Core Natural Resources - 10-Q quarterly report FY2020 Q1

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

__________________________________________________

FORM 10-Q

__________________________________________________

(Mark One)



☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the quarterly period ended March 31, 2020



☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 001-38147

__________________________________________________

CONSOL Energy Inc.

(Exact name of registrant as specified in its charter)



Delaware		82-1954058
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

1000 CONSOL Energy Drive, Suite 100

Canonsburg, PA 15317-6506

(724) 416-8300

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

__________________________________________________

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value	CEIX	New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ☒ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

CONSOL Energy Inc. had 26,029,202 shares of common stock, $0.01 par value, outstanding at May 1, 2020.

TABLE OF CONTENTS




	Part I. Financial Information	Page

Item 1.	Financial Statements
	Consolidated Statements of Income for the three months ended March 31, 2020 and 2019	4
	Consolidated Statements of Comprehensive Income for the three months ended March 31, 2020 and 2019	5
	Consolidated Balance Sheets at March 31, 2020 and December 31, 2019	6
	Consolidated Statements of Stockholders' Equity for the three months ended March 31, 2020 and 2019	8
	Consolidated Statements of Cash Flows for the three months ended March 31, 2020 and 2019	9
	Notes to Consolidated Financial Statements	10

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	32

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	51

Item 4.	Controls and Procedures	51

	Part II. Other Information

Item 1.	Legal Proceedings	52

Item 1A.	Risk Factors	52

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	54

Item 4.	Mine Safety Disclosures	54

Item 6.	Exhibits	54

	Signatures	56

IMPORTANT DEFINITIONS REFERENCED IN THIS QUARTERLY REPORT

Unless the context otherwise requires:


•	“CONSOL Energy,” “we,” “our,” “us,” “our Company” and “the Company” refer to CONSOL Energy Inc. and its subsidiaries;


•	“Btu” means one British Thermal unit;

•

“Coal Business” refers to all of our interest in the Pennsylvania Mining Complex (PAMC) and certain related coal assets, including: (i) a 25% undivided interest in the PAMC; (ii) the CONSOL Marine Terminal; (iii) development of the Itmann Mine; and (iv) undeveloped coal reserves (Greenfield Reserves) located in the Northern Appalachian, Central Appalachian and Illinois basins and certain related coal assets and liabilities;


•	“CONSOL Marine Terminal” refers to the terminal operations located at the Port of Baltimore;


•	“distribution” refers to the pro rata distribution of the Company's issued and outstanding shares of common stock to its former parent's stockholders on November 29, 2017;


•	“former parent” refers to CNX Resources Corporation and its consolidated subsidiaries;


•	“General Partner” refers to CONSOL Coal Resources GP LLC, a Delaware limited liability company;


•	“Greenfield Reserves” means those undeveloped reserves owned by the Company in the Northern Appalachian, Central Appalachian and Illinois basins that are not associated with the Pennsylvania Mining Complex;


•	“mmBtu” means one million British Thermal units;


•	“Partnership” or “CCR” refers to a Delaware limited partnership that holds a 25% undivided interest in, and is the sole operator of, the Pennsylvania Mining Complex;


•	“Pennsylvania Mining Complex” or “PAMC” refers to the Bailey, Enlow Fork and Harvey coal mines, coal reserves and related assets and operations, located primarily in southwestern Pennsylvania and owned 75% by the Company and 25% by the Partnership; and


•	“separation” refers to the separation of the Coal Business from our former parent’s other businesses on November 28, 2017, and the creation, as a result of the distribution, of an independent, publicly-traded company (the Company) to hold the assets and liabilities associated with the Coal Business after the distribution.

PART I : FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CONSOL ENERGY INC.

CONSOLIDATED STATEMENTS OF INCOME

(Dollars in thousands, except per share data)

(unaudited)



	Three Months Ended March 31,
Revenue and Other Income:	2020			2019
Coal Revenue	$	255,452		$	332,502
Terminal Revenue	16,501			17,818
Freight Revenue	3,147			6,662
Miscellaneous Other Income	16,170			13,292
(Loss) Gain on Sale of Assets	(14		)	339
Total Revenue and Other Income	291,256			370,613
Costs and Expenses:
Operating and Other Costs	212,275			230,112
Depreciation, Depletion and Amortization	54,943			50,724
Freight Expense	3,147			6,662
Selling, General and Administrative Costs	17,670			21,923
(Gain) Loss on Debt Extinguishment	(16,833		)	23,143
Interest Expense, net	15,671			18,596
Total Costs and Expenses	286,873			351,160
Earnings Before Income Tax	4,383			19,453
Income Tax Expense (Benefit)	1,908			(850		)
Net Income	2,475			20,303
Less: Net Income Attributable to Noncontrolling Interest	108			5,868
Net Income Attributable to CONSOL Energy Inc. Shareholders	$	2,367		$	14,435

Earnings per Share:
Total Basic Earnings per Share	$	0.09		$	0.52
Total Dilutive Earnings per Share	$	0.09		$	0.52

The accompanying notes are an integral part of these consolidated financial statements.

CONSOL ENERGY INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Dollars in thousands)

(unaudited)



	Three Months Ended March 31,
	2020			2019
Net Income	$	2,475		$	20,303

Other Comprehensive Income:
Actuarially Determined Long-Term Liability Adjustments (Net of tax: ($1,214), ($781))	3,624			2,460
Unrecognized Loss on Derivatives:
Unrealized Loss on Cash Flow Hedges (Net of tax: $933, $0)	(2,773		)	—
Other Comprehensive Income	851			2,460

Comprehensive Income	$	3,326		$	22,763

Less: Comprehensive Income Attributable to Noncontrolling Interest	123			5,867

Comprehensive Income Attributable to CONSOL Energy Inc. Shareholders	$	3,203		$	16,896

The accompanying notes are an integral part of these consolidated financial statements.

CONSOL ENERGY INC.

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)



	(Unaudited)
	March 31, 2020		December 31, 2019
ASSETS
Current Assets:
Cash and Cash Equivalents	$	78,166	$	80,293
Restricted Cash	661		—
Accounts and Notes Receivable
Trade Receivables, net of Allowance	113,098		131,688
Other Receivables, net of Allowance	33,878		40,984
Inventories	58,638		54,131
Prepaid Expenses and Other Assets	26,302		30,933
Total Current Assets	310,743		338,029
Property, Plant and Equipment:
Property, Plant and Equipment	5,053,698		5,008,180
Less—Accumulated Depreciation, Depletion and Amortization	2,965,903		2,916,015
Total Property, Plant and Equipment—Net	2,087,795		2,092,165
Other Assets:
Deferred Income Taxes	102,425		103,505
Right of Use Asset - Operating Leases	67,787		72,632
Other, net of Allowance	84,718		87,471
Total Other Assets	254,930		263,608
TOTAL ASSETS	$	2,653,468	$	2,693,802

The accompanying notes are an integral part of these consolidated financial statements.

CONSOL ENERGY INC.

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)



	(Unaudited)
	March 31, 2020			December 31, 2019
LIABILITIES AND EQUITY
Current Liabilities:
Accounts Payable	$	89,556		$	106,223
Current Portion of Long-Term Debt	67,441			50,272
Other Accrued Liabilities	237,261			235,769
Total Current Liabilities	394,258			392,264
Long-Term Debt:
Long-Term Debt	604,927			653,802
Finance Lease Obligations	21,942			9,036
Total Long-Term Debt	626,869			662,838
Deferred Credits and Other Liabilities:
Postretirement Benefits Other Than Pensions	429,085			432,496
Pneumoconiosis Benefits	201,718			202,142
Asset Retirement Obligations	254,805			250,211
Workers’ Compensation	60,961			61,194
Salary Retirement	44,439			49,930
Operating Lease Liability	52,975			55,413
Other	17,268			14,919
Total Deferred Credits and Other Liabilities	1,061,251			1,066,305
TOTAL LIABILITIES	2,082,378			2,121,407

Stockholders' Equity:
Common Stock, $0.01 Par Value; 62,500,000 Shares Authorized, 26,029,202 Issued and Outstanding at March 31, 2020; 25,932,618 Issued and Outstanding at December 31, 2019	260			259
Capital in Excess of Par Value	528,062			523,762
Retained Earnings	258,972			259,903
Accumulated Other Comprehensive Loss	(347,889		)	(348,725		)
Total CONSOL Energy Inc. Stockholders' Equity	439,405			435,199
Noncontrolling Interest	131,685			137,196
TOTAL EQUITY	571,090			572,395
TOTAL LIABILITIES AND EQUITY	$	2,653,468		$	2,693,802

The accompanying notes are an integral part of these consolidated financial statements.

CONSOL ENERGY INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(Dollars in thousands)



	Common Stock		Capital in Excess of Par Value			Retained Earnings			Accumulated Other Comprehensive (Loss) Income			Total CONSOL Energy Inc. Stockholders' Equity			Noncontrolling Interest			Total Equity
December 31, 2019	$	259	$	523,762		$	259,903		$	(348,725	)	$	435,199		$	137,196		$	572,395
(Unaudited)
Net Income	—		—			2,367			—			2,367			108			2,475
Actuarially Determined Long-Term Liability Adjustments (Net of $1,214 Tax)	—		—			—			3,609			3,609			15			3,624
Interest Rate Hedge (Net of ($933) Tax)	—		—			—			(2,773		)	(2,773		)	—			(2,773		)
Comprehensive Income	—		—			2,367			836			3,203			123			3,326
Adoption of ASU 2016-13 (Net of ($1,109) Tax)	—		—			(3,298		)	—			(3,298		)	—			(3,298		)
Issuance of Common Stock	1		(1		)	—			—			—			—			—
Amortization of Stock-Based Compensation Awards	—		4,856			—			—			4,856			158			5,014
Shares/Units Withheld for Taxes	—		(555		)	—			—			(555		)	(217		)	(772		)
Distributions to Noncontrolling Interest	—		—			—			—			—			(5,575		)	(5,575		)
March 31, 2020	$	260	$	528,062		$	258,972		$	(347,889	)	$	439,405		$	131,685		$	571,090



	Common Stock		Capital in Excess of Par Value			Retained Earnings		Accumulated Other Comprehensive (Loss) Income			Total CONSOL Energy Inc. Stockholders' Equity			Noncontrolling Interest			Total Equity
December 31, 2018	$	274	$	550,995		$	182,148	$	(323,482	)	$	409,935		$	141,676		$	551,611
(Unaudited)
Net Income	—		—			14,435		—			14,435			5,868			20,303
Actuarially Determined Long-Term Liability Adjustments (Net of $781 Tax)	—		—			—		2,461			2,461			(1		)	2,460
Comprehensive Income	—		—			14,435		2,461			16,896			5,867			22,763
Issuance of Common Stock	2		(2		)	—		—			—			—			—
Amortization of Stock-Based Compensation Awards	—		7,053			—		—			7,053			397			7,450
Shares/Units Withheld for Taxes	—		(3,863		)	—		—			(3,863		)	(880		)	(4,743		)
Distributions to Noncontrolling Interest	—		—			—		—			—			(5,559		)	(5,559		)
March 31, 2019	$	276	$	554,183		$	196,583	$	(321,021	)	$	430,021		$	141,501		$	571,522

The accompanying notes are an integral part of these consolidated financial statements.

CONSOL ENERGY INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

(unaudited)



	Three Months Ended March 31,
	2020			2019
Cash Flows from Operating Activities:
Net Income	$	2,475		$	20,303
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:
Depreciation, Depletion and Amortization	54,943			50,724
Loss (Gain) on Sale of Assets	14			(339		)
Stock/Unit-Based Compensation	5,014			7,450
Amortization of Debt Issuance Costs	1,444			1,976
(Gain) Loss on Debt Extinguishment	(16,833		)	23,143
Deferred Income Taxes	1,908			(850		)
Equity in Earnings of Affiliates	315			—
Changes in Operating Assets:
Accounts and Notes Receivable	23,064			(16,850		)
Inventories	(4,507		)	(6,242		)
Prepaid Expenses and Other Assets	4,845			2,761
Changes in Other Assets	191			10,080
Changes in Operating Liabilities:
Accounts Payable	(15,726		)	(10,695		)
Other Operating Liabilities	3,899			12,419
Changes in Other Liabilities	(9,646		)	(11,709		)
Net Cash Provided by Operating Activities	51,400			82,171
Cash Flows from Investing Activities:
Capital Expenditures	(27,178		)	(34,171		)
Proceeds from Sales of Assets	—			311
Net Cash Used in Investing Activities	(27,178		)	(33,860		)
Cash Flows from Financing Activities:
Proceeds from Finance Lease Obligations	16,293			—
Payments on Finance Lease Obligations	(4,899		)	(4,537		)
Proceeds from Term Loan A	—			26,250
Payments on Term Loan A	(3,750		)	—
Payments on Term Loan B	(688		)	(122,375		)
Payments on Second Lien Notes	(25,480		)	(7,000		)
Payments on Asset-Backed Financing	(174		)	—
Distributions to Noncontrolling Interest	(5,575		)	(5,559		)
Shares/Units Withheld for Taxes	(772		)	(4,743		)
Debt-Related Financing Fees	(643		)	(18,514		)
Net Cash Used in Financing Activities	(25,688		)	(136,478		)
Net Decrease in Cash and Cash Equivalents and Restricted Cash	(1,466		)	(88,167		)
Cash and Cash Equivalents and Restricted Cash at Beginning of Period	80,293			264,935
Cash and Cash Equivalents and Restricted Cash at End of Period	$	78,827		$	176,768

Non-Cash Investing and Financing Activities:
Finance Lease	$	7,023		$	—
Longwall Shield Rebuild	$	9,129		$	—

The accompanying notes are an integral part of these consolidated financial statements.

CONSOL ENERGY INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(Dollars in thousands, except per share data)

NOTE 1—BASIS OF PRESENTATION:

Basis of Presentation

The accompanying Consolidated Financial Statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States (“GAAP”) for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2020 are not necessarily indicative of the results that may be expected for future periods.

The Consolidated Balance Sheet at December 31, 2019 has been derived from the Audited Consolidated Financial Statements at that date but does not include all disclosures required by GAAP. This Form 10-Q report should be read in conjunction with CONSOL Energy Inc.'s Annual Report on Form 10-K for the year ended December 31, 2019.

Basis of Consolidation

The Consolidated Financial Statements include the accounts of CONSOL Energy Inc. and its wholly-owned and majority-owned and/or controlled subsidiaries. The portion of these entities that is not owned by the Company is presented as non-controlling interest. All significant intercompany transactions and accounts have been eliminated in consolidation.

Recent Accounting Pronouncements

In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-04 - Reference Rate Reform (Topic 848) - Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The amendments in this Update provide optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. In response to concerns about structural risks of interbank offered rates (IBORs), and, particularly, the risk of cessation of the London Interbank Offered Rate (LIBOR), regulators in several jurisdictions around the world have undertaken reference rate reform initiatives to identify alternative reference rates that are more observable or transaction based and less susceptible to manipulation. This Update also provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments in this Update apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The amendments in this Update are effective for all entities as of March 12, 2020 through December 31, 2022. An entity may elect to apply the amendments for contract modifications by Topic or Industry Subtopic as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020, or prospectively from a date within an interim period that includes or is subsequent to March 12, 2020, up to the date that the financial statements are available to be issued. Once elected for a Topic or an Industry Subtopic, the amendments in this Update must be applied prospectively for all eligible contract modifications for that Topic or Industry Subtopic. Management has elected to apply this Update subsequent to March 12, 2020. Management is currently evaluating the impact of this guidance, but does not expect this update to have a material impact on the Company's financial statements.

In January 2020, the FASB issued ASU 2020-01 - Investments - Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815). The amendments in this Update clarify certain interactions between the guidance to account for certain equity securities under Topic 321, the guidance to account for investments under the equity method of accounting in Topic 323, and the guidance in Topic 815, which could change how an entity accounts for an equity security under the measurement alternative or a forward contract or purchased option to purchase securities that, upon settlement of the forward contract or exercise of the purchased option, would be accounted for under the equity method of accounting or the fair value option in accordance with Topic 825, Financial Instruments. These amendments improve current GAAP by reducing diversity in practice and increasing comparability of the accounting for these interactions. The amendments in this Update are effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. Early adoption is permitted. Management does not expect this update to have a material impact on the Company's financial statements.

In December 2019, the FASB issued ASU 2019-12 - Income Taxes (Topic 740) to reduce the complexity of accounting for income taxes while maintaining or improving the usefulness of the information provided to users of financial statements. The amendments in Update 2019-12 will remove the following exceptions: (1) the exception to the incremental approach for intra-period tax allocation; (2) exceptions to accounting for basis differences when there are ownership changes in foreign investments; and (3) the exception to the general methodology for calculating income taxes in an interim period when a year-to-date loss exceeds the anticipated loss for the year. The amendments in Update 2019-12 will also simplify the accounting for income taxes in the areas of franchise tax, step up in the tax basis of goodwill associated with a business combination, allocation of current and deferred tax expense to a legal entity that is not subject to tax in its separate financial statements, and presentation of the effect of an enacted change in tax laws or rates in the annual effective tax rate computation in the interim period that includes the enactment date. The Update adds minor codification improvements for income taxes related to employee stock ownership plans and investments in qualified affordable housing projects accounted for using the equity method. These changes will be effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. Early adoption is permitted. Management does not expect this update to have a material impact on the Company's financial statements.

In August 2018, the FASB issued ASU 2018-15 - Intangibles - Goodwill and Other - Internal Use Software (Subtopic 350-40) to help entities evaluate the accounting for fees paid by a customer in a cloud computing arrangement (hosting arrangement) by providing guidance for determining when the arrangement includes a software license. The amendments in Update 2018-15 align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements of capitalizing implementation costs incurred to develop or obtain internal-use software. These changes are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. CONSOL Energy adopted this guidance during the three months ended March 31, 2020, and there was no material impact on the Company's financial statements.

In August 2018, the FASB issued ASU 2018-14 - Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20) to improve the effectiveness of disclosures in the notes to the financial statements by facilitating clear communication of the information required by GAAP. The amendments modify the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. These changes will be effective for fiscal years ending after December 15, 2020, including interim periods within those fiscal years. Management is currently evaluating the impact this guidance may have on the Company’s financial statements.

In August 2018, the FASB issued ASU 2018-13 - Fair Value Measurement (Topic 820) to improve the effectiveness of disclosures in the notes to the financial statements by facilitating clear communication of the information required by GAAP. The amendments modify the disclosure requirements on fair value measurements including the consideration of costs and benefits. These changes are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. CONSOL Energy adopted this guidance during the three months ended March 31, 2020, and there was no material impact on the Company's financial statements.

Earnings per Share

Basic earnings per share are computed by dividing net income attributable to CONSOL Energy Inc. shareholders by the weighted average shares outstanding during the reporting period. Dilutive earnings per share are computed similarly to basic earnings per share, except that the weighted average shares outstanding are increased to include additional shares from restricted stock units and performance share units, if dilutive. The number of additional shares is calculated by assuming that outstanding restricted stock units and performance share units were released, and that the proceeds from such activities were used to acquire shares of common stock at the average market price during the reporting period.

The table below sets forth the share-based awards that have been excluded from the computation of diluted earnings per share because their effect would be anti-dilutive:



	For the Three Months Ended
	March 31,
	2020	2019
Anti-Dilutive Restricted Stock Units	141,279	—
Anti-Dilutive Performance Share Units	—	8,086
	141,279	8,086

The computations for basic and dilutive earnings per share are as follows:



	For the Three Months Ended
Dollars in thousands, except per share data	March 31,
	2020		2019
Numerator:
Net Income	$	2,475	$	20,303
Less: Net Income Attributable to Noncontrolling Interest	108		5,868
Net Income Attributable to CONSOL Energy Inc. Shareholders	$	2,367	$	14,435

Denominator:
Weighted-average shares of common stock outstanding	25,987,155		27,530,859
Effect of dilutive shares	265,056		308,534
Weighted-average diluted shares of common stock outstanding	26,252,211		27,839,393

Earnings per Share:
Basic	$	0.09	$	0.52
Dilutive	$	0.09	$	0.52

As of March 31, 2020, CONSOL Energy has 500,000 shares of preferred stock, none of which are issued or outstanding.

NOTE 2—REVENUE:

The following table disaggregates CONSOL Energy's revenue from contracts with customers to depict how the nature, amount, timing and uncertainty of the Company's revenues and cash flows are affected by economic factors:



	Three Months Ended
	March 31, 2020		March 31, 2019
Coal Revenue	$	255,452	$	332,502
Terminal Revenue	16,501		17,818
Freight Revenue	3,147		6,662
Total Revenue from Contracts with Customers	$	275,100	$	356,982

CONSOL Energy's coal revenue is generally recognized when title passes to the customer and the price is fixed and determinable. The Company has determined that each ton of coal represents a separate and distinct performance obligation. The Company's coal supply contracts and other sales and operating revenue contracts vary in length from short-term to long-term contracts and do not typically have significant financing components.

The estimated transaction price from each of the Company's contracts is based on the total amount of consideration to which the Company expects to be entitled under the contract. Included in the transaction price for certain coal supply contracts is the impact of variable consideration, including quality price adjustments, handling services, per ton price fluctuations based on certain coal sales price indices and anticipated payments in lieu of shipments. The estimated transaction price for each contract is allocated to the Company's performance obligations based on relative stand-alone selling prices determined at contract inception.

Coal Revenue

Revenues are generally recognized when title passes to the customers and the price is fixed and determinable. Generally, title passes when coal is loaded at the central preparation facility and, on occasion, at terminal locations or other customer destinations. The Company's coal contract revenue per ton is fixed and determinable and adjusted for nominal quality adjustments. Some coal contracts also contain positive electric power price-related adjustments, which represent market-driven price adjustments, wherein no additional value is exchanged, in addition to a fixed base price per ton. The Company’s coal contracts generally do not allow for retroactive adjustments to pricing after title to the coal has passed.

Some of the Company's contracts span multiple years and have annual pricing modifications, based upon market-driven or inflationary adjustments, where no additional value is exchanged. Management believes that the invoice price is the most appropriate rate at which to recognize revenue.

While CONSOL Energy does, from time to time, experience costs of obtaining coal customer contracts with amortization periods greater than one year, those costs are generally immaterial to the Company's net income. At March 31, 2020 and December 31, 2019, the Company did not have any capitalized costs to obtain customer contracts on its Consolidated Balance Sheets. As of and for the three months ended March 31, 2020 and 2019, the Company has not recognized any amortization of previously existing capitalized costs of obtaining customer contracts. Further, the Company has not recognized any revenue in the current period that is not a result of current period performance.

Terminal Revenue

Terminal revenues are attributable to the Company's CONSOL Marine Terminal and include revenues earned from providing receipt and unloading of coal from rail cars, transporting coal from the receipt point to temporary storage or stockpile facilities located at the Terminal, stockpiling, blending, weighing, sampling, redelivery, and loading of coal onto vessels. Revenues for these services are generally earned on a rateable basis, and performance obligations are considered fulfilled as the services are performed.

The CONSOL Marine Terminal does not normally experience material costs of obtaining customer contracts with amortization periods greater than one year. At March 31, 2020 and December 31, 2019, the Company did not have any capitalized costs to obtain customer contracts on its Consolidated Balance Sheets. As of and for the three months ended March 31, 2020 and 2019, the Company has not recognized any amortization of previously existing capitalized costs of obtaining Terminal customer contracts. Further, the Company has not recognized any revenue in the current period that is not a result of current period performance.

Freight Revenue

Some of CONSOL Energy's coal contracts require that the Company sell its coal at locations other than its central preparation plant. The cost to transport the Company's coal to the ultimate sales point is passed through to the Company's customers and CONSOL Energy recognizes the freight revenue equal to the transportation costs when title of the coal passes to the customer.

Contract Balances

Contract assets are recorded separately from trade receivables in the Company's Consolidated Balance Sheets and are reclassified to trade receivables as title passes to the customer and the Company's right to consideration becomes unconditional. Payments for coal shipments are typically due within two to four weeks from the invoice date. CONSOL Energy typically does not have material contract assets that are stated separately from trade receivables since the Company's performance obligations are satisfied as control of the goods or services passes to the customer, thereby granting the Company an unconditional right to receive consideration. Contract liabilities relate to consideration received in advance of the satisfaction of the Company's performance obligations. Contract liabilities are recognized as revenue at the point in time when control of the good or service passes to the customer.

NOTE 3—MISCELLANEOUS OTHER INCOME:



	For the Three Months Ended March 31,
	2020		2019
Contract Buyout	$	10,825	$	1,048
Royalty Income - Non-Operated Coal	4,504		6,210
Rental Income	497		617
Interest Income	244		887
Property Easements and Option Income	63		979
Purchased Coal Sales	—		3,186
Other	37		365
Miscellaneous Other Income	$	16,170	$	13,292

NOTE 4—COMPONENTS OF PENSION AND OTHER POST-EMPLOYMENT BENEFIT (OPEB) PLANS NET PERIODIC BENEFIT COSTS:

The components of Net Periodic Benefit (Credit) Cost are as follows:



	Pension Benefits						Other Post-Employment Benefits
	Three Months Ended March 31,						Three Months Ended March 31,
	2020			2019			2020			2019
Service Cost	$	296		$	987		$	—		$	—
Interest Cost	5,044			6,275			3,199			4,580
Expected Return on Plan Assets	(10,455		)	(10,114		)	—			—
Amortization of Prior Service Credits	—			(92		)	(601		)	(601		)
Amortization of Actuarial Loss	1,730			1,490			2,319			2,315
Net Periodic Benefit (Credit) Cost	$	(3,385	)	$	(1,454	)	$	4,917		$	6,294

(Credits) expenses related to pension and other post-employment benefits are reflected in Operating and Other Costs in the Consolidated Statements of Income.

NOTE 5—COMPONENTS OF COAL WORKERS’ PNEUMOCONIOSIS (CWP) AND WORKERS’ COMPENSATION NET PERIODIC BENEFIT COSTS:

The components of Net Periodic Benefit Cost are as follows:



	CWP				Workers' Compensation
	Three Months Ended March 31,				Three Months Ended March 31,
	2020		2019		2020			2019
Service Cost	$	1,151	$	948	$	1,569		$	1,421
Interest Cost	1,551		1,750		461			646
Amortization of Actuarial Loss (Gain)	1,401		254		(122		)	(193		)
State Administrative Fees and Insurance Bond Premiums	—		—		621			587
Net Periodic Benefit Cost	$	4,103	$	2,952	$	2,529		$	2,461

NOTE 6—INCOME TAXES:

The Company has evaluated the impact of the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), which was signed into law by the President of the United States in March 2020. The CARES Act has various income tax related provisions, including temporary net operating loss carryback and limitation measures, a relaxation of the limitation on interest deductions, the postponement of statutory filing dates, and a technical correction of the 2017 Tax Cuts and Jobs Act related to qualified improvement property.

The Company's effective tax rate is based on its estimated full year effective tax rate. The effective tax rate for the three months ended March 31, 2020 differs from the U.S. federal statutory rate of 21%, primarily due to the income tax benefit for excess percentage depletion, offset by the impact of discrete tax expense related to equity compensation and the unfavorable impact on percentage depletion related to the additional interest deduction available under the CARES Act. The CARES Act increased the amount of deductible interest from 30% of adjusted taxable income to 50% for tax years 2019 and 2020, which generates current cash tax benefit, but also reduces the base of earnings upon which percentage depletion was computed. The effective tax rate for the three months ended March 31, 2020 was 44.6%, composed of a tax benefit of (3.1)% from operations and discrete tax expense of $902 related to equity compensation and $1,139 related to the effect of the CARES Act, as noted above.

The effective tax rate for the three months ended March 31, 2019 was (4.4)%, composed of a tax benefit of (2.5)% from operations and a discrete tax benefit of (1.9)% primarily related to equity compensation. The effective tax rate for the three months ended March 31, 2019 differs from the U.S. federal statutory rate of 21%, primarily due to the income tax benefit for excess percentage depletion.

The Company utilizes the “more likely than not” standard in recognizing a tax benefit in its financial statements. For the three months ended March 31, 2020 and the year ended December 31, 2019, the Company did not have any unrecognized tax benefits. If accrual for interest or penalties is required, it is the Company's policy to include these as a component of income tax expense.

The Company is subject to taxation in the United States and its various states, as well as Canada and its various provinces. Under the provisions of the tax matters agreement entered into between the Company and its former parent on November 28, 2017 (the “TMA”), certain subsidiaries of the Company are subject to examination for tax years for the period January 1, 2016 through the three months ended March 31, 2020 for certain state and foreign returns. Further, the Company is subject to examination for the period November 28, 2017 through the three months ended March 31, 2020 for federal and certain state returns.

NOTE 7—CREDIT LOSSES:

Effective January 1, 2020, the Company adopted ASU 2016-013, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments using a modified retrospective approach. This ASU replaces the incurred loss impairment model with an expected credit loss impairment model for financial instruments, including trade and other receivables. The amendment requires entities to consider forward-looking information to estimate expected credit losses, resulting in earlier recognition of losses for receivables that are current or not yet due, which were not considered under previous accounting guidance. The Company recorded a cumulative-effect adjustment to retained earnings in the amount of $3,298, net of $1,109 of income taxes, for expected credit losses on financial assets at the adoption date.

The following table illustrates the impact of ASC 326.



	January 1, 2020
	As Reported Under ASC 326		Pre-ASC 326 Adoption		Impact of ASC 326 Adoption

Trade Receivables	$	3,051	$	2,100	$	951
Other Receivables	3,372		711		2,661
Other Assets	795		—		795
Allowance for Credit Losses on Receivables	$	7,218	$	2,811	$	4,407

The Company is exposed to credit losses primarily through sales of products and services. The Company's expected loss allowance methodology for accounts receivable is developed using historical collection experience, current and future economic and market conditions and a review of the current status of customers' trade and other accounts receivables. Due to the short-term nature of such receivables, the estimate of the amount of accounts receivable that may not be collected is based on an aging of the accounts receivable balances and the financial condition of customers. Additionally, specific allowance amounts are established to record the appropriate provision for customers that have a higher probability of default. The Company's monitoring activities include timely account reconciliations, dispute resolution, payment confirmation, consideration of customers' financial condition and macroeconomic conditions.

Balances are written off when determined to be uncollectible. The Company considered the current and expected future economic and market conditions surrounding the novel coronavirus (COVID-19) pandemic and determined that the estimate of credit losses was not significantly impacted.

Management estimates the allowance balance using relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. Historical credit loss experience provides the basis for the estimation of expected credit losses. Adjustments to historical loss information are made for changes to the assessment of anticipated payment, changes in economic conditions, current industry trends in the markets the Company serves, and changes in the financial health of the Company's counterparties.

The following table provides a roll-forward of the allowance for credit losses by portfolio segment that is deducted from the amortized cost basis of accounts receivable to present the net amount expected to be collected.



	Trade Receivables			Other Receivables		Other Assets

Beginning Balance, January 1, 2020	$	2,100		$	711	$	—
Adoption of ASU 2016-13, cumulative-effect adjustment to retained earnings	951			2,661		795
Provision for expected credit losses	(643		)	1,242		35
Ending Balance, March 31, 2020	$	2,408		$	4,614	$	830

NOTE 8—INVENTORIES:

Inventory components consist of the following:



	March 31, 2020		December 31, 2019
Coal	$	4,621	$	2,484
Supplies	54,017		51,647
Total Inventories	$	58,638	$	54,131

Inventories are stated at the lower of cost or net realizable value. The cost of coal inventories is determined by the first-in, first-out (“FIFO”) method. Coal inventory costs include labor, supplies, equipment costs, operating overhead, depreciation, depletion, amortization and other related costs. The cost of supplies inventory is determined by the average cost method and includes operating and maintenance supplies to be used in the Company's coal operations.

NOTE 9—ACCOUNTS RECEIVABLE SECURITIZATION:

CONSOL Energy and certain of its U.S. subsidiaries are parties to a trade accounts receivable securitization facility with financial institutions for the sale on a continuous basis of eligible trade accounts receivable. In March 2020, the securitization facility was amended to, among other things, extend the maturity date from August 30, 2021 to March 27, 2023.

Pursuant to the securitization facility, CONSOL Thermal Holdings LLC sells current and future trade receivables to CONSOL Pennsylvania Coal Company LLC. CONSOL Marine Terminals LLC and CONSOL Pennsylvania Coal Company LLC sell and/or contribute current and future trade receivables (including receivables sold to CONSOL Pennsylvania Coal Company LLC by CONSOL Thermal Holdings LLC) to CONSOL Funding LLC (the “SPV”). The SPV, in turn, pledges its interests in the receivables to PNC Bank, which either makes loans or issues letters of credit on behalf of the SPV. The maximum amount of advances and letters of credit outstanding under the securitization facility may not exceed $100 million.

Loans under the securitization facility accrue interest at a reserve-adjusted LIBOR market index rate equal to the one-month Eurodollar rate. Loans and letters of credit under the securitization facility also accrue a program fee and a letter of credit participation fee, respectively, ranging from 2.00% to 2.50% per annum depending on the total net leverage ratio of CONSOL Energy. In addition, the SPV paid certain structuring fees to PNC Capital Markets LLC and will pay other customary fees to the lenders, including a fee on unused commitments equal to 0.60% per annum.

At March 31, 2020, the Company's eligible accounts receivable yielded $30,258 of borrowing capacity. At March 31, 2020, the facility had no outstanding borrowings and $30,919 of letters of credit outstanding, leaving no unused capacity. CONSOL Energy posted $661 of cash collateral to secure the difference in the outstanding letters of credit and the eligible accounts receivable. Cash collateral of $661 is included in Restricted Cash in the Consolidated Balance Sheets. At December 31, 2019, the Company's eligible accounts receivable yielded $41,282 of borrowing capacity. At December 31, 2019, the facility had no outstanding borrowings and $41,211 of letters of credit outstanding, leaving available borrowing capacity of $71. Costs associated with the receivables facility totaled $341 and $382 for the three months ended March 31, 2020 and 2019, respectively. These costs have been recorded as financing fees which are included in Operating and Other Costs in the Consolidated Statements of Income. The Company has not derecognized any receivables due to its continued involvement in the collections efforts.

NOTE 10—PROPERTY, PLANT AND EQUIPMENT:

Property, plant and equipment consists of the following:



	March 31, 2020		December 31, 2019
Plant and Equipment	$	3,066,656	$	3,028,514
Coal Properties and Surface Lands	873,597		872,909
Airshafts	443,600		437,003
Mine Development	342,707		342,706
Advance Mining Royalties	327,138		327,048
Total Property, Plant and Equipment	5,053,698		5,008,180
Less: Accumulated Depreciation, Depletion and Amortization	2,965,903		2,916,015
Total Property, Plant and Equipment, Net	$	2,087,795	$	2,092,165

Coal reserves are controlled either through fee ownership or by lease. The duration of the leases vary; however, the lease terms are generally extended automatically to the exhaustion of economically recoverable reserves, as long as active mining continues. Coal interests held by lease provide the same rights as fee ownership for mineral extraction and are legally considered real property interests.

As of March 31, 2020 and December 31, 2019, property, plant and equipment includes gross assets under finance leases of $75,435 and $52,729, respectively. Accumulated amortization for finance leases was $37,861 and $31,373 at March 31, 2020 and December 31, 2019, respectively. Amortization expense for assets under finance leases approximated $4,964 and $3,914 for the three months ended March 31, 2020 and 2019, respectively, and is included in Depreciation, Depletion and Amortization in the accompanying Consolidated Statements of Income.

NOTE 11—OTHER ACCRUED LIABILITIES:



	March 31, 2020		December 31, 2019
Subsidence Liability	$	96,022	$	90,645
Accrued Payroll and Benefits	15,674		21,102
Accrued Interest	9,280		6,281
Accrued Other Taxes	5,407		4,753
Litigation	2,685		2,565
Short-Term Incentive Compensation	1,456		3,997
Other	12,139		9,719
Current Portion of Long-Term Liabilities:
Postretirement Benefits Other than Pensions	31,359		31,833
Asset Retirement Obligations	21,741		21,741
Operating Lease Liability	18,249		19,479
Pneumoconiosis Benefits	12,251		12,331
Workers' Compensation	10,998		11,323
Total Other Accrued Liabilities	$	237,261	$	235,769

NOTE 12—LONG-TERM DEBT:



	March 31, 2020		December 31, 2019
Debt:
Term Loan B due in September 2024 (Principal of $272,250 and $272,938 less Unamortized Discount of $1,125 and $1,187, 5.49% and 6.30% Weighted Average Interest Rate, respectively)	$	271,125	$	271,751
11.00% Senior Secured Second Lien Notes due November 2025	178,452		221,628
MEDCO Revenue Bonds in Series due September 2025 at 5.75%	102,865		102,865
Term Loan A due in March 2023 (4.74% and 5.55% Weighted Average Interest Rate, respectively)	85,000		88,750
Other Asset-Backed Financing Arrangements	18,243		9,289
Advance Royalty Commitments (10.78% Weighted Average Interest Rate)	1,895		1,895
Less: Unamortized Debt Issuance Costs	8,966		10,323
	648,614		685,855
Less: Amounts Due in One Year*	43,687		32,053
Long-Term Debt	$	604,927	$	653,802

* Excludes current portion of Finance Lease Obligations of $23,754 and $18,219 at March 31, 2020 and December 31, 2019, respectively.

In November 2017, CONSOL Energy entered into a revolving credit facility with commitments up to $300 million (the “Revolving Credit Facility”), a Term Loan A Facility of up to $100 million (the “TLA Facility”) and a Term Loan B Facility of up to $400 million (the “TLB Facility”, and together with the Revolving Credit Facility and the TLA Facility, the “Senior Secured Credit Facilities”). On March 28, 2019, the Company amended the Senior Secured Credit Facilities (the “amendment”) to increase the borrowing commitment of the Revolving Credit Facility to $400 million and reallocate the principal amounts outstanding under the TLA Facility and TLB Facility. As a result, the principal amount outstanding under the TLA Facility was $100 million and the principal amount outstanding under the TLB Facility was $275 million. Borrowings under the Company's Senior Secured Credit Facilities bear interest at a floating rate which can be, at the Company's option, either (i) LIBOR plus an applicable margin or (ii) an alternate base rate plus an applicable margin. The applicable margin for the Revolving Credit Facility and TLA Facility depends on the total net leverage ratio, whereas the applicable margin for the TLB Facility is fixed. The amendment reduced the applicable margin by 50 basis points on both the Revolving Credit Facility and the TLA Facility, and by 150 basis points on the TLB Facility. The amendment also extended the maturity dates of the Senior Secured Credit Facilities. The maturity date of the Revolving Credit and TLA Facilities was extended from November 28, 2021 to March 28, 2023. The TLB Facility's maturity date was extended from November 28, 2022 to September 28, 2024. Obligations under the Senior Secured Credit Facilities (Term Loan B and Term Loan A, together with the Revolving Credit Facility, on which there were no outstanding borrowings at March 31, 2020) are guaranteed by (i) all owners of the 75% undivided economic interest in the PAMC held by the Company, (ii) any other members of the Company’s group that own any portion of the collateral securing the Revolving Credit Facility, and (iii) subject to certain customary exceptions and agreed materiality thresholds, all other existing or future direct or indirect wholly-owned restricted subsidiaries of the Company (excluding the Partnership and its wholly-owned subsidiaries). The obligations are secured by, subject to certain exceptions (including a limitation of pledges of equity interests in certain subsidiaries and certain thresholds with respect to real property), a first-priority lien on (i) the Company’s 75% undivided economic interest in the PAMC, (ii) the limited partner units of the Partnership held by the Company, (iii) the equity interests in CONSOL Coal Resources GP LLC held by the Company (iv) the CONSOL Marine Terminal and (v) the 1.5 billion tons of Greenfield Reserves.

The Senior Secured Credit Facilities contain a number of customary affirmative covenants. In addition, the Senior Secured Credit Facilities contain a number of negative covenants, including (subject to certain exceptions) limitations on (among other things): indebtedness, liens, investments, acquisitions, dispositions, restricted payments, and prepayments of junior indebtedness. The amendment expanded the covenants relating to finance leases, general investments, joint venture investments and annual share repurchase baskets. The amendment also amended the restricted payments covenant to permit up to a $50 million annual dividend.

The Senior Secured Credit Facilities also include (i) a maximum first lien gross leverage ratio, (ii) a maximum total net leverage ratio, and (iii) a minimum fixed charge coverage ratio. CONSOL Energy must maintain a maximum first lien gross leverage ratio covenant of no more than 1.75 to 1.00. The maximum first lien gross leverage ratio is calculated as the ratio of Consolidated First Lien Debt to Consolidated EBITDA, excluding the Partnership. The maximum first lien gross leverage ratio was 1.45 to 1.00 at March 31, 2020. CONSOL Energy must maintain a maximum total net leverage ratio covenant of no more than 2.75 to 1.00. The maximum total net leverage ratio is calculated as the ratio of Consolidated Indebtedness, minus Cash on Hand, to Consolidated EBITDA, excluding the Partnership. The maximum total net leverage ratio was 2.17 to 1.00 at March 31, 2020. Consolidated EBITDA, as used in the covenant calculation, excludes non-cash compensation expenses, non-recurring transaction expenses, extraordinary gains and losses, gains and losses on discontinued operations, non-cash charges related to legacy employee liabilities and gains and losses on debt extinguishment, and includes cash distributions received from the Partnership and subtracts cash payments related to legacy employee liabilities. The facilities also include a minimum fixed charge coverage covenant of no less than 1.10 to 1.00, measured quarterly. The minimum fixed charge coverage ratio is calculated as the ratio of Consolidated EBITDA to Consolidated Fixed Charges, excluding the Partnership. Consolidated Fixed Charges, as used in the covenant calculation, include cash interest payments, cash payments for income taxes, scheduled debt repayments, dividends paid, and Maintenance Capital Expenditures. The minimum fixed charge coverage ratio was 1.27 to 1.00 at March 31, 2020. The Company was in compliance with all of its debt covenants as of March 31, 2020.

The TLB Facility also includes a financial covenant that requires the Company to repay a certain amount of its borrowings under the TLB Facility within ten business days after the date it files its Form 10-K with the Securities and Exchange Commission if the Company has excess cash flow (as defined in the credit agreement for the Senior Secured Credit Facilities) during the year covered by the applicable Form 10-K. During the three months ended March 31, 2019, CONSOL Energy made the required repayment of approximately $110 million based on the amount of the Company's excess cash flow as of December 31, 2018. For fiscal year 2018, such repayment was equal to 75% of the Company's excess cash flow less any voluntary prepayments of its borrowings under the TLB Facility made by the Company during 2018. For all subsequent fiscal years, the required repayment is equal to a certain percentage of the Company’s excess cash flow for such year, ranging from 0% to 75% depending on the Company’s total net leverage ratio, less the amount of certain voluntary prepayments made by the Company, if any, under the TLB Facility during such fiscal year. The amendment reduced the maximum amount of the mandatory annual excess cash flow sweep under the TLB Facility by 25%. Based on the Company's excess cash flow calculation, no repayment was required with respect to the year ended December 31, 2019. As such, as of December 31, 2019, no amount related to the prepayment of the TLB Facility in connection with the excess cash flow requirement has been classified as Current Portion of Long-Term Debt in the Consolidated Balance Sheets. The amount of excess cash flow is a covenant feature only applicable as of the Company's year-end and will be calculated as of December 31, 2020.

At March 31, 2020, the Revolving Credit Facility had no borrowings outstanding and $79,880 of letters of credit outstanding, leaving $320,120 of unused capacity. At December 31, 2019, the Revolving Credit Facility had no borrowings outstanding and $69,588 of letters of credit outstanding, leaving $330,412 of unused capacity. From time to time, CONSOL Energy is required to post financial assurances to satisfy contractual and other requirements generated in the normal course of business. Some of these assurances are posted to comply with federal, state or other government agencies' statutes and regulations. CONSOL Energy sometimes uses letters of credit to satisfy these requirements and these letters of credit reduce the Company's borrowing facility capacity.

In November 2017, CONSOL Energy issued $300 million in aggregate principal amount of 11.00% Senior Secured Second Lien Notes due 2025 (the “Second Lien Notes”) pursuant to an indenture (the “Indenture”) dated as of November 13, 2017, by and between the Company and UMB Bank, N.A., a national banking association, as trustee and collateral trustee (the “Trustee”). On November 28, 2017, certain subsidiaries of the Company executed a supplement to the Indenture and became party to the Indenture as a guarantor (the “Guarantors”). The Second Lien Notes are secured by second priority liens on substantially all of the assets of the Company and the Guarantors that are pledged and on a first-priority basis as collateral securing the Company’s obligations under the Senior Secured Credit Facilities (described above), subject to certain exceptions under the Indenture. The Indenture contains covenants that will limit the ability of the Company and the Guarantors, to (i) incur, assume or guarantee additional indebtedness or issue preferred stock; (ii) create liens to secure indebtedness; (iii) declare or pay dividends on the Company’s common stock, redeem stock or make other distributions to the Company’s stockholders; (iv) make investments; (v) restrict dividends, loans or other asset transfers from the Company’s restricted subsidiaries; (vi) merge or consolidate, or sell, transfer, lease or dispose of substantially all of the Company’s assets; (vii) sell or otherwise dispose of certain assets, including equity interests in subsidiaries; (viii) enter into transactions with affiliates; and (ix) create unrestricted subsidiaries. These covenants are subject to important exceptions and qualifications. If the Second Lien Notes achieve an investment grade rating from both Standard & Poor’s Ratings Services and Moody’s Investors Service, Inc. and no default under the Indenture exists, many of the foregoing covenants will terminate and cease to apply.

During the three months ended March 31, 2020, the Company repurchased $43,176 of its outstanding 11.00% Senior Secured Second Lien Notes due in 2025. During the three months ended March 31, 2019, the Company made a required repayment of approximately $110 million on the TLB Facility (discussed above) and amended the Senior Secured Credit Facilities. The Company also repurchased $7,000 of its outstanding 11.00% Senior Secured Second Lien Notes due in 2025 during the three months ended March 31, 2019. As part of these transactions, $16,833 and $23,143 was included in (Gain) Loss on Debt Extinguishment on the Consolidated Statements of Income for the three months ended March 31, 2020 and 2019, respectively.

The Company is a borrower under two asset-backed financing arrangements related to certain equipment. The equipment, which has an approximate value of $18,243, fully collateralizes the loans. As of March 31, 2020, a total of $14,900 matures in December 2020 and $3,343 matures in September 2024. The loans had a weighted average interest rate of 5.42% and 5.07% at March 31, 2020 and December 31, 2019, respectively.

During the year ended December 31, 2019, the Company entered into interest rate swaps, which effectively converted $150,000 of the TLB Facility's floating interest rate to a fixed interest rate for the twelve months ending December 31, 2020 and 2021, and $50,000 of the TLB Facility's floating interest rate to a fixed interest rate for the twelve months ending December 31, 2022. The interest rate swaps qualify for cash flow hedge accounting treatment and as such, the change in the fair value of the interest rate swaps is recorded on the Company's Consolidated Balance Sheets as an asset or liability. The effective portion of the gains or losses is reported as a component of accumulated other comprehensive loss and the ineffective portion is reported in earnings. At March 31, 2020 and December 31, 2019, the interest rate swap contracts were reflected in the Consolidated Balance Sheets at their fair value of $3,861 and $154, respectively, which is recorded in Other Accrued Liabilities and Other Liabilities. The fair value of the interest rate swaps reflected an unrealized loss of $2,773 (net of $(933) tax) at March 31, 2020. The unrealized loss is included on the Consolidated Statements of Stockholders' Equity as part of accumulated other comprehensive loss, as well as on the Consolidated Statements of Comprehensive Income as unrealized loss on cash flow hedges. Some of the Company's interest rate swaps reached their effective date in the three months ending March 31, 2020. As such, a gain of $4 was recognized in interest expense in the Consolidated Statements of Income. During 2020, notional amounts of $150,000 will become effective. In the next 12 months, the Company expects a loss of approximately $1,667 to be reclassified into earnings.

NOTE 13—COMMITMENTS AND CONTINGENT LIABILITIES:

The Company and its former parent entered into a separation and distribution agreement on November 28, 2017 that implemented the legal and structural separation of the Company from its former parent. The separation and distribution agreement also identified the assets of the Coal Business that were transferred to the Company and the liabilities and contracts related to the Coal Business that were assumed by the Company as part of the separation and distribution, and provides post-closing indemnification obligations and procedures between the Company and its former parent relating to the liabilities of the Coal Business that the Company assumed.

The Company is subject to various lawsuits and claims with respect to such matters as personal injury, wrongful death, damage to property, exposure to hazardous substances, governmental regulations including environmental remediation, employment and contract disputes and other claims and actions arising out of the normal course of business. The Company accrues the estimated loss for these lawsuits and claims when the loss is probable and reasonably estimable. The Company’s estimated accruals related to these pending claims, individually and in the aggregate, are immaterial to the financial position, results of operations or cash flows of the Company as of March 31, 2020. It is possible that the aggregate loss in the future with respect to these lawsuits and claims could ultimately be material to the Company’s financial position, results of operations or cash flows; however, such amounts cannot be reasonably estimated. The amount claimed against the Company as of March 31, 2020 is disclosed below when an amount is expressly stated in the lawsuit or claim, which is not often the case.

Fitzwater Litigation: Three nonunion retired coal miners have sued Fola Coal Company LLC, Consolidation Coal Company (“CCC”) and CONSOL of Kentucky Inc. (“COK”) (as well as the Company's former parent) in West Virginia Federal Court alleging ERISA violations in the termination of retiree health care benefits. The Plaintiffs contend they relied to their detriment on oral statements and promises of “lifetime health benefits” allegedly made by various members of management during Plaintiffs’ employment and that they were allegedly denied access to Summary Plan Documents that clearly reserved the right to modify or terminate the Retiree Health and Welfare Plan subject to Plaintiffs’ claims. Pursuant to Plaintiffs’ amended complaint filed on April 24, 2017, Plaintiffs request that retiree health benefits be reinstated and seek to represent a class of all nonunion retirees who were associated with AMVEST and COK areas of operation. On October 15, 2019, Plantiffs’ supplemental motion for class certification was denied on all counts. On April 1, 2020, the Court issued a revised scheduling order for the remaining individual claims, setting August 4, 2020 as the trial date. The Company believes it has a meritorious defense and intends to vigorously defend this suit.

Casey Litigation: A class action lawsuit was filed on August 23, 2017 on behalf of two nonunion retired coal miners against CCC, COK, CONSOL Buchanan Mining Co., LLC and Kurt Salvatori in West Virginia Federal Court alleging ERISA violations in the termination of retiree health care benefits. Filed by the same lawyers who filed the Fitzwater litigation, and raising nearly identical claims, the Plaintiffs contend they relied to their detriment on oral promises of “lifetime health benefits” allegedly made by various members of management during Plaintiffs’ employment and that they were not provided with copies of Summary Plan Documents clearly reserving to the Company the right to modify or terminate the Retiree Health and Welfare Plan. Plaintiffs request that retiree health benefits be reinstated for them and their dependents and seek to represent a class of all nonunion retirees of any subsidiary of the Company's former parent that operated or employed individuals in McDowell or Mercer Counties, West Virginia, or Buchanan or Tazewell Counties, Virginia whose retiree welfare benefits were terminated. On December 1, 2017, the trial court judge in Fitzwater signed an order to consolidate Fitzwater with Casey. The Casey complaint was amended on March 1, 2018 to add new plaintiffs, add defendant CONSOL Pennsylvania Coal Company, LLC and eliminate defendant CONSOL Buchanan Mining Co., LLC in an attempt to expand the class of retirees. On October 15, 2019, Plantiffs’ supplemental motion for class certification was denied on all counts. On April 1, 2020, the Court issued a revised scheduling order for the remaining individual claims, setting August 4, 2020 as the trial date. The Company believes it has a meritorious defense and intends to vigorously defend this suit.

Other Matters: Various Company subsidiaries are defendants in certain other legal proceedings arising out of the conduct of the Coal Business prior to the separation and distribution, and the Company is also a defendant in other legal proceedings following the separation and distribution. In the opinion of management, based upon an investigation of these matters and discussion with legal counsel, the ultimate outcome of such other legal proceedings, individually and in the aggregate, is not expected to have a material adverse effect on the Company’s financial position, results of operations or liquidity.

As part of the separation and distribution, the Company assumed various financial obligations relating to the Coal Business and agreed to reimburse its former parent for certain financial guarantees relating to the Coal Business that its former parent retained following the separation and distribution. Employee-related financial guarantees have primarily been provided to support the United Mine Workers’ of America’s 1992 Benefit Plan and federal black lung and various state workers’ compensation self-insurance programs. Environmental financial guarantees have primarily been provided to support various performance bonds related to reclamation and other environmental issues. Other financial guarantees have been extended to support sales contracts, insurance policies, legal matters, full and timely payments of mining equipment leases, and various other items necessary in the normal course of business.

The following is a summary, as of March 31, 2020, of the financial guarantees, unconditional purchase obligations and letters of credit to certain third parties. These amounts represent the maximum potential of total future payments that the Company could be required to make under these instruments, or under the separation and distribution agreement to the extent retained by the Company's former parent on behalf of the Coal Business. These amounts have not been reduced for potential recoveries under recourse or collateralization provisions. Generally, recoveries under reclamation bonds would be limited to the extent of the work performed at the time of the default. No amounts related to these financial guarantees and letters of credit are recorded as liabilities in the financial statements. The Company’s management believes that these guarantees will expire without being funded, and therefore, the commitments will not have a material adverse effect on the Company’s financial condition.



	Amount of Commitment Expiration per Period
	Total Amounts Committed		Less Than 1 Year		1-3 Years		3-5 Years		Beyond 5 Years
Letters of Credit:
Employee-Related	$	64,558	$	35,806	$	28,752	$	—	$	—
Environmental	398		398		—		—		—
Other	45,843		40,682		5,161		—		—
Total Letters of Credit	110,799		76,886		33,913		—		—
Surety Bonds:
Employee-Related	87,424		69,889		17,535		—		—
Environmental	527,406		496,365		31,041		—		—
Other	4,125		3,293		832		—		—
Total Surety Bonds	618,955		569,547		49,408		—		—
Guarantees:
Other	14,654		7,348		6,576		398		332
Total Guarantees	14,654		7,348		6,576		398		332
Total Commitments	$	744,408	$	653,781	$	89,897	$	398	$	332

Included in the above table are commitments and guarantees entered into in conjunction with the sale of Consolidation Coal Company and certain of its subsidiaries, which contain all five of its longwall coal mines in West Virginia and its river operations, to a third party. As part of the separation and distribution, the Company's former parent agreed to indemnify the Company and the Company agreed to indemnify its former parent in each case with respect to guarantees of certain equipment lease obligations that were assumed by the third party. In the event that the third party would default on the obligations defined in the agreements, the Company would be required to perform under the guarantees. If the Company would be required to perform, the stock purchase agreement provides various recourse actions. As of March 31, 2020, the Company has not been required to perform under these guarantees. The equipment lease obligations are collateralized by the underlying assets. The current maximum estimated exposure under these guarantees as of March 31, 2020 and December 31, 2019 is believed to be approximately $20,000. At March 31, 2020 and December 31, 2019, the fair value of these guarantees was $444 and $482, respectively, and is included in Other Accrued Liabilities on the Consolidated Balance Sheets. The fair value of certain of the guarantees was determined using the Company’s risk-adjusted interest rate. Significant increases or decreases in the risk-adjusted interest rates may result in a significantly higher or lower fair value measurement. No other amounts related to financial guarantees and letters of credit are recorded as liabilities in the financial statements. Significant judgment is required in determining the fair value of these guarantees. The guarantees of the leases are classified within Level 3 of the fair value hierarchy.

The Company regularly evaluates the likelihood of default for all guarantees based on an expected loss analysis and records the fair value, if any, of its guarantees as an obligation in the consolidated financial statements.

NOTE 14—FAIR VALUE OF FINANCIAL INSTRUMENTS:

CONSOL Energy determines the fair value of assets and liabilities based on the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants. The fair values are based on assumptions that market participants would use when pricing an asset or liability, including assumptions about risk and the risks inherent in valuation techniques and the inputs to valuations. The fair value hierarchy is based on whether the inputs to valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources (including LIBOR-based discount rates), while unobservable inputs reflect the Company’s own assumptions of what market participants would use.

The fair value hierarchy includes three levels of inputs that may be used to measure fair value as described below.

Level One - Quoted prices for identical instruments in active markets.

Level Two - The fair value of the assets and liabilities included in Level 2 are based on standard industry income approach models that use significant observable inputs, including LIBOR-based discount rates.

Level Three - Unobservable inputs significant to the fair value measurement supported by little or no market activity. The significant unobservable inputs used in the fair value measurement of the Company’s third-party guarantees are the credit risk of the third-party and the third-party surety bond markets. A significant increase or decrease in these values, in isolation, would have a directionally similar effect resulting in higher or lower fair value measurement of the Company’s Level 3 guarantees.

In those cases when the inputs used to measure fair value meet the definition of more than one level of the fair value hierarchy, the lowest level input that is significant to the fair value measurement in its totality determines the applicable level in the fair value hierarchy.

The financial instruments measured at fair value on a recurring basis are summarized below:



	Fair Value Measurements at								Fair Value Measurements at
	March 31, 2020								December 31, 2019
Description	Level 1		Level 2			Level 3			Level 1		Level 2			Level 3
Lease Guarantees	$	—	$	—		$	(444	)	$	—	$	—		$	(482	)
Derivatives ⁽¹⁾	$	—	$	(3,861	)	$	—		$	—	$	(154	)	$	—

(1) Interest rate swaps are valued based on observable market swap rates and are classified within Level 2 of the fair value hierarchy.

The following methods and assumptions were used to estimate the fair value for which the fair value option was not elected:

Long-term debt: The fair value of long-term debt is measured using unadjusted quoted market prices or estimated using discounted cash flow analyses. The discounted cash flow analyses are based on current market rates for instruments with similar cash flows.

The carrying amounts and fair values of financial instruments for which the fair value option was not elected are as follows:



	March 31, 2020				December 31, 2019
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Long-Term Debt	$	657,580	$	447,291	$	696,178	$	642,018

Certain of the Company’s debt is actively traded on a public market and, as a result, constitutes Level 1 fair value measurements. The portion of the Company’s debt obligations that is not actively traded is valued through reference to the applicable underlying benchmark rate and, as a result, constitutes Level 2 fair value measurements.

NOTE 15—SEGMENT INFORMATION:

CONSOL Energy Inc. consists of one reportable segment: the Pennsylvania Mining Complex, which includes the Bailey Mine, the Enlow Fork Mine, the Harvey Mine and the Central Preparation Plant. The principal activities of the PAMC are mining, preparation and marketing of thermal coal, sold primarily to power generators. It also includes selling, general and administrative activities, as well as various other activities assigned to the PAMC.

CONSOL Energy’s Other division includes revenue and expenses from various corporate and diversified business activities that are not allocated to the PAMC division. The diversified business activities include the CONSOL Marine Terminal, development of the Itmann Mine, the Greenfield Reserves, closed and idle mine activities, selling, general and administrative activities, interest expense and income taxes, as well as various other non-operated activities, none of which are individually significant to the Company.

Industry segment results for the three months ended March 31, 2020 are:



	PAMC		Other			Adjustments and Eliminations		Consolidated
Coal Revenue	$	255,452	$	—		$	—	$	255,452	(A)
Terminal Revenue	—		16,501			—		16,501
Freight Revenue	3,147		—			—		3,147
Total Revenue and Freight	$	258,599	$	16,501		$	—	$	275,100
Earnings (Loss) Before Income Tax	$	10,875	$	(6,492	)	$	—	$	4,383
Segment Assets	$	1,949,655	$	703,813		$	—	$	2,653,468
Depreciation, Depletion and Amortization	$	48,418	$	6,525		$	—	$	54,943
Capital Expenditures	$	20,692	$	6,486		$	—	$	27,178

Industry segment results for the three months ended March 31, 2019 are:



	PAMC		Other			Adjustments and Eliminations		Consolidated
Coal Revenue	$	332,502	$	—		$	—	$	332,502	(A)
Terminal Revenue	—		17,818			—		17,818
Freight Revenue	6,662		—			—		6,662
Total Revenue and Freight	$	339,164	$	17,818		$	—	$	356,982
Earnings (Loss) Before Income Tax	$	64,698	$	(45,245	)	$	—	$	19,453
Segment Assets	$	1,992,549	$	774,492		$	—	$	2,767,041
Depreciation, Depletion and Amortization	$	44,868	$	5,856		$	—	$	50,724
Capital Expenditures	$	32,372	$	1,799		$	—	$	34,171


(A)	For the three months ended March 31, 2020 and 2019, the PAMC segment had revenues from the following customers, each comprising over 10% of the Company’s total sales:



	Three Months Ended March 31,
	2020		2019
Customer A	$	38,908	$	61,872
Customer B	$	104,354	$	123,118
Customer C	$	35,683	$	41,866

Reconciliation of Segment Information to Consolidated Amounts:

Total Assets:



	March 31,
	2020		2019
Segment Assets for Total Reportable Business Segments	$	1,949,655	$	1,992,549
Segment Assets for All Other Business Segments	509,657		510,583
Items Excluded from Segment Assets:
Cash and Other Investments	91,731		186,295
Deferred Tax Assets	102,425		77,614
Total Consolidated Assets	$	2,653,468	$	2,767,041

NOTE 16—ADDITIONAL INFORMATION WITH RESPECT TO UNRESTRICTED SUBSIDIARIES:

Under the terms of the Indenture and Senior Secured Credit Facilities, CONSOL Energy has designated certain of its subsidiaries as “Unrestricted Subsidiaries”. The current Unrestricted Subsidiaries are the Partnership and its subsidiaries and the SPV. CONSOL Energy is required under the terms of the Indenture and the Senior Secured Credit Facilities to present additional information that reflects the financial condition and results of operations of the Company and its Restricted Subsidiaries separate from the financial condition and results of operations of the Company's Unrestricted Subsidiaries for the periods presented. This additional information is below.

Income Statement for the Three Months Ended March 31, 2020 (unaudited):




	Company and Restricted Subsidiaries			Unrestricted Subsidiaries		Consolidated
Revenue and Other Income:
Coal Revenue	$	191,589		$	63,863	$	255,452
Terminal Revenue	16,501			—		16,501
Freight Revenue	2,360			787		3,147
Miscellaneous Other Income	3,863			12,307		16,170
Loss on Sale of Assets	(14		)	—		(14		)
Total Revenue and Other Income	214,299			76,957		291,256
Costs and Expenses:
Operating and Other Costs	163,592			48,683		212,275
Depreciation, Depletion and Amortization	43,015			11,928		54,943
Freight Expense	2,360			787		3,147
Selling, General and Administrative Costs	13,624			4,046		17,670
Gain on Debt Extinguishment	(16,833		)	—		(16,833		)
Interest Expense, net	13,516			2,155		15,671
Total Costs and Expenses	219,274			67,599		286,873
(Loss) Earnings Before Income Tax	(4,975		)	9,358		4,383
Income Tax Expense	1,908			—		1,908
Net (Loss) Income	(6,883		)	9,358		2,475
Less: Net Income Attributable to Noncontrolling Interest	108			—		108
Net (Loss) Income Attributable to CONSOL Energy Inc. Shareholders	$	(6,991	)	$	9,358	$	2,367



Balance Sheet at March 31, 2020 (unaudited):

	Company and Restricted Subsidiaries			Unrestricted Subsidiaries		Consolidated
ASSETS
Current Assets:
Cash and Cash Equivalents	$	77,896		$	270	$	78,166
Restricted Cash	—			661		661
Accounts and Notes Receivable
Trade Receivables, net of Allowance	—			113,098		113,098
Other Receivables, net of Allowance	31,654			2,224		33,878
Inventories	44,852			13,786		58,638
Prepaid Expenses and Other Assets	21,931			4,371		26,302
Total Current Assets	176,333			134,410		310,743
Property, Plant and Equipment:
Property, Plant and Equipment	4,059,878			993,820		5,053,698
Less-Accumulated Depreciation, Depletion and Amortization	2,382,961			582,942		2,965,903
Property, Plant and Equipment - Net	1,676,917			410,878		2,087,795
Other Assets:
Deferred Income Taxes	102,425			—		102,425
Right of Use Asset - Operating Leases	53,268			14,519		67,787
Other, net of Allowance	71,277			13,441		84,718
Total Other Assets	226,970			27,960		254,930
TOTAL ASSETS	$	2,080,220		$	573,248	$	2,653,468
LIABILITIES AND EQUITY
Current Liabilities:
Accounts Payable	$	65,078		$	24,478	$	89,556
Accounts (Recoverable) Payable - Related Parties	(4,279		)	4,279		—
Current Portion of Long-Term Debt	58,529			8,912		67,441
Other Accrued Liabilities	197,677			39,584		237,261
Total Current Liabilities	317,005			77,253		394,258
Long-Term Debt:
Long-Term Debt	452,472			152,455		604,927
Finance Lease Obligations	16,867			5,075		21,942
Total Long-Term Debt	469,339			157,530		626,869
Deferred Credits and Other Liabilities:
Postretirement Benefits Other Than Pensions	429,085			—		429,085
Pneumoconiosis Benefits	195,449			6,269		201,718
Asset Retirement Obligations	243,837			10,968		254,805
Workers' Compensation	57,313			3,648		60,961
Salary Retirement	44,439			—		44,439
Operating Lease Liability	42,039			10,936		52,975
Other	16,445			823		17,268
Total Deferred Credits and Other Liabilities	1,028,607			32,644		1,061,251
TOTAL LIABILITIES	1,814,951			267,427		2,082,378
Total CONSOL Energy Inc. Stockholders’ Equity	133,584			305,821		439,405
Noncontrolling Interest	131,685			—		131,685
TOTAL LIABILITIES AND EQUITY	$	2,080,220		$	573,248	$	2,653,468

Income Statement for the Three Months Ended March 31, 2019 (unaudited):




	Company and Restricted Subsidiaries			Unrestricted Subsidiaries		Consolidated
Revenue and Other Income:
Coal Revenue	$	249,376		$	83,126	$	332,502
Terminal Revenue	17,818			—		17,818
Freight Revenue	4,997			1,665		6,662
Miscellaneous Other Income	11,981			1,311		13,292
Gain on Sale of Assets	334			5		339
Total Revenue and Other Income	284,506			86,107		370,613
Costs and Expenses:
Operating and Other Costs	177,603			52,509		230,112
Depreciation, Depletion and Amortization	39,507			11,217		50,724
Freight Expense	4,997			1,665		6,662
Selling, General and Administrative Costs	17,363			4,560		21,923
Loss on Debt Extinguishment	23,143			—		23,143
Interest Expense, net	17,245			1,351		18,596
Total Costs and Expenses	279,858			71,302		351,160
Earnings Before Income Tax	4,648			14,805		19,453
Income Tax Benefit	(850		)	—		(850		)
Net Income	5,498			14,805		20,303
Less: Net Income Attributable to Noncontrolling Interest	5,868			—		5,868
Net (Loss) Income Attributable to CONSOL Energy Inc. Shareholders	$	(370	)	$	14,805	$	14,435



Balance Sheet at December 31, 2019:

	Company and Restricted Subsidiaries			Unrestricted Subsidiaries		Consolidated
ASSETS
Current Assets:
Cash and Cash Equivalents	$	79,717		$	576	$	80,293
Accounts and Notes Receivable
Trade Receivables, net of Allowance	—			131,688		131,688
Other Receivables, net of Allowance	39,412			1,572		40,984
Inventories	41,478			12,653		54,131
Prepaid Expenses and Other Assets	25,181			5,752		30,933
Total Current Assets	185,788			152,241		338,029
Property, Plant and Equipment:
Property, Plant and Equipment	4,023,282			984,898		5,008,180
Less-Accumulated Depreciation, Depletion and Amortization	2,344,777			571,238		2,916,015
Property, Plant and Equipment - Net	1,678,505			413,660		2,092,165
Other Assets:
Deferred Income Taxes	103,505			—		103,505
Right of Use Asset - Operating Leases	56,937			15,695		72,632
Other, net of Allowance	74,015			13,456		87,471
Total Other Assets	234,457			29,151		263,608
TOTAL ASSETS	$	2,098,750		$	595,052	$	2,693,802
LIABILITIES AND EQUITY
Current Liabilities:
Accounts Payable	$	79,140		$	27,083	$	106,223
Accounts (Recoverable) Payable - Related Parties	(1,419		)	1,419		—
Current Portion of Long-Term Debt	45,020			5,252		50,272
Other Accrued Liabilities	196,314			39,455		235,769
Total Current Liabilities	319,055			73,209		392,264
Long-Term Debt:
Long-Term Debt	505,646			148,156		653,802
Finance Lease Obligations	7,391			1,645		9,036
Total Long-Term Debt	513,037			149,801		662,838
Deferred Credits and Other Liabilities:
Postretirement Benefits Other Than Pensions	432,496			—		432,496
Pneumoconiosis Benefits	196,114			6,028		202,142
Asset Retirement Obligations	239,410			10,801		250,211
Workers' Compensation	57,583			3,611		61,194
Salary Retirement	49,930			—		49,930
Operating Lease Liability	43,906			11,507		55,413
Other	14,134			785		14,919
Total Deferred Credits and Other Liabilities	1,033,573			32,732		1,066,305
TOTAL LIABILITIES	1,865,665			255,742		2,121,407
Total CONSOL Energy Inc. Stockholders’ Equity	95,889			339,310		435,199
Noncontrolling Interest	137,196			—		137,196
TOTAL LIABILITIES AND EQUITY	$	2,098,750		$	595,052	$	2,693,802

NOTE 17—RELATED PARTY TRANSACTIONS:

Transactions with the Company's Former Parent (2017)

Transition Services Agreements

The Company entered into a transition services agreement (“TSA”) and certain other agreements in connection with the separation and distribution agreement with its former parent to cover certain continued corporate services provided by the Company and its former parent to each other following the completion of the separation and distribution. In connection with the separation and distribution, the Company began to set up its own corporate functions, and pursuant to the TSA, the Company's former parent provided various corporate support services, including certain accounting, human resources, information technology, office and building, risk, security, tax and treasury, building security and tax services, as well as certain regulatory compliance services required during the period in which the Company remained a majority-owned subsidiary of its former parent. The TSA expired in February 2019. The charges associated with these services were not material during the three months ended March 31, 2019, and were consistent with expenses that the Company's former parent had historically allocated or incurred with respect to such services.

Former Parent Receivables and Payables

The Company had a receivable from its former parent of $6,791 at December 31, 2019, which was recorded in Other Receivables on the Consolidated Balance Sheets. The balance of this receivable was collected during the three months ended March 31, 2020. This receivable relates to reimbursements per the terms of the separation and distribution agreement.

CONSOL Coal Resources LP

CONSOL Energy, certain of its subsidiaries and the Partnership are party to an Omnibus Agreement, dated September 30, 2016, as amended on November 28, 2017 (the “Omnibus Agreement”). Under the Omnibus Agreement, CONSOL Energy provides the Partnership with certain services in exchange for payments by the Partnership for those services.

On November 28, 2017, the Company entered into an Affiliated Company Credit Agreement with the Partnership and certain of its subsidiaries (the Partnership Credit Parties) as amended on March 28, 2019 (as amended, the “Affiliated Company Credit Agreement”) under which the Company provides as lender a revolving credit facility in an aggregate principal amount of up to $275 million to the Partnership Credit Parties. In connection with the completion of the separation, the Partnership drew an initial $201 million, the net proceeds of which were used to repay outstanding amounts under CCR's $400 million senior secured revolving credit facility with certain lenders and PNC Bank, National Association, as administrative agent (the “Original CCR Credit Facility”), and to provide working capital for the Partnership following the separation and for other general corporate purposes. The Original CCR Credit Facility was then terminated.

On March 28, 2019, the Affiliated Company Credit Agreement was amended to extend the maturity date from February 27, 2023 to December 28, 2024. Interest accrues at a rate ranging from 3.75% to 4.75%, subject to the Partnership's net leverage ratio. For the three months ended March 31, 2020 and 2019, $2,114 and $1,796 of interest was incurred under the Affiliated Company Credit Agreement, respectively. The collateral obligations under the Affiliated Company Credit Agreement generally mirror the Original CCR Credit Facility, as does the list of entities that will act as guarantors thereunder. The Affiliated Company Credit Agreement is subject to financial covenants relating to a maximum first lien gross leverage ratio and a maximum total net leverage ratio, which will be calculated on a consolidated basis for the Partnership and its restricted subsidiaries at the end of each fiscal quarter. The Partnership was in compliance with each of these financial covenants at March 31, 2020. The Affiliated Company Credit Agreement also contains a number of customary affirmative covenants and negative covenants, including limitations on the ability of the Partnership to incur additional indebtedness, grant liens, and make investments, acquisitions, dispositions, restricted payments, and prepayments of junior indebtedness (subject to certain limited exceptions).

CCR is a party to a number of other agreements with CONSOL Energy, or its subsidiaries, that are described in detail in the section titled “Agreements with Affiliates” in Item 13 of CCR’s Form 10-K filed on February 14, 2020.

In August 2019, upon payment of the cash distribution with respect to the quarter ended June 30, 2019, the financial requirements for the conversion of all CCR subordinated units were satisfied. As a result, all 11,611,067 of the CCR subordinated units owned entirely by CONSOL Energy Inc. were converted into CCR common units on a one-for-one basis. The conversion did not impact the amount of the cash distribution paid or the total number of CCR's outstanding units representing limited partner interests.

Charges for services from the Company to CCR include the following:



	For the Three Months Ended March 31,
	2020		2019
Operating and Other Costs	$	853	$	763
Selling, General and Administrative Costs	2,793		3,056
Total Services from CONSOL Energy	$	3,646	$	3,819

Operating and Other Costs include pension service costs and insurance expenses. Selling, General and Administrative Costs include charges for incentive compensation, an annual administrative support fee and reimbursement for the provision of certain management and operating services provided by the Company.

At March 31, 2020 and December 31, 2019, CCR had a net payable to the Company in the amount of $4,279 and $1,419, respectively. This payable includes reimbursements for business expenses, executive fees, stock-based compensation and other items under the Omnibus Agreement.

In May 2019, CONSOL Energy Inc.'s Board of Directors approved an expansion of the stock, unit and debt repurchase program (see Note 18 - Stock, Unit and Debt Repurchases). The program expansion allows the Company to use up to $50 million of the program to purchase CCR's outstanding common units in the open market. None of the Partnership's common units were purchased under this program during the three months ended March 31, 2020 and 2019.

NOTE 18—STOCK, UNIT AND DEBT REPURCHASES:

In December 2017, CONSOL Energy’s Board of Directors approved a program to repurchase, from time to time, the Company’s outstanding shares of common stock or its 11.00% Senior Secured Second Lien Notes due 2025, in an aggregate amount of up to $50 million through the period ending June 30, 2019. The program was subsequently amended by CONSOL Energy’s Board of Directors in July 2018 to allow up to $100 million of repurchases of the Company’s common stock or its 11.00% Senior Secured Second Lien Notes due 2025, subject to certain limitations in the Company’s current credit agreement and the TMA. The Company’s Board of Directors also authorized the Company to use up to $25 million of the program to purchase CONSOL Coal Resources LP’s outstanding common units in the open market. In May 2019, CONSOL Energy's Board of Directors approved an expansion of the program in the amount of $75 million, bringing the aggregate limit of the program to $175 million. The May 2019 expansion also increased the aggregate limit of the amount of CCR's common units that can be purchased under the program to $50 million, which is consistent with the Company's credit facility covenants that prohibit the Company from using more than $50 million for the purchase of CCR's outstanding common units. The Company's Board of Directors also approved extending the termination date of the program from June 30, 2019 to June 30, 2020. In July 2019, CONSOL Energy's Board of Directors approved an expansion of the program in the amount of $25 million, bringing the aggregate limit of the Company's stock, unit and debt repurchase program to $200 million.

Under the terms of the program, CONSOL Energy is permitted to make repurchases in the open market, in privately negotiated transactions, accelerated repurchase programs or in structured share repurchase programs. CONSOL Energy is also authorized to enter into one or more 10b5-1 plans with respect to any of the repurchases. Any repurchases of common stock, notes or units are to be funded from available cash on hand or short-term borrowings. The program does not obligate CONSOL Energy to acquire any particular amount of its common stock, notes or units, and can be modified or suspended at any time at the Company’s discretion. The program is conducted in compliance with applicable legal requirements and within the limits imposed by any credit agreement, receivables purchase agreement, indenture, or the TMA, and is subject to market conditions and other factors.

During the three months ended March 31, 2020 and 2019, the Company repurchased approximately $43,176 and $7,000 of its 11.00% Senior Secured Second Lien Notes due 2025, respectively. No common shares were repurchased and no common Partnership units were purchased under this program during the three months ended March 31, 2020 and 2019.

NOTE 19—SUBSEQUENT EVENTS:

On May 8, 2020, CONSOL Energy Inc.'s Board of Directors approved an expansion of the stock, unit and debt repurchase program. The aggregate amount of the program's expansion is $70 million, bringing the total amount of the Company's stock, unit and debt repurchase program to $270 million. The Company's Board of Directors also approved extending the termination date of the program, from June 30, 2020 to June 30, 2022. The program's available capacity as of May 11, 2020 is $100,622.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS

OF OPERATIONS

You should read the following Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) in conjunction with the Consolidated Financial Statements and corresponding notes included elsewhere in this Form 10-Q. In addition, this Form 10-Q report should be read in conjunction with the Consolidated Financial Statements for the three-year period ended December 31, 2019 included in CONSOL Energy Inc.'s Form 10-K, filed on February 14, 2020. This MD&A contains forward-looking statements and the matters discussed in these forward-looking statements are subject to risks, uncertainties, and other factors that could cause actual results to differ materially from those projected or implied in the forward-looking statements. Please see “Risk Factors” and “Forward-Looking Statements” for a discussion of the uncertainties, risks and assumptions associated with these statements.

All amounts discussed are in millions of U.S. dollars, unless otherwise indicated.

COVID-19 Update

The Company is monitoring the impact of the COVID-19 pandemic (“COVID-19”) and has taken, and will continue to take, steps to mitigate the potential risks and impact on the Company and its employees. The health and safety of our employees is paramount, and we have taken, and will continue to take, various precautions to minimize risks from COVID-19. In response to two employees testing positive for COVID-19, the Company temporarily curtailed production at the Bailey Mine for two weeks at the end of March. The Company continues to monitor the health and safety of its employees closely in order to limit potential risks to our employees, contractors, family members and the community.

We are considered a critical infrastructure company by the U.S. Department of Homeland Security. As a result, we are exempt from Pennsylvania Governor Tom Wolf's executive order closing all businesses that are not life sustaining. The unprecedented decline in coal demand that began in the first quarter is continuing into the second quarter of 2020 driven by widespread government-imposed lockdowns caused by COVID-19. In response to the decline in demand for our coal as a result of COVID-19, we announced on April 14, 2020 that we temporarily idled production at the Enlow Fork Mine. This decline in coal demand has negatively impacted our operational, sales and financial performances year-to-date and we expect that this negative impact will continue as the pandemic continues.

It is not clear how long the government-imposed shut-downs of non-essential businesses in the United States and abroad will last, and there is a possibility that such shut-downs may be re-imposed after being lifted if COVID-19 experiences a resurgence. We expect that depressed domestic and international demand for our coal will continue for so long as there are widespread, government-imposed shut-downs of business activity. Additionally, some of our customers have already attempted, and may in the future attempt, to invoke force majeure or similar provisions in the contracts they have in place with us in order to avoid taking possession of and paying us for our coal that they are contractually obligated to purchase. Sustained decrease in demand for our coal and the failure of our customers to purchase coal from us that they are obligated to purchase pursuant to existing contracts would have a material adverse effect on our results of operations and financial condition. The extent to which COVID-19 may adversely impact our business depends on future developments, which are highly uncertain and unpredictable, including new information concerning the severity of the outbreak and the effectiveness of actions globally to contain or mitigate its effects. While we expect this matter to negatively impact our results of operations, cash flows and financial condition, the current level of uncertainty over the economic and operational impacts of COVID-19 means the related financial impact on the Company cannot be reasonably estimated at this time. The Company will continue to take steps it believes are appropriate to mitigate the impacts of COVID-19 on its operations, liquidity and financial condition.

Our Business

We are a leading, low-cost producer of high-quality bituminous coal, focused on the extraction and preparation of coal in the Appalachian Basin due to our ability to efficiently produce and deliver large volumes of high-quality coal at competitive prices, the strategic location of our mines and the industry experience of our management team.

Coal from the PAMC is valued because of its high energy content (as measured in Btu per pound), relatively low levels of sulfur and other impurities, and strong thermoplastic properties that enable it to be used in metallurgical as well as thermal applications. We take advantage of these desirable quality characteristics and our extensive logistical network, which is directly served by both the Norfolk Southern and CSX railroads, to aggressively market our product to a broad base of strategically selected, top-performing power plant customers in the eastern United States. We also capitalize on the operational synergies afforded by the CONSOL Marine Terminal to export our coal to thermal and metallurgical end-users in Europe, Asia, South America, and Africa, as well as Canada.

Our operations, including the PAMC and the CONSOL Marine Terminal, have consistently generated strong cash flows. As of December 31, 2019, the PAMC controls 669.4 million tons of high-quality Pittsburgh seam reserves, enough to allow for approximately 23.5 years of full-capacity production. In addition, we own or control approximately 1.5 billion tons of Greenfield Reserves located in the Northern Appalachian (“NAPP”), the Central Appalachian (“CAPP”) and the Illinois Basins (“ILB”), which we believe provide future growth and monetization opportunities. Our vision is to maximize cash flow generation through the safe, compliant, and efficient operation of this core asset base, while strategically reducing debt, returning capital through share buybacks or dividends, and, when prudent, allocating capital toward compelling growth opportunities.

Our core businesses consist of our:

•

Pennsylvania Mining Complex: The PAMC, which includes the Bailey Mine, the Enlow Fork Mine, the Harvey Mine and the Central Preparation Plant, has extensive high-quality coal reserves. We mine our reserves from the Pittsburgh No. 8 Coal Seam, which is a large contiguous formation of high-Btu coal that is ideal for high productivity, low-cost longwall operations. The design of the PAMC is optimized to produce large quantities of coal on a cost-efficient basis. We are able to sustain high production volumes at comparatively low operating costs due to, among other things, our technologically advanced longwall mining systems, logistics infrastructure and safety. All of the PAMC mines utilize longwall mining, which is a highly automated underground mining technique that produces large volumes of coal at lower costs compared to other underground mining methods. We own a 75% undivided interest in the PAMC, and the remaining 25% is owned by CCR, as discussed below.


•	CCR Ownership: CONSOL Energy owns, directly or indirectly, through CCR's general partner, 61.4% of the partnership, which is comprised of a 1.7% general partner interest and a 59.7% limited partner interest. At March 31, 2020, CCR's assets included a 25% undivided interest in, and full operational control over, the PAMC.


•	CONSOL Marine Terminal: Through our subsidiary CONSOL Marine Terminals LLC, we provide coal export terminal services through the Port of Baltimore. The terminal can either store coal or load coal directly into vessels from rail cars. It is also the only major east coast United States coal terminal served by two railroads, Norfolk Southern Corporation and CSX Transportation Inc.

•

Itmann Mine: Construction of the Itmann Mine, located in Wyoming County, West Virginia, began in the second half of 2019. Full production from the mine is expected upon completion of a new preparation plant, and could begin by the end of 2021, depending on market conditions. When fully operational, the Company anticipates approximately 900 thousand tons per year of high-quality, low-vol coking coal capacity.


•	Greenfield Reserves: We own approximately 1.5 billion tons of high-quality, undeveloped coal reserves located in NAPP, CAPP and the ILB.

These assets and the diverse markets they serve provide robust flexibility for generating cash across a wide variety of demand and pricing scenarios. This flexibility begins with the low-cost structure and optionality afforded by the PAMC. The three mines at the PAMC, which include the Bailey, Enlow Fork and Harvey mines, produce coal from the Pittsburgh No. 8 Coal Seam using longwall mining, a highly automated underground mining technique that produces large volumes of coal at lower costs compared to alternative mining methods. These three mines collectively operate five longwalls, and the production from all three mines is processed at a single, centralized preparation plant, which is connected via conveyor belts to each mine. The Central Preparation Plant, which can clean and process up to 8,200 raw tons of coal per hour, provides economies of scale while also maintaining the ability to segregate and blend coal based on quality. This infrastructure enables us to tailor our production levels and quality specifications to meet market demands. It also results in a highly productive, low-cost operation as compared to other NAPP coal mines. In 2019, the PAMC operated three of the top four most productive longwall mines in NAPP. For the year ending December 31, 2019, productivity averaged 7.10 tons of coal per employee hour, compared with an average of 5.28 tons per employee hour for all other currently-operating NAPP longwalls. Our high productivity helps drive a low cost structure. Our efficiency strengthens our margins throughout the commodity cycle, and has allowed us to continue to generate positive margins even in challenging pricing environments.

Coal from the PAMC is versatile in that it can be sold either domestically or abroad, in the thermal coal market or as a crossover product in the high-volatile metallurgical coal market. We have a well-established and diverse customer base, comprised primarily of domestic electric-power-producing companies located in the eastern United States. For 2020 and 2021, our contracted position, as of May 11, 2020, is at 98% and 44%, respectively, assuming annual production of 26 million tons. We believe our committed and contracted position is well-balanced and provides diversification benefits.

Q1 2020 Highlights:


•	Net income of $2.5 million


•	Repurchased $43.2 million of the Company's 11.00% Senior Secured Second Lien Notes due 2025 during the quarter


•	Successfully amended and extended the term of the Company's accounts receivable securitization facility while maintaining the borrowing capacity and interest rate


•	Raised $16.3 million through an equipment finance lease transaction and added an additional $20.0 million commitment for future financing needs

How We Evaluate Our Operations

Our management team uses a variety of financial and operating metrics to analyze our performance. These metrics are significant factors in assessing our operating results and profitability. The metrics include: (i) coal production, sales volumes and average revenue per ton; (ii) cost of coal sold, a non-GAAP financial measure; (iii) cash cost of coal sold, a non-GAAP financial measure; and (iv) average cash margin per ton, an operating ratio derived from non-GAAP financial measures.

Cost of coal sold, cash cost of coal sold, and average cash margin per ton normalize the volatility contained within comparable GAAP measures by adjusting certain non-operating or non-cash transactions. Each of these non-GAAP metrics are used as supplemental financial measures 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;


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


•	the viability of acquisitions and other capital expenditure projects and the returns on investment of various investment opportunities; and


•	the attractiveness of capital projects and acquisitions and the overall rates of return on alternative investment opportunities.

These non-GAAP financial measures should not be considered an alternative to total costs, net income, operating cash flow or any other measure of financial performance or liquidity presented in accordance with GAAP. These measures exclude some, but not all, items that affect net income or net cash, and these measures and the way we calculate them may vary from those of other companies. As a result, the items presented below may not be comparable to similarly titled measures of other companies.

Reconciliation of Non-GAAP Financial Measures

We evaluate our cost of coal sold and cash cost of coal sold on an aggregate basis. We define cost of coal sold as operating and other production costs related to produced tons sold, along with changes in coal inventory, both in volumes and carrying values. The cost of coal sold includes items such as direct operating costs, royalty and production taxes, direct administration costs, and depreciation, depletion and amortization costs on production assets. Our costs exclude any indirect costs, such as selling, general and administrative costs, freight expenses, interest expenses, depreciation, depletion and amortization costs on non-production assets and other costs not directly attributable to the production of coal. The cash cost of coal sold includes cost of coal sold less depreciation, depletion and amortization costs on production assets. The GAAP measure most directly comparable to cost of coal sold and cash cost of coal sold is total costs and expenses.

The following table presents a reconciliation of cost of coal sold and cash cost of coal sold to total costs and expenses, the most directly comparable GAAP financial measure, on a historical basis, for each of the periods indicated (in thousands).



	Three Months Ended March 31,
	2020			2019
Total Costs and Expenses	$	286,873		$	351,160
Freight Expense	(3,147		)	(6,662		)
Selling, General and Administrative Costs	(17,670		)	(21,923		)
Gain (Loss) on Debt Extinguishment	16,833			(23,143		)
Interest Expense, net	(15,671		)	(18,596		)
Other Costs (Non-Production)	(20,882		)	(30,793		)
Depreciation, Depletion and Amortization (Non-Production)	(9,363		)	(8,165		)
Cost of Coal Sold	$	236,973		$	241,878
Depreciation, Depletion and Amortization (Production)	(45,580		)	(42,559		)
Cash Cost of Coal Sold	$	191,393		$	199,319

We define average cash margin per ton sold as average coal revenue per ton, net of average cash cost of coal sold per ton. The GAAP measure most directly comparable to average cash margin per ton sold is total coal revenue.

The following table presents a reconciliation of average cash margin per ton sold to total coal revenue, the most directly comparable GAAP financial measure, on a historical basis, for each of the periods indicated (in thousands, except per ton information).



	Three Months Ended March 31,
	2020			2019
Total Coal Revenue	$	255,452		$	332,502
Operating and Other Costs	212,275			230,112
Less: Other Costs (Non-Production)	(20,882		)	(30,793		)
Total Cash Cost of Coal Sold	191,393			199,319
Add: Depreciation, Depletion and Amortization	54,943			50,724
Less: Depreciation, Depletion and Amortization (Non-Production)	(9,363		)	(8,165		)
Total Cost of Coal Sold	$	236,973		$	241,878
Total Tons Sold (in millions)	5.9			6.7
Average Revenue per Ton Sold	$	43.16		$	49.38
Average Cash Cost of Coal Sold per Ton	32.41			29.71
Depreciation, Depletion and Amortization Costs per Ton Sold	7.63			6.21
Average Cost of Coal Sold per Ton	40.04			35.92
Average Margin per Ton Sold	3.12			13.46
Add: Depreciation, Depletion and Amortization Costs per Ton Sold	7.63			6.21
Average Cash Margin per Ton Sold	$	10.75		$	19.67

Three Months Ended March 31, 2020 Compared with the Three Months Ended March 31, 2019

Net Income Attributable to CONSOL Energy Inc. Shareholders

CONSOL Energy reported net income attributable to CONSOL Energy Inc. shareholders of $2 million for the three months ended March 31, 2020, compared to net income attributable to CONSOL Energy Inc. shareholders of $14 million for the three months ended March 31, 2019.

CONSOL Energy consists of the Pennsylvania Mining Complex, as well as various corporate and other business activities that are not allocated to the PAMC. The other business activities include the CONSOL Marine Terminal, development of the Itmann Mine, the Greenfield Reserves, closed and idle mine activities, selling, general and administrative activities, interest expense and income taxes, as well as various other non-operated activities.

PAMC ANALYSIS:

The PAMC division's principal activities consist of mining, preparation and marketing of thermal coal, sold primarily to power generators. The division also includes selling, general and administrative costs, as well as various other activities assigned to the PAMC division, but not included in the cost components on a per unit basis.

The PAMC division had earnings before income tax of $11 million for the three months ended March 31, 2020, compared to earnings before income tax of $64 million for the three months ended March 31, 2019. Variances are discussed below.



	For the Three Months Ended
	March 31,
(in millions)	2020		2019		Variance
Revenue:
Coal Revenue	$	255	$	333	$	(78	)
Freight Revenue	3		7		(4		)
Miscellaneous Other Income	11		5		6
Total Revenue and Other Income	269		345		(76		)
Cost of Coal Sold:
Operating Costs	191		199		(8		)
Depreciation, Depletion and Amortization	46		43		3
Total Cost of Coal Sold	237		242		(5		)
Other Costs:
Other Costs	1		9		(8		)
Depreciation, Depletion and Amortization	3		2		1
Total Other Costs	4		11		(7		)
Freight Expense	3		7		(4		)
Selling, General and Administrative Costs	14		21		(7		)
Total Costs and Expenses	258		281		(23		)
Earnings Before Income Tax	$	11	$	64	$	(53	)

Coal Production

The table below presents total tons produced (in thousands) from the Pennsylvania Mining Complex for the periods indicated:



	For the Three Months Ended March 31,
Mine	2020	2019	Variance
Bailey	2,804	2,947	(143	)
Enlow Fork	2,375	2,830	(455	)
Harvey	795	1,072	(277	)
Total	5,974	6,849	(875	)

Coal production was 6.0 million tons for the three months ended March 31, 2020, compared to 6.8 million tons for the three months ended March 31, 2019. The PAMC division's coal production decreased mainly in response to weakened customer demand as a result of a warmer than normal winter, followed by a decline in global demand due to the COVID-19 pandemic and, in response, the widespread government-imposed shut-downs, which have significantly reduced electricity consumption and, therefore, demand for the Company's coal.

Coal Operations

The PAMC division's coal revenue and cost components on a per unit basis for the three months ended March 31, 2020 and 2019 are detailed in the table below. The PAMC division's operations also include various costs such as selling, general and administrative, freight and other costs not included in the unit cost analysis because these costs are not directly associated with coal production.



	For the Three Months Ended March 31,
	2020		2019		Variance
Total Tons Sold (in millions)	5.9		6.7		(0.8		)
Average Revenue per Ton Sold	$	43.16	$	49.38	$	(6.22	)

Average Cash Cost of Coal Sold per Ton ⁽¹⁾	$	32.41	$	29.71	$	2.70
Depreciation, Depletion and Amortization Costs per Ton Sold (Non-Cash Cost)	7.63		6.21		1.42
Average Cost of Coal Sold per Ton ⁽¹⁾	$	40.04	$	35.92	$	4.12
Average Margin per Ton Sold	$	3.12	$	13.46	$	(10.34	)
Add: Depreciation, Depletion and Amortization Costs per Ton Sold	7.63		6.21		1.42
Average Cash Margin per Ton Sold ⁽¹⁾	$	10.75	$	19.67	$	(8.92	)

(1) Average cash cost of coal sold per ton and average cost of coal sold per ton are non-GAAP measures and average cash margin per ton sold is an operating ratio derived from non-GAAP measures. See “How We Evaluate Our Operations - Reconciliation of Non-GAAP Financial Measures” for a reconciliation of non-GAAP measures to the most directly comparable GAAP measures.

Coal Revenue

Coal revenue was $255 million for the three months ended March 31, 2020, compared to $333 million for the three months ended March 31, 2019. Total tons sold decreased in the period-to-period comparison in response to weakened customer demand due to a warmer than normal winter followed by the COVID-19 pandemic and, in response, the widespread government-imposed shut-downs, which have significantly reduced electricity consumption and, therefore, demand for the Company's coal. The decrease in customer demand resulted in lower pricing received on netback contracts and export sales.

Freight Revenue and Freight Expense

Freight revenue is the amount billed to customers for transportation costs incurred. This revenue is based on the weight of coal shipped, negotiated freight rates and method of transportation, primarily rail, used by the customers to which the Company contractually provides transportation services. Freight revenue is completely offset by freight expense. Freight revenue and freight expense were both $3 million for the three months ended March 31, 2020, compared to $7 million for the three months ended March 31, 2019. The $4 million decrease was due to decreased shipments to customers where the Company was contractually obligated to provide transportation services.

Miscellaneous Other Income

Miscellaneous other income was $11 million for the three months ended March 31, 2020, compared to $5 million for the three months ended March 31, 2019. The $6 million increase was primarily the result of additional customer contract buyouts in the three months ended March 31, 2020, offset, in part, by a decrease in sales of externally purchased coal to blend and resell. These contract buyouts involved the negotiation of early terminations of several customer contracts in exchange for payment of certain fees to the Company.

Cost of Coal Sold

Cost of coal sold is comprised of operating costs related to produced tons sold, along with changes in both the volumes and carrying values of coal inventory. The costs of coal sold include items such as direct operating costs, royalties and production taxes, direct administration costs and depreciation, depletion, and amortization costs on production assets. Total cost of coal sold was $237 million for the three months ended March 31, 2020, or $5 million lower than the $242 million for the three months ended March 31, 2019. Average cost of coal sold per ton was $40.04 for the three months ended March 31, 2020, compared to $35.92 for the three months ended March 31, 2019. The decrease in the total cost of coal sold was primarily driven by decreased production-related expenses, as less coal was mined in response to weakened commodity markets. This was partially offset by an increase in subsidence expense, primarily due to the timing and nature of the properties undermined. On a per unit basis, the decreased production and higher subsidence costs resulted in an overall increase in the average cost of coal sold per ton.

Other Costs

Other costs include items that are assigned to the PAMC division but are not included in unit costs, such as coal reserve holding costs and purchased coal costs. Total other costs decreased $7 million in the three months ended March 31, 2020 compared to the three months ended March 31, 2019. The decrease was primarily attributable to a reduction in costs related to externally purchased coal to blend and resell.

Selling, General, and Administrative Costs

The amount of selling, general and administrative costs related to the PAMC division was $14 million for the three months ended March 31, 2020, compared to $21 million for the three months ended March 31, 2019. The $7 million decrease in the period-to-period comparison was primarily related to accelerated non-cash amortization recorded in the three months ended March 31, 2019 for retiree-eligible employees who received awards under the Company's Performance Incentive Plan, and lower short-term incentive compensation earned in the three months ended March 31, 2020.

OTHER ANALYSIS:

The other division includes revenue and expenses from various corporate and diversified business activities that are not allocated to the PAMC division. The diversified business activities include the CONSOL Marine Terminal, development of the Itmann Mine, the Greenfield Reserves, closed and idle mine activities, selling, general and administrative activities, interest expense and income taxes, as well as various other non-operated activities.

Other business activities had a loss before income tax of $7 million for the three months ended March 31, 2020, compared to a loss before income tax of $45 million for the three months ended March 31, 2019. Variances are discussed below.



	For the Three Months Ended
	March 31,
(in millions)	2020			2019			Variance
Revenue:
Terminal Revenue	$	17		$	18		$	(1	)
Miscellaneous Other Income	5			8			(3		)
Total Revenue and Other Income	22			26			(4		)
Other Costs and Expenses:
Operating and Other Costs	20			22			(2		)
Depreciation, Depletion and Amortization	6			6			—
Selling, General and Administrative Costs	4			1			3
(Gain) Loss on Debt Extinguishment	(17		)	23			(40		)
Interest Expense, net	16			19			(3		)
Total Other Costs and Expenses	29			71			(42		)
Loss Before Income Tax	$	(7	)	$	(45	)	$	38

Terminal Revenue

Terminal revenue consists of sales from the CONSOL Marine Terminal, which is located in the Port of Baltimore, Maryland and provides access to international coal markets. CONSOL Marine Terminal revenue was $17 million for the three months ended March 31, 2020, compared to $18 million for the three months ended March 31, 2019. The $1 million decrease in the period-to-period comparison was primarily attributable to a decrease in revenues associated with throughput tons not covered by the Company's take-or-pay contract.

Miscellaneous Other Income

Miscellaneous other income was $5 million for the three months ended March 31, 2020, compared to $8 million for the three months ended March 31, 2019. The change is due to the following items:



	For the Three Months Ended March 31,
(in millions)	2020		2019		Variance
Royalty Income - Non-Operated Coal	$	5	$	6	$	(1	)
Property Easements and Option Income	—		1		(1		)
Rental Income	—		1		(1		)
Total Miscellaneous Other Income	$	5	$	8	$	(3	)

Operating and Other Costs

Operating and other costs were $20 million for the three months ended March 31, 2020, compared to $22 million for the three months ended March 31, 2019. Operating and other costs decreased in the period-to-period comparison due to the following items:



	For the Three Months Ended March 31,
(in millions)	2020		2019		Variance
Terminal Operating Costs	$	5	$	6	$	(1	)
Employee-Related Legacy Liability Expense	7		9		(2		)
Coal Reserve Holding Costs	1		1		—
Closed and Idle Mines	1		1		—
Litigation Expense	—		3		(3		)
Other	6		2		4
Total Operating and Other Costs	$	20	$	22	$	(2	)

Depreciation, Depletion and Amortization

There were no material changes in depreciation, depletion and amortization costs in the period-to-period comparison.

Selling, General and Administrative Costs

Selling, general and administrative costs are allocated to the Company's Other division based on a percentage of total revenue, a percentage of total projected capital expenditures and a percentage of resources utilized. The increase of $3 million is a result of increases in the portion of selling, general and administrative expenses allocated to the Other division due to increased activity in the most recent quarter at the Itmann Mine and other business development activities, such as coal-to-products development.

(Gain) Loss on Debt Extinguishment

Gain on debt extinguishment of $17 million was recognized in the three months ended March 31, 2020 due to the open market repurchases of the Company's 11.00% Senior Secured Second Lien Notes due 2025, which traded well below par value.

Loss on debt extinguishment of $23 million was recognized in the three months ended March 31, 2019 due to the open market repurchases of the Company's 11.00% Senior Secured Second Lien Notes due 2025, the $110 million required repayment on the Term Loan B Facility, and the refinancing of the Company's Revolving Credit Facility, Term Loan A Facility and Term Loan B Facility. See Note 12 - Long-Term Debt in the Notes to the Consolidated Financial Statements included in Item 1 of this Form 10-Q for additional information.

Interest Expense, net

Interest expense, net of amounts capitalized, is comprised of interest on the Company's Senior Secured Credit Facilities, the 11.00% Senior Secured Second Lien Notes due 2025 and the 5.75% MEDCO Revenue Bonds. Interest expense, net of amounts capitalized, decreased $3 million in the period-to-period comparison, primarily related to the $110 million required repayment on the Term Loan B Facility, as well as the refinancing of the Company's Revolving Credit Facility, Term Loan A Facility and Term Loan B Facility, both of which occurred during the first quarter of 2019. The decrease is also attributable to repurchases of the Company's 11.00% Senior Secured Second Lien Notes due 2025 during the three months ended March 31, 2020 and 2019, totaling approximately $43 million and $7 million, respectively (see Note 18 - Stock, Unit and Debt Repurchases in the Notes to the Consolidated Financial Statements in Item 1 of this Form 10-Q for additional information).

Liquidity and Capital Resources

CONSOL Energy's sources of liquidity include cash generated from operations, cash on hand, borrowings under the revolving credit facility and securitization facility (which are discussed below), and, if necessary, the ability to issue additional equity or debt securities. The Company believes that cash generated from these sources will be sufficient to meet its short-term working capital requirements, long-term capital expenditure requirements, and debt servicing obligations, as well as to provide required letters of credit.

It is not clear how long the government-imposed shut-downs of non-essential businesses in the United States and abroad will last, and there is a possibility that such shut-downs may be re-imposed after being lifted if COVID-19 experiences a resurgence. We expect that depressed demand for our coal will continue for so long as there is a widespread, government-imposed shut-down of business activity. Additionally, some of our customers have already attempted, and may in the future attempt, to invoke force majeure or similar provisions in the contracts they have in place with us in order to avoid taking possession of and paying us for our coal that they are contractually obligated to purchase. Sustained decrease in demand for our coal and the failure of our customers to purchase coal from us that they are obligated to purchase pursuant to existing contracts would have a material adverse effect on our results of operations and financial condition. The extent to which COVID-19 may adversely impact our business depends on future developments, which are highly uncertain and unpredictable, including new information concerning the severity of the outbreak and the effectiveness of actions globally to contain or mitigate its effects. While we expect this matter to negatively impact our results of operations, cash flows and financial condition, the current level of uncertainty over the economic and operational impacts of COVID-19 means the related financial impact cannot be reasonably estimated at this time. The Company will continue to take the appropriate steps to mitigate the impact on the Company's operations, liquidity and financial condition.

In March 2020, the President of the United States signed the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) into law. The CARES Act has various liquidity boosting provisions that affect the Company related to income taxes and employee taxes. The Company has evaluated the various provisions, particularly the increased amount of deductible interest from 30% of adjusted taxable income to 50% for tax years 2019 and 2020. This is expected to reduce the Company's cash burden for 2019 and 2020, resulting in additional free cash flow. In addition to a decrease in the cash paid for income taxes, the Company is expecting additional free cash flow by deferring the Company's payment of its portion of the Social Security payroll taxes in accordance with the provisions of the CARES Act. These sources of cash flow will aid in reducing uncertainty over the economic and operational impacts of COVID-19.

The Company expects to generate adequate cash flow from operations in 2020 due to its strong contracted position and ongoing cost control measures. The Company experienced delays in collections of accounts receivable in 2019. Collections showed some improvement during the first quarter of 2020. However, the Company will continue to monitor the creditworthiness of its customers. If these delays continue or increase, the Company may have less cash flow from operations and may have less borrowing capacity under its securitization facility (under which borrowing capacity is based on certain current accounts receivable).

The Company started a capital construction project on the coarse refuse disposal area in 2017, which is expected to continue through 2021. The Company began construction of the Itmann Mine in the second half of 2019. Full production from the mine is expected upon completion of a new preparation plant, and could begin by the end of 2021, depending on market conditions.

Uncertainty in the financial markets brings additional potential risks to CONSOL Energy. These risks include declines in the Company's stock price, less availability and higher costs of additional credit, potential counterparty defaults, and commercial bank failures. Financial market disruptions may impact the Company's collection of trade receivables. As a result, CONSOL Energy regularly monitors the creditworthiness of its customers and counterparties and manages credit exposure through payment terms, credit limits, prepayments and security.

The Company owns an undivided interest in 75% of the PAMC and the Partnership owns the remaining undivided 25% interest of the PAMC. As of March 31, 2020, the Company had a 61.4% economic ownership interest in the Partnership through its various holdings of the general partner and limited partnership interests of the Partnership.

The Company is actively monitoring the effects of the ongoing COVID-19 pandemic on its liquidity and capital resources. We took several steps in the first quarter to buttress our liquidity. We expect that there will be a decrease in demand for our coal, which could affect our liquidity. Our Revolving Credit Facility, Term Loan A Facility, Term Loan B Facility, Securitization Facility and the Indenture entered into in connection with our 11.00% Senior Secured Second Lien Notes due 2025 (collectively, the “Credit Facilities”) contain certain financial covenants. Events resulting from the effects of COVID-19 may negatively impact our liquidity and, as a result, our ability to comply with these covenants, which could lead us to seek an amendment or waivers from our lenders, limit access to or require accelerated repayment of amounts borrowed under the Credit Facilities, or require us to pursue alternative financing. We have no assurance that any such alternative financing, if required, could be obtained at terms acceptable to us, or at all, as a result of the effects of COVID-19 on capital markets at such time.

Cash Flows (in millions)



	For the Three Months Ended March 31,
	2020			2019			Change
Cash Provided by Operating Activities	$	51		$	82		$	(31	)
Cash Used in Investing Activities	$	(27	)	$	(34	)	$	7
Cash Used in Financing Activities	$	(26	)	$	(136	)	$	110

Cash provided by operating activities decreased $31 million in the period-to-period comparison, primarily due to an $18 million decrease in net income and other working capital changes that occurred throughout both periods.

Cash used in investing activities decreased $7 million in the period-to-period comparison. Capital expenditures decreased primarily due to a decrease in expenditures associated with the coarse refuse disposal area project, as well as a decrease in expenditures related to the conversion to and implementation of a new Enterprise Resource and Planning system.



	For the Three Months Ended March 31,
	2020		2019		Change
Building and Infrastructure	$	15	$	15	$	—
Equipment Purchases and Rebuilds	8		7		1
Refuse Storage Area	3		7		(4		)
IS&T Infrastructure	—		3		(3		)
Other	1		2		(1		)
Total Capital Expenditures	$	27	$	34	$	(7	)

Cash used in financing activities decreased $110 million in the period-to-period comparison. During the three months ended March 31, 2020, total payments of $30 million were made on the Company's Term Loan A Facility, Term Loan B Facility and 11.00% Senior Secured Second Lien Notes. The Company also received proceeds of approximately $16 million related to a finance leasing arrangement in the three months ended March 31, 2020.

During the three months ended March 31, 2019, total payments of $129 million were made on the Company's Term Loan B Facility and 11.00% Senior Secured Second Lien Notes, which included the required excess cash flow repayment of $110 million on the Term Loan B Facility (see Note 12 - Long-Term Debt for additional information). The Company also received additional proceeds on its Term Loan A Facility in the amount of $26 million as a result of the debt refinancing that occurred during the three months ended March 31, 2019. In connection with the debt refinancing, approximately $18 million of financing-related fees and charges were paid in the three months ended March 31, 2019.

Senior Secured Credit Facilities

In November 2017, the Company entered into a revolving credit facility with commitments up to $300 million (the “Revolving Credit Facility”), a Term Loan A Facility of up to $100 million (the “TLA Facility”) and a Term Loan B Facility of up to $400 million (the “TLB Facility”, and together with the Revolving Credit Facility and the TLA Facility, the “Senior Secured Credit Facilities”). On March 28, 2019, the Company amended the Senior Secured Credit Facilities (the “amendment”) to increase the borrowing commitment of the Revolving Credit Facility to $400 million and reallocate the principal amounts outstanding under the TLA Facility and TLB Facility. As a result, the principal amount outstanding under the TLA Facility was $100 million and the principal amount outstanding under the TLB Facility was $275 million. Borrowings under the Company's Senior Secured Credit Facilities bear interest at a floating rate which can be, at the Company's option, either (i) LIBOR plus an applicable margin or (ii) an alternate base rate plus an applicable margin. The applicable margin for the Revolving Credit Facility and TLA Facility depends on the total net leverage ratio, whereas the applicable margin for the TLB Facility is fixed. The amendment reduced the applicable margin by 50 basis points on both the Revolving Credit Facility and the TLA Facility, and by 150 basis points on the TLB Facility. The amendment also extended the maturity dates of the Senior Secured Credit Facilities. The maturity date of the Revolving Credit and TLA Facilities was extended from November 28, 2021 to March 28, 2023. The TLB Facility's maturity date was extended from November 28, 2022 to September 28, 2024. In June 2019, the TLA Facility began amortizing in equal quarterly installments of (i) 3.75% of the original principal amount thereof, for four consecutive quarterly installments commencing with the quarter ended June 30, 2019, (ii) 6.25% of the original principal amount thereof for the subsequent eight quarterly installments commencing with the quarter ended June 30, 2020 and (iii) 8.75% of the original principal amount thereof for the quarterly installments thereafter, with the remaining balance due at final maturity. In June 2019, the TLB Facility began amortizing in equal quarterly installments in an amount equal to 0.25% per annum of the amended principal amount thereof, with the remaining balance due at final maturity.

Obligations under the Senior Secured Credit Facilities are guaranteed by (i) all owners of the 75% undivided economic interest in the PAMC held by the Company, (ii) any other members of the Company’s group that own any portion of the collateral securing the Revolving Credit Facility, and (iii) subject to certain customary exceptions and agreed materiality thresholds, all other existing or future direct or indirect wholly-owned restricted subsidiaries of the Company (excluding the Partnership and its wholly-owned subsidiaries). The obligations are secured by, subject to certain exceptions (including a limitation of pledges of equity interests in certain subsidiaries and certain thresholds with respect to real property), a first-priority lien on (i) the Company’s 75% undivided economic interest in the Pennsylvania Mining Complex, (ii) the limited partner units of the Partnership held by the Company, (iii) the equity interests in CONSOL Coal Resources GP LLC held by the Company (iv) the CONSOL Marine Terminal and (v) the 1.5 billion tons of Greenfield Reserves. The Senior Secured Credit Facilities contain a number of customary affirmative covenants. In addition, the Senior Secured Credit Facilities contain a number of negative covenants, including (subject to certain exceptions) limitations on (among other things): indebtedness, liens, investments, acquisitions, dispositions, restricted payments, and prepayments of junior indebtedness. The amendment expanded the covenants relating to finance leases, general investments, joint venture investments and annual share repurchase baskets. The amendment also amended the restricted payments covenant to permit up to a $50 million annual dividend.

The Revolving Credit and TLA Facilities also include financial covenants, including (i) a maximum first lien gross leverage ratio, (ii) a maximum total net leverage ratio, and (iii) a minimum fixed charge coverage ratio. CONSOL Energy must maintain a maximum first lien gross leverage ratio covenant of no more than 1.75 to 1.00. The maximum first lien gross leverage ratio is calculated as the ratio of Consolidated First Lien Debt to Consolidated EBITDA, excluding the Partnership. The maximum first lien gross leverage ratio was 1.45 to 1.00 at March 31, 2020. CONSOL Energy must maintain a maximum total net leverage ratio covenant of no more than 2.75 to 1.00. The maximum total net leverage ratio is calculated as the ratio of Consolidated Indebtedness, minus Cash on Hand, to Consolidated EBITDA, excluding the Partnership. The maximum total net leverage ratio was 2.17 to 1.00 at March 31, 2020. Consolidated EBITDA, as used in the covenant calculation, excludes non-cash compensation expenses, non-recurring transaction expenses, extraordinary gains and losses, gains and losses on discontinued operations, non-cash charges related to legacy employee liabilities and gains and losses on debt extinguishment, and includes cash distributions received from the Partnership and subtracts cash payments related to legacy employee liabilities. The facilities also include a minimum fixed charge coverage covenant of no less than 1.10 to 1.00, measured quarterly. The minimum fixed charge coverage ratio is calculated as the ratio of Consolidated EBITDA to Consolidated Fixed Charges, excluding the Partnership. Consolidated Fixed Charges, as used in the covenant calculation, include cash interest payments, cash payments for income taxes, scheduled debt repayments, dividends paid, and Maintenance Capital Expenditures. The minimum fixed charge coverage ratio was 1.27 to 1.00 at March 31, 2020.

The TLB Facility also includes a financial covenant that requires the Company to repay a certain amount of its borrowings under the TLB Facility within ten business days after the date it files its Form 10-K with the Securities and Exchange Commission if the Company has excess cash flow (as defined in the credit agreement for the Senior Secured Credit Facilities) during the year covered by the applicable Form 10-K. During the three months ended March 31, 2019, CONSOL Energy made the required repayment of approximately $110 million based on the amount of the Company's excess cash flow as of December 31, 2018. For fiscal year 2018, such repayment was equal to 75% of the Company’s excess cash flow less any voluntary prepayments of its borrowings under the TLB Facility made by the Company during 2018. For all subsequent fiscal years, the required repayment is equal to a certain percentage of the Company’s excess cash flow for such year, ranging from 0% to 75% depending on the Company’s total net leverage ratio, less the amount of certain voluntary prepayments made by the Company, if any, under the TLB Facility during such fiscal year. The amendment reduced the maximum amount of the mandatory annual excess cash flow sweep under the TLB Facility by 25%. Based on the Company's excess cash flow calculation, no repayment was required with respect to the year ended December 31, 2019. As such, as of December 31, 2019, no amount related to the prepayment of the TLB Facility in connection with the excess cash flow requirement has been classified as Current Portion of Long-Term Debt in the Consolidated Balance Sheets. The amount of excess cash flow is a covenant feature only applicable as of the Company's year-end and will be calculated as of December 31, 2020.

During the year ended December 31, 2019, the Company entered into interest rate swaps, which effectively converted $150 million of the TLB Facility's floating interest rate to a fixed interest rate for the twelve months ending December 31, 2020 and 2021, and $50 million of the TLB Facility's floating interest rate to a fixed interest rate for the twelve months ending December 31, 2022.

The Senior Secured Credit Facilities contain customary events of default, including with respect to a failure to make payments when due, cross-default and cross-judgment default and certain bankruptcy and insolvency events.

At March 31, 2020, the Revolving Credit Facility had no borrowings outstanding and $80 million of letters of credit outstanding, leaving $320 million of unused capacity. From time to time, CONSOL Energy is required to post financial assurances to satisfy contractual and other requirements generated in the normal course of business. Some of these assurances are posted to comply with federal, state or other government agencies' statutes and regulations. CONSOL Energy sometimes uses letters of credit to satisfy these requirements and these letters of credit reduce the Company's borrowing facility capacity.

Securitization Facility

On November 30, 2017, (1)(i) CONSOL Marine Terminals LLC, as an originator of receivables, (ii) CONSOL Pennsylvania Coal Company LLC (“CONSOL Pennsylvania”), as an originator of receivables and as initial servicer of the receivables for itself and the other originators (collectively, the “Originators”), each a wholly-owned subsidiary of CONSOL Energy, and (iii) CONSOL Funding LLC (the “SPV”), a Delaware special purpose entity and wholly-owned subsidiary of CONSOL Energy, as buyer, entered into a Purchase and Sale Agreement (the “Purchase and Sale Agreement”) and (2)(i) CONSOL Thermal Holdings LLC, an indirect, wholly-owned subsidiary of the Partnership, as sub-originator (the “Sub-Originator”), and (ii) CONSOL Pennsylvania, as buyer and as initial servicer of the receivables for itself and the Sub-Originator, entered into a Sub-Originator Sale Agreement (the “Sub-Originator PSA”). In addition, on November 30, 2017, the SPV entered into a Receivables Financing Agreement (the “Receivables Financing Agreement”) by and among (i) the SPV, as borrower, (ii) CONSOL Pennsylvania, as initial servicer, (iii) PNC Bank, as administrative agent, LC Bank and lender, and (iv) the additional persons from time to time party thereto as lenders. Together, the Purchase and Sale Agreement, the Sub-Originator PSA and the Receivables Financing Agreement establish the primary terms and conditions of an accounts receivable securitization program (the “Securitization”). In March 2020, the securitization facility was amended to, among other things, extend the maturity date from August 30, 2021 to March 27, 2023.

Pursuant to the Securitization, (i) the Sub-Originator sells current and future trade receivables to CONSOL Pennsylvania and (ii) the Originators sell and/or contribute current and future trade receivables (including receivables sold to CONSOL Pennsylvania by the Sub-Originator) to the SPV and the SPV, in turn, pledges its interests in the receivables to PNC Bank, which either makes loans or issues letters of credit on behalf of the SPV. The maximum amount of advances and letters of credit outstanding under the Securitization may not exceed $100 million.

Loans under the Securitization accrue interest at a reserve-adjusted LIBOR market index rate equal to the one-month Eurodollar rate. Loans and letters of credit under the Securitization also accrue a program fee and a letter of credit participation fee, respectively, ranging from 2.00% to 2.50% per annum depending on the total net leverage ratio of CONSOL Energy. In addition, the SPV paid certain structuring fees to PNC Capital Markets LLC and will pay other customary fees to the lenders, including a fee on unused commitments equal to 0.60% per annum.

The SPV’s assets and credit are not available to satisfy the debts and obligations owed to the creditors of CONSOL Energy, the Sub-Originator or any of the Originators. The Sub-Originator, the Originators and CONSOL Pennsylvania as servicer are independently liable for their own customary representations, warranties, covenants and indemnities. In addition, CONSOL Energy has guaranteed the performance of the obligations of the Sub-Originator, the Originators and CONSOL Pennsylvania as servicer, and will guarantee the obligations of any additional originators or successor servicer that may become party to the Securitization. However, neither CONSOL Energy nor its affiliates will guarantee collectability of receivables or the creditworthiness of obligors thereunder.

The agreements comprising the Securitization contain various customary representations and warranties, covenants and default provisions which provide for the termination and acceleration of the commitments and loans under the Securitization in certain circumstances including, but not limited to, failure to make payments when due, breach of representation, warranty or covenant, certain insolvency events or failure to maintain the security interest in the trade receivables, and defaults under other material indebtedness.

At March 31, 2020, eligible accounts receivable totaled approximately $30 million. At March 31, 2020, the facility had no outstanding borrowings and $31 million of letters of credit outstanding, leaving no unused capacity. The Company posted $1 million of cash collateral to secure the difference in the outstanding letters of credit and the eligible accounts receivable. Cash collateral of $1 million is included in Restricted Cash in the Consolidated Balance Sheets. Costs associated with the receivables facility totaled $341 thousand for the three months ended March 31, 2020. These costs have been recorded as financing fees which are included in Operating and Other Costs in the Consolidated Statements of Income. The Company has not derecognized any receivables due to its continued involvement in the collections efforts.

11.00% Senior Secured Second Lien Notes due 2025

On November 13, 2017, the Company issued $300 million in aggregate principal amount of 11.00% Senior Secured Second Lien Notes due 2025 (the “Second Lien Notes”) pursuant to an indenture (the “Indenture”) dated as of November 13, 2017, by and between the Company and UMB Bank, N.A., a national banking association, as trustee and collateral trustee (the “Trustee”). On November 28, 2017, certain subsidiaries of the Company executed a supplement to the Indenture and became party to the Indenture as a guarantor (the “Guarantors”). The Second Lien Notes are secured by second priority liens on substantially all of the assets of the Company and the Guarantors that are pledged and on a first-priority basis as collateral securing the Company’s obligations under the Senior Secured Credit Facilities (described above), subject to certain exceptions under the Indenture.

On or after November 15, 2021, the Company may redeem all or part of the Second Lien Notes at the redemption prices set forth below, plus accrued and unpaid interest, if any, to, but not including, the redemption date (subject to the rights of holders of the Second Lien Notes on the relevant record date to receive interest due on the relevant interest payment date), beginning on November 15 of the years indicated:



	Year	Percentage
	2021	105.50%
	2022	102.75%
	2023 and thereafter	100.00%

Prior to November 15, 2020, the Company may on one or more occasions redeem up to 35% of the principal amount of the Second Lien Notes with an amount of cash not greater than the amount of the net cash proceeds from one or more equity offerings at a redemption price equal to 111.00% of the principal amount of the Second Lien Notes to be redeemed, plus accrued and unpaid interest, if any, to, but not including, the date of redemption, as long as at least 65% of the aggregate principal amount of the Second Lien Notes originally issued on the issue date (excluding Second Lien Notes held by the Company and its subsidiaries) remains outstanding after each such redemption and the redemption occurs within less than 180 days after the date of the closing of the equity offering.

At any time or from time to time prior to November 15, 2021, the Company may also redeem all or a part of the Second Lien Notes, at a redemption price equal to 100% of the principal amount thereof plus the Applicable Premium, as defined in the Indenture, plus accrued and unpaid interest, if any, to, but not including, the redemption date (subject to the rights of holders of the Second Lien Notes on the relevant record date to receive interest due on the relevant interest payment date).

The Indenture contains covenants that will limit the ability of the Company and the Guarantors, to (i) incur, assume or guarantee additional indebtedness or issue preferred stock; (ii) create liens to secure indebtedness; (iii) declare or pay dividends on the Company’s common stock, redeem stock or make other distributions to the Company’s stockholders; (iv) make investments; (v) restrict dividends, loans or other asset transfers from the Company’s restricted subsidiaries; (vi) merge or consolidate, or sell, transfer, lease or dispose of substantially all of the Company’s assets; (vii) sell or otherwise dispose of certain assets, including equity interests in subsidiaries; (viii) enter into transactions with affiliates; and (ix) create unrestricted subsidiaries. These covenants are subject to important exceptions and qualifications. If the Second Lien Notes achieve an investment grade rating from both Standard & Poor’s Ratings Services and Moody’s Investors Service, Inc. and no default under the Indenture exists, many of the foregoing covenants will terminate and cease to apply. The Indenture also contains customary events of default, including (i) default for 30 days in the payment when due of interest on the Notes; (ii) default in payment when due of principal or premium, if any, on the Notes at maturity, upon redemption or otherwise; (iii) covenant defaults; (iv) cross-defaults to certain indebtedness, and (v) certain events of bankruptcy or insolvency with respect to the Company or any of the Guarantors. If an event of default occurs and is continuing, the Trustee or the holders of at least 25% in aggregate principal amount of the then outstanding Second Lien Notes may declare all the Notes to be due and payable immediately. If an event of default arises from certain events of bankruptcy or insolvency, with respect to the Company, any restricted subsidiary of the Company that is a significant subsidiary or any group of restricted subsidiaries of the Company that, taken together, would constitute a significant subsidiary, all outstanding Second Lien Notes will become due and payable immediately without further action or notice.

If the Company experiences certain kinds of changes of control, holders of the Second Lien Notes will be entitled to require the Company to repurchase all or any part of that holder’s Second Lien Notes pursuant to an offer on the terms set forth in the Indenture. The Company will offer to make a cash payment equal to 101% of the aggregate principal amount of the Second Lien Notes repurchased plus accrued and unpaid interest on the Second Lien Notes repurchased to, but not including, the date of purchase, subject to the rights of holders of the Notes on the relevant record date to receive interest due on the relevant interest payment date.

The Second Lien Notes were issued in a private offering that is exempt from the registration requirements of the Securities Act, to qualified institutional buyers in accordance with Rule 144A and to persons outside of the United States pursuant to Regulation S under the Securities Act.

Affiliated Company Credit Agreement with Partnership

On November 28, 2017, the Company also entered into an Affiliated Company Credit Agreement with the Partnership and certain of its subsidiaries (the “Partnership Credit Parties”) under which the Company provides as lender a revolving credit facility in an aggregate principal amount of up to $275 million to the Partnership Credit Parties. In connection with the completion of the separation, the Partnership drew an initial $201 million, the net proceeds of which were used to repay the Original CCR Credit Facility and to provide working capital for the Partnership following the separation and for other general corporate purposes.

On March 28, 2019, the Affiliated Company Credit Agreement was amended to extend the maturity date from February 27, 2023 to December 28, 2024. The collateral obligations under the Affiliated Company Credit Agreement generally mirror the Original CCR Credit Facility, as does the list of entities that will act as guarantors thereunder. The Affiliated Company Credit Agreement is subject to financial covenants relating to a maximum first lien gross leverage ratio and a maximum total net leverage ratio, which will be calculated on a consolidated basis for the Partnership and its restricted subsidiaries at the end of each fiscal quarter. The Partnership was in compliance with each of these financial covenants at March 31, 2020. The Affiliated Company Credit Agreement also contains a number of customary affirmative covenants and negative covenants, including limitations on the ability of the Partnership to incur additional indebtedness, grant liens, and make investments, acquisitions, dispositions, restricted payments, and prepayments of junior indebtedness (subject to certain limited exceptions).

Contractual Obligations

CONSOL Energy is required to make future payments under various contracts. CONSOL Energy also has commitments to fund its pension plans, provide payments for other postretirement benefit plans, and fund capital projects. The following is a summary of the Company's significant contractual obligations at March 31, 2020 (in thousands):



	Payments due by Year
	Less Than 1 Year		1-3 Years		3-5 Years		More Than 5 Years		Total
Purchase Order Firm Commitments	$	1,034	$	318	$	—	$	—	$	1,352
Long-Term Debt	43,687		67,598		265,507		281,913		658,705
Interest on Long-Term Debt	45,490		85,270		80,092		23,343		234,195
Finance Lease Obligations	23,754		18,135		3,807		—		45,696
Interest on Finance Lease Obligations	1,713		1,312		138		—		3,163
Operating Lease Obligations	22,355		34,865		12,066		14,804		84,090
Long-Term Liabilities—Employee Related (a)	56,222		107,670		103,782		490,566		758,240
Other Long-Term Liabilities (b)	147,820		39,084		27,822		188,882		403,608
Total Contractual Obligations (c)	$	342,075	$	354,252	$	493,214	$	999,508	$	2,189,049

_________________________


(a)	Employee related long-term liabilities include other post-employment benefits and work-related injuries and illnesses. Estimated salaried retirement contributions required to meet minimum funding standards under ERISA are excluded from the pay-out table due to the uncertainty regarding amounts to be contributed. CONSOL Energy does not expect to contribute to the pension plan in 2020.


(b)	Other long-term liabilities include asset retirement obligations and other long-term liability costs.


(c)	The significant obligations table does not include obligations to taxing authorities due to the uncertainty surrounding the ultimate settlement of amounts and timing of these obligations.

Debt

At March 31, 2020, CONSOL Energy had total long-term debt and finance lease obligations of $703 million outstanding, including the current portion of long-term debt of $67 million. This long-term debt consisted of:


•	An aggregate principal amount of $272 million in connection with the Term Loan B (TLB) Facility, due in September 2024, less $1 million of unamortized bond discount. Borrowings under the TLB Facility bear interest at a floating rate.


•	An aggregate principal amount of $178 million of 11.00% Senior Secured Second Lien Notes due in November 2025. Interest on the notes is payable May 15 and November 15 of each year.


•	An aggregate principal amount of $85 million in connection with the Term Loan A (TLA) Facility, due in March 2023. Borrowings under the TLA Facility bear interest at a floating rate.


•	An aggregate principal amount of $103 million of industrial revenue bonds which were issued to finance the Baltimore port facility, bear interest at 5.75% per annum and mature in September 2025. Interest on the industrial revenue bonds is payable March 1 and September 1 of each year. Payment of the principal and interest on the notes is guaranteed by CONSOL Energy.


•	An aggregate principal amount of $18 million in connection with asset-backed financing. Approximately $15 million is due in December 2020 at a weighted average interest rate of 5.83%, and approximately $3 million is due in September 2024 at an interest rate of 3.61%.


•	Advance royalty commitments of $2 million with a weighted average interest rate of 10.78% per annum.


•	An aggregate principal amount of $46 million of finance leases with a weighted average interest rate of 5.17% per annum.

At March 31, 2020, CONSOL Energy had no borrowings outstanding and approximately $80 million of letters of credit outstanding under the $400 million senior secured Revolving Credit Facility. At March 31, 2020, CONSOL Energy had no borrowings outstanding and approximately $31 million of letters of credit outstanding under the $100 million Securitization Facility.

Stock, Unit and Debt Repurchases

In December 2017, CONSOL Energy’s Board of Directors approved a program to repurchase, from time to time, the Company's outstanding shares of common stock or its 11.00% Senior Secured Second Lien Notes due 2025, in an aggregate amount of up to $50 million through the period ending June 30, 2019. The program was subsequently amended by CONSOL Energy's Board of Directors in July 2018 to allow up to $100 million of repurchases of the Company's common stock or its 11.00% Senior Secured Second Lien Notes due 2025, subject to certain limitations in the Company's current credit agreement and that certain tax matters agreement entered into by and between the Company and its former parent on November 28, 2017 (the “TMA”). The Company's Board of Directors also authorized the Company to use up to $25 million of the program to purchase CONSOL Coal Resources LP's outstanding common units in the open market. In May 2019, CONSOL Energy's Board of Directors approved an expansion of the program in the amount of $75 million, bringing the aggregate limit of the program to $175 million. The May 2019 expansion also increased the aggregate limit of the amount of CONSOL Coal Resources LP's common units that can be purchased under the program to $50 million, which is consistent with the Company's credit facility covenants that prohibit the Company from using more than $50 million for the purchase of CONSOL Coal Resources LP's outstanding common units. The Company's Board of Directors also approved extending the termination date of the program from June 30, 2019 to June 30, 2020. In July 2019, CONSOL Energy's Board of Directors approved an expansion of the program in the amount of $25 million, bringing the aggregate limit of the program to $200 million. On May 8, 2020, CONSOL Energy Inc.'s Board of Directors approved an expansion of the stock, unit and debt repurchase program. The aggregate amount of the program's expansion is $70 million, bringing the total amount of the Company's stock, unit and debt repurchase program to $270 million. The Company's Board of Directors also approved extending the termination date of the program, from June 30, 2020 to June 30, 2022. The program's available capacity as of May 11, 2020 is $100,622.

Under the terms of the program, CONSOL Energy is permitted to make repurchases in the open market, in privately negotiated transactions, accelerated repurchase programs or in structured share repurchase programs. CONSOL Energy is also authorized to enter into one or more 10b5-1 plans with respect to any of the repurchases. Any repurchases of common stock, notes or units are to be funded from available cash on hand or short-term borrowings. The program does not obligate CONSOL Energy to acquire any particular amount of its common stock, notes or units, and can be modified or suspended at any time at the Company’s discretion. The program is conducted in compliance with applicable legal requirements and within the limits imposed by any credit agreement, receivables purchase agreement, indenture or the TMA and is subject to market conditions and other factors.

During the three months ended March 31, 2020, the Company repurchased approximately $43 million of its 11.00% Senior Secured Second Lien Notes due 2025. No common shares were repurchased and no common Partnership units were purchased under this program during the three months ended March 31, 2020.

Total Equity and Dividends

Total equity attributable to CONSOL Energy was $571 million at March 31, 2020 and $572 million at December 31, 2019. See the Consolidated Statements of Stockholders' Equity in Item 1 of this Form 10-Q for additional details.

The declaration and payment of dividends by CONSOL Energy is subject to the discretion of CONSOL Energy's Board of Directors, and no assurance can be given that CONSOL Energy will pay dividends in the future. The determination to pay dividends in the future will depend upon, among other things, general business conditions, CONSOL Energy's financial results, contractual and legal restrictions regarding the payment of dividends by CONSOL Energy, planned investments by CONSOL Energy and such other factors as the Board of Directors deems relevant. The Company's Senior Secured Credit Facilities limit CONSOL Energy's ability to pay dividends up to $25 million annually, which increases to $50 million annually when the Company's total net leverage ratio is less than 1.50 to 1.00 and subject to an aggregate amount up to a cumulative credit calculation set forth in the facilities. The total net leverage ratio was 2.17 to 1.00 and the cumulative credit was approximately $11 million at March 31, 2020. The cumulative credit starts with $50 million and builds with excess cash flow commencing in 2018. The calculation of the total net leverage ratio excludes the Partnership. The Senior Secured Credit Facilities do not permit dividend payments in the event of default. The Indenture to the 11.00% Senior Secured Second Lien Notes limits dividends when the Company's total net leverage ratio exceeds 2.00 to 1.00 and subject to an amount not to exceed an annual rate of 4.0% of the quoted public market value per share of such common stock at the time of the declaration. The Indenture does not permit dividend payments in the event of default.

In connection with the separation and distribution, the Partnership entered into an intercompany loan arrangement with the Company with an initial outstanding balance of $201 million. The Partnership used the initial loan to repay outstanding borrowings under the prior revolving credit facility, which was then terminated. The new intercompany loan arrangement similarly limits the Partnership's ability to pay distributions to its unitholders (including the Company) when the Partnership's net leverage ratio exceeds 3.25 to 1.00 or the Partnership's first lien gross leverage ratio exceeds 2.75 to 1.00.

Upon payment of the cash distribution with respect to the quarter ended June 30, 2019, the financial requirements for the conversion of all CCR subordinated units were satisfied. As a result, on August 16, 2019, all 11,611,067 subordinated units, owned entirely by CONSOL Energy Inc., were converted into common units on a one-for-one basis. The conversion did not impact the amount of the cash distribution paid or the total number of CCR's outstanding units representing limited partner interests.

On April 23, 2020, the Board of Directors of CCR's general partner made the decision to temporarily suspend the quarterly cash distributions to all of CCR's unitholders due to the ongoing uncertainty in the commodity markets driven by the COVID-19 pandemic-related demand decline. Accordingly, CCR will focus on deleveraging its balance sheet by conserving cash, boosting liquidity and reducing its outstanding debt.

Off-Balance Sheet Arrangements

CONSOL Energy does not maintain off-balance sheet transactions, arrangements, obligations or other relationships with unconsolidated entities or others that are reasonably likely to have a material current or future effect on CONSOL Energy’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources which are not disclosed in the Notes to the Consolidated Financial Statements of this Form 10-Q. CONSOL Energy participates in the United Mine Workers of America (the “UMWA”) Combined Benefit Fund and the UMWA 1992 Benefit Plan which generally accepted accounting principles recognize on a pay-as-you-go basis. These benefit arrangements may result in additional liabilities that are not recognized on the Consolidated Balance Sheet at March 31, 2020. The various multi-employer benefit plans are discussed in Note 16—Other Employee Benefit Plans in the Notes to the Consolidated Financial Statements in Item 8 of the December 31, 2019 Form 10-K. CONSOL Energy's total contributions under the Coal Industry Retiree Health Benefit Act of 1992 were $1,364 and $1,551 for the three months ended March 31, 2020 and 2019, respectively. Based on available information at December 31, 2019, CONSOL Energy's obligation for the UMWA Combined Benefit Fund and 1992 Benefit Plan is estimated to be approximately $62,295. CONSOL Energy also uses a combination of surety bonds, corporate guarantees and letters of credit to secure its financial obligations for employee-related, environmental, performance and various other items which are not reflected on the Consolidated Balance Sheet at March 31, 2020. Management believes these items will expire without being funded. See Note 13—Commitments and Contingent Liabilities in the Notes to the Consolidated Financial Statements included in Item 1 of this Form 10-Q for additional details of the various financial guarantees that have been issued by CONSOL Energy.

Forward-Looking Statements

Certain statements in this Quarterly Report on Form 10-Q are “forward-looking statements” within the meaning of the federal securities laws. With the exception of historical matters, the matters discussed in this Quarterly Report on Form 10-Q are forward-looking statements (as defined in Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) that involve risks and uncertainties that could cause actual results and outcomes to differ materially from results expressed in or implied by our forward-looking statements. Accordingly, investors should not place undue reliance on forward-looking statements as a prediction of actual results. The forward-looking statements may include projections and estimates concerning the timing and success of specific projects and our future production, revenues, income and capital spending. When we use the words “anticipate,” “believe,” “could,” “continue,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “should,” “will,” or their negatives, or other similar expressions, the statements which include those words are usually forward-looking statements. When we describe strategy that involves risks or uncertainties, we are making forward-looking statements. The forward-looking statements in this Quarterly Report on Form 10-Q speak only as of the date of this Quarterly Report on Form 10-Q; we disclaim any obligation to update these statements unless required by securities law, and we caution you not to rely on them unduly. We have based these forward-looking statements on our current expectations and assumptions about future events. While our management considers these expectations and assumptions to be reasonable, they are inherently subject to significant business, economic, competitive, regulatory and other risks, contingencies and uncertainties, most of which are difficult to predict and many of which are beyond our control. These risks, contingencies and uncertainties relate to, among other matters, the following:


•	the effects the COVID-19 pandemic has on our business and results of operations and on the global economy;


•	a restructuring of liabilities of Murray Energy as a result of its bankruptcy may result in the Company becoming responsible for certain liabilities that Murray Energy assumed from our former parent in 2013;


•	deterioration in economic conditions in any of the industries in which our customers operate may decrease demand for our products, impair our ability to collect customer receivables and impair our ability to access capital;


•	volatility and wide fluctuation in coal prices based upon a number of factors beyond our control including oversupply relative to the demand available for our products, weather and the price and availability of alternative fuels;


•	an extended decline in the prices we receive for our coal affecting our operating results and cash flows;


•	significant downtime of our equipment or inability to obtain equipment, parts or raw materials;


•	decreases in the availability of, or increases in, the price of commodities or capital equipment used in our coal mining operations;


•	our customers extending existing contracts or entering into new long-term contracts for coal on favorable terms;


•	our reliance on major customers;


•	our inability to collect payments from customers if their creditworthiness declines or if they fail to honor their contracts;


•	our inability to acquire additional coal reserves that are economically recoverable;


•	decreases in demand and changes in coal consumption patterns of electric power generators;


•	the availability and reliability of transportation facilities and other systems, disruption of rail, barge, processing and transportation facilities and other systems that deliver our coal to market and fluctuations in transportation costs;


•	a loss of our competitive position because of the competitive nature of coal industries, or a loss of our competitive position because of overcapacity in these industries impairing our profitability;


•	foreign currency fluctuations that could adversely affect the competitiveness of our coal abroad;


•	recent action and the possibility of future action on trade made by U.S. and foreign governments;


•	the risks related to the fact that a significant portion of our production is sold in international markets;


•	coal users switching to other fuels in order to comply with various environmental standards related to coal combustion emissions;


•	the impact of potential, as well as any adopted, regulations to address climate change, including any relating to greenhouse gas emissions, on our operating costs as well as on the market for coal;


•	the effects of litigation seeking to hold energy companies accountable for the effects of climate change;


•	the effects of government regulation on the discharge into the water or air, and the disposal and clean-up of, hazardous substances and wastes generated during our coal operations;

•

the risks inherent in coal operations, including being subject to unexpected disruptions caused by adverse geological conditions, equipment failures, delays in moving out longwall equipment, railroad derailments, security breaches or terroristic acts and other hazards, delays in the completion of significant construction or repair of equipment, fires, explosions, seismic activities, accidents and weather conditions;


•	failure to obtain or renew surety bonds on acceptable terms, which could affect our ability to secure reclamation and coal lease obligations;


•	failure to obtain adequate insurance coverages;


•	operating in a single geographic area;


•	the effects of coordinating our operations with oil and natural gas drillers and distributors operating on our land;


•	our inability to obtain financing for capital expenditures on satisfactory terms;


•	the effects of receiving low sustainability scores which potentially results in the exclusion of our securities from consideration by certain investment funds and a negative perception by investors;


•	the effect of new or existing tariffs and other trade measures;


•	our inability to find suitable acquisition targets or integrating the operations of future acquisitions into our operations;


•	obtaining, maintaining and renewing governmental permits and approvals for our coal operations;


•	the effects of stringent federal and state employee health and safety regulations, including the ability of regulators to shut down our operations;


•	the potential for liabilities arising from environmental contamination or alleged environmental contamination in connection with our past or current coal operations;


•	the effects of asset retirement obligations and certain other liabilities;


•	uncertainties in estimating our economically recoverable coal reserves;


•	the outcomes of various legal proceedings, including those which are more fully described herein;


•	defects in our chain of title for our undeveloped reserves or failure to acquire additional property to perfect our title to coal rights;


•	exposure to employee-related long-term liabilities;


•	the risk of our debt agreements, our debt and changes in interest rates affecting our operating results and cash flows;


•	the effects of hedging transactions on our cash flow;


•	the effect of our affiliated company credit agreement on our cash flows;


•	failure by one or more of the third parties to satisfy certain liabilities it acquired from our former parent, or failure to perform its obligations under various arrangements, which our former parent guaranteed and for which we have indemnification obligations to our former parent;


•	information theft, data corruption, operational disruption and/or financial loss resulting from a terrorist attack or cyber incident;


•	certain provisions in our multi-year coal sales contracts may provide limited protection during adverse economic conditions, and may result in economic penalties or permit the customer to terminate the contract;


•	the potential failure to retain and attract qualified personnel of the Company and a possible increased reliance on third party contractors as a result;


•	we may not receive distributions from the Partnership;


•	failure to maintain effective internal controls over financial reporting;


•	certain risks related to our separation from our former parent;


•	a determination by the Internal Revenue Service that the distribution or certain related transactions should be treated as a taxable transaction;


•	uncertainty with respect to the Company’s common stock, potential stock price volatility and future dilution;


•	the consequences of a lack of or negative commentary about us published by securities analysts and media;


•	uncertainty regarding the timing of any dividends we may declare;


•	uncertainty as to whether we will repurchase shares of our common stock or outstanding debt securities;


•	restrictions on the ability to acquire us in our certificate of incorporation, bylaws and Delaware law and the resulting effects on the trading price of our common stock;


•	inability of stockholders to bring legal action against us in any forum other than the state courts of Delaware; and


•	other unforeseen factors.

The above list of factors is not exhaustive or necessarily in order of importance. Additional information concerning factors that could cause actual results to differ materially from those in forward-looking statements include those discussed under “Risk Factors” elsewhere in this report. The Company disclaims any intention or obligation to update publicly any forward-looking statements, whether in response to new information, future events, or otherwise, except as required by applicable law.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

For quantitative and qualitative disclosures about market risk, see Item 7A, “Quantitative and Qualitative Disclosures About Market Risk,” of our Annual Report on Form 10-K for the year ended December 31, 2019. There have been no material changes to the Company's exposures to market risk since December 31, 2019.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

CONSOL Energy, under the supervision and with the participation of its management, including CONSOL Energy's principal executive officer and principal financial officer, evaluated the effectiveness of the Company's “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on that evaluation, CONSOL Energy's principal executive officer and principal financial officer have concluded that the Company's disclosure controls and procedures are effective as of March 31, 2020 to ensure that information required to be disclosed by CONSOL Energy in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and includes controls and procedures designed to ensure that information required to be disclosed by CONSOL Energy in such reports is accumulated and communicated to CONSOL Energy's management, including CONSOL Energy's principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Controls over Financial Reporting

During the fiscal quarter covered by this Quarterly Report on Form 10-Q, there were no changes in the Company's internal controls over financial reporting, as such term is defined in Rule 13a-15(f) of the Exchange Act, that materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.

It should be noted that any system of controls, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system will be met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of future events.

PART II: OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Our operations are subject to a variety of risks and disputes normally incidental to our business. As a result, we may, at any given time, be a defendant in various legal proceedings and litigation arising in the ordinary course of business. However, we are not currently subject to any material litigation. Refer to Note 13 - Commitments and Contingent Liabilities in the Notes to the Consolidated Financial Statements in Part 1, Item 1 of this Form 10-Q, incorporated herein by this reference.

ITEM 1A. RISK FACTORS

In addition to the other information set forth in this quarterly report, including the risk factor set forth below, you should carefully consider the factors described in “Part 1 - Item 1A. Risk Factors” of CONSOL Energy's 2019 Form 10-K. These described risks are not the only risks the Company faces. Additional risks and uncertainties not currently known to CONSOL Energy or that the Company currently deems to be immaterial also may materially adversely affect CONSOL Energy's business, financial condition and/or operating results.

Our business, results of operations and financial condition may be adversely affected by the outbreak of the novel coronavirus (COVID-19).

The COVID-19 pandemic began to adversely impact our business and operations late in the first quarter of 2020 and is continuing to adversely affect our business, operations and liquidity. The effects of the continuing pandemic and related governmental response could include extended disruptions to supply chains and capital markets, reduced labor availability and productivity and a prolonged reduction in demand for coal and overall global economic activity.

The demand for coal experienced unprecedented decline starting at the end of the quarter ended March 31, 2020, and the unprecedented decline in coal demand is continuing into the second quarter of 2020 driven by the widespread government-imposed lockdowns caused by the COVID-19 pandemic, which have significantly reduced electricity consumption and, therefore, demand for our coal. This decline in coal demand has negatively impacted our operational, sales and financial performances year-to-date and we expect that this negative impact will continue as the pandemic continues. It is not clear how long the government-imposed shut-downs of non-essential businesses in the United States and abroad will last, and there is a possibility that such shut-downs may be re-imposed after being lifted if COVID-19 experiences a resurgence. We expect that depressed demand for our coal will continue for so long as there is a widespread, government-imposed shut-down of business activity. Additionally, some of our customers have already attempted, and may in the future attempt, to invoke force majeure or similar provisions in the contracts they have in place with us in order to avoid taking possession of and paying us for our coal that they are contractually obligated to purchase. Sustained decrease in demand for our coal and the failure of our customers to purchase coal from us that they are obligated to purchase pursuant to existing contracts would have a material adverse effect on our results of operations and financial condition. In addition, COVID-19 is present in Pennsylvania. On March 30, 2020, we announced that we temporarily curtailed production at the Bailey Mine for a two-week period and undertook a precautionary deep cleaning of the facilities at the Bailey Mine after two of our employees working at such facility tested positive for COVID-19. We may be forced to temporarily curtail production in our operations again if some of our employees test positive for COVID-19 in the future. Such temporary curtailment could have a significant impact on our production of coal. The continued spread of COVID-19 has caused increased volatility in the global capital markets. Such volatility increases the cost of, and decreases access to, capital. If the Company needs to access the capital markets to fund its operations, such capital could be prohibitively expensive which could cause the Company to pursue alternative sources of funding for its operations and working capital. Finally, COVID-19 may cause some of our suppliers to fail to deliver the quantities of supplies we need or fail to deliver such supplies in a timely manner. The failure to receive any such supplies could inhibit our ability to operate our mines or otherwise run our business. Additionally, our ability to ship our coal domestically or abroad could be impaired by disruptions in our global transportation network resulting from the COVID-19 pandemic.

The extent to which COVID-19 may adversely impact our business depends on future developments, which are highly uncertain and unpredictable, including new information concerning the severity of the outbreak and the effectiveness of actions globally to contain or mitigate its effects. While we expect this matter to negatively impact our results of operations, cash flows and financial condition, the current level of uncertainty over the economic and operational impacts of COVID-19 means the related financial impact cannot be reasonably estimated at this time. The Company will continue to take the appropriate steps to mitigate the impacts of COVID-19 on the Company's operations, liquidity and financial condition.

As a result of the Murray Energy bankruptcy, the Company may be asked to pay for certain liabilities previously held by Murray in a 2013 transaction between Murray and our former parent.

In 2013, Murray Energy and its subsidiaries (“Murray”) entered into a stock purchase agreement (the “Murray sale agreement”) with our former parent pursuant to which Murray acquired the stock of CCC and certain subsidiaries and certain other assets and liabilities. At the time of sale, the liabilities included certain retiree medical liabilities under the Coal Industry Retiree Health Benefits Act of 1992 (“Coal Act”) and certain federal black lung liabilities under the Black Lung Benefits Act (“BLBA”). Based upon information available to the Company, we estimate that the annual servicing costs of these liabilities are approximately $10 million to $20 million per year for the next ten years. The annual servicing cost would decline each year since the beneficiaries of the Coal Act consist principally of miners who retired prior to 1994.

Murray filed for Chapter 11 bankruptcy in October 2019. As part of the ongoing bankruptcy proceedings, Murray entered into a settlement with the United Mine Workers of America 1992 Benefit Plan (“1992 Plan”) to transfer retirees in the Murray Energy Section 9711 Plan into the 1992 Plan, which the bankruptcy court approved on April 30, 2020. The 1992 Plan recently filed an action in the United States District Court for the District of Columbia asking the court to make a determination whether our former parent or we have any continuing retiree medical liabilities under the Coal Act. The Murray sale agreement includes indemnification by Murray with respect to the Coal Act and BLBA liabilities. In addition, we had agreed to indemnify our former parent relative to certain pre-separation liabilities. In addition to pursuing all available claims against Murray in the bankruptcy, we are currently, and will continue to, vigorously defend any claims that attempt to transfer any of such liabilities directly or indirectly to us, including raising all applicable defenses against the 1992 Plan’s suit and those of any other party.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

There were no repurchases of the Company's equity securities during the three months ended March 31, 2020. Since the December 2017 inception of the Company's current stock, unit and debt repurchase program, CONSOL Energy Inc.'s Board of Directors has approved a $270 million stock, unit and debt repurchase program, which terminates on June 30, 2022. As of May 11, 2020, approximately $100.6 million remained available under the stock, unit and debt repurchase program. The program does not obligate CONSOL Energy to acquire any particular amount of its common stock, notes or units, and can be modified or suspended at any time at the Company’s discretion. See Note 18 - Stock, Unit and Debt Repurchases in the Notes to the Consolidated Financial Statements in Item 1 of this Form 10-Q for more information.

Limitation Upon Payment of Dividends

The Indenture and the Senior Secured Credit Facilities include certain covenants limiting the Company's ability to declare and pay dividends.

ITEM 4. MINE SAFETY DISCLOSURES

The information concerning mine safety violations or other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K (17 CFR 229.104) is included in Exhibit 95 to this Quarterly Report on Form 10-Q.

ITEM 6. EXHIBITS



Exhibits	Description	Method of Filing

3.1	Amended and Restated Certificate of Incorporation of the Company	Filed as Exhibit 3.1 to Form 8-K (File No. 001-38147) filed on December 4, 2017

3.2	Certificate of Amendment to Amended and Restated Certificate of Incorporation of the Company	Filed as Exhibit 3.1 to Form 8-K (File No. 001-38147) filed on May 8, 2020

3.3	Second Amended and Restated Bylaws	Filed as Exhibit 3.2 to Form 8-K (File No. 001-38147) filed on May 8, 2020

10.1	Amendment to Letter Agreement by and between CONSOL Energy Inc. and James J. McCaffrey dated as of February 13, 2020 *	Filed herewith

10.2	Fifth Amendment to Receivables Financing Agreement dated as of March 27, 2020**	Filed herewith

10.3	Form of Notice of Restricted Stock Unit Award Terms and Conditions *	Filed herewith

10.4	Form of Notice of Performance-Based Restricted Stock Unit Award Terms and Conditions for James A. Brock*^#	Filed herewith

10.5	Form of Notice of Performance-Based Cash Award*^#	Filed herewith

10.6	Change in Control Severance Agreement for Mitesh Thakkar*	Filed herewith

31.1	Certification of Chief Executive Officer pursuant to Section 302 of Sarbanes-Oxley Act of 2002	Filed herewith

31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Filed herewith

32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	Filed herewith

32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	Filed herewith

95	Mine Safety and Health Administration Safety Data	Filed herewith

101	Interactive Data File (Form 10-Q for the quarterly period ended March 31, 2020, furnished in Inline XBRL)	Filed herewith

104	Cover Page Interactive Data File (formatted as Inline XBRL)	Contained in Exhibit 101

* Indicates management contract or compensatory plan or arrangement

** Information in this exhibit identified by brackets is confidential and has been excluded pursuant to Item 601(b)(10)(iv) of Regulation S-K because it (i) is not material and (ii) would likely cause competitive harm to the Company if publicly disclosed.

# Schedules and attachments to this Exhibit have been omitted pursuant to Item 601(a)(5) of Regulation S-K.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, as of the 11th day of May, 2020.



	CONSOL ENERGY INC.

	By:		/s/ JAMES A. BROCK
			James A. Brock
			Director, Chief Executive Officer and President (Principal Executive Officer)

	By:		/s/ MITESHKUMAR B. THAKKAR
			Miteshkumar B. Thakkar
			Interim Chief Financial Officer (Principal Financial Officer)

	By:		/s/ JOHN M. ROTHKA
			John M. Rothka
			Chief Accounting Officer (Principal Accounting Officer)

Core Natural Resources - 10-Q quarterly report FY2020 Q1

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