Westmoreland Coal Company Reports Year End 2010 Results
Westmoreland Coal Company (NYSE AMEX: WLB) today reported its results for 2010.
Highlights:
Operating income increased $52.3 million (164.6%) during 2010 from a
loss of $31.8 million to a profit of $20.5 million.
Adjusted EBITDA increased $51.3 million (169.4%) during 2010 to $81.6
million as compared to $30.3 million in 2009.
Net loss applicable to common shareholders of $1.9 million ($0.17 per
diluted share) for 2010 compared to a net loss of $28.7 million ($2.88
per diluted share) for 2009. The 2010 $1.9 million net loss includes
$3.4 million of non-cash, mark-to-market expense relating to the
conversion feature in the Company′s convertible notes.
Total revenues were $506.1 million for 2010, 14.1% higher than
revenues for 2009.
Westmoreland continued its strong safety performance again achieving
reportable and lost time incident rates approximately 72% of the
national averages for surface operations for both the fourth quarter
and all of 2010.
'During 2010, we increased our operating profit by over $52 million by
improving both our coal and power operating results while significantly
driving down our heritage costs,? said Keith E. Alessi, Westmoreland′s
President and CEO. 'Absent the mark-to-market expense on our convertible
debt feature, we would have posted a net income for 2010. Our coal
operations achieved strong cost performance during the year, while again
demonstrating our commitment to safety by significantly beating the
national surface mine averages.?
'With the closing of our $150 million senior secured notes issued on
February 4th, we have significantly enhanced our liquidity position,
strengthened our balance sheet, and positioned the company for the
future. The refinancing expenses and the conversion premium on our
convertible debt will result in a first quarter charge of approximately
$20 million. Absent those charges, we expect our results to continue to
improve in 2011.?
Westmoreland′s 2010 net loss includes $3.4 million of mark-to-market
expense from the conversion feature on the Company′s convertible notes
and $1.4 million of debt discount amortization expense also associated
with the accounting requirements for the convertible notes.
Westmoreland′s 2009 net loss includes a $17.1 million non-cash income
tax benefit resulting from other comprehensive income gains, $5.1
million of income from the favorable valuation of the conversion feature
in the Company′s convertible notes, a $0.8 million gain related to the
settlement of a heritage benefit claim, and $4.8 million of expense
related to the settlement of a customer dispute.
Excluding the $4.8 million of expense related to the convertible notes
in 2010 and the $18.1 million of income in 2009 discussed above, our
2010 net loss decreased by $49.7 million.
The Company′s revenues in 2010 increased to $506.1 million compared with
$443.4 million in 2009. This increase was primarily driven by a $56.9
million increase in coal segment revenue due to price increases under
existing coal supply agreements, the start of new agreements, and the
significant customer shutdowns we experienced during 2009.
Westmoreland′s Adjusted EBITDA increased from $30.3 million in 2009 to
$81.6 million in 2010.
Coal Segment
The following table shows comparative coal results between 2010 and 2009:
| Year Ended December 31, | |||||||||||||||||||
| Increase / (Decrease) | |||||||||||||||||||
| 2010 | 2009 | $ | % | ||||||||||||||||
(In thousands) | |||||||||||||||||||
| $ | 418,058 | $ | 361,206 | $ | 56,852 | 15.7 | % | |||||||||||
| 32,922 | 476 | 32,446 | 6816.4 | % | ||||||||||||||
| 81,681 | 51,207 | 30,474 | 59.5 | % | ||||||||||||||
| 25.2 | 24.3 | 0.9 | 3.7 | % | ||||||||||||||
| $ | 1.31 | $ | 0.02 | $ | 1.29 | 6568.9 | % | |||||||||||
The Company′s coal revenues for 2010 increased to $418.1 million
compared with $361.2 million in 2009. This $56.9 million increase
occurred primarily from the 0.9 million increase in tons sold due to the
2009 customer shutdowns, as well as price increases and the start of new
agreements in 2010.
Coal segment operating income increased to $32.9 million in 2010
compared to $0.5 million in 2009. Excluding the $4.8 million expense
related to the 2009 reclamation claim, our coal segment operating income
increased by $27.6 million. This increase was primarily driven by the
factors which increased revenue and strong cost management performance.
Coal segment Adjusted EBITDA increased to $81.7 million in 2010 compared
to $51.2 million in 2009.
Power Segment
The following table shows comparative power results between 2010 and
2009:
| Year Ended December 31, | |||||||||||||||||||
| Increase / (Decrease) | |||||||||||||||||||
| 2010 | 2009 | $ | % | ||||||||||||||||
(In thousands) | |||||||||||||||||||
Revenues | $ | 87,999 | $ | 82,162 | $ | 5,837 | 7.1 | % | |||||||||||
Operating income | 11,721 | 7,672 | 4,049 | 52.8 | % | ||||||||||||||
Adjusted EBITDA |
|
| 4,547 | 25.1 | % | ||||||||||||||
Megawatts hours | 1,620 | 1,486 | 134 | 9.0 | % | ||||||||||||||
The Company ′s power segment revenues for 2010 increased to $88.0
million compared to $82.2 million in 2009. This $5.8 million increase
occurred primarily from an increase in megawatt hours sold as a result
of a planned major maintenance outage, which occurs every five years,
and a significant unplanned outage, both of which occurred in 2009. No
comparable outages occurred in 2010.
Power segment operating income increased to $11.7 million in 2010
compared to $7.7 million in 2009. This $4.0 million increase was
primarily from increased megawatt hours sold and decreased maintenance
expenses as a result of the planned and unplanned maintenance outages
discussed above.
Power segment Adjusted EBITDA increased to $22.7 million in 2010
compared to $18.1 million in 2009.
Heritage Segment
The Company′s 2010 heritage costs were $16.0 million compared to $31.8
million in 2009. Excluding a gain on a heritage legal claim settlement
of $0.8 million in 2009, our heritage segment operating expenses
decreased by $16.6 million. This decrease was primarily due to the
agreement we entered into which modernized how we provide prescription
drug benefits to our retirees.
Heritage segment Adjusted EBITDA decreased to a negative $16.0 million
in 2010 from a negative $31.8 million in 2009.
Corporate Segment
The Company′s corporate segment operating expenses in 2010 remained
consistent with expenses for 2009.
Corporate segment Adjusted EBITDA decreased to a negative $6.8 million
from a negative $7.3 million in 2009.
Nonoperating Results (including other income
(expense), income tax benefit, and net loss attributable to
noncontrolling interest)
The Company′s 2010 other expense increased to $23.8 million compared
with $14.5 million of expense for 2009. This is primarily due to the
$9.9 million impact of the fair value adjustment on the Company′s
convertible debt instrument and related amortization of debt discount.
The Company′s 2010 income tax benefit was $0.1 million in 2010 compared
with $17.1 million in 2009. Excluding the $17.1 million tax effect of
other comprehensive income gains, the 2010 income tax benefit remained
consistent with 2009.
The Company′s 2010 net loss attributable to noncontrolling interest was
$2.6 million compared to $1.8 million in 2009. This increase was due to
an increase in the adjustment to reduce losses from a partially owned
consolidated coal segment subsidiary.
Cash Flow from Operations
Cash provided by operating activities increased $15.9 million in 2010
compared to 2009 primarily as a result of a $26.0 million reduction in
net loss in 2010. The increase in operating cash flows was partially
offset by the $17.9 million decrease in cash receipts due to a
contractually scheduled decrease in the payments ROVA collects from its
customer.
Cash used in investing activities decreased $9.4 million in 2010
compared to 2009 primarily as a result of the reduction in our capital
spending in 2010. Additions to property, plant and equipment were $22.8
million in 2010 compared to $34.5 million in 2009.
Cash used in financing activities in 2010 remained consistent with 2009.
The Company′s working capital deficit at December 31, 2010 decreased by
$39.2 million to approximately $35.8 million compared to a $75.0 million
deficit at December 31, 2009 primarily as a result of a decrease in
current installments of long-term debt and the payment of a settlement
for reclamation claims.
Liquidity
Following the February 4, 2011 senior secured note offering, the Company
significantly increased its cash and overall liquidity position. As the
Company expects further increases in its 2011 coal operating profits and
a continuation of its reduced heritage expenditures, it anticipates that
its cash flows from operations, cash on hand and available borrowing
capacity will be sufficient to meet its investing, financing, and
working capital requirements for the foreseeable future.
In the Company′s Form 10-K for the period ended December 31, 2010, the
Company did not receive the going concern explanatory paragraph by its
independent registered public accounting firm that it did in 2009.
Conference Call
A conference call regarding Westmoreland Coal Company′s 2010 results
will be held on Thursday, March 10, 2011, at 10:00 a.m. Eastern Time.
Call-in instructions are available on the Company′s website and have
been provided in a separate news release.
Safety
Safety performance at Westmoreland mines continues to be significantly
better than the national average for surface operations. Westmoreland
mines had reportable and lost time incident rates year to date through
the fourth quarter of 1.31 and 0.88 versus the national surface mine
rates of 1.83 and 1.23, respectively. The reportable incident rate for
2010 compared favorably to the fourth quarter 2009 rate of 1.38. The
lost time rate for the fourth quarter of 2009 was slightly better than
2010 at 0.74.
In addition, Westmoreland received state and industry safety awards
during 2010, which includes the following awards:
Montana Governor′s Safety Award for large mines: Absaloka Mine
Montana Governor′s Safety Award for small mines: Savage Mine
North Dakota Lignite Energy Council Safety Excellence Award: Beulah
Mine
Rocky Mountain Coal Mining Institute's Safety Award for Surface Mines:
Savage Mine
Additional Information
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.
Cautionary Note Regarding Forward-Looking 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. Examples of forward-looking statements
include, but are not limited to, Mr. Alessi′s comment that we expect our
results to continue to improve in 2011, that the Company expects further
increases in its 2011 coal operating profits and a continuation of its
reduced heritage expenditures, and that the Company anticipates that its
cash flows from operations, cash on hand and available borrowing
capacity will be sufficient to meet its investing, financing, and
working capital requirements for the foreseeable future.
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 statements. 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 our postretirement medical benefit and pension obligations
and the impact of the recently enacted healthcare legislation;
changes in our black lung obligations, changes in our experience
related to black lung claims, and the impact of the recently enacted
healthcare legislation;
our potential inability to expand or continue current coal operations
due to limitations in obtaining bonding capacity for new mining
permits;
our potential inability to maintain compliance with debt covenant and
waiver agreement requirements;
the potential inability of our subsidiaries to pay dividends to us due
to restrictions in our debt arrangements, reductions in planned coal
deliveries or other business factors;
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 our
operations or those of our major power generating customers;
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.
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.
Westmoreland Coal Company and Subsidiaries Consolidated Statements of Operations (Unaudited) | |||||||||||||||||
| Years Ended December 31, | |||||||||||||||||
| 2010 | 2009 | 2008 | |||||||||||||||
(In thousands, except per share data) | |||||||||||||||||
Revenues | $ | 506,057 | $ | 443,368 | $ | 509,696 | |||||||||||
Cost and expenses: | |||||||||||||||||
Cost of sales | 394,827 | 373,070 | 409,795 | ||||||||||||||
Depreciation, depletion and amortization | 44,690 | 44,254 | 41,387 | ||||||||||||||
Selling and administrative | 39,481 | 40,612 | 40,513 | ||||||||||||||
Heritage health benefit expenses | 14,421 | 28,074 | 33,452 | ||||||||||||||
Restructuring charges | - | - | 2,009 | ||||||||||||||
Loss (gain) on sales of assets | 226 | 191 | (1,425 | ) | |||||||||||||
Other operating income | (8,109 | ) | (11,059 | ) | - | ||||||||||||
485,536 | 475,142 | 525,731 | |||||||||||||||
Operating income (loss) | 20,521 | (31,774 | ) | (16,035 | ) | ||||||||||||
Other income (expense): | |||||||||||||||||
Interest expense | (22,992 | ) | (23,733 | ) | (23,130 | ) | |||||||||||
Interest expense attributable to beneficial conversion feature | - | - | (8,146 | ) | |||||||||||||
Loss on extinguishment of debt | - | - | (5,178 | ) | |||||||||||||
Interest income | 1,747 | 3,218 | 5,125 | ||||||||||||||
Other income (loss) | (2,587 | ) | 5,991 | (284 | ) | ||||||||||||
(23,832 | ) | (14,524 | ) | (31,613 | ) | ||||||||||||
Loss before income taxes | (3,311 | ) | (46,298 | ) | (47,648 | ) | |||||||||||
Income tax (benefit) expense | (141 | ) | (17,136 | ) | 919 | ||||||||||||
Net loss | (3,170 | ) | (29,162 | ) | (48,567 | ) | |||||||||||
Less net loss attributable to noncontrolling interest | (2,645 | ) | (1,817 | ) | - | ||||||||||||
Net loss attributable to the Parent company | (525 | ) | (27,345 | ) | (48,567 | ) | |||||||||||
Less preferred stock dividend requirements | 1,360 | 1,360 | 1,360 | ||||||||||||||
Net loss applicable to common shareholders | $ | (1,885 | ) | $ | (28,705 | ) | $ | (49,927 | ) | ||||||||
Net loss per share applicable to common shareholders: | |||||||||||||||||
Basic and diluted | $ | (0.17 | ) | $ | (2.88 | ) | $ | (5.25 | ) | ||||||||
Weighted average number of common shares outstanding | |||||||||||||||||
Basic and diluted | 10,791 | 9,967 | 9,512 | ||||||||||||||
See accompanying Notes to Consolidated Financial Statements. | |||||||||||||||||
Westmoreland Coal Company and Subsidiaries Summary Financial Information (Unaudited) | ||||||||||||
| December 31, | ||||||||||||
| 2010 | 2009 | |||||||||||
(In thousands) | ||||||||||||
| Cash Flow | ||||||||||||
Net cash provided by operating activities | $ | 45,353 | $ | 29,448 | ||||||||
Net cash used in investing activities | (29,180 | ) | (38,597 | ) | ||||||||
Net cash used in financing activities | (20,917 | ) | (20,273 | ) | ||||||||
| December 31, | ||||||||||||
| 2010 | 2009 | |||||||||||
(In thousands) | ||||||||||||
| Balance Sheet Data (Unaudited) | ||||||||||||
Total assets | $ | 750,306 | $ | 772,728 | ||||||||
Total debt | $ | 242,104 | $ | 254,695 | ||||||||
Working capital deficit | $ | (35,793 | ) | $ | (74,976 | ) | ||||||
Total deficit | $ | (162,355 | ) | $ | (141,799 | ) | ||||||
Common shares outstanding | 11,161 | 10,346 | ||||||||||
| December 31, | |||||||||||||||||
| 2010 | 2009 | 2008 | |||||||||||||||
(In thousands) | |||||||||||||||||
| Adjusted EBITDA | |||||||||||||||||
Coal | $ | 81,681 | $ | 51,207 | $ | 57,743 | |||||||||||
Power | 22,664 | 18,117 | 26,493 | ||||||||||||||
Heritage | (15,968 | ) | (31,770 | ) | (35,497 | ) | |||||||||||
Corporate | (6,761 | ) | (7,253 | ) | (9,944 | ) | |||||||||||
Total | $ | 81,616 | $ | 30,301 | $ | 38,795 | |||||||||||
| December 31, | |||||||||||||||||
| 2010 | 2009 | 2008 | |||||||||||||||
| Reconciliation of Adjusted EBITDA to Net income | (In thousands) | ||||||||||||||||
| Net (Loss) | $ | (3,170 | ) | $ | (29,162 | ) | $ | (48,567 | ) | ||||||||
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