Westmoreland Coal Company (Nasdaq:WLB) (the "Company") today
reported its fourth quarter and full year 2017 financial results
and provided an update on its capital structure evaluation.
In light of ongoing discussions with Westmoreland's creditors in
connection with the Company's capital structure review,
Westmoreland will not host a conference call for investors this
quarter.
2017 Results and Highlights:
Fourth Quarter:
- Revenues of $363.8 million from 12.8 million tons sold
- Net income applicable to common shareholders of $35.1 million,
or $1.87 per share
- Adjusted EBITDA of $86.0 million
- Cash flow provided by operating activities of $93.0
million;
- Free cash flow of $83 million;
Full Year:
- Revenues of $1.4 billion from 49.7 million tons sold
- Net loss applicable to common shareholders of $71.3 million, or
$3.82 per share
- Adjusted EBITDA of $269.3 million
- Cash flow provided by operating activities of $114.2
million
- Free cash flow of $129.6 million
"Cash flow generated by our business exceeded expectations in
2017 as we benefited from our safe and efficient operations and
meeting our customer requirements under the long-term sales
contracts," said Interim President and Chief Executive Officer,
Michael Hutchinson. "As we previously noted, we are working
diligently to improve our capital structure so it better matches
our cash flow profile."
Gary Kohn, Westmoreland's Chief Financial Officer, stated,
"Together with our financial and legal advisers we are designing an
improved capital structure for Westmoreland Coal and all of our
subsidiaries. Our aim is to create a capital structure that better
aligns with our cash flow and allows for an improved balance sheet.
During the restructuring process, we have remained focused on
safety and on providing our customers with the level of service
they have come to expect from Westmoreland."
Safety
Westmoreland’s safety metrics for the year ended December 31,
2017 are shown below:
|
Year Ended December 31, 2017 |
|
Reportable Rate |
|
Lost Time Rate |
U.S. Surface
Operations |
1.45 |
|
|
0.89 |
|
U.S. National Surface
Average |
1.35 |
|
|
0.78 |
|
Percentage |
107 |
% |
|
114 |
% |
|
|
|
|
|
|
U.S. Underground
Operations |
1.55 |
|
|
0.97 |
|
U.S. National
Underground Average |
4.86 |
|
|
3.78 |
|
Percentage |
32 |
% |
|
26 |
% |
|
|
|
|
|
|
Canadian
Operations |
1.49 |
|
|
0.41 |
|
Balance Sheet, Cash Flow and Liquidity
Westmoreland finished the year with $103.2 million in cash and
cash equivalents, up from $60.1 million at December 31, 2016.
At December 31, 2017, the Company had an undrawn $50 million
revolving credit facility, of which $28.7 million, net of letters
of credit and borrowing base restrictions, was available for
borrowing.
Free cash flow generated in 2017 was $129.6 million, which was
the result of strong operations, favorable year-end working
capital, and a net $13.4 million of released bond collateral. Bond
collateral returns were previously included in cash from investing
activities, but are now included on several lines of cash from
operating activities on the cash flow statement. As a result,
bond collateral return is included in free cash flow generation.
Capital expenditures totaled $35.0 million, and net cash from loan
and lease receivables was $50.5 million. Included in cash flow
provided by operations were cash uses for interest expense of $98.1
million and for asset retirement obligations of $43.4 million.
Gross debt plus capital lease obligations at December 31,
2017 totaled $1.1 billion, down $70.7 million from year end
2016. Outstanding gross indebtedness, cash on hand and net
debt as of December 31, 2017 were as follows:
|
Gross Debt |
|
Cash on Hand |
|
Net Debt |
|
(in millions) |
Parent |
$ |
692.8 |
|
|
$ |
47.2 |
|
|
$ |
645.6 |
|
San Juan |
56.6 |
|
|
19.3 |
|
|
37.3 |
|
WMLP |
326.5 |
|
|
36.7 |
|
|
289.8 |
|
Consolidated |
$ |
1,075.9 |
|
|
$ |
103.2 |
|
|
$ |
972.7 |
|
Consolidated and Segment Results
Consolidated Adjusted EBITDA in the fourth quarter was $86.0
million, down 4% from the record high quarterly Adjusted EBITDA of
$89.1 million in the same period of the prior year. Full year
consolidated Adjusted EBITDA of $269.3 million, which included an
incremental $37.1 million from the early Capital Power repayment of
loan and lease receivables, was down slightly from the previous
year.
The Coal - U.S. segment fourth quarter Adjusted EBITDA was up
18% to $43.9 million. Full year 2017 Adjusted EBITDA was up
2% to $129.3 million. These improvements were driven by high-margin
reclamation work at the Jewett mine and performance from the San
Juan mine. Also reflected in the year-over-year comparisons are the
2016 coal supply contract expirations at the Jewett and Beulah
mines.
The Coal - Canada segment fourth quarter Adjusted EBITDA was
down 41% to $18.9 million. Full year 2017 Adjusted EBITDA was
up 2% to $90.0 million. The year-over-year fourth quarter
comparison was negatively impacted by the accelerated Capital Power
receipt in the first quarter of 2017 due to the loss of financing
income after the payment was made. Results in the Coal -
Canada segment were also affected by the now-resolved dragline
issues at the Estevan mine and the cost overruns due to operational
issues at the Coal Valley mine earlier in the year.
The Coal - WMLP segment had fourth quarter Adjusted EBITDA of
$15.8 million, a 25% decrease from the prior year, and full year
Adjusted EBITDA of $68.7 million, a 13% decrease. Operations
at the Coal - WMLP segment were negatively impacted by ongoing Ohio
open-market pressures and the Kemmerer pit flooding in the first
half of 2017.
The Power segment Adjusted EBITDA of $14.4 million in the fourth
quarter and $11.3 million for the full year 2017 benefited from the
acceleration of non-cash deferred revenue associated with the exit
of the power supply contracts at ROVA.
Corporate Update
Westmoreland expects to file its annual report on Form 10-K
today containing an audit opinion with an explanatory paragraph
referring to Westmoreland's conclusion that substantial doubt
exists regarding its ability to continue as a going concern.
Delivery of financial statements with such an audit opinion
constitutes a breach of certain covenants under the revolver and
the San Juan term loan. If accelerated, default under the revolver
can cause a cross-default to the Westmoreland term loan and senior
notes. Westmoreland has obtained waivers from the specific lender
groups with respect to the potential event of default, as well as
certain other matters. The waivers provide Westmoreland with
additional time to continue negotiations with lenders regarding
changes to the capital structure. Substantially all of
Westmoreland's debt is now classified as current as of December 31,
2017.
Westmoreland has suspended the search for a permanent Chief
Executive Officer until the conclusion of the capital structure
negotiations.
Notes
Westmoreland presents certain non-GAAP financial measures,
including Adjusted EBITDA and free cash flow, that Westmoreland
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.
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.
For further information please contact:
Gary Kohn, Chief Financial
Officer1-720-354-4467gkohn@westmoreland.com
Cautionary Note Regarding Forward-Looking
Statements
Forward-looking statements contained in this news release 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. They are statements neither of
historical fact nor guarantees or assurances of future
performance. Possible events or factors that could cause
actual results of performance to differ materially from those
anticipated in Westmoreland's forward-looking statements include,
but are not limited to, the following:
- Adverse impacts to Westmoreland's business, financial
condition, results of operations and cash flows resulting from the
ongoing capital structure review, including the Company's possible
filing for bankruptcy protection under Chapter 11 of the United
States Bankruptcy Code;
- Adverse impacts to Westmoreland's business as a result of the
audit opinion of its independent auditor containing an explanatory
paragraph referencing Westmoreland's conclusion that substantial
doubt exists as to its ability to continue as a going concern;
- The impact of cross-acceleration and cross-default provisions
between Westmoreland's debt and debt held by WMLP;
- Westmoreland's substantial level of indebtedness and its
ability to adhere to financial covenants contained within the
agreements governing indebtedness;
- Westmoreland's ability to generate sufficient cash flow;
- Existing and future environmental legislation and regulation
affecting both Westmoreland's coal mining operations and its
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 concentration of revenues Westmoreland derives from a small
number of customers, and the creditworthiness of those
customers;
- Changes in Westmoreland's post-retirement medical benefit and
pension obligations resulting from market volatility or changes in
assumptions regarding Westmoreland's future expenses;
- Inaccuracies in Westmoreland's estimates of its coal reserves,
reclamation and/or mine closure obligations;
- Potential limitations in obtaining bonding capacity and/or
increases in Westmoreland's mining costs as a result of increased
bonding expenses;
- Business interruptions, including unplanned equipment failures,
geological, hydrological or other conditions, and competition
and/or conflicts with other resource extraction activities, caused
by external factors;
- Natural disasters and events, including blizzards, earthquakes,
drought, floods, fire and storms, not all of which are covered by
insurance;
- Potential title defects or loss of leasehold interests in
Westmoreland's properties, which could result in unanticipated
costs or an inability to mine the properties;
- Risks associated with cybersecurity and data leakage;
- Westmoreland's ability to continue to acquire and develop coal
reserves through acquisition and to raise the associated capital
necessary to fund its expansion;
- Changes in Westmoreland's tax position resulting from ownership
changes, Westmoreland's interest in WMLP, and changes in tax
law;
- Risks associated with Westmoreland's interest in WMLP;
- The availability and costs of key supplies or commodities, such
as transportation, key equipment and materials;
- Competition within Westmoreland's industry and with producers
of competing energy sources;
- Westmoreland's relationships with, and other conditions
affecting, Westmoreland's customers, including how power prices and
consumption patterns affect Westmoreland's customers’ decisions to
run their plants;
- Changes in the export and import markets for coal
products;
- Extensive government regulations both in the US. and Canada,
including existing and potential future legislation, treaties and
regulatory requirements;
- The impacts of climate change concerns;
- Westmoreland's ability to obtain and/or renew operating
permits;
- The failure to meet the continued listing requirements of the
Nasdaq Global Market and the potential inability to regain
compliance with Nasdaq's continued listing requirements;
- Westmoreland's ability to effectively manage and integrate
acquisitions;
- Risks associated with Westmoreland's business outside the
United States;
- Other factors that are described under the heading “Risk
Factors” found in Westmoreland's reports filed with the Securities
and Exchange Commission, including Westmoreland's most recent
Annual Report on Form 10-K and Quarterly Reports on Form 10-Q.
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
SubsidiariesSummary Consolidated and Operating
Segment Data (Unaudited)
|
Three Months Ended December 31, |
|
|
|
|
|
Increase / (Decrease) |
|
2017 |
|
2016 |
|
$ |
|
% |
|
(In thousands, except tons sold data) |
Westmoreland
Consolidated |
|
|
|
|
|
|
|
Revenues |
$ |
363,796 |
|
|
$ |
392,737 |
|
|
$ |
(28,941 |
) |
|
(7.4 |
)% |
Operating
income |
57,112 |
|
|
22,641 |
|
|
34,471 |
|
|
152.3 |
% |
Adjusted
EBITDA |
85,963 |
|
|
89,115 |
|
|
(3,152 |
) |
|
(3.5 |
)% |
Tons sold
- millions of equivalent tons |
12.8 |
|
|
15.0 |
|
|
(2.2 |
) |
|
(14.7 |
)% |
|
|
|
|
|
|
|
|
Coal -
U.S. |
|
|
|
|
|
|
|
Revenues |
$ |
153,252 |
|
|
$ |
173,029 |
|
|
$ |
(19,777 |
) |
|
(11.4 |
)% |
Operating
income (loss) |
35,137 |
|
|
(25,537 |
) |
|
60,674 |
|
|
|
* |
Adjusted
EBITDA |
43,904 |
|
|
37,345 |
|
|
6,559 |
|
|
17.6 |
% |
Tons sold
- millions of equivalent tons |
5.6 |
|
|
6.5 |
|
|
(0.9 |
) |
|
(13.8 |
)% |
|
|
|
|
|
|
|
|
Coal -
Canada |
|
|
|
|
|
|
|
Revenues |
$ |
124,222 |
|
|
$ |
116,257 |
|
|
$ |
7,965 |
|
|
6.9 |
% |
Operating
income |
26,530 |
|
|
18,185 |
|
|
8,345 |
|
|
45.9 |
% |
Adjusted
EBITDA |
18,855 |
|
|
32,194 |
|
|
(13,339 |
) |
|
(41.4 |
)% |
Tons sold
- millions of equivalent tons |
5.6 |
|
|
6.3 |
|
|
(0.7 |
) |
|
(11.1 |
)% |
|
|
|
|
|
|
|
|
Coal -
WMLP |
|
|
|
|
|
|
|
Revenues |
$ |
74,141 |
|
|
$ |
86,072 |
|
|
$ |
(11,931 |
) |
|
(13.9 |
)% |
Operating
(loss) income |
(8,499 |
) |
|
6,376 |
|
|
(14,875 |
) |
|
|
* |
Adjusted
EBITDA |
15,805 |
|
|
21,034 |
|
|
(5,229 |
) |
|
(24.9 |
)% |
Tons sold
- millions of equivalent tons |
1.8 |
|
|
1.9 |
|
|
(0.1 |
) |
|
(5.3 |
)% |
|
|
|
|
|
|
|
|
Power |
|
|
|
|
|
|
|
Revenues |
$ |
16,012 |
|
|
$ |
21,084 |
|
|
$ |
(5,072 |
) |
|
(24.1 |
)% |
Operating
income |
11,066 |
|
|
32,301 |
|
|
(21,235 |
) |
|
(65.7 |
)% |
Adjusted
EBITDA |
14,350 |
|
|
5,853 |
|
|
8,497 |
|
|
145.2 |
% |
___________________* Not meaningful
Westmoreland Coal Company and
SubsidiariesSummary Consolidated and Operating
Segment Data (Unaudited)
|
Years Ended December 31, |
|
|
|
|
|
Increase / (Decrease) |
|
2017 |
|
2016 |
|
$ |
|
% |
|
(In thousands, except tons sold data) |
Westmoreland
Consolidated |
|
|
|
|
|
|
|
Revenues |
$ |
1,384,568 |
|
|
$ |
1,477,960 |
|
|
$ |
(93,392 |
) |
|
(6.3 |
)% |
Operating
income |
39,212 |
|
|
38,130 |
|
|
1,082 |
|
|
2.8 |
% |
Adjusted
EBITDA |
269,332 |
|
|
271,855 |
|
|
(2,523 |
) |
|
(0.9 |
)% |
Tons sold
- millions of equivalent tons |
49.7 |
|
|
54.7 |
|
|
(5.0 |
) |
|
(9.1 |
)% |
|
|
|
|
|
|
|
|
Coal -
U.S. |
|
|
|
|
|
|
|
Revenues |
$ |
573,697 |
|
|
$ |
651,713 |
|
|
$ |
(78,016 |
) |
|
(12.0 |
)% |
Operating
income (loss) |
40,063 |
|
|
(8,063 |
) |
|
48,126 |
|
|
|
* |
Adjusted
EBITDA |
129,325 |
|
|
126,563 |
|
|
2,762 |
|
|
2.2 |
% |
Tons sold
- millions of equivalent tons |
20.0 |
|
|
24.1 |
|
|
(4.1 |
) |
|
(17.0 |
)% |
|
|
|
|
|
|
|
|
Coal -
Canada |
|
|
|
|
|
|
|
Revenues |
$ |
438,273 |
|
|
$ |
415,593 |
|
|
$ |
22,680 |
|
|
5.5 |
% |
Operating
income |
8,898 |
|
|
39,104 |
|
|
(30,206 |
) |
|
(77.2 |
)% |
Adjusted
EBITDA |
90,031 |
|
|
88,423 |
|
|
1,608 |
|
|
1.8 |
% |
Tons sold
- millions of equivalent tons |
22.8 |
|
|
22.8 |
|
|
— |
|
|
— |
% |
|
|
|
|
|
|
|
|
Coal -
WMLP |
|
|
|
|
|
|
|
Revenues |
$ |
315,605 |
|
|
$ |
349,341 |
|
|
$ |
(33,736 |
) |
|
(9.7 |
)% |
Operating
income |
9,822 |
|
|
8,873 |
|
|
949 |
|
|
10.7 |
% |
Adjusted
EBITDA |
68,701 |
|
|
79,303 |
|
|
(10,602 |
) |
|
(13.4 |
)% |
Tons sold
- millions of equivalent tons |
7.4 |
|
|
7.8 |
|
|
(0.4 |
) |
|
(5.1 |
)% |
|
|
|
|
|
|
|
|
Power |
|
|
|
|
|
|
|
Revenues |
$ |
77,189 |
|
|
$ |
86,578 |
|
|
$ |
(9,389 |
) |
|
(10.8 |
)% |
Operating
income |
15,274 |
|
|
28,535 |
|
|
(13,261 |
) |
|
(46.5 |
)% |
Adjusted
EBITDA |
11,274 |
|
|
3,626 |
|
|
7,648 |
|
|
210.9 |
% |
___________________* Not meaningful
Westmoreland Coal Company and
SubsidiariesConsolidated Statements of Operations
(Unaudited)
|
Three Months Ended
December 31, |
|
Years Ended December 31, |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
|
(In thousands, except per share data) |
|
(In thousands, except per share data) |
Revenues |
$ |
363,796 |
|
|
$ |
392,737 |
|
|
$ |
1,384,568 |
|
|
$ |
1,477,960 |
|
Cost, expenses and
other: |
|
|
|
|
|
|
|
Cost of
sales (exclusive of depreciation, depletion and amortization, shown
separately) |
259,573 |
|
|
291,952 |
|
|
1,096,098 |
|
|
1,156,687 |
|
Depreciation, depletion and amortization |
6,923 |
|
|
72,170 |
|
|
121,054 |
|
|
185,267 |
|
Selling
and administrative |
31,478 |
|
|
27,893 |
|
|
120,184 |
|
|
108,560 |
|
Heritage
health benefit expenses |
2,680 |
|
|
2,275 |
|
|
12,633 |
|
|
11,777 |
|
(Gain)
loss on sale/disposal of assets |
(2,873 |
) |
|
245 |
|
|
(2,671 |
) |
|
(1,124 |
) |
Loss on
impairment |
5,872 |
|
|
— |
|
|
5,872 |
|
|
— |
|
Derivative loss (gain) |
4,642 |
|
|
(26,219 |
) |
|
(1,929 |
) |
|
(24,055 |
) |
Income
from equity affiliates |
(1,611 |
) |
|
(1,464 |
) |
|
(5,885 |
) |
|
(5,591 |
) |
Other
operating loss |
— |
|
|
3,244 |
|
|
— |
|
|
8,309 |
|
|
306,684 |
|
|
370,096 |
|
|
1,345,356 |
|
|
1,439,830 |
|
Operating income |
57,112 |
|
|
22,641 |
|
|
39,212 |
|
|
38,130 |
|
Other (expense)
income: |
|
|
|
|
|
|
|
Interest
expense |
(29,269 |
) |
|
(31,150 |
) |
|
(118,657 |
) |
|
(121,819 |
) |
Interest
income |
1,159 |
|
|
1,914 |
|
|
4,101 |
|
|
7,435 |
|
Gain
(loss) on foreign exchange |
283 |
|
|
816 |
|
|
(3,108 |
) |
|
(715 |
) |
Other
income (loss) |
220 |
|
|
(397 |
) |
|
(573 |
) |
|
38 |
|
|
(27,607 |
) |
|
(28,817 |
) |
|
(118,237 |
) |
|
(115,061 |
) |
Income (loss) before
income taxes |
29,505 |
|
|
(6,176 |
) |
|
(79,025 |
) |
|
(76,931 |
) |
Income
tax (benefit) expense |
(4,484 |
) |
|
1,601 |
|
|
(5,890 |
) |
|
(48,059 |
) |
Net income (loss) |
33,989 |
|
|
(7,777 |
) |
|
(73,135 |
) |
|
(28,872 |
) |
Less net
loss attributable to noncontrolling interest |
(1,080 |
) |
|
(226 |
) |
|
(1,795 |
) |
|
(1,771 |
) |
Net income
(loss) applicable to common shareholders |
$ |
35,069 |
|
|
$ |
(7,551 |
) |
|
$ |
(71,340 |
) |
|
$ |
(27,101 |
) |
Net income (loss) per
share applicable to common shareholders: |
|
|
|
|
|
|
|
Basic and
diluted |
$ |
1.87 |
|
|
$ |
(0.41 |
) |
|
$ |
(3.82 |
) |
|
$ |
(1.47 |
) |
Weighted average number
of common shares outstanding: |
|
|
|
|
|
|
|
Basic and
diluted |
18,759 |
|
|
18,571 |
|
|
18,694 |
|
|
18,486 |
|
Westmoreland Coal Company and
SubsidiariesConsolidated Balance Sheets
(Unaudited)
|
December 31, 2017 |
|
December 31, 2016 |
Assets |
(In thousands) |
Current assets: |
|
|
|
Cash and
cash equivalents |
$ |
103,247 |
|
|
$ |
60,082 |
|
Receivables: |
|
|
|
Trade |
103,611 |
|
|
140,731 |
|
Loan and
lease receivables |
— |
|
|
5,867 |
|
Other |
17,697 |
|
|
13,261 |
|
Total
receivables |
121,308 |
|
|
159,859 |
|
Inventories |
106,795 |
|
|
125,515 |
|
Other
current assets |
11,517 |
|
|
32,258 |
|
Total current assets |
342,867 |
|
|
377,714 |
|
Land, mineral rights,
property, plant and equipment |
1,665,740 |
|
|
1,617,938 |
|
Less accumulated
depreciation, depletion and amortization |
923,905 |
|
|
782,417 |
|
Net land,
mineral rights, property, plant and equipment |
741,835 |
|
|
835,521 |
|
Loan and lease
receivables, less current portion |
— |
|
|
44,474 |
|
Advanced coal
royalties |
21,404 |
|
|
18,722 |
|
Restricted investments,
reclamation deposits and bond collateral |
200,194 |
|
|
219,275 |
|
Investment in joint
venture |
27,763 |
|
|
26,951 |
|
Other assets |
55,036 |
|
|
62,252 |
|
Total
Assets |
$ |
1,389,099 |
|
|
$ |
1,584,909 |
|
Liabilities and Shareholders’ Deficit |
|
|
|
Current
liabilities: |
|
|
|
Current
installments of long-term debt |
$ |
983,427 |
|
|
$ |
86,272 |
|
Accounts
payable and accrued expenses: |
|
|
|
Trade and
other accrued liabilities |
121,489 |
|
|
142,233 |
|
Interest
payable |
22,840 |
|
|
22,458 |
|
Production taxes |
41,688 |
|
|
44,995 |
|
Postretirement medical benefits |
14,734 |
|
|
14,892 |
|
Deferred
revenue |
5,068 |
|
|
15,253 |
|
Asset
retirement obligations |
48,429 |
|
|
32,207 |
|
Other
current liabilities |
9,401 |
|
|
20,964 |
|
Total
current liabilities |
1,247,076 |
|
|
379,274 |
|
Long-term debt, less
current installments |
64,980 |
|
|
1,022,794 |
|
Postretirement medical
benefits, less current portion |
317,407 |
|
|
308,709 |
|
Pension and SERP
obligations, less current portion |
43,585 |
|
|
43,982 |
|
Deferred revenue, less
current portion |
1,984 |
|
|
16,251 |
|
Asset retirement
obligations, less current portion |
426,038 |
|
|
451,834 |
|
Other liabilities |
31,477 |
|
|
52,182 |
|
Total liabilities |
2,132,547 |
|
|
2,275,026 |
|
Shareholders’
deficit: |
|
|
|
Common
stock of $0.01 par value: Authorized 30,000,000 shares; Issued and
outstanding 18,771,643 shares at December 31, 2017 and
18,570,642 shares at December 31, 2016 |
188 |
|
|
186 |
|
Other
paid-in capital |
250,494 |
|
|
248,143 |
|
Accumulated other comprehensive loss |
(160,525 |
) |
|
(179,072 |
) |
Accumulated deficit |
(829,107 |
) |
|
(757,367 |
) |
Total shareholders’
deficit |
(738,950 |
) |
|
(688,110 |
) |
Noncontrolling
interests in consolidated subsidiaries |
(4,498 |
) |
|
(2,007 |
) |
Total deficit |
(743,448 |
) |
|
(690,117 |
) |
Total
Liabilities and Shareholders’ Deficit |
$ |
1,389,099 |
|
|
$ |
1,584,909 |
|
Westmoreland Coal Company and
SubsidiariesConsolidated Statements of Cash Flows
(Unaudited)
|
Years Ended December 31, |
|
2017 |
|
2016 |
|
(In thousands) |
Cash flows from
operating activities: |
|
|
|
Net
loss |
$ |
(73,135 |
) |
|
$ |
(28,872 |
) |
Adjustments to reconcile net loss to net cash provided by operating
activities: |
|
|
|
Depreciation, depletion and amortization |
121,054 |
|
|
185,267 |
|
Accretion
of asset retirement obligation |
45,132 |
|
|
40,423 |
|
Share-based compensation |
3,200 |
|
|
7,584 |
|
Non-cash
interest expense |
9,344 |
|
|
9,215 |
|
Amortization of deferred financing costs |
10,778 |
|
|
11,537 |
|
(Gain) on
derivative instruments |
(1,929 |
) |
|
(24,055 |
) |
Loss on
foreign exchange |
3,108 |
|
|
715 |
|
Loss on
impairment |
5,872 |
|
|
— |
|
Income
from equity affiliates |
(5,885 |
) |
|
(5,591 |
) |
Distributions from equity affiliates |
6,977 |
|
|
6,914 |
|
Deferred
income taxes benefit |
(5,909 |
) |
|
(46,142 |
) |
Other |
560 |
|
|
(2,705 |
) |
Changes
in operating assets and liabilities: |
|
|
|
Receivables |
35,636 |
|
|
(4,430 |
) |
Inventories |
20,309 |
|
|
13,033 |
|
Accounts
payable and accrued expenses |
(20,180 |
) |
|
10,505 |
|
Interest
payable |
471 |
|
|
5,131 |
|
Deferred
revenue |
(24,462 |
) |
|
(7,370 |
) |
Other
assets and liabilities |
20,467 |
|
|
13,227 |
|
Asset
retirement obligations |
(43,403 |
) |
|
(32,452 |
) |
Return of
derivative collateral |
6,158 |
|
|
— |
|
Net cash
provided by operating activities |
114,163 |
|
|
151,934 |
|
Cash
flows from investing activities: |
|
|
|
Additions
to property, plant and equipment |
(35,016 |
) |
|
(46,132 |
) |
Proceeds
from sales of restricted investments |
50,226 |
|
|
34,814 |
|
Purchases
of restricted investments |
(54,281 |
) |
|
(36,052 |
) |
Cash
payments related to acquisitions and other |
(3,580 |
) |
|
(120,992 |
) |
Proceeds
from sales of assets |
4,990 |
|
|
7,695 |
|
Receipts
from loan and lease receivables |
50,488 |
|
|
8,987 |
|
Payments
related to loan and lease receivables |
— |
|
|
(2,164 |
) |
Other |
(2,166 |
) |
|
(1,850 |
) |
Net cash
provided by (used in) investing activities |
10,661 |
|
|
(155,694 |
) |
Cash
flows from financing activities: |
|
|
|
Borrowings from long-term debt, net of debt discount |
— |
|
|
122,250 |
|
Repayments of long-term debt |
(82,091 |
) |
|
(70,370 |
) |
Borrowings on revolving lines of credit |
275,300 |
|
|
423,500 |
|
Repayments on revolving lines of credit |
(275,300 |
) |
|
(425,500 |
) |
Debt
issuance costs and other refinancing costs |
— |
|
|
(8,784 |
) |
Other |
(711 |
) |
|
(974 |
) |
Net cash (used in)
provided by financing activities |
(82,802 |
) |
|
40,122 |
|
Effect of
exchange rate changes on cash |
1,143 |
|
|
784 |
|
Net
increase in cash and cash equivalents |
43,165 |
|
|
37,146 |
|
Cash and
cash equivalents, beginning of year |
60,082 |
|
|
22,936 |
|
Cash and
cash equivalents, end of year |
$ |
103,247 |
|
|
$ |
60,082 |
|
Supplemental disclosures of cash flow information: |
|
|
|
Cash paid
for interest |
$ |
98,139 |
|
|
$ |
96,290 |
|
Cash paid
for income taxes |
— |
|
|
1,316 |
|
Non-cash
transactions: |
|
|
|
Accrued
purchases of property and equipment |
$ |
4,019 |
|
|
$ |
6,496 |
|
Capital
leases and other financing sources |
1,333 |
|
|
27,355 |
|
Westmoreland Coal Company and
SubsidiariesNon-GAAP Reconciliations
(Unaudited)
The tables below show how Westmoreland 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 December 31, |
|
Years Ended December 31, |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
|
(In thousands) |
Adjusted EBITDA
by Segment |
|
|
|
|
|
|
|
Coal -
U.S. |
$ |
43,904 |
|
|
$ |
37,347 |
|
|
$ |
129,325 |
|
|
$ |
126,563 |
|
Coal -
Canada |
18,855 |
|
|
32,181 |
|
|
90,031 |
|
|
88,423 |
|
Coal -
WMLP |
15,805 |
|
|
21,044 |
|
|
68,701 |
|
|
79,303 |
|
Power |
14,350 |
|
|
5,854 |
|
|
11,274 |
|
|
3,626 |
|
Heritage |
(3,187 |
) |
|
(3,083 |
) |
|
(14,242 |
) |
|
(13,409 |
) |
Corporate |
(3,764 |
) |
|
(4,228 |
) |
|
(15,757 |
) |
|
(12,651 |
) |
Total |
$ |
85,963 |
|
|
$ |
89,115 |
|
|
$ |
269,332 |
|
|
$ |
271,855 |
|
|
Three Months Ended December 31, |
|
Year Ended December 31, |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
|
(In thousands) |
Reconciliation
of Adjusted EBITDA to Net Loss |
|
|
|
|
|
|
|
Net income (loss) |
$ |
33,989 |
|
|
$ |
(7,777 |
) |
|
$ |
(73,135 |
) |
|
$ |
(28,872 |
) |
Income
tax (benefit) expense |
(4,484 |
) |
|
1,601 |
|
|
(5,890 |
) |
|
(48,059 |
) |
Interest
income |
(1,159 |
) |
|
(1,914 |
) |
|
(4,101 |
) |
|
(7,435 |
) |
Interest
expense |
29,269 |
|
|
31,150 |
|
|
118,657 |
|
|
121,819 |
|
Depreciation, depletion and amortization |
6,923 |
|
|
72,170 |
|
|
121,054 |
|
|
185,267 |
|
Accretion
of asset retirement obligation |
11,337 |
|
|
10,193 |
|
|
45,132 |
|
|
40,423 |
|
Amortization of intangible assets and liabilities (1) |
(89 |
) |
|
(158 |
) |
|
(890 |
) |
|
(810 |
) |
EBITDA |
$ |
75,786 |
|
|
$ |
105,265 |
|
|
$ |
200,827 |
|
|
$ |
262,333 |
|
Advisory
fees (2) |
2,649 |
|
|
— |
|
|
5,423 |
|
|
— |
|
(Gain)
loss on foreign exchange |
(283 |
) |
|
(816 |
) |
|
3,108 |
|
|
715 |
|
Loss on
impairment |
5,872 |
|
|
— |
|
|
5,872 |
|
|
— |
|
Acquisition-related costs (3) |
— |
|
|
— |
|
|
— |
|
|
568 |
|
Customer
payments received under loan and lease receivables (4) |
— |
|
|
5,095 |
|
|
50,489 |
|
|
13,064 |
|
Derivative loss (gain) |
4,642 |
|
|
(26,219 |
) |
|
(1,929 |
) |
|
(24,055 |
) |
(Gain)
loss on sale/disposal of assets and other adjustments |
(2,057 |
) |
|
4,131 |
|
|
2,342 |
|
|
11,646 |
|
Share-based compensation |
(646 |
) |
|
1,659 |
|
|
3,200 |
|
|
7,584 |
|
Adjusted EBITDA |
$ |
85,963 |
|
|
$ |
89,115 |
|
|
$ |
269,332 |
|
|
$ |
271,855 |
|
_________________(1)
Represents amortization of intangible assets and liabilities not
included in Depreciation, depletion and
amortization.(2) 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.(3) Includes
acquisition and transition costs and the impact of cost of sales
related to the sale of inventory written up to fair value in the
acquisition of the Canadian
mines.(4) 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; however, they are included within
Adjusted EBITDA so that the cash received by Westmoreland is
treated consistently with Westmoreland's other contracts that do
not result in loan and lease receivable accounting. During
2017, Westmoreland received $52.5 million from its customer at the
Genesee mine, representing an accelerated repayment of all
outstanding loan and lease receivables. Accordingly, there
will be no additional payments from the customer at the Genesee
mine in the form of loan and lease repayments. Westmoreland
will continue to manage the Genesee mine and earn a management fee
pursuant to the contract mining arrangement, but has no further
obligation to make capital expenditures at the mine. All
future capital expenditures at the Genesee mine will be funded by
the customer.
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 the
Company's debts, after giving consideration to those expenses
required to maintain the Company's assets and infrastructure.
Accordingly, although free cash flow is not a measure of
performance calculated in accordance with GAAP, Westmoreland
believes free cash flow is useful to investors because it allows
analysts and others in the industry to assess the Company's
performance, liquidity and ability to satisfy debt
requirements.
Reconciliation of Free Cash Flow to Net Cash Provided by
Operating Activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended December 31, |
|
Years Ended December 31, |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
|
|
|
|
|
(In thousands) |
Net cash
provided by operating activities |
$ |
93,009 |
|
|
$ |
66,831 |
|
|
$ |
114,163 |
|
|
$ |
151,934 |
|
Less cash
paid for property, plant and equipment |
(9,651 |
) |
|
(15,513 |
) |
|
(35,016 |
) |
|
(46,132 |
) |
Plus net
customer payments received under loan and lease receivables |
— |
|
|
4,112 |
|
|
50,488 |
|
|
6,823 |
|
Free cash flow |
$ |
83,358 |
|
|
$ |
55,430 |
|
|
$ |
129,635 |
|
|
$ |
112,625 |
|