Westmoreland Reports Second Quarter 2011 Results
Westmoreland Coal Company (NasdaqGM:WLB) today reported its second
quarter results for 2011.
Highlights:
Q2 2011 coal tons sold decreased 1.7 million tons from Q2 2010 due to
the effects of a prolonged hydro-electric season, flooding in Montana
and North Dakota, and the expiration of an unprofitable coal contract
in December 2010.
Operating income decreased $2.3 million from $1.3 million in Q2 2010
to an operating loss of $1.0 million in Q2 2011. Year to date 2011
operating income was $6.4 million compared to 2010 year to date
operating income of $6.6 million.
Adjusted EBITDA decreased $2.2 million during Q2 2011 to $14.2 million
as compared to $16.4 million in Q2 2010. Year to date 2011 Adjusted
EBITDA was $37.5 million compared to year to date 2010 Adjusted EBITDA
of $37.6 million.
Net loss applicable to common shareholders of $7.7 million ($0.59 per
basic and diluted share) for Q2 2011 compared to Q2 2010 net income of
$0.9 million ($0.09 per basic and diluted share). Second quarter 2010
net income included $4.3 million of income on a fair value adjustment
for the conversion feature in the Company′s convertible debt. Year to
date net loss for 2011 was $25.7 million compared to a year to date
2010 net loss of $2.3 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 approximately 38.5% and 45.2%,
respectively, of the national averages for surface operations for the
second quarter of 2011.
During the second quarter of 2011, Westmoreland′s Beulah Mine received
the Rocky Mountain Coal Mining Institute Surface Mine Safety Award,
small mine category, for the surface mine with the lowest reportable
rate of incidents in the eight-member state region.
'The story of the quarter was water; unprecedented amounts of it,? said
Keith E. Alessi, Westmoreland′s President and CEO. 'Record snow pack in
the Cascade Mountains led to one of the longest hydroelectric seasons in
history and negatively impacted sales at three of our mines. Year to
date we estimate that we experienced a volume reduction of 1.5 million
tons as a result of these conditions. In addition, late in the quarter,
historic flood levels were experienced in North Dakota which disrupted
rail service out of our WRI mine. These conditions have now abated and
we expect our tonnage sales to return to normal during the third
quarter. During the quarter our power operation performed extremely well
and we did an excellent job of managing controllable costs.?
'We are very pleased with the continuation of our strong safety
performance during the second quarter of 2011. We again beat the
national surface mine averages and take great pride in the Beulah Mine
receiving the Rocky Mountain Coal Mining Institute Surface Mine Safety
Award.?
Westmoreland′s second quarter 2010 income included $4.3 million of
income from the fair value adjustment on the conversion feature in the
Company′s convertible debt. Excluding the fair value adjustment, second
quarter 2011 net loss increased by $4.4 million. 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 conversion
feature′s fair value adjustment. 2010 year to date net income includes
$0.5 million of expense on the fair value adjustment of the conversion
feature. Excluding those items, net loss increased by $3.7 million.
The Company′s revenues in Q2 2011 decreased to $112.1 million compared
with $127.6 million in Q2 2010. This revenue decrease was driven by
lower tonnage sales due to the unusually long hydroelectric season, the
flooding conditions, and the December 2010 expiration of an unprofitable
coal contract.
Westmoreland′s Adjusted EBITDA decreased to $14.2 million in Q2 2011
from $16.4 million in Q2 2010.
Coal Segment Operating Results
The following table summarizes the Company′s Q2 2011 and Q2 2010 coal
segment performance:
Three Months Ended June 30, | |||||||||||||||||||
Increase / (Decrease) | |||||||||||||||||||
2011 | 2010 | $ | % | ||||||||||||||||
Revenues (in thousands) | $ | 90,776 | $ | 106,458 | $ | (15,682) | (14.7)% | ||||||||||||
Operating income (in thousands) | 2,080 | 5,721 | (3,641) | (63.6)% | |||||||||||||||
Adjusted EBITDA (in thousands) | 13,906 | 17,675 | (3,769) | (21.3)% | |||||||||||||||
Tons sold - millions of equivalent tons | 4.4 | 6.1 | (1.7) | (27.9)% | |||||||||||||||
Operating income per ton sold | $ | 0.47 | $ | 0.94 | $ | (0.47) | (50.0)% |
Westmoreland ′s coal revenues for the second quarter of 2011 decreased
to $90.8 million compared with $106.5 million in the second quarter of
2010. This $15.7 million decrease was primarily due to favorable
hydropower conditions, which displaced Westmoreland′s customers′
coal-generated power. Coal revenues also decreased due to flooding
conditions which disrupted rail service to the Absaloka Mine and the
expiration of an unprofitable coal contract at the Rosebud Mine.
The Company expects the hydropower conditions impacting its operations
to return to normal during the third quarter of 2011.
Power Segment Operating Results
The following table summarizes the Company′s Q2 2011 and Q2 2010 power
segment performance:
Three Months Ended June 30, | |||||||||||||||||||
Increase / (Decrease) | |||||||||||||||||||
2011 | 2010 | $ | % | ||||||||||||||||
(In thousands) | |||||||||||||||||||
Revenues | $ | 21,364 | $ | 21,174 | $ | 190 | 0.9% | ||||||||||||
Operating income | 2,450 | 1,307 | 1,143 | 87.5% | |||||||||||||||
Adjusted EBITDA | 5,363 | 4,002 | 1,361 | 34.0% | |||||||||||||||
Megawatts hours | 402 | 368 | 34 | 9.2% |
The Company ′s power segment revenues for the second quarter of 2011
increased to $21.4 million compared to $21.2 million in second quarter
2010. This $0.2 million increase is primarily from increased megawatt
hours sold as a result of shorter planned outages.
Power segment operating income increased to $2.5 million in Q2 2011
compared to $1.3 million in Q2 2010 due to decreased maintenance costs.
Heritage Segment Operating Results
The Company′s second quarter 2011 heritage operating expenses of $3.8
million are comparable to the operating expenses for the second quarter
of 2010.
Corporate Segment Operating Results
The Company′s corporate segment operating expenses for the second
quarter of 2011 of $1.7 million is comparable to $1.9 million in the
second quarter of 2010.
Nonoperating Results
The Company′s interest expense for the second quarter of 2011 increased
to $7.6 million compared with $5.8 million for the second quarter of
2010. This increase was primarily due to the issuance of the Company′s
new notes in February 2011.
The Company′s other income for the second quarter of 2011 decreased to
$0.2 million compared with $4.7 million of income for the second quarter
of 2010. Excluding the $4.6 million impact of the fair value adjustment
on derivatives, other income increased $0.2 million primarily due to
gains on sales of securities during the second quarter of 2011.
Cash Flow from Operations and Liquidity
Cash provided by operating activities increased $4.5 million in the six
months ended June 30, 2011 compared to the six months ended June 30,
2010, primarily due to favorable changes in working capital.
Safety
Safety performance at Westmoreland mines continued to be significantly
better than the national average for surface operations.
Reportable | Lost Time | |||||||||||
Westmoreland Coal | 0.75 | 0.57 | ||||||||||
National Surface Mine Average | 1.95 | 1.26 |
Conference Call
A conference call regarding Westmoreland Coal Company′s second quarter
2011 results will be held on Thursday, August 4, 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.
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 the Company′s expectation that its
tonnage sales will return to normal during the third quarter and that
hydropower conditions impacting its operations will return to normal
during the third quarter of 2011.
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.
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) | |||||||||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||
2011 | 2010 | 2011 | 2010 | ||||||||||||||
(In thousands, except per share data) | |||||||||||||||||
Revenues | $ | 112,140 | $ | 127,632 | $ | 239,904 | $ | 254,071 | |||||||||
Cost, expenses and other: | |||||||||||||||||
Cost of sales | 91,289 | 104,481 | 188,799 | 202,158 | |||||||||||||
Depreciation, depletion and amortization | 11,004 | 11,078 | 22,249 | 22,471 | |||||||||||||
Selling and administrative | 9,035 | 9,673 | 18,340 | 19,648 | |||||||||||||
Heritage health benefit expenses | 3,441 | 3,394 | 7,219 | 7,309 | |||||||||||||
Loss (gain) on sales of assets | 241 | 19 | 324 | 90 | |||||||||||||
Other operating income | (1,870 | ) | (2,346 | ) | (3,467 | ) | (4,252 | ) | |||||||||
113,140 | 126,299 | 233,464 | 247,424 | ||||||||||||||
Operating income (loss) | (1,000 | ) | 1,333 | 6,440 | 6,647 | ||||||||||||
Other income (expense): | |||||||||||||||||
Interest expense | (7,645 | ) | (5,767 | ) | (14,612 | ) | (11,490 | ) | |||||||||
Loss on extinguishment of debt | - | - | (17,030 | ) | - | ||||||||||||
Interest income | 329 | 367 | 711 | 777 | |||||||||||||
Other income (loss) | 240 | 4,726 | (2,777 | ) | 891 | ||||||||||||
(7,076 | ) | (674 | ) | (33,708 | ) | (9,822 | ) | ||||||||||
Income (loss) before income taxes | (8,076 | ) | 659 | (27,268 | ) | (3,175 | ) | ||||||||||
Income tax benefit from operations | (161 | ) | (47 | ) | (621 | ) | (137 | ) | |||||||||
Net income (loss) | (7,915 | ) | 706 | (26,647 | ) | (3,038 | ) | ||||||||||
Less net loss attributable to noncontrolling interest | (508 | ) | (553 | ) | (1,630 | ) | (1,443 | ) | |||||||||
Net income (loss) attributable to the Parent company | (7,407 | ) | 1,259 | (25,017 | ) | (1,595 | ) | ||||||||||
Less preferred stock dividend requirements | 340 | 340 | 680 | 680 | |||||||||||||
Net income (loss) applicable to common shareholders | $ | (7,747 | ) | $ | 919 | $ | (25,697 | ) | $ | (2,275 | ) | ||||||
Net income (loss) per share applicable to common shareholders: | |||||||||||||||||
Basic | $ | (0.59 | ) | $ | 0.09 | $ | (2.01 | ) | $ | (0.21 | ) | ||||||
Diluted | (0.59 | ) | 0.09 | (2.01 | ) | (0.21 | ) | ||||||||||
Weighted average number of common shares outstanding: | |||||||||||||||||
Basic | 13,200 | 10,654 | 12,789 | 10,588 | |||||||||||||
Diluted | 13,200 | 10,704 | 12,789 | 10,588 | |||||||||||||
Net income (loss) (from above) | $ | (7,915 | ) | $ | 706 | $ | (26,647 | ) | $ | (3,038 | ) | ||||||
Other comprehensive income (loss): | |||||||||||||||||
| 385 | 436 | 770 | 664 | |||||||||||||
| (72 | ) | (70 | ) | (144 | ) | (138 | ) | |||||||||
Tax effect of other comprehensive income gains | (57 | ) | - | (167 | ) | - | |||||||||||
| (161 | ) | (108 | ) | (191 | ) | (607 | ) | |||||||||
Comprehensive income (loss) | $ | (7,820 | ) | $ | 964 | $ | (26,379 | ) | $ | (3,119 | ) | ||||||
See accompanying Notes to Consolidated Financial Statements. | |||||||||||||||||
Westmoreland Coal Company and Subsidiaries Summary Financial Information (Unaudited) | ||||||||
Six Months Ended June 30, | ||||||||
2011 | 2010 | |||||||
(In thousands) | ||||||||
Cash Flow | ||||||||
Net cash provided by operating activities | $ | 24,320 | $ | 19,848 | ||||
Net cash used in investing activities | (14,477 | ) | (7,896 | ) | ||||
Net cash provided by (used in) financing activities | 26,120 | (11,785 | ) | |||||
June 30, 2011 | December 31, 2010 | |||||||
(In thousands) | ||||||||
Balance Sheet Data (Unaudited) | ||||||||
Total assets | $ | 772,369 | $ | 750,306 | ||||
Total debt | $ | 290,669 | $ | 242,104 | ||||
Working capital deficit | $ | (8,641 | ) | $ | (35,793 | ) | ||
Total deficit | $ | (180,207 | ) | $ | (162,355 | ) | ||
Common shares outstanding | 13,237 | 11,161 | ||||||
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||
(In thousands) | ||||||||||||
Adjusted EBITDA by Segment | ||||||||||||
Coal | $ | 13,906 | $ | 17,675 | $ | 35,191 | $ | 37,913 | ||||
Power | 5,363 | 4,002 | 12,715 | 10,883 | ||||||||
Heritage | (3,817) | (3,761) | (7,987) | (8,016) | ||||||||
Corporate | (1,204) | (1,532) | (2,387) | (3,167) | ||||||||
Total | $ | 14,248 | $ | 16,384 | $ | 37,532 | $ | 37,613 | ||||
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||
(In thousands) | ||||||||||||
Reconciliation of Adjusted EBITDA to net loss | ||||||||||||
Net income (loss) | $ | (7,915) | $ | 706 | $ | (26,647) | $ | (3,038) | ||||
Income tax benefit from continuing operations | (161) | (47) | (621) | (137) | ||||||||
Other loss (income) | (240) | (4,726) | 2,777 | (891) | ||||||||
Interest income | (329) | (367) | (711) | (777) | ||||||||
Loss on extinguishment of debt | - | - | 17,030 | - | ||||||||
Interest expense | 7,645 | 5,767 | 14,612 | 11,490 | ||||||||
Depreciation, depletion and amortization | 11,004 | 11,078 | 22,249 | 22,471 | ||||||||
Accretion of ARO and receivable | 2,700 | 2,837 | 5,400 | 5,840 | ||||||||
Amortization of intangible assets and liabilities | 164 | 151 | 327 | 236 | ||||||||
EBITDA | 12,868 | 15,399 | 34,416 | 35,194 | ||||||||
Loss on sale of assets | 241 | 19 | 324 | 90 | ||||||||
Share-based compensation | 1,139 | 966 | 2,792 | 2,329 | ||||||||
Adjusted EBITDA | $ | 14,248 | $ | 16,384 | $ | 37,532 | $ | 37,613 | ||||
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.
Westmoreland Coal Company
Kevin Paprzycki, 719-442-2600