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 September 30, 2009
 
OR
 
r
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
Commission File Number 0-14731
 
 
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 r
 
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  r
 
Accelerated filer r
 
 
Non-accelerated filer  r
(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  r 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  r No  r
 
Shares outstanding as of November 10, 2009:  27,758,023
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 I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS

Consolidated Balance Sheet
 (in thousands, except share data)
   
September 30,
2009
   
December 31,
2008 *
 
ASSETS
           
Current assets:
           
Cash and cash equivalents
$
14,750
 
$
21,013
 
Certificates of deposit
 
 1,021
       
Prepaid Federal income taxes
 
       1,486
   
1,531
 
Accounts receivable
 
        6,769
   
6,113
 
Coal inventory
 
  1,620
 
 
776
 
Other
 
2,789
   
1,928
 
Total current assets
 
28,435
   
31,361
 
Coal properties, at cost:
           
Land, buildings and equipment
 
84,276
   
55,027
 
Mine development
 
46,402
   
45,289
 
   
130,678
   
100,316
 
Less - accumulated depreciation, depletion, and amortization
 
(13,586
)
 
(7,233
)
   
117,092
   
93,083
 
Investment in Savoy
 
6,955
   
7,911
 
Deferred income taxes, net
 
2,414
       
Other assets
 
2,355
   
3,710
 
 
$
157,251
 
$
136,065
 
LIABILITIES AND EQUITY
           
Current liabilities:
           
Current portion of bank debt
$
7,500
 
$
2,500
 
Accounts payable and accrued liabilities
 
9,561
   
11,563
 
State income tax payable
 
483
   
605
 
Other
 
609
   
310
 
Total current liabilities
 
18,153
   
14,978
 
             
Long-term liabilities:
           
Bank debt, net of current portion
 
30,000
   
37,500
 
Interest rate swaps, at estimated fair value
 
1,643
   
2,290
 
Deferred income taxes
 
 
   
1,700
 
Asset retirement obligations
 
912
   
686
 
Other
 
4,345
   
4,345
 
Total long-term liabilities
 
36,900
 
 
46,521
 
Total liabilities
 
55,053
   
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; 27,758,023 and 22,446,028 outstanding
 
277
   
224
 
Additional paid-in capital
 
84,587
   
69,739
 
Retained earnings
 
17,334
   
2,920
 
Total Hallador stockholders' equity
 
102,198
   
72,883
 
Noncontrolling interest
       
1,683
 
Total equity
 
102,198
 
 
74,566
 
 
$
157,251
 
$
136,065
 
*Derived from our Form 10-K
See accompanying notes.
 
2
 
 
Consolidated Statement of Operations
(in thousands, except per share data)
 
 
 
 
   
Nine months ended
   
Three months ended
 
   
September 30,
   
September 30,
 
 
 
2009
   
2008
   
2009
   
2008
 
Revenue:
                       
  Coal sales
  $ 85,140     $ 41,688     $ 29,543     $ 17,726  
  Equity (loss) – Savoy
    (956 )     (103 )     (407 )     (378 )
  Other
    770       894       (25 )     112  
 
    84,954       42,479       29,111       17,460  
Costs and expenses:
                               
Cost of coal sales
    48,332       27,579       16,902       11,127  
DD&A
    6,353       3,213       2,566       1,282  
SG&A
    3,046       2,270       1,306       902  
Interest (1)
    1,431       2,227       603       851  
      59,162       35,289       21,377       14,162  
                                 
Income before income taxes
    25,792       7,190       7,734       3,298  
                                 
Less income taxes
    (9,358 )             (3,218 )        
                                 
Net income
    16,434       7,190       4,516       3,298  
                                 
Less: net income attributable to the noncontrolling  interest
    (2,020 )     (846 )     (643 )     (365 )
                                 
Net income attributable to Hallador
  $ 14,414     $ 6,344     $ 3,873     $ 2,933  
                                 
Net income per share attributable to Hallador:
                               
Basic and diluted
  $ .63     $ .36     $ .17     $ .14  
                                 
Weighted average shares outstanding:
                               
Basic and diluted
    22,753       17,824       23,358       20,707  

_______________________________
 
(1)  Included in interest expense for the nine and three months ended September 30, 2009 was a credit of $647 and $116, respectively, due to the change in the estimated fair value of the interest rate swaps.  Such credit was $57 and $18 for the comparable 2008 periods. We also capitalized $293 and $176 in interest expense for the nine months ended September 30, 2009 and 2008, respectively.  No interest was capitalized for the three months ended September 30, 2009 and 2008.

 
See accompanying notes .

 
3
 

 
 
Condensed Consolidated Statement of Cash Flows
(in thousands)
 
 
 
   
Nine months ended
September 30,
 
   
2009
   
2008
 
Operating activities:
           
Cash provided by operating activities
  $ 31,824     $ 7,166  
                 
Investing activities:
               
Acquisition of additional 20% interest in Sunrise*
            (11,771 )
Capital expenditures for coal properties
    (33,635 )     (10,852 )
Other
    (130 )     193  
Cash used in investing activities
    (33,765 )     (22,430 )
                 
Financing activities:
               
Proceeds from bank debt
            2,000  
Payments of bank debt
    (2,500 )     (1,334 )
Acquisition of remaining 20% interest in Sunrise*
    (25,805 )        
Proceeds from stock sales
    24,892       21,983  
Cash distributions to noncontrolling interests
    (909 )        
Other
            (47 )
   Cash (used in) provided by financing activities
    (4,322 )     22,602  
                 
Increase (decrease) in cash and cash equivalents
    (6,263 )     7,338  
                 
Cash and cash equivalents, beginning of period
    21,013       6,978  
                 
Cash and cash equivalents, end of period
  $ 14,750     $ 14,316  
                 
Cash paid for interest (net of amount capitalized - $293 and $176)
  $ 2,338     $ 2,308  
 
Cash paid for state income taxes  
  $ 849          
                 
Change in accounts payable for coal properties
  $ (3,381 )   $ 994  
 
_______________________________
 
*The 2008 acquisition was treated as an investing activity and accounted for under purchase accounting rules; however, due to changes in accounting rules, the 2009 acquisition was treated as a financing activity and accounted for as an equity transaction.

 
 
See accompanying notes.

 
4
 
 
Consolidated Statement of Stockholders’ Equity
(in thousands, except shares)
 
 
   
Shares
   
Common Stock
   
Additional Paid-in Capital
   
Retained Earnings
   
Total
 
                               
Balance December 31, 2008
    22,446,028     $ 224     $ 69,739     $ 2,920     $ 72,883  
                                         
Equity offering
    4,150,000       42       24,850               24,892  
                                         
Stock issued to Sunrise members for their remaining 20% interest valued at par (fair value of $6,800); See Note 5
    1,133,328       11       (11 )                
                                         
Cash ($25,805) paid to Sunrise members for their remaining 20% interest, net of deferred  income tax assets of $12,700 and $2,794 to close out the minority interest (treated as an equity transaction)
                    (10,311 )             (10,311 )
                                         
Restricted shares issued
    28,667               161               161  
                                         
Stock-based compensation
                    139               139  
                                         
Other
                    20               20  
                                         
Net income
                            14,414       14,414  
                                         
Balance September 30, 2009
    27,758,023     $ 277     $ 84,587     $ 17,334     $ 102,198  
 

 
See accompanying notes.
 
 
 
5
 
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.
 
Our organization and business, the accounting policies we follow and other information, are contained in the notes to our consolidated 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 subsidiary.  All significant intercompany accounts and transactions have been eliminated.  We are engaged in the production of coal from an underground mine located in southwestern 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 seven 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 September 30, 2009 and (ii) a condensed statement of operations for the nine months ended September 30, 2009 and 2008.
 
Condensed Balance Sheet
 
 
Current assets
 
$  8,879
 
 
PP&E
 
  12,072
 
     
$20,951
 
         
 
Total liabilities
 
$  5,522
 
 
Partners' capital
 
  15,429
 
     
$20,951
 
  
Condensed Statement of Operations
 
   
2009
 
2008
 
 
Revenue
$5,556
 
$5,587
 
 
Expenses
  (7,668)
 
  (5,078)
 
 
Net (loss) income
$ (2,112 )
 
$   509
 
 
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 $332,000.  For 2009 there was no difference.
 
 
6
 
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.   We have fully drawn down the $40 million term loan and have made or first  principal payment  of $2.5 million.  We have outstanding letters of credit in the amount of $3.5 million, which leaves about $26 million available under the revolver.  We pay a .5% commitment fee for the unused funds.
 
In connection with the old loan agreements, we entered into two agreements swapping variable rates for fixed rates. The first swap agreement, which initially covered $26 million in debt, commenced on July 15, 2007 and matures on July 15, 2012; the current notional amount is about $15 million.  The second swap agreement, which initially covered $10 million, commenced on December 28, 2007 and matures on December 28, 2011; the current notional amount is about $8 million.  Considering the two swap agreements, our current interest rate is about 6.1%.  At September 30, 2009 and December 31, 2008, our interest rates swaps resulted in a liability of $1.64 million and $2.3 million, respectively.  The difference of $647,000 is included as a reduction in our interest expense for the nine months ended September 30, 2009.  The recorded value of our bank debt approximates fair value as it bears interest at a floating rate.
 
4.         Income Taxes
 
For the nine months ended September 30, 2009, our effective income tax rate increased to 39%, a 2% increase over the effective tax rate of 37% for the six months ended June 30, 2009.  As discussed in Note 5 below, we acquired the remaining 20% membership interest in Sunrise.  In doing so, we derived tax basis for our coal properties and, consequently, there will not be any percentage depletion in excess of basis which is a permanent difference for tax purposes that previously served to reduce the effective income tax rate.  This change caused the effective rate for the three months ended September 30, 2009 to be 45%.
 
5.         Stock Sale and Purchase of Remaining Interest in Sunrise
 
On September 16, 2009, we entered into agreements to purchase the remaining 20% membership interest in Sunrise Coal, LLC (“Sunrise”), from the existing members for an aggregate purchase price of about $32.6 million, consisting of about $25.8 million in cash and 1,133,328 in shares of our common stock valued at $6/share ($6.8 million).  Sunrise is now a wholly-owned entity of ours.  Brent Bilsland, our new president and board member, received cash of about $3.185 million and 8,333 shares of our stock for his approximate 2% interest and his spouse received cash of about $1.775 million and 208,333 shares of our stock for her interest (slightly less than 2%). His parents also sold their approximate 8% interest in Sunrise under the same terms receiving 383,332 shares and the remainder in cash.   In addition, Brent Bilsland purchased for cash 200,000 shares (at $6/share) directly from Victor Stabio, our CEO.
 
For accounting purposes the buyout was treated as an equity transaction among members of a controlled group.  For income tax purposes we will be able to increase our tax basis in the coal properties and receive future tax deductions; accordingly, a deferred tax asset of $12.7 million was recognized.
 
The day before the purchase, in a private placement transaction, we sold 4,150,000 shares of our common stock for an aggregate cash purchase price of $24.9 million ($6/share).  The proceeds from the sale were used to purchase the remaining membership interests in Sunrise as described above.  All but 450,000 shares were sold to our existing shareholders and board members.  Yorktown Energy Partners VIII, LP, a private partnership affiliated with board member Bryan Lawrence, purchased 2,950,000 shares and an entity affiliated with board member Sheldon Lubar purchased 750,000 shares.
 
 
7
 
6.         Subsequent Events
 
No subsequent events have occurred through November 10, 2009 that could have a material effect on our financial position, cash flows or results of operations.
 
ITEM 2. MD&A.
 
THE FOLLOWING DISCUSSION UPDATES THE MD&A SECTION OF OUR 2008 FORM 10-K AND SHOULD BE READ IN CONJUNCTION THERETO.
 
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.   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.
 
Our management is in favor of reasonable and practical steps to protect the environment.  We are not in favor of the current cap and trade bill passed by the House and being discussed in the Senate.  Unless countries like Mexico, China, India and Russia pass and enforce similar laws any reduction in carbon omissions in our country would be inconsequential to the ultimate goal.
 
Liquidity and Capital Resource
 
We plan to fund future mine expansion through a combination of draws from the revolving credit facility with our banks and cash from operations.  We have about $26 million available under the revolver due to outstanding letters of credit.  Our budgeted capital expenditures for the last quarter of 2009 are about $8 million and $20 million for 2010.
 
We have no material off-balance sheet arrangements.
 
Results of Operations
 
Year to Date
 
The recession has reduced power demand, which has reduced the need for coal.  Stockpiles at some of our customers are high and, accordingly, during July we were asked by one of our customers to defer a total of 400,000 tons through December 31, 2010.  These tons will be shipped in 2011-2013.  We have agreed to assist our customer because of our valued relationship.
 
Due to the reduced power demand, we estimate fourth quarter sales for 2009 to be about 737,000 tons at an average selling price of $44.50/ton.  We expect 2010 sales to be about 3 million tons at an average price of $42.  The reduction in average prices is due to higher priced coal being deferred to later years.
 
For 2009 we sold 1,931,000 tons at an average price of about $44/ton.  For 2008 we sold 1,355,000 tons at an average price of about $30.75/ton.
 
During 2009 our equity loss in Savoy was due to lower oil and gas prices and higher operating costs relative to 2008.
 
Cost of coal sales per ton averaged $25/ton in 2009 compared to $20.35 in 2008.  The increase was due to inefficiencies during our mine expansion and construction, temporary adverse mining conditions and higher costs associated with government impositions.  Our mining employees totaled 290 at September 30, 2009 compared to 190 at September 30, 2008.  We expect the cost of coal sales to average $23-24/ton for the remainder of 2009.
 
The increase in DD&A was due to the significant increase in our coal sales. There were no significant changes in our coal reserves.
 
 
 
8
 
 
SG&A increased primarily due to the higher level of operations.
 
Included in 2009 interest expense was a credit of $647,000 relating to our interest rate swaps; such amount for 2008 was a credit of $57,000.   In addition, we capitalized $293,000 in interest expense for 2009 compared to $176,000 for 2008.  Because our mine expansion is complete,  we are no longer capitalizing interest.
 
Quarter to Date
 
For 2009 we sold 673,000 tons at an average price of about $44/ton.  For 2008 we sold 530,000 tons at an average price of about $33.45/ton.
 
For 2009 our equity loss in Savoy was due to lower oil and gas prices and higher operating costs relative to 2008.
 
Cost of coal sales averaged $25.11/ton in 2009 compared to $21 in 2008. We expect the cost of coal sales to average $23-24/ton for the remainder of 2009.
 
The increase in DD&A was due to the significant increase in our coal sales.
 
Included in 2009 interest expense was a credit of $116,000 relating to our interest rate swaps; such amount for 2008 was a credit of $18,000.  No interest was capitalized for either period.
 
New Accounting Pronouncements
 
None of the recent FASB pronouncements had, or will have any material effect on us.
 
 
9
 

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 and CFO 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 and CFO of the effectiveness of the design and operation of our disclosure controls and procedures. Based upon that evaluation, our CEO and 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 September 30, 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
 
 
 
10.1 -- Form of Purchase and Sale Agreement dated September 16, 2009 (1)
10.2 -- Form of Subscription Agreement dated September 15, 2009 (1)
10.3 -- Form of Hallador Petroleum Company Restricted Stock Unit Issuance Agreement. (1)
21.1 -- List of Subsidiaries (2)
31.1 -- SOX 302 Certification - CEO (2)
31.2 -- SOX 302 Certification - CFO (2)
32    -- SOX 906 Certification - CEO and CFO (2)
---------------------------------------------
(1)   IBR to the Form 8-K Filed September 18, 2009
(2)   Filed herewith.
 
 
 
 
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
Anderson Bishop, CFO
 

10
 
 
 
 
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