Westmoreland Reports Third Quarter 2012 Results; Announces Leadership Transition

Westmoreland Reports Third Quarter 2012 Results; Announces Leadership Transition

ENGLEWOOD, Colo.--(BUSINESS WIRE)-- Westmoreland Coal Company (NasdaqGM:WLB) today reported its third quarter results for 2012, as well as a transition plan for Westmoreland's senior leadership.

Highlights:

  • Adjusted EBITDA increased 46.7% or $11.3 million during Q3 2012 to $35.5 million as compared to $24.2 million in Q3 2011. Year to date 2012 Adjusted EBITDA was $77.4 million, an increase of $15.7 million or 25.4% over 2011 year to date Adjusted EBITDA of $61.7 million.

  • Total revenues were $161.3 million for Q3 2012 compared to $132.4 million in Q3 2011, an increase of 21.8%.

  • Net income applicable to common shareholders of $7.3 million ($0.52 per basic and $0.50 per diluted share) for Q3 2012 compared to a Q3 2011 net income of $2.4 million ($0.18 per basic and diluted share). Year to date net loss for 2012 was $4.6 million compared to a year to date net loss for 2011 of $23.3 million. The 2011 net loss includes $20.2 million of charges related to the refinancing of debt.

  • The company improved its liquidity position during the quarter, ending the quarter with cash and cash equivalents of $53.7 million. It also had an additional $43.1 million available to it under existing lines of credit.

  • Westmoreland continued its strong safety performance achieving reportable and lost time incident rates approximately 63.5% and 46.8%, respectively, of the national averages for surface operations year to date through the third quarter of 2012.

  • Robert P. King, current President and Chief Operating Officer was appointed to the Board of Directors effective October 24, 2012.

  • The company also announced that Keith E. Alessi, Westmoreland's current Chief Executive Officer, will retire effective April 5, 2013 and will assume the position of Executive Chairman of the Board. Mr. King will assume the role of Chief Executive Officer on that date.


"This is a record quarter for the company as measured by Adjusted EBITDA," said Keith E. Alessi, Westmoreland's Chief Executive Officer. "The strong increases over prior year were largely driven by the operating results of the Kemmerer mine and the continuing execution of our low overhead, mine mouth model. To put the quarter in perspective, the financial results of this single quarter exceeded the financial results of the entire year of 2009. I feel that we demonstrated during 2010 and 2011 that we repaired the business and built a solid platform. Now, in 2012, I believe that we are showing that we can grow our business responsibly and profitably."

"Year to date Adjusted EBITDA through the first three quarters exceeds the Adjusted EBITDA we generated during the entire year of 2011. This has allowed us to continue to deleverage the business and we ended the quarter in a highly liquid position."

"The Board of Directors and I have been preparing for a transition of the day-to-day leadership of the business for some time now. The hiring of Bob King earlier this year was an important step in this process. He has made a positive impact on our business and I am confident that his skills and deep industry experience will benefit the company as it continues to seek growth opportunities. I look forward to continuing to work closely with Bob in my role as Executive Chairman beginning in April 2013. I am also pleased that our current Chairman, Dick Klingaman, has agreed to transition to Lead Independent Director at the time I move to the Executive Chair role."

Richard Klingaman, Chairman of the Board, stated, "I am thrilled that Keith has agreed to resume the role of Executive Chairman. The leadership team of Alessi and King brings experience, creativity, and drive to Westmoreland as it continues to pursue its strategic plan to create long term shareholder value."

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 third quarter of 2012 of 1.07 and 0.53 versus the national surface mine rates of 1.68 and 1.14, respectively.

Nine Months Ended
September 30, 2012

Reportable

Lost Time

Westmoreland

1.07

0.53

National Average

1.68

1.14

Percentage

63.5%

46.8%

Effective February 1, 2012, Westmoreland's safety performance statistics are inclusive of the Kemmerer Mine.

Financial Results

Westmoreland's Adjusted EBITDA increased to $35.5 million in Q3 2012 from $24.2 million in Q3 2011. This increase was predominately driven by the January 31st acquisition of the Kemmerer Mine. Q3 2012 Adjusted EBITDA was negatively impacted by reduced tonnage demand due to reduced demand for power and increased wind generation. In addition, ROVA was impacted by unscheduled outages.

Westmoreland's revenues in Q3 2012 increased to $161.3 million compared with $132.4 million in Q3 2011. This increase was primarily driven by the addition of the Kemmerer Mine offset by the reduced tonnage and unscheduled outages described above.

Westmoreland's Q3 2012 net income increased by $4.9 million over prior year. This increase was driven by the Kemmerer Mine's performance, and was partially offset with increased interest expense and other factors described above.

Coal Segment Operating Results

The following table summarizes Westmoreland's Q3 2012 and Q3 2011 coal segment performance:

Three Months Ended September 30,

Increase / (Decrease)

2012

2011

$

%

Revenues (in thousands)

$

138,798

$

108,823

$

29,975

27.5

%

Operating income (in thousands)

18,025

9,679

8,346

86.2

%

Adjusted EBITDA (in thousands)

34,584

22,070

12,514

56.7

%

Tons sold - millions of equivalent tons

6.0

6.0

-

-

%

Westmoreland's coal revenues and Adjusted EBITDA both increased significantly during the third quarter of 2012 over prior year due primarily to the Kemmerer Mine acquisition and were offset by reduced tonnage demand due to reduced demand for power and increased wind generation.

Power Segment Operating Results

The following table summarizes Westmoreland's Q3 2012 and Q3 2011 power segment performance:

Three Months Ended September 30,

Increase / (Decrease)

2012

2011

$

%

(In thousands)

Revenues

$

22,534

$

23,626

$

(1,092

)

(4.6

)%

Operating income

4,023

4,694

(671

)

(14.3

)%

Adjusted EBITDA

6,742

7,441

(699

)

(9.4

)%

Megawatts hours

417

445

(28

)

(6.3

)%

Westmoreland's power segment revenues and Adjusted EBITDA decreased in Q3 2012 as ROVA experienced unplanned outages during the quarter.

Nonoperating Results

Third quarter 2012 corporate expenses increased as a result of higher long-term compensation expenses. Interest expense for Q3 2012 also increased to $11.1 million from $7.7 million in Q3 2011 as a result of the Kemmerer acquisition debt issued in January 2012.

Cash Flow from Operations and Liquidity

Cash and cash equivalents increased to $53.7 million at September 30, 2012 up from $30.8 million as of December 31, 2011. Overall cash increased by $22.9 million driven by the Kemmerer Mine's strong initial performance and working capital management following the acquisition.

Conference Call

A conference call regarding Westmoreland Coal Company's third quarter 2012 results will be held on Friday, October 26, 2012, at 10:00 a.m. Eastern Time. Call-in instructions are available on our web site and have been provided in a separate news release.

About Westmoreland Coal Company

Westmoreland Coal Company is the oldest independent coal company in the United States. Its coal operations include coal mining in the Powder River Basin in Montana, sub-bituminous mining in Wyoming, 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

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
September 30,

Nine Months Ended
September 30,

2012

2011

2012

2011

(In thousands, except per share data)

Revenues

$

161,332

$

132,449

$

441,410

$

372,353

Cost, expenses and other:

Cost of sales

117,088

100,164

339,906

288,964

Depreciation, depletion and amortization

15,534

11,612

42,542

33,861

Selling and administrative

11,665

9,884

37,157

28,224

Heritage health benefit expenses

3,881

3,896

11,743

11,115

Loss on sales of assets

14

91

291

415

Other operating income

(2,301

)

(1,769

)

(10,503

)

(5,236

)

145,881

123,878

421,136

357,343

Operating income

15,451

8,571

20,274

15,010

Other income (expense):

Interest expense

(11,096

)

(7,650

)

(32,011

)

(22,262

)

Loss on extinguishment of debt

-

-

-

(17,030

)

Interest income

475

423

1,371

1,134

Other income (loss)

196

147

611

(2,630

)

(10,425

)

(7,080

)

(30,029

)

(40,788

)

Income (loss) before income taxes

5,026

1,491

(9,755

)

(25,778

)

Income tax benefit from operations

(325

)

(84

)

(1,239

)

(706

)

Net income (loss)

5,351

1,575

(8,516

)

(25,072

)

Less net loss attributable to noncontrolling interest

(2,271

)

(1,154

)

(4,914

)

(2,783

)

Net income (loss) attributable to the Parent company

7,622

2,729

(3,602

)

(22,289

)

Less preferred stock dividend requirements

340

340

1,020

1,020

Net income (loss) applicable to common shareholders

$

7,282

$

2,389

$

(4,622

)

$

(23,309

)

Net income (loss) per share applicable to common shareholders:

Basic

$

0.52

$

0.18

$

(0.33

)

$

(1.79

)

Diluted

$

0.50

$

0.18

$

(0.33

)

$

(1.79

)

Weighted average number of common shares outstanding:

Basic

14,104

13,384

13,986

12,990

Diluted

15,326

13,442

13,986

12,990

Westmoreland Coal Company and Subsidiaries

Summary Financial Information (Unaudited)

Nine Months Ended September 30,

2012

2011

(In thousands)

Cash Flow

Net cash provided by operating activities

$

42,349

$

34,028

Net cash used in investing activities

(116,649

)

(15,495

)

Net cash provided by financing activities

97,202

18,921

September 30,
2012

December 31,
2011

(In thousands)

Balance Sheet Data (Unaudited)

Total cash and cash equivalents

$

53,685

$

30,783

Total assets

971,153

759,172

Total debt

388,096

282,269

Working capital (deficit)

10,120

(21,669

)

Total deficit

(252,747

)

(249,858

)

Common shares outstanding

14,143

13,811

Three Months Ended
September 30,

Nine Months Ended
September 30,

2012

2011

2012

2011

(In thousands)

Adjusted EBITDA by Segment

Coal

$

34,584

$

22,070

$

84,080

$

57,262

Power

6,742

7,441

13,168

20,152

Heritage

(4,149

)

(4,076

)

(12,686

)

(12,062

)

Corporate

(1,657

)

(1,278

)

(7,150

)

(3,663

)

Total

$

35,520

$

24,157

$

77,412

$

61,689

Three Months Ended
September 30,

Nine Months Ended
September 30,

2012

2011

2012

2011

(In thousands)

Reconciliation of Adjusted EBITDA to net loss