Westmoreland Reports Third Quarter 2011 Results
08.11.2011 | Business Wire
Highlights: Coal Segment Operating Results Power Segment Operating Results Heritage Segment Operating Results Corporate Segment Operating Results Nonoperating Results Cash Flow from Operations and Liquidity Safety Conference Call Additional Information Cautionary Note Regarding Forward-Looking Westmoreland Coal Company and Subsidiaries Consolidated Statements of Operations (Unaudited) Westmoreland Coal Company and Subsidiaries September 30, Westmoreland Coal Company
Westmoreland Coal Company (NasdaqGM:WLB) today reported its third
quarter results for 2011.
Operating income increased $0.8 million from $7.8 million in Q3 2010
to $8.6 million in Q3 2011. Year to date 2011 operating income was
$15.0 million compared to 2010 year to date operating income of $14.5
million.
Adjusted EBITDA increased $1.4 million during Q3 2011 to $24.2 million
as compared to $22.8 million in Q3 2010. Year to date 2011 Adjusted
EBITDA was $61.7 million compared to year to date 2010 Adjusted EBITDA
of $60.4 million.
Net income applicable to common shareholders of $2.4 million ($0.18
per basic and diluted share) for Q3 2011 compared to Q3 2010 net
income of $ 2.5 million ($0.23 per basic and diluted share). Year to
date net loss for 2011 was $23.3 million compared to a year to date
2010 net income of $0.2 million. The 2011 net loss includes $17.0
million in charges related to the refinancing of debt in February 2011
and $3.2 million of expense on the conversion feature′s fair value
adjustment.
Westmoreland again continued its strong safety performance achieving
reportable and lost time incident rates 55.5% and 52.5%, respectively,
of the national averages for surface operations for the third quarter
of 2011.
During the third quarter of 2011, Westmoreland′s Western Energy Mine
received an Excellence in Surface Coal Mining Award from the Office of
Surface Mining for its reclamation efforts at the Company′s mine in
Colstrip, Montana.
'We are very pleased with our third quarter results,? said Keith E.
Alessi, Westmoreland′s President and CEO. 'Despite losing significant
tons again this quarter to flooding and record levels of hydropower
generation, we managed to increase both our operating income and
Adjusted EBITDA over the prior year. Additionally, through excellent
preparation and response, our ROVA Power operation minimized its
downtime and mitigated impacts Hurricane Irene had on our third quarter
operations.?
'We are also very pleased with the continuation of our strong safety
performance during the third quarter of 2011 as we again beat the
national surface mine averages. We take great pride in another major
mining award as our Western Energy Mine in Colstrip, Montana received
the Office of Surface Mining′s Directors Award for Excellence in Surface
Coal Mining.?
'During the quarter we made progress on one of our key strategic
initiatives, the addition of new coal reserves, as we continued
negotiations with resource owners at several at our mines. We hope to
complete at least one of these negotiations by year end. In line with
another of our key strategic initiatives, we also continue to explore
opportunities to grow our business through the acquisition of operations
that fit our core mine mouth business model.?
Westmoreland′s 2011 year to date net income includes $17.0 million of
charges related to the refinancing of debt in February 2011 and $3.2
million of expense on the fair value adjustment on the conversion
feature in the Company′s convertible debt that was for the most part
converted to common stock and retired in February 2011. 2010 year to
date net income included $0.9 million of expense related to the impact
of the fair value adjustment of the conversion feature and the related
debt discount. Excluding those items, net income decreased by $0.5
million.
The Company′s revenues in Q3 2011 increased to $132.4 million compared
with $124.1 million in the third quarter of 2010. This increase was
primarily driven by an increase in the Company′s coal segment revenues
due to increased sales at its Absaloka, Beulah, and Jewett Mines.
Favorable pricing also contributed to the increased revenues.
Westmoreland′s Adjusted EBITDA increased to $24.2 million in Q3 2011
from $22.8 million in Q3 2010.
The following table summarizes the Company′s Q3 2011 and Q3 2010 coal
segment performance:
?
Three Months Ended September 30,
?
?
Increase / (Decrease) 2011
?
?
2010
?
?
$
?
?
%
Revenues (in thousands)
$
108,823
?
?
$
100,482
$
8,341
?
?
?
8.3
%
Operating income (in thousands)
9,679
8,869
810
9.1
%
Adjusted EBITDA (in thousands)
22,070
20,839
1,231
5.9
%
Tons sold - millions of equivalent tons
6.0
6.5
(0.5
)
(7.7
)%
Operating income per ton sold
$
1.61
$
1.36
$
0.25
18.2
%
Westmoreland ′s coal revenues for the third quarter of 2011 increased to
$108.8 million compared with $100.5 million in the third quarter of
2010. This $8.3 million increase was primarily due to increased sales at
the Absaloka, Beulah, and Jewett Mines. Favorable pricing also
contributed to the increased revenues. Overall tons sold decreased
during the quarter due to lower sales at the Rosebud Mine as a result of
favorable hydropower conditions, however revenues were largely
unaffected due to favorable pricing.
Coal segment operating income was $9.7 million in the third quarter of
2011 compared to $8.9 million in the third quarter of 2010. This $0.8
million increase was primarily driven by favorable pricing.
The following table summarizes the Company′s Q3 2011 and Q3 2010 power
segment performance:
?
Three Months Ended September 30,
?
?
Increase / (Decrease) 2011
?
?
2010
?
?
$
?
?
%
(In thousands)
Revenues
$
23,626
?
?
$
23,598
$
28
?
?
?
0.1
%
Operating income
4,694
5,059
(365
)
(7.2
)%
Adjusted EBITDA
7,441
7,761
(320
)
(4.1
)%
Megawatts hours
445
439
6
1.4
%
The Company ′s power segment revenues for the third quarter of 2011 were
comparable with our third quarter 2010 power segment revenues.
Power segment operating income decreased to $4.7 million in the third
quarter of 2011 compared to $5.1 million in the third quarter of 2010.
This $0.4 million decrease was primarily from increased property tax
expense.
The Company′s third quarter 2011 heritage operating expenses of $4.1
million are comparable to $4.7 million in the third quarter of 2010.
The Company′s corporate segment operating expenses for the third quarter
of 2011 of $1.7 million are comparable to $1.4 million in the third
quarter of 2010.
The Company′s interest expense for the third quarter of 2011 increased
to $7.7 million compared with $5.8 million for the third quarter of
2010. This increase was primarily due to the higher overall debt levels
resulting from the February 2011 note offering.
The Company′s other income for the third quarter of 2011 of $0.1 million
was comparable to the third quarter of 2010.
Cash provided by operating activities decreased by $3.6 million in the
nine months ended September 30, 2011 compared to the nine months ended
September 30, 2010, primarily due to the increase in interest payments
in 2011 related to the issuance of the Company′s new notes in February
2011.
Safety performance at Westmoreland mines continued to be significantly
better than the national average for surface operations.
Reportable
?
?
?
Lost Time
Westmoreland Coal
1.01
?
?
?
0.63
National Surface Mine Average
1.82
1.20
A conference call regarding Westmoreland Coal Company′s third quarter
2011 results will be held on Tuesday, November 8, 2011, at 10:00 a.m.
Eastern Time. Call-in instructions are available on the Company′s web
site and have been provided in a separate news release.
Westmoreland Coal Company is the oldest independent coal company in the
United States. The Company′s coal operations include coal mining in the
Powder River Basin in Montana and lignite mining operations in Montana,
North Dakota and Texas. Its power operations include ownership of the
two-unit ROVA coal-fired power plant in North Carolina. For more
information visit www.westmoreland.com.
Statements
This news release contains 'forward-looking statements.? Forward-looking
statements can be identified by words such as 'anticipates,? 'intends,?
'plans,? 'seeks,? 'believes,? 'estimates,? 'expects? and similar
references to future periods. Forward-looking statements include, but
are not limited to, the Company′s hope to complete at least one of coal
reserve acquisitions by year end.
Forward-looking statements are based on the Company′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. The Company′s
actual results may differ materially from those contemplated by the
forward-looking. The Company cautions you therefore 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 and the following:
changes in the Company′s postretirement medical benefit and pension
obligations and the impact of recently enacted healthcare legislation;
changes in the Company′s black lung obligations, changes in the
Company′s experience related to black lung claims, and impact of the
recently enacted healthcare legislation;
the Company′s potential inability to expand or continue current coal
operations due to limitations in obtaining bonding capacity for new
mining permits;
the Company′s potential inability to maintain compliance with debt
covenant requirements;
the potential inability of the Company′s subsidiaries to pay dividends
to them due to restrictions in the Company′s debt arrangements,
reductions in planned coal deliveries or other business factors;
the Company′s potential inability to enter into new coal supply
agreements with existing customers due to the unfavorable result of
competitive bid processes or the shutdown of a power facility due to
new environmental legislation or regulations;
risks associated with the structure of ROVA′s contracts with its
lenders, coal suppliers and power purchaser, which could dramatically
affect the overall profitability of ROVA;
the effect of Environmental Protection Agency inquiries and
regulations on the operations of ROVA;
the effect of prolonged maintenance or unplanned outages at the
Company′s operations or those of its major power generating customers,
including unplanned outages at its customers due to the impact of
weather-related variances;
future legislation and changes in regulations, governmental policies
and taxes, including those aimed at reducing emissions of elements
such as mercury, sulfur dioxides, nitrogen oxides, particulate matter
or greenhouse gases; and
the other factors that are described in 'Risk Factors? in the
Company′s Form 10-K for fiscal year 2010 and in subsequent Quarterly
Reports on 10-Q .
Any forward-looking statements made by the Company in this news release
speaks only as of the date on which it was made. Factors or events that
could cause the Company′s actual results to differ may emerge from
time-to-time, and it is not possible for the Company to predict all of
them. The Company 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.
# # #
?
?
?
?
?
Three Months Ended
September 30,Nine Months Ended
September 30,2011
?
?
2010
?
?
2011
?
?
2010
(In thousands, except per share data)
Revenues
$
132,449
?
?
$
124,080
$
372,353
?
?
$
378,152
?
Cost, expenses and other:
Cost of sales
100,164
94,208
288,964
296,366
Depreciation, depletion and amortization
11,612
10,964
33,861
33,435
Selling and administrative
9,884
8,930
28,224
28,578
Heritage health benefit expenses
3,896
4,241
11,115
11,550
Loss on sales of assets
91
165
415
256
Other operating income
(1,769
)
(2,267
)
(5,236
)
(6,519
)
123,878
?
116,241
?
357,343
?
363,666
?
Operating income (loss)
8,571
7,839
15,010
14,486
?
Other income (expense):
Interest expense
(7,650
)
(5,756
)
(22,262
)
(17,245
)
Loss on extinguishment of debt
-
-
(17,030
)
-
Interest income
423
603
1,134
1,380
Other income (loss)
147
?
17
?
(2,630
)
907
?
(7,080
)
(5,136
)
(40,788
)
(14,958
)
Income (loss) before income taxes
1,491
2,703
(25,778
)
(472
)
Income tax expense (benefit)from operations
(84
)
285
?
(706
)
149
?
Net income (loss)
1,575
2,418
(25,072
)
(621
)
Less net loss attributable to noncontrolling interest
(1,154
)
(435
)
(2,783
)
(1,878
)
Net income (loss) attributable to the Parent company
2,729
2,853
(22,289
)
1,257
Less preferred stock dividend requirements
340
?
340
?
1,020
?
1,020
?
Net income (loss) applicable to common shareholders
$
2,389
?
$
2,513
?
$
(23,309
)
$
237
?
?
Net income (loss) per share applicable to common shareholders:
Basic
$
0.18
$
0.23
$
(1.79
)
$
0.02
Diluted
0.18
0.23
(1.79
)
0.02
?
Weighted average number of common shares outstanding:
Basic
13,384
10,849
12,990
10,676
Diluted
13,442
10,911
12,990
10,758
?
Net income (loss) (from above)
$
1,575
$
2,418
$
(25,072
)
$
(621
)
Other comprehensive income (loss):
Amortization of accumulated actuarial gains or losses,
? ?pension
442
332
1,212
996
Amortization of accumulated actuarial gains or losses,
? ?transition
obligations and prior service costs,
? ?postretirement medical
benefits
(72
)
(68
)
(216
)
(206
)
Tax effect of other comprehensive income gains
(141
)
-
(308
)
-
Unrealized and realized gains and losses on available-for-
sale
securities
(12
)
262
?
(203
)
(345
)
Comprehensive income (loss)
$
1,792
?
$
2,944
?
$
(24,587
)
$
(176
)
?
See accompanying Notes to Consolidated Financial Statements.
?
Summary
Financial Information (Unaudited)
?
Nine Months Ended September 30, 2011
?
?
2010
(In thousands)
Cash Flow
?
?
Net cash provided by operating activities
$
34,028
$
37,584
Net cash used in investing activities
(15,495
)
(16,950
)
Net cash provided by (used in) financing activities
18,921
(15,083
)
?
?
?
?
2011
?
?
December 31,
2010
(In thousands)
Balance Sheet Data (Unaudited)
Total assets
$
768,967
$
750,306
Total debt
$
286,460
$
242,104
Working capital deficit
$
(5,906
)
$
(35,793
)
Total deficit
$
(174,368
)
$
(162,355
)
Common shares outstanding
13,762
11,161
?
?
?
?
Three Months Ended
September 30,Nine Months Ended
September 30,2011
?
?
2010
?
?
2011
?
?
2010
(In thousands)
Adjusted EBITDA by Segment
?
?
?
?
Coal
$
22,070
$
20,839
$
57,262
$
58,753
Power
7,441
7,761
20,152
18,644
Heritage
(4,076
)
(4,729
)
(12,062
)
(12,745
)
Corporate
(1,278
)
(1,067
)
(3,663
)
(4,234
)
Total
$
24,157
?
$
22,804
?
$
61,689
?
$
60,418
?
?
?
?
?
Three Months Ended
September 30,Nine Months Ended
September 30,2011
?
?
2010
?
?
2011
?
?
2010
(In thousands)
Reconciliation of Adjusted EBITDA to net income (loss)
?
?
?
?
Net income (loss)
$
1,575
$
2,418
$
(25,072
)
$
(621
)
?
Income tax expense (benefit) from continuing
? ?operations
(84
)
285
(705
)
149
Other loss (income)
(147
)
(17
)
2,630
(908
)
Interest income
(423
)
(603
)
(1,134
)
(1,380
)
Loss on extinguishment of debt
-
-
17,030
-
Interest expense
7,650
5,756
22,262
17,246
Depreciation, depletion and amortization
11,612
10,964
33,861
33,435
Accretion of ARO and receivable
2,700
2,847
8,100
8,687
Amortization of intangible assets and liabilities
167
?
112
?
494
?
348
?
EBITDA
23,050
21,762
57,466
56,956
?
Loss on sale of assets
91
165
415
256
Share-based compensation
1,016
?
877
?
3,808
?
3,206
?
Adjusted EBITDA
$
24,157
?
$
22,804
?
$
61,689
?
$
60,418
?
?
EBITDA and Adjusted EBITDA are supplemental measures of financial
performance that are not required by, or presented in accordance with,
GAAP. EBITDA and Adjusted EBITDA are included in this news release
because they are key metrics use d by management to assess the Company′s
operating performance and the Company believes that EBITDA and Adjusted
EBITDA 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; and
help investors to more meaningfully evaluate and compare the results
of the Company′s operations from period to period by removing the
effect of the Company′s capital structure and asset base from its
operating results.
Neither EBITDA nor Adjusted EBITDA is a measure calculated in accordance
with GAAP. The items excluded from EBITDA and Adjusted EBITDA are
significant in assessing the Company′s operating results. EBITDA and
Adjusted EBITDA 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. For example, EBITDA and
Adjusted EBITDA:
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. Other companies in the
Company′s industry and in other industries may calculate EBITDA and
Adjusted EBITDA differently from the way that the Company does, limiting
their usefulness as comparative measures. Because of these limitations,
EBITDA and Adjusted EBITDA should not be considered as measures of
discretionary cash available to the Company to invest in the growth of
its business. The Company compensates for these limitations by relying
primarily on its GAAP results and using EBITDA and Adjusted EBITDA only
as supplemental data.
Kevin Paprzycki, 719-442-2600