Westmoreland Coal Company (Nasdaq:WLB) today reported financial
results for the second quarter 2017 and updated its guidance.
Second Quarter Highlights
- Revenues of $323.0 million from 11.0 million tons sold
- Net loss applicable to common shareholders of $50.4 million, or
$2.69 per share
- Adjusted EBITDA of $32.6 million
Six Month Highlights
- Revenues of $662.8 million from 23.3 million tons sold
- Net loss applicable to common shareholders of $87.2 million, or
$4.68 per share
- Adjusted EBITDA of $120.8 million, including approximately $46
million incremental from the Capital Power payment
- Cash flow provided by operating activities of $10.2
million
- Free cash flow of $47.5 million, which also includes the
accelerated Capital Power payment
Kevin Paprzycki, Westmoreland's Chief Executive Officer, said,
"This quarter, we executed across all of our strategic initiatives
to drive long-term value creation. Specifically, we have
formalized an agreement to sell ROVA, our coal-fired generating
station, secured multiple contract extensions which will add volume
and cash flow over multiple years, and continued making progress
toward optimizing our capital structure. Our disciplined
approach toward capitalizing on near-term catalysts will help
further strengthen our business and enhance shareholder value."
"That said, results for the second quarter and first half came
in below our expectations as unfavorable sales volume mix and
higher costs at Coal Valley weighed on our performance. We
continue to expect stronger results in the back half, following
last year's pattern, but we have lowered our full year guidance to
reflect the first half results, pricing adjustments for contract
extensions, as well as our updated demand projections for the
remainder of 2017."
Safety
Westmoreland's safety metrics are below.
| |
|
Six Months Ended June 30, 2017 |
| |
|
Reportable Rate |
|
Lost Time Rate |
| U.S. Surface
Operations |
|
1.44 |
|
1.28 |
| U.S. National Surface
Average |
|
1.47 |
|
1.02 |
| Percentage |
|
98% |
|
125% |
| |
|
|
|
|
| U.S. Underground
Operations |
|
1.61 |
|
1.21 |
| U.S. National
Underground Average |
|
4.79 |
|
3.44 |
| Percentage |
|
34% |
|
35% |
| |
|
|
|
|
| Canadian
Operations |
|
0.98 |
|
0.33 |
Consolidated and Segment Results
During the second quarter of 2017, consolidated adjusted EBITDA
declined 28.5% compared with the same period in 2016. This
decline was driven in part by declines in the Coal - Canada segment
resulting from increased equipment maintenance and costs to develop
the pit at the Coal Valley mine due to a delay in the sale of this
facility. Compared with the same period in 2016, second
quarter 2017 revenues were also impacted by the 2016 expiration of
the Jewett and Beulah coal supply contracts in the Coal - U.S.
segment, which were partially offset by additional reclamation
revenue at the Jewett mine. In addition, seasonal outages at
our customers' plants and the timing of weather-related demand
drove lower adjusted EBITDA as we sold fewer tons to high-margin
customers. Adjusted EBITDA was favorably impacted by
cost-savings initiatives across the company, particularly in the
Coal - WMLP segment.
Consolidated adjusted EBITDA for the first six months of 2017
was $120.8 million, inclusive of the impact of the $52.5 million
early repayment from Capital Power. Adjusted EBITDA for the
first six months was influenced by the many of the same factors as
the three month period: the contract expirations at Jewett and
Beulah, operational challenges at Coal Valley, weather-related
demand and volume mix issues, offset by cost reductions, increased
volume from San Juan, and Jewett reclamation revenue. In
addition, the first half of 2017 was impacted by increased costs
associated with unexpected dragline maintenance as well as lower
revenue and increased costs resulting from record precipitation at
the Westmoreland Resource Partners LP's ("WMLP") Kemmerer mine,
each of which occurred in the first quarter.
Cash Flow and Liquidity
Westmoreland’s free cash flow through June 30, 2017 was
$47.5 million. Free cash flow is the net of cash flow
provided by operations of $10.2 million, less capital expenditures
of $13.1 million, plus net cash collected for the loan and lease
receivables of $50.5 million. Included in cash flow provided
by operations was cash used for interest expense of $48.9 million
and for asset retirement obligations of $20.8 million, plus
positive working capital of $10.5 million.
At June 30, 2017, cash and cash equivalents on hand totaled
$57.6 million, a $2.5 million decrease from year end. The
decrease was comprised of free cash flow generation of $47.5
million; net debt reductions, including capital lease payments, of
$44.3 million; a $3.6 million reserve acquisition and other
non-operating cash uses of $2.6 million.
Gross debt plus capital lease obligations at quarter end totaled
$1.1 billion, of which $325.5 million resides at WMLP and $782.4
million resides at Westmoreland Coal Company. There was $27.0
million available to draw, net of letters of credit, on
Westmoreland's revolving credit facility. An additional $15.0
million was available to WMLP through its revolving credit
facility, which is not available to Westmoreland Coal Company for
borrowings. No amounts had been drawn on either revolving
credit facility as of June 30, 2017.
ROVA Sale
Earlier today, Westmoreland announced the sale of the Roanoke
Valley Power Facility ("ROVA") for $5 million. Westmoreland
continues to anticipate the return of approximately $10 million of
cash collateral this year for the related ROVA power contracts.
Full-Year Guidance
Regarding the revised outlook, Paprzycki commented, “We revised
the midpoint of our adjusted EBITDA guidance by $35 million.
Nearly one-third of this is from contract extensions where we
granted price concessions in exchange for extended contract
length. These extensions, including the recently announce
Kemmerer contract, will increase our total cash flow and EBITDA
over multiple years. Another one third of the change to
guidance stems from the weather patterns’ effect on our sales
volume and mix across our operations. The remainder of the change
is from operational issues, in particular the dragline outage we
experienced in the first half and higher costs at Coal Valley."
Westmoreland's 2017 guidance was revised as follows:
|
Guidance Summary |
|
Original 2017 Guidance |
|
Revised 2017 Guidance |
| Coal tons sold |
|
40 -
50 million tons |
|
40 -
50 million tons |
| Adjusted EBITDA |
|
$280 -
$310 million |
|
$250 -
$270 million |
| Free cash flow |
|
$115 -
$140 million |
|
$90 -
$115 million |
| Capital
expenditures |
|
$40 -
$45 million |
|
$40 -
$45 million |
| Cash interest |
|
approximately $95 million |
|
approximately $95 million |
Adjusted EBITDA and free cash flow include the $52.5 million
early repayment of loan and lease receivables related to the
Genesee mine, of which approximately $40 million is incremental to
2017 compared to 2016 results.
Notes
Westmoreland presents certain non-GAAP financial measures,
including adjusted EBITDA and free cash flow, that management
believes provide meaningful supplemental information and provide
meaningful comparability to prior periods. Reconciliations of
non-GAAP to GAAP measures are presented in the accompanying
tables.
Conference Call
Westmoreland Coal Company will host its earnings conference call
on August 3, 2017, at 10:00 a.m. Eastern Time.
Participants may join the call using the numbers below:
Toll Free:
1-844-WCC-COAL (844-922-2625)International:
1-201-689-8584Webcast
www.westmoreland.com/investors/investor-webcasts
A replay of the teleconference will be available
until August 17, 2017 and can be accessed using the information
below:
Replay:
1-877-481-4010 or 1-919-882-2331Replay ID:
15919Webcast
www.westmoreland.com/investors/investor-webcasts
About Westmoreland Coal Company
Westmoreland Coal Company is the oldest independent coal company
in the United States. Westmoreland’s coal operations include
surface coal mines in the United States and Canada, underground
coal mines in Ohio and New Mexico, a char production facility, and
a 50% interest in an activated carbon plant. Westmoreland
also owns the general partner of and a majority interest in
Westmoreland Resource Partners, LP, a publicly-traded coal master
limited partnership (NYSE:WMLP). For more information, visit
www.westmoreland.com.
Cautionary Note Regarding Forward-Looking
Statements
Forward-looking statements are based on Westmoreland’s current
expectations and assumptions regarding its business, the economy
and other future conditions. Because forward-looking
statements relate to the future, they are subject to inherent
uncertainties, risks and changes in circumstances that are
difficult to predict. Actual results may differ materially
from those contemplated by the forward-looking statements.
Westmoreland cautions you against relying on any of these
forward-looking statements. They are statements neither of
historical fact nor guarantees or assurances of future
performance. Possible events or factors that could cause
actual results or performance to differ materially from those
anticipated in our forward-looking statements include, but are not
limited to the following:
- our ability to consummate the sale of the ROVA and Coal Valley
facilities on reasonable terms or at all;
- our relationships with, and other conditions affecting, our
customers, including how power prices affect our customers’
decision to run their plants;
- seasonal variations and inclement weather, which may cause
fluctuations in our operating results, profitability, cash flow and
working capital needs related to our operating segments;
- our substantial level of indebtedness and our ability to adhere
to financial covenants related to our borrowing arrangements;
- existing and future legislation and regulation affecting both
our coal mining operations and our customers' coal usage,
governmental policies and taxes, including those aimed at reducing
emissions of elements such as mercury, sulfur dioxides, nitrogen
oxides, particulate matter or greenhouse gases,
- the effect of the Environmental Protection Agency's and
Canadian and provincial governments' inquiries and regulations on
the operations of the power plants to which we provide coal;
- Alberta's Climate Leadership Plan to phase out coal-fired
electricity generation by 2030;
- our ability to manage the San Juan entities;
- the effect of legal and administrative proceedings,
settlements, investigations and claims, including any related to
citations and orders issued by regulatory authorities, and the
availability of related insurance coverage;
- changes in our post-retirement medical benefit and pension
obligations and the impact of the recently enacted healthcare
legislation on our employee health benefit costs;
- inaccuracies in our estimates of our coal reserves;
- our potential inability to expand or continue current coal
operations due to limitations in obtaining bonding capacity for new
mining permits, and/or increases in our mining costs as a result of
increased bonding expenses;
- the effect of prolonged maintenance or unplanned outages at our
operations or those of our major power generating customers;
- the inability to control costs, recognize favorable tax credits
and/or receive adequate train traffic at our open market mine
operations;
- the ability or inability of our power hedging arrangements to
generate cash.
- competition within our industry and with producers of competing
energy sources;
- the availability and costs of key supplies or commodities, such
as diesel fuel, steel and explosives;
- potential title defects or loss of leasehold interests in our
properties, which could result in unanticipated costs or an
inability to mine the properties;
- and other risks, uncertainties and assumptions described in our
periodic filings with the Securities and Exchange Commission,
including in "Risk Factors" in our most recent Annual Report on
Form 10-K and subsequent filings.
Any forward-looking statements made by Westmoreland in this news
release speak only as of the date on which it was made.
Westmoreland undertakes no obligation to publicly update any
forward-looking statements, whether as a result of new information,
future developments or otherwise, except as may be required by
law.
| Westmoreland Coal Company and
Subsidiaries |
| Summary Consolidated and Operating Segment
Data (Unaudited) |
| |
|
|
|
Three Months Ended June 30, |
|
|
|
|
|
|
|
Increase / (Decrease) |
|
|
|
2017 |
|
2016 |
|
$ |
|
% |
|
|
|
(In thousands, except tons sold data) |
| Westmoreland
Consolidated |
|
|
|
|
|
|
|
|
|
Revenues |
|
$ |
323,025 |
|
|
$ |
357,597 |
|
|
$ |
(34,572 |
) |
|
(9.7 |
)% |
| Operating
loss |
|
(21,067 |
) |
|
(883 |
) |
|
(20,184 |
) |
|
(2,285.8 |
)% |
| Adjusted
EBITDA |
|
32,566 |
|
|
45,556 |
|
|
(12,990 |
) |
|
(28.5 |
)% |
| Tons
sold—millions of equivalent tons |
|
11.0 |
|
|
12.0 |
|
|
(1.0 |
) |
|
(8.3 |
)% |
| |
|
|
|
|
|
|
|
|
| Coal -
U.S. |
|
|
|
|
|
|
|
|
|
Revenues |
|
$ |
141,037 |
|
|
$ |
152,519 |
|
|
$ |
(11,482 |
) |
|
(7.5 |
)% |
| Operating
(loss) income |
|
(6,623 |
) |
|
588 |
|
|
(7,211 |
) |
|
* |
| Adjusted
EBITDA |
|
23,656 |
|
|
20,848 |
|
|
2,808 |
|
|
13.5 |
% |
| Tons
sold—millions of equivalent tons |
|
4.0 |
|
|
4.7 |
|
|
(0.7 |
) |
|
(14.9 |
)% |
| |
|
|
|
|
|
|
|
|
| Coal -
Canada |
|
|
|
|
|
|
|
|
|
Revenues |
|
$ |
89,349 |
|
|
$ |
109,328 |
|
|
$ |
(19,979 |
) |
|
(18.3 |
)% |
| Operating
(loss) income |
|
(11,735 |
) |
|
3,590 |
|
|
(15,325 |
) |
|
* |
| Adjusted
EBITDA |
|
(1,598 |
) |
|
14,342 |
|
|
(15,940 |
) |
|
* |
| Tons
sold—millions of equivalent tons |
|
5.2 |
|
|
5.6 |
|
|
(0.4 |
) |
|
(7.1 |
)% |
| |
|
|
|
|
|
|
|
|
| Coal -
WMLP |
|
|
|
|
|
|
|
|
|
Revenues |
|
$ |
81,052 |
|
|
$ |
80,468 |
|
|
$ |
584 |
|
|
0.7 |
% |
| Operating
income (loss) |
|
7,588 |
|
|
(4,282 |
) |
|
11,870 |
|
|
* |
| Adjusted
EBITDA |
|
18,854 |
|
|
16,303 |
|
|
2,551 |
|
|
15.6 |
% |
| Tons
sold—millions of equivalent tons |
|
1.9 |
|
|
1.7 |
|
|
0.2 |
|
|
11.8 |
% |
| |
|
|
|
|
|
|
|
|
|
Power |
|
|
|
|
|
|
|
|
|
Revenues |
|
$ |
19,880 |
|
|
$ |
21,944 |
|
|
$ |
(2,064 |
) |
|
(9.4 |
)% |
| Operating
(loss) income |
|
(383 |
) |
|
6,731 |
|
|
(7,114 |
) |
|
* |
| Adjusted
EBITDA |
|
(141 |
) |
|
614 |
|
|
(755 |
) |
|
* |
|
|
|
|
|
|
|
|
|
|
|
|
|
| * Not meaningful |
|
|
|
|
|
|
|
|
|
|
|
| Westmoreland Coal Company and
Subsidiaries |
| Summary Consolidated and Operating Segment
Data (Unaudited) |
| |
|
|
|
Six Months Ended June 30, |
|
|
|
|
|
|
|
Increase / (Decrease) |
|
|
|
2017 |
|
2016 |
|
$ |
|
% |
| |
|
(In thousands, except tons sold data) |
| Westmoreland
Consolidated |
|
|
|
|
|
|
|
|
|
Revenues |
|
$ |
662,762 |
|
|
$ |
713,451 |
|
|
$ |
(50,689 |
) |
|
(7.1 |
)% |
| Operating
(loss) income |
|
(32,154 |
) |
|
6,736 |
|
|
(38,890 |
) |
|
* |
| Adjusted
EBITDA |
|
120,784 |
|
|
109,206 |
|
|
11,578 |
|
|
10.6 |
% |
| Tons
sold—millions of equivalent tons |
|
23.3 |
|
|
25.8 |
|
|
(2.5 |
) |
|
(9.7 |
)% |
| |
|
|
|
|
|
|
|
|
| Coal -
U.S. |
|
|
|
|
|
|
|
|
|
Revenues |
|
$ |
278,405 |
|
|
$ |
308,508 |
|
|
$ |
(30,103 |
) |
|
(9.8 |
)% |
| Operating
(loss) income |
|
(2,287 |
) |
|
8,254 |
|
|
(10,541 |
) |
|
* |
| Adjusted
EBITDA |
|
51,125 |
|
|
51,198 |
|
|
(73 |
) |
|
(0.1 |
)% |
| Tons
sold—millions of equivalent tons |
|
8.8 |
|
|
10.7 |
|
|
(1.9 |
) |
|
(17.8 |
)% |
| |
|
|
|
|
|
|
|
|
| Coal -
Canada |
|
|
|
|
|
|
|
|
|
Revenues |
|
$ |
198,364 |
|
|
$ |
203,084 |
|
|
$ |
(4,720 |
) |
|
(2.3 |
)% |
| Operating
(loss) income |
|
(18,839 |
) |
|
15,693 |
|
|
(34,532 |
) |
|
* |
| Adjusted
EBITDA |
|
57,637 |
|
|
37,666 |
|
|
19,971 |
|
|
53.0 |
% |
| Tons
sold—millions of equivalent tons |
|
11.1 |
|
|
11.4 |
|
|
(0.3 |
) |
|
(2.6 |
)% |
| |
|
|
|
|
|
|
|
|
| Coal -
WMLP |
|
|
|
|
|
|
|
|
|
Revenues |
|
$ |
155,857 |
|
|
$ |
172,949 |
|
|
$ |
(17,092 |
) |
|
(9.9 |
)% |
| Operating
income (loss) |
|
8,870 |
|
|
(3,473 |
) |
|
12,343 |
|
|
* |
| Adjusted
EBITDA |
|
31,723 |
|
|
35,583 |
|
|
(3,860 |
) |
|
(10.8 |
)% |
| Tons
sold—millions of equivalent tons |
|
3.6 |
|
|
3.7 |
|
|
(0.1 |
) |
|
(2.7 |
)% |
| |
|
|
|
|
|
|
|
|
|
Power |
|
|
|
|
|
|
|
|
|
Revenues |
|
$ |
41,107 |
|
|
$ |
43,940 |
|
|
$ |
(2,833 |
) |
|
(6.4 |
)% |
| Operating
(loss) income |
|
(1,136 |
) |
|
931 |
|
|
(2,067 |
) |
|
* |
| Adjusted
EBITDA |
|
(3,514 |
) |
|
(2,734 |
) |
|
(780 |
) |
|
(28.5 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| * Not meaningful |
|
|
|
|
|
|
|
|
|
|
|
|
| Westmoreland Coal Company and
Subsidiaries |
| Consolidated Statements of Operations
(Unaudited) |
| |
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
|
2017 |
|
2016 |
|
2017 |
|
2016 |
|
|
(In thousands) |
| Revenues |
$ |
323,025 |
|
|
$ |
357,597 |
|
|
$ |
662,762 |
|
|
$ |
713,451 |
|
| Cost, expenses and
other: |
|
|
|
|
|
|
|
| Cost of
sales |
271,909 |
|
|
298,181 |
|
|
556,513 |
|
|
579,307 |
|
|
Depreciation, depletion and amortization |
39,497 |
|
|
35,223 |
|
|
76,064 |
|
|
72,237 |
|
| Selling
and administrative |
30,166 |
|
|
27,613 |
|
|
60,592 |
|
|
55,012 |
|
| Heritage
health benefit expenses |
3,306 |
|
|
3,222 |
|
|
6,604 |
|
|
6,237 |
|
| Loss
(gain) on sale/disposal of assets |
133 |
|
|
(2,253 |
) |
|
(34 |
) |
|
(1,917 |
) |
|
Derivative loss (gain) |
481 |
|
|
(5,878 |
) |
|
(1,904 |
) |
|
(3,278 |
) |
| Income
from equity affiliates |
(1,400 |
) |
|
(1,287 |
) |
|
(2,919 |
) |
|
(2,580 |
) |
| Other
operating loss |
— |
|
|
3,659 |
|
|
— |
|
|
1,697 |
|
| |
344,092 |
|
|
358,480 |
|
|
694,916 |
|
|
706,715 |
|
| Operating (loss)
income |
(21,067 |
) |
|
(883 |
) |
|
(32,154 |
) |
|
6,736 |
|
| Other (expense)
income: |
|
|
|
|
|
|
|
| Interest
expense |
(30,109 |
) |
|
(30,860 |
) |
|
(59,371 |
) |
|
(59,787 |
) |
| Interest
income |
1,038 |
|
|
2,356 |
|
|
1,931 |
|
|
4,147 |
|
| Loss on
foreign exchange |
(1,185 |
) |
|
(364 |
) |
|
(1,652 |
) |
|
(1,751 |
) |
| Other
income |
302 |
|
|
254 |
|
|
2,460 |
|
|
132 |
|
| |
(29,954 |
) |
|
(28,614 |
) |
|
(56,632 |
) |
|
(57,259 |
) |
| Loss before income
taxes |
(51,021 |
) |
|
(29,497 |
) |
|
(88,786 |
) |
|
(50,523 |
) |
| Income
tax benefit |
(501 |
) |
|
(100 |
) |
|
(965 |
) |
|
(48,035 |
) |
| Net loss |
(50,520 |
) |
|
(29,397 |
) |
|
(87,821 |
) |
|
(2,488 |
) |
| Less net
loss attributable to noncontrolling interest |
(138 |
) |
|
(808 |
) |
|
(637 |
) |
|
(1,306 |
) |
| Net loss
applicable to common shareholders |
$ |
(50,382 |
) |
|
$ |
(28,589 |
) |
|
$ |
(87,184 |
) |
|
$ |
(1,182 |
) |
| Net loss per share
applicable to common shareholders: |
|
|
|
|
|
|
|
| Basic and
diluted |
$ |
(2.69 |
) |
|
$ |
(1.54 |
) |
|
$ |
(4.68 |
) |
|
$ |
(0.06 |
) |
| Weighted average number
of common shares outstanding: |
|
|
|
|
|
|
|
| Basic and
diluted |
18,700 |
|
|
18,540 |
|
|
18,636 |
|
|
18,401 |
|
| Westmoreland Coal Company and
Subsidiaries |
| Consolidated Balance Sheets
(Unaudited) |
| |
|
|
June 30, 2017 |
|
December 31, 2016 |
|
|
(In thousands) |
|
Assets |
|
|
|
| Current assets: |
|
|
|
| Cash and
cash equivalents |
$ |
57,620 |
|
|
$ |
60,082 |
|
|
Receivables: |
|
|
|
|
Trade |
132,715 |
|
|
140,731 |
|
| Loan and
lease receivables |
— |
|
|
5,867 |
|
|
Other |
11,450 |
|
|
13,261 |
|
| Total
receivables |
144,165 |
|
|
159,859 |
|
|
Inventories |
120,580 |
|
|
125,515 |
|
| Other
current assets |
23,096 |
|
|
32,258 |
|
| Total current
assets |
345,461 |
|
|
377,714 |
|
| Land,
mineral rights, property, plant and equipment |
1,647,600 |
|
|
1,617,938 |
|
| Less
accumulated depreciation, depletion and amortization |
861,752 |
|
|
782,417 |
|
| Net land,
mineral rights, property, plant and equipment |
785,848 |
|
|
835,521 |
|
| Loan and
lease receivables, less current portion |
— |
|
|
44,474 |
|
| Advanced
coal royalties |
19,049 |
|
|
18,722 |
|
|
Reclamation deposits |
76,131 |
|
|
74,362 |
|
|
Restricted investments and bond collateral |
146,386 |
|
|
144,913 |
|
|
Investment in joint venture |
27,363 |
|
|
26,951 |
|
| Other
assets |
59,233 |
|
|
62,252 |
|
| Total
Assets |
$ |
1,459,471 |
|
|
$ |
1,584,909 |
|
|
Liabilities and Shareholders’ Deficit |
|
|
|
| Current
liabilities: |
|
|
|
| Current
installments of long-term debt |
$ |
54,494 |
|
|
$ |
86,272 |
|
| Accounts
payable and accrued expenses: |
|
|
|
| Trade and
other accrued liabilities |
124,474 |
|
|
142,233 |
|
| Interest
payable |
22,515 |
|
|
22,458 |
|
|
Production taxes |
44,509 |
|
|
44,995 |
|
|
Postretirement medical benefits |
14,892 |
|
|
14,892 |
|
| Deferred
revenue |
15,204 |
|
|
15,253 |
|
| Asset
retirement obligations |
41,952 |
|
|
32,207 |
|
| Other
current liabilities |
25,170 |
|
|
20,964 |
|
| Total current
liabilities |
343,210 |
|
|
379,274 |
|
| Long-term
debt, less current installments |
1,021,068 |
|
|
1,022,794 |
|
|
Postretirement medical benefits, less current portion |
309,526 |
|
|
308,709 |
|
| Pension
and SERP obligations, less current portion |
43,681 |
|
|
43,982 |
|
| Deferred
revenue, less current portion |
10,498 |
|
|
16,251 |
|
| Asset
retirement obligations, less current portion |
449,998 |
|
|
451,834 |
|
| Other
liabilities |
48,000 |
|
|
52,182 |
|
| Total liabilities |
2,225,981 |
|
|
2,275,026 |
|
| Shareholders’
deficit: |
|
|
|
| Common
stock of $.01 par value: Authorized 30,000,000 shares; Issued and
outstanding 18,742,143 at June 30, 2017 and 18,570,642 at December
31, 2016 |
187 |
|
|
186 |
|
| Other
paid-in capital |
249,442 |
|
|
248,143 |
|
|
Accumulated other comprehensive loss |
(168,259 |
) |
|
(179,072 |
) |
|
Accumulated deficit |
(844,886 |
) |
|
(757,367 |
) |
| Total shareholders’
deficit |
(763,516 |
) |
|
(688,110 |
) |
|
Noncontrolling interests in consolidated subsidiaries |
(2,994 |
) |
|
(2,007 |
) |
| Total deficit |
(766,510 |
) |
|
(690,117 |
) |
| Total
Liabilities and Shareholders’ Deficit |
$ |
1,459,471 |
|
|
$ |
1,584,909 |
|
| Westmoreland Coal Company and Subsidiaries |
| Consolidated Statements of Cash Flows
(Unaudited) |
| |
|
|
|
Six Months Ended June 30, |
|
|
|
2017 |
|
2016 |
|
|
|
(In thousands) |
| Cash flows from
operating activities: |
|
|
|
|
| Net
loss |
|
$ |
(87,821 |
) |
|
$ |
(2,488 |
) |
|
Adjustments to reconcile net loss to net cash provided by (used in)
operating activities: |
|
|
|
|
|
Depreciation, depletion and amortization |
|
76,064 |
|
|
72,237 |
|
| Accretion
of asset retirement obligation |
|
22,437 |
|
|
14,297 |
|
|
Share-based compensation |
|
2,480 |
|
|
4,534 |
|
| Non-cash
interest expense |
|
4,639 |
|
|
4,554 |
|
|
Amortization of deferred financing costs |
|
5,193 |
|
|
6,630 |
|
| Gain on
derivative instruments |
|
(1,904 |
) |
|
(3,278 |
) |
| Loss on
foreign exchange |
|
1,652 |
|
|
1,751 |
|
| Income
from equity affiliates |
|
(2,919 |
) |
|
(2,580 |
) |
|
Distributions from equity affiliates |
|
3,403 |
|
|
3,633 |
|
| Deferred
income tax benefit |
|
(965 |
) |
|
(47,547 |
) |
|
Other |
|
(1,752 |
) |
|
(8,017 |
) |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
Receivables |
|
11,360 |
|
|
7,362 |
|
|
Inventories |
|
7,706 |
|
|
6,343 |
|
| Accounts
payable and accrued expenses |
|
(20,919 |
) |
|
(4,044 |
) |
| Interest
payable |
|
532 |
|
|
(3,011 |
) |
| Deferred
revenue |
|
(5,809 |
) |
|
6,948 |
|
| Other
assets and liabilities |
|
17,596 |
|
|
26,123 |
|
| Asset
retirement obligations |
|
(20,819 |
) |
|
(41,548 |
) |
|
Net cash provided by operating activities |
|
10,154 |
|
|
41,899 |
|
| Cash flows from
investing activities: |
|
|
|
|
| Additions
to property, plant and equipment |
|
(13,104 |
) |
|
(12,231 |
) |
| Change in
restricted investments |
|
(2,009 |
) |
|
658 |
|
| Cash
payments related to acquisitions |
|
(3,580 |
) |
|
(125,314 |
) |
| Proceeds
from sales of assets |
|
783 |
|
|
6,706 |
|
| Receipts
from loan and lease receivables |
|
50,488 |
|
|
3,268 |
|
| Payments
related to loan and lease receivables |
|
— |
|
|
(334 |
) |
|
Other |
|
(969 |
) |
|
(538 |
) |
|
Net cash provided by (used in) investing
activities |
|
31,609 |
|
|
(127,785 |
) |
| Cash flows from
financing activities: |
|
|
|
|
|
Borrowings from long-term debt, net of debt discount |
|
— |
|
|
122,250 |
|
|
Repayments of long-term debt |
|
(44,324 |
) |
|
(17,991 |
) |
|
Borrowings on revolving lines of credit |
|
113,200 |
|
|
195,400 |
|
|
Repayments on revolving lines of credit |
|
(113,200 |
) |
|
(194,370 |
) |
| Debt
issuance costs and other refinancing costs |
|
— |
|
|
(5,709 |
) |
|
Other |
|
(364 |
) |
|
(529 |
) |
|
Net cash (used in) provided by financing
activities |
|
(44,688 |
) |
|
99,051 |
|
| Effect of exchange rate
changes on cash |
|
463 |
|
|
(225 |
) |
| Net (decrease) increase
in cash and cash equivalents |
|
(2,462 |
) |
|
12,940 |
|
| Cash and cash
equivalents, beginning of period |
|
60,082 |
|
|
22,936 |
|
| Cash and cash
equivalents, end of period |
|
$ |
57,620 |
|
|
$ |
35,876 |
|
|
Supplemental disclosures of cash flow information: |
|
|
|
|
| Cash paid
for interest |
|
$ |
48,931 |
|
|
$ |
47,972 |
|
Westmoreland Coal Company and
SubsidiariesNon-GAAP Reconciliations
(Unaudited)
The tables below show how the Company calculates and reconciles
to the most directly comparable GAAP financial measures EBITDA,
Adjusted EBITDA (including a breakdown by segment), and free cash
flow.
EBITDA, Adjusted EBITDA, and free cash flow are supplemental
measures of financial performance that are not required by, or
presented in accordance with, GAAP. EBITDA, Adjusted EBITDA,
and free cash flow are included in this news release because they
are key metrics used by management to assess Westmoreland’s
operating performance and as a basis for strategic planning and
forecasting. Westmoreland believes that EBITDA, Adjusted
EBITDA, and free cash flow are useful to an investor in evaluating
the Company’s operating performance because these measures:
- are used widely by investors to measure a company’s operating
performance without regard to items excluded from the calculation
of such terms, which can vary substantially from company to company
depending upon accounting methods and book value of assets, capital
structure and the method by which assets were acquired, among other
factors;
- are used by rating agencies, lenders and other parties to
evaluate creditworthiness; and
- help investors to more meaningfully evaluate and compare the
results of Westmoreland’s operations from period to period by
removing the effect of the Company’s capital structure and asset
base from the Company’s operating results.
Neither EBITDA, Adjusted EBITDA, nor free cash flow are measures
calculated in accordance with GAAP. The items excluded from
EBITDA, Adjusted EBITDA, and free cash flow are significant in
assessing Westmoreland’s operating results. EBITDA, Adjusted
EBITDA, and free cash flow have limitations as analytical tools,
and should not be considered in isolation from, or as a substitute
for, analysis of the Company’s results as reported under GAAP.
Other companies in Westmoreland’s industry and in other
industries may calculate EBITDA, Adjusted EBITDA, and free cash
flow differently from the way that Westmoreland does, limiting
their usefulness as comparative measures. Because of these
limitations, EBITDA, Adjusted EBITDA, and free cash flow should not
be considered as measures of discretionary cash available to the
Company to invest in the growth of its business. Westmoreland
compensates for these limitations by relying primarily on its GAAP
results and using EBITDA, Adjusted EBITDA, and free cash flow only
as supplemental data.
EBITDA and Adjusted EBITDA
EBITDA (earnings before interest expense, interest income,
income taxes, depreciation, depletion, amortization and accretion
expense) and Adjusted EBITDA are non-GAAP measures that do not
reflect the Company’s cash expenditures, or future requirements for
capital and major maintenance expenditures or contractual
commitments; do not reflect income tax expenses or the cash
requirements necessary to pay income taxes; do not reflect changes
in, or cash requirements for, the Company’s working capital needs;
and do not reflect the significant interest expense, or the cash
requirements necessary to service interest or principal payments,
on certain of the Company’s debt obligations. In addition,
although depreciation and amortization are non-cash charges, the
assets being depreciated and amortized will often have to be
replaced in the future and EBITDA and Adjusted EBITDA do not
reflect any cash requirements for such replacements.
Westmoreland considers Adjusted EBITDA to be useful because it
reflects operating performance before the effects of certain
non-cash items and other items that it believes are not indicative
of core operations. The Company uses Adjusted EBITDA to
assess operating performance.
| |
|
|
|
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
| |
|
|
|
|
|
|
2017 |
|
2016 |
|
2017 |
|
2016 |
| |
|
|
|
|
|
|
(In thousands) |
| Adjusted EBITDA
by Segment |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Coal -
U.S. |
|
|
|
|
|
|
$ |
23,656 |
|
|
$ |
20,848 |
|
|
$ |
51,125 |
|
|
$ |
51,198 |
|
| Coal -
Canada |
|
|
|
|
|
|
(1,598 |
) |
|
14,342 |
|
|
57,637 |
|
|
37,666 |
|
| Coal -
WMLP |
|
|
|
|
|
|
18,854 |
|
|
16,303 |
|
|
31,723 |
|
|
35,583 |
|
|
Power |
|
|
|
|
|
|
(141 |
) |
|
614 |
|
|
(3,514 |
) |
|
(2,734 |
) |
|
Heritage |
|
|
|
|
|
|
(3,786 |
) |
|
(3,518 |
) |
|
(7,456 |
) |
|
(6,999 |
) |
|
Corporate |
|
|
|
|
|
|
(4,419 |
) |
|
(3,033 |
) |
|
(8,731 |
) |
|
(5,508 |
) |
|
Total |
|
|
|
|
|
|
$ |
32,566 |
|
|
$ |
45,556 |
|
|
$ |
120,784 |
|
|
$ |
109,206 |
|
| Reconciliation
of Net (Loss) Income to Adjusted EBITDA |
Three Months Ended June 30, |
|
Six Months Ended June 30, |
| |
2017 |
|
2016 |
|
2017 |
|
2016 |
| |
(In thousands) |
|
Net loss |
$ |
(50,520 |
) |
|
$ |
(29,397 |
) |
|
$ |
(87,821 |
) |
|
$ |
(2,488 |
) |
| Income
tax benefit |
(501 |
) |
|
(100 |
) |
|
(965 |
) |
|
(48,035 |
) |
| Interest
income |
(1,038 |
) |
|
(2,356 |
) |
|
(1,931 |
) |
|
(4,147 |
) |
| Interest
expense |
30,109 |
|
|
30,860 |
|
|
59,371 |
|
|
59,787 |
|
|
Depreciation, depletion and amortization |
39,497 |
|
|
35,223 |
|
|
76,064 |
|
|
72,237 |
|
| Accretion
of asset retirement obligation |
11,142 |
|
|
10,332 |
|
|
22,437 |
|
|
19,950 |
|
|
Amortization of intangible assets and liabilities |
(267 |
) |
|
(260 |
) |
|
(534 |
) |
|
(427 |
) |
|
EBITDA |
28,422 |
|
|
44,302 |
|
|
66,621 |
|
|
96,877 |
|
|
|
|
|
|
|
|
|
|
| Advisory
fees (1) |
925 |
|
|
— |
|
|
925 |
|
|
— |
|
| Loss on
foreign exchange |
1,185 |
|
|
364 |
|
|
1,652 |
|
|
1,751 |
|
|
Acquisition-related costs |
— |
|
|
133 |
|
|
— |
|
|
568 |
|
| Customer
payments received under loan and lease receivables (2)
|
— |
|
|
2,727 |
|
|
50,489 |
|
|
5,387 |
|
|
Derivative loss (gain) |
481 |
|
|
(5,878 |
) |
|
(1,904 |
) |
|
(3,278 |
) |
| Loss on
sale/disposal of assets and other adjustments |
420 |
|
|
1,954 |
|
|
521 |
|
|
3,367 |
|
|
Share-based compensation |
1,133 |
|
|
1,954 |
|
|
2,480 |
|
|
4,534 |
|
|
Adjusted EBITDA |
$ |
32,566 |
|
|
$ |
45,556 |
|
|
$ |
120,784 |
|
|
$ |
109,206 |
|
___________________(1)
Amount represents fees paid to financial and legal advisers related
to the assessment of Westmoreland's capital structure. These
advisers, together with Westmoreland's management and board of
directors, are developing and evaluating options to optimize
Westmoreland's overall capital
structure.(2) Represents a
return of and on capital. These amounts are not included in
operating income or operating cash flows as the capital outlays are
treated as loan and lease receivables, but are included within
Adjusted EBITDA so that the cash received is treated consistently
with all other contracts that do not result in loan and lease
receivable accounting. On March 24, 2017, Westmoreland
received $52.5 million from its customer at the Genesee
mine, representing an accelerated repayment of all outstanding loan
and lease receivables. While Westmoreland will continue to provide
contract mining services at the Genesee mine, all future capital
expenditures at the Genesee mine will be funded by the customer.
Accordingly, there will be no additional payments from the customer
at the Genesee mine in the form of loan and lease repayments, but
Westmoreland will earn a management fee pursuant a contract mining
arrangement.
Free Cash Flow
Free cash flow represents net cash provided by (used in)
operating activities less additions to property, plant and
equipment (“CAPEX” or “capital expenditures”) plus net customer
payments received under loan and lease receivables. Free cash
flow is a non-GAAP measure and should not be considered as an
alternative to cash and cash equivalents, cash flow from
operations, cash flow from investing activities, cash flow from
financing activities, net income (loss) or any other measure of
performance presented in accordance with GAAP. Free cash flow
is intended to represent cash flow available to satisfy our debts,
after giving consideration to those expenses required to maintain
our assets and infrastructure. Accordingly, although free
cash flow is not a measure of performance calculated in accordance
with GAAP, the Company believes free cash flow is useful to
investors because it allows analysts and others in the industry to
assess performance, liquidity and ability to satisfy debt
requirements.
| Reconciliation
of Net Cash Provided by Operating Activities to Free Cash Flow
|
|
|
|
|
Six Months Ended June 30, |
| |
|
|
|
|
2017 |
|
2016 |
| |
|
|
|
|
(In thousands) |
|
Net cash provided by operating activities |
|
|
|
|
$ |
10,154 |
|
|
$ |
41,899 |
|
| Less cash
paid for property, plant and equipment |
|
|
|
|
(13,104 |
) |
|
(12,231 |
) |
| Net
customer payments received under loan and lease receivables |
|
|
|
|
50,488 |
|
|
2,934 |
|
|
Free cash flow |
|
|
|
|
$ |
47,538 |
|
|
$ |
32,602 |
|
For further information please contact:
Gary Kohn, Chief Financial Officer
1-720-354-4467
gkohn@westmoreland.com