WARRIOR MET COAL, INC. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Form 10-K)

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The following discussion and analysis provides a narrative of our results of
operations and financial condition for the years ended December 31, 2021,
December 31, 2020, and December 31, 2019. You should read the following
discussion and analysis of our financial condition and results of operations
together with our audited financial statements and related notes appearing
elsewhere in this Annual Report. Some of the information contained in this
discussion and analysis or set forth elsewhere in this Annual Report, including
information with respect to our plans and strategy for our business and related
financing, includes forward­looking statements that involve risks and
uncertainties. As a result of many factors, including those factors set forth in
"Part I, Item 1A. Risk Factors," our actual results could differ materially from
the results described in, or implied by, the forward­looking statements
contained in the following discussion and analysis. Please see "Forward-Looking
Statements."

For a discussion and analysis of our results of operations and financial
condition for the year ended December 31, 2019, please refer to Part II, Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations of our Annual Report on Form 10-K for the fiscal year ended December
31, 2020.

Overview

We are a U.S.-based, environmentally and socially minded supplier to the global
steel industry. We are dedicated entirely to mining non-thermal met coal used as
a critical component of steel production by metal manufacturers in Europe, South
America and Asia. We are a large-scale, low-cost producer and exporter of
premium met coal, also known as hard coking coal ("HCC"), operating
highly-efficient longwall operations in our underground mines based in Alabama,
Mine No. 4 and Mine No. 7.

As of December 31, 2021, Mine No. 4 and Mine No. 7, our two operating mines, had
approximately 90.2 million metric tons of recoverable reserves and our
undeveloped Blue Creek mine contained 63.3 million metric tons of recoverable
reserves and 44.9 million metric tons of coal resources exclusive of reserves,
which total 108.2 million metric tons. As a result of our high quality coal, our
realized price has historically been in line with, or at a slight discount to,
the Platts Index. Our HCC, mined from the Southern Appalachian portion of the
Blue Creek coal seam, is characterized by low sulfur, low-to-medium ash, and LV
to MV. These qualities make our coal ideally suited as a coking coal for the
manufacture of steel.

We sell substantially all of our met coal production to steel producers. Met
coal, which is converted to coke, is a critical input in the steel production
process. Met coal is both consumed domestically in the countries where it is
produced and exported by several of the largest producing countries, such as
China, Australia, the United States, Canada and Russia. Therefore, demand for
our coal will be highly correlated to conditions in the global steelmaking
industry. The steelmaking industry's demand for met coal is affected by a number
of factors, including the cyclical nature of that industry's business,
technological developments in the steelmaking process and the availability of
substitutes for steel such as aluminum, composites and plastics. A significant
reduction in the demand for steel products would reduce the demand for met coal,
which would have a material adverse effect upon our business. Similarly, if
alternative ingredients are used in substitution for met coal in the integrated
steel mill process, the demand for met coal would materially decrease, which
could also materially adversely affect demand for our met coal.

COVID-19[female[feminine


The global steelmaking industry's demand for met coal is affected by pandemics,
epidemics or other public health emergencies, such as the outbreak of the novel
coronavirus ("COVID-19"), which was first reported in late 2019. In March 2020,
the World Health Organization ("WHO") declared COVID-19 a pandemic, and the
President of the United States declared the COVID-19 outbreak a national
emergency. In the two years since then, the pandemic has dramatically impacted
the global health and economic environment, including millions of confirmed
cases and deaths, business slowdowns or shutdowns, labor shortfalls, supply
chain challenges, regulatory challenges, and market volatility. In addition,
governments and central banks in several parts of the world have enacted fiscal
and monetary stimulus measures to counteract the impacts of COVID-19.

Over the course of 2021, COVID-19 case rates and the health and economic impacts
of the pandemic fluctuated dramatically in different communities in the U.S. and
globally, particularly with the spread of new variants. We continued to see a
prolonged impact on the economy, our industry, and our company, with increased
challenges for customers and suppliers, labor shortages, supply chain
challenges, and increasing inflation, among other impacts. We expect these and
other impacts to continue and possibly worsen, depending on the future course of
the pandemic and actions taken in connection with it.

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We continue to closely monitor and address the pandemic and related
developments, including the impact on our company, our employees, our customers,
our suppliers and our communities. The Company has considered and continues to
consider and be guided by health data and evolving guidance from the Centers for
Disease Control and Prevention (CDC), in particular, as well as other health
organizations globally, federal, state and local governmental authorities, and
our customers, among others. We have taken, and continue to take, robust actions
to help protect the health, safety and well-being of our employees, to support
continued performance, to support our suppliers and local communities, and to
continue to serve our customers. Our goals have been, and continue to be to
lessen the potential adverse impacts, both health and economic, and to continue
to position the Company for long-term success. As of the filing of this Form
10-K, the Company has not had to idle or temporarily idle its mines due to
COVID-19.

Notwithstanding our continued operations, COVID-19 has had and may continue to
have further negative impacts on our two operating mines, supply chain,
transportation networks and customers, which may continue to compress our
margins, and reduce demand for the met coal that we produce. The COVID-19
outbreak is a widespread public health crisis that is adversely affecting the
economies and financial markets of many countries, including those of our
customers, which are primarily located in Europe, South America and Asia. A
prolonged economic downturn could adversely affect demand for our met coal and
contribute to volatile supply and demand conditions affecting prices and
volumes. The progression of COVID-19 could also negatively impact our business
or results of operations through the temporary closure of one of our mines,
customers or critical suppliers, or the McDuffie Coal Terminal at the Port of
Mobile in Alabama, or a disruption to our rail and barge carriers, which would
delay or prevent deliveries to our customers, among others.

In addition, the ability of our employees and our suppliers' and customers'
employees to work may be significantly impacted by individuals contracting or
being exposed to COVID-19, or as a result of the control measures noted above,
which may significantly affect the demand for met coal. Our customers may be
directly impacted by business curtailments or weak market conditions and may not
be willing or able to fulfill their contractual obligations or open letters of
credit. We may also experience delays in obtaining letters of credit or
processing letter of credit payments due to the impacts of COVID-19 on foreign
issuing and U.S. intermediary banks. Furthermore, the progression of, and global
response to, the COVID-19 outbreak has begun to cause, and increases the risk
of, further delays in construction activities and equipment deliveries related
to our capital projects, including potential delays in obtaining permits from
government agencies. The extent of such delays and other effects of COVID-19 on
our capital projects, certain of which are outside of our control, is unknown,
but they may impact or delay the timing of anticipated benefits of capital
projects.

Collective agreement


Our CBA contract with the UMWA expired on April 1, 2021, and the UMWA initiated
a strike which continues today. We continue to negotiate in good faith to reach
a new union contract. During the strike, we continue to successfully execute our
business continuity plans, allowing us to meet the needs of our valued
customers. Due to the strike, we idled Mine No. 4 and scaled back operations at
Mine No. 7. In connection with the idling of Mine No. 4 and reduced operations
at Mine No. 7, we incurred idle mine expenses of $33.9 million for the year
ended December 31, 2021. These expenses are reported separately in the
Statements of Operations and represent expenses incurred while the respective
mine is idled or operating below normal capacity, such as electricity, insurance
and maintenance labor. Due to the strike, we have also incurred approximately
$21.4 million of business interruption expenses for the year ended December 31,
2021. These expenses represent incremental expenses incurred as a direct result
of the strike. These expenses are also presented separately in the Statements of
Operations. Despite incurring costs associated with the strike, we have been
able to manage our working capital and spending to deliver strong results in the
current markets. We believe that we are well positioned to fulfill anticipated
customer volume commitments for 2022. In the current environment and without a
new contract, the Company believes that production and sales volume for 2022
could be between 5.0 million and 6.0 million metric tons. These volumes include
the assumed restart of Mine 4 and continued lower production at Mine 7.
Similarly, with a new contract, Warrior believes that production and sales
volumes over a twelve-month period could ramp up to a run rate of approximately
7.0 million metric tons within three to four months. While we have business
continuity plans in place, the strike may still cause disruption to production
and shipping activities, and our plans may vary significantly from quarter to
quarter in 2022.

Basis of Presentation

The consolidated financial statements included elsewhere in this Annual Report
and the other financial information presented and discussed in this management's
discussion and analysis includes the accounts of Warrior Met Coal, Inc. and its
subsidiaries (the "Company").


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How we evaluate our operations


Our primary business, the mining and exporting of met coal for the steel
industry, is conducted in one business segment: Mining. All other operations and
results are reported under the "All Other" category as a reconciling item to
consolidated amounts, which includes the business results from our sale of
natural gas extracted as a byproduct from our underground coal mines and
royalties from our leased properties. Our natural gas and royalty businesses do
not meet the criteria in ASC 280, Segment Reporting, to be considered as
operating or reportable segments.

Our management uses a variety of financial and operating metrics to analyze our
performance. These metrics are significant factors in assessing our operating
results and profitability and include: (i) Segment Adjusted EBITDA; (ii) sales
volumes and average selling price, which drive coal sales revenue; (iii) cash
cost of sales, a non-GAAP financial measure; and (iv) Adjusted EBITDA, a
non-GAAP financial measure.


                                                  For the years ended December 31,
                                                2021             2020            2019
(in thousands)
Segment Adjusted EBITDA                    $   474,001       $ 136,701       $ 515,253
Metric tons sold                                 5,699           6,735           7,240
Metric tons produced                             5,084           7,132           7,683
Gross price realization (1)                         92  %           96  %           98  %
Average net selling price per metric ton   $    180.43       $  113.12       $  170.72
Cash cost of sales per metric ton          $     96.43       $   92.31       $   99.15
Adjusted EBITDA                            $   457,008       $ 108,276       $ 485,693


(1) Gross price realization represents a volume weighted-average calculation of
our daily realized price per ton based on gross sales, which excludes demurrage
and other charges, as a percentage of the Platts Index.

Segment Adjusted EBITDA


We define Segment Adjusted EBITDA as net income (loss) adjusted for other
revenues, cost of other revenues, depreciation and depletion, selling, general
and administrative, and certain transactions or adjustments that the CEO, our
Chief Operating Decision Maker does not consider for the purposes of making
decisions to allocate resources among segments or assessing segment performance.
Segment Adjusted EBITDA is used as a supplemental financial measure by
management and by external users of our financial statements, such as investors,
industry analysts, lenders and ratings agencies, to assess:

•our operating performance as compared to the operating performance of other
companies in the coal industry, without regard to financing methods, historical
cost basis or capital structure;

•the ability of our assets to generate sufficient cash flow to pay distributions;

• our ability to incur and service debt and finance capital expenditures; and

• the viability of acquisitions and other investment projects and the returns on investment from various investment opportunities, such as Blue Stream.

Sales volumes, gross price realization and average Net selling price


We evaluate our operations based on the volume of coal we can safely produce and
sell in compliance with regulatory standards, and the prices we receive for our
coal. Our sales volume and sales prices are largely dependent upon the terms of
our coal sales contracts, for which prices generally are set on daily index
averages or a quarterly basis. The volume of coal we sell is also a function of
the pricing environment in the international met coal markets and the amounts of
LV and MV coal that we sell. We evaluate the price we receive for our coal on
two primary metrics: first, our gross price realization and second, our average
net selling price per metric ton.
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Our gross price realization represents a volume weighted-average calculation of
our daily realized price per ton based on the blended gross sales of our LV and
MV coal, excluding demurrage and quality specification adjustments, as a
percentage of the Platts Index daily price. Our gross price realizations reflect
the premiums and discounts we achieve on our LV and MV coal versus the Platts
Index price because of the high quality premium products we sell into the export
markets. In addition, the premiums and discounts in a quarter or year can be
impacted by a rising or falling price environment.

On a quarterly basis, our blended gross selling price per metric ton may differ
from the Platts Index price per metric ton, primarily due to our gross sales
price per ton being based on a blended average of gross sales price on our LV
and MV coals as compared to the Platts Index price and due to the fact that many
of our met coal supply agreements are based on a variety of indices.

Our average net selling price per metric ton represents our coal net sales
revenue divided by total metric tons of coal sold. In addition, our average net
selling price per metric ton is net of the previously mentioned demurrage and
quality specification adjustments.

Cash cost of sales


We evaluate our cash cost of sales on a cost per metric ton basis. Cash cost of
sales is based on reported cost of sales and includes items such as freight,
royalties, manpower, fuel and other similar production and sales cost items, and
may be adjusted for other items that, pursuant to GAAP, are classified in the
Statements of Operations as costs other than cost of sales, but relate directly
to the costs incurred to produce met coal and sell it free-on-board at the Port
of Mobile in Alabama. Our cash cost of sales per metric ton is calculated as
cash cost of sales divided by the metric tons sold. Cash cost of sales is used
as a supplemental financial measure by management and by external users of our
financial statements, such as investors, industry analysts, lenders and ratings
agencies, to assess:

•our operating performance as compared to the operating performance of other
companies in the coal industry, without regard to financing methods, historical
cost basis or capital structure; and

• the viability of acquisitions and other investment projects and the returns on investment from various investment opportunities, such as Blue Stream.


We believe that this non-GAAP financial measure provides additional insight into
our operating performance, and reflects how management analyzes our operating
performance and compares that performance against other companies on a
consistent basis for purposes of business decision making by excluding the
impact of certain items that management does not believe are indicative of our
core operating performance. We believe that cash costs of sales presents a
useful measure of our controllable costs and our operational results by
including all costs incurred to produce met coal and sell it free-on-board at
the Port of Mobile in Alabama. Period-to-period comparisons of cash cost of
sales are intended to help management identify and assess additional trends
potentially impacting our Company that may not be shown solely by
period-to-period comparisons of cost of sales. Cash cost of sales should not be
considered an alternative to cost of sales or any other measure of financial
performance or liquidity presented in accordance with GAAP. Cash cost of sales
excludes some, but not all, items that affect cost of sales, and our
presentation may vary from the presentations of other companies. As a result,
cash cost of sales as presented below may not be comparable to similarly titled
measures of other companies.

The following table provides a reconciliation of cash cost of sales to total cost of sales, the most directly comparable GAAP financial measure, on a historical basis for each of the periods indicated.

                                                                      For the years ended December 31,
                                                                2021                   2020                2019
(in thousands)
Cost of sales                                            $    554,282      

$625,170 $720,745
Accretion of asset retirement obligation and valuation adjustment

                                                     (2,802)                 (1,702)            (1,519)
Stock compensation expense                                     (1,917)                 (1,789)            (1,405)
Cash cost of sales                                       $    549,563              $  621,679          $ 717,821



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Adjusted EBITDA


We define Adjusted EBITDA as net income (loss) before net interest expense,
income tax expense (benefit), depreciation and depletion, non-cash asset
retirement obligation accretion and valuation adjustments, non-cash stock
compensation expense, other non-cash accretion and valuation adjustments,
non-cash mark-to-market loss on gas hedges, loss on early extinguishment of
debt, business interruption expenses, idle mine expenses and other income and
expenses. Adjusted EBITDA is used as a supplemental financial measure by
management and by external users of our financial statements, such as investors,
industry analysts, lenders and ratings agencies, to assess:

•our operating performance as compared to the operating performance of other
companies in the coal industry, without regard to financing methods, historical
cost basis or capital structure; and

• the viability of acquisitions and other investment projects and the returns on investment from various investment opportunities, such as Blue Stream.


We believe that the presentation of Adjusted EBITDA in this Annual Report
provides information useful to investors in assessing our financial condition
and results of operations. The GAAP measure most directly comparable to Adjusted
EBITDA is net income (loss). Adjusted EBITDA should not be considered an
alternative to net income or loss or any other measure of financial performance
or liquidity presented in accordance with GAAP. Adjustments excludes some, but
not all, items that affect net income (loss) and our presentation of Adjusted
EBITDA may vary from that presented by other companies.

The following table presents a reconciliation of Adjusted EBITDA to net income
(loss), the most directly comparable GAAP financial measure, on a historical
basis for each of the periods indicated.

                                                                         

For the years ended the 31st of December,

                                                                    2021                   2020               2019
(in thousands)
Net income (loss)                                            $    150,881              $ (35,761)         $ 301,699
Interest expense, net                                              35,389                 32,310             29,335
Income tax expense (benefit)                                       49,096                (20,144)            65,417
Depreciation and depletion                                        141,418                118,092             97,330

Accretion of retirement obligations and value adjustment (1)

                                                      3,427                  2,631             (7,891)
Stock compensation expense (2)                                      9,370                  7,602              5,820
Other non-cash accretion and valuation adjustments (3)              1,881                  6,014              7,042
Non-cash mark-to-market loss on gas hedges                          1,595                      -                  -

Loss on early extinguishment of debt (4)                            9,678                      -              9,756
Business interruption (5)                                          21,372                      -                  -
Idle mine (6)                                                      33,899                      -                  -
Other income and expenses (7)                                        (998)                (2,468)           (22,815)
Adjusted EBITDA                                              $    457,008              $ 108,276          $ 485,693



(1)Represents non-cash accretion expense and valuation adjustment associated
with our asset retirement obligations (see Note 8 to our consolidated financial
statements).
(2)Represents non-cash stock compensation expense associated with equity awards
(see Note 12 to our consolidated financial statements).
(3)Represents non-cash accretion expense and valuation adjustment associated
with our black lung obligations (see Note 10 to our consolidated financial
statements).
(4)Represents a loss incurred in connection with the early extinguishment of
debt (see Note 13 to our consolidated financial statements)
(5)Represents business interruption expenses associated with the UMWA strike.
(6)Represents idle mine expenses incurred in connection with the idling of Mine
No. 4 and reduced operations at Mine No. 7.
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(7)Represents proceeds received upon settlement of a lawsuit, COVID-19 pandemic
related expenses and settlement proceeds received for the Shared Services Claim
and Hybrid Debt Claim associated with the Walter Canada CCAA and other Walter
Claims (each discussed below).

Operating results

Year ended December 31, 2021 and 2020


The following table summarizes certain financial information relating to our
operating results that have been derived from our audited financial statements
for the year ended December 31, 2021 and 2020.

                                                                            

For the years ended the 31st of December,

                                                                                    % of                                     % of
                                                                                    Total                                    Total
(in thousands)                                              2021                  Revenues               2020              Revenues
Revenues:
Sales                                               $       1,028,283                  97.1  %       $ 761,871                  97.3  %
Other revenues                                                 30,933                   2.9  %          20,867                   2.7  %
Total revenues                                              1,059,216                 100.0  %         782,738                 100.0  %

Costs and expenses: cost of sales (excluding items listed separately below)

                                                        554,282                  52.3  %         625,170                  79.9  %
Cost of other revenues (exclusive of items shown
separately below)                                              28,899                   2.7  %          33,736                   4.3  %
Depreciation and depletion                                    141,418                  13.4  %         118,092                  15.1  %
Selling, general and administrative                            35,593                   3.4  %          32,879                   4.2  %
Business interruption                                          21,372                   2.0  %               -                     -  %
Idle mine                                                      33,899                   3.2  %               -                     -  %

Total costs and expenses                                      815,463                  77.0  %         809,877                 103.5  %
Operating income (loss)                                       243,753                  23.0  %         (27,139)                 (3.5) %
Interest expense, net                                         (35,389)                 (3.3) %         (32,310)                 (4.1) %
Loss on early extinguishment of debt                           (9,678)                 (0.9) %               -                     -  %
Other income                                                    1,291                   0.1  %           3,544                   0.5  %
Income (loss) before income tax expense (benefit)             199,977                  18.9  %         (55,905)                 (7.1) %
Income tax expense (benefit)                                   49,096                   4.6  %         (20,144)                 (2.6) %
Net income (loss)                                   $         150,881                  14.2  %         (35,761)                 (4.6) %

Components of sales, production and cost of sales on a unit basis for the year ended December 31, 2021 and 2020 were as follows:

For the years ended the 31st of December,

                                                                             2021                   2020
Met Coal (metric tons in thousands)
Metric tons sold                                                                5,699               6,735
Metric tons produced                                                            5,084               7,132
Gross price realization                                                            92   %              96  %
Average net selling price per metric ton                              $        180.43           $  113.12
Cash cost of sales per metric ton                                     $         96.43           $   92.31



The year ended December 31, 2021 has been a difficult year. Despite the ongoing challenges posed by COVID-19 and the UMWA strike, we are pleased with our performance in 2021.

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The following list highlights our key achievements for the year ended
December 31, 2021:

•we achieved an annual sales volume of 5.7 million metric tons and a production volume of 5.1 million metric tons;

•we made a net profit of $150.9 millionWhere $2.93 per diluted share;


•we delivered positive cash flows from operations of $351.5 million and positive
free cash flow of $280.2 million while continuing to invest $71.4 million in
property, plant and equipment and mine development;

•we maintained a strong balance sheet with total liquidity of $479.0 millioncomposed of cash and cash equivalents of $395.8 million and $83.2 million
available under our ABL facility;


•we achieved a record total reportable incidence rate of 1.25, which is
considerably lower than the national total reportable incidence rate for all
underground coal mines in the United States of 4.89 for the nine months ended
September 30, 2021 (represents the latest data available);

•we successfully refinanced our senior notes and amended our ABL facility strengthening our balance sheet and financial position for long-term success; and

• we have demonstrated an ongoing commitment to returning capital to our shareholders, paying our $0.05 quarterly dividends per share.


Sales were $1.0 billion for the year ended December 31, 2021, compared to $761.9
million for the year ended December 31, 2020. The $266.4 million increase in
revenues was primarily driven by a $383.6 million increase related to a $67.31
increase in the average selling price per metric ton of met coal offset
partially by a $117.2 million decrease due to a 1.0 million metric ton decrease
in met coal sales volume.

Other revenues for the year ended December 31, 2021 were $30.9 million compared
to $20.9 million for the year ended December 31, 2020. Other revenues are
comprised of revenue derived from our natural gas operations, as well as earned
royalty revenue. The $10.1 million increase in other revenues is primarily due
to an average increase in natural gas prices of approximately 90% offset
partially by a loss of $1.6 million on our natural gas hedges.

Cost of sales (exclusive of items shown separately below) was $554.3 million, or
52.3% of total revenues for the year ended December 31, 2021, compared to $625.2
million, or 79.9% of total revenues for the year ended December 31, 2020. The
$70.9 million decrease in cost of sales was primarily driven by a $95.6 million
decrease due to a 1.0 million metric ton decrease in met coal sales volumes
offset partially by a $23.5 million increase due to a $4.12 per metric ton
increase in the average cash cost of sales per metric ton. The increase in
average cash cost of sales per metric ton is primarily due to our variable cost
structure in our labor, royalties and logistics contracts that vary in response
to changes in met coal prices.

Cost of other revenues was $28.9 million for the year ended December 31, 2021,
compared to $33.7 million for the year ended December 31, 2020. The $4.8 million
decrease is primarily due to a net change of $4.3 million in our black lung
obligation valuation adjustment recorded annually in the fourth quarter
primarily attributable to changes in discount rates and claims history.

Depreciation and depletion was $141.4 million, or 13.4% of total revenues, for
the year ended December 31, 2021, compared to $118.1 million, or 15.1% of total
revenues for the year ended December 31, 2020. The increase in depreciation
expense is primarily driven by the immediate recognition of $20.7 million in
depreciation expense that would normally be capitalized into coal inventory when
produced but was not due to the idled status of Mine No. 4 combined with a 0.7
million metric ton drawdown in our ending coal inventory balances as
depreciation and depletion is first capitalized into coal inventory and relieved
when tons are sold.

Selling, general and administrative expenses were $35.6 million, or 3.4% of
total revenues, for the year ended December 31, 2021 compared to $32.9 million,
or 4.2% of total revenues for the year ended December 31, 2020. The $2.7 million
increase in selling, general and administrative expenses is primarily driven by
an increase in employee related expenses and stock compensation expense due to
the accelerated vesting of awards for certain individuals who have reached
retirement eligibility offset partially by a decrease in other professional
services.
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Business interruption charges were $21.4 million for the year ended
December 31, 2021. These expenses represent non-recurring expenses that are directly attributable to the ongoing UMWA strike for greater safety and security, labor negotiations and other expenses.


Idle mine expenses were $33.9 million for the year ended December 31, 2021.
These expenses represent idle expenses incurred in connection with the idling of
Mine No. 4 and reduced operations at Mine No. 7, such as electricity, insurance
and maintenance labor.

Interest expense, net was $35.4 million, or 3.3% of total revenues, for the year
ended December 31, 2021, compared to $32.3 million, or 4.1% of total revenues,
for the year ended December 31, 2020. The $3.1 million increase was primarily
driven by an increase of $1.8 million due to interest on new equipment financing
leases, an increase of $0.8 million in interest on our senior notes due to the
timing of the issuance of the New Notes (as defined below) and a decrease in
interest income.

For the year ended December 31, 2021, we recognized a loss on early
extinguishment of debt of $9.7 million upon the extinguishment of $343.4 million
of our Existing Notes (as defined below). The loss on early extinguishment of
debt represents a premium paid to retire the debt, accelerated amortization of
debt discount, net, and the write-off of Existing Notes debt issuance costs.

Other income was $1.3 million, or 0.1% of total revenues, for the year ended
December 31, 2021 compared to $3.5 million or 0.5% of total revenues, for the
year ended December 31, 2020. Other income for the year ended December 31, 2021,
represents proceeds received in connection with the settlement of a lawsuit
offset partially by COVID-19 pandemic related expenses.

In connection with our acquisition of certain core operating assets of Walter
Energy, we acquired a receivable owed to Walter Energy by Walter Canada for
certain shared services provided by Walter Energy to Walter Canada (the "Shared
Services Claim") and a receivable for unpaid interest owed to Walter Energy from
Walter Canada in respect of a promissory note (the "Hybrid Debt Claim").  Each
of these claims were asserted by us in the Walter Canada CCAA proceedings.
Walter Energy deemed these receivables to be uncollectible for the year ended
December 31, 2015 and we did not assign any value to these receivables in
acquisition accounting as collectability was deemed remote.  In 2020, we
received $1.8 million in settlement proceeds for the Shared Services Claim and
Hybrid Debt Claim which is reflected as other income in the Statements of
Operations. The collectability of additional amounts, if any, related to the
Shared Services Claim and Hybrid Debt Claim depends on the outcome of, and the
timing of any resolution of, the Walter Canada CCAA proceedings and cannot be
predicted with certainty

During the fourth quarter of 2020, we received $1.7 million in the settlement proceeds related to other Walter Energy claims. As with Walter Canada’s claims under the CCAA, we did not attribute any value to these receivables in acquisition accounting, as collectability was deemed remote.


For the year ended December 31, 2021, we recognized income tax expense of $49.1
million or an effective tax rate of 24.6% primarily due to pre-tax income of
$200.0 million combined with the establishment of a non-cash state deferred
income tax asset valuation allowance of $46.0 million offset partially by an
income tax benefit of $22.4 million due to the remeasurement of state deferred
income tax assets and liabilities, $12.2 million of depletion and a $4.7 million
income tax benefit from the IRC Section 451 Marginal Well Credit. The Marginal
Well Credit is a production-based tax credit that provides a credit for
qualified natural gas production. The credit is phased out when natural gas
prices exceed certain levels. For the year ended December 31, 2020, we
recognized an income tax benefit of $20.1 million or an effective tax rate of
36.0% primarily due to a loss recognized before income taxes and a $4.0 million
income tax benefit from the IRC Section 451 Marginal Well Credit.

At December 31, 2021, we had federal and state NOLs of approximately $722.3
million and $992.6 million, respectively. Accordingly, we expect to continue to
utilize our federal NOLs and credit carryforwards, we believe we will not pay
any cash federal income taxes for the next six to eight years based on our
long-term forecast of met coal prices, sales volumes and performance. Our U.S.
federal and state pre-tax net operating loss carryforwards do not begin to
expire until 2034 and 2029, respectively. In addition, the Company has
approximately $23.3 million of general business credit carryforwards which begin
to expire in December 31, 2027 and fully expire in December 31, 2041. See Note 7
of the Notes to the Financial Statements for more information.


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Cash and capital resources

Overview


Our sources of cash have been coal and natural gas sales to customers, proceeds
received from the Notes (as defined below) and access to our ABL Facility.
Historically, our primary uses of cash have been for funding the operations of
our coal and natural gas production operations, working capital, our capital
expenditures, our reclamation obligations, payment of principal and interest on
our Notes, professional fees and other non-recurring transaction expenses. In
addition, we used available cash on hand to repurchase shares of common stock
and to pay our quarterly and special dividends, each of which reduces or reduced
cash and cash equivalents.

Going forward, we will use cash to fund debt service payments on our Notes, the
ABL Facility and our other indebtedness, to fund operating activities, working
capital, capital expenditures, and strategic investments, and, if declared, to
pay our quarterly and/or special dividends. Our ability to fund our capital
needs going forward will depend on our ongoing ability to generate cash from
operations and borrowing availability under the ABL Facility, and, in the case
of any future strategic investments, capital expenditures, or special dividends
financed partially or wholly with debt financing, our ability to access the
capital markets to raise additional capital.

Our ability to generate positive cash flow from operations in the future will
be, at least in part, dependent on continued stable global economic conditions
and a resolution of the CBA contract negotiations with the UMWA. There remains
significant uncertainty as to the effects of new COVID-19 variants on the global
economy, which in turn may, among other things, impact our ability to generate
positive cash flows from operations, fund capital expenditure needs and
successfully execute and fund key initiatives, such as the development of Blue
Creek.

Our available liquidity as of December 31, 2021 was $479.0 million, consisting
of $395.8 million of cash and cash equivalents and $83.2 million of availability
under our ABL Facility. As of December 31, 2021, no loans were outstanding under
the ABL Facility and there were $9.4 million of letters of credit issued and
outstanding under the ABL Facility. On March 24, 2020, we borrowed $70.0 million
in a partial draw of the ABL Facility (the "ABL Draw") as a precautionary
measure in order to increase our cash position and preserve financial
flexibility in light of the uncertainty resulting from the COVID-19 outbreak. In
June 2020, we reduced the outstanding principal amount of the ABL Draw by $30.0
million and in the third quarter of 2021, we reduced the remaining $40.0 million
outstanding principal amount of the ABL Draw.

In the ordinary course of our business, we are required to provide surety bonds
and letters of credit to provide financial assurance for certain transactions
and business activities. Federal and state laws require us to obtain surety
bonds or other acceptable security to secure payment of certain long-term
obligations including mine closure or reclamation costs and other miscellaneous
obligations. As of December 31, 2021, we had outstanding surety bonds and
letters of credit with parties for post-mining reclamation at all of our mining
operations totaling $40.9 million, $17.0 million as collateral for self-insured
black lung related claims and $3.6 million for miscellaneous purposes.

We believe that our future cash flows from operations, together with cash on our
balance sheet and proceeds from the borrowings under our ABL Facility, will
provide adequate resources to fund our debt service payments and planned
operating and capital expenditure needs for at least the next twelve months and
beyond. However, we will continue to assess our liquidity needs in light of the
ongoing CBA contract negotiations with the UMWA and the ongoing impact of
COVID-19.

The Company's principal contractual commitments include repayments of long-term
debt and related interest, potential minimum throughput payments associated with
our rail and port providers, asset retirement obligation payments, black lung
obligation payments, payments on various coal and land leases, payments under
financing lease obligations and payments associated with our natural gas swap
contracts. Currently, there are no known trends or expected changes anticipated
in future periods that would not be indicative of past results for our
contractual commitments.

Refer to the respective notes to the financial statements for further
information about our credit facilities and long-term debt (Note 13),
commitments and contingencies (Note 16), asset retirement obligations (Note 8),
black lung obligations (Note 10), lease payment obligations (Note 14), share
repurchase programs (Note 17) and derivative instruments (Note 18).

If our cash flows from operations are less than we require, we may need to incur
additional debt or issue additional equity. From time to time we may need to
access the long-term and short-term capital markets to obtain financing. Our
access to, and the availability of, financing on acceptable terms and conditions
in the future will be affected by many factors, including: (i) our credit
ratings, (ii) the liquidity of the overall capital markets, (iii) the current
state of the global economy and
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(iv) restrictions in our ABL Facility, the Indenture (as defined below), and any
other existing or future debt agreements. There can be no assurance that we will
have or continue to have access to the capital markets on terms acceptable to us
or at all.

Statements of Cash Flows

Cash balances were $395.8 million, $211.9 million and $193.4 million at
December 31, 2021, December 31, 2020and December 31, 2019respectively.

The following table provides a summary of net cash provided by (used in) operating, investing and financing activities for the period (in thousands):

For the years ended the 31st of December,

                                                                     2021                   2020               2019

Net cash provided by operating activities                     $    351,543              $ 112,626          $ 532,814
Net cash used in investing activities                              (71,146)              (108,189)          (134,213)
Net cash (used in) provided by financing activities                (96,474)                14,096           (411,623)
Net increase (decrease) in cash and cash equivalents and
restricted cash                                               $    183,923              $  18,533          $ (13,022)


Operating Activities

Net cash flows from operating activities consist of net income (loss) adjusted
for noncash items, such as depreciation and depletion of property, plant and
equipment and mineral interests, deferred income tax expense (benefit),
stock-based compensation, amortization of debt issuance costs and debt discount,
net, accretion expense and valuation adjustment associated with our asset
retirement obligations, mark-to-market losses on gas hedges, loss on early
extinguishment of debt and changes in net working capital. The timing between
the conversion of our billed and unbilled receivables into cash from our
customers, production and sale of coal inventory and disbursements to our
vendors is the primary driver of changes in our working capital.

Net cash provided by operating activities was $351.5 million for the year ended
December 31, 2021, and was primarily attributed to net income of $150.9 million
adjusted for depreciation and depletion expense of $141.4 million, deferred
income tax expense of $49.1 million, stock-based compensation expense of $9.4
million, loss on early extinguishment of debt of $9.7 million, accretion expense
and valuation adjustment of asset retirement obligations of $3.4 million,
amortization of debt issuance costs and debt discount of $1.7 million,
mark-to-market loss on gas hedges of 1.6 million, an increase in other operating
activities of $5.7 million and an increase in net working capital of $21.4
million. The increase in our working capital was primarily attributable to an
increase in trade accounts receivable combined with a decrease in accounts
payable and accrued expenses and other current liabilities offset partially by a
decrease in inventories. The increase in trade accounts receivable is due to the
timing of sales and a $67.31 increase in the average selling price per metric
ton. The decrease in inventories, accounts payable and accrued expenses and
other current liabilities is due to lower production volumes with the idling of
Mine No. 4 for much of the year combined with lower spending due to the ongoing
UMWA strike.

  Net cash provided by operating activities was $112.6 million for the year
ended December 31, 2020, and was primarily attributed to a net loss of $35.8
million adjusted for depreciation and depletion expense of $118.1 million, an
increase in other operating activities of $19.6 million, stock-based
compensation expense of $7.6 million, accretion expense of asset retirement
obligations of $3.0 million, amortization of debt issuance costs and debt
discount of $1.5 million and a decrease in net working capital of $19.0 million,
partially offset by a deferred income tax benefit of $20.1 million and a change
in the asset retirement obligation due to a change in estimate of $0.4 million.
The decrease in our working capital was primarily attributable to a decrease in
income tax receivable and trade accounts receivable combined with an increase in
accounts payable offset partially by an increase in inventories combined with a
decrease in accrued expenses. The decrease in income tax receivable is due to
the alternative minimum tax ("AMT") credit refund of $24.3 million received
during the third quarter of 2020. The decrease in trade accounts receivable and
increase in inventories is due to a 0.5 million metric ton decrease in met coal
sales volume. The increase in our accounts payable is primarily driven by the
timing of payments.

Net cash provided by operating activities was $532.8 million for the year ended
December 31, 2019, and was primarily attributed to net income of $301.7 million
adjusted for depreciation and depletion expense of $97.3 million, deferred
income tax expense of $68.5 million, an increase in other operating activities
of $26.1 million, loss on early extinguishment of debt of $9.8
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million, stock-based compensation expense of $5.8 million, accretion expense of
asset retirement obligations of $3.2 million, amortization of debt issuance
costs and debt discount of $1.4 million, and a decrease in net working capital
of $30.2 million, partially offset by a change in asset retirement obligation
due to a change in estimate of $11.1 million. The decrease in our working
capital was primarily attributable to a decrease in trade accounts receivable
combined with a decrease in income tax receivable and an increase in inventories
offset by accrued expenses and accounts payable due to decreased fourth quarter
production and sales volume.

Investing Activities

Net cash used in investing activities was $71.1 million for the year ended
December 31, 2021, primarily comprised of $57.9 million of purchases of
property, plant and equipment and $13.5 million of capitalized mine development
costs associated with our Mine No. 4 development. We spent approximately
$45.2 million in sustaining capital and spent an additional $12.7 million in
other discretionary capital, which included primarily the service shaft
construction and bathhouse at Mine No. 4.

Net cash used in investing activities was $108.2 million for the year ended
December 31, 2020, primarily comprised of $87.5 million of purchases of
property, plant and equipment and $27.1 million of capitalized mine development
costs associated with our Mine No. 4 development. We spent approximately
$60.0 million in sustaining capital and spent an additional $28.0 million in
other discretionary capital, which included primarily the service shaft
construction and bathhouse at Mine No. 4. The cash capital expenditures exclude
non-cash capital accruals and leases of approximately $44.8 million. Net cash
used in investing activities also includes $8.5 million of purchases of
short-term investments offset partially by $14.7 million of sales of short-term
investments and $0.2 million of proceeds from sale of property, plant and
equipment.

Net cash used in investing activities was $134.2 million for the year ended
December 31, 2019, primarily comprised
of $107.3 million of purchases of property, plant and equipment and $23.4
million of capitalized mine development costs associated with our Mine 4
development. We spent approximately $89.0 million in sustaining capital and
spent an additional $18.0 million in other discretionary capital, which included
primarily the shaft construction at Mine No. 4. The cash capital expenditures
exclude non-cash capital accruals and leases of approximately $45.5 million. Net
cash used in investing activities also includes $24.2 million of purchases of
short-term investments offset partially by $17.5 million of sales of short-term
investments and $3.1 million of proceeds from sale of property, plant and
equipment.

Fundraising activities


Net cash used in financing activities was $96.5 million for the year ended
December 31, 2021, primarily due to the redemption of the Existing Notes of
$350.3 million, the repayment of the ABL Draw of $40.0 million, principal
repayments of financing lease obligations of $29.0 million, payment of dividends
of $10.5 million and payment of debt issuance costs associated with the issuance
of the New Notes and the amendment of the ABL Facility of $11.4 million offset
partially by $347.7 million in proceeds received from the issuance of the New
Notes.

Net cash provided by financing activities was $14.1 million for the year ended
December 31, 2020, primarily due to the proceeds received from the ABL Draw of
$70.0 million offset by the subsequent partial repayment of the ABL Draw in an
amount equal to $30.0 million, principal repayments of financing lease
obligations of $14.2 million and the payment of dividends of $10.4 million.

Net cash used in financing activities was $411.6 million for the year ended
December 31, 2019, primarily due to the payment of regular quarterly dividends
and the April 2019 Special Dividend totaling $240.4 million in the aggregate,
retirements of debt of $140.3 million, repayments of financing lease obligations
of $17.3 million, and common shares repurchased of $12.5 million.

Capital allocation policy


On May 17, 2017, the Board adopted the Capital Allocation Policy of paying a
quarterly cash dividend of $0.05 per share. The Capital Allocation Policy states
the following: In addition to the regular quarterly dividend and to the extent
that the Company generates excess cash that is beyond the then current
requirements of the business, the Board may consider returning all or a portion
of such excess cash to stockholders through a special dividend or implementation
of a stock repurchase program. Any future dividends or stock repurchases will be
at the discretion of the Board and subject to consideration of a number of
factors, including business and market conditions, future financial performance
and other strategic investment opportunities. The Company will also seek to
optimize its capital structure to improve returns to stockholders while allowing
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flexibility for the Company to pursue highly selective strategic growth opportunities that can provide attractive returns for shareholders.


As the Company continues to monitor its liquidity in light of the COVID-19
pandemic, the Chinese ban on Australian coal and our CBA contract negotiations
with the UMWA, the Company may decide to suspend its Capital Allocation Policy
in the future if the Board deems it to be necessary or appropriate.

The Company has paid a regular quarterly cash dividend of $0.05 per share every
quarter since the Board adopted the Capital Allocation Policy. As of
December 31, 2021, the Company has paid $49.9 million of regular quarterly cash
dividends under the Capital Allocation Policy.

April 2019 Special dividend


  On April 23, 2019, the Board declared a special cash dividend of approximately
$230.0 million which was paid with cash on hand and was paid on May 14, 2019 to
stockholders of record as of the close of business on May 6, 2019.

Share buyback program


On March 26, 2019, the Board approved the Company's second stock repurchase
program (the "New Stock Repurchase Program") that authorizes repurchases of up
to an aggregate of $70.0 million of the Company's outstanding common stock. The
Company fully exhausted its previous stock repurchase program (the "First Stock
Repurchase Program") of $40.0 million of its outstanding common stock. The New
Stock Repurchase Program does not require the Company to repurchase a specific
number of shares or have an expiration date. The New Stock Repurchase Program
may be suspended or discontinued by the Board at any time without prior notice.

  Under the New Stock Repurchase Program, we may repurchase shares of our common
stock from time to time, in amounts, at prices and at such times as we deem
appropriate, subject to market and industry conditions, share price, regulatory
requirements and other considerations as determined from time to time by us. Our
repurchases may be executed using open market purchases or privately negotiated
transactions in accordance with applicable securities laws and regulations,
including Rule 10b-18 of the Exchange Act and repurchases may be executed
pursuant to Rule 10b5-1 under the Exchange Act. Repurchases will be subject to
limitations in the ABL Facility and the Indenture. We intend to fund repurchases
under the New Stock Repurchase Program from cash on hand and/or other sources of
liquidity.

From December 31, 2021we bought back 500,000 shares for approximately
$10.6 millionleaving about $58.8 million share buybacks authorized under the new share buyback program.


In light of the uncertainties resulting from COVID-19 and as a precautionary
measure to preserve liquidity, the
Company has temporarily suspended its New Stock Repurchase Program. The Company
will continue to monitor its liquidity in light of the pandemic, the Chinese ban
on Australian coal and our CBA contract negotiations with the UMWA and will
consider when to reinstate the program.

ABL installation


On April 1, 2016, we entered into the Asset-Based Revolving Credit Agreement
with certain lenders and Citibank, N.A. (together with its affiliates,
"Citibank"), as administrative agent and collateral agent, with an aggregate
lender commitment of up to $50.0 million, at any time outstanding, subject to
borrowing base availability.

On October 15, 2018, we entered into an Amended and Restated Asset-Based
Revolving Credit Agreement, by and among us and certain of our subsidiaries, as
borrowers, the guarantors party thereto, the lenders from time to time party
thereto and Citibank, as administrative agent, which amended and restated in its
entirety the existing ABL Facility and, among other things (i) increased the
aggregate commitments available to be borrowed under the ABL Facility to $125.0
million, (ii) extended the maturity date of the Asset-Based Revolving Credit
Agreement to October 15, 2023; (iii) decreased the applicable interest rate
margins with respect to the loans and the applicable fees in connection with the
issuance of letters of credit; and (iv) amended certain covenants and other
terms and provisions.

On December 19, 2019, we entered into an Amendment No. 2 to the Amended and
Restated Credit Agreement, which, among other things amended the definitions of
Fixed Charges and Fixed Charge Coverage Ratio in the Amended and Restated Credit
Agreement to generally conform to the corresponding definitions in the
Indenture, solely for purposes of incurring
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unsecured debt based on fixed charge coverage ratio and added customary language in relation to rules for suspending qualified financial contracts.


On July 20, 2020, we entered into an Amendment No. 3 to the Amended and Restated
Credit Agreement, which among other things (i) clarified certain definitions
related to the calculation of the borrowing base and (ii) decreased the
aggregate commitments available to be borrowed under the ABL Facility to $120.0
million on February 28, 2021.

On December 6, 2021, we entered into the Second Amended and Restated Asset-Based
Revolving Credit Agreement (the "Second Amended and Restated Credit Agreement"),
by and among us and certain of its subsidiaries, as borrowers, the guarantors
party thereto, the lenders from time to time party thereto and Citibank, as
administrative agent (in such capacity, the "Agent"), which amends and restates
in its entirety the existing Amended and Restated Asset-Based Revolving Credit
Agreement (as amended, the "ABL Facility"). The Second Amended and Restated
Credit Agreement, among other things, (i) extended the maturity date of the ABL
Facility to December 6, 2026; (ii) changed the calculation of the interest rate
payable on borrowings from being based on LIBOR to be based on SOFR, with
corresponding changes to the applicable interest rate margins with respect to
such borrowings, (iii) amended certain definitions related to the calculation of
the borrowing base; (iv) increased the commitments that may be used to issue
letters of credit to $65.0 million; and (v) amended certain baskets contained in
the covenants to conform to the baskets contained in the Indenture. The Second
Amended and Restated Credit Agreement also allows us to borrow up to $132.0
million through October 14, 2023, decreasing to $116.0 million through November
2026, subject to availability under the borrowing base and other conditions.

The amendment to the ABL Facility in December 2021 was considered to be a debt
modification and resulted in incremental debt issuance costs of $3.3 million
which are reflected as deferred financing costs in other long-term assets on the
Balance Sheet. These costs coupled with the $1.7 million of deferred financing
costs related to the existing ABL will be amortized to interest expense over the
remaining term of the ABL Facility.

Under the ABL Facility, up to $10.0 million of the commitments may be used to
incur swingline loans from Citibank. As of December 31, 2021, no loans were
outstanding under the ABL Facility and there were $9.4 million of letters of
credit issued and outstanding under the ABL Facility. At December 31, 2021, the
Company had $83.2 million of availability under the ABL Facility.

Revolving loan (and letter of credit) availability under the ABL Facility is
subject to a borrowing base, which at any time is equal to the sum of certain
eligible billed and unbilled accounts, certain eligible inventory, certain
eligible supplies inventory and qualified cash, in each case, subject to
specified advance rates. The borrowing base availability is subject to certain
reserves, which may be established by the agent in its reasonable credit
discretion. The reserves may include rent reserves, lower of cost or market
reserve, port charges reserves and any other reserves that the Agent determines
in its reasonable credit judgment to the extent such reserves relate to
conditions that could reasonably be expected to have an adverse effect on the
value of the collateral included in the borrowing base.

Subject to permitted exceptions, the obligations of the borrowers under the ABL
Facility are guaranteed by each of our domestic subsidiaries and secured by (i)
first-priority security interests in the ABL Priority Collateral (as defined in
the indenture governing the Notes), which includes, among other things, certain
accounts receivables, inventory and cash of ours and the guarantors, and (ii)
second-priority security interests in the Notes Priority Collateral (as defined
in the indenture governing the Notes), which includes, among other things,
material mining properties, shares of capital stock of the guarantors,
intellectual property, as extracted collateral (to the extent not constituting
inventory), and certain fixed assets of ours and the guarantors.

Borrowings under the ABL Facility bear interest at a rate equal to either (i)
SOFR, plus a credit adjustment spread, ranging currently from approximately 11
bps to 43 bps depending on the interest period selected by us, or (ii) an
alternate base rate plus, in each case of the foregoing (i) and (ii), an
applicable margin, which is determined based on the average availability of the
commitments under the ABL Facility, ranging currently from 150 bps to 200 bps or
50 bps to 100 bps, respectively. In addition to paying interest on the
outstanding borrowings under the ABL Facility, we are required to pay a fee in
respect of unutilized commitments, which is based on the availability of the
commitments under the ABL Facility, ranging from 25 bps to 37.5 bps. We are also
required to pay a fee on amounts available to be drawn under outstanding letters
of credit under the ABL Facility at a rate not in excess of 200 bps, and certain
administrative fees.

We are able to voluntarily repay outstanding loans and reduce unused
commitments, in each case, in whole or in part, at any time without premium or
penalty. We are required to repay outstanding loans and cash collateralize
letters of credit anytime the outstanding loans and letters of credit exceed the
maximum availability then in effect. We are also required to use
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net proceeds from certain significant asset sales to repay outstanding loans,
but may re-borrow following such prepayments if the conditions to borrowings are
met.

The ABL Facility contains customary covenants for asset-based credit agreements
of this type, including among other things: (i) requirements to deliver
financial statements, other reports and notices; (ii) restrictions on the
existence or incurrence of certain indebtedness; (iii) restrictions on the
existence or incurrence of certain liens; (iv) restrictions on making certain
restricted payments; (v) restrictions on making certain investments; (vi)
restrictions on certain mergers, consolidations and asset dispositions; (vii)
restrictions on certain transactions with affiliates; and (viii) restrictions on
modifications to certain indebtedness. Additionally, the ABL Facility contains a
springing fixed charge coverage ratio of not less than 1.00 to 1.00, which ratio
is tested if availability under the ABL Facility is less than a certain amount.
As of December 31, 2021, we were not subject to this covenant. Subject to
customary grace periods and notice requirements, the ABL Facility also contains
customary events of default.

We were in compliance with all applicable covenants under the ABL Facility at
December 31, 2021.


Senior Secured Notes

On December 6, 2021, we issued $350.0 million in aggregate principal amount of
7.875% senior secured notes due 2028 (the "Notes") at an initial price of
99.343% of their face amount. The Notes were issued to qualified institutional
buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the
"Securities Act"), and to certain non-U.S. persons in transactions outside the
United States in accordance with Regulation S under the Securities Act. We used
the net proceeds of the offering of the Notes, together with cash on hand, to
fund the redemption of all of our outstanding 8.00% senior secured notes due
2024 (the "Existing Notes"), including payment of the redemption premium in
connection with such redemption. As a result, we recognized a loss on early
extinguishment of debt of $9.7 million which represents the write-off of the
previously capitalized Existing Notes debt issuance costs and debt discount,
net, along with the redemption premium.

In connection with the issuance of the Notes, we incurred debt issuance costs of
$8.1 million for the year ended December 31, 2021, which consisted primarily of
structuring fees and legal fees, and are included in long-term debt in the
Balance Sheet.

The Notes will accrue interest at a rate of 7.875% per year from December 6,
2021. Interest on the Notes will be payable on June 1 and December 1 of each
year, commencing on June 1, 2022. The Notes will mature on December 1, 2028.

At any time prior to December 1, 2024, we may redeem the Notes, in whole or in
part, at a price equal to 100.00% of the principal amount of the Notes redeemed
plus the Applicable Premium (as defined in the indenture governing the Notes)
and accrued and unpaid interest, if any, to, but excluding, the applicable
redemption date. The Notes are redeemable at our option, in whole or in part,
from time to time, on or after December 1, 2024, at redemption prices specified
in the indenture governing the Notes, plus accrued and unpaid interest, if any,
to, but excluding the redemption date. At any time on or prior to December 1,
2024, we may redeem up to 40% of the aggregate principal amount of the Notes
with the proceeds of certain equity offerings, at a redemption price of 107.875%
of the principal amount of the Notes, plus accrued and unpaid interest, if any,
to but excluding the redemption date. We are also required to make offers to
purchase the Notes (i) at a purchase price of 101.00% of the principal amount
thereof in the event we experience specific kinds of change of control
triggering events, (ii) at a purchase price of 103.00% of the principal amount
thereof prior to making certain restricted payments, and (iii) at a purchase
price of 100.00% of the principal amount thereof in the event we make certain
asset sales or dispositions and do not reinvest the net proceeds therefrom or
use such net proceeds to repay certain indebtedness, in each case, plus accrued
and unpaid interest, if any, to, but excluding the date of purchase.

Ticket offer


  On February 21, 2019, we commenced an offer to purchase (the "Restricted
Payment Offer"), in cash, up to $150.0 million principal amount of its
outstanding Existing Notes, at a repurchase price of 103% of the aggregate
principal amount of such Existing Notes, plus accrued and unpaid interest with
respect to such Existing Notes to, but not including, the date of repurchase.
Concurrently with, but separate from, the Restricted Payment Offer, we commenced
a cash tender offer (the "Tender Offer" and, together with the Restricted
Payment Offer, the "Offers") to purchase up to $150.0 million principal amount
of the Existing Notes at a repurchase price of 104.25% of the aggregate
principal amount of such Existing Notes, plus accrued and unpaid interest to,
but not including, the date of repurchase. In connection with the Offers, we
extinguished $140.3 million of the Existing Notes and recognized a loss on early
extinguishment of debt of $9.8 million during the year ended December 31, 2019.
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Short-term investments


During the year ended December 31, 2021, we had $17.0 million of surety bonds
with $8.5 million of collateral recognized as short term investments. These
investments were posted as collateral for the self-insured black lung related
claims asserted by or on behalf of former employees of Walter Energy and its
subsidiaries, which were assumed in the acquisition of certain assets of Walter
Energy and relate to periods prior to March 31, 2016.

Capital expenditure


Our mining operations require investments to maintain, expand, upgrade or
enhance our operations and to comply with environmental regulations. Maintaining
and expanding mines and related infrastructure is capital intensive.
Specifically, the exploration, permitting and development of met coal reserves,
mining costs, the maintenance of machinery and equipment and compliance with
applicable laws and regulations require ongoing capital expenditures. While a
significant amount of the capital expenditures required at our mines has been
spent, we must continue to invest capital to maintain our production. In
addition, any decisions to increase production at our mines and the development
of the high-quality met coal recoverable reserves at Blue Creek could also
affect our capital needs or cause future capital expenditures to be higher than
in the past and/or higher than our estimates.

To fund our capital expenditures, we may be required to use cash from our
operations, incur debt or sell equity securities. Our ability to obtain bank
financing or our ability to access the capital markets for future equity or debt
offerings may be limited by our financial condition at the time of any such
financing or offering and the covenants in our current or future debt
agreements, as well as by general economic conditions, contingencies and
uncertainties, including as a result of the COVID-19 pandemic that are beyond
our control.

Our capital expenditures were $57.9 million, $87.5 million and $107.3 million
for the year ended December 31, 2021, December 31, 2020 and December 31, 2019
respectively. During 2021, we spent approximately $45.2 million in sustaining
capital and an additional $12.7 million in other discretionary capital, which
included primarily the service shaft construction and bathhouse at Mine No. 4.
As a result of the UMWA strike, we temporarily suspended work on the Mine No. 4
service shaft, bathhouse and mine development. Our deferred mine development
costs were $13.5 million, $27.1 million and $23.4 million for the years ended
December 31, 2021, December 31, 2020 and December 31, 2019 respectively, and
primarily relate to Mine No. 4. We evaluate our spending on an ongoing basis in
connection with our mining plans and the prices of met coal taking into
consideration the funding available to maintain our operations at optimal
production levels.

Our capital spending is expected to range from $95.0 million to $105.0 million
for the full year 2022, consisting of sustaining capital expenditures of
approximately $75.0 to $80.0 million and discretionary capital expenditures of
approximately $20.0 to $25.0 million for the 4 North portal construction. Our
sustaining capital expenditures include expenditures related to longwall
operations, continuous miners, new ventilation, and bleeder shafts.

Rights agreement


On February 14, 2020, we adopted the Rights Agreement in an effort to prevent
the imposition of significant limitations under Section 382 of the Code on our
ability to utilize our current NOLs to reduce our future tax liabilities. The
Company's stockholders ratified the Rights Agreement at the 2020 Annual Meeting
of Stockholders.

The Rights Agreement is intended to supplement the 382 Transfer Restrictions and
is designed to serve the interests of all stockholders by preserving the
availability of our NOLs and is similar to plans adopted by other companies with
significant NOLs.

Pursuant to the Rights Agreement, one preferred stock purchase right (a "Right"
or the "Rights") was distributed to stockholders of the Company for each share
of common stock of the Company outstanding as of the close of business on
February 28, 2020. Initially, these Rights will not be exercisable and will
trade with the shares of common stock. If the Rights become exercisable, each
Right will initially entitle stockholders to buy one one-thousandth of a share
of a newly created series of preferred stock designated as "Series A Junior
Participating Preferred Stock" at an exercise price of $31.00 per Right. While
the Rights Agreement is in effect, any person or group that acquires beneficial
ownership of 4.99% or more of the common stock or any existing stockholder who
currently owns 5.00% or more of the common stock that acquires any additional
shares of common stock (such person, group or existing stockholder, an
"Acquiring Person") without approval from the Board would be subject to
significant dilution in their ownership interest in the Company. In such an
event, each Right will entitle its holder to buy, at the exercise price, common
stock having a market value of two times the then current exercise price of the
Right and
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the Rights held by such Acquiring Person will become void. The Rights Agreement
also gives discretion to the Board to determine that someone is an Acquiring
Person even if they do not own 4.99% or more of the Common Stock but do own
4.99% or more in value of the outstanding stock, as determined pursuant to
Section 382 of the Code and the regulations promulgated thereunder. In addition,
the Board has established procedures to consider requests to exempt certain
acquisitions of the Company's securities from the Rights Agreement if the Board
determines that doing so would not limit or impair the availability of the NOLs
or is otherwise in the best interests of the Company. The Board may redeem the
Rights for $0.01 per Right at any time before any person or group triggers the
Rights Agreement. The distribution of the Rights is not a taxable event for
stockholders of the Company and will not affect the Company's' financial
condition or results of operations (including earnings per share).

The Rights will expire on the earliest of (i) the close of business on February
14, 2023,(ii) the close of business on the first anniversary of the date of
entry into the Rights Agreement, if stockholder approval of the Rights Agreement
has not been received by or on such date, (iii) the time at which the Rights are
redeemed as provided in the Rights Agreement, (iv) the time at which the Rights
are exchanged as provided in the Rights Agreement, (v) the time at which the
Board determines that the NOLs are fully utilized or no longer available under
Section 382 of the Code, (vi) the effective date of the repeal of Section 382 of
the Code if the Board determines that the Rights Agreement is no longer
necessary or desirable for the preservation of NOLs, or (vii) the closing of any
merger or other acquisition transaction involving the Company pursuant to an
agreement of the type described in the Rights Agreement. Additional details
about the Rights Agreement is contained in the Company's Current Report on Form
8-K filed with the SEC on February 14, 2020.

Designation of Series A Junior Participating Preferred Shares


In connection with the adoption of the Rights Agreement, the Board approved a
certificate of designations of Series A Junior Participating Preferred Stock
designating 140,000 shares of preferred stock, which was filed on February 14,
2020 with the Secretary of State of the State of Delaware and became effective
on such date. Each one one-thousandth of a share of Series A Junior
Participating Preferred Stock, if issued:

• will not be refundable;

• entitle its holder to quarterly dividend payments equal to the dividend paid on an ordinary share;


•will entitle the holder upon liquidation, dissolution or winding-up of the
Company to receive the greater of (a) $0.01 per one one-thousandth of a share of
Series A Junior Participating Preferred Stock (plus any accrued but unpaid
dividends) and (b) an amount equal to the payment made on one share of common
stock;

•will have the same voting power as an ordinary share; and


•if shares of common stock are exchanged via merger, consolidation, or a similar
transaction, will entitle the holder to a payment equal to the payment made on
one share of Common Stock.

Blue Creek

We believe that Blue Creek represents one of the few remaining untapped reserves
of premium High Vol A met coal in the United States and that it has the
potential to provide us with meaningful growth. We believe that the combination
of a low production cost and the high quality of the High Vol A met coal mined
from Blue Creek, assuming we achieve our expected price realizations, will
generate some of the highest met coal margins in the U.S., generate strong
investment returns for us and achieve a rapid payback of our investment across a
range of met coal price environments.

According to our third party reserve report, and under the SEC's new rules
governing mineral reserves, specifically subpart 1300 of Regulation S-K under
the Modernization of Property Disclosures for Mining Registrants, Blue Creek has
63.3 million metric tons of recoverable reserves and 44.9 million metric tons of
coal resources exclusive of reserves, which total 108.2 million metric tons. We
have the ability to acquire adjacent reserves that would increase total reserves
to over 154 million metric tons. We expect that Blue Creek will have a mine life
of approximately 50 years assuming a single longwall operation.

Our third-party reserve report also indicates that, once developed, Blue Creek
will produce a premium High Vol A met coal that is characterized by low-sulfur
and high CSR. High Vol A met coal has traditionally priced at a discount to the
Australian Premium Low Vol and the U.S. Low Vol coals; however, in the last
eighteen months, it has been priced at or slightly
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above these coals. Warrior expects High Vol A coals will continue to become
increasingly scarce as a result of Central Appalachian producers mining thinner
and deeper reserves, which we expect will continue to support prices. This trend
creates an opportunity for us to take advantage of favorable pricing dynamics
driven by the declining supply of premium High Vol A met coal.

If we are able to successfully develop Blue Creek, we expect that it will be a
transformational investment for us. We expect that the new single longwall mine
at Blue Creek will have the capacity to produce an average of 3.9 million metric
tons per annum of premium High Vol A met coal over the first ten years of
production, thereby increasing our annual production capacity by 54%. This, in
turn, would expand our product portfolio to our global customers by allowing us
to offer three premium hard coking coals from a single port location. Given
these factors, and assuming we achieve expected price realizations, we believe
that we will achieve some of the highest premium met coal margins in the United
States.

Due to the ongoing uncertainty related to the COVID-19 pandemic, the Chinese ban
on Australian coal and our current CBA contract negotiations with the UMWA, we
incurred minimal spend on the development of Blue Creek in 2021. We have delayed
the development of the Blue Creek project, while we focus on preserving cash and
liquidity.

Outlook

During the UMWA strike, the Company continues to successfully execute its
business continuity plans, allowing it to meet the needs of its valued
customers. Despite incurring costs associated with the strike, the Company has
been able to manage its working capital and spending to deliver strong results
in the current markets.

U.S. inflation hit its fastest pace in nearly four decades in 2021 as pandemic
related supply and demand imbalances, along with stimulus intended to shore up
the economy, pushed the consumer price index up to a 7% annual rate. We expect
COVID-19 to continue to impact global supply markets and supply chains,
resulting in shortages, extended lead times and increased inflation impacting
our operations and profitability. We are applying a number of different
strategies to mitigate the impact of these challenges on our operations,
including placing purchase orders earlier, utilizing short term contracts and
leveraging our supplier relationships. While inflation did not have a
significant impact to our profitability in 2021, we do expect ongoing inflation
to have a larger impact in 2022. In 2022, we expect inflation to have a larger
negative impact on our profitability, as we expect increases in steel prices,
freight rates, labor and other materials and supplies. These increases affect,
among others, the costs of belt structure, roof bolts, cable, magnetite, rock
dust and machinery and equipment purchases.

The Company believes that it is well positioned to fulfill anticipated customer
volume commitments for 2022. In the current operating environment and without a
new labor contract, the Company believes that production and sales volume for
2022 could be between 5.5 million and 6.5 million short tons. These volumes
include the assumed restart of Mine 4 and continued lower production at Mine 7.
While the Company has business continuity plans in place, the strike and
COVID-19 may still cause disruption to production and shipment activities, and
the plans may vary significantly from quarter to quarter for the full year of
2022. Similarly, with a new contract, Warrior believes that production and sales
volume over a twelve-month period could ramp up to a run rate of approximately
7.5 million short tons within three to four months.

Significant Accounting Policies and Estimates


The financial statements are prepared in conformity with GAAP, which require the
use of estimates, judgments and assumptions that affect the reported amounts of
assets and liabilities, the disclosure of contingent assets and liabilities at
the date of the financial statements, and the reported amounts of revenues and
expenses in the period presented. Management evaluates these estimates and
assumptions on an ongoing basis, using historical experience, consultation with
experts and other methods considered reasonable in the particular circumstances.
Nevertheless, actual results may differ significantly from management's
estimates.

We believe the following discussion addresses our most critical accounting
estimates, which are those that are most important to the presentation of our
financial condition and results of operations and require management's most
difficult, subjective and complex judgments, often as a result of the need to
make estimates about the effect of matters that are inherently uncertain. These
estimates are based upon management's historical experience and on various other
assumptions that we believe reasonable under the circumstances. Changes in
estimates used in these and other items could have a material impact on our
financial statements. Our significant accounting policies are described in Note
2 to our financial statements included elsewhere in this Annual Report.


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Coal reserves


Our mineral reserves and resources estimates are calculated in accordance with
subpart 1300 of Regulation S-K under the Modernization of Property Disclosures
for Mining Registrants of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). Our mineral reserves and resources are updated on an annual
basis. There are numerous uncertainties inherent in estimating quantities and
values of mineral reserves and resources, including many factors that are beyond
our control. As a result, estimates of mineral reserves and resources are by
their nature uncertain. Information about our reserves and resources consists of
estimates based on engineering, economic and geological data assembled by our
internal engineers and geologists or third-party consultants. A number of
sources of information are used to determine accurate recoverable reserve and
resource estimates including:

•geological conditions;

•the historical production of the zone compared to the production of the other production zones;

•the supposed effects of regulations and taxes by government agencies;

•geological studies and reserves already completed;

•future price assumptions; and

•future operating expenses.

Some of the factors and assumptions, which will change from time to time, that affect the mineral reserve and resource estimates include, among other factors:

•mining activities;

•new engineering and geological data;

•the acquisition or sale of reserves; and

• modification of mining plans or mining methods.


Each of these factors may vary considerably from the assumptions used in
estimating reserves and resources. For these reasons, estimates of economically
recoverable quantities of coal attributable to a particular group of properties,
and classifications of these reserves and resources based on risk of recovery
and estimates of future net cash flows, may vary substantially. Actual
production, revenues and expenditures with respect to reserves and resources
will likely vary from estimates and these variances may be material. Variances
could affect our projected future revenues and expenditures, as well as the
valuation of coal reserves, resources and depletion rates. As of December 31,
2021, we had estimated reserves totaling 162.8 million metric tons and estimated
mineral resources exclusive of reserves of 44.9 million metric tons

Asset retirement obligations


Our asset retirement obligations primarily consist of spending estimates to
reclaim surface lands and supporting infrastructure at both surface and
underground mines in accordance with applicable reclamation laws in the United
States as defined by each mining permit. Significant reclamation activities
include reclaiming refuse piles and slurry ponds, reclaiming the pit and support
acreage at surface mines, and sealing portals at underground mines. Asset
retirement obligations are determined for each mine using various estimates and
assumptions, including estimates of disturbed acreage as determined from
engineering data, estimates of future costs to reclaim the disturbed acreage and
the timing of related cash flows, discounted using a credit-adjusted, risk-free
rate. Our asset retirement obligations also include estimates to reclaim gas
wells in accordance with the Oil and Gas Board of Alabama. On at least an annual
basis, we review our entire asset retirement obligation liability and make
necessary adjustments for permit changes, the anticipated timing of mine
closures, and revisions to cost estimates and productivity assumptions to
reflect current experience. As changes in estimates occur, the carrying amount
of the obligation and asset are revised to reflect the new estimate after
applying the appropriate credit-adjusted, risk-free discount rate. For sites
where there is no asset, expense or income is recognized for changes in
estimates. If our assumptions differ from actual experience, or if changes in
the regulatory environment occur, our actual cash expenditures and costs that we
incur could be materially different than currently estimated. At December 31,
2021, we had recorded asset retirement obligation liabilities of $70.7 million,
including $5.1 million reported as a current liability.

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Income taxes


As a result of the acquisition of certain assets of Walter Energy, we have
significant federal and state NOLs. The Company has federal NOL carryforwards of
approximately $722.3 million as of December 31, 2021, of which $31.0 million are
indefinite lived and the remainder expire predominantly in December 31, 2034
through December 31, 2036. The Company has state NOL carryforwards of
approximately $992.6 million, which expire predominantly in December 31, 2029
through December 31, 2031. In addition, the Company has approximately $23.3
million of general business credits which begin to expire in December 31, 2027
and fully expire in December 31, 2041

We believe the utilization of these NOLs, subject to certain limitations, will
significantly reduce the amount of federal and state income taxes payable by us
for the foreseeable future as compared to what we would have had to pay at the
statutory rates without these NOL benefits. Under Section 382 of the Code, these
NOLs could be subject to annual limitations, further limitations, or
elimination, as described below, if we were to undergo a subsequent ownership
change in the future. To the extent we have taxable income in the future and can
utilize these NOL carryforwards, subject to certain limitations, to reduce
taxable income, our cash taxes will be significantly reduced in those future
years. Notwithstanding the above, even if all of our regular U.S. federal income
tax liability for a given year is reduced to zero by virtue of utilizing our
NOLs, we may still be subject to state, local or other non-federal income taxes.
See "Part I, Item 1A. Risk Factors-Risks Related to Our Business-We may be
unable to generate sufficient taxable income from future operations, or other
circumstances could arise, which may limit or eliminate our ability to utilize
our significant tax NOLs or maintain our deferred tax assets."

On September 18, 2017, the IRS issued to us a private letter ruling, which
favorably resolved certain questions about our ability to qualify for an
exception to the annual limitations under Section 382 of the Code on the
utilization of NOLs to reduce taxable income. Based on such private letter
ruling, we believe that there is no limitation on the utilization of our NOLs to
shield our income from federal taxation. The private letter ruling was issued
based on, among other things, certain facts and assumptions, as well as certain
representations, statements and undertakings provided to the IRS by us. If any
of these facts, assumptions, representations, statements or undertakings are, or
become, incorrect, inaccurate or incomplete, the private letter ruling may be
invalid and the conclusions reached therein could be jeopardized. If we were to
undergo a subsequent ownership change, our ability to utilize our NOLs and other
tax attributes could be subject to severe limitations.

GAAP requires that deferred tax assets and liabilities be recognized using
enacted tax rates for the effect of temporary differences between the book and
tax bases of recorded assets and liabilities. Deferred tax assets are required
to be reduced by a valuation allowance if it is "more likely than not" that some
portion or the entire deferred tax asset will not be realized. In our evaluation
of the need for a valuation allowance on our deferred tax assets, we consider,
among other things, all available positive and negative evidence, including
scheduled reversals of deferred tax liabilities, projected future taxable
income, the overall business environment, our historical financial results, our
industry's historically cyclical financial results, our cumulative three-year
income or loss position and potential current and future tax planning
strategies.

At December 31, 2017, we had a valuation allowance established against our
deferred income tax assets, which represented a full valuation allowance against
our net deferred income tax assets. As of December 31, 2018, after considering
all relevant factors, we concluded that our deferred income tax assets were more
likely than not to be realized and released our valuation allowance against our
net deferred income tax assets resulting in a $225.8 million income tax benefit.

On February 12, 2021, the Alabama Governor signed into law Alabama House Bill
170, now Act 2021-1 (the "Act"). The Act makes several changes to the state's
business tax structure. Among the provisions of the Act, is the repeal of the
so-called corporate income tax "throwback rule." That rule required all sales
originating in Alabama and delivered to a jurisdiction where the seller was not
subject to tax, to be included in the seller's Alabama income tax base. Thus,
prior to repeal of the throwback rule, we had to rely on its Alabama NOL
carryforwards to shelter taxes imposed under such throwback rule. As a result of
the now repealed throwback rule, effective January 1, 2021, all such sales
should now be excluded from Alabama taxable income without the need to utilize
Alabama NOLs. As a result of the repeal of the throwback rule, we remeasured our
Alabama deferred income tax assets and liabilities and recorded a non-cash
income tax benefit of $22.4 million. Additionally, we determined that it is not
more likely than not that we would have sufficient taxable income to utilize all
of our Alabama deferred income tax assets prior to expiration. Therefore, we
established a non-cash valuation allowance of $46.0 million against such
deferred income tax assets.

As of December 31, 2021, we considered all positive and negative evidence and
concluded that our federal deferred income tax assets remain more likely than
not to be realized and a valuation allowance was not required. Certain factors,
could change or circumstances could arise that could further limit or eliminate
the amount of the available NOLs to us, such as an ownership change or an
adjustment by a tax authority. Also, certain circumstances, such as the COVID-19
pandemic, the Chinese ban on Australian coal, the ongoing UMWA strike and the
unknown duration and overall impact on our operations,
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including our inability to generate sufficient future taxable income from operations, could limit our ability to fully utilize our deferred tax assets prior to their expiration.

Recently Adopted Accounting Standards

See note 2 of our consolidated financial statements for information on the new accounting standards.

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