plan's inception date. Remaining eligible employees of CONSOL Energy began participation in the CPCC 401(k) Plan on November 1, 2017. Prior to participating in the CPCC 401(k) Plan, eligible employees participated in the Company's former parent's 401(k) plan. Effective December 31, 2019, the CPCC 401(k) Plan was amended to change its sponsor from CONSOL Pennsylvania Coal Company to CONSOL Energy Inc., and the plan's name was changed from the CONSOL Pennsylvania Coal Company Investment Plan to the CONSOL Energy Inc. Investment Plan (the “CEIX 401(k) Plan”). The CEIX 401(k) Plan and the Company's former parent's 401(k) plan both include company matching of 6% of eligible compensation contributed by eligible CONSOL Energy employees. The Company may also make discretionary contributions to the CEIX 401(k) Plan ranging from 1% to 6% of eligible compensation for eligible employees (as defined by the CEIX 401(k) Plan). Discretionary contributions of $10,445 were accrued for at December 31, 2018, and were paid into employees' accounts in the first quarter of 2019. There were no such discretionary contributions accrued for or made by the Company in the years ended December 31, 2020 and 2019. Total payments and costs were $8,114, $10,737 and $20,655 for the years ended December 31, 2020, 2019 and 2018, respectively.
Long-Term Disability
CONSOL Energy has a Long-Term Disability Plan available to all eligible full-time salaried employees. The benefits for this plan are based on a percentage of monthly earnings, offset by all other income benefits available to the disabled.
|
|
For the Years Ended
|
|
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
2018
|
|
Net periodic benefit costs
|
|
$
|
1,700
|
|
|
$
|
1,483
|
|
|
$
|
2,088
|
|
Discount rate assumption used to determine net periodic benefit costs
|
|
|
2.86
|
%
|
|
|
3.97
|
%
|
|
|
3.22
|
%
|
Liabilities incurred under the Long-Term Disability Plan are included in Other Accrued Liabilities and Deferred Credits and Other Liabilities–Other in the Consolidated Balance Sheets and amounted to a combined total of $11,374 and $12,749 at December 31, 2020 and 2019, respectively.
NOTE 18—STOCK-BASED COMPENSATION:
CONSOL Energy adopted the CONSOL Energy Inc. Omnibus Performance Incentive Plan (the “Performance Incentive Plan”) on November 22, 2017. The Performance Incentive Plan provides for grants of stock-based awards to employees, including any officer or employee-director of the Company, who is not a member of the Compensation Committee. These awards are intended to compensate the recipients thereof based on the performance of the Company's stock and the recipients' continued services during the vesting period, as well as align the recipients' long-term interests with those of the Company's shareholders. CONSOL Energy is responsible for the cost of awards granted under the Performance Incentive Plan, and all determinations with respect to awards to be made under the Performance Incentive Plan will be made by the board of directors or a committee as delegated by the board of directors.
The Performance Incentive Plan limits the number of units that may be delivered pursuant to vested awards to 2,600,000 shares, subject to proportionate adjustment in the event of stock splits, stock dividends, recapitalizations, and other similar transactions or events. Shares subject to awards that are canceled, forfeited, withheld to satisfy exercise prices or tax withholding obligations or otherwise terminate without delivery will be available for delivery pursuant to other awards.
For only those shares expected to vest, CONSOL Energy recognizes stock-based compensation costs on a straight-line basis over the requisite service period of the award as specified in the award agreement, which is generally the vesting term. The vesting of all awards will accelerate in the event of death and disability and may accelerate upon a change in control of CONSOL Energy. Some awards may accelerate based on retirement age. The Company accounts for forfeitures of stock-based compensation as they occur. The total stock-based compensation expense recognized during the years ended December 31, 2020, 2019 and 2018 was $11,161, $11,351, and $8,392, respectively, and was included in Selling, General and Administrative Costs on the Consolidated Statements of Income. This includes expense specifically related to the Performance Incentive Plan. The related deferred tax benefit totaled $2,871, $2,856 and $1,911 for the years ended December 31, 2020, 2019 and 2018, respectively.
As of December 31, 2020, CONSOL Energy has $6,537 of unrecognized compensation cost related to all nonvested stock-based compensation awards, which is expected to be recognized over a weighted-average period of 1.63 years. When restricted stock and performance share unit awards become vested, the issuances are made from CONSOL Energy's common stock shares.
Restricted Stock Units
CONSOL Energy grants certain employees and non-employee directors restricted stock units, which entitle the holder to shares of common stock as the award vests. Compensation expense is recognized on a straight-line basis over the requisite service period of the award. The total fair value of restricted stock units vested during the years ended December 31, 2020, 2019 and 2018 was $6,913, $4,407 and $3,734, respectively. The following table represents the nonvested restricted stock units and their corresponding fair value (based upon the closing share price) at the date of grant:
|
|
Number of
|
|
|
Weighted Average
|
|
|
|
Shares
|
|
|
Grant Date Fair Value
|
|
Nonvested at December 31, 2019
|
|
|
453,336
|
|
|
$
|
34.60
|
|
Granted
|
|
|
1,257,152
|
|
|
$
|
7.81
|
|
Vested
|
|
|
(172,429
|
)
|
|
$
|
31.86
|
|
Forfeited
|
|
|
(49,098
|
)
|
|
$
|
12.42
|
|
Nonvested at December 31, 2020
|
|
|
1,488,961
|
|
|
$
|
13.07
|
|
Performance Share Units
CONSOL Energy grants certain employees performance share unit awards, which entitle the holder to shares of common stock subject to the achievement of certain market and performance goals. Compensation expense is recognized over the service period of awards and adjusted for the probability of achievement of performance-based goals. The total fair value of performance share units vested during the years ended December 31, 2020, 2019 and 2018 was $1,042, $6,323 and $4,910, respectively. The following table represents the nonvested performance share units and their corresponding fair value (based upon the closing share price and/or Monte Carlo simulation) on the date of grant:
|
|
Number of
|
|
|
Weighted Average
|
|
|
|
Shares
|
|
|
Grant Date Fair Value
|
|
Nonvested at December 31, 2019
|
|
|
193,265
|
|
|
$
|
33.55
|
|
Granted
|
|
|
229,440
|
|
|
$
|
8.60
|
|
Vested
|
|
|
(33,665
|
)
|
|
$
|
30.95
|
|
Forfeited
|
|
|
(52,195
|
)
|
|
$
|
38.66
|
|
Nonvested at December 31, 2020
|
|
|
336,845
|
|
|
$
|
17.81
|
|
NOTE 19—SUPPLEMENTAL CASH FLOW INFORMATION:
The following are non-cash transactions that impact the investing and financing activities of CONSOL Energy.
CONSOL Energy entered into non-cash finance lease arrangements of $42,200, $4,424 and $1,301 for the years ended December 31, 2020, 2019 and 2018, respectively. Additionally, during the year ended December 31, 2018, the Company terminated two operating leases on its longwall shields, and refinanced these as finance leases in the amount of $45,979.
As of December 31, 2020, 2019 and 2018, CONSOL Energy purchased goods and services related to capital projects in the amount of $1,671, $3,785 and $2,311, respectively, which are included in accounts payable, current portion of long-term debt and other accrued liabilities on the Consolidated Balance Sheets.
The following table shows cash paid for interest and income taxes for the periods indicated.
|
|
For the Years Ended December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
2018
|
|
Cash Paid For:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest (net of amounts capitalized)
|
|
$
|
62,997
|
|
|
$
|
73,574
|
|
|
$
|
92,926
|
|
Income taxes
|
|
$
|
1,476
|
|
|
$
|
40,139
|
|
|
$
|
12,834
|
|
NOTE 20—CONCENTRATION OF CREDIT RISK AND MAJOR CUSTOMERS:
CONSOL Energy primarily markets its thermal coal principally to electric power producers in the eastern United States. Revenues generated from electric power producers in the eastern United States were 65%, 65% and 71% for the years ended December 31, 2020, 2019 and 2018, respectively. The Company has contractual relationships with certain coal exporters who distribute coal to international markets. For the years ended December 31, 2020, 2019 and 2018, approximately 35%, 35% and 29%, respectively, of the Company's coal revenues were derived from these exporters. The Company uses the end usage point as the basis for attributing tons to individual countries. Because title to the Company's export shipments typically transfers to brokerage customers at a point that does not necessarily reflect the end usage point, the Company attributes export tons to the country with the end usage point, if known. No individual country outside of the United States was attributed greater than 10% of total tons sold during the years ended December 31, 2020, 2019 and 2018.
During the years ended December 31, 2020, 2019 and 2018, three customers each comprised over 10% of the Company's total coal sales revenue, aggregating approximately 55%, 70% and 57%, respectively, of the Company's sales. Additionally, three of the Company's customers each had outstanding balances in excess of 10% of the total trade receivable balance as of December 31, 2020, and two of the Company's customers each had outstanding balances in excess of 10% of the total trade receivable balance as of December 31, 2019.
Concentration of credit risk is summarized below:
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Thermal coal utilities
|
|
$
|
32,343
|
|
|
$
|
58,557
|
|
Coal exporters and distributors
|
|
|
82,948
|
|
|
|
73,416
|
|
Steel and coke producers
|
|
|
5,302
|
|
|
|
—
|
|
Other
|
|
|
2,122
|
|
|
|
1,815
|
|
Total Trade Receivables
|
|
|
122,715
|
|
|
|
133,788
|
|
Less: Allowance for credit losses
|
|
|
4,426
|
|
|
|
2,100
|
|
Total Trade Receivables, net
|
|
$
|
118,289
|
|
|
$
|
131,688
|
|
NOTE 21—FAIR VALUE OF FINANCIAL INSTRUMENTS:
CONSOL Energy determines the fair value of assets and liabilities based on the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants. The fair values are based on assumptions that market participants would use when pricing an asset or liability, including assumptions about risk and the risks inherent in valuation techniques and the inputs to valuations. The fair value hierarchy is based on whether the inputs to valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources (including LIBOR-based discount rates), while unobservable inputs reflect the Company's own assumptions of what market participants would use.
The fair value hierarchy includes three levels of inputs that may be used to measure fair value as described below.
Level One - Quoted prices for identical instruments in active markets.
Level Two - The fair value of the assets and liabilities included in Level 2 are based on standard industry income approach models that use significant observable inputs, including LIBOR-based discount rates.
Level Three - Unobservable inputs significant to the fair value measurement supported by little or no market activity. The significant unobservable inputs used in the fair value measurement of the Company's third-party guarantees are the credit risk of the third-party and the third-party surety bond markets. A significant increase or decrease in these values, in isolation, would have a directionally similar effect resulting in a higher or lower fair value measurement of the Company's Level 3 guarantees.
In those cases when the inputs used to measure fair value meet the definition of more than one level of the fair value hierarchy, the lowest level input that is significant to the fair value measurement in its totality determines the applicable level in the fair value hierarchy.
The financial instruments measured at fair value on a recurring basis are summarized below:
|
|
Fair Value Measurements at
|
|
|
Fair Value Measurements at
|
|
|
|
December 31, 2020
|
|
|
December 31, 2019
|
|
Description
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Lease Guarantees
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(168
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(482
|
)
|
Derivatives (1)
|
|
$
|
—
|
|
|
$
|
(2,834
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(154
|
)
|
|
$
|
—
|
|
(1) Interest rate swaps are valued based on observable market swap rates and are classified within Level 2 of the fair value hierarchy.
The following methods and assumptions were used to estimate the fair value for which the fair value option was not elected:
Long-term debt: The fair value of long-term debt is measured using unadjusted quoted market prices or estimated using discounted cash flow analyses. The discounted cash flow analyses are based on current market rates for instruments with similar cash flows.
The carrying amounts and fair values of financial instruments for which the fair value option was not elected are as follows:
|
|
December 31, 2020
|
|
|
December 31, 2019
|
|
|
|
Carrying
|
|
|
Fair
|
|
|
Carrying
|
|
|
Fair
|
|
|
|
Amount
|
|
|
Value
|
|
|
Amount
|
|
|
Value
|
|
Long-Term Debt
|
|
$
|
610,510
|
|
|
$
|
517,862
|
|
|
$
|
696,178
|
|
|
$
|
642,018
|
|
Certain of the Company’s debt is actively traded on a public market and, as a result, constitutes Level 1 fair value measurements. The portion of the Company’s debt obligations that is not actively traded is valued through reference to the applicable underlying benchmark rate and, as a result, constitutes Level 2 fair value measurements.
NOTE 22—COMMITMENTS AND CONTINGENT LIABILITIES:
The Company is subject to various lawsuits and claims with respect to such matters as personal injury, wrongful death, damage to property, exposure to hazardous substances, governmental regulations including environmental remediation, employment and contract disputes and other claims and actions arising out of the normal course of business. The Company accrues the estimated loss for these lawsuits and claims when the loss is probable and reasonably estimable. The Company's estimated accruals relating to these pending claims, individually and in the aggregate, are immaterial to the financial position, results of operations or cash flows of the Company as of December 31, 2020. It is possible that the aggregate loss in the future with respect to these lawsuits and claims could ultimately be material to the Company's financial position, results of operations or cash flows; however, such amounts cannot be reasonably estimated. The amount claimed against the Company as of December 31, 2020 is disclosed below when an amount is expressly stated in the lawsuit or claim, which is not often the case.
Fitzwater Litigation: Three nonunion retired coal miners have sued Fola Coal Company LLC, Consolidation Coal Company (“CCC”) and CONSOL of Kentucky Inc. (“COK”) (as well as the Company's former parent) in West Virginia Federal Court alleging ERISA violations in the termination of retiree health care benefits. The Plaintiffs contend they relied to their detriment on oral statements and promises of “lifetime health benefits” allegedly made by various members of management during Plaintiffs’ employment and that they were allegedly denied access to Summary Plan Documents that clearly reserved the right to modify or terminate the Retiree Health and Welfare Plan subject to Plaintiffs' claims. Pursuant to Plaintiffs' amended complaint filed on April 24, 2017, Plaintiffs request that retiree health benefits be reinstated and seek to represent a class of all nonunion retirees who were associated with AMVEST and COK areas of operation. On October 15, 2019, Plaintiffs' supplemental motion for class certification was denied on all counts. On July 15, 2020, Plaintiffs filed an interlocutory appeal with the Fourth Circuit Court of Appeals on the Order denying class certification. The Fourth Circuit denied Plaintiffs' appeal on August 14, 2020. Trial is currently scheduled to take place in the first quarter of 2021. The Company believes it has a meritorious defense and intends to vigorously defend this suit.
Casey Litigation: A class action lawsuit was filed on August 23, 2017 on behalf of two nonunion retired coal miners against CCC, COK, CONSOL Buchanan Mining Co., LLC and Kurt Salvatori in West Virginia Federal Court alleging ERISA violations in the termination of retiree health care benefits. Filed by the same lawyers who filed the Fitzwater litigation, and raising nearly identical claims, the Plaintiffs contend they relied to their detriment on oral promises of “lifetime health benefits” allegedly made by various members of management during Plaintiffs’ employment and that they were not provided with copies of Summary Plan Documents clearly reserving to the Company the right to modify or terminate the Retiree Health and Welfare Plan. Plaintiffs request that retiree health benefits be reinstated for them and their dependents and seek to represent a class of all nonunion retirees of any subsidiary of the Company's former parent that operated or employed individuals in McDowell or Mercer Counties, West Virginia, or Buchanan or Tazewell Counties, Virginia whose retiree welfare benefits were terminated. On December 1, 2017, the trial court judge in Fitzwater signed an order to consolidate Fitzwater with Casey. The Casey complaint was amended on March 1, 2018 to add new plaintiffs, add defendant CONSOL Pennsylvania Coal Company, LLC and eliminate defendant CONSOL Buchanan Mining Co., LLC in an attempt to expand the class of retirees. On October 15, 2019, Plaintiffs' supplemental motion for class certification was denied on all counts. On July 15, 2020, Plaintiffs filed an interlocutory appeal with the Fourth Circuit Court of Appeals on the Order denying class certification. The Fourth Circuit denied Plaintiffs' appeal on August 14, 2020. Trial is currently scheduled to take place in the first quarter of 2021. The Company believes it has a meritorious defense and intends to vigorously defend this suit.
United Mine Workers of America 1992 Benefit Plan Litigation: In 2013, Murray Energy and its subsidiaries (“Murray”) entered into a stock purchase agreement (the “Murray sale agreement”) with the Company's former parent pursuant to which Murray acquired the stock of CCC and certain subsidiaries and certain other assets and liabilities. At the time of sale, the liabilities included certain retiree medical liabilities under the Coal Act and certain federal black lung liabilities under the Black Lung Benefits Act (“BLBA”). Based upon information available, the Company estimates that the annual servicing costs of these liabilities are approximately $10 million to $20 million per year for the next ten years. The annual servicing cost would decline each year since the beneficiaries of the Coal Act consist principally of miners who retired prior to 1994. Murray filed for Chapter 11 bankruptcy in October 2019. As part of the ongoing bankruptcy proceedings, Murray entered into a settlement with the 1992 Plan to transfer retirees in the Murray Energy Section 9711 Plan into the 1992 Plan, which the bankruptcy court approved on April 30, 2020. The 1992 Plan recently filed an action in the United States District Court for the District of Columbia asking the court to make a determination whether the Company's former parent or the Company has any continuing retiree medical liabilities under the Coal Act. The Murray sale agreement includes indemnification by Murray with respect to the Coal Act and BLBA liabilities. In addition, the Company had agreed to indemnify its former parent relative to certain pre-separation liabilities. As of September 16, 2020, the Company has entered into a settlement agreement with Murray, and has withdrawn its claims in bankruptcy. See Note 2 - Major Transactions for a discussion of this settlement agreement. The Company will continue to vigorously defend any claims that attempt to transfer any of such liabilities directly or indirectly to the Company, including raising all applicable defenses against the 1992 Plan’s suit and those of any other party.
Other Matters: Various Company subsidiaries are defendants in certain other legal proceedings arising out of the conduct of the Coal Business prior to the separation and distribution, and the Company is also a defendant in other legal proceedings following the separation and distribution. In the opinion of management, based upon an investigation of these matters and discussion with legal counsel, the ultimate outcome of such other legal proceedings, individually and in the aggregate, is not expected to have a material adverse effect on the Company’s financial position, results of operations or liquidity.
As part of the separation and distribution, the Company assumed various financial obligations relating to the Coal Business and agreed to reimburse its former parent for certain financial guarantees relating to the Coal Business that its former parent retained following the separation and distribution. Employee-related financial guarantees have primarily been provided to support the 1992 Plan and federal black lung and various state workers’ compensation self-insurance programs. Environmental financial guarantees have primarily been provided to support various performance bonds related to reclamation and other environmental issues. Other financial guarantees have been extended to support sales contracts, insurance policies, legal matters, full and timely payments of mining equipment leases, and various other items necessary in the normal course of business.
The following is a summary, as of December 31, 2020, of the financial guarantees, unconditional purchase obligations and letters of credit to certain third parties. These amounts represent the maximum potential of total future payments that the Company could be required to make under these instruments, or under the SDA to the extent retained by the Company's former parent on behalf of the Coal Business. Certain letters of credit included in the table below were issued against other commitments included in this table. These amounts have not been reduced for potential recoveries under recourse or collateralization provisions. Generally, recoveries under reclamation bonds would be limited to the extent of the work performed at the time of the default. No amounts related to these financial guarantees and letters of credit are recorded as liabilities in the financial statements. The Company's management believes that these guarantees will expire without being funded, and therefore, the commitments will not have a material adverse effect on the Company's financial condition.
|
|
Amount of Commitment Expiration Per Period
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts
|
|
|
Less Than
|
|
|
|
|
|
|
|
|
|
|
Beyond
|
|
|
|
Committed
|
|
|
1 Year
|
|
|
1-3 Years
|
|
|
3-5 Years
|
|
|
5 Years
|
|
Letters of Credit:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee-Related
|
|
$
|
75,776
|
|
|
$
|
54,134
|
|
|
$
|
21,642
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Environmental
|
|
|
398
|
|
|
|
—
|
|
|
|
398
|
|
|
|
—
|
|
|
|
—
|
|
Other
|
|
|
80,982
|
|
|
|
33,282
|
|
|
|
47,700
|
|
|
|
—
|
|
|
|
—
|
|
Total Letters of Credit
|
|
$
|
157,156
|
|
|
$
|
87,416
|
|
|
$
|
69,740
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Surety Bonds:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee-Related
|
|
$
|
83,524
|
|
|
$
|
83,524
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Environmental
|
|
|
563,705
|
|
|
|
559,155
|
|
|
|
4,550
|
|
|
|
—
|
|
|
|
—
|
|
Other
|
|
|
4,379
|
|
|
|
4,379
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Total Surety Bonds
|
|
$
|
651,608
|
|
|
$
|
647,058
|
|
|
$
|
4,550
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Guarantees:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
$
|
8,673
|
|
|
$
|
6,538
|
|
|
$
|
1,554
|
|
|
$
|
398
|
|
|
$
|
183
|
|
Included in the above table are commitments and guarantees entered into in conjunction with the sale of Consolidation Coal Company and certain of its subsidiaries, which contain all five of its longwall coal mines in West Virginia and its river operations, to a third party. As part of the separation and distribution, the Company's former parent agreed to indemnify the Company and the Company agreed to indemnify its former parent in each case with respect to guarantees of certain equipment lease obligations that were assumed by the third party. In the event that the third party would default on the obligations defined in the agreements, the Company would be required to perform under the guarantees. As of December 31, 2020, the Company has not been required to perform under these guarantees. The equipment lease obligations are collateralized by the underlying assets. The current maximum estimated exposure under these guarantees as of December 31, 2020 and 2019 is believed to be approximately $8,000 and $20,000, respectively. At December 31, 2020 and 2019, the fair value of these guarantees was $168 and $482, respectively, and is included in Other Accrued Liabilities on the Consolidated Balance Sheets. The fair value of certain of the guarantees was determined using the Company’s risk-adjusted interest rate. Significant increases or decreases in the risk-adjusted interest rates may result in a significantly higher or lower fair value measurement. No other amounts related to financial guarantees and letters of credit are recorded as liabilities in the financial statements. Significant judgment is required in determining the fair value of these guarantees. The guarantees of the leases are classified within Level 3 of the fair value hierarchy.
The Company regularly evaluates the likelihood of default for all guarantees based on an expected loss analysis and records the fair value, if any, of its guarantees as an obligation in the consolidated financial statements.
NOTE 23—SEGMENT INFORMATION:
The Company reports segment information based on the “management” approach. The management approach designates the internal reporting used by management to make decisions on and assess performance of the Company’s reportable segments. CONSOL Energy consists of two reportable segments. The PAMC includes the Bailey Mine, the Enlow Fork Mine, the Harvey Mine and a centralized preparation plant. The PAMC segment’s principal activities include the mining, preparation and marketing of thermal coal. The CONSOL Marine Terminal provides coal export terminal services through the Port of Baltimore. Selling, general and administrative costs are allocated to the Company’s segments based on a percentage of resources utilized, a percentage of total revenue and a percentage of total projected capital expenditures. CONSOL Energy’s Other segment includes revenue and expenses from various corporate and diversified business activities that are not allocated to the PAMC or the CONSOL Marine Terminal segments. The diversified business activities include the development of the Itmann Mine, the Greenfield Reserves, closed and idle mine activities, other income, gain on asset sales related to non-core assets, and gain/loss on debt extinguishment. Additionally, interest expense and income taxes, as well as various other non-operated activities, none of which are individually significant to the Company, are also reflected in CONSOL Energy's Other segment and are not allocated to the PAMC and CONSOL Marine Terminal segments.
The Company evaluates the performance of its segments utilizing Adjusted EBITDA and various sales and production metrics. Adjusted EBITDA is not a measure of financial performance in accordance with GAAP, and items excluded from Adjusted EBITDA are significant in understanding and assessing the Company's financial condition. Therefore, Adjusted EBITDA should not be considered in isolation, nor as an alternative to net income, income from operations, or cash flows from operations, or as a measure of the Company's profitability, liquidity, or performance under GAAP. The Company uses Adjusted EBITDA to measure the operating performance of its segments and to allocate resources to its segments. Investors should be aware that the Company's presentation of Adjusted EBITDA may not be comparable to similarly titled measures used by other companies.
The CONSOL Marine Terminal has been disclosed in CONSOL Energy’s Other segment during prior years due to its relative contribution to the Company’s Adjusted EBITDA. The recent COVID-19 pandemic has negatively impacted the Company’s 2020 financial performance and has influenced its outlook with respect to the importance of coal exports. Effective December 31, 2020, the Company disclosed the CONSOL Marine Terminal in a separate reportable segment due to its increased contribution to Adjusted EBITDA as well as the increased reliance on coal exports serviced by the CONSOL Marine Terminal in accordance with how the Company's chief operating decision maker receives and reviews financial information. The Company has revised the consolidated segment information for all periods presented in this Annual Report on Form 10-K to reflect this reclassification.
Industry segment results for the year ended December 31, 2020 are:
|
|
|
|
|
|
CONSOL
|
|
|
|
|
|
|
Adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
Marine
|
|
|
|
|
|
|
and
|
|
|
|
|
|
|
|
|
PAMC
|
|
|
Terminal
|
|
|
Other
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
Coal Revenue
|
|
$
|
771,363
|
|
|
$
|
—
|
|
|
$
|
1,299
|
|
|
$
|
—
|
|
|
$
|
772,662
|
|
(A)
|
Terminal Revenue
|
|
|
—
|
|
|
|
66,810
|
|
|
|
—
|
|
|
|
—
|
|
|
|
66,810
|
|
|
Freight Revenue
|
|
|
39,990
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
39,990
|
|
|
Total Revenue and Freight
|
|
$
|
811,353
|
|
|
$
|
66,810
|
|
|
$
|
1,299
|
|
|
$
|
—
|
|
|
$
|
879,462
|
|
|
Adjusted EBITDA
|
|
$
|
228,211
|
|
|
$
|
44,356
|
|
|
$
|
(11,044
|
)
|
|
$
|
—
|
|
|
$
|
261,523
|
|
|
Segment Assets
|
|
$
|
1,864,514
|
|
|
$
|
108,711
|
|
|
$
|
550,141
|
|
|
$
|
—
|
|
|
$
|
2,523,366
|
|
|
Depreciation, Depletion and Amortization
|
|
$
|
198,272
|
|
|
$
|
5,095
|
|
|
$
|
7,393
|
|
|
$
|
—
|
|
|
$
|
210,760
|
|
|
Capital Expenditures
|
|
$
|
70,195
|
|
|
$
|
1,455
|
|
|
$
|
14,354
|
|
|
$
|
—
|
|
|
$
|
86,004
|
|
|
Industry segment results for the year ended December 31, 2019 are:
|
|
|
|
|
|
CONSOL
|
|
|
|
|
|
|
Adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
Marine
|
|
|
|
|
|
|
and
|
|
|
|
|
|
|
|
|
PAMC
|
|
|
Terminal
|
|
|
Other
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
Coal Revenue
|
|
$
|
1,288,529
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,288,529
|
|
(A)
|
Terminal Revenue
|
|
|
—
|
|
|
|
67,363
|
|
|
|
—
|
|
|
|
—
|
|
|
|
67,363
|
|
|
Freight Revenue
|
|
|
19,667
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
19,667
|
|
|
Total Revenue and Freight
|
|
$
|
1,308,196
|
|
|
$
|
67,363
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,375,559
|
|
|
Adjusted EBITDA
|
|
$
|
394,354
|
|
|
$
|
44,491
|
|
|
$
|
(32,909
|
)
|
|
$
|
—
|
|
|
$
|
405,936
|
|
|
Segment Assets
|
|
$
|
1,981,721
|
|
|
$
|
87,558
|
|
|
$
|
624,523
|
|
|
$
|
—
|
|
|
$
|
2,693,802
|
|
|
Depreciation, Depletion and Amortization
|
|
$
|
185,616
|
|
|
$
|
4,078
|
|
|
$
|
17,403
|
|
|
$
|
—
|
|
|
$
|
207,097
|
|
|
Capital Expenditures
|
|
$
|
148,709
|
|
|
$
|
6,675
|
|
|
$
|
14,355
|
|
|
$
|
—
|
|
|
$
|
169,739
|
|
|
Industry segment results for the year ended December 31, 2018 are:
|
|
|
|
|
|
CONSOL
|
|
|
|
|
|
|
Adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
Marine
|
|
|
|
|
|
|
and
|
|
|
|
|
|
|
|
|
PAMC
|
|
|
Terminal
|
|
|
Other
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
Coal Revenue
|
|
$
|
1,364,292
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,364,292
|
|
(A)
|
Terminal Revenue
|
|
|
—
|
|
|
|
64,926
|
|
|
|
—
|
|
|
|
—
|
|
|
|
64,926
|
|
|
Freight Revenue
|
|
|
43,572
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
43,572
|
|
|
Total Revenue and Freight
|
|
$
|
1,407,864
|
|
|
$
|
64,926
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,472,790
|
|
|
Adjusted EBITDA
|
|
$
|
479,969
|
|
|
$
|
40,901
|
|
|
$
|
(36,134
|
)
|
|
$
|
—
|
|
|
$
|
484,736
|
|
|
Segment Assets
|
|
$
|
1,894,209
|
|
|
$
|
84,929
|
|
|
$
|
781,589
|
|
|
$
|
—
|
|
|
$
|
2,760,727
|
|
|
Depreciation, Depletion and Amortization
|
|
$
|
178,969
|
|
|
$
|
3,782
|
|
|
$
|
18,513
|
|
|
$
|
—
|
|
|
$
|
201,264
|
|
|
Capital Expenditures
|
|
$
|
124,570
|
|
|
$
|
5,475
|
|
|
$
|
15,704
|
|
|
$
|
—
|
|
|
$
|
145,749
|
|
|
(A) For the years ended December 31, 2020, 2019 and 2018, the PAMC segment had revenues from the following customers, each comprising over 10% of the Company's total sales:
|
|
For the Years Ended December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
2018
|
|
Customer A
|
|
$
|
134,354
|
|
|
$
|
242,703
|
|
|
$
|
283,703
|
|
Customer B
|
|
$
|
173,461
|
|
|
$
|
446,403
|
|
|
$
|
274,755
|
|
Customer C
|
|
$
|
116,536
|
|
|
$
|
215,099
|
|
|
$
|
214,152
|
|
Reconciliation of Segment Information to Consolidated Amounts:
Revenue and Other Income:
|
|
For the Years Ended December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
2018
|
|
Total Segment Revenue and Freight from External Customers
|
|
$
|
879,462
|
|
|
$
|
1,375,559
|
|
|
$
|
1,472,790
|
|
Other Income not Allocated to Segments (Note 4)
|
|
|
126,886
|
|
|
|
53,349
|
|
|
|
58,660
|
|
Gain on Sale of Assets
|
|
|
15,295
|
|
|
|
1,995
|
|
|
|
565
|
|
Total Consolidated Revenue and Other Income
|
|
$
|
1,021,643
|
|
|
$
|
1,430,903
|
|
|
$
|
1,532,015
|
|
Adjusted EBITDA:
|
|
For the Years Ended December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
2018
|
|
(Loss) Earnings Before Income Tax
|
|
$
|
(9,242
|
)
|
|
$
|
98,097
|
|
|
$
|
187,613
|
|
Interest Expense, net
|
|
|
61,186
|
|
|
|
66,464
|
|
|
|
83,848
|
|
(Gain) Loss on Debt Extinguishment
|
|
|
(21,352
|
)
|
|
|
24,455
|
|
|
|
3,922
|
|
Interest Income
|
|
|
(1,230
|
)
|
|
|
(2,937
|
)
|
|
|
(2,146
|
)
|
Depreciation, Depletion and Amortization
|
|
|
210,760
|
|
|
|
207,097
|
|
|
|
201,264
|
|
CCR Merger Fees
|
|
|
9,822
|
|
|
|
—
|
|
|
|
—
|
|
Stock/Unit-Based Compensation
|
|
|
11,579
|
|
|
|
12,760
|
|
|
|
10,235
|
|
Adjusted EBITDA
|
|
$
|
261,523
|
|
|
$
|
405,936
|
|
|
$
|
484,736
|
|
Total Assets:
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Segment Assets for Total Reportable Business Segments
|
|
$
|
1,973,225
|
|
|
$
|
2,069,279
|
|
Segment Assets for All Other Business Segments
|
|
|
437,307
|
|
|
|
427,782
|
|
Items Excluded from Segment Assets:
|
|
|
|
|
|
|
|
|
Cash and Other Investments
|
|
|
44,013
|
|
|
|
93,236
|
|
Deferred Tax Assets
|
|
|
68,821
|
|
|
|
103,505
|
|
Total Consolidated Assets
|
|
$
|
2,523,366
|
|
|
$
|
2,693,802
|
|
Enterprise-Wide Disclosures:
For the years ended December 31, 2020, 2019 and 2018, CONSOL Energy revenue was predominantly attributable to customers based in the United States of America. No individual country outside of the United States was attributed greater than 10% of total tons sold during the years ended December 31, 2020, 2019 and 2018.
CONSOL Energy's property, plant and equipment is predominantly located in the United States. At December 31, 2020 and 2019, less than 1% of the Company's net property, plant and equipment was located in Canada.
NOTE 24—RELATED PARTY TRANSACTIONS
Transactions with the Company's Former Parent (2017)
Transition Services Agreements
The Company entered into a transition services agreement (“TSA”) and certain other agreements in connection with the separation and distribution agreement with its former parent to cover certain continued corporate services provided by the Company and its former parent to each other following the completion of the separation and distribution. In connection with the separation and distribution, the Company began to set up its own corporate functions, and pursuant to the TSA, the Company's former parent provided various corporate support services, including certain accounting, human resources, information technology, office and building, risk, security, tax and treasury, building security and tax services, as well as certain regulatory compliance services required during the period in which the Company remained a majority-owned subsidiary of its former parent. The TSA expired in February 2019. The charges associated with these services were not material during the years ended December 31, 2019 and 2018, and were consistent with expenses that the Company's former parent had historically allocated or incurred with respect to such services.
Former Parent Receivables and Payables
The Company had a receivable from its former parent of $6,791 at December 31, 2019, which was recorded in Other Receivables on the Consolidated Balance Sheets. The balance of this receivable was collected during the year ended December 31, 2020. This receivable relates to reimbursements per the terms of the separation and distribution agreement.
During the year ended December 31, 2018, the Company paid its former parent $18,234 related to the final settlement of shared, separation-related fees. Per the separation and distribution agreement, these costs were split equally by the two companies. These costs consisted of consulting and professional fees associated with preparing for and executing the separation and distribution, as well as various other items.
CONSOL Coal Resources LP
On December 30, 2020, CONSOL Energy completed the acquisition of all of the outstanding common units of CONSOL Coal Resources, and CONSOL Coal Resources became the Company's indirect wholly-owned subsidiary (see Note 2 - Major Transactions in the Notes to the Audited Consolidated Financial Statements in Item 8 of this Form 10-K for additional information). In connection with the closing of the CCR Merger, CONSOL Energy issued 7,967,690 shares of its common stock to acquire the 10,912,138 common units of CCR held by third-party CCR investors at a fixed exchange ratio of 0.73 shares of CEIX common stock for each CCR unit, for total implied consideration of $51,710.
CONSOL Energy, certain of its subsidiaries and the Partnership are party to an Omnibus Agreement, dated September 30, 2016, as amended on November 28, 2017 (the “Omnibus Agreement”). Under the Omnibus Agreement, CONSOL Energy provides the Partnership with certain services in exchange for payments by the Partnership for those services.
On November 28, 2017, the Company entered into an Affiliated Company Credit Agreement with the Partnership and certain of its subsidiaries (the “Partnership Credit Parties”), as amended on June 5, 2020 (as amended, the “Affiliated Company Credit Agreement”), under which the Company provides as lender a revolving credit facility in an aggregate principal amount of up to $275 million to the Partnership Credit Parties. In connection with the completion of the separation, the Partnership drew an initial $201 million, the net proceeds of which were used to repay outstanding amounts under CCR's $400 million senior secured revolving credit facility with certain lenders and PNC Bank, National Association, as administrative agent (the “Original CCR Credit Facility”), to provide working capital for the Partnership following the separation and for other general corporate purposes. The Original CCR Credit Facility was then terminated.
On June 5, 2020, the Company amended the Affiliated Company Credit Agreement to provide eight quarters of financial covenant relaxation, effected a 50 basis points increase in the rate at which borrowings under the Affiliated Company Credit Agreement bore interest, and added additional conditions to be met for the covenants relating to general investments, investments in unrestricted subsidiaries, and distributions to equity holders of the Partnership. The Affiliated Company Credit Agreement had a maturity date of December 28, 2024. Interest accrued at a rate ranging from 4.25% to 5.25%, subject to the Partnership's net leverage ratio. For the years ended December 31, 2020, 2019 and 2018, $9,155, $7,892 and $7,709 of interest was incurred under the Affiliated Company Credit Agreement, respectively. The collateral obligations under the Affiliated Company Credit Agreement generally mirrored the Original CCR Credit Facility, as did the list of entities that acted as guarantors thereunder. The Affiliated Company Credit Agreement was subject to financial covenants relating to a maximum first lien gross leverage ratio and a maximum total net leverage ratio, which were to be calculated on a consolidated basis for the Partnership and its restricted subsidiaries at the end of each fiscal quarter. The Affiliated Company Credit Agreement also contained a number of customary affirmative covenants and negative covenants, including limitations on the ability of the Partnership to incur additional indebtedness, grant liens, and make investments, acquisitions, dispositions, restricted payments, and prepayments of junior indebtedness (subject to certain limited exceptions). In connection with the closing of the CCR Merger, the Affiliated Company Credit Agreement was terminated, all obligations and guarantees thereunder repaid and discharged and all liens granted in connection therewith released. In connection with the termination of the Affiliated Company Credit Agreement and in exchange for, and in satisfaction of, payment of the outstanding balance of approximately $176,535 thereunder, CCR issued 37,322,410 CCR common units to the Company.
In August 2019, upon payment of the cash distribution with respect to the quarter ended June 30, 2019, the financial requirements for the conversion of all CCR subordinated units were satisfied. As a result, all 11,611,067 of the CCR subordinated units owned entirely by CONSOL Energy Inc. were converted into CCR common units on a one-for-one basis. The conversion did not impact the amount of the cash distribution paid or the total number of CCR's outstanding units representing limited partner interests.
Charges for services from the Company to CCR include the following:
|
|
For the Years Ended December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
2018
|
|
Operating and Other Costs
|
|
$
|
3,820
|
|
|
$
|
3,219
|
|
|
$
|
2,918
|
|
Selling, General and Administrative Costs
|
|
|
9,604
|
|
|
|
8,309
|
|
|
|
8,300
|
|
Total Services from CONSOL Energy
|
|
$
|
13,424
|
|
|
$
|
11,528
|
|
|
$
|
11,218
|
|
Operating and Other Costs include pension service costs and insurance expenses. Selling, General and Administrative Costs include charges for incentive compensation, an annual administrative support fee and reimbursement for the provision of certain management and operating services provided by the Company.
At December 31, 2019, CCR had a net payable to the Company in the amount of $1,419. This payable includes reimbursements for business expenses, executive fees, stock-based compensation and other items under the Omnibus Agreement.
In May 2019, CONSOL Energy Inc.'s Board of Directors approved an expansion of the stock, unit and debt repurchase program (See Note 5 - Stock, Unit and Debt Repurchases). The program expansion allows the Company to use up to $50 million of the program to purchase CCR's outstanding common units in the open market. None of the Partnership's common units were purchased under this program during the year ended December 31, 2020. During the year ended December 31, 2019, 26,297 of the Partnership's common units were purchased under this program at an average price of $14.05 per unit.
NOTE 25—SUBSEQUENT EVENTS
The Company has evaluated all subsequent events through the date the financial statements were issued. No material recognized or non-recognizable subsequent events were identified.