Westmoreland Reports Third Quarter 2015 Results, Updates Full Year Guidance
Westmoreland Coal Company (NasdaqGM:WLB) today announced results of the
third quarter ended September 30, 2015 and updated its full year
guidance.
Revenues for the quarter were $349.8 million versus $337.8 million in
the same quarter in 2014. Adjusted EBITDA for the third quarter of 2015
was $48.0 million, while Adjusted EBITDA for the third quarter of 2014
was $41.7 million. Adjusted EBITDA for this quarter included results of
WMLP and the Buckingham operations, which were not present during the
third quarter of 2014. Net loss for the quarter was $46.6 million versus
$49.3 million in the same quarter in 2014.
"The quarter was a steady one despite very mild weather and customer
outages," said CEO Keith E. Alessi. "Strength in our historical US Coal
operations offset weakness in our Ohio operations."
"As we now have greater visibility, we are updating our guidance for the
year. Since issuing original guidance, we have seen numerous impacts on
EBITDA and changes in capital spending. We still anticipate the free
cash flow we generate for 2015 will service cash interest and
additionally retire approximately $44 million in debt, or $2.45 per
share. This falls within the range of outcomes of our previous guidance
for EBITDA and capital. While our core business remains solid, we have
experienced a prolonged plant outage at the largest customer of the MLP
and Buckingham. The customer expected to be fully operational in the
third quarter but continuing operational problems have delayed returning
to full capacity until mid-November. The cumulative EBITDA impact of
this outage in 2015 is $15.0 million versus our original guidance.
Additionally, the high level of M&A activity conducted during the third
quarter resulted in approximately $5.0 million in incremental
professional services fees. We have adjusted our EBITDA guidance by
$20.0 million to reflect these two items and we narrowed the range. We
have also reduced our projected capital expenditures for the year due to
lower tons sold and outstanding management of capital projects. A table
reflecting these guidance updates is shown within this press release."
"During the quarter, we completed diligence on several potential
acquisitions which we chose not to pursue because they did not meet our
criteria. We will remain disciplined in our approach to business
development. We intend to close the San Juan transaction before December
31, subject to closing conditions and approvals, using a combination of
cash on hand and debt financing."
"I am extraordinarily proud of the numerous awards our mines received
during the quarter including the prestigious Sentinels of Safety award
and the 2015 Railroad Commission of Texas Coal Mining Reclamation Award
at Jewett and the 2015 North Dakota Public Service Commission
Reclamation Award at Beulah."
Updated Guidance
Guidance Summary
|
|
|
Original Range
|
|
|
Revised Range
|
(in millions)
|
|
|
Low
|
|
|
High
|
|
|
Low
|
|
|
High
|
Tons
|
|
|
56.0
|
|
|
|
60.0
|
|
|
|
54.0
|
|
|
|
56.0
|
Adjusted EBITDA
|
|
|
$
|
235.0
|
|
|
|
$
|
270.0
|
|
|
|
$
|
215.0
|
|
|
|
$
|
225.0
|
Capital Expenditures
|
|
|
$
|
74.0
|
|
|
|
$
|
92.0
|
|
|
|
$
|
70.0
|
|
|
|
$
|
75.0
|
Per Ton
|
|
|
$
|
1.32
|
|
|
|
$
|
1.53
|
|
|
|
$
|
1.30
|
|
|
|
$
|
1.34
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Safety
Safety performance through the first nine months of 2015 at Westmoreland
mines was as follows:
|
|
|
|
|
Reportable
|
|
|
Lost Time
|
U.S. Operations
|
|
|
|
|
1.44
|
|
|
0.72
|
U.S. National Average
|
|
|
|
|
1.92
|
|
|
1.34
|
Percentage
|
|
|
|
|
74.8%
|
|
|
53.7%
|
|
|
|
|
|
|
|
|
|
Canadian Operations
|
|
|
|
|
3.75
|
|
|
0.43
|
|
|
|
|
|
|
|
|
|
Financial Results
Westmoreland’s revenues in Q3 2015 increased to $349.8 million compared
with $337.8 million in Q3 2014. Q3 2015 Adjusted EBITDA increased to
$48.0 million from $41.7 million in Q3 2014. Net loss applicable to
common shareholders decreased by $2.8 million, from $49.3 million ($2.95
per basic share) in Q3 2014 to $46.6 million ($2.59 per basic share) in
Q3 2015.
Revenues increased primarily due to the WMLP and Buckingham
acquisitions. Adjusted EBITDA increased due to the WMLP and Canadian
acquisitions, but was offset somewhat by unfavorable weather conditions
and customer outages at several operations impacting sales.
The decrease in Q3 net loss was driven largely by a $17.8 million
decrease in derivative losses on our ROVA power contract and a $3.3
million decrease in restructuring charges. These changes were offset by
a $5.6 million increase in interest expense due to our higher debt
levels arising from our MLP and Buckingham acquisitions and $5.4 million
in additional losses on extinguishment of debt arising from the early
repayment of amounts under our term loan using the proceeds received
from the Kemmerer Drop described below.
During the quarter we contributed 100% of the outstanding equity
interests in Westmoreland Kemmerer, LLC ("WKL") to WMLP for $230 million
in aggregate consideration (the "Kemmerer Drop"). The results of
operations of WKL have been reclassified into the MLP segment and out of
the US Coal segment in the following analysis.
Coal - U.S. Segment Operating Results
The following table summarizes Westmoreland’s Q3 2015 and Q3 2014 U.S.
coal segment performance:
|
|
|
Three Months Ended September 30,
|
|
|
|
|
|
|
Increase / (Decrease)
|
|
|
|
2015
|
|
|
2014
|
|
|
$
|
|
|
%
|
|
|
|
(In thousands, except per ton data)
|
Revenues
|
|
|
$
|
132,018
|
|
|
$
|
123,134
|
|
|
|
$
|
8,884
|
|
|
|
7.2
|
%
|
Operating income (loss)
|
|
|
482
|
|
|
(349
|
)
|
|
|
831
|
|
|
|
(238.1
|
)%
|
Adjusted EBITDA
|
|
|
14,758
|
|
|
14,923
|
|
|
|
(165
|
)
|
|
|
(1.1
|
)%
|
Tons sold - millions of equivalent tons
|
|
|
6.0
|
|
|
6.5
|
|
|
|
(0.5
|
)
|
|
|
(7.7
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Our third quarter 2015 U.S. coal segment revenues increased primarily
due to the Buckingham acquisition.
U.S. coal Adjusted EBITDA decreased due to continued unfavorable weather
conditions at our Jewett Mine as well as customer outages affecting
several locations.
Coal - Canada Segment Operating Results
The following table summarizes Westmoreland’s Q3 2015 and Q3 2014 Canada
coal segment performance:
|
|
|
Three Months Ended September 30,
|
|
|
|
|
|
|
|
|
|
Increase / (Decrease)
|
|
|
|
2015
|
|
|
2014
|
|
|
$
|
|
|
%
|
|
|
|
(In thousands, except per ton data)
|
Revenues
|
|
|
$
|
107,752
|
|
|
$
|
151,340
|
|
|
|
$
|
(43,588
|
)
|
|
|
(28.8
|
)%
|
Operating income (loss)
|
|
|
4,009
|
|
|
(1,453
|
)
|
|
|
5,462
|
|
|
|
(375.9
|
)%
|
Adjusted EBITDA
|
|
|
23,659
|
|
|
22,307
|
|
|
|
1,352
|
|
|
|
6.1
|
%
|
Tons sold - millions of equivalent tons
|
|
|
6.2
|
|
|
6.6
|
|
|
|
(0.4
|
)
|
|
|
(6.1
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Third quarter 2015 revenue decreased due to lower export prices
impacting the Coal Valley operations and the continued weakening of the
Canadian Dollar. Operating income and Adjusted EBITDA increased as a
result of operational improvements.
Coal - WMLP Segment Operating Results
The following table summarizes Westmoreland’s Q3 2015 and Q3 2014 WMLP
coal segment performance:
|
|
|
Three Months Ended September 30,
|
|
|
|
|
|
|
|
|
|
Increase / (Decrease)
|
|
|
|
2015
|
|
|
2014
|
|
|
$
|
|
|
%
|
|
|
|
(In thousands, except per ton data)
|
Revenues
|
|
|
$
|
94,785
|
|
|
|
$
|
41,917
|
|
|
|
$
|
52,868
|
|
|
|
126.1
|
%
|
Operating income (loss)
|
|
|
(4,845
|
)
|
|
|
5,142
|
|
|
|
(9,987
|
)
|
|
|
(194.2
|
)%
|
Adjusted EBITDA
|
|
|
15,648
|
|
|
|
10,250
|
|
|
|
5,398
|
|
|
|
52.7
|
%
|
Tons sold - millions of equivalent tons
|
|
|
1.6
|
|
|
|
1.1
|
|
|
|
0.5
|
|
|
|
45.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The WMLP Segment includes the results of operations of WKL in both
periods and the results of our WMLP acquisition for the three months
ended September 30, 2015. Changes period-over-period relate to the WMLP
acquisition.
Power Segment Operating Results
The following table summarizes Westmoreland’s Q3 2015 and Q3 2014 power
segment performance:
|
|
|
Three Months Ended September 30,
|
|
|
|
|
|
|
|
|
|
Increase / (Decrease)
|
|
|
|
2015
|
|
|
2014
|
|
|
$
|
|
|
%
|
|
|
|
(In thousands)
|
Revenues
|
|
|
$
|
22,017
|
|
|
|
$
|
21,439
|
|
|
|
$
|
578
|
|
|
2.7
|
%
|
Operating loss
|
|
|
(7,976
|
)
|
|
|
(26,413
|
)
|
|
|
18,437
|
|
|
(69.8
|
)%
|
Adjusted EBITDA
|
|
|
75
|
|
|
|
(175
|
)
|
|
|
250
|
|
|
(142.9
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Our third quarter 2015 power segment revenues were relatively
consistent, with both periods reflecting softer power demand and pricing
than historically normal summers. The operating loss improved largely as
a result of $1 7.8 million less in derivative losses on our power
contract.
Nonoperating Results
Interest expense for Q3 2015 increased to $26.8 million from $21.3
million in Q3 2014 primarily due to higher debt levels arising from our
acquisitions of WMLP and Buckingham. Other expenses were also higher as
a result of a loss on extinguishment of debt of $5.4 million incurred
during Q3 2015 as a result of paying down debt with proceeds from the
Kemmerer Drop.
Cash Flow, Leverage, and Liquidity
For the nine months ended September 30, 2015, Westmoreland generated
$20.9 million in net cash provided by operating activities, used $(47.5)
million in cash flows from investing activities, and provided $44.2
million in cash flows from financing activities. Net of a $(2.6) million
effect of the change in foreign exchange, this results in a $15.1
million increase in our cash position during the period.
Westmoreland had the following liquidity at September 30, 2015 and
December 31, 2014:
|
|
|
|
|
September 30,
|
|
|
December 31,
|
|
|
|
|
|
2015
|
|
|
2014
|
|
|
|
|
|
(In millions)
|
Cash and cash equivalents
|
|
|
|
|
$
|
29.3
|
|
|
$
|
14.3
|
Corporate revolving line of credit
|
|
|
|
|
28.9
|
|
|
16.9
|
Total
|
|
|
|
|
$
|
58.2
|
|
|
$
|
31.2
|
|
|
|
|
|
|
|
|
|
|
|
Conference Call
A conference call regarding Westmoreland Coal Company’s third quarter
2015 results will be held on Friday, October 23, 2015, at 10:00 a.m.
Eastern Time. Call-in numbers are:
Live Participant Dial In (Toll Free): 844-WCC-COAL (844-922-2625) Live
Participant Dial In (International): 201-689-8584
About Westmoreland Coal Company
Westmoreland Coal Company is the oldest independent coal company in the
United States. Westmoreland’s coal operations include sub-bituminous and
lignite surface coal mining in the Western United States and Canada, an
underground bituminous coal mine in Ohio, 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. 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
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. Our 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
|
Consolidated Statements of Operations (Unaudited)
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2015
|
|
|
2014
|
|
|
2015
|
|
|
2014
|
|
|
|
(In thousands, except per share data)
|
Revenues
|
|
|
$
|
349,796
|
|
|
|
$
|
337,830
|
|
|
|
$
|
1,070,240
|
|
|
|
$
|
805,989
|
|
Cost, expenses and other:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales
|
|
|
292,973
|
|
|
|
285,524
|
|
|
|
880,162
|
|
|
|
670,467
|
|
Depreciation, depletion and amortization
|
|
|
34,459
|
|
|
|
28,175
|
|
|
|
106,781
|
|
|
|
68,713
|
|
Selling and administrative
|
|
|
29,383
|
|
|
|
24,434
|
|
|
|
84,611
|
|
|
|
68,551
|
|
Heritage health benefit expenses
|
|
|
2,801
|
|
|
|
3,315
|
|
|
|
8,022
|
|
|
|
10,246
|
|
Loss on sale/disposal of assets
|
|
|
1,135
|
|
|
|
119
|
|
|
|
2,148
|
|
|
|
114
|
|
Restructuring charges
|
|
|
—
|
|
|
|
3,265
|
|
|
|
656
|
|
|
|
11,207
|
|
Derivative loss
|
|
|
5,815
|
|
|
|
23,691
|
|
|
|
6,717
|
|
|
|
29,621
|
|
Income from equity affiliates
|
|
|
(463
|
)
|
|
|
(1,261
|
)
|
|
|
(4,141
|
)
|
|
|
(2,060
|
)
|
Other operating loss (income)
|
|
|
(1,000
|
)
|
|
|
—
|
|
|
|
(1,000
|
)
|
|
|
151
|
|
|
|
|
365,103
|
|
|
|
367,262
|
|
|
|
1,083,956
|
|
|
|
857,010
|
|
Operating loss
|
|
|
(15,307
|
)
|
|
|
(29,432
|
)
|
|
|
(13,716
|
)
|
|
|
(51,021
|
)
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
(26,831
|
)
|
|
|
(21,251
|
)
|
|
|
(76,870
|
)
|
|
|
(63,835
|
)
|
Loss on extinguishment of debt
|
|
|
(5,385
|
)
|
|
|
(13
|
)
|
|
|
(5,385
|
)
|
|
|
(12,648
|
)
|
Interest income
|
|
|
1,555
|
|
|
|
2,468
|
|
|
|
6,262
|
|
|
|
4,351
|
|
Gain (loss) on foreign exchange
|
|
|
1,679
|
|
|
|
(1,742
|
)
|
|
|
2,474
|
|
|
|
(5,883
|
)
|
Other income
|
|
|
356
|
|
|
|
118
|
|
|
|
1,082
|
|
|
|
697
|
|
|
|
|
(28,626
|
)
|
|
|
(20,420
|
)
|
|
|
(72,437
|
)
|
|
|
(77,318
|
)
|
Loss before income taxes
|
|
|
(43,933
|
)
|
|
|
(49,852
|
)
|
|
|
(86,153
|
)
|
|
|
(128,339
|
)
|
Income tax expense
|
|
|
4,087
|
|
|
|
(718
|
)
|
|
|
13,596
|
|
|
|
2,979
|
|
Net loss
|
|
|
(48,020
|
)
|
|
|
(49,134
|
)
|
|
|
(99,749
|
)
|
|
|
(131,318
|
)
|
Less net loss attributable to noncontrolling interest
|
|
|
(1,458
|
)
|
|
|
—
|
|
|
|
(4,850
|
)
|
|
|
—
|
|
Net loss attributable to Westmoreland Coal Company
|
|
|
(46,562
|
)
|
|
|
(49,134
|
)
|
|
|
(94,899
|
)
|
|
|
(131,318
|
)
|
Less preferred stock dividend requirements
|
|
|
—
|
|
|
|
195
|
|
|
|
—
|
|
|
|
664
|
|
Net loss applicable to common shareholders
|
|
|
$
|
(46,562
|
)
|
|
|
$
|
(49,329
|
)
|
|
|
$
|
(94,899
|
)
|
|
|
$
|
(131,982
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share applicable to common shareholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
|
$
|
(2.59
|
)
|
|
|
$
|
(2.95
|
)
|
|
|
$
|
(5.32
|
)
|
|
|
$
|
(8.49
|
)
|
Weighted average number of common shares outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
|
17,986
|
|
|
|
16,729
|
|
|
|
17,846
|
|
|
|
15,554
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Westmoreland Coal Company and Subsidiaries
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Summary Financial Information (Unaudited)
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Nine Months Ended September 30,
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2015
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2014
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(In thousands)
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Cash Flow
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Net cash provided by operating activities
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$
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20,882
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$
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38,211
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Net cash used in investing activities
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(47,451
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)
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(344,615
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)
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Net cash provided by financing activities
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44,248
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371,509
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September 30, 2015
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December 31, 2014
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(In thousands)
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Balance Sheet Data
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Total cash and cash equivalents
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$
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29,336
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$
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14,258
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Total assets
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1,728,222
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1,829,578
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Total debt
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1,052,954
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975,211
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Working capital surplus (deficit)
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41,154
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(13,126
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)
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Total shareholders’ deficit
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(489,216
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)
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(349,445
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)
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The tables below show how we calculated Adjusted EBITDA, including a
breakdown by segment, and reconciles Adjusted EBITDA to net loss, the
most directly comparable GAAP financial measure.
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Three Months Ended September 30,
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Nine Months Ended September 30,
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2015
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2014
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2015
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2014
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(In thousands)
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Adjusted EBITDA by Segment
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Coal - U.S.
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$
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14,758
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$
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14,923
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$
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49,209
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$
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44,911
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Coal - Canada
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23,659
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22,307
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81,497
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44,295
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Coal - WMLP
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15,648
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10,250
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49,826
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34,594
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Power
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75
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(175
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)
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(3,152
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)
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3,868
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Heritage
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(2,950
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)
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(3,914
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)
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(8,699
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)
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(11,303
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)
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Corporate
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(3,224
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)
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(1,683
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)
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(9,406
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)
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(5,909
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)
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Total
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$
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47,966
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$
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41,708
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$
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159,275
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$
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110,456
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Three Months Ended September 30,
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Nine Months Ended September 30,
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2015
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2014
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2015
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2014
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(In thousands)
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Reconciliation of Adjusted EBITDA to net loss
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Net loss
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$
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(48,020
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)
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$
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(49,134
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)
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$
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(99,749
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)
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$
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(131,318
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)
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Income tax expense (benefit)
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4,087
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(718
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)
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13,596
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2,979
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Interest income
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(1,555
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)
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(2,468
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)
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(6,262
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)
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(4,351
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)
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Interest expense
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26,831
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21,251
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76,870
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63,835
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Depreciation, depletion and amortization
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34,459
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28,175
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106,781
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68,713
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Accretion of ARO and receivable
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7,142
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6,969
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21,250
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16,257
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Amortization of intangible assets and liabilities
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(250
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)
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75
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(756
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)
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385
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EBITDA
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22,694
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4,150
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111,730
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16,500
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Restructuring charges
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—
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3,265
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656
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11,207
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Loss (gain) on foreign exchange
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(1,679
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)
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1,742
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(2,474
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)
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5,883
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Loss on extinguishment of debt
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5,385
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13
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5,385
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12,648
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Acquisition related costs
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3,070
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1,616
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4,470
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22,079
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Customer payments received under loan and lease receivables
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8,731
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4,545
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24,252
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7,830
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Derivative gain
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5,815
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23,691
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6,717
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29,621
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Loss (gain) on sale/disposal of assets and other adjustments
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2,008
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1,675
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2,951
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1,232
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Share-based compensation
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1,942
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1,011
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5,588
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3,456
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Adjusted EBITDA
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$
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47,966
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$
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41,708
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$
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159,275
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$
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110,456
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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 used by management to assess Westmoreland’s
operating performance and Westmoreland believes that EBITDA and Adjusted
EBITDA are useful to an investor in evaluating our operating performance
because these measures:
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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 Westmoreland’s operations from period to period by removing the
effect of our capital structure and asset base from our 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 Westmoreland’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 our
results as reported under GAAP. For example, EBITDA and Adjusted EBITDA:
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do not reflect our cash expenditures, or future requirements for
capital and major maintenance expenditures or contractual commitments;
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do not reflect income tax expenses or the cash requirements necessary
to pay income taxes;
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do not reflect changes in, or cash requirements for, our working
capital needs; and
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do not reflect the significant interest expense, or the cash
requirements necessary to service interest or principal payments, on
certain of our 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 our
industry and in other industries may calculate EBITDA and Adjusted
EBITDA differently from the way that Westmoreland 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 us to invest in the growth of its
business. Westmoreland compensates for these limitations by relying
primarily on its GAAP results and using EBITDA and Adjusted EBITDA only
as supplemental data.
View source version on businesswire.com: http://www.businesswire.com/news/home/20151023005300/en/ Copyright Business Wire 2015
Source: Business Wire
(October 23, 2015 - 7:00 AM EDT)
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