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Westmoreland Reports Second Quarter and First Half 2017 Results

ENGLEWOOD, Colo., Aug. 03, 2017 (GLOBE NEWSWIRE) -- Westmoreland Coal Company (Nasdaq:WLB) today reported financial results for the second quarter 2017 and updated its guidance.

Second Quarter Highlights

  • Revenues of $323.0 million from 11.0 million tons sold
  • Net loss applicable to common shareholders of $50.4 million, or $2.69 per share
  • Adjusted EBITDA of $32.6 million

Six Month Highlights

  • Revenues of $662.8 million from 23.3 million tons sold
  • Net loss applicable to common shareholders of $87.2 million, or $4.68 per share
  • Adjusted EBITDA of $120.8 million, including approximately $46 million incremental from the Capital Power payment
  • Cash flow provided by operating activities of $10.2 million
  • Free cash flow of $47.5 million, which also includes the accelerated Capital Power payment

Kevin Paprzycki, Westmoreland's Chief Executive Officer, said, "This quarter, we executed across all of our strategic initiatives to drive long-term value creation. Specifically, we have formalized an agreement to sell ROVA, our coal-fired generating station, secured multiple contract extensions which will add volume and cash flow over multiple years, and continued making progress toward optimizing our capital structure. Our disciplined approach toward capitalizing on near-term catalysts will help further strengthen our business and enhance shareholder value."

"That said, results for the second quarter and first half came in below our expectations as unfavorable sales volume mix and higher costs at Coal Valley weighed on our performance. We continue to expect stronger results in the back half, following last year's pattern, but we have lowered our full year guidance to reflect the first half results, pricing adjustments for contract extensions, as well as our updated demand projections for the remainder of 2017."

Safety

Westmoreland's safety metrics are below.

Six Months Ended June 30, 2017
Reportable Rate Lost Time Rate
U.S. Surface Operations 1.44 1.28
U.S. National Surface Average 1.47 1.02
Percentage 98% 125%
U.S. Underground Operations 1.61 1.21
U.S. National Underground Average 4.79 3.44
Percentage 34% 35%
Canadian Operations 0.98 0.33

Consolidated and Segment Results

During the second quarter of 2017, consolidated adjusted EBITDA declined 28.5% compared with the same period in 2016. This decline was driven in part by declines in the Coal - Canada segment resulting from increased equipment maintenance and costs to develop the pit at the Coal Valley mine due to a delay in the sale of this facility. Compared with the same period in 2016, second quarter 2017 revenues were also impacted by the 2016 expiration of the Jewett and Beulah coal supply contracts in the Coal - U.S. segment, which were partially offset by additional reclamation revenue at the Jewett mine. In addition, seasonal outages at our customers' plants and the timing of weather-related demand drove lower adjusted EBITDA as we sold fewer tons to high-margin customers. Adjusted EBITDA was favorably impacted by cost-savings initiatives across the company, particularly in the Coal - WMLP segment.

Consolidated adjusted EBITDA for the first six months of 2017 was $120.8 million, inclusive of the impact of the $52.5 million early repayment from Capital Power. Adjusted EBITDA for the first six months was influenced by the many of the same factors as the three month period: the contract expirations at Jewett and Beulah, operational challenges at Coal Valley, weather-related demand and volume mix issues, offset by cost reductions, increased volume from San Juan, and Jewett reclamation revenue. In addition, the first half of 2017 was impacted by increased costs associated with unexpected dragline maintenance as well as lower revenue and increased costs resulting from record precipitation at the Westmoreland Resource Partners LP's ("WMLP") Kemmerer mine, each of which occurred in the first quarter.

Cash Flow and Liquidity

Westmoreland’s free cash flow through June 30, 2017 was $47.5 million. Free cash flow is the net of cash flow provided by operations of $10.2 million, less capital expenditures of $13.1 million, plus net cash collected for the loan and lease receivables of $50.5 million. Included in cash flow provided by operations was cash used for interest expense of $48.9 million and for asset retirement obligations of $20.8 million, plus positive working capital of $10.5 million.

At June 30, 2017, cash and cash equivalents on hand totaled $57.6 million, a $2.5 million decrease from year end. The decrease was comprised of free cash flow generation of $47.5 million; net debt reductions, including capital lease payments, of $44.3 million; a $3.6 million reserve acquisition and other non-operating cash uses of $2.6 million.

Gross debt plus capital lease obligations at quarter end totaled $1.1 billion, of which $325.5 million resides at WMLP and $782.4 million resides at Westmoreland Coal Company. There was $27.0 million available to draw, net of letters of credit, on Westmoreland's revolving credit facility. An additional $15.0 million was available to WMLP through its revolving credit facility, which is not available to Westmoreland Coal Company for borrowings. No amounts had been drawn on either revolving credit facility as of June 30, 2017.

ROVA Sale

Earlier today, Westmoreland announced the sale of the Roanoke Valley Power Facility ("ROVA") for $5 million. Westmoreland continues to anticipate the return of approximately $10 million of cash collateral this year for the related ROVA power contracts.

Full-Year Guidance

Regarding the revised outlook, Paprzycki commented, “We revised the midpoint of our adjusted EBITDA guidance by $35 million. Nearly one-third of this is from contract extensions where we granted price concessions in exchange for extended contract length. These extensions, including the recently announce Kemmerer contract, will increase our total cash flow and EBITDA over multiple years. Another one third of the change to guidance stems from the weather patterns’ effect on our sales volume and mix across our operations. The remainder of the change is from operational issues, in particular the dragline outage we experienced in the first half and higher costs at Coal Valley."

Westmoreland's 2017 guidance was revised as follows:

Guidance Summary Original 2017 Guidance Revised 2017 Guidance
Coal tons sold 40 - 50 million tons 40 - 50 million tons
Adjusted EBITDA $280 - $310 million $250 - $270 million
Free cash flow $115 - $140 million $90 - $115 million
Capital expenditures $40 - $45 million $40 - $45 million
Cash interest approximately $95 million approximately $95 million

Adjusted EBITDA and free cash flow include the $52.5 million early repayment of loan and lease receivables related to the Genesee mine, of which approximately $40 million is incremental to 2017 compared to 2016 results.

Notes

Westmoreland presents certain non-GAAP financial measures, including adjusted EBITDA and free cash flow, that management believes provide meaningful supplemental information and provide meaningful comparability to prior periods. Reconciliations of non-GAAP to GAAP measures are presented in the accompanying tables.

Conference Call

Westmoreland Coal Company will host its earnings conference call on August 3, 2017, at 10:00 a.m. Eastern Time.

Participants may join the call using the numbers below:

Toll Free: 1-844-WCC-COAL (844-922-2625)
International: 1-201-689-8584
Webcast www.westmoreland.com/investors/investor-webcasts

A replay of the teleconference will be available until August 17, 2017 and can be accessed using the information below:

Replay: 1-877-481-4010 or 1-919-882-2331
Replay ID: 15919
Webcast www.westmoreland.com/investors/investor-webcasts

About Westmoreland Coal Company

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). 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. 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. Possible events or factors that could cause actual results or performance to differ materially from those anticipated in our forward-looking statements include, but are not limited to the following:

  • our ability to consummate the sale of the ROVA and Coal Valley facilities on reasonable terms or at all;
  • our relationships with, and other conditions affecting, our customers, including how power prices affect our customers’ decision to run their plants;
  • seasonal variations and inclement weather, which may cause fluctuations in our operating results, profitability, cash flow and working capital needs related to our operating segments;
  • our substantial level of indebtedness and our ability to adhere to financial covenants related to our borrowing arrangements;
  • existing and future legislation and regulation affecting both our coal mining operations and our customers' coal usage, governmental policies and taxes, including those aimed at reducing emissions of elements such as mercury, sulfur dioxides, nitrogen oxides, particulate matter or greenhouse gases,
  • the effect of the Environmental Protection Agency's and Canadian and provincial governments' inquiries and regulations on the operations of the power plants to which we provide coal;
  • Alberta's Climate Leadership Plan to phase out coal-fired electricity generation by 2030;
  • our ability to manage the San Juan entities;
  • the effect of legal and administrative proceedings, settlements, investigations and claims, including any related to citations and orders issued by regulatory authorities, and the availability of related insurance coverage;
  • changes in our post-retirement medical benefit and pension obligations and the impact of the recently enacted healthcare legislation on our employee health benefit costs;
  • inaccuracies in our estimates of our coal reserves;
  • our potential inability to expand or continue current coal operations due to limitations in obtaining bonding capacity for new mining permits, and/or increases in our mining costs as a result of increased bonding expenses;
  • the effect of prolonged maintenance or unplanned outages at our operations or those of our major power generating customers;
  • the inability to control costs, recognize favorable tax credits and/or receive adequate train traffic at our open market mine operations;
  • the ability or inability of our power hedging arrangements to generate cash.
  • competition within our industry and with producers of competing energy sources;
  • the availability and costs of key supplies or commodities, such as diesel fuel, steel and explosives;
  • potential title defects or loss of leasehold interests in our properties, which could result in unanticipated costs or an inability to mine the properties;
  • and other risks, uncertainties and assumptions described in our periodic filings with the Securities and Exchange Commission, including in "Risk Factors" in our most recent Annual Report on Form 10-K and subsequent filings.

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
Summary Consolidated and Operating Segment Data (Unaudited)
Three Months Ended June 30,
Increase / (Decrease)
2017 2016 $ %
(In thousands, except tons sold data)
Westmoreland Consolidated
Revenues $323,025 $357,597 $(34,572) (9.7)%
Operating loss (21,067) (883) (20,184) (2,285.8)%
Adjusted EBITDA 32,566 45,556 (12,990) (28.5)%
Tons sold—millions of equivalent tons 11.0 12.0 (1.0) (8.3)%
Coal - U.S.
Revenues $141,037 $152,519 $(11,482) (7.5)%
Operating (loss) income (6,623) 588 (7,211) *
Adjusted EBITDA 23,656 20,848 2,808 13.5%
Tons sold—millions of equivalent tons 4.0 4.7 (0.7) (14.9)%
Coal - Canada
Revenues $89,349 $109,328 $(19,979) (18.3)%
Operating (loss) income (11,735) 3,590 (15,325) *
Adjusted EBITDA (1,598) 14,342 (15,940) *
Tons sold—millions of equivalent tons 5.2 5.6 (0.4) (7.1)%
Coal - WMLP
Revenues $81,052 $80,468 $584 0.7%
Operating income (loss) 7,588 (4,282) 11,870 *
Adjusted EBITDA 18,854 16,303 2,551 15.6%
Tons sold—millions of equivalent tons 1.9 1.7 0.2 11.8%
Power
Revenues $19,880 $21,944 $(2,064) (9.4)%
Operating (loss) income (383) 6,731 (7,114) *
Adjusted EBITDA (141) 614 (755) *
* Not meaningful


Westmoreland Coal Company and Subsidiaries
Summary Consolidated and Operating Segment Data (Unaudited)
Six Months Ended June 30,
Increase / (Decrease)
2017 2016 $ %
(In thousands, except tons sold data)
Westmoreland Consolidated
Revenues $662,762 $713,451 $(50,689) (7.1)%
Operating (loss) income (32,154) 6,736 (38,890) *
Adjusted EBITDA 120,784 109,206 11,578 10.6%
Tons sold—millions of equivalent tons 23.3 25.8 (2.5) (9.7)%
Coal - U.S.
Revenues $278,405 $308,508 $(30,103) (9.8)%
Operating (loss) income (2,287) 8,254 (10,541) *
Adjusted EBITDA 51,125 51,198 (73) (0.1)%
Tons sold—millions of equivalent tons 8.8 10.7 (1.9) (17.8)%
Coal - Canada
Revenues $198,364 $203,084 $(4,720) (2.3)%
Operating (loss) income (18,839) 15,693 (34,532) *
Adjusted EBITDA 57,637 37,666 19,971 53.0%
Tons sold—millions of equivalent tons 11.1 11.4 (0.3) (2.6)%
Coal - WMLP
Revenues $155,857 $172,949 $(17,092) (9.9)%
Operating income (loss) 8,870 (3,473) 12,343 *
Adjusted EBITDA 31,723 35,583 (3,860) (10.8)%
Tons sold—millions of equivalent tons 3.6 3.7 (0.1) (2.7)%
Power
Revenues $41,107 $43,940 $(2,833) (6.4)%
Operating (loss) income (1,136) 931 (2,067) *
Adjusted EBITDA (3,514) (2,734) (780) (28.5)%
* Not meaningful


Westmoreland Coal Company and Subsidiaries
Consolidated Statements of Operations (Unaudited)
Three Months Ended June 30, Six Months Ended June 30,
2017 2016 2017 2016
(In thousands)
Revenues$323,025 $357,597 $662,762 $713,451
Cost, expenses and other:
Cost of sales271,909 298,181 556,513 579,307
Depreciation, depletion and amortization39,497 35,223 76,064 72,237
Selling and administrative30,166 27,613 60,592 55,012
Heritage health benefit expenses3,306 3,222 6,604 6,237
Loss (gain) on sale/disposal of assets133 (2,253) (34) (1,917)
Derivative loss (gain)481 (5,878) (1,904) (3,278)
Income from equity affiliates(1,400) (1,287) (2,919) (2,580)
Other operating loss 3,659 1,697
344,092 358,480 694,916 706,715
Operating (loss) income(21,067) (883) (32,154) 6,736
Other (expense) income:
Interest expense(30,109) (30,860) (59,371) (59,787)
Interest income1,038 2,356 1,931 4,147
Loss on foreign exchange(1,185) (364) (1,652) (1,751)
Other income302 254 2,460 132
(29,954) (28,614) (56,632) (57,259)
Loss before income taxes(51,021) (29,497) (88,786) (50,523)
Income tax benefit(501) (100) (965) (48,035)
Net loss(50,520) (29,397) (87,821) (2,488)
Less net loss attributable to noncontrolling interest(138) (808) (637) (1,306)
Net loss applicable to common shareholders$(50,382) $(28,589) $(87,184) $(1,182)
Net loss per share applicable to common shareholders:
Basic and diluted$(2.69) $(1.54) $(4.68) $(0.06)
Weighted average number of common shares outstanding:
Basic and diluted18,700 18,540 18,636 18,401


Westmoreland Coal Company and Subsidiaries
Consolidated Balance Sheets (Unaudited)
June 30, 2017 December 31, 2016
(In thousands)
Assets
Current assets:
Cash and cash equivalents$57,620 $60,082
Receivables:
Trade132,715 140,731
Loan and lease receivables 5,867
Other11,450 13,261
Total receivables144,165 159,859
Inventories120,580 125,515
Other current assets23,096 32,258
Total current assets345,461 377,714
Land, mineral rights, property, plant and equipment1,647,600 1,617,938
Less accumulated depreciation, depletion and amortization861,752 782,417
Net land, mineral rights, property, plant and equipment785,848 835,521
Loan and lease receivables, less current portion 44,474
Advanced coal royalties19,049 18,722
Reclamation deposits76,131 74,362
Restricted investments and bond collateral146,386 144,913
Investment in joint venture27,363 26,951
Other assets59,233 62,252
Total Assets$1,459,471 $1,584,909
Liabilities and Shareholders’ Deficit
Current liabilities:
Current installments of long-term debt$54,494 $86,272
Accounts payable and accrued expenses:
Trade and other accrued liabilities124,474 142,233
Interest payable22,515 22,458
Production taxes44,509 44,995
Postretirement medical benefits14,892 14,892
Deferred revenue15,204 15,253
Asset retirement obligations41,952 32,207
Other current liabilities25,170 20,964
Total current liabilities343,210 379,274
Long-term debt, less current installments1,021,068 1,022,794
Postretirement medical benefits, less current portion309,526 308,709
Pension and SERP obligations, less current portion43,681 43,982
Deferred revenue, less current portion10,498 16,251
Asset retirement obligations, less current portion449,998 451,834
Other liabilities48,000 52,182
Total liabilities2,225,981 2,275,026
Shareholders’ deficit:
Common stock of $.01 par value: Authorized 30,000,000 shares; Issued and
outstanding 18,742,143 at June 30, 2017 and 18,570,642 at December 31, 2016
187 186
Other paid-in capital249,442 248,143
Accumulated other comprehensive loss(168,259) (179,072)
Accumulated deficit(844,886) (757,367)
Total shareholders’ deficit(763,516) (688,110)
Noncontrolling interests in consolidated subsidiaries(2,994) (2,007)
Total deficit(766,510) (690,117)
Total Liabilities and Shareholders’ Deficit$1,459,471 $1,584,909

Westmoreland Coal Company and Subsidiaries
Consolidated Statements of Cash Flows (Unaudited)
Six Months Ended June 30,
2017 2016
(In thousands)
Cash flows from operating activities:
Net loss $(87,821) $(2,488)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation, depletion and amortization 76,064 72,237
Accretion of asset retirement obligation 22,437 14,297
Share-based compensation 2,480 4,534
Non-cash interest expense 4,639 4,554
Amortization of deferred financing costs 5,193 6,630
Gain on derivative instruments (1,904) (3,278)
Loss on foreign exchange 1,652 1,751
Income from equity affiliates (2,919) (2,580)
Distributions from equity affiliates 3,403 3,633
Deferred income tax benefit (965) (47,547)
Other (1,752) (8,017)
Changes in operating assets and liabilities:
Receivables 11,360 7,362
Inventories 7,706 6,343
Accounts payable and accrued expenses (20,919) (4,044)
Interest payable 532 (3,011)
Deferred revenue (5,809) 6,948
Other assets and liabilities 17,596 26,123
Asset retirement obligations (20,819) (41,548)
Net cash provided by operating activities 10,154 41,899
Cash flows from investing activities:
Additions to property, plant and equipment (13,104) (12,231)
Change in restricted investments (2,009) 658
Cash payments related to acquisitions (3,580) (125,314)
Proceeds from sales of assets 783 6,706
Receipts from loan and lease receivables 50,488 3,268
Payments related to loan and lease receivables (334)
Other (969) (538)
Net cash provided by (used in) investing activities 31,609 (127,785)
Cash flows from financing activities:
Borrowings from long-term debt, net of debt discount 122,250
Repayments of long-term debt (44,324) (17,991)
Borrowings on revolving lines of credit 113,200 195,400
Repayments on revolving lines of credit (113,200) (194,370)
Debt issuance costs and other refinancing costs (5,709)
Other (364) (529)
Net cash (used in) provided by financing activities (44,688) 99,051
Effect of exchange rate changes on cash 463 (225)
Net (decrease) increase in cash and cash equivalents (2,462) 12,940
Cash and cash equivalents, beginning of period 60,082 22,936
Cash and cash equivalents, end of period $57,620 $35,876
Supplemental disclosures of cash flow information:
Cash paid for interest $48,931 $47,972


Westmoreland Coal Company and Subsidiaries
Non-GAAP Reconciliations (Unaudited)

The tables below show how the Company calculates and reconciles to the most directly comparable GAAP financial measures EBITDA, Adjusted EBITDA (including a breakdown by segment), and free cash flow.

EBITDA, Adjusted EBITDA, and free cash flow are supplemental measures of financial performance that are not required by, or presented in accordance with, GAAP. EBITDA, Adjusted EBITDA, and free cash flow are included in this news release because they are key metrics used by management to assess Westmoreland’s operating performance and as a basis for strategic planning and forecasting. Westmoreland believes that EBITDA, Adjusted EBITDA, and free cash flow 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;
  • are used by rating agencies, lenders and other parties to evaluate creditworthiness; and
  • help investors to more meaningfully evaluate and compare the results of Westmoreland’s operations from period to period by removing the effect of the Company’s capital structure and asset base from the Company’s operating results.

Neither EBITDA, Adjusted EBITDA, nor free cash flow are measures calculated in accordance with GAAP. The items excluded from EBITDA, Adjusted EBITDA, and free cash flow are significant in assessing Westmoreland’s operating results. EBITDA, Adjusted EBITDA, and free cash flow 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.

Other companies in Westmoreland’s industry and in other industries may calculate EBITDA, Adjusted EBITDA, and free cash flow differently from the way that Westmoreland does, limiting their usefulness as comparative measures. Because of these limitations, EBITDA, Adjusted EBITDA, and free cash flow should not be considered as measures of discretionary cash available to the Company to invest in the growth of its business. Westmoreland compensates for these limitations by relying primarily on its GAAP results and using EBITDA, Adjusted EBITDA, and free cash flow only as supplemental data.

EBITDA and Adjusted EBITDA

EBITDA (earnings before interest expense, interest income, income taxes, depreciation, depletion, amortization and accretion expense) and Adjusted EBITDA are non-GAAP measures that 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. Westmoreland considers Adjusted EBITDA to be useful because it reflects operating performance before the effects of certain non-cash items and other items that it believes are not indicative of core operations. The Company uses Adjusted EBITDA to assess operating performance.

Three Months Ended June 30, Six Months Ended June 30,
2017 2016 2017 2016
(In thousands)
Adjusted EBITDA by Segment
Coal - U.S. $23,656 $20,848 $51,125 $51,198
Coal - Canada (1,598) 14,342 57,637 37,666
Coal - WMLP 18,854 16,303 31,723 35,583
Power (141) 614 (3,514) (2,734)
Heritage (3,786) (3,518) (7,456) (6,999)
Corporate (4,419) (3,033) (8,731) (5,508)
Total $32,566 $45,556 $120,784 $109,206


Reconciliation of Net (Loss) Income to Adjusted EBITDAThree Months Ended June 30, Six Months Ended June 30,
2017 2016 2017 2016
(In thousands)
Net loss$(50,520) $(29,397) $(87,821) $(2,488)
Income tax benefit(501) (100) (965) (48,035)
Interest income(1,038) (2,356) (1,931) (4,147)
Interest expense30,109 30,860 59,371 59,787
Depreciation, depletion and amortization39,497 35,223 76,064 72,237
Accretion of asset retirement obligation11,142 10,332 22,437 19,950
Amortization of intangible assets and liabilities(267) (260) (534) (427)
EBITDA28,422 44,302 66,621 96,877
Advisory fees (1)925 925
Loss on foreign exchange1,185 364 1,652 1,751
Acquisition-related costs 133 568
Customer payments received under loan and lease receivables (2) 2,727 50,489 5,387
Derivative loss (gain)481 (5,878) (1,904) (3,278)
Loss on sale/disposal of assets and other adjustments420 1,954 521 3,367
Share-based compensation1,133 1,954 2,480 4,534
Adjusted EBITDA$32,566 $45,556 $120,784 $109,206

___________________
(1) Amount represents fees paid to financial and legal advisers related to the assessment of Westmoreland's capital structure. These advisers, together with Westmoreland's management and board of directors, are developing and evaluating options to optimize Westmoreland's overall capital structure.
(2) Represents a return of and on capital. These amounts are not included in operating income or operating cash flows as the capital outlays are treated as loan and lease receivables, but are included within Adjusted EBITDA so that the cash received is treated consistently with all other contracts that do not result in loan and lease receivable accounting. On March 24, 2017, Westmoreland received $52.5 million from its customer at the Genesee mine, representing an accelerated repayment of all outstanding loan and lease receivables. While Westmoreland will continue to provide contract mining services at the Genesee mine, all future capital expenditures at the Genesee mine will be funded by the customer. Accordingly, there will be no additional payments from the customer at the Genesee mine in the form of loan and lease repayments, but Westmoreland will earn a management fee pursuant a contract mining arrangement.

Free Cash Flow

Free cash flow represents net cash provided by (used in) operating activities less additions to property, plant and equipment (“CAPEX” or “capital expenditures”) plus net customer payments received under loan and lease receivables. Free cash flow is a non-GAAP measure and should not be considered as an alternative to cash and cash equivalents, cash flow from operations, cash flow from investing activities, cash flow from financing activities, net income (loss) or any other measure of performance presented in accordance with GAAP. Free cash flow is intended to represent cash flow available to satisfy our debts, after giving consideration to those expenses required to maintain our assets and infrastructure. Accordingly, although free cash flow is not a measure of performance calculated in accordance with GAAP, the Company believes free cash flow is useful to investors because it allows analysts and others in the industry to assess performance, liquidity and ability to satisfy debt requirements.

Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow Six Months Ended June 30,
2017 2016
(In thousands)
Net cash provided by operating activities $10,154 $41,899
Less cash paid for property, plant and equipment (13,104) (12,231)
Net customer payments received under loan and lease receivables 50,488 2,934
Free cash flow $47,538 $32,602


For further information please contact: Gary Kohn, Chief Financial Officer 1-720-354-4467 gkohn@westmoreland.com

Source:Westmoreland Coal Company