NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements include the accounts and operations of Westmoreland Resource Partners, LP (the "Partnership") and its consolidated subsidiaries and have been prepared in accordance with United States generally accepted accounting principles (“GAAP”) and require the use of management’s estimates. The financial information contained in this Quarterly Report on Form 10-Q is unaudited, but reflects all adjustments which in the opinion of management are necessary for a fair presentation of the financial information for the periods shown. Such adjustments are of a normal recurring nature. Certain prior-year amounts have been reclassified to conform with the financial statement line items used by Westmoreland Coal Company (“WCC”), the parent of our general partner Westmoreland Resources GP, LLC (the "GP"). The results of operations for the
three
months ended
March 31, 2017
are not necessarily indicative of results to be expected for the year ending December 31, 2017.
These unaudited quarterly consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in the Partnership’s Annual Report on Form 10-K for the year ended
December 31, 2016
(“
2016
Form 10-K”). There were no changes to our significant accounting policies from those disclosed in the audited consolidated financial statements and notes thereto contained in our
2016
Form 10-K, except as described below.
Accounting Pronouncements Effective in the Future
In February 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-02, "
Leases (Topic 842)
" which requires companies leasing assets to recognize on their balance sheet a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term on contracts longer than one year. The lessee is permitted to make an accounting policy election to not recognize lease assets and lease liabilities for short-term leases. How leases are recorded on the balance sheet represents a significant change from previous GAAP guidance as described in ASU "
Leases (Topic 840)."
ASU 2016-02 maintains a distinction between finance leases and operating leases similar to the distinction under previous lease guidance for capital leases and operating leases. The impact of leases reported in the Partnership’s operating results and statement of cash flows are expected to be similar to previous GAAP.
ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, and early adoption is permitted. Adoption of the new lease accounting standard will require the Partnership to apply the new standard to the earliest period using a modified retrospective approach. The Partnership is currently in the process of evaluating the impact of the new standard, including the evaluation of the impact, if any, on changes to business processes, systems and controls to support recognition and disclosure under the new guidance, however, at this time is unable to determine the impact this standard will have on the financial statements and related disclosures.
In January 2016, the FASB issued ASU 2016-01, "
Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities
" which updates certain aspects of recognition, measurement, presentation and disclosure of financial instruments. This standard is effective for interim and annual periods beginning after December 15, 2017. We are currently evaluating the effect adopting this guidance will have on our consolidated financial statements and footnote disclosures.
In May 2014, the FASB issued ASU 2014-09, "
Revenue from Contracts with Customers,
" issued as a new Topic, ASC Topic 606. The new revenue recognition standard supersedes all existing revenue recognition guidance. Under this ASU, an entity should recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2015-14, issued in August 2015, deferred the effective date of ASU 2014-09 to the first quarter of 2018, with early adoption permitted in the first quarter of 2017. The Partnership intends to adopt the amended guidance as of January 1, 2018.
In March, April, May, and December 2016, the FASB issued the following updates, respectively, to provide supplemental adoption guidance and clarification to ASU 2014-09. These standards must be adopted concurrently upon the adoption of ASU 2014-09. We are currently evaluating the potential effects of adopting the provisions of these updates.
|
|
•
|
ASU 2016-08,
Revenue from Contracts with Customers: Principal versus Agent Considerations (Reporting Revenue Gross versus Net)
.
|
|
|
•
|
ASU 2016-10,
Revenue from Contracts with Customers: Identifying Performance Obligations and Licensing
.
|
|
|
•
|
ASU 2016-12,
Revenue from Contracts with Customers: Narrow-Scope Improvements and Practical Expedients
.
|
WESTMORELAND RESOURCE PARTNERS, LP AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
|
|
•
|
ASU 2016-19,
Technical Corrections and Improvements
.
|
During 2016, the Partnership established an implementation team to develop a multi-phase plan to adopt the requirements of the new standard. The team is in the process of developing its conclusions on several aspects of the standard including principal versus agent considerations, identification of performance obligations and the determination of when control of goods and services transfers to the Partnership’s customers. Under the new standard, companies may use either of the following transition methods: (i) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients, or (ii) a modified retrospective approach with the cumulative effect of initially adopting ASU 2014-09 recognized at the date of adoption (which includes additional footnote disclosures). We have not concluded which transition method we will elect, but we currently anticipate using the full retrospective approach.
2. INVENTORIES
Inventories consisted of the following:
|
|
|
|
|
|
|
|
|
|
March 31, 2017
|
|
December 31, 2016
|
|
(In thousands)
|
Coal stockpiles
|
$
|
5,514
|
|
|
$
|
4,518
|
|
Materials and supplies
|
12,016
|
|
|
13,091
|
|
Reserve for obsolete inventory
|
(50
|
)
|
|
(50
|
)
|
Total
|
$
|
17,480
|
|
|
$
|
17,559
|
|
3. RESTRICTED INVESTMENTS
The Partnership invests certain bond collateral in a limited selection of fixed-income investment options and receives the investment returns on these investments. These investments are not available to meet the Partnership’s general cash needs. These investments include available-for-sale securities. Available-for-sale securities are reported at fair value with unrealized gains and losses excluded from earnings and reported in
Accumulated other comprehensive loss
.
The carrying value and estimated fair value of our restricted investments were as follows:
|
|
|
|
|
|
|
|
|
|
March 31, 2017
|
|
December 31, 2016
|
|
(In thousands)
|
Cash and cash equivalents
|
$
|
7,011
|
|
|
$
|
8,581
|
|
Available-for-sale securities
|
31,100
|
|
|
29,160
|
|
|
$
|
38,111
|
|
|
$
|
37,741
|
|
Available-for-Sale Restricted Investments
The cost basis, gross unrealized holding gains and losses and fair value of available-for-sale securities were as follows:
|
|
|
|
|
|
|
|
|
|
March 31, 2017
|
|
December 31, 2016
|
|
(In thousands)
|
Cost basis
|
$
|
31,143
|
|
|
$
|
29,349
|
|
Gross unrealized holding gains
|
221
|
|
|
167
|
|
Gross unrealized holding losses for less than one year
|
(109
|
)
|
|
(106
|
)
|
Gross unrealized holding losses for more than one year
|
(155
|
)
|
|
(250
|
)
|
Fair Value
|
$
|
31,100
|
|
|
$
|
29,160
|
|
4. IMPAIRMENT CHARGES
In the first quarter of 2016, management made an operating decision to part-out and scrap a large-capacity shovel resulting in an impairment charge of
$0.5 million
for the
three months ended March 31, 2016
. There were
no
impairment charges incurred for the
three months ended March 31, 2017
.
WESTMORELAND RESOURCE PARTNERS, LP AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
5. DEBT AND LINES OF CREDIT
Debt consisted of the following:
|
|
|
|
|
|
|
|
|
|
March 31, 2017
|
|
December 31, 2016
|
|
(In thousands)
|
Term loan facility
|
$
|
308,116
|
|
|
$
|
306,189
|
|
Capital lease obligations
|
15,713
|
|
|
16,351
|
|
Other
|
536
|
|
|
589
|
|
Total debt outstanding
|
324,365
|
|
|
323,129
|
|
Less debt issuance costs
|
(4,812
|
)
|
|
(5,483
|
)
|
Less current installments
|
(4,179
|
)
|
|
(3,819
|
)
|
Total debt outstanding, less current installments
|
$
|
315,374
|
|
|
$
|
313,827
|
|
The following table presents remaining aggregate contractual debt maturities of all long-term debt:
|
|
|
|
|
|
March 31, 2017
|
|
(In thousands)
|
2017
|
$
|
3,072
|
|
2018
|
312,292
|
|
2019
|
4,105
|
|
2020
|
1,694
|
|
2021
|
1,586
|
|
Thereafter
|
1,616
|
|
Total debt
|
$
|
324,365
|
|
Credit Facilities
2014 Financing Agreement
On December 31, 2014, we entered into a financing agreement with the lenders party thereto and U.S. Bank National Association, as administrative and collateral agent (the “2014 Financing Agreement”). As of
March 31, 2017
, we had a term loan of
$308.1 million
outstanding under the 2014 Financing Agreement. Borrowings on such term loan bear interest at a variable rate per annum equal to, at our option, (1) the three-month London Interbank Offered Rate (“LIBOR”) (subject to a floor of
0.75%
) plus
8.5%
or (ii) the Reference Rate (as defined in the 2014 Financing Agreement). As of
March 31, 2017
, the 2014 Financing Agreement had a cash interest rate of
9.65%
, consisting of the LIBOR (
1.15%
) plus
8.5%
. The term loan under the 2014 Financing Agreement matures on December 31, 2018.
The 2014 Financing Agreement also provides for “PIK Interest” (as defined in the 2014 Financing Agreement) at a variable rate per annum between
1.00%
and
3.00%
based on our Consolidated Total Net Leverage Ratio (as defined in the 2014 Financing Agreement). The rate of PIK Interest is recalculated on a quarterly basis with the PIK Interest added quarterly to the then-outstanding principal amount of the term loan under the 2014 Financing Agreement. PIK Interest under the 2014 Financing Agreement was
$2.3 million
for the
three
months ended
March 31, 2017
. The outstanding term loan amount represents the principal balance of
$289.7 million
, plus PIK Interest of
$18.4 million
.
During the
three
months ended
March 31, 2017
, we paid down
$0.4 million
of the term loan under the 2014 Financing Agreement with proceeds from oil and gas royalties received. The 2014 Financing Agreement requires mandatory prepayment of principal with proceeds from such events.
WESTMORELAND RESOURCE PARTNERS, LP AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
In connection with the acquisition of the Kemmerer Mine, in Lincoln county Wyoming, from WCC, we amended the 2014 Financing Agreement on July 31, 2015 to (i) allow us to make cash distributions in an aggregate amount not to exceed
$15.0 million
(previously
$7.5 million
) when our Consolidated Total Net Leverage ratio is more than
3.75
or Fixed Charge Coverage ratio is less than
1.00
(as such ratios are defined in the 2014 Financing Agreement) and (ii) at any time that we have a revolving loan facility available, require us to have liquidity of at least
$7.5 million
(previously
$5.0 million
), after giving effect to such cash distributions and applying availability under such revolving loan facility towards satisfying the liquidity requirement (“Restricted Distributions”). As of
March 31, 2017
, our Consolidated Total Net Leverage ratio is in excess of
3.75
, our Fixed Charge Coverage ratio is below
1.0
, and we have made
$14.4 million
in Restricted Distributions.
As of
March 31, 2017
, we were in compliance with all covenants under the terms of the 2014 Financing Agreement.
Revolving Credit Facility
On October 23, 2015, the Partnership and its subsidiaries entered into a loan and security agreement (the “Revolving Credit Facility”) with the lenders party thereto and The PrivateBank and Trust Company, as administrative agent, which permits borrowings up to the aggregate principal amount of
$15.0 million
, subject to borrowing base calculations as defined in the agreement and letters of credit in an aggregate outstanding amount of up to
$10.0 million
, which reduces availability under the Revolving Credit Facility on a dollar-for-dollar basis. The Revolving Credit Facility contains the same terms as the 2014 Financing Agreement regarding Restricted Distributions. At
March 31, 2017
, availability under the Revolving Credit Facility was
$14.7 million
.
Capital Leases
We did not enter into any new capital leases during the
three
months ended
March 31, 2017
.
6. DISTRIBUTIONS OF AVAILABLE CASH
We distribute
100%
of our available cash within
45
days after the end of each quarter to unitholders of record and to our GP, subject to the conditions and limitations within the 2014 Financing Agreement and the Revolving Credit Facility. Available cash is determined at the end of each quarter and is generally defined in the Partnership’s Fourth Amended and Restated Agreement of Limited Partnership, as amended (the "Partnership Agreement") as all cash and cash equivalents on hand at the end of each quarter less reserves established by our GP in its reasonable discretion for future cash requirements. These reserves are retained to provide for the conduct of our business, the payment of debt principal and interest and to provide funds for future distributions for any one or more of the next four quarters, and to comply with applicable law. Our available cash may also include, if our GP so determines, all or any portion of the cash on hand on the date of determination of available cash for the quarter resulting from working capital borrowings made subsequent to the end of such quarter.
We made cash distributions as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
2017
|
|
2016
|
Limited Partner common units
|
$
|
163
|
|
|
$
|
1,142
|
|
General Partner units
|
5
|
|
|
8
|
|
Warrants
|
22
|
|
|
33
|
|
Both our 2014 Financing Agreement and Revolving Credit Facility restrict us from making cash distributions in excess of
$15.0 million
in the aggregate when certain ratios and liquidity requirements are not met. As of
March 31, 2017
, these ratios are not met, and we do not foresee them being met in the near future. As of
March 31, 2017
, we have distributed
$14.4 million
in cash that counts toward the
$15.0 million
in aggregate Restricted Distribution payments. On April 27, 2017, we announced a quarterly cash distribution for the quarter ended
March 31, 2017
, of
$0.1333
per limited partner common unit, general partner unit and warrant with distribution rights. Additionally, we declared a paid-in-kind unit distribution of
$0.1333
per Series A Convertible Unit. The cash distribution totaling approximately
$0.2 million
, was payable to all common unitholders and warrant holders on May 15, 2017 to all common unitholders and warrant holders of record as of May 11, 2017, which record date was revised via press release on May 1, 2017.
7. FAIR VALUE MEASUREMENTS
WESTMORELAND RESOURCE PARTNERS, LP AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
The book values of cash, accounts receivable and accounts payable are considered to be representative of their respective fair values because of the immediate short-term maturity of these financial instruments.
In connection with our refinancing in June 2013, certain of the second lien lenders and lender affiliates received warrants entitling them to purchase common units. The warrants are measured at fair value at each balance sheet date. As of
March 31, 2017
, the fair value of each warrant was
$4.68
, based on the following: spot price of
$4.80
per unit as traded on the New York Stock Exchange, with an exercise price of
$0.12
per unit. The fair value of the warrants are a Level 1 measurement.
See
Note 3. Restricted Investments
to the consolidated financial statements (unaudited) for additional disclosures related to fair value measurements of restricted investments.
8. UNIT-BASED COMPENSATION
We grant employees and non-employee directors restricted common units under our Long-Term Incentive Plan (“LTIP”). We recognized compensation expense from unit-based arrangements shown in the following table:
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
2017
|
|
2016
|
|
(In thousands)
|
Recognition of fair value of restricted common units over the vesting period
|
$
|
42
|
|
|
$
|
64
|
|
A summary of restricted common unit award activity for the
three
months ended
March 31, 2017
is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Units
|
|
Weighted Average Grant-Date Fair Value
|
|
Unamortized Compensation Expense
|
Unvested balance at December 31, 2016
|
63,780
|
|
|
$
|
3.92
|
|
|
|
Granted
|
—
|
|
|
—
|
|
|
|
Vested
|
(63,780
|
)
|
|
3.92
|
|
|
|
Unvested balance at March 31, 2017
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
9. COMMITMENTS AND CONTINGENCIES
Coal Sales Contracts
We are committed under long-term contracts to sell coal that meets certain quality requirements at specified prices. Many of these prices are subject to cost pass-through or cost adjustment provisions that mitigate some risk from rising costs. Quantities sold under some of these contracts may vary from year to year within certain limits at the option of the customer or us. As of
March 31, 2017
, the remaining terms of our long-term contracts range from
one
to
nine
years.
Purchase
Commitments
In April 2016, we entered into a fixed price agreement to purchase
1.0 million
tons of coal from a third party through December 31, 2017. Through
March 31, 2017
we have purchased
0.6 million
coal tons under the purchase commitment.
From time to time, we purchase coal from third parties in order to meet quality or delivery requirements under our customer contracts. We buy coal on the spot market, and the cost of that coal is dependent upon the market price and quality of the coal.
Litigation
There have been no material changes in our litigation since
December 31, 2016
. For additional information, refer to
Note
21. Commitments and Contingencie
s to the consolidated financial statements of our
2016
Form 10-K.
WESTMORELAND RESOURCE PARTNERS, LP AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Guarantees
Our GP and the Partnership guarantee certain obligations of our subsidiaries. We believe that these guarantees will expire without any liability to the guarantors, and therefore will not have a material adverse effect on our financial position, liquidity or operations.
10. PARTNERS' CAPITAL AND CONVERTIBLE UNITS
Our capital accounts are comprised of approximately
0.16%
beneficial general partner interests and
99.84%
limited partner interests as of
March 31, 2017
. Our limited partners have limited rights of ownership as provided for under our Partnership Agreement and the right to participate in our distributions. Our General Partner manages our operations and participates in our distributions, including certain incentive distributions pursuant to the incentive distribution rights, which are nonvoting limited partner interests held by our GP. Pursuant to our Partnership Agreement, our General Partner participates in losses and distributions based on its interest. The General Partner’s participation in the allocation of losses and distributions is not limited and therefore, such participation can result in a deficit to its capital account. Allocation of losses and distributions, including distributions for previous transactions between entities under common control, has resulted in a deficit to certain limited partners’ capital accounts included in our consolidated balance sheets.
Series A Convertible Units
WCC, the owner of our General Partner, holds and participates in distributions on our Series A Convertible Units. Series A Convertible Units have the right to share in distributions from us on a pro-rata basis with the common units. All or any portion of each distribution payable in respect of the Series A Convertible Units (the “Series A Convertible Unit Distribution”) may, at our Board of Directors’ election, be paid in Series A paid-in-kind Units (“Series A PIK Units”). To the extent any portion of the Series A Convertible Unit Distribution is paid in Series A PIK Units for any quarter, the distribution to the holders of incentive distribution rights shall be reduced by that portion of the distribution that is attributable to the payment of those Series A PIK Units. The Series A Convertible Units will convert into common units, on a
one
-for-one basis, at the earlier of the date on which we first make a regular quarterly cash distribution with respect to any quarter to holders of common units in an amount at least equal to
$0.22
per common unit or upon a change of control. The Series A Convertible Units have the same voting rights as if they were outstanding common units and will vote together with the common units as a single class. In addition, the Series A Convertible Units are entitled to vote as a separate class on any matters that materially adversely affect the rights or preferences of the Series A Convertible Units in relation to other classes of partnership interests or as required by law.
Series B Convertible Units
On October 28, 2016, we issued
4,512,500
Series B Convertible Units representing limited partner interests in the Partnership (the “Series B Units”) to WCC in exchange for WCC’s
4,512,500
common units (the “Exchange”). Upon issuance of the Series B Units in the Exchange, WCC’s common units were canceled. The Series B Units do not share in distributions with the common units and are convertible at the option of the holder on a
one
-for-one basis into common units on the day after the record date for a cash distribution on the common units in which the Partnership is unable to make such a distribution without exceeding its restricted payment basket under the 2014 Financing Agreement. The Series B Units will convert automatically upon a change of control or a dissolution or liquidation of the Partnership. The Series B Units have the same voting rights as if they were outstanding common units and will vote together with the common units as a single class. In addition, the Series B Units are entitled to vote as a separate class on any matters that materially adversely affect the rights or preferences of the Series B Units in relation to other classes of partnership interests or as required by law. Concurrently with the Exchange, we entered into Amendment No. 2 to the Partnership Agreement, which established the terms of the Series B Units.
Liquidation Units
All subordinated units were transferred to WCC in connection with our GP being acquired on December 31, 2014. These units were then converted to liquidation units which have no distribution or voting rights, other than in connection with liquidation. For tax purposes, liquidation units are allocated additional taxable income but no additional taxable loss compared to other unit classes.
Warrants
In June 2013, in connection with a prior credit facility, certain lenders and lender affiliates received warrants entitling them to purchase
166,557
common units at
$0.12
per unit. The warrants participate in distributions whether or not exercised.
WESTMORELAND RESOURCE PARTNERS, LP AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Outstanding Units
|
|
|
|
|
|
|
|
March 31, 2017
|
|
December 31, 2016
|
Limited partner common units
|
1,284,840
|
|
|
1,221,060
|
|
Series A Units
|
16,215,029
|
|
|
15,656,551
|
|
Series B Units
|
4,512,500
|
|
|
4,512,500
|
|
Liquidation units
|
856,698
|
|
|
856,698
|
|
Warrants
|
166,557
|
|
|
166,557
|
|
General Partner units
|
35,291
|
|
|
35,291
|
|
Net Income (Loss) attributable to limited partners
Net income (loss) is allocated to the GP and the limited partners in accordance with their respective ownership percentages, after giving effect to distributions and declared distributions on Series A Convertible Units, and General Partner units, including incentive distribution rights. Unvested unit-based payment awards that contain non-forfeitable rights to distributions (whether paid or unpaid) are classified as participating securities and are included in our computation of basic and diluted limited partners’ net income (loss) per common unit. Basic and diluted limited partners’ net income (loss) per common unit is calculated by dividing limited partners’ interest in net income (loss) by the weighted average number of outstanding limited partner units during the period. We determined basic and diluted limited partners’ net loss per common unit as follows (in thousands, except per unit amounts):
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
2017
|
|
2016
|
Net loss attributable to the Partnership
|
$
|
(8,815
|
)
|
|
$
|
(8,856
|
)
|
Less:
|
|
|
|
Paid and declared distributions on Series A convertible units
|
2,162
|
|
|
3,131
|
|
Series A convertible units share of undistributed loss
|
(8,229
|
)
|
|
(9,535
|
)
|
Paid and declared distributions on Series B convertible units
|
—
|
|
|
—
|
|
Series B convertible units share of undistributed loss
|
(2,292
|
)
|
|
—
|
|
Paid and declared distributions on General Partner units
|
5
|
|
|
7
|
|
General Partner units share of undistributed loss
|
(18
|
)
|
|
(22
|
)
|
Paid and declared distributions on Warrants
|
22
|
|
|
33
|
|
Net loss available to limited partners
|
$
|
(465
|
)
|
|
$
|
(2,470
|
)
|
|
|
|
|
Weighted average number of common units used in computation of Limited Partners' net loss per common unit (basic and diluted)
1,2
|
1,451
|
|
|
5,885
|
|
Limited Partners' net loss per common unit (basic and diluted)
|
$
|
(0.32
|
)
|
|
$
|
(0.41
|
)
|
____________________
1
Unvested LTIP units are not dilutive units for the periods presented herein, but could be in the future. Anti-dilutive units are not used in calculating diluted average units.
2
Reflects the impact of the outstanding common unit warrants for the three months ended
March 31, 2017
and
2016
, respectively.
11. ACCUMULATED OTHER COMPREHENSIVE LOSS
The following table reflects the changes in accumulated other comprehensive loss arising from our available-for-sale securities (net of tax):
|
|
|
|
|
|
Accumulated Other Comprehensive Loss
|
|
(In thousands)
|
Balance at December 31, 2016
|
$
|
(189
|
)
|
Other comprehensive loss before reclassification
|
116
|
|
Amounts reclassified from accumulated other comprehensive loss
|
30
|
|
Balance at March 31, 2017
|
$
|
(43
|
)
|
WESTMORELAND RESOURCE PARTNERS, LP AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
The following table reflects the reclassifications out of accumulated other comprehensive loss for the
three
months ended
March 31, 2017
:
|
|
|
|
|
|
|
|
|
|
|
|
Amount reclassified from accumulated other comprehensive loss
|
|
Affected line item in the statement where net loss is presented
|
|
Details about accumulated other comprehensive loss components
|
|
Three Months Ended March 31, 2017
|
|
|
|
|
(In thousands)
|
|
|
Realized gains and losses on available-for-sale securities
|
|
$
|
30
|
|
|
Other income
|
12. RELATED PARTY TRANSACTIONS
In 2015, the Partnership and the GP entered into an administrative and operational services agreement (the “Services Agreement”). The Services Agreement is terminable by either party upon
120
days’ written notice prior to the end of any fiscal year. Under the terms of the Services Agreement, our GP provides services through its employees, or employees of its affiliates, to us and is reimbursed for all related costs incurred on our behalf. Pursuant to the Services Agreement, the Partnership engaged the GP to continue providing services such as general administrative and management, engineering, operations (including mining operations), geological, corporate development, real property, marketing, and other services to the Partnership. Administrative services include without limitation legal, finance and accounting, treasury, insurance administration and claims processing, risk management, health, safety and environmental, information technology, human resources, credit, payroll, internal audit and tax. Under the Services Agreement the Partnership pays the GP a fixed annual management fee of
$2.2 million
for certain executive and administrative services, and reimburses the GP at cost for other expenses and expenditures. The current terms of the Services Agreement expires on December 31,
2017
, and automatically renews for successive
one year
periods unless terminated. The primary reimbursements to our GP under the Service Agreement during the
three
months ended
March 31, 2017
were for employee-related costs. Reimbursable costs under the Services Agreement totaling
$0.9 million
and
$2.7 million
were included in accounts payable as of
March 31, 2017
and December 31,
2016
, respectively. In December 2016, the Partnership prepaid the GP for the 2017 annual management fee of
$2.2 million
, of which
$1.6 million
was included in
Other current assets
at
March 31, 2017
.
On January 9, 2017 the Partnership acquired surface coal reserves ("Johnson Run") through conveyance of leases and recoupable advance royalty payments from Buckingham Coal Company, LLC, a wholly owned subsidiary of WCC, for
$1.7 million
.
Finally, we sold coal to a subsidiary of WCC, which generated
$3.8 million
in coal revenues for the
three
months ended
March 31, 2017
.
13. SEGMENT INFORMATION
We operate in
one
business segment. We operate surface coal mines in Ohio and Wyoming, selling high-value thermal coal to utilities, industrial customers, municipalities and other coal-related entities primarily in the Midwest and Wyoming. All of our operations have similar economic characteristics including but not limited to coal quality, geology, coal marketing opportunities, mining and transportation methods and regulatory issues. Our operating and executive management makes its decisions based on consolidated reports. Our Ohio operating subsidiaries share customers and a particular customer may receive coal from any one of such Ohio operating subsidiaries. We also lease or sublease coal reserves to others through our Ohio operations in exchange for a per ton royalty rate.
14. SUBSEQUENT EVENTS
The Partnership has evaluated subsequent events in accordance with ASC 855, Subsequent Events, through the filing date of its Quarterly Report on Form 10-Q, and determined that there have been no events that have not been disclosed elsewhere in the
Notes to the Consolidated Financial Statements (Unaudited)
that have occurred that would require adjustments to disclosures in the consolidated financial statements (unaudited).