Good afternoon. My name is Gary, and I will be your conference operator today. At this time, I would like to welcome everyone to the Warrior Met Coal Third Quarter 2018 Financial Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. Before we begin, I have been asked to note that today's discussion may contain forward-looking statements, and actual results may differ materially from those discussed. For more information regarding forward-looking statements, please refer to the Company's press release and SEC filings. I have also been asked to note that the Company has posted reconciliations of the non-GAAP financial measures discussed during this call in the tables accompanying the Company's earnings press release located on the Investors section of the Company's website at www.warriormetcoal.com. In addition to the earnings release, the Company has posted a brief supplemental slide presentation to the Investors section of it's website at www.warriormetcoal.com. Please note, this call is being recorded. Here today to discuss the Company's results are Mr. Walt Scheller, Chief Executive Officer of Warrior Met Coal; and Mr. Dale Boyles, Chief Financial Officer. Mr. Scheller, you may begin your remarks.

Thanks, operator. Hello, everyone, and thank you for taking the time to join us today to discuss our third quarter results. After my remarks, Dale will review our results and additional detail, and then you will have the opportunity to ask any questions you may have. Warrior continued to perform in line with our expectations in the third quarter with a healthy market demand for our premium products supported by strengthen in global steel production in our key market. While sales lines were lower than the record highs we saw at the beginning of this year due to logistical issues out of our control, we continue to track with our previously issued guidance. We expect to close out the year in the upper end of that range assuming everything goes as expected. Production volume for the third quarter was 1.8 million short tons compared to 1.6 million short tons produced in the same quarter in 2017. We successfully completed two back-to-back longwall moves in the third quarter and achieved production levels that were better than expected. This better than expected production contributed to slightly higher inventories at the end of the third quarter. A longwall move can be challenging due to several factors including the time it takes to complete the move and the degree of difficulty in rebuilding and relocating large heavy equipment. Our better than expected results demonstrate, both the significant efforts made by our employees in anticipating and planning the move, as well as their ability to adapt and adjust to challenging geologic conditions. Sales volumes for the third quarter were 1.7 million short tons, compared to 2.1 million short tons in the same quarter 2017. As a reminder, in that quarter we benefited from the sale to approximately 400,000 short tons of excess inventory that we…

Thanks, Walt. Overall, we're pleased with our results for the third quarter. Our third quarter results were in line with our expectations and ahead of our internal budgets. For the third quarter of 2018 net income on a GAAP basis was $53 million or $1 per diluted share compared to net income of $120 million or $2.27 per diluted share in the third quarter of 2017 which included the tax benefit of $38 million of $0.71 per diluted share. Excluding one-time transaction and other expenses for the secondary equity offerings, non-GAAP adjusted net income was $56 million, or $1.06 per diluted share compared to $2.27 per diluted share in the third quarter of 2017. Adjusted EBITDA was $94 million in the third quarter as compared to adjusted EBITDA of $107 million in the same period of 2017. The Company's adjusted EBITDA margins which we calculate as adjusted EBITDA divided by total revenues was 34% for the third quarter, roughly identical to the prior period. The decrease period over period is primarily due to lower sales volume at 41%, partially offset by a 10% increase in net selling prices. Total revenues were $273 million in the third quarter of 2018 compared to $312 million in the same period last year. As previously mentioned, this decrease was primarily attributable to 21% decrease in sales volumes partially offset by a 10% increase in net selling prices. Last year's third quarter sales volumes were positively impacted by higher than expected production levels in the first half of 2017 in which inventory levels were 612,000 short tons entering the third quarter last year. In addition, there were no longwall moves in the prior year's third quarter compared to two longwall moves in the third quarter of this year. Our third quarter gross price realization was…

Thanks Dale. Before we move on to Q&A, I would like to summarize where we stand from an operations standpoint. Looking at the big picture for our production, we'll continue to make good progress towards our goals. We completed two longwall moves during the third quarter with a better than expected impact on production. We expect to have one additional longwall move in the fourth quarter as previously noted. Fourth quarter production will be negatively impacted by this longwall move along with less operating days in the fourth quarter for two major holidays which has been reflected in the Company's guidance. Our operational success is a credit to the hard work and dedication of our employees, and I thank them for all they have been doing to help us perform as strongly as we have thus far in 2018. Our top priority remains working safely as that is the first and most important step to working efficiently and ultimately achieving success in the marketplace. Market fundamentals are expected to remain supportive of a positive pricing environment until the end of the year. Our customers have continued to run their steel mills at high operating rates as global demand for steel remains strong. While met coal availability remains vulnerable to supply disruptions such as mine production issues, weather related events, and [indiscernible] constraints. One last noteworthy topic that I should discuss is the amended railroad contract. We successfully capitalized on the opportunity to amend and extend the contract with our railroad transportation partner. By working together as partners, we were able to reach a mutually beneficial agreement that continues to strengthen our relationship. Due to confidentiality and provisions in the contract, we're not able to go into details of the contract but we can confirm that our term was extended until March 2025. In addition, this new agreement should only increase our cost by approximately $1 per ton under current market conditions. We believe this is a very successful outcome for the Company considering the current coal price environment. As I've said on previous calls, we run the business as if the next pricing downturn and geological issue are just around the corner with conservative targets and flexible operations that allows us to adjust to the market environment as it changes throughout the year. We're pleased with the Company's excellent performance this year and we appreciate the support and engagement we've received from our shareholders and of course our employees. Given how we performed year-to-date, we forget about our prospects for the balance of the year, particularly if the pricing environment continues to move the way we expect. With that, we'd like to open the call for questions. Operator?

[Operator Instructions] The first question comes from Jeremy Sussman with Clarksons.

I guess just maybe first starting with the production guidance; I think the implied number in Q4 is about 1.5 million tons at the midpoint, and obviously that's bit below the year-to-date average. I know you have a longwall move but can you just talk about sort of -- just conservatism on your part or is there a reason why we should see our production dip from the strong levels we've seen in the first few quarters?

The other thing that we're really baking in here is the fact we've got two big holidays, with Thanksgiving and Christmas, and we always have a lot of absenteeism and you're never quite sure whether you'll have the crew to run the longwalls or not given where the absenteeism sits. So those two holidays are a big part of that, plus the longwall move; you know, the longwall move is not well in the third quarter and hopefully this one will as well, but we'll see.

And then maybe if I shift gears; another strong quarter of cash generation, I think you're upto $130 million or so of cash, $225 million of liquidity. Would it be possible to see an event of special dividend or something like that before year end or I guess how should we think about kind of that front given you've talked in the past about sort of minimum liquidity levels much lower than kind of where you're at today?

We were building cash in the quarter, so with $130 million at the end of the quarter, there is not set timing on special dividends or buybacks, we try to take advantage of the opportunities and we are here late in the year where we're in the middle of our budgeting process, so if I take that information and once we get it all pulled and compiled, and see what the needs of the business are before we would make a decision on the timing or whether or not we actually pay our special dividend. So it's kind of to be continued answer, it's really all I have at this point.

The next question comes from Lucas Pipes with B. Riley FBR.

Just to piggyback there on Jeremy's last question; Dale, can you remind us kind of what's your targets are in terms of cash on the balance sheet?

Well, we've never set a target with cash on the balance sheet, we've always said with this low costs variable nature of our cost structure we don't need a lot of cash on the balance sheet to run the business, we don't have pension and post-retirement liabilities or any cash taxes to pay; so that gives us a lot of flexibility to maximize the use of our cash. So we don't really target a cash number, we target more of a liquidity being on minimum level of $100 million being a combination of cash and the ABL.

So minimum of $100 million and you have -- with the ABL I think you have $95 million, did I hear that right?

Yes. So combined at the end of the quarter $225 million.

And then just to turn to the operations for a little bit, compared to my estimates costs during the third quarter did come in a low but higher than I anticipated and when I look back historically, I think the last time costs were at about this level. You had three longwall moves, so can you maybe share a little bit of color as to what may have changed to elevate cost a little bit; is it labor, is it steel, maybe combination of factors? And obviously you did have two longwall moves, so maybe they were little bit different than prior one, so if you could share kind of what those added to the cost structure? That would all be very helpful. Thank you.

I'll start off with one and let Dale follow-up. But one of the big ones as we had about 5,320 PSI [ph] that needed to be built at Mine 7 to really take care of an area that was always just -- given us a little bit of risk in terms of what happened when -- with the air behind it. So we took advantage this year of the opportunity to go ahead and get all those seals built. A lot of that billing for those seals and payment for those seals came in in the third quarter, so that was a big chunk of what caused that price to go up. But again, in our opinion what that does is that lowers the risk for the coal mines and it's a very good thing to do. Dale?

Yes, and I guess I would add to that. There were -- back in the Walter days in the Chapter 11, there is a backlog of this projects, it because a lot was done in '15 and '16; so in these price environments when we can kind of imagine with our cost, we'll spend money to kind of take care of those projects because they really do minimize the risk going forward; so that's another factor there. As I said, also in my comments that our longwall move costs are moving -- are going a little bit higher this year and in this quarter if you remember at the beginning of the year, we're only going to have two longwall moves for this year but as the first quarter really took off really well, Mine 4 has been performing we pulled an longwall move into this year. So we've been moving at much higher advancement rates than we originally projected in our guidance, so that's running a little bit higher and that's just a factor that we're performing better.

Walt, I think in your prepared remarks you mentioned potentially coming in towards the higher end of the volume range for the full year; did I hear that right? And if that is true, what are implications for the cost side for the full year? Should we be thinking about the low end or is that maybe taking it a step too far? Thank you.

You are correct, we certainly should be around the high end of the tons sold and tons produced. But I do think you're taking this a little too far because again, we're working on these projects and we're going to continue to one of the markets while we can deal -- we're going to work on these projects really hard and we'll continue on this throughout the rest of the year but our intention is to come in within the guidance we've provided for cost.

[Operator Instructions] The next question comes from [indiscernible].

Just thinking about the total nameplate capacity, I believe in some of the prior releases you mentioned that the goal is to get upto 8 million tons per year. Where are you along that spectrum; is that something you think you might hit next year or will it take longer? And how much additional CapEx if that's the right way to think about it, gets you there? In other words, I'm trying to sort of get somewhat of a sense for as what do you expect for CapEx in 2019?

I guess, first I'll start off with -- if you look at the first two quarters of the year, we mined 4 million tons. If you look at where the top end of our range will be, it will be at 7.5 million for the year. As nameplate is kind of being the perfect year where everything goes as well as it possibly could, and while that's what we push for and drive for, that's not what we expect. There is always issues in underground mining but we're driving to get ourselves to where on a regular basis we can perform at that level, and we'll continue to do so. As we look into next year, we've talked a little bit about the cash we have on our balance sheet and where we're sitting and where the market is, and we're going to go into next year thinking the same way. I think we did the last two years which is that -- we'll have a sustaining budget, and then as we talk to our Board, we'll probably go in with some discretionary projects that we think make the mine's more productive, more efficient and safer. So we'll be looking at doing all those things but we're in the middle of that budgeting process right now, so I really don't have a number of where we will end up on capital.

I appreciate that color but sorry, I don't recall what the sustaining CapEx is; what has that been? What's the trend been in the past for that? Is that about $50 million or so is it higher than that?

What we've said is that for the coal mines themselves, it's about 70-ish and then once you add in the gas companies, it takes it up in the mid-70s or as we said 80.

First time here we've got a little high on the sustaining level because you replaced some fans and things like that but you don't do it every single year they might be every couple or three years.

The next question is a follow-up from Lucas Pipes with B. Riley FBR.

One thing I wanted to ask on is one of your neighbors recently filed bankruptcy and I wondered if there is any connection between maybe keeping a little bit more cash and liquidity at this time and potentially being some assets up for selling in the neighborhood?

We saw that too that they had filed and we've always talked about the fact that those assets and the development assets are right in our backyard and they would be good fit for us. That has nothing to do with where we're sitting on liquidity right now but we're surely more into paying close attention to what's going on.

And then one other follow-up; Walter if I heard you right in your prepared remarks, you mentioned something about premiums for higher quality coals and obviously there is a lot of environment regulation in China that's changed the landscape across the commodity world quite dramatically. Can you elaborate on your comments there; and I wanted to make sure I caught all of that properly. Thank you.

That's really focused on the fact that the mills that are running flat out in China are tending to be the ones that are down along the coast line. And those are the ones that they are able to get the lower sulfur coals in because a lot of their production is higher sulfur and that allows -- so we have more imports coming in of the high quality hard coking coal that are going in to support those steel operations. And that's kind of been an ongoing theme over the last year and a half or so as thrilling back steel capacity in areas where they can't do it as cleanly as they can along the coast line which drives demand for the high quality coal.

And in your negotiations with customers, has sulfur premium discount become an increasing part of the conversation?

No. Our customers have -- our sulfur and the sulfurs in the coal is coming from around here are much lower than those in the interior of China. And that's what allows these coals to be very desirable for the steel mills and both -- in our key markets, South America and Europe.

At this time, there are no further questions. I will now turn the call back over to Mr. Scheller for any closing comments.

That concludes our call for this afternoon. Thank you again for joining us today. We appreciate your interest in Warrior Met Coal.