Westmoreland Reports Second Quarter 2016 Results
Second Quarter Highlights
- Revenues of $356.2 million from 12.0 million tons sold
- Net loss applicable to common shareholders of $25.4 million, or $1.37 per diluted share
- Adjusted EBITDA of $43.6 million
Six Month Highlights
- Revenues of $711.0 million from 25.8 million tons sold
- Net income applicable to common shareholders of $5.2 million, or $0.28 per diluted share, including a sizable tax benefit
- Adjusted EBITDA of $106.5 million
- Cash flow provided by operating activities of $37.4 million
- Free cash flow of $28.1 million
“We remain on track to meet our 2016 adjusted EBITDA and free cash flow guidance based on our first half results and the demand trends that have continued to strengthen since June. We delivered second quarter profitability and cash flow right on our plan which factored in power demand at its lowest during the spring months," said Chief Executive Officer Kevin Paprzycki.
“We are executing well on our business strategies with a focus on maximizing cash flow from our sales volume. Based on our expectation that cash flow generation will be greater in the second half, we plan to reduce our total debt later in 2016.”
Westmoreland’s commitment to safety in all aspects of its operations is again reflected in the safety metrics.
|Six Months Ended June 30, 2016|
|U.S. National Average||3.22||2.41|
Consolidated and Segment Results
Second quarter results are influenced by the normal seasonality of low springtime power demand and significant scheduled maintenance downtime at customer plants. While consolidated adjusted EBITDA was down 21% for the second quarter and 4% for the first six months compared with the same periods last year, cash flow from operations and free cash flow for the first six months exceeded last year’s levels. Coal - Canada had a strong second quarter in 2015 including accelerated loan and lease payments which aided adjusted EBITDA. In comparison, Canadian demand in the second quarter of 2016 was impacted by weather, most notably above-average rainfall. Coal - U.S. and Coal - WMLP segments grew adjusted EBITDA for the quarter and six months compared to the same periods last year. The Coal - U.S. growth resulted from the San Juan acquisition closing in the first quarter of 2016 and the Coal - WMLP growth was from improved operations.
Cash Flow and Liquidity
Westmoreland improved free cash flow generation during the first half of 2016 from the same period last year driven in part by recovery of cash from working capital. Free cash flow through June 30, 2016, was $28.1 million comprised of cash flow provided by operations of $37.4 million, less capital expenditures of $12.2 million, plus net cash collected under certain contracts for loan and lease receivables of $2.9 million. In the first six months, cash flow benefited from a positive working capital change of $6.6 million while asset retirement obligations were a use of $16.4 million.
Cash and cash equivalents on hand at June 30, 2016 were $35.9 million, a $12.9 million increase from year end. Contributing to the increase in cash on hand were the free cash flow generation of $28.1 million; proceeds from asset sales of $6.7 million; net cash debt reductions, mostly capital lease pay downs, of $17.0 million; cash used, net of loan proceeds received, to purchase San Juan of $3.1 million; and cash required for bonding of $0.7 million.
Gross debt plus capital lease obligations at quarter end totaled $1,181.0 million. The increase from year end is attributable to the San Juan financing. Gross debt includes $3.0 million drawn on the revolving credit facility at June 30, 2016. There was $43.3 million available to draw, net of letters of credit.
“This year, so far, is progressing normally and as we expected. The strengthening demand, and the resulting cash flow, taken together with our first-half results provide confidence in our ability to achieve our guidance this year,” said Paprzycki.
Westmoreland’s 2016 guidance remains:
|Coal tons sold||53 - 60 million tons|
|Adjusted EBITDA||$235 - $275 million|
|Free cash flow||$60 - $80 million|
|Capital expenditures||$59 - $71 million|
|Cash interest||approximately $90 million|
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). Its power operations include ownership of the two-unit ROVA coal-fired power plant in North Carolina.