Generates Record Adjusted EBITDA and Free Cash Flow
Provides 2017 Guidance
ENGLEWOOD, Colo., March 28, 2017 (GLOBE NEWSWIRE) -- Westmoreland Coal Company (Nasdaq:WLB) today reported its fourth quarter and full year 2016 financial results and provided its 2017 guidance.
2016 Results and Highlights:
Fourth Quarter:
- Revenues of $392.7 million from 15.0 million tons sold
- Net loss applicable to common shareholders of $7.6 million, or $0.41 per share
- Record high quarterly adjusted EBITDA of $89.1 million
Full Year:
- Revenues of $1.5 billion from 54.7 million tons sold
- Net loss applicable to common shareholders of $27.1 million, or $1.47 per share, including a tax benefit
- Record high annual adjusted EBITDA of $271.9 million
- Cash flow provided by operating activities of $151.9 million
- Higher-than-expected free cash flow of $112.6 million
Westmoreland's Chief Executive Officer, Kevin Paprzycki, commented, “During 2016, we delivered on our two main commitments of maximizing free cash flow generation and reducing our debt position, which we achieved while reporting record adjusted EBITDA and free cash flow. This is a direct result of the resiliency of our business model and outstanding performance by our operators, despite an otherwise challenging market environment. We also took steps to significantly reduce the cash burn from our non-core assets, Coal Valley and ROVA, and to position them such that we are more aggressively pursuing strategic alternatives. As we look toward 2017, we remain focused on maximizing cash generation and strengthening our balance sheet, supported, in part, by the recent Capital Power prepayment, which provides additional financial flexibility to pursue our goals.”
Safety
Westmoreland’s commitment to safety in all aspects of its operations is again reflected in the safety metrics below.
| Year Ended December 31, 2016 | |||||
| Reportable Rate | Lost Time Rate | ||||
| U.S. Surface Operations | 1.34 | 0.70 | |||
| U.S. National Surface Average | 1.44 | 0.96 | |||
| Percentage | 93 | % | 73 | % | |
| U.S. Underground Operations | 3.23 | 2.09 | |||
| U.S. National Underground Average | 4.95 | 3.56 | |||
| Percentage | 65 | % | 59 | % | |
| Canadian Operations | 2.82 | 0.89 | |||
Consolidated and Segment Results
Consolidated adjusted EBITDA for the fourth quarter was $89.1 million, an increase of 51% when compared with the fourth quarter of 2015. Consolidated adjusted EBITDA for 2016 was $271.9 million, an increase of 22% when compared to 2015. The acquisition of San Juan in the Coal - U.S. segment in early 2016 contributed meaningfully to an increase in consolidated adjusted EBITDA for both the fourth quarter and full year 2016. Increased revenue within the Coal - U.S. segment and solid execution on cost savings initiatives throughout the business, particularly within the Coal - U.S. and Coal - WMLP segments, also drove higher adjusted EBITDA in the fourth quarter and full year 2016. This was offset somewhat by lower net loan and lease receivable activity in the Coal - Canada segment. The restatement, described below, added consolidated adjusted EBITDA of $6.1 million to the full year 2016.
Cash Flow and Liquidity
Westmoreland’s free cash flow for 2016 was $112.6 million, driven by record adjusted EBITDA and successful working capital initiatives. Working capital added $30.1 million to free cash flow in 2016, of which $13.0 million was the direct result of the supply chain team's focus on inventory management. Also benefiting working capital was the timing of payables.
Free cash flow is the net of cash flow provided by operations of $151.9 million, less capital expenditures of $46.1 million, plus net cash collected under certain contracts for loan and lease receivables of $6.8 million. Included in cash flow provided by operations were cash uses for interest expense of $96.3 million and $32.5 million for asset retirement obligations.
During the year, Westmoreland added $37.1 million to its cash balances to end the year with cash on hand of $60.1 million. This cash increase was driven by free cash flow generation of $112.6 million; borrowings, net of repayments, of $49.9 million; and proceeds from asset sales of $7.7 million; partially offset by cash used for debt issuance of $8.8 million and net cash used to purchase San Juan of $121.0 million.
Gross debt plus capital lease obligations at December 31, 2016 totaled $1.1 billion. During 2016, repayments of long-term debt totaled $70.4 million. There was $36.3 million available to draw, net of letters of credit, on Westmoreland's revolving credit facility at December 31, 2016.
Restatement
On February 24, 2017, Westmoreland announced that it would restate its previously issued financial statements as a result of changes in accounting for its customer reclamation receivables. Westmoreland’s 2016 Form 10-K contains restated consolidated financial statements for the years ended December 31, 2015 and 2014, and all interim periods during 2016 and 2015.
2017 Full Year Guidance
Westmoreland’s 2017 Outlook is provided in the table below.
Commenting on the outlook for 2017, Mr. Paprzycki said, “Our 2017 outlook is similar to our 2016 expected performance as our resilient business model continues to yield consistent, predictable results.”
Key year-over-year changes impacting guidance include:
- Of the total $52 million payment related to the Genesee Mine, as announced previously, approximately $40 million is incremental to adjusted EBITDA and free cash flow in 2017 compared to the amount Westmoreland expected to receive in the normal course of business during 2017.
- Contract expirations (Jewett and Beulah), continued market softness in Ohio, a planned extended outage at a key customer, and a conservative view on weather resulting from the warm winter season thus far in 2017, are also expected to impact adjusted EBITDA, free cash flow and coal tons sold.
- Westmoreland expects to generate strong cash flow again this year. In addition to the payment from Capital Power, free cash flow is expected to benefit from positive working capital and breakeven cash flow at Coal Valley. Westmoreland also expects to receive nearly $10 million from the release of ROVA cash collateral, which is not part of the free cash flow calculation, but is available for use in de-levering and other corporate purposes.
| Guidance Summary | 2017 | ||||||
| Coal tons sold | 40 - 50 million tons | ||||||
| Adjusted EBITDA | $280 - $310 million | ||||||
| Free cash flow | $115 - $140 million | ||||||
| Capital expenditures | $40 - $50 million | ||||||
| Cash interest | Approximately $95 million |
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 March 28, 2017, at 4:30 p.m. Eastern Time. A presentation, which will be reviewed during the call, will also be available at www.westmoreland.com.
Participants may join the call using the numbers below:
| Toll Free: | 1-844-WCC-COAL (844-922-2625) | |||
| International: | 1-201-689-8584 | |||
| Webcast: | www.westmoreland.com/investors/investor-webcasts |
A replay of the teleconference will be available until April 11, 2017 and can be accessed using the numbers below:
| Replay: | 1-877-481-4010 or 1-919-882-2331 | |||
| Replay ID: | 10238 | |||
| Webcast: | 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). Its power operations include ownership of the two-unit ROVA coal-fired power plants in North Carolina. 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. Important factors that could cause actual results to differ materially from those in the forward-looking statements include political, economic, business, competitive, market, weather and regulatory conditions.
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 December 31, | ||||||||||||||
| Increase / (Decrease) | ||||||||||||||
| 2016 | 2015 (As Restated) | $ | % | |||||||||||
| (In thousands, except tons sold data) | ||||||||||||||
| Westmoreland Consolidated | ||||||||||||||
| Revenues | $ | 392,737 | $ | 341,664 | $ | 51,073 | 14.9 | % | ||||||
| Operating income (loss) | 22,641 | (121,621 | ) | 144,262 | * | |||||||||
| Adjusted EBITDA | 89,115 | 59,205 | 29,910 | 50.5 | % | |||||||||
| Tons sold - millions of equivalent tons | 15.0 | 12.6 | 2.4 | 19.0 | % | |||||||||
| Coal - U.S. | ||||||||||||||
| Revenues | $ | 173,027 | $ | 125,593 | $ | 47,434 | 37.8 | % | ||||||
| Operating income (loss) | (25,537 | ) | 2,483 | (28,020 | ) | * | ||||||||
| Adjusted EBITDA | 37,347 | 19,918 | 17,429 | 87.5 | % | |||||||||
| Tons sold - millions of equivalent tons | 6.8 | 5.3 | 1.5 | 28.3 | % | |||||||||
| Coal - Canada | ||||||||||||||
| Revenues | $ | 116,257 | $ | 113,290 | $ | 2,967 | 2.6 | % | ||||||
| Operating income | 18,184 | 16,531 | 1,653 | 10.0 | % | |||||||||
| Adjusted EBITDA | 32,181 | 28,676 | 3,505 | 12.2 | % | |||||||||
| Tons sold - millions of equivalent tons | 6.3 | 5.4 | 0.9 | 16.7 | % | |||||||||
| Coal - WMLP | ||||||||||||||
| Revenues | $ | 86,072 | $ | 87,697 | $ | (1,625 | ) | (1.9 | )% | |||||
| Operating income | 6,376 | 940 | 5,436 | 578.3 | % | |||||||||
| Adjusted EBITDA | 21,044 | 15,535 | 5,509 | 35.5 | % | |||||||||
| Tons sold - millions of equivalent tons | 1.9 | 1.9 | — | — | % | |||||||||
| Power | ||||||||||||||
| Revenues | $ | 21,084 | $ | 20,422 | $ | 662 | 3.2 | % | ||||||
| Operating income (loss) | 32,301 | (130,274 | ) | 162,575 | * | |||||||||
| Adjusted EBITDA | 5,854 | 3,895 | 1,959 | 50.3 | % | |||||||||
* Not meaningful
| Westmoreland Coal Company and Subsidiaries Summary Consolidated and Operating Segment Data (Unaudited) | ||||||||||||||
| Years Ended December 31, | ||||||||||||||
| Increase / (Decrease) | ||||||||||||||
| 2016 | 2015 (As Restated) | $ | % | |||||||||||
| (In thousands, except tons sold data) | ||||||||||||||
| Westmoreland Consolidated | ||||||||||||||
| Revenues | $ | 1,477,960 | $ | 1,419,518 | $ | 58,442 | 4.1 | % | ||||||
| Operating income (loss) | 38,130 | (145,696 | ) | 183,826 | * | |||||||||
| Adjusted EBITDA | 271,855 | 222,832 | 49,023 | 22.0 | % | |||||||||
| Tons sold - millions of equivalent tons | 54.7 | 53.3 | 1.4 | 2.6 | % | |||||||||
| Coal - U.S. | ||||||||||||||
| Revenues | $ | 651,713 | $ | 552,745 | $ | 98,968 | 17.9 | % | ||||||
| Operating income (loss) | (8,063 | ) | 2,213 | (10,276 | ) | * | ||||||||
| Adjusted EBITDA | 126,563 | 77,135 | 49,428 | 64.1 | % | |||||||||
| Tons sold - millions of equivalent tons | 24.1 | 22.5 | 1.6 | 7.1 | % | |||||||||
| Coal - Canada | ||||||||||||||
| Revenues | $ | 415,593 | $ | 430,416 | $ | (14,823 | ) | (3.4 | )% | |||||
| Operating income | 39,104 | 36,830 | 2,274 | 6.2 | % | |||||||||
| Adjusted EBITDA | 88,423 | 105,744 | (17,321 | ) | (16.4 | )% | ||||||||
| Tons sold - millions of equivalent tons | 22.8 | 22.9 | (0.1 | ) | (0.4 | )% | ||||||||
| Coal - WMLP | ||||||||||||||
| Revenues | $ | 349,341 | $ | 388,605 | $ | (39,264 | ) | (10.1 | )% | |||||
| Operating income (loss) | 8,873 | (5,211 | ) | 14,084 | * | |||||||||
| Adjusted EBITDA | 79,303 | 66,134 | 13,169 | 19.9 | % | |||||||||
| Tons sold - millions of equivalent tons | 7.8 | 7.9 | (0.1 | ) | (1.3 | )% | ||||||||
| Power | ||||||||||||||
| Revenues | $ | 86,578 | $ | 84,423 | $ | 2,155 | 2.6 | % | ||||||
| Operating income (loss) | 28,535 | (146,868 | ) | 175,403 | * | |||||||||
| Adjusted EBITDA | 3,626 | 743 | 2,883 | 388.0 | % | |||||||||
* Not meaningful
| Westmoreland Coal Company and Subsidiaries Consolidated Statements of Operations (Unaudited) | ||||||||||||||||
| Three Months Ended December 31, | Years Ended December 31, | |||||||||||||||
| 2016 | 2015 (As Restated) | 2016 | 2015 (As Restated) | |||||||||||||
| (In thousands, except per share data) | (In thousands, except per share data) | |||||||||||||||
| Revenues | $ | 392,737 | $ | 341,664 | $ | 1,477,960 | $ | 1,419,518 | ||||||||
| Cost, expenses and other: | ||||||||||||||||
| Cost of sales | 291,952 | 271,167 | 1,156,687 | 1,175,849 | ||||||||||||
| Depreciation, depletion and amortization | 72,170 | 26,848 | 185,267 | 140,328 | ||||||||||||
| Selling and administrative | 27,893 | 24,189 | 108,560 | 95,554 | ||||||||||||
| Heritage health benefit expenses | 2,275 | 6,551 | 11,777 | 14,573 | ||||||||||||
| Loss (gain) on sales of assets | 245 | 2,718 | (1,124 | ) | 4,866 | |||||||||||
| Loss on impairment | — | 136,210 | — | 136,210 | ||||||||||||
| Restructuring charges | — | — | — | 656 | ||||||||||||
| Derivative (gain) loss | (26,219 | ) | (1,130 | ) | (24,055 | ) | 5,587 | |||||||||
| Income from equity affiliates | (1,464 | ) | (1,268 | ) | (5,591 | ) | (5,409 | ) | ||||||||
| Other operating loss (income) | 3,244 | (2,000 | ) | 8,309 | (3,000 | ) | ||||||||||
| 370,096 | 463,285 | 1,439,830 | 1,565,214 | |||||||||||||
| Operating income (loss) | 22,641 | (121,621 | ) | 38,130 | (145,696 | ) | ||||||||||
| Other income (expense): | ||||||||||||||||
| Interest expense | (31,150 | ) | (26,597 | ) | (121,819 | ) | (101,311 | ) | ||||||||
| Loss on extinguishment of debt | — | — | — | (5,385 | ) | |||||||||||
| Interest income | 1,914 | 1,731 | 7,435 | 7,993 | ||||||||||||
| Gain (loss) on foreign exchange | 816 | 1,200 | (715 | ) | 3,674 | |||||||||||
| Other (expense) income | (397 | ) | 658 | 38 | 1,740 | |||||||||||
| (28,817 | ) | (23,008 | ) | (115,061 | ) | (93,289 | ) | |||||||||
| Loss before income taxes | (6,176 | ) | (144,629 | ) | (76,931 | ) | (238,985 | ) | ||||||||
| Income tax expense (benefit) | 1,601 | (33,848 | ) | (48,059 | ) | (19,890 | ) | |||||||||
| Net loss | (7,777 | ) | (110,781 | ) | (28,872 | ) | (219,095 | ) | ||||||||
| Less net loss attributable to noncontrolling interest | (226 | ) | (603 | ) | (1,771 | ) | (5,453 | ) | ||||||||
| Net loss attributable to the Parent company | (7,551 | ) | (110,178 | ) | (27,101 | ) | (213,642 | ) | ||||||||
| Less preferred stock dividend requirements | — | 3 | — | 3 | ||||||||||||
| Net loss applicable to common shareholders | $ | (7,551 | ) | $ | (110,181 | ) | $ | (27,101 | ) | $ | (213,645 | ) | ||||
| Net loss per share applicable to common shareholders: | ||||||||||||||||
| Basic and diluted | $ | (0.41 | ) | $ | (6.10 | ) | $ | (1.47 | ) | $ | (11.93 | ) | ||||
| Weighted average number of common shares outstanding: | ||||||||||||||||
| Basic and diluted | 18,571 | 18,062 | 18,486 | 17,905 | ||||||||||||
| Westmoreland Coal Company and Subsidiaries Consolidated Balance Sheets (Unaudited) | ||||||||
| December 31, 2016 | December 31, 2015 (As Restated) | |||||||
| (In thousands) | ||||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 60,082 | $ | 22,936 | ||||
| Receivables: | ||||||||
| Trade | 140,731 | 134,141 | ||||||
| Loan and lease receivables | 5,867 | 6,157 | ||||||
| Other | 13,261 | 11,627 | ||||||
| 159,859 | 151,925 | |||||||
| Inventories | 125,515 | 122,156 | ||||||
| Other current assets | 32,258 | 16,103 | ||||||
| Total current assets | 377,714 | 313,120 | ||||||
| Property, plant and equipment: | ||||||||
| Land and mineral rights | 744,253 | 576,313 | ||||||
| Plant and equipment | 873,685 | 790,677 | ||||||
| 1,617,938 | 1,366,990 | |||||||
| Less accumulated depreciation, depletion and amortization | 782,417 | 620,148 | ||||||
| Net property, plant and equipment | 835,521 | 746,842 | ||||||
| Loan and lease receivables | 44,474 | 49,313 | ||||||
| Advanced coal royalties | 18,722 | 19,781 | ||||||
| Reclamation deposits | 74,362 | 77,364 | ||||||
| Restricted investments and bond collateral | 144,913 | 140,807 | ||||||
| Investment in joint venture | 26,951 | 27,374 | ||||||
| Intangible assets, net of accumulated amortization of $4.6 million and $15.9 million at December 31, 2016 and December 31, 2015, respectively | 28,199 | 29,190 | ||||||
| Other assets | 34,053 | 12,188 | ||||||
| Total Assets | $ | 1,584,909 | $ | 1,415,979 | ||||
| Westmoreland Coal Company and Subsidiaries Consolidated Balance Sheets (Continued) (Unaudited) | ||||||||
| December 31, 2016 | December 31, 2015 (As Restated) | |||||||
| (In thousands) | ||||||||
| Liabilities and Shareholders’ Deficit | ||||||||
| Current liabilities: | ||||||||
| Current installments of long-term debt | $ | 86,272 | $ | 38,852 | ||||
| Revolving lines of credit | — | 1,970 | ||||||
| Accounts payable and accrued expenses: | ||||||||
| Trade and other accrued liabilities | 142,233 | 109,985 | ||||||
| Interest payable | 22,458 | 15,527 | ||||||
| Production taxes | 44,995 | 46,895 | ||||||
| Postretirement medical benefits | 14,892 | 13,855 | ||||||
| Deferred revenue | 15,253 | 10,715 | ||||||
| Asset retirement obligations | 32,207 | 40,571 | ||||||
| Other current liabilities | 20,964 | 31,056 | ||||||
| Total current liabilities | 379,274 | 309,426 | ||||||
| Long-term debt, less current installments | 1,022,794 | 979,357 | ||||||
| Workers’ compensation, less current portion | 4,499 | 5,068 | ||||||
| Excess of black lung benefit obligation over trust assets | 17,594 | 17,220 | ||||||
| Postretirement medical costs, less current portion | 308,709 | 285,518 | ||||||
| Pension and SERP obligations, less current portion | 43,982 | 44,808 | ||||||
| Deferred revenue, less current portion | 16,251 | 24,613 | ||||||
| Asset retirement obligations, less current portion | 451,834 | 379,192 | ||||||
| Intangible liabilities, net of accumulated amortization of $10.8 million at December 31, 2016 and $9.8 million at December 31, 2015, respectively | 2,402 | 3,470 | ||||||
| Other liabilities | 27,687 | 30,208 | ||||||
| Total liabilities | 2,275,026 | 2,078,880 | ||||||
| Shareholders’ deficit: | ||||||||
| Common stock of $0.01 par value | ||||||||
| Authorized 30,000,000 shares; Issued and outstanding 18,570,642 shares at December 31, 2016 and 18,162,148 shares at December 31, 2015, respectively | 186 | 182 | ||||||
| Other paid-in capital | 248,143 | 240,721 | ||||||
| Accumulated other comprehensive loss | (179,072 | ) | (174,270 | ) | ||||
| Accumulated deficit | (757,367 | ) | (730,266 | ) | ||||
| Total shareholders’ deficit | (688,110 | ) | (663,633 | ) | ||||
| Noncontrolling interests in consolidated subsidiaries | (2,007 | ) | 732 | |||||
| Total deficit | (690,117 | ) | (662,901 | ) | ||||
| Total Liabilities and Deficit | $ | 1,584,909 | $ | 1,415,979 | ||||
| Westmoreland Coal Company and Subsidiaries Consolidated Statements of Cash Flows (Unaudited) | |||||||
| Years Ended December 31, | |||||||
| 2016 | 2015 (As Restated) | ||||||
| (In thousands) | |||||||
| Cash flows from operating activities: | |||||||
| Net loss | $ | (28,872 | ) | $ | (219,095 | ) | |
| Adjustments to reconcile net loss to net cash provided by operating activities: | |||||||
| Depreciation, depletion and amortization | 185,267 | 140,328 | |||||
| Accretion of asset retirement obligation | 40,423 | 38,892 | |||||
| Share-based compensation | 7,584 | 7,748 | |||||
| Non-cash interest expense | 9,215 | 6,857 | |||||
| Amortization of deferred financing costs | 11,537 | 10,601 | |||||
| Loss on extinguishment of debt | — | 4,445 | |||||
| (Gain) loss on derivative instruments | (24,055 | ) | 5,587 | ||||
| Loss (gain) on foreign exchange | 715 | (3,674 | ) | ||||
| Loss on impairment | — | 136,210 | |||||
| Income from equity affiliates | (5,591 | ) | (5,409 | ) | |||
| Distributions from equity affiliates | 6,914 | 7,057 | |||||
| Deferred income taxes benefit | (46,142 | ) | (17,961 | ) | |||
| Other | (2,705 | ) | (146 | ) | |||
| Changes in operating assets and liabilities: | |||||||
| Receivables | (4,430 | ) | 1,987 | ||||
| Inventories | 13,033 | 1,800 | |||||
| Accounts payable and accrued expenses | 10,505 | (5,447 | ) | ||||
| Interest payable | 5,131 | (5,569 | ) | ||||
| Deferred revenue | (7,370 | ) | (13,094 | ) | |||
| Other assets and liabilities | 13,227 | (19,613 | ) | ||||
| Asset retirement obligations | (32,452 | ) | (25,942 | ) | |||
| Net cash provided by operating activities | 151,934 | 45,562 | |||||
| Cash flows from investing activities: | |||||||
| Additions to property, plant and equipment | (46,132 | ) | (77,921 | ) | |||
| Change in restricted investments | (1,238 | ) | (28,670 | ) | |||
| Cash payments in escrow for future acquisitions | — | 34,000 | |||||
| Cash payments related to acquisitions and other | (120,992 | ) | (32,529 | ) | |||
| Cash acquired related to acquisition, net | — | 2,780 | |||||
| Proceeds from sales of assets | 7,695 | 2,224 | |||||
| Proceeds from the sale of restricted investments | — | 15,532 | |||||
| Receipts from loan and lease receivables | 8,987 | 21,954 | |||||
| Payments related to loan and lease receivables | (2,164 | ) | (5,654 | ) | |||
| Other | (1,850 | ) | (2,517 | ) | |||
| Net cash used in investing activities | (155,694 | ) | (70,801 | ) | |||
| Cash flows from financing activities: | |||||||
| Borrowings from long-term debt, net of debt discount | 122,250 | 199,359 | |||||
| Repayments of long-term debt | (70,370 | ) | (148,071 | ) | |||
| Borrowings on revolving lines of credit | 423,500 | 201,746 | |||||
| Repayments on revolving lines of credit | (425,500 | ) | (209,351 | ) | |||
| Debt issuance costs and other refinancing costs | (8,784 | ) | (8,132 | ) | |||
| Proceeds from issuance of common shares | — | — | |||||
| Other | (974 | ) | 1,172 | ||||
| Net cash provided by financing activities | 40,122 | 36,723 | |||||
| Effect of exchange rate changes on cash | 784 | (2,806 | ) | ||||
| Net increase in cash and cash equivalents | 37,146 | 8,678 | |||||
| Cash and cash equivalents, beginning of year | 22,936 | 14,258 | |||||
| Cash and cash equivalents, end of year | $ | 60,082 | $ | 22,936 | |||
| Supplemental disclosures of cash flow information: | |||||||
| Cash paid for interest | $ | 96,290 | $ | 72,972 | |||
| Cash paid for income taxes | 1,316 | 434 | |||||
| Non-cash transactions: | |||||||
| Accrued purchases of property and equipment | 6,496 | 3,766 | |||||
| Capital leases and other financing sources | 27,355 | 15,232 | |||||
Westmoreland Coal Company and Subsidiaries
Non-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 December 31, | Years Ended December 31, | ||||||||||||||
| 2016 | 2015 (As Restated) | 2016 | 2015 (As Restated) | ||||||||||||
| (In thousands) | |||||||||||||||
| Adjusted EBITDA by Segment | |||||||||||||||
| Coal - U.S. | $ | 37,347 | $ | 19,918 | $ | 126,563 | $ | 77,135 | |||||||
| Coal - Canada | 32,181 | 28,676 | 88,423 | 105,744 | |||||||||||
| Coal - WMLP | 21,044 | 15,535 | 79,303 | 66,134 | |||||||||||
| Power | 5,854 | 3,895 | 3,626 | 743 | |||||||||||
| Heritage | (3,083 | ) | (6,897 | ) | (13,409 | ) | (15,596 | ) | |||||||
| Corporate | (4,228 | ) | (1,922 | ) | (12,651 | ) | (11,328 | ) | |||||||
| Total | $ | 89,115 | $ | 59,205 | $ | 271,855 | $ | 222,832 | |||||||
| Three Months Ended December 31, | Year Ended December 31, | ||||||||||||||
| 2016 | 2015 (As Restated) | 2016 | 2015 (As Restated) | ||||||||||||
| (In thousands) | |||||||||||||||
| Reconciliation of Net Loss to Adjusted EBITDA | |||||||||||||||
| Net loss | $ | (7,777 | ) | $ | (110,781 | ) | $ | (28,872 | ) | $ | (219,095 | ) | |||
| Income tax expense (benefit) | 1,601 | (33,848 | ) | (48,059 | ) | (19,890 | ) | ||||||||
| Interest income | (1,914 | ) | (1,731 | ) | (7,435 | ) | (7,993 | ) | |||||||
| Interest expense | 31,150 | 26,597 | 121,819 | 101,311 | |||||||||||
| Depreciation, depletion and amortization | 72,170 | 26,848 | 185,267 | 140,328 | |||||||||||
| Accretion of ARO | 10,193 | 9,630 | 40,423 | 38,892 | |||||||||||
| Amortization of intangible assets and liabilities | (158 | ) | (254 | ) | (810 | ) | (1,010 | ) | |||||||
| EBITDA | $ | 105,265 | $ | (83,539 | ) | $ | 262,333 | $ | 32,543 | ||||||
| Restructuring charges | — | — | — | 656 | |||||||||||
| (Gain) loss on foreign exchange | (816 | ) | (1,200 | ) | 715 | (3,674 | ) | ||||||||
| Loss on impairment | — | 136,210 | — | 136,210 | |||||||||||
| Loss on extinguishment of debt | — | — | — | 5,385 | |||||||||||
| Acquisition-related costs (1) | — | 1,489 | 568 | 5,959 | |||||||||||
| Customer payments received under loan and lease receivables (2) | 5,095 | 2,876 | 13,064 | 27,128 | |||||||||||
| Derivative loss (gain) | (26,219 | ) | (1,130 | ) | (24,055 | ) | 5,587 | ||||||||
| Loss on sale/disposal of assets and other adjustments | 4,131 | 2,339 | 11,646 | 5,290 | |||||||||||
| Share-based compensation | 1,659 | 2,160 | 7,584 | 7,748 | |||||||||||
| Adjusted EBITDA | $ | 89,115 | $ | 59,205 | $ | 271,855 | $ | 222,832 | |||||||
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(1) Includes the impact of cost of sales related to the sale of inventory written up to fair value in the acquisition of Westmoreland Resources GP, LLC, the general partner of WMLP.
(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 by the Company is treated consistently with all other contracts within the Company that do not result in loan and lease receivable accounting.
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 | ||||||||
| Years Ended December 31, | ||||||||
| 2016 | 2015 (As Restated) | |||||||
| (In thousands) | ||||||||
| Net cash provided by operating activities | $ | 151,934 | $ | 45,562 | ||||
| Less cash paid for property, plant and equipment | (46,132 | ) | (77,921 | ) | ||||
| Plus net customer payments received under loan and lease receivables | 6,823 | 16,300 | ||||||
| Free cash flow | $ | 112,625 | $ | (16,059 | ) | |||