amend10qmar09.htm
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
 
FORM 10-Q/A
(Amendment No. 1)
 
þ
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended March 31, 2009
OR
 
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
Commission File Number 0-14731
 
Hallador logo
 
Hallador Petroleum Company
(Exact Name of Registrant as Specified in Its Charter)
 
Colorado
 
84-1014610
(State of Incorporation)
 
(I.R.S. Employer Identification No.)
     
1660 Lincoln St., Suite 2700, Denver, Colorado
 
80264-2701
(Address of Principal Executive Offices)
 
(Zip Code)
 
(303) 839-5504  fax: (303) 832-3013
(Issuer’s Telephone Number, Including Area Code)
 
Indicate by check mark whether the issuer: (1) has filed all reports required to be filed by Section 13 or 15(d) of the 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 þ No o
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
 
 
Large accelerated filer o
 
Accelerated filer o
 
 
Non-accelerated filer o  (Do not check if a smaller reporting company)
 
Smaller reporting company þ
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes o No þ
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). 
Yes o No o
 
Shares outstanding as of May 7, 2009:  22,446,028
EXPLANATORY NOTE
 
This Form 10-Q/A is being filed solely to amend Exhibits 31 and 32 (the SOX 302 and 906 certifications) of the original filing and does not amend any other information set forth in the original filing and we have not updated disclosures contained therein to reflect any events that occurred subsequent to the date of the original filing.
 
 
1
 
PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheet
 (in thousands, except share data)
   
 March 31,
2009
 
December 31,
2008 * 
ASSETS
Current assets:
           
Cash and cash equivalents
$
  19,764
 
$
21,013
 
Certificates of deposit
  2,838        
Federal income tax receivable
 
417
   
1,531
 
Accounts receivable
 
   6,732
   
6,113
 
Coal inventory
 
71
   
776
 
Other
 
  1,814
   
1,928
 
Total current assets
 
  31,636
   
31,361
 
             
Coal properties, at cost:
           
Land, buildings and equipment
 
  64,489
   
55,027
 
Mine development
 
    48,426
   
45,289
 
   
    112,915
   
100,316
 
Less - accumulated depreciation, depletion, and amortization
 
    (9,890
)
 
(7,233
)
   
  103,025
   
93,083
 
Investment in Savoy
 
  7,652
   
7,911
 
Other assets
 
  2,505
   
3,710
 
 
$
  144,818
 
$
136,065
 
LIABILITIES AND STOCKHOLDERS' EQUITY
           
Current liabilities:
           
Current portion of bank debt
 $
  5,000
 
 $
2,500
 
Accounts payable and accrued liabilities
 
  10,210
   
11,563
 
State income tax payable
 
  1,173
   
605
 
Other
 
  18
   
310
 
Total current liabilities
 
  16,401
   
14,978
 
             
Long-term liabilities:
           
Bank debt, net of current portion
 
  35,000
   
37,500
 
Interest rate swaps, at estimated fair value
 
  2,133
   
2,290
 
Deferred income taxes
 
  3,681
   
1,700
 
Asset retirement obligations
 
  696
   
686
 
Other
 
  4,345
   
4,345
 
Total long-term liabilities
 
  45,855
   
46,521
 
             
Total liabilities
 
  62,256
   
61,499
 
Equity:
           
Hallador stockholders' equity
           
Preferred stock, $.10 par value, 10,000,000 shares authorized; none issued
           
Common stock, $.01 par value, 100,000,000 shares authorized; 22,446,028 outstanding
 
 224
   
  224
 
Additional paid-in capital
 
  69,800
   
69,739
 
Retained earnings
 
  9,969
   
2,920
 
Total Hallador stockholders' equity
 
   79,993
   
72,883
 
Noncontrolling interest
 
     2,569
   
1,683
 
Total equity
 
 82,562
   
74,566
 
 
$
   144,818
 
$
136,065
 
*Derived from the Form 10-K
See accompanying notes.
 
2

 

Consolidated Statement of Operations
(in thousands, except per share data)
 
 
 
 
 
     
Three months ended March 31,
 
   
2009
   
2008
 
Revenue:
           
Coal Sales                              
 
$
29,811     $ 9,681  
Equity (loss) - Savoy
    (259     (31
Other
    458       561  
      30,010       10,211  
                 
Costs and expenses:
               
Cost of coal sales
    15,321       7,585  
DD&A
    1,769       905  
G&A
    940       600  
Interest
    382       1,532
 
    18,412       10,622  
                                                               
Income (loss) before income taxes       11,598       (411
                 
Income taxes:                
Current
    1,682          
Deferred
    1,981          
      3,663          
 
               
Net income (loss)     7,935       (411
Less: net (income) loss  attributable to the noncontrolling interest
    (886      74  
                 
Net income (loss) attributable to Hallador   $ 7,049     $ (337
                 
Net income (loss) per share:
               
Basic and diluted
  $ .31    
$
 (.02 )
                 
Weighted average shares outstanding:
               
Basic and diluted
     22,446       16,363  
 
 
--------------------------------------------
*Includes $885 relating to our interest rate swaps.
 
See accompanying notes.
 
 

 
3

 

 
 
 
Condensed Consolidated Statement of Cash Flows
(in thousands)
 
 

 
 
 
   
 Three months ended March 31,
 
   
2009
   
2008
 
             
Operating activities:
           
Cash provided by operating activities
   $ 13,391      $
730
 
                 
Investing activities:
               
Capital expenditures for coal properties
    (12,802     (2,941 )
Other
    (1,838     604
 
Cash used in investing activities
    (14,640     (2,337 )
                 
Financing activities:
               
Proceeds from bank debt
            1,698  
Cash provided by financing activities
            1,698  
                 
Increase (decrease) in cash and cash equivalents
    (1,249
)
    91  
                 
Cash and cash equivalents, beginning of period
    21,013       6,978  
                 
Cash and cash equivalents, end of period
  $ 19,764     $ 7,069  
                 
Cash paid for interest (net of amount capitalized – $300 and $100)
  $ 963     $ 672  

  
 
 
 
 
 
 
 
 
 
 
See accompanying notes.

 
4

 
Notes to Consolidated Financial Statements
 
1.
General Business
 
The interim financial data is unaudited; however, in our opinion, it includes all adjustments, consisting only of normal recurring adjustments necessary for a fair statement of the results for the interim periods. The financial statements included herein have been prepared pursuant to the SEC’s rules and regulations; accordingly, certain information and footnote disclosures normally included in GAAP financial statements have been condensed or omitted.
 
On January 1, 2009, we adopted SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements.
 
Our organization and business, the accounting policies we follow and other information, are contained in the notes to our financial statements filed as part of our 2008 Form 10-K. This quarterly report should be read in conjunction with such 10-K.
 
The accompanying consolidated financial statements include the accounts of Hallador Petroleum Company and its subsidiaries.  All significant intercompany accounts and transactions have been eliminated.  We are engaged in the production of coal from a shallow underground mine located in western Indiana.  We also own a 45% equity interest in Savoy Energy L.P., a private oil and gas company which has operations primarily in Michigan.
 
As discussed in prior filings, we have entered into significant equity transactions with Yorktown and other entities that invest with Yorktown.  Yorktown currently owns about 55% of our common stock and represents one of the five seats on our board.
 
2.
Equity Investment in Savoy
 
We account for our  45% interest in Savoy using the equity method of accounting.
 
Below (in thousands) are:   (i) a condensed balance sheet at March 31, 2009 and (ii) a condensed statement of operations for the quarters ended March 31, 2009 and 2008.

 
Condensed Balance Sheet
 
 
Current assets
 
$  8,501
 
 
PP&E
 
  11,357
 
     
$19,858
 
         
 
Total liabilities
 
$  2,893
 
 
Partners' capital
 
  16,965
 
     
$19,858
 
 
 
Condensed Statement of Operations
 
   
2009
 
2008
 
           
 
Revenue
$ 1,981 
 
$1,460
 
 
Expenses
  (2,556) 
 
  (1,289)
 
 
Net income (loss)
$  (575)
 
$   171
 
           
 
For 2008, the difference between the purchase price and our pro rata share of the equity of Savoy was amortized based on Savoy's units of production rate using proved developed oil and gas reserves and amounted to $109,000.  For 2009 there was no difference. 
 
5

 
3.        Notes Payable

In December 2008, we entered into a new loan agreement with a bank consortium that provides for a $40 million term loan and a $30 million revolving credit facility.  At March 31, 2009, we have fully drawn down the $40 million term loan.  We have outstanding letters of credit in the amount of $3 million, which leaves $27 million available under the revolver.  
 
In connection with the old loan agreements, we entered into two interest rate swap agreements swapping variable rates for fixed rates. The first swap agreement which covers $26 million in debt commenced on July 15, 2007 and matures on July 15, 2012. The second swap agreement which covers $10 million commenced on December 28, 2007 and matures on December 28, 2011.  The two swap agreements fix our interest rate at about 8.3%.  At March 31, 2009, our interest rates swaps resulted in a liability of about $2.1 million and at December 31, 2008 they resulted in a liability of $2.3 million.  The difference of $157,000 is included as a reduction in our interest expense.  The recorded value of our bank debt approximates fair value as it bears interest at a floating rate.
 
4.        Income Taxes
 
The effective tax rate of about 34% for the three months ended March 31, 2009 was calculated using the annual effective rate projection on recurring earnings.   Excess tax depletion is the primary reason for the effective rate being less than the statutory rate.

 
 
6

 
ITEM 2. MD&A.
 
THE FOLLOWING DISCUSSION UPDATES THE MD&A SECTION OF OUR 2008 FORM 10-K AND SHOULD BE READ IN CONJUNCTION THEREWITH. 
 
We are still on track to sell about three million tons of coal for the year. Through March 31, 2009 we have sold about 662,000 tons at an average price of about $45/ton. 
 
Cap on Carbon Emissions
 
On April 17, 2009 the Obama Administration declared that carbon dioxide threatened the planet.  The landmark decision lays the ground work for federal efforts to cap carbon emissions.   The Environmental Protection Agency (EPA)  officials are on record saying they would take a go-slow approach, holding two public hearings in May before the findings are official.  After that, any new regulations would go through a public comment period, more hearings and a long review.  New regulations driven by the finding  could be years away; but, unless superseded by congressional action, the EPA ruling eventually could lead to stricter emissions limits. 
 
Under our current contracts, any new taxes or costs relating to these events, can be passed on to the customer.  We are unable to determine what effect these events will have on future coal demand.
 
Liquidity and Capital Resource
 
We plan to fund future mine expansion through a combination of draws from the $30 million revolving credit facility with our banks and cash from operations.  We have $27 million  available under the revolver due to outstanding letters of credit of $3 million. 
 
We have no material off-balance sheet arrangements.
 
Results of Operations 
 
During 2009, we sold about 662,000 tons of coal at an average selling price of about $45/ton.  During 2008 we sold about 353,000 at about $27/ton.  For the remainder of 2009, we expect the average price to be in the $45/ton range.
 
The increase in cost of coal sales and DD&A was due to the significant increase in our coal sales.
 
G&A increased primarily to the higher level of operations.
 
Included in 2008 interest expense was about $885,000 relating to our interest rate swaps.  The 2009 amount includes a credit of about $160,000 for the swaps.  In addition, we capitalized about $300,000 in interest expense for 2009 compared to $100,000 for 2008.
 
For most of our history, we operated in a loss position and had significant net operating loss carry forwards.  At December 31, 2008, we have federal net operating loss carry forwards of about $2.5 million and expect to utilize them in 2009.  For calendar year 2008 we had pretax income of about $11.8 million and a tax provision of about $2.9 million.  For the quarter ended March 31, 2009 we had pretax income of about $11.6 million and a tax provision of about $3.7 million.  We expect these income trends to continue and estimate our effective tax rate to be in the 34% - 38% range for the foreseeable future.  
 
New Accounting Pronouncements
 
None of the recent FASB pronouncements had, or will have any material effect on us.  
 
 
7

 

ITEM 3.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Smaller reporting companies are not required to provide the information required by this item.
 
ITEM 4(T). CONTROLS AND PROCEDURES.
 
Disclosure Controls
 
We maintain a system of disclosure controls and procedures that are designed for the purposes of ensuring that information required to be disclosed in our SEC reports is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to our CEO as appropriate to allow timely decisions regarding required disclosure.
 
As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our CEO of the effectiveness of the design and operation of our disclosure controls and procedures. Based upon that evaluation, our CEO, who is also our CFO, concluded that our disclosure controls and procedures are effective for the purposes discussed above.
 
There has been no change in our internal control over financial reporting during the quarter ended March 31, 2009 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
 
 
PART II—OTHER INFORMATION
 
ITEM 6.
EXHIBITS
 
(a)
 
31.1    -- SOX 302 Certification - CEO
31.2    -- SOX 302 Certification - CFO
32       -- SOX 906 Certification - CEO and CFO
   

SIGNATURE

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.

 


       
HALLADOR PETROLEUM COMPANY
         
December 15, 2009
     
/S/ W. ANDERSON BISHOP
W. Anderson Bishop, CFO
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
8