Fair Value Disclosure

9 Months Ended

Sep. 30, 2022

NOTE 5—Fair Value Disclosure

The following table presents the Company's assets and liabilities accounted for at fair value on a recurring basis:


			Fair Value Measurements at Reporting Date Using
			Quoted Prices in				Significant
			Active Markets for		Significant Other		Unobservable
			Identical Assets		Observable Inputs		Inputs
Description	Date		(Level 1)		(Level 2)		(Level 3)
	September 30, 2022
Assets:
Equity securities	$	14,084	$	14,084	$	—	$	—

	$	14,084	$	14,084	$	—	$	—




	December 31, 2021
Assets:
Equity securities	$	16,070	$	16,070	$	—	$	—
	$	16,070	$	16,070	$	—	$	—

Bellaire Corporation (“Bellaire”) is a non-operating subsidiary of the Company with legacy liabilities relating to closed mining operations, primarily former Eastern U.S. underground coal mining operations. Prior to 2021, Bellaire contributed $5.0 million to establish a mine water treatment trust (the "Mine Water Treatment Trust") to assure the long-term treatment of post-mining discharge. Bellaire's Mine Water Treatment Trust invests in equity securities that are reported at fair value based upon quoted market prices in active markets for identical assets; therefore, they are classified as Level 1 within the fair value hierarchy. The Company recognized a loss of $0.5 million and $2.7 million during the three and nine months ended September 30, 2022, respectively, and a gain of less than $0.1 million and $1.0 million during the three and nine months ended September 30, 2021, respectively, related to the Mine Water Treatment Trust.

Prior to 2021, the Company invested $2.0 million in equity securities of a public company with a diversified portfolio of royalty producing mineral interests. The investment is reported at fair value based upon quoted market prices in active markets for identical assets; therefore, it is classified as Level 1 within the fair value hierarchy. The Company recognized a gain of $0.2 million and $1.0 million during the three and nine months ended September 30, 2022, respectively, and a gain of $0.4 million and $1.6 million during the three and nine months ended September 30, 2021, respectively, related to the investment in these equity securities.

The gains and losses related to equity securities are reported on the line Loss (gain) on equity securities in the Other (income) expense section of the Unaudited Condensed Consolidated Statements of Operations.

As discussed in Note 1, the Company recorded the estimated fair value of an office building and membership units of a privately held company during the second quarter of 2022. These fair value measurements were based on significant inputs not observable in the market and thus represent Level 3 measurements within the fair value measurement hierarchy. Level 3 fair market values were determined using a variety of information, including estimated future cash flows and external appraisals, and considered both the income and market approaches.

The significant assumptions used in determining the fair value of the membership units are the estimated future cash flows and the discount rate applied to the estimated future cash flows. The estimate of future cash flows is based on available historical information and forecasts provided by the privately held company that are inherently uncertain. Management determined the appropriate discount rate based on the weighted average cost of capital ("WACC"). The WACC takes into account both the

after-tax cost of debt and cost of equity. A major component of the cost of equity is the current risk-free rate on twenty-year U.S. Treasury bonds as well as company specific risk and size premiums.

In determining the $4.1 million fair value of the office building, the Company engaged an independent real estate appraiser to appraise the property utilizing observed sales transactions for similar assets as well as consideration of an income approach.

Prior to receiving the membership units from GRE, the Company held a $5.0 million investment in the same privately-held company. The Company previously elected to use the measurement alternative to fair value included in ASC 321, Investments – Equity Securities, that allows investments without readily determinable fair values to be carried at cost less impairment, if any, adjusted for observable price changes in orderly transactions for the identical or similar investments. The Company determined that the receipt of the additional membership units does not represent an observable transaction as defined in ASC 321. As such, the Company will add the fair value of the additional membership units of $12.8 million to the $5.0 million historical cost basis of the existing membership units, the total of which is the initial measurement of the Company’s equity method investment.

Subsequent to the receipt of the additional membership units on May 2, 2022, the Company began to account for the investment under the equity method of accounting subject to a one quarter reporting lag. The Company recorded $2.2 million, which represents its share of the privately-held company's second quarter earnings and immaterial basis difference adjustments, during the third quarter of 2022 on the "Income from equity method investee" line within the accompanying Unaudited Condensed Consolidated Statements of Operations.

The office building is included in Property, plant and equipment, net and the investment in the privately-held company is included in Investment in private company equity units within the accompanying Unaudited Condensed Consolidated Balance Sheets.

The Company regularly performs reviews of potential future development projects and identified certain legacy assets where future development is unlikely. As a result, the Company estimated the fair value of the assets using unobservable inputs, which are classified as Level 3 inputs. The long-lived assets, which included land, prepaid royalties and capitalized leasehold costs, were written off to zero in the third quarter of 2022 and resulted in non-cash asset impairment charges of $3.9 million in the Minerals Management segment. The impairment charges are reported on the line "Asset impairment charges" in the Unaudited Condensed Consolidated Statements of Operations.

There were no transfers into or out of Levels 1, 2 or 3 during the nine months ended September 30, 2022 and 2021.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details