ENGLEWOOD, Colo., April 02, 2018 (GLOBE NEWSWIRE) -- 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 Subsidiaries Summary 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 Subsidiaries Summary 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 Subsidiaries Consolidated 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 Subsidiaries Consolidated 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 Subsidiaries Consolidated 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 Subsidiaries Non-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  

 

Primary Logo