Alpha Metallurgical Resources Inc.
02/27/2026 | Press release | Distributed by Public on 02/27/2026 06:41
Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)
Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis provides a narrative of our results of operations and financial condition for the years ended December 31, 2025 and 2024. The following discussion and analysis should be read in conjunction with our Consolidated Financial Statements and related notes and the risk factors included elsewhere in this Annual Report on Form 10-K. For discussion on results of operations and financial condition pertaining to 2023 and year-over-year comparisons between 2024 and 2023, refer to "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2024.
The following discussion includes forward-looking statements about our business, financial condition and results of operations, including discussions about management's expectations for our business. These statements represent projections, beliefs and expectations based on current circumstances and conditions and in light of recent events and trends, and you should not construe these statements either as assurances of performance or as promises of a given course of action. Instead, various known and unknown factors are likely to cause our actual performance and management's actions to vary, and the results of these variances may be both material and adverse. Refer to "Cautionary Statement Regarding Forward-Looking Statements" and "Item 1A. Risk Factors."
Market Overview
Supply-related issues, including December 2025 and January 2026 flooding in Queensland, Australia, impacted metallurgical markets in recent months. Due to constraints on Australian met coal supply, a divergence between the Australian-linked indices and the U.S. East Coast markets significantly expanded, with spreads also widening between the premium grade low vol. coal and lower quality high vol. coals. Despite supply-related moves like these, the global metallurgical coal markets are still structurally influenced by steel demand, which is linked to economic conditions, policy decisions, geopolitical tensions, tariffs and ongoing trade negotiations, all of which could impact met coal pricing.
Metallurgical coal prices experienced varied movements across the indices during the fourth quarter of 2025. Of the four indices Alpha closely monitors, the Australian Premium Low Volatile index represents the largest move, an increase of 14.6%. The Australian Premium Low Volatile index increased from $190.20 per metric ton on October 1, 2025, to $218.00 per metric ton on December 31, 2025. The U.S. East Coast Low Volatile index rose from $177.00 per metric ton in October to $185.00 per metric ton by the end of December, an increase of 4.5%. By contrast, the U.S. East Coast High Volatile A index fell from $152.50 per metric ton at the beginning of the quarter to $150.50 per metric ton at the end of the quarter, and the U.S. East Coast High Volatile B index decreased from $144.50 per metric ton to $144.20 per metric ton at the quarter's close. Since then, all four indices have increased from their end-of-quarter levels. As of February 16, 2026, the Australian Premium Low Volatile increased to $242.50 per metric ton from its quarter-close level. The U.S. East Coast Low Volatile, High Volatile A, and High Volatile B indices measured $198.00, $160.00, and $150.00 per ton, respectively, as of the same date.
The world manufacturing Purchasing Managers' Index ("PMI") recorded a three-month high in January with a PMI of 50.9, up from December's PMI of 50.4. China's PMI moved slightly higher from 50.1 in December to 50.3 in January. India, an important market for Alpha, had a PMI of 55.4 in January, up from December's two-year low of 55.0. The United States' PMI rose to 52.4 in January from its December level of 51.8. Europe's January PMI was 49.5, an increase from a nine-month low of 48.8 in December. Brazil's manufacturing sector PMI was 47.0 in January, a decrease from December's PMI of 47.6.
As compiled by the World Steel Association ("WSA"), global crude steel production in December 2025 reached 139.6 million metric tons from 70 countries, representing a 3.7% decrease compared to December 2024. The world's largest steel-producing country, China, recorded the largest percentage decline of the top ten steel-producing countries, with its December 2025 production of 68.2 million metric tons, representing a 10.3% decrease year-over-year. The next largest producer, India, recorded 14.8 million metric tons in December 2025, up 10.1% from its December 2024 level. The United States produced 6.9 million metric tons of crude steel in December, representing a 3.6% increase from December 2024. Japan's 6.6 million metric tons of steel produced in December 2025 was down 4.8% year-over-year. Of the top 10 steel-producing countries, Turkey experienced the largest year-over-year percentage increase, at 18.5%, with 3.5 million metric tons of steel produced in December. Regionally, the Asia and Oceania region, which contains both India and China, produced 99.7 million metric tons of crude steel in December 2025, a 6.3% decrease from December 2024. The European Union produced 9.9 million metric tons in December, representing a 3.9% increase compared to the same period last year. North America's December 2025 crude steel production was 9.0 million metric tons, down 0.4% from the December 2024 level.
The American Iron and Steel Institute's capacity utilization rate for U.S. steel mills was 77.8% for the week ending February 14, 2026. This is up from the year-ago period when the capacity utilization rate was 76.5%.
In the seaborne thermal market, the API2 index was $94.55 per metric ton as of October 1, 2025, and increased to $96.90 per metric ton on December 31, 2025.
Business Overview
We are a Tennessee-based mining company with operations across Virginia and West Virginia. With customers across the globe, high-quality reserves and significant port capacity, we are a leading supplier of metallurgical coal products to the steel industry. We operate high-quality, cost-competitive coal mines across the CAPP coal basin. As of December 31, 2025, our operations consisted of nineteen active mines and eight active coal preparation and load-out facilities, with approximately 3,960 employees. We produce, process, and sell met coal and thermal coal. We also sell coal produced by others, some of which is processed and/or blended with coal produced from our mines prior to resale, with the remainder purchased for resale. As of December 31, 2025, we had 294.5 million tons of reserves, which included 282.8 million tons of proven and probable metallurgical reserves and 11.7 million tons of proven and probable thermal reserves.
We began operations on July 26, 2016, with mining operations in NAPP, CAPP, and the PRB. Through the Acquisition, we acquired a significant reserve base. We also acquired Alpha Natural Resources Inc.'s 40.6% interest in the DTA coal export terminal in Newport News, Virginia, and on March 31, 2017, we acquired a portion of another partner's ownership stake and increased our interest to 65.0%. We merged with Alpha Natural Resources Holdings, Inc. and ANR, Inc. on November 9, 2018.
On December 10, 2020, we closed on a transaction with Iron Senergy Holdings, LLC, to sell our thermal coal mining operations located in Pennsylvania consisting primarily of our Cumberland mining complex and related property (our former NAPP operations). This transaction accelerated our strategic exit from thermal coal production to shift our focus to met coal production.
For the years ended December 31, 2025 and 2024, sales of met coal were 14.1 million tons and 15.9 million tons, respectively, and accounted for approximately 93% and 93%, respectively, of our coal sales volume. Sales of thermal coal were 1.2 million tons and 1.2 million tons, respectively, and accounted for approximately 7% and 7%, respectively, of our coal sales volume.
Our sales of met coal were made primarily in several countries in Asia, Europe, and the Americas and to steel companies in the northeastern and midwestern regions of the United States. Our sales of thermal coal were made primarily to large utilities and industrial customers both in the United States and across the world. For the years ended December 31, 2025 and 2024 approximately 73% and 78%, respectively, of our coal revenues were derived from coal sales made to customers outside the United States.
In addition, we generate other revenues from equipment sales, rentals, terminal and processing fees, coal and environmental analysis fees, royalties and the sale of natural gas. We also record freight and handling fulfillment revenue within coal revenues for freight and handling services provided in delivering coal to certain customers, which are a component of the contractual selling price.
As of December 31, 2025, we have one reportable operating segment: Met. Refer to Notes 21 and 22 to the Consolidated Financial Statements for additional disclosures on our reportable segment, geographic areas, and export coal revenue information.
As discussed in the "Market Overview" presented above, metallurgical coal prices remain at lower levels than in recent years due to weak global steel demand which has been influenced by a slowdown in manufacturing activity. Economic pressures, geopolitical uncertainty, and shifting trade policies have contributed to metallurgical market challenges. Our results of operations for the year ended December 31, 2025 were impacted by these factors.
Recent Business Developments
In 2025, due to continued softness in the met coal pricing environment, especially for U.S. High-Vol. products driven by weak global steel demand combined with additional U.S. High-Vol. production, we reduced production levels at our Jerry Fork and Black Eagle mines within our Power Mountain and Marfork mining complexes, respectively, and temporarily idled our Long Branch surface mine within our McClure/Toms Creek mining complex.
In 2024, we began the development phase for our new Kingston Wildcat underground mine located in Fayette County, West Virginia. The mine, which will produce a Low-Vol. quality met coal, is expected to begin production in the first quarter of
2026.
In 2023, we completed development of and commenced production at our Rolling Thunder and Checkmate Powellton mines within our Power Mountain and Elk Run mining complexes, respectively, which produce High-Vol. B quality met coal from the Powellton coal seam.
In the first quarter of 2023, we completed a series of transactions to acquire a number of coal trucks and related equipment and facilities to secure trucking services for our operations. In December 2022, we purchased substantially all of the assets of a mining equipment component manufacturing and rebuild business to help secure the supply of certain underground mining equipment parts needed for our operations.
Factors Affecting Our Results of Operations
Sales Agreements. We manage our commodity price risk for coal sales through the use of coal supply agreements. As of February 17, 2026, we had sales commitments for 2026 as follows:
| 2026 Guidance | ||||||||
| (In millions of tons) | Low | High | ||||||
| Metallurgical | 14.4 | 15.4 | ||||||
| Thermal | 0.7 | 1.1 | ||||||
| Met Segment - Total Shipments | 15.1 | 16.5 | ||||||
|
Committed/Priced (1)
|
Committed |
Volume (in millions of tons)
|
Average Committed Realized Price per Ton | ||||||||||||||
| Metallurgical - Domestic | 4.1 | $136.30 | |||||||||||||||
| Metallurgical - Export | 1.5 | $127.53 | |||||||||||||||
| Metallurgical Total | 37 | % | 5.6 | $134.02 | |||||||||||||
| Thermal | 77 | % | 0.7 | $73.17 | |||||||||||||
|
Met Segment
|
40 | % | 6.3 | $127.30 | |||||||||||||
(1)Based on committed and priced coal shipments as of February 17, 2026. Committed percentage based on the midpoint of shipment guidance range. Actual average per-ton realizations on committed and priced tons recognized in future periods may vary based on actual freight expense in future periods relative to assumed freight expense embedded in projected average per-ton realizations. Includes estimates of future coal shipments based upon contract terms and anticipated delivery schedules. Actual coal shipments may vary from these estimates.
Realized Pricing.Our realized price per ton of coal is influenced by many factors that vary by region, including (i) coal quality, which includes energy (heat content), sulfur, ash, volatile matter and moisture content; (ii) differences in market conventions concerning transportation costs and volume measurement; and (iii) regional supply and demand.
•Coal Quality. The energy content or heat value of thermal coal is a significant factor influencing coal prices as higher energy coal is more desirable to consumers and typically commands a higher price in the market. The heat value of coal is commonly measured in British thermal units or the amount of heat needed to raise the temperature of one pound of water by one-degree Fahrenheit. Coal from the Eastern and Midwest regions of the United States tends to have a higher heat value than coal found in the western United States. Coal volatility is a significant factor influencing met coal pricing as coal with a lower volatility has historically been more highly valued and typically commands a higher price in the market. The volatility refers to the loss in mass, less moisture, when coal is heated in the absence of air. The volatility of met coal determines the percentage of feed coal that becomes coke, known as coke yield, with lower volatility producing a higher coke yield.
•Market Conventions.Coal sales contracts are priced according to conventions specific to the market into which such coal is to be sold. Our domestic sales contracts are typically priced free on board ("FOB") at our mines and on a short ton basis. Our international sales contracts are typically priced FOB at the shipping port from which such coal is delivered and on a metric ton basis. Accordingly, for international sales contracts, we typically bear the cost of transportation from our mines to the applicable outbound shipping port, and our coal sales realization per ton calculation reflects the conversion of such tonnage from metric tons into short tons, as well as the elimination of the freight and handling fulfillment component of coal sales revenue. In addition, for domestic sales contracts, as
customers typically bear the cost of transportation from our mines, our operations located further away from the end user of the coal may command lower prices.
•Regional Supply and Demand.Our realized price per ton is influenced by market forces of the regional market into which such coal is to be sold. Market pricing may vary according to region and lead to different discounts or premiums to the most directly comparable benchmark price for such coal product.
Costs. Our results of operations are dependent upon our ability to maximize productivity and control costs. Our primary expenses are for operating supply costs, repair and maintenance expenditures, cost of purchased coal, royalties, wages and benefits, freight and handling costs and taxes incurred in selling our coal. The principal goods and services we use in our operations include maintenance and repair parts and services, electricity, fuel, roof control and support items, explosives, tires, conveyance structure, ventilation supplies and lubricants. Our management strives to aggressively control costs and improve operating performance to mitigate external cost pressures. We experience volatility in operating costs related to fuel, explosives, steel, tires, contract services and healthcare, among others, and take measures to mitigate the increases in these costs at all operations. We have a centralized sourcing group for major supplier contract negotiation and administration, for the negotiation and purchase of major capital goods, and to support the business units. We promote competition between suppliers and seek to develop relationships with suppliers that focus on lowering our costs. We seek suppliers who identify and concentrate on implementing continuous improvement opportunities within their area of expertise. To the extent upward pressure on costs exceeds our ability to realize sales increases, or if we experience unanticipated operating or transportation difficulties, our operating margins would be negatively impacted. We may also experience difficult geologic conditions, delays in obtaining permits, labor shortages, unforeseen equipment problems, and unexpected shortages of critical materials such as tires, fuel and explosives that may result in adverse cost increases and limit our ability to produce at forecasted levels.
Results of Operations
Our results of operations for the years ended December 31, 2025 and 2024 are discussed in these "Results of Operations" presented below.
Year Ended December 31, 2025 Compared to the Year Ended December 31, 2024
Revenues
The following table summarizes information about our revenues during the years ended December 31, 2025 and 2024:
| Year Ended December 31, | Increase (Decrease) | ||||||||||||||||||||||
| (In thousands, except for per ton data) | 2025 | 2024 | $ or Tons | % | |||||||||||||||||||
| Coal revenues | $ | 2,122,605 | $ | 2,946,579 | $ | (823,974) | (28.0) | % | |||||||||||||||
| Other revenues | 6,876 | 10,706 | (3,830) | (35.8) | % | ||||||||||||||||||
| Total revenues | $ | 2,129,481 | $ | 2,957,285 | $ | (827,804) | (28.0) | % | |||||||||||||||
| Tons sold | 15,280 | 17,127 | (1,847) | (10.8) | % | ||||||||||||||||||
Coal revenues. Coal revenues decreased $824.0 million, or 28.0%, for the year ended December 31, 2025 compared to the prior year period. The decrease was primarily due to a 19.3% decline in average coal sales realization as metallurgical coal pricing declined significantly as a result of weakened global steel demand. Coal sales volumes also declined 10.8% due to weaker demand. Refer to the "Non-GAAP Coal revenues" section below for further detail on coal revenues for the year ended December 31, 2025 compared to the prior year period.
Cost and Expenses
The following table summarizes information about our costs and expenses during the years ended December 31, 2025 and 2024:
| Year Ended December 31, | Increase (Decrease) | ||||||||||||||||||||||
| (In thousands) | 2025 | 2024 | $ | % | |||||||||||||||||||
| Cost of coal sales (exclusive of items shown separately below) | $ | 1,924,691 | $ | 2,451,601 | $ | (526,910) | (21.5) | % | |||||||||||||||
| Depreciation, depletion and amortization | 174,524 | 167,331 | $ | 7,193 | 4.3 | % | |||||||||||||||||
| Accretion on asset retirement obligations | 22,126 | 25,050 | $ | (2,924) | (11.7) | % | |||||||||||||||||
| Amortization of acquired intangibles | 5,427 | 6,700 | $ | (1,273) | (19.0) | % | |||||||||||||||||
| Selling, general and administrative expenses (exclusive of depreciation, depletion and amortization shown separately above) | 60,158 | 74,000 | $ | (13,842) | (18.7) | % | |||||||||||||||||
| Other operating loss | 3,921 | 4,749 | $ | (828) | (17.4) | % | |||||||||||||||||
| Total costs and expenses | $ | 2,190,847 | $ | 2,729,431 | $ | (538,584) | (19.7) | % | |||||||||||||||
Cost of coal sales. Cost of coal sales decreased $526.9 million, or 21.5%, for the year ended December 31, 2025 compared to the prior year period, partially due to a 10.8% decline in coal sales volumes due to weaker demand. Average cost of coal sales per ton decreased 12.0% compared to the prior year period, due in part to a reduction in freight and handling costs as a relatively lower percentage of export sales resulted in lower rail and ocean vessel freight costs. The lower coal pricing environment reduced royalties and taxes. In addition, lower levels of purchased coal and the ongoing impact of cost reduction efforts, including wage reductions during the second quarter of 2025, as well as the impact of previous decisions to reduce relatively higher-cost production sources served to reduce costs on a per ton basis. Refer to the "Non-GAAP Cost of coal sales" section below for further detail on cost of coal sales for the year ended December 31, 2025 compared to the prior year period.
Depreciation, depletion and amortization. Depreciation, depletion and amortization increased $7.2 million, or 4.3%, for the year ended December 31, 2025 compared to the prior year period. The increase was primarily due to an increase in assets placed in service through December 2025.
Selling, general and administrative. Selling, general and administrative expenses decreased $13.8 million, or 18.7%, for the year ended December 31, 2025 compared to the prior year period. This decrease was primarily related to decreases of $8.8 million in incentive pay and $2.0 million in wages and benefits expenses.
Total Other Expense, Net
The following table summarizes information about our total other expense, net during the years ended December 31, 2025 and 2024:
| Year Ended December 31, | Increase (Decrease) | ||||||||||||||||||||||
| (In thousands) | 2025 | 2024 | $ | % | |||||||||||||||||||
| Total other expense, net | $ | 26,093 | $ | 17,104 | $ | 8,989 | 52.6 | % | |||||||||||||||
Total other expense, net increased $9.0 million, or 52.6%, for the year ended December 31, 2025 compared to the prior year period, primarily related to increases in equity loss in affiliates and net periodic benefit costs for black lung benefit obligations and a decrease in interest income.
Income Tax (Benefit) Expense
The following table summarizes information about our income tax (benefit) expense during the years ended December 31, 2025 and 2024:
| Year Ended December 31, | Increase (Decrease) | ||||||||||||||||||||||
| (In thousands) | 2025 | 2024 | $ | % | |||||||||||||||||||
| Income tax (benefit) expense | $ | (25,772) | $ | 23,171 | $ | (48,943) | (211.2) | % | |||||||||||||||
Income tax benefit of $25.8 million was recorded for the year ended December 31, 2025 on a loss before income taxes of $87.5 million. The effective tax rate of 29.5% differs from the federal statutory rate of 21% primarily due to the permanent impact of percentage depletion, state income taxes, net of federal impact, and the impact of stock compensation, partially offset by the impact of non-deductible compensation and provision-to-return adjustments.
Income tax expense of $23.2 million was recorded for the year ended December 31, 2024 on income before income taxes of $210.8 million. The effective tax rate of 11.0% differs from the federal statutory rate of 21% primarily due to the permanent impact of stock compensation, percentage depletion, and foreign-derived intangible income deductions, partially offset by the impact of non-deductible compensation and state income taxes, net of federal impact. Refer to Note 16 to the Consolidated Financial Statements for additional information.
Non-GAAP Financial Measures
The discussion below contains "non-GAAP financial measures." These are financial measures that either exclude or include amounts that are not excluded or included in the most directly comparable measures calculated and presented in accordance with generally accepted accounting principles in the United States ("U.S. GAAP" or "GAAP"). Specifically, we make use of the non-GAAP financial measures "Adjusted EBITDA," "non-GAAP coal revenues," "non-GAAP cost of coal sales," and "non-GAAP coal margin." In addition to net income (loss), we use Adjusted EBITDA to measure the operating performance of our reportable segment. Adjusted EBITDA does not purport to be an alternative to net income (loss) as a measure of operating performance or any other measure of operating results, financial performance, or liquidity presented in accordance with GAAP. Moreover, this measure is not calculated identically by all companies and therefore may not be comparable to similarly titled measures used by other companies. Adjusted EBITDA is presented because management believes it is a useful indicator of the financial performance of our coal operations. We use non-GAAP coal revenues to present coal revenues generated, excluding freight and handling fulfillment revenues. Non-GAAP coal sales realization per ton for our operations is calculated as non-GAAP coal revenues divided by tons sold. We use non-GAAP cost of coal sales to adjust cost of coal sales to remove freight and handling costs, depreciation, depletion and amortization - production (excluding the depreciation, depletion and amortization related to selling, general and administrative functions), accretion on asset retirement obligations, amortization of acquired intangibles, and idled and closed mine costs. Non-GAAP cost of coal sales per ton for our operations is calculated as non-GAAP cost of coal sales divided by tons sold. Non-GAAP coal margin per ton for our coal operations is calculated as non-GAAP coal sales realization per ton for our coal operations less non-GAAP cost of coal sales per ton for our coal operations. The presentation of these measures should not be considered in isolation, or as a substitute for analysis of our results as reported under GAAP.
Management uses non-GAAP financial measures to supplement GAAP results to provide a more complete understanding of the factors and trends affecting the business than GAAP results alone. The definition of these non-GAAP measures may be changed periodically by management to adjust for significant items important to an understanding of operating trends and to adjust for items that may not reflect the trend of future results by excluding transactions that are not indicative of our core operating performance. Furthermore, analogous measures are used by industry analysts to evaluate our operating performance. Because not all companies use identical calculations, the presentations of these measures may not be comparable to other similarly titled measures of other companies and can differ significantly from company to company depending on long-term strategic decisions regarding capital structure, the tax jurisdictions in which companies operate, capital investments and other factors.
Included below are reconciliations of non-GAAP financial measures to GAAP financial measures.
The following tables summarize certain financial information relating to our coal operations for the years ended December 31, 2025 and 2024:
| Year Ended December 31, | Increase (Decrease) | ||||||||||||||||||||||
| 2025 | 2024 | $ or Tons | % | ||||||||||||||||||||
| Coal revenues | $ | 2,122,605 | $ | 2,946,579 | $ | (823,974) | (28.0) | % | |||||||||||||||
| Less: Freight and handling fulfillment revenues | (333,691) | (503,306) | 169,615 | 33.7 | % | ||||||||||||||||||
| Non-GAAP Coal revenues | $ | 1,788,914 | $ | 2,443,273 | $ | (654,359) | (26.8) | % | |||||||||||||||
| Non-GAAP Coal sales realization per ton | $ | 117.08 | $ | 142.66 | $ | (25.58) | (17.9) | % | |||||||||||||||
| Cost of coal sales (exclusive of items shown separately below) | $ | 1,924,691 | $ | 2,451,601 | $ | (526,910) | (21.5) | % | |||||||||||||||
|
Depreciation, depletion and amortization - production (1)
|
173,249 | 166,105 | 7,144 | 4.3 | % | ||||||||||||||||||
| Accretion on asset retirement obligations | 22,126 | 25,050 | (2,924) | (11.7) | % | ||||||||||||||||||
| Amortization of acquired intangibles | 5,427 | 6,700 | (1,273) | (19.0) | % | ||||||||||||||||||
| Total Cost of coal sales | $ | 2,125,493 | $ | 2,649,456 | $ | (523,963) | (19.8) | % | |||||||||||||||
| Less: Freight and handling costs | (333,691) | (503,306) | 169,615 | 33.7 | % | ||||||||||||||||||
|
Less: Depreciation, depletion and amortization - production (1)
|
(173,249) | (166,105) | (7,144) | (4.3) | % | ||||||||||||||||||
| Less: Accretion on asset retirement obligations | (22,126) | (25,050) | 2,924 | 11.7 | % | ||||||||||||||||||
| Less: Amortization of acquired intangibles | (5,427) | (6,700) | 1,273 | 19.0 | % | ||||||||||||||||||
| Less: Idled and closed mine costs | (28,988) | (29,868) | 880 | 2.9 | % | ||||||||||||||||||
| Non-GAAP Cost of coal sales | $ | 1,562,012 | $ | 1,918,427 | $ | (356,415) | (18.6) | % | |||||||||||||||
| Non-GAAP Cost of coal sales per ton | $ | 102.23 | $ | 112.01 | $ | (9.78) | (8.7) | % | |||||||||||||||
| GAAP Coal margin | $ | (2,888) | $ | 297,123 | $ | (300,011) | (101.0) | % | |||||||||||||||
| GAAP Coal margin per ton | $ | (0.19) | $ | 17.35 | $ | (17.54) | (101.1) | % | |||||||||||||||
| Non-GAAP Coal margin | $ | 226,902 | $ | 524,846 | $ | (297,944) | (56.8) | % | |||||||||||||||
| Non-GAAP Coal margin per ton | $ | 14.85 | $ | 30.64 | $ | (15.79) | (51.5) | % | |||||||||||||||
| Tons sold | 15,280 | 17,127 | (1,847) | (10.8) | % | ||||||||||||||||||
(1)Depreciation, depletion and amortization - production excludes the depreciation, depletion and amortization related to selling, general and administrative functions.
Non-GAAP Coal revenues. Non-GAAP coal revenues decreased $654.4 million, or 26.8%, for the year ended December 31, 2025 compared to the prior year period. The decrease was primarily due to a $25.58, or 17.9%, decline in non-GAAP coal sales realization per ton as weakened global steel demand reduced metallurgical coal pricing. In addition, coal sales volumes declined 10.8% due to weaker demand.
Non-GAAP Cost of coal sales. Non-GAAP cost of coal sales decreased $356.4 million, or 18.6%, for the year ended December 31, 2025 compared to the prior year period, primarily due to a 10.8% decline in coal sales volumes due to weaker demand. Average non-GAAP cost of coal sales per ton decreased $9.78, or 8.7%, compared to the prior year period due in part to lower royalties and taxes as a result of a lower coal pricing environment. In addition, lower levels of purchased coal and the ongoing impact of cost reduction efforts, including wage reductions during the second quarter of 2025, as well as the impact of previous decisions to reduce higher-cost production sources served to reduce costs on a per ton basis. Our Checkmate Powellton mine, which was in its early stages of operations and had relatively higher costs, was idled during the fourth quarter of 2024. In addition, our Long Branch surface mine was idled in the first quarter of 2025 and production levels were reduced at our Jerry Fork and Black Eagle mines during 2025.
Adjusted EBITDA
The following tables present a reconciliation of net (loss) income to Adjusted EBITDA for the years ended December 31, 2025 and 2024:
| Year Ended December 31, | |||||||||||
| (In thousands) | 2025 | 2024 | |||||||||
| Net (loss) income | $ | (61,687) | $ | 187,579 | |||||||
| Interest expense | 3,019 | 3,811 | |||||||||
| Interest income | (15,466) | (18,208) | |||||||||
| Income tax (benefit) expense | (25,772) | 23,171 | |||||||||
| Depreciation, depletion, and amortization | 174,524 | 167,331 | |||||||||
| Non-cash stock compensation expense | 13,598 | 12,318 | |||||||||
| Accretion on asset retirement obligations | 22,126 | 25,050 | |||||||||
| Amortization of acquired intangibles | 5,427 | 6,700 | |||||||||
|
Non-recurring mine flood costs (1)
|
6,098 | - | |||||||||
| Adjusted EBITDA | $ | 121,867 | $ | 407,752 | |||||||
(1)Non-recurring mine recovery and idle costs due to the water inundation at the Rolling Thunder mine in November 2025.
The following table summarizes Adjusted EBITDA:
| Year Ended December 31, | Increase (Decrease) | ||||||||||||||||||||||
| (In thousands) | 2025 | 2024 | $ | % | |||||||||||||||||||
| Adjusted EBITDA | $ | 121,867 | $ | 407,752 | $ | (285,885) | (70.1) | % | |||||||||||||||
Adjusted EBITDA decreased $285.9 million, or 70.1%, for the year ended December 31, 2025 compared to the prior year period, primarily driven by a decrease in tons sold and decreased coal margin due to lower non-GAAP coal sales realization per ton in the current period.
Liquidity and Capital Resources
Overview
Our primary sources of liquidity are derived from existing unrestricted cash balances, short-term investments, proceeds from future coal sales, and amounts available under our revolving credit agreement. Our primary capital resource requirements stem from the cost of our coal production and purchases, selling and administrative expenses, taxes, capital expenditures, debt service obligations, reclamation obligations, and collateral requirements. As of December 31, 2025, we had $9.8 million of long-term indebtedness outstanding, net of current portion, and no indebtedness and $41.3 million letters of credit ("LC") outstanding under our ABL Facility (as defined below).
We believe that cash on hand and cash generated from our operations will be sufficient to meet our working capital, anticipated capital expenditure, income tax, debt service, collateral and reclamation obligations requirements for the next 12 months and the reasonably foreseeable future. We may also use cash in accordance with our share repurchase program. We rely on a number of assumptions in budgeting for our future activities. These include the costs for mine development to sustain capacity of our operating mines, our cash flows from operations, effects of regulation and taxes by governmental agencies, mining technology improvements and reclamation costs. These assumptions are inherently subject to significant business, political, economic, regulatory, environmental and competitive uncertainties, pending and existing climate-related initiatives, contingencies and risks, all of which are difficult to predict and many of which are beyond our control. For example, if the new authorization process for all self-insured coal mine operators is adopted, it would substantially increase the collateral required to secure our self-insured federal black lung obligations. Refer to the "DCMWC Reauthorization Process" section below for more information. Increased scrutiny of ESG matters specific to the coal sector could negatively influence our ability to raise capital in the future and result in a reduced number of surety and insurance providers. We may need to raise additional funds if market conditions deteriorate, if one or more of our assumptions prove to be incorrect or if we choose to expand our acquisition or
development efforts or any other activity more rapidly than we presently anticipate and we may not be able to do so in a timely fashion, on terms acceptable to us, or at all. Additionally, we may elect to raise additional funds before we need them if the conditions for raising capital are favorable. We may seek to sell equity or debt securities or obtain additional bank credit facilities. The sale of equity securities could result in dilution to our stockholders. The incurrence of additional indebtedness could result in increased fixed obligations and additional covenants that could restrict our operations.
Liquidity
The following table summarizes our total liquidity as of December 31, 2025:
| (in thousands) | December 31, 2025 | ||||
| Cash and cash equivalents | $ | 365,974 | |||
| Short-term investments | 49,582 | ||||
|
Credit facility availability (1)
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183,746 | ||||
| Minimum liquidity requirement | (75,000) | ||||
| Total liquidity | $ | 524,302 | |||
(1)Comprised of our unused commitments available under our credit agreement entered into on October 27, 2023 that was amended and extended on May 6, 2025 (the "ABL Agreement") after considering $41.3 million of outstanding LCs, subject to limitations described therein.
Cash Collateral
We are required to provide cash collateral to secure our obligations under certain worker's compensation, black lung, reclamation-related obligations, financial payments and other performance obligations, and other operating agreements. Future regulatory changes relating to these obligations could result in increased obligations, additional costs, or additional collateral requirements which could require greater use of alternative sources of funding for this purpose, which would reduce our liquidity. Refer to the "DCMWC Reauthorization Process" section below for information related to the new authorization process for self-insured coal mine operators being implemented by the U.S. Department of Labor (Division of Coal Mine Workers' Compensation). As of December 31, 2025, we had the following cash collateral on our Consolidated Balance Sheets:
|
(in thousands)
|
December 31, 2025 | ||||
| Long-term restricted cash | $ | 126,911 | |||
| Long-term restricted investments | 34,356 | ||||
| Long-term deposits | 4,792 | ||||
| Total cash collateral | $ | 166,059 | |||
Off-Balance Sheet Arrangements
We are required to provide financial assurance in order to perform the post-mining reclamation required by our mining permits, pay workers' compensation claims under workers' compensation laws in various states, pay federal black lung benefits, and perform certain other obligations. In order to provide the required financial assurance, we generally use surety bonds for post-mining reclamation and workers' compensation obligations. We also use bank LCs to collateralize certain obligations. As of December 31, 2025, we had the following outstanding surety bonds and LCs:
|
(in thousands)
|
December 31, 2025 | ||||
| Surety bonds | $ | 170,014 | |||
|
Letters of credit (1)
|
$ | 41,254 | |||
(1) The LCs outstanding are under the ABL Agreement.
Refer to Note 20, part (c), to the Consolidated Financial Statements for further disclosures on off-balance sheet arrangements.
Debt Financing
Refer to Note 13 to the Consolidated Financial Statements for disclosures on long-term debt including the May 6, 2025 amendment and extension of the ABL Facility.
Capital Requirements
Our capital expenditures for the year ended December 31, 2025 were $127.2 million. We expect to spend between $148 million and $168 million on capital expenditures during 2026. At the midpoint of guidance, this total includes approximately $137.0 million in sustaining maintenance capital, approximately $9.5 million in planned projects to invest in mine development, and approximately $11.5 million in carryover from 2025 due to timing and availability of supplies and contract labor.
Contractual Obligations
The following is a summary of our significant contractual obligations as of December 31, 2025:
|
(in thousands)
|
2026 | 2027 | 2028 | 2029 | 2030 | After 2030 | Total | ||||||||||||||||||||||||||||||||||
| Minimum royalties | $ | 16,859 | $ | 16,163 | $ | 15,104 | $ | 13,745 | $ | 13,642 | $ | 99,215 | $ | 174,728 | |||||||||||||||||||||||||||
| Coal purchase commitments | 11,072 | - | - | - | - | - | 11,072 | ||||||||||||||||||||||||||||||||||
|
Unconditional purchase obligations (1)
|
117,517 | 53,633 | 14,246 | 14,667 | 3,693 | - | 203,756 | ||||||||||||||||||||||||||||||||||
| Total | $ | 145,448 | $ | 69,796 | $ | 29,350 | $ | 28,412 | $ | 17,335 | $ | 99,215 | $ | 389,556 | |||||||||||||||||||||||||||
(1)Includes contractual commitments related to capital expenditures as well as rail freight and export terminal costs, including approximately $39.6 million in 2026 for expected DTA funding. Refer to "Business Updates" below for further discussion.
Additionally, we have long-term liabilities relating to asset retirement obligations, pension benefits, black lung benefits, postretirement life insurance benefits, and workers' compensation benefits. The table below reflects the estimated undiscounted cash flows for these obligations:
| (in thousands) | 2026 | 2027 | 2028 | 2029 | 2030 | After 2030 | Total | ||||||||||||||||||||||||||||||||||
| Asset retirement obligation | $ | 23,198 | $ | 37,191 | $ | 28,098 | $ | 24,409 | $ | 21,996 | $ | 362,947 | $ | 497,839 | |||||||||||||||||||||||||||
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Pension benefit obligation (1)
|
31,937 | 31,822 | 31,526 | 31,236 | 30,964 | 825,332 | 982,817 | ||||||||||||||||||||||||||||||||||
| Black lung benefit obligation | 12,329 | 12,200 | 11,960 | 11,769 | 11,703 | 224,230 | 284,191 | ||||||||||||||||||||||||||||||||||
| Postretirement life insurance benefit obligation | 610 | 607 | 607 | 605 | 603 | 11,668 | 14,700 | ||||||||||||||||||||||||||||||||||
| Workers' compensation benefit obligation | 7,230 | 5,320 | 4,291 | 3,746 | 3,169 | 46,959 | 70,715 | ||||||||||||||||||||||||||||||||||
| Total | $ | 75,304 | $ | 87,140 | $ | 76,482 | $ | 71,765 | $ | 68,435 | $ | 1,471,136 | $ | 1,850,262 | |||||||||||||||||||||||||||
(1)The estimated undiscounted cash flows are expected to be paid from the defined benefit pension plan assets held within the defined benefit pension plan trust. Refer to Note 17 to the Consolidated Financial Statements for further disclosures related to this obligation.
Business Updates
On March 25, 2025, Moody's Investors Service assessed our Senior Secured Bank Credit Facility with a B1/LGD4 Rating and maintained our B1 Corporate Family Rating and SGL-2 Speculative Grade Liquidity Rating. The rating outlook was noted as stable. On July 22, 2025, S&P Global Ratings maintained our BB- issuer credit rating and stable rating outlook. On December 10, 2025, Moody's Investors Service affirmed our B1 rating on the ABL Facility, B1 Corporate Family Rating, and SGL-2 Speculative Grade Liquidity Rating and noted that the rating outlook remained stable. Should we receive any negative outlook ratings in the future, such negative outlook ratings would result in potential liquidity risks for us, including the risks of declines in our stock value, declines in our cash and cash equivalents, less availability and higher costs of additional credit, and requests for additional collateral by surety providers.
We own a 65.0% interest in DTA, a coal export terminal in Newport News, Virginia. DTA provides us with the ability to fulfill a broad range of customer coal quality requirements through coal blending, while also providing storage capacity and transportation flexibility. DTA needs capital investment to maximize functionality and minimize downtime due to mechanical issues. Under the terms of our partnership related agreements with respect to our investment in DTA, we are required to fund our proportionate share of DTA's ongoing operating and capital costs. Beyond our share of routine operating costs, we expect
we will invest an average of approximately $21.0 million per year for infrastructure and equipment upgrades at DTA over the next 5 years. In addition, to mitigate the risk of shipment delays during the upgrade period, in April 2024, we entered into a 3-year agreement which would allow for the loading of 1.2 to 2.0 million tons of coal annually at a third party terminal in Newport News, VA.
We continually strive to enhance our capital structure and financial flexibility. We may refinance or repay outstanding debt, seek to amend our credit facility, undertake additional borrowings, sell assets or businesses or take other measures as we believe circumstances warrant. We may decide to pursue or not pursue these opportunities at any time. Access to additional funds from liquidity-generating transactions or other sources of external financing is subject to market conditions and certain limitations, including our credit rating and covenant restrictions in our credit facilities.
As a regular part of our business, we review opportunities for, and engage in discussions and negotiations concerning, the acquisition or disposition of coal mining and related infrastructure assets and interests in coal mining companies, and acquisitions or dispositions of, or combinations or other strategic transactions involving, companies with coal mining or other complementary assets. When we believe that these opportunities are consistent with our strategic plans and our acquisition or disposition criteria, we will make bids or proposals and/or enter into letters of intent and other similar agreements. These bids or proposals, which may be binding or non-binding, are customarily subject to a variety of conditions and usually permit us to terminate the discussions and any related agreement if, among other things, we are not satisfied with the results of due diligence. Any acquisition opportunities we pursue could materially affect our liquidity and capital resources and may require us to incur indebtedness, seek equity capital or both. There can be no assurance that additional financing will be available on terms acceptable to us, or at all.
Income Taxes
During the year ended December 31, 2025, we paid federal and state income taxes, net of refunds received, of $2.1 million.
On July 4, 2025, legislation commonly referred to as the "One Big Beautiful Bill Act" ("OBBBA") was signed into law. The OBBBA includes the addition of metallurgical coal to the list of "applicable critical minerals" for purposes of the Section 45X credit. The Section 45X credit (also known as the advanced manufacturing production credit), as amended, provides a refundable tax credit equal to 2.5% of the production costs for metallurgical coal produced during tax years 2026 through 2029. We are currently analyzing the financial impact of the Section 45X credit and expect that it will serve as a source of additional liquidity in future years. Based on preliminary analysis, we currently believe the annual cash benefit of the tax credit may be in the range of $30 million to $50 million, dependent upon the amount of qualifying production costs incurred in a given year.
Refer to Note 16 to the Consolidated Financial Statements for further disclosures related to income taxes.
Pension Plan
We sponsor a qualified non-contributory pension plan ("Pension Plan") which covers certain salaried and non-union hourly employees. Participants accrued benefits either based on certain formulas, the participant's compensation prior to retirement or plan specified amounts for each year of service. Benefits are frozen under the Pension Plan. Annual funding contributions to the Pension Plan are made as recommended by consulting actuaries based upon the Employee Retirement Income Security Act of 1974, as amended ("ERISA") funding standards. Funding decisions also consider certain funded status thresholds defined by the Pension Protection Act of 2006. We contributed $17.0 million in minimum contributions to the Pension Plan in 2025 and expect to contribute $23.1 million in 2026. Refer to Note 17 to the Consolidated Financial Statements for further disclosures related to the Pension Plan and the related obligation.
DCMWC Reauthorization Process
In January 2025, the DOL published a final rule revising the requirements and procedures for authorizing operators to self-insure their liabilities under the Black Lung Benefits Act (the "2025 Final Rule"), and we anticipate it would require a substantial increase in the collateral required to secure self-insured federal black lung obligations. Under the 2025 Final Rule's 100% minimum collateral requirement, if this requirement is not modified or stayed through legal action, we estimate we would be required to provide approximately $80.0 million to $100.0 million of collateral to secure certain of our black lung obligations. The 2025 Final Rule permits us to use combinations of letters of credit, surety bonds, and cash to meet the collateral requirement. We received a letter from the Division of Coal Mine Workers' Compensation ("DCMWC") dated January 14, 2025, outlining the new procedures and application process for authorizing operators to self-insure under the new regulation. The letter outlined authorization form requirements and provided a 60-day period for the submission of the required documents. Subsequently, on February 20, 2025, we received a letter from the DCMWC stating that the 60-day deadline to
provide information was no longer applicable and no information was required to be submitted at this time. DCMWC stated that additional guidance would be provided in due course after consultation with new DOL leadership. We continue to evaluate the potential impact of the 2025 Final Rule and await further communication from the DCMWC.
New York State Act
In December 2024, the state of New York adopted the Climate Change Superfund Act, purporting to impose significant, ongoing cash charges upon a variety of companies involved in the production and use of fossil fuels, including our company (the "Act"). Other states have adopted or are contemplating adopting similar laws.
We believe that the new law is unconstitutional under the U.S. Constitution. In February 2025, we, along with numerous U.S. states and other entities involved in the fossil fuel industry, filed a complaint against the attorney general of New York and other New York officials. The complaint was filed in the federal district court for the Northern District of New York and requests that the court (a) declare that the Act is preempted by federal statutes and otherwise violates the U.S. Constitution, (b) declare that the Act is unenforceable, and (c) enjoin the state of New York and its officials from taking any action to implement or enforce the Act. On May 1, 2025, the U.S. Department of Justice and the Environmental Protection Agency filed a similar complaint against the State of New York, Kathleen Hochul in her capacity as Governor, Letitia James in her capacity as New York Attorney General and Amanda Lefton in her capacity as Acting Commissioner of the New York Department of Environmental Conservation in the Southern District of New York, requesting that the court declare the Act unconstitutional and permanently enjoin its implementation or enforcement.
Although we believe that the Act is very unlikely to be upheld, the outcome cannot be predicted with certainty. If the Act, or similar acts adopted in other U.S. states, were upheld, our liquidity would be materially, adversely affected.
Respirable Crystalline Silica Final Rule
In April 2024, MSHA issued its final rule, Lowering Miners' Exposure to Respirable Crystalline Silica and Improving Respiratory Protection, to reduce miner exposures to respirable crystalline silica and improve respiratory protection for all airborne hazards. The final rule lowers the permissible exposure limit of respirable crystalline silica at 50 micrograms per cubic meter of air (μg/m3) for a full shift exposure, calculated as an 8-hour time weighted average, for all miners. The final rule also includes other requirements to protect miner health and update existing respiratory protection requirements. For coal mine operators, the deadline for compliance with the new rule was April 14, 2025. On April 4, 2025, however, the U.S. Court of Appeals for the Eighth Circuit ("Court") granted a temporary administrative stay of the enforcement of the final rule and is now considering whether to block enforcement permanently or allow enforcement to begin. In a filing with the Court in late 2025, MSHA indicated its intent to review and potentially modify portions of the rules at issue. Our compliance with these or any other new health and safety regulations could increase our mining costs substantially. Further, if we were ever found to be in violation of these regulations, we could face penalties or restrictions that may materially and adversely affect our operations, financial results and liquidity.
Climate Effect Disclosures
In March 2024, the Securities and Exchange Commission ("SEC") adopted new rules requiring issuers to disclose certain climate-related information beginning in 2025. Shortly following their release, the rules were stayed by a federal court. The SEC subsequently stayed the rules pending resolution of ongoing litigation. In March 2025, the SEC voted to end its legal defense of the rules, and litigation has been suspended by the Eighth Circuit until the SEC informs the court whether it intends to reconsider the rules under administrative procedures or whether the SEC will renew its defense of the rules. We cannot be certain whether or when these rules will take effect or what form they may ultimately take. It is therefore not presently possible to estimate reliably the potential effects of the rules upon us, including the potential costs associated with compliance.
Share Repurchase Program
Refer to Note 7 to the Consolidated Financial Statements and "Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities" for information on the share repurchase program and the shares repurchased during the current period.
Dividend Program
Refer to Note 7 to the Consolidated Financial Statements for information related to our dividend program.
Cash Flows
Cash, cash equivalents, and restricted cash decreased by $111.3 million and increased by $220.0 million and $28.7 million over the years ended December 31, 2025, 2024, and 2023, respectively. The net change in cash, cash equivalents, and restricted cash was attributable to the following:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Cash flows (in thousands): | |||||||||||||||||
| Net cash provided by operating activities | $ | 144,926 | $ | 579,919 | $ | 851,159 | |||||||||||
| Net cash used in investing activities | (203,975) | (230,986) | (166,000) | ||||||||||||||
| Net cash used in financing activities | (52,227) | (128,897) | (656,428) | ||||||||||||||
| Net (decrease) increase in cash and cash equivalents and restricted cash | $ | (111,276) | $ | 220,036 | $ | 28,731 | |||||||||||
Operating Activities.Net cash provided by operating activities for the year ended December 31, 2025 decreased compared to the prior year primarily due to a reduction in Met segment non-GAAP coal margin as discussed above in "Results of Operations". In addition, the prior year period benefited from a significant decline in inventory and accounts receivable levels due primarily to the substantial weakening in metallurgical coal demand and pricing levels that occurred during that period.
Net cash provided by operating activities for the year ended December 31, 2024 decreased compared to the year ended December 31, 2023 primarily due to a reduction in Met non-GAAP coal margin, partially offset by changes in operating assets and liabilities. Operating assets and liabilities fluctuated as the prior year period was negatively impacted by significant increases in accounts receivable and inventory and the final payment of our contingent revenue obligation, partially offset by a reduction in the amount held on deposit for the payment of dividends.
Investing Activities.The decrease in net cash used in investing activities for the year ended December 31, 2025 compared to the prior year period was primarily related to a reduction in the level of capital expenditures, partially offset by purchases of short-term investments in the current year period to improve yield on existing cash balances. In recent years, capital expenditures were above routine maintenance levels as we invested in upgrading and improving facilities and equipment and the development of new mines. Capital expenditures for 2025 are lower given the significant expenditures in prior years combined with the temporary idling of our Checkmate mine in the fourth quarter of 2024 and an increased focus on cost control given decreases in metallurgical coal prices.
Net cash used in investing activities for the year ended December 31, 2024 increased compared to the year ended December 31, 2023 despite a lower level of capital expenditures, as the prior year period benefited from a higher level of net proceeds from investment security activity. The increased level of net proceeds from investment security activity in the prior year period was primarily due to the liquidation of certain marketable securities to facilitate the transfer of funds to another financial institution.
Financing Activities.The decrease in net cash used in financing activities for the year ended December 31, 2025 compared to the prior year period was driven by a reduction in common shares repurchased upon the vesting of stock grants as well as a reduction in the level of common stock repurchased under our share repurchase program, which was suspended from March 2024 until August 2025.
Net cash used in financing activities for the year ended December 31, 2024 decreased compared to the year ended December 31, 2023, driven by a significant reduction in level of stock repurchases made under our share repurchase program as well as a reduction in dividends paid due to the payment of a one-time special dividend in the prior year period and the cessation of our fixed dividend program in the fourth quarter of 2023.
Analysis of Material Debt Covenants
We are in compliance with all covenants under the ABL Agreement as of December 31, 2025, including the requirement that we maintain minimum liquidity, as defined in the ABL Agreement, of $75.0 million. A breach of the covenants in the ABL Agreement could result in a default under the terms of such agreement, and the respective lenders could then elect to declare any amounts borrowed due and payable and require outstanding LCs to be cash collateralized. In addition, a default under the terms of the agreement would inhibit our ability to make certain restricted payments, as defined in the ABL Agreement, including our ability to repurchase shares of our common stock.
Critical Accounting Estimates
The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We base our estimates on historical experience and on various other factors and assumptions, including the current economic environment, that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis and adjust such estimates and assumptions as facts and circumstances require. Foreign currency and energy markets, and fluctuations in demand for steel products have combined to increase the uncertainty inherent in such estimates and assumptions. As future events and their effects cannot be determined with precision, actual results may differ significantly from these estimates. Changes in these estimates resulting from continuing changes in the economic environment will be reflected in the financial statements in future periods.
Reclamation.Our asset retirement obligations arise from the federal Surface Mining Control and Reclamation Act of 1977 and similar state statutes, which require that mine property be restored in accordance with specified standards and an approved reclamation plan. Significant reclamation activities include reclaiming refuse and slurry ponds, reclaiming the pit and support acreage at surface mines, sealing portals at deep mines, and the treatment of water. We determine the future cash flows necessary to satisfy our reclamation obligations on a permit-by-permit basis based upon current permit requirements and various estimates and assumptions, including estimates of disturbed acreage, cost estimates, and assumptions regarding productivity. We are also faced with increasingly stringent environmental regulation, much of which is beyond our control, which could increase our costs and materially increase our asset retirement obligations. Estimates of disturbed acreage are determined based on approved mining plans and related engineering data. Cost estimates are based upon third-party costs. Productivity assumptions are based on historical experience with the equipment that is expected to be utilized in the reclamation activities. Our asset retirement obligations are initially recorded at fair value. In order to determine fair value, we use assumptions including a discount rate and third-party costs. Each is discussed further below:
•Discount Rate.Asset retirement obligations are initially recorded at fair value. We utilize discounted cash flow techniques to estimate the fair value of our obligations. We base our discount rate on the rates of treasury bonds with maturities similar to expected mine lives and adjust for our credit standing as necessary after considering funding and assurance provisions. Changes in our credit standing could have a material impact on our asset retirement obligations.
•Third-Party Costs.The measurement of an obligation at fair value is based upon the amount a third party would demand to perform the obligation. Because we plan to perform a significant amount of the reclamation activities with internal resources, our estimates of third-party costs includes their margin. We base our estimates of third-party costs upon our historical experience with contractors performing similar types of reclamation activities. To the extent we carry out reclamation activities using internal resources, our estimates of third-party costs will result in a recorded obligation that is potentially greater than our estimates. If our cost estimates are accurate, the excess of the recorded obligation over the cost incurred to perform the work will be recorded as a reduction to Depreciation, depletion and amortization within our Consolidated Statements of Operations at the time that reclamation work is completed.
On at least an annual basis, we review our reclamation liabilities and make necessary adjustments for permit changes as granted by state authorities, additional costs resulting from accelerated mine closures, and revisions to cost estimates and productivity assumptions to reflect current experience and updated plans. At December 31, 2025, we had recorded asset retirement obligation liabilities of $227.4 million, including amounts reported as current. While the precise amount of these future costs cannot be determined with certainty, as of December 31, 2025, we estimate that the aggregate undiscounted cost of final mine closures is approximately $497.8 million. Refer to Note 14 to the Consolidated Financial Statements for reclamation disclosures including a table summarizing the changes in asset retirement obligations for the years ended December 31, 2025 and 2024.
Retirement Plans. We have a non-contributory defined benefit retirement Pension Plan covering certain of our salaried and non-union hourly employees, all of which are frozen. Benefits are based on either the employee's compensation prior to retirement or stated amounts for each year of service with us. Funding of the Pension Plan is in accordance with requirements of ERISA, and our contributions can be deducted for federal income tax purposes. We contributed $17.0 million to our Pension Plan for the year ended December 31, 2025. For the year ended December 31, 2025, we recorded a net periodic benefit cost of $5.2 million for our Pension Plan and have recorded a net obligation of $87.3 million which is net of assets of $370.1 million. Refer to Note 17 to the Consolidated Financial Statements for disclosures summarizing the changes in this projected benefit obligation for the years ended December 31, 2025 and 2024.
The calculation of the net periodic benefit cost (credit) and projected benefit obligation associated with our Pension Plan requires the use of a number of assumptions, which are used by our independent actuaries to make the underlying calculations. Refer to Note 17 to the Consolidated Financial Statements for a summary of these assumptions and additional disclosures related to our Pension Plan. Changes in these assumptions can result in different net periodic benefit expense and liability amounts, and actual experience can differ from the assumptions.
•The expected long-term rate of return on plan assets is an assumption of the rate of return on plan assets reflecting the average rate of earnings expected on the funds invested or to be invested to provide for the benefits included in the projected benefit obligation. We establish the expected long-term rate of return on plan assets at the beginning of each fiscal year based upon historical returns and projected returns on the underlying mix of invested assets. The Pension Plan investment targets are 50% equity securities and 50% fixed income funds. Refer to Note 17 to the Consolidated Financial Statements for additional disclosures on this assumption. Investments are rebalanced on a periodic basis to stay within these targeted guidelines. The expected long-term rate of return on plan assets assumption used to determine net periodic benefit cost was 5.70% for the year ended December 31, 2025. The expected long-term rate of return on plan assets assumption to be used in 2026 is expected to be 5.70%. Any difference between the actual experience and the assumed experience is deferred as an unrecognized actuarial gain or loss and amortized into expense in future periods.
•The discount rate represents our estimate of the interest rate at which pension benefits could be effectively settled. Assumed discount rates are used in the measurement of the projected and accumulated benefit obligations and the interest cost component of the net periodic benefit cost. In estimating that rate, we use rates of return on high quality, fixed income investments. The weighted average discount rate used to determine the pension benefit obligation was 5.44% for the year ended December 31, 2025. The differences resulting from actual versus assumed discount rates are amortized into pension net periodic benefit cost (credit) over the remaining average life of the active plan participants. A one percentage-point increase in the discount rate would increase the net periodic pension cost for the year ended December 31, 2025 by approximately $1.6 million and decrease the projected benefit obligation as of December 31, 2025 by approximately $43.0 million. The corresponding effects of a one percentage-point decrease in discount rate would decrease the net periodic pension cost for the year ended December 31, 2025 by approximately $2.1 million and increase the projected benefit obligation as of December 31, 2025 by approximately $51.6 million.
Coal Workers' Pneumoconiosis. We are required by federal and state statues to provide benefits to employees for awards related to coal workers' pneumoconiosis disease (black lung). Certain of our subsidiaries are insured for black lung benefit obligations by a third-party insurance provider and certain subsidiaries are self-insured for black lung benefit obligations and may fund certain benefit payments through a Section 501(c)(21) tax-exempt trust fund. Provisions are made for estimated benefits based on annual evaluations prepared by independent actuaries. Charges are made to operations for self-insured black lung claims, as determined by an independent actuary at the present value of the actuarially computed liability for such benefits over the employee's applicable term of service. These actuarially determined liabilities use various actuarial assumptions, including the discount rate, future cost trends, demographic assumptions, and return on plan assets to estimate the costs and obligations for these items.
•The discount rate represents our estimate of the interest rate at which black lung benefit obligations could be effectively settled. Assumed discount rates are used in the measurement of the black lung benefit obligations and the interest cost and service cost components of the net periodic benefit cost. In estimating that rate, we use rates of return on high quality, fixed income investments. The weighted average discount rate used to determine black lung benefit obligations was 5.46% for the year ended December 31, 2025. The differences resulting from actual versus assumed discount rates are amortized into black lung net periodic benefit cost over the remaining average life of the active plan participants. A one percentage-point increase in the discount rate would increase the net periodic black lung benefit cost for the year ended December 31, 2025 by approximately $0.5 million and decrease the projected benefit obligation as of December 31, 2025 by approximately $11.9 million. The corresponding effects of a one percentage-point decrease in discount rate would decrease the net periodic black lung benefit cost for the year ended
December 31, 2025 by approximately $0.6 million and increase the projected benefit obligation as of December 31, 2025 by approximately $14.3 million.
If our assumptions do not materialize as expected, actual cash expenditures and costs that we incur could differ materially from our current estimates. Moreover, regulatory changes could affect our obligation to satisfy these or additional obligations. As of December 31, 2025, we had estimated black lung benefit obligations of approximately $130.6 million, including amounts reported as current, which are net of assets of $2.8 million that are held in a tax-exempt trust fund. As of December 31, 2025, we had $102.2 million of restricted cash collateral and $13.1 million of letters of credit securing these obligations. For the year ended December 31, 2025, we recorded a net periodic benefit cost of $12.2 million for our black lung benefit obligations. Refer to Note 17 to the Consolidated Financial Statements for disclosures summarizing these underlying assumptions and the changes in these projected benefit obligations for the years ended December 31, 2025 and 2024.
Income Taxes.We recognize deferred tax assets and liabilities 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 reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred tax assets will not be realized. In evaluating our ability to recover our deferred tax assets within the jurisdiction in which they arise, we consider all available positive and negative evidence, including the expected reversals of deferred tax liabilities, projected future taxable income, taxable income available via carryback to prior years, tax planning strategies, and results of recent operations. We assess the realizability of our deferred tax assets, including scheduling the reversal of our deferred tax assets and liabilities, to determine the amount of valuation allowance needed. Scheduling the reversal of deferred tax asset and liability balances requires judgment and estimation. We believe the deferred tax liabilities relied upon as future taxable income in our assessment will reverse in the same period and jurisdiction and are of the same character as the temporary differences giving rise to the deferred tax assets that will be realized. At December 31, 2025, a valuation allowance of $3.2 million has been provided on deferred tax assets not expected to provide future tax benefits. Refer to Note 16 to the Consolidated Financial Statements for additional disclosures on income taxes.
For a further discussion of the factors that could result in a change in our assumptions, refer to "Item 1A. Risk Factors" and our other filings with the Securities and Exchange Commission.
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