Attached files
| file | filename |
|---|---|
| EX-99.2 - EXHIBIT 99.2 - WESTMORELAND COAL Co | westmorelandadjustedebit.htm |
| EX-23.1 - EXHIBIT 23.1 - WESTMORELAND COAL Co | exh23-1_070114.htm |
| EX-99.3 - EXHIBIT 99.3 - WESTMORELAND COAL Co | exh99-3_070114.htm |
| 8-K - 8-K - WESTMORELAND COAL Co | f8k_070114i502701801.htm |
| EX-99.1 - EXHIBIT 99.1 - WESTMORELAND COAL Co | exh99-1_070814.htm |
Exhibit 99.4
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
The following unaudited pro forma condensed combined financial information is based on the historical financial statements of Westmoreland Coal Company and Subsidiaries, or Westmoreland, and the combined consolidated historical financial statements of the Prairie Mines & Royalty Ltd. ("PMRL") and Coal Valley Resources Inc. ("CVRI") (collectively referred to as the "Canadian Subsidiaries") and has been prepared to reflect the acquisition of PMRL and CVRI, or the Canadian Acquisition, from Sherritt International, Inc. which was completed on April 28, 2014. They are presented for illustrative purposes only and may not be indicative of the combined company’s financial position or results of operations that would have actually occurred had the Canadian Acquisition been completed at or as of the dates indicated, nor are they indicative of our future operating results or financial position. The data in the unaudited pro forma condensed combined consolidated balance sheet as of March 31, 2014 assume the Canadian Acquisition was completed on that date. The data in the unaudited pro forma condensed combined consolidated statements of operations for the three months ended March 31, 2014 and 2013 assume the Canadian Acquisition was completed as of January 1, 2013.
The unaudited pro forma condensed combined consolidated financial information should be read in conjunction with the other materials filed with this Current Report on Form 8-K.
The Canadian Acquisition has been accounted for as a business combination in accordance with FASB ASC Topic 805. For purposes of these unaudited pro forma condensed combined financial statements, the acquisition price of the Canadian Subsidiaries has been allocated to the tangible assets acquired and liabilities assumed based on a preliminary estimate of those assets and liabilities. The actual amounts recorded upon finalization of the purchase price allocation may differ materially from the information presented in the accompanying unaudited pro forma condensed combined financial statements. Our financial statements issued after the completion of the Canadian Acquisition will reflect such fair values, which may materially differ from the amounts allocated to such tangible and intangible assets and liabilities in the historical financial statements of the Canadian Subsidiaries and will determine a new basis in such assets and liabilities that will be reflected in our accounting. In addition, the Canadian Acquisition will result in an increase in our leverage, leading to an increase in interest expense. As a result, amounts presented in our future consolidated financial statements and footnotes will not be comparable with those of historical periods and with the pro forma financial statements included in this Current Report on Form 8-K.
The combined consolidated financial statements provided to us in respect of the Canadian Subsidiaries (which form the basis of the unaudited pro forma combined financial information) were prepared in accordance with International Financial Reporting Standards, or IFRS, and therefore are not directly comparable to our financial statements which are prepared in accordance with generally accepted accounting principles in the United States or GAAP. Adjustments were made to the Canadian Subsidiaries’ combined consolidated financial statements from IFRS to GAAP by evaluating and documenting the existing differences between IFRS and GAAP. IFRS is a set of accounting principles more focused on objectives and principles and less reliant on detailed rules than GAAP. There are significant and material differences in several key areas between GAAP and IFRS which would affect Westmoreland. Additionally, GAAP provides specific guidance in classes of accounting transactions for which equivalent guidance in IFRS does not exist. Adjustments were also made to convert Canadian dollars to US dollars based on historical exchange rates, which may differ from future exchange rates.
The integration of the businesses we are acquiring in the Canadian Acquisition may not achieve the desired results. The unaudited pro forma condensed combined consolidated statements of operations and the unaudited pro forma condensed combined consolidated balance sheet do not reflect the cost of any integration activities or benefits from the Canadian Acquisition and synergies that may be derived from any integration activities, both of which may have a material effect on the consolidated results of operations in periods following the completion of the Canadian Acquisition.
Once the necessary due diligence has been completed, the final purchase price has been determined and the purchase price adjustments have been completed, actual results may differ materially from the information presented in this unaudited pro forma condensed combined consolidated financial information.
Westmoreland Coal Company
Unaudited Pro Forma Condensed Combined Balance Sheet
As of March 31, 2014
PMRL and CVRI Historical | Removal of Royalty and Highvale (a) | IFRS to GAAP, Currency Adjustments, and Reclassifications(b) | PMRL and CVRI Adjusted | Westmoreland Historical | Pro forma adjustments related to financing | Pro forma adjustments related to acquisition | Total Pro Forma | ||||||||||||||||||||||||||||
(CAD in thousands) | (USD in thousands) | ||||||||||||||||||||||||||||||||||
Assets | |||||||||||||||||||||||||||||||||||
Current assets: | |||||||||||||||||||||||||||||||||||
Cash and cash equivalents | $ | 59,770 | $ | — | $ | (6,709 | ) | $ | 53,061 | $ | 61,900 | $ | 385,014 | (c) | $ | (436,237 | ) | (f) | $ | 63,738 | |||||||||||||||
Receivables: | |||||||||||||||||||||||||||||||||||
Trade | 70,631 | (4,423 | ) | (8,416 | ) | 57,792 | 64,715 | — | — | 122,507 | |||||||||||||||||||||||||
Contractual third party reclamation receivables | — | — | — | — | 8,213 | — | — | 8,213 | |||||||||||||||||||||||||||
Other | — | — | — | — | 1,375 | — | — | 1,375 | |||||||||||||||||||||||||||
70,631 | (4,423 | ) | (8,416 | ) | 57,792 | 74,303 | — | — | 132,095 | ||||||||||||||||||||||||||
Inventories | 143,491 | — | (22,195 | ) | 121,296 | 35,447 | — | 25,000 | (g) | 181,743 | |||||||||||||||||||||||||
Restricted investments and bond collateral | — | — | — | — | 16,900 | (16,900 | ) | (c) | — | — | |||||||||||||||||||||||||
Lease receivables | 19,848 | — | (8,166 | ) | 11,682 | — | — | — | 11,682 | ||||||||||||||||||||||||||
Deferred tax assets | — | — | 5,219 | 5,219 | — | — | 1,807 | (g) | 7,026 | ||||||||||||||||||||||||||
Other current assets | 204,267 | (3 | ) | (21,092 | ) | 183,172 | 16,643 | — | (182,344 | ) | (g) | 17,471 | |||||||||||||||||||||||
Total current assets | 498,007 | (4,426 | ) | (61,359 | ) | 432,222 | 205,193 | 368,114 | (591,774 | ) | 413,755 | ||||||||||||||||||||||||
Property, plant and equipment: | |||||||||||||||||||||||||||||||||||
Land and mineral rights | — | — | — | — | 278,198 | — | 249,829 | (g) | 528,027 | ||||||||||||||||||||||||||
Plant and equipment | 1,391,668 | — | 75,860 | 1,467,528 | 673,189 | — | (1,353,161 | ) | (g) | 787,556 | |||||||||||||||||||||||||
1,391,668 | — | 75,860 | 1,467,528 | 951,387 | — | (1,103,332 | ) | 1,315,583 | |||||||||||||||||||||||||||
Less accumulated depreciation, depletion and amortization | 1,048,342 | — | (27,843 | ) | 1,020,499 | 461,754 | — | (1,020,499 | ) | (g) | 461,754 | ||||||||||||||||||||||||
Net property, plant and equipment | 343,326 | — | 103,703 | 447,029 | 489,633 | — | (82,833 | ) | 853,829 | ||||||||||||||||||||||||||
Advanced coal royalty | — | — | — | — | 7,263 | — | — | 7,263 | |||||||||||||||||||||||||||
Reclamation deposits | — | — | — | — | 75,315 | — | — | 75,315 | |||||||||||||||||||||||||||
Restricted investments and bond collateral | — | — | — | — | 523,483 | (467,319 | ) | (c) | 48,085 | (f) | 104,249 | ||||||||||||||||||||||||
Contractual third party reclamation receivables | — | — | — | — | 88,036 | — | — | 88,036 | |||||||||||||||||||||||||||
Intangible assets | 557,533 | (557,533 | ) | — | — | 1,099 | — | — | 1,099 | ||||||||||||||||||||||||||
Lease receivables | 127,322 | — | (43,428 | ) | 83,894 | — | — | — | 83,894 | ||||||||||||||||||||||||||
Other assets | 12,378 | — | 32,692 | 45,070 | 17,125 | 5,511 | (d) | (37,266 | ) | (g) | 30,440 | ||||||||||||||||||||||||
Total Assets | $ | 1,538,566 | $ | (561,959 | ) | $ | 31,608 | $ | 1,008,215 | $ | 1,407,147 | $ | (93,694 | ) | $ | (663,788 | ) | $ | 1,657,880 | ||||||||||||||||
Westmoreland Coal Company
Unaudited Pro Forma Condensed Combined Balanced Sheet (Continued)
As of March 31, 2014
PMRL and CVRI Historical | Removal of Royalty and Highvale (a) | IFRS to GAAP, Currency Adjustments, and Reclassifications(b) | PMRL and CVRI Adjusted | Westmoreland Historical | Pro forma adjustments related to financing | Pro forma adjustments related to acquisition | Total Pro Forma | ||||||||||||||||||||||||||||
(CAD in thousands) | (USD in thousands) | ||||||||||||||||||||||||||||||||||
Liabilities and Shareholders' Deficit | |||||||||||||||||||||||||||||||||||
Current liabilities: | |||||||||||||||||||||||||||||||||||
Current installments of long-term debt | $ | 299,930 | $ | — | $ | 9,434 | $ | 309,364 | $ | 48,586 | $ | (18,000 | ) | (e) | $ | (271,356 | ) | (g) | $ | 68,594 | |||||||||||||||
Trade payables | 90,530 | (516 | ) | (9,701 | ) | 80,313 | 62,598 | — | — | 142,911 | |||||||||||||||||||||||||
Production taxes | — | — | — | — | 46,794 | — | — | 46,794 | |||||||||||||||||||||||||||
Workers' compensation | — | — | — | — | 712 | — | — | 712 | |||||||||||||||||||||||||||
Postretirement medical benefits | — | — | — | — | 13,955 | — | — | 13,955 | |||||||||||||||||||||||||||
SERP | — | — | — | — | 390 | — | — | 390 | |||||||||||||||||||||||||||
Deferred revenue | — | — | — | — | 16,034 | — | — | 16,034 | |||||||||||||||||||||||||||
Asset retirement obligation | 19,355 | — | (1,844 | ) | 17,511 | 22,227 | — | 10,635 | (g) | 50,373 | |||||||||||||||||||||||||
Other current liabilities | 51,700 | (40 | ) | (42,930 | ) | 8,730 | 24,390 | — | (15,233 | ) | (g) | 17,887 | |||||||||||||||||||||||
Preferred shares note | 732,094 | — | (732,094 | ) | — | — | — | — | — | ||||||||||||||||||||||||||
Total current liabilities | 1,193,609 | (556 | ) | (777,135 | ) | 415,918 | 235,686 | (18,000 | ) | (275,954 | ) | 357,650 | |||||||||||||||||||||||
Long-term debt, less current installments | — | 91,470 | 91,470 | 751,645 | (63,000 | ) | (e) | — | 780,115 | ||||||||||||||||||||||||||
Workers' compensation, less current portion | — | — | — | — | 6,680 | — | — | 6,680 | |||||||||||||||||||||||||||
Excess of black lung benefit obligation over trust assets | — | — | — | — | 9,376 | — | — | 9,376 | |||||||||||||||||||||||||||
Post retirement medical benefits, less current portion | — | — | — | — | 271,275 | — | — | 271,275 | |||||||||||||||||||||||||||
Pension and SERP benefits, less current portion | — | — | — | — | 23,524 | — | — | 23,524 | |||||||||||||||||||||||||||
Deferred revenue, less current portion | — | — | — | — | 43,299 | — | — | 43,299 | |||||||||||||||||||||||||||
Asset retirement obligation, less current portion | 151,911 | — | (8,365 | ) | 143,546 | 259,036 | — | (48,566 | ) | (g) | 354,016 | ||||||||||||||||||||||||
Intangible liabilities | — | — | — | — | 5,339 | — | — | 5,339 | |||||||||||||||||||||||||||
Deferred tax liabilities | 121,338 | (104,547 | ) | 2,712 | 19,503 | — | — | 4,310 | (g) | 23,813 | |||||||||||||||||||||||||
Other liabilities | 99,286 | (656 | ) | (101,064 | ) | (2,434 | ) | 7,503 | — | 2,434 | (g) | 7,503 | |||||||||||||||||||||||
Total Liabilities | 1,566,144 | (105,759 | ) | (792,382 | ) | 668,003 | 1,613,363 | (81,000 | ) | (317,776 | ) | 1,882,590 | |||||||||||||||||||||||
Shareholders' deficit: | |||||||||||||||||||||||||||||||||||
Preferred Stock | — | — | — | — | 121 | — | — | 121 | |||||||||||||||||||||||||||
Common Stock | 708,460 | — | (24,550 | ) | 683,910 | 37,155 | — | (683,910 | ) | 37,155 | |||||||||||||||||||||||||
Other Paid in Capital | 2,028 | — | (1,935 | ) | 93 | 134,952 | — | (93 | ) | 134,952 | |||||||||||||||||||||||||
Accumulated other comprehensive loss | 804 | — | 25,842 | 26,646 | (63,369 | ) | — | (26,646 | ) | (63,369 | ) | ||||||||||||||||||||||||
Accumulated earnings (deficit) | (738,870 | ) | (456,200 | ) | 824,633 | (370,437 | ) | (315,075 | ) | (12,694 | ) | 364,637 | (333,569 | ) | |||||||||||||||||||||
Total shareholders' deficit | (27,578 | ) | (456,200 | ) | 823,990 | 340,212 | (206,216 | ) | (12,694 | ) | (346,012 | ) | (224,710 | ) | |||||||||||||||||||||
Noncontrolling interest | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
Total equity (deficit) | (27,578 | ) | (456,200 | ) | 823,990 | 340,212 | (206,216 | ) | (12,694 | ) | (346,012 | ) | (224,710 | ) | |||||||||||||||||||||
Total Liabilities and Shareholders' Deficit | $ | 1,538,566 | $ | (561,959 | ) | $ | 31,608 | $ | 1,008,215 | $ | 1,407,147 | $ | (93,694 | ) | $ | (663,788 | ) | $ | 1,657,880 | ||||||||||||||||
See Notes to Unaudited Pro Forma Condensed Combined Financial Statements
Westmoreland Coal Company
Unaudited Pro Forma Condensed Combined Statement of Operations
Three months ended March 31, 2014
PMRL/CVRI Historical | Removal of Royalty and Highvale (a) | IFRS to GAAP, Currency Adjustments, and Reclassifications (b) | PMRL and CVRI Adjusted | Westmoreland Historical | Pro forma adjustments related to financing | Pro forma adjustments related to acquisition | Total Pro Forma | ||||||||||||||||||||||||||||
(CAD in thousands) | (USD in thousands) | ||||||||||||||||||||||||||||||||||
Revenues | $ | 203,201 | $ | (10,879 | ) | $ | (18,907 | ) | $ | 173,415 | $ | 180,202 | $ | — | $ | — | $ | 353,617 | |||||||||||||||||
Costs and expenses: | |||||||||||||||||||||||||||||||||||
Cost of sales | 153,527 | (147 | ) | (18,542 | ) | 134,838 | 138,630 | — | 2,299 | (i) | 275,767 | ||||||||||||||||||||||||
Depreciation, depletion, and amortization | 28,134 | (2,724 | ) | (1,880 | ) | 23,530 | 16,059 | — | (18,677 | ) | (j) | 20,912 | |||||||||||||||||||||||
Income from equity affiliates | — | — | (1,265 | ) | (1,265 | ) | — | — | — | (1,265 | ) | ||||||||||||||||||||||||
Selling and administrative | 5,790 | — | (590 | ) | 5,200 | 13,331 | — | — | 18,531 | ||||||||||||||||||||||||||
Heritage health benefits | — | — | — | — | 3,544 | — | — | 3,544 | |||||||||||||||||||||||||||
Loss (gain) on sales of assets | — | — | (56 | ) | (56 | ) | 38 | — | — | (18 | ) | ||||||||||||||||||||||||
Restructuring charges | — | — | — | — | 397 | — | — | 397 | |||||||||||||||||||||||||||
Other operating income | — | — | — | — | 150 | — | — | 150 | |||||||||||||||||||||||||||
187,451 | (2,871 | ) | (22,333 | ) | 162,247 | 172,149 | — | (16,378 | ) | 318,018 | |||||||||||||||||||||||||
15,750 | (8,008 | ) | 3,426 | 11,168 | 8,053 | — | 16,378 | 35,599 | |||||||||||||||||||||||||||
Other income (expense): | |||||||||||||||||||||||||||||||||||
Interest expense | (6,913 | ) | — | 1,187 | (5,726 | ) | (20,798 | ) | (9,143 | ) | (h) | — | (35,667 | ) | |||||||||||||||||||||
Interest income | 3,722 | (11 | ) | (1,506 | ) | 2,205 | 302 | — | — | 2,507 | |||||||||||||||||||||||||
Loss on foreign exchange | — | — | — | — | (6,790 | ) | — | — | (6,790 | ) | |||||||||||||||||||||||||
Other income | (15,336 | ) | — | 15,336 | — | 93 | — | — | 93 | ||||||||||||||||||||||||||
(18,527 | ) | (11 | ) | 15,017 | (3,521 | ) | (27,193 | ) | (9,143 | ) | — | (39,857 | ) | ||||||||||||||||||||||
Income (loss) before income taxes | (2,777 | ) | (8,019 | ) | 18,443 | 7,647 | (19,140 | ) | (9,143 | ) | 16,378 | (4,258 | ) | ||||||||||||||||||||||
Income tax expense (benefit) | 2,160 | (2,022 | ) | 2,607 | 2,745 | (110 | ) | — | 1,108 | (k) | 3,743 | ||||||||||||||||||||||||
Net income (loss) | (4,937 | ) | (5,997 | ) | 15,836 | 4,902 | (19,030 | ) | (9,143 | ) | 15,270 | (8,001 | ) | ||||||||||||||||||||||
Less: net loss attributable to noncontrolling interests | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
Net income (loss) attributable to Parent company | (4,937 | ) | (5,997 | ) | 15,836 | 4,902 | (19,030 | ) | (9,143 | ) | 15,270 | (8,001 | ) | ||||||||||||||||||||||
Less: preferred stock dividend requirements | — | — | — | — | 261 | — | — | 261 | |||||||||||||||||||||||||||
Net income (loss) per share applicable to Common shareholders | $ | (4,937 | ) | $ | (5,997 | ) | $ | 15,836 | $ | 4,902 | $ | (19,291 | ) | $ | (9,143 | ) | $ | 15,270 | $ | (8,262 | ) | ||||||||||||||
EBITDA RECONCILIATION | |||||||||||||||||||||||||||||||||||
Net income (loss) | $ | 4,902 | $ | (19,030 | ) | $ | (8,001 | ) | |||||||||||||||||||||||||||
Income tax expense (benefit) | 2,745 | (110 | ) | 3,743 | |||||||||||||||||||||||||||||||
Other loss (income) | — | (93 | ) | (93 | ) | ||||||||||||||||||||||||||||||
Interest income | (2,205 | ) | (302 | ) | (2,507 | ) | |||||||||||||||||||||||||||||
Loss on foreign exchange | — | 6,790 | 6,790 | ||||||||||||||||||||||||||||||||
Interest expense | 5,726 | 20,798 | 35,667 | ||||||||||||||||||||||||||||||||
Depreciation, depletion and amortization | 23,530 | 16,059 | 20,912 | ||||||||||||||||||||||||||||||||
Accretion of ARO and receivable | 1,426 | 3,479 | 7,204 | ||||||||||||||||||||||||||||||||
Amortization of intangible assets and liabilities | — | 153 | 153 | ||||||||||||||||||||||||||||||||
EBITDA | 36,124 | 27,744 | 63,868 | ||||||||||||||||||||||||||||||||
Customer payments received treated as lease receivables under GAAP | 4,971 | — | 4,971 | ||||||||||||||||||||||||||||||||
Restructuring expenses | — | 397 | 397 | ||||||||||||||||||||||||||||||||
(Gain)/loss on sale of assets and other adjustments | 1,963 | 38 | 2,001 | ||||||||||||||||||||||||||||||||
Share-based compensation | 82 | 728 | 810 | ||||||||||||||||||||||||||||||||
Adjusted EBITDA | $ | 43,140 | $ | 28,907 | $ | 72,047 | |||||||||||||||||||||||||||||
Westmoreland Coal Company
Unaudited Pro Forma Condensed Combined Statement of Operations
Three months ended March 31, 2013
PMRL/CVRI Historical | Removal of Royalty and Highvale (a) | IFRS to GAAP, Currency Adjustments, and Reclassifications (b) | PMRL and CVRI Adjusted | Westmoreland Historical | Pro forma adjustments related to financing | Pro forma adjustments related to acquisition | Total Pro Forma | ||||||||||||||||||||||||||||
(CAD in thousands) | (USD in thousands) | ||||||||||||||||||||||||||||||||||
Revenues | $ | 179,338 | $ | (23,176 | ) | $ | (1,837 | ) | $ | 154,325 | $ | 161,448 | $ | — | $ | — | $ | 315,773 | |||||||||||||||||
Costs and expenses: | |||||||||||||||||||||||||||||||||||
Cost of sales | 140,489 | (11,036 | ) | 3,434 | 132,887 | 130,421 | — | 1,628 | (i) | 264,936 | |||||||||||||||||||||||||
Depreciation, depletion, and amortization | 24,868 | (3,902 | ) | 1,314 | 22,280 | 14,426 | — | (17,427 | ) | (j) | 19,279 | ||||||||||||||||||||||||
Income from equity affiliates | — | — | (1,439 | ) | (1,439 | ) | — | — | — | (1,439 | ) | ||||||||||||||||||||||||
Selling and administrative | 3,417 | 2,161 | 503 | 6,081 | 11,887 | — | — | 17,968 | |||||||||||||||||||||||||||
Heritage health benefits | — | — | — | — | 3,951 | — | — | 3,951 | |||||||||||||||||||||||||||
Loss (gain) on sales of assets | — | — | 2,719 | 2,719 | (234 | ) | — | — | 2,485 | ||||||||||||||||||||||||||
Impairment loss | — | 11,848 | (11,848 | ) | — | — | — | — | — | ||||||||||||||||||||||||||
Other operating income | (33,867 | ) | 34,176 | (3 | ) | 306 | (4,737 | ) | — | — | (4,431 | ) | |||||||||||||||||||||||
134,907 | 33,247 | (5,320 | ) | 162,834 | 155,714 | — | (15,799 | ) | 302,749 | ||||||||||||||||||||||||||
44,431 | (56,423 | ) | 3,483 | (8,509 | ) | 5,734 | — | 15,799 | 13,024 | ||||||||||||||||||||||||||
Other income (expense): | |||||||||||||||||||||||||||||||||||
Interest expense | (5,100 | ) | 61 | 3,361 | (1,678 | ) | (10,160 | ) | (8,761 | ) | (h) | — | (20,599 | ) | |||||||||||||||||||||
Interest income | 3,930 | (279 | ) | (1,402 | ) | 2,249 | 297 | — | — | 2,546 | |||||||||||||||||||||||||
Other income | (15,176 | ) | — | 15,176 | — | 70 | — | — | 70 | ||||||||||||||||||||||||||
(16,346 | ) | (218 | ) | 17,135 | 571 | (9,793 | ) | (8,761 | ) | — | (17,983 | ) | |||||||||||||||||||||||
Income (loss) before income taxes | 28,085 | (56,641 | ) | 20,618 | (7,938 | ) | (4,059 | ) | (8,761 | ) | 15,799 | (4,959 | ) | ||||||||||||||||||||||
Income tax expense (benefit) | 7,378 | (13,896 | ) | 72 | (6,446 | ) | 28 | — | 7,785 | (k) | 1,367 | ||||||||||||||||||||||||
Net income (loss) | 20,707 | (42,745 | ) | 20,546 | (1,492 | ) | (4,087 | ) | (8,761 | ) | 8,014 | (6,326 | ) | ||||||||||||||||||||||
Less: net loss attributable to noncontrolling interests | — | — | — | — | (1,702 | ) | — | — | (1,702 | ) | |||||||||||||||||||||||||
Net income (loss) attributable to Parent company | 20,707 | (42,745 | ) | 20,546 | (1,492 | ) | (2,385 | ) | (8,761 | ) | 8,014 | (4,624 | ) | ||||||||||||||||||||||
Less: preferred stock dividend requirements | — | — | — | — | 340 | — | — | 340 | |||||||||||||||||||||||||||
Net income (loss) per share applicable to Common shareholders | $ | 20,707 | $ | (42,745 | ) | $ | 20,546 | $ | (1,492 | ) | $ | (2,725 | ) | $ | (8,761 | ) | $ | 8,014 | $ | (4,964 | ) | ||||||||||||||
EBITDA RECONCILIATION | |||||||||||||||||||||||||||||||||||
Net loss | $ | (1,492 | ) | $ | (4,087 | ) | $ | (6,326 | ) | ||||||||||||||||||||||||||
Income tax expense (benefit) | (6,446 | ) | 28 | 1,367 | |||||||||||||||||||||||||||||||
Other loss (income) | — | (70 | ) | (70 | ) | ||||||||||||||||||||||||||||||
Interest income | (2,249 | ) | (297 | ) | (2,546 | ) | |||||||||||||||||||||||||||||
Interest expense | 1,678 | 10,160 | 20,599 | ||||||||||||||||||||||||||||||||
Depreciation, depletion and amortization | 22,280 | 14,426 | 19,279 | ||||||||||||||||||||||||||||||||
Accretion of ARO and receivable | 1,758 | 3,180 | 6,566 | ||||||||||||||||||||||||||||||||
Amortization of intangible assets and liabilities | — | 164 | 164 | ||||||||||||||||||||||||||||||||
EBITDA | 15,529 | 23,504 | 39,033 | ||||||||||||||||||||||||||||||||
Customer payments received treated as lease receivables under GAAP | 5,879 | — | 5,879 | ||||||||||||||||||||||||||||||||
(Gain)/loss on sale of assets and other adjustments | 6,422 | (234 | ) | 6,188 | |||||||||||||||||||||||||||||||
Share-based compensation | 100 | 2,386 | 2,486 | ||||||||||||||||||||||||||||||||
Adjusted EBITDA | $ | 27,930 | $ | 25,656 | $ | 53,586 | |||||||||||||||||||||||||||||
Westmoreland Coal Company and Subsidiaries
Notes to Unaudited Pro Forma Condensed Combined Financial Statements
Note 1. Basis of Presentation
The unaudited pro forma condensed combined financial information presented are based on the historical financial statements of Westmoreland Coal Company and the combined consolidated financial statements of the Canadian Subsidiaries and have been prepared to reflect the Canadian Acquisition. They are presented for illustrative purposes only and may not be indicative of the combined company’s financial position or results of operations that would have actually occurred had the Canadian Acquisition been completed at or as of the dates indicated, nor are they indicative of our future operating results or financial position. The data in the unaudited pro forma condensed combined consolidated balance sheet as of March 31, 2014 assume the Canadian Acquisition was completed on that date. The data in the unaudited pro forma condensed combined consolidated statements of operations for the three months ended March 31, 2014 and 2013 assume the Canadian Acquisition was completed as of January 1, 2013.
Pro forma adjustments reflected in the unaudited pro forma condensed combined consolidated balance sheet are based on items that are directly attributable to the proposed Canadian Acquisition and factually supportable. Pro forma adjustments reflected in the unaudited pro forma condensed combined consolidated statements of operations are based on items directly attributable to the Canadian Acquisition, factually supportable and expected to have a continuing impact on Westmoreland.
The combined consolidated financial statements provided to us in respect of the Canadian Subsidiaries (which form the basis of the unaudited pro forma combined financial information regarding the Canadian Subsidiaries presented herein) were prepared in accordance with IFRS, and therefore are not directly comparable to our financial statements which are prepared in accordance with GAAP. IFRS is a set of accounting principles more focused on objectives and principles and less reliant on detailed rules than GAAP. There are significant and material differences in several key areas between GAAP and IFRS which would affect Westmoreland. Additionally, GAAP provides specific guidance in classes of accounting transactions for which equivalent guidance in IFRS does not exist. Adjustments were made to the Canadian Subsidiaries’ financial statements from IFRS to GAAP by evaluating and documenting the existing differences between IFRS and GAAP. Adjustments were also made to convert Canadian dollars to US dollars based on historical exchange rates, which may differ from future exchange rates.
At this time, Westmoreland has not completed a detailed valuation analysis to determine the fair values of the Canadian Subsidiaries’ assets and liabilities and accordingly, the unaudited pro forma condensed combined consolidated financial statements include a preliminary allocation of the purchase price based on assumptions and estimates which, while considered reasonable under the circumstances, are subject to changes, which may be material. Additionally, Westmoreland has not completed the due diligence necessary to identify items that could significantly impact the purchase price allocation or the assumptions and adjustments made in preparation of these unaudited pro forma condensed combined consolidated financial statements.
Upon completion of a detailed valuation analysis, there may be additional increases or decreases to the recorded book values of the Canadian Subsidiaries’ assets and liabilities, including, but not limited to, mineral reserves, property and equipment, asset retirement obligations, leases and loans receivable, capital lease obligations, coal supply agreements and other intangible assets that will give rise to future amounts of depletion, depreciation and amortization expenses or credits; or interest income and expense; that are not reflected in this unaudited pro forma condensed combined consolidated financial information. Accordingly, once the necessary due diligence is completed, the final purchase price is determined and the purchase price allocation is completed, actual results may differ materially from the information presented in this unaudited pro forma condensed combined consolidated financial information. Additionally, the unaudited pro forma condensed combined balance sheet and the unaudited pro forma condensed combined statements of operations and do not reflect the cost of any integration activities or benefits from the Canadian Acquisition and synergies that may be derived from any integration activities, both of which may have a material impact on the consolidated results of operations in periods following the completion of the Canadian Acquisition.
Certain amounts in the Canadian Subsidiaries’ combined consolidated balance sheet and statements of operations have been reclassified to conform to the Westmoreland presentation.
Note 2. Preliminary Purchase Price
The preliminary purchase price of approximately $452.3 million was made up of $322.8 million of cash consideration and the assumption of an estimated $129.5 million of capital leases, which includes certain adjustments provided for in the Arrangement Agreement, relating to, among other things, working capital, indebtedness, pension plan funding and coal inventory.
Note 3. Pro forma adjustments
(a) | Reflects the removal of the Highvale Mine and Royalty Ltd. from the historical financial statements of the historical PMRL and CVRI. The Highvale contract mining operation was terminated in January 2013. The royalty business was transferred to another party concurrently with the closing of the Canadian Acquisition. |
(b) | Reflects adjustments for IFRS to GAAP conversion, currency adjustments from Canadian dollars to US dollars based on historical exchange rates, and certain reclassifications to conform to the presentation of Westmoreland’s financial statements. IFRS to GAAP adjustments include the removal of approximately $6.7 million of deferred stripping costs from the balance sheet and related adjustments to the statements of operations. Additionally, certain equipment in the amount of $83..0 million has been reclassified from Leases and loans receivables to Property, plant and equipment; with resulting adjustments to the income statement. Reclassifications involved the movement of capital lease obligations of approximately $38.0 million from Other current liabilities to Current installments of long-term debt and approximately $91.5 million from Other liabilities to Long-term debt, less current installments. See Appendix A for further detailed breakdown of the components of this column related to the Balance Sheet and Statement of Operations as of and for the three months ended March 31, 2014. See Appendix B for further detailed breakdown of the components of this column related to the Statement of Operations for the three months ended March 31, 2013. |
Also, intercompany debt of approximately $732 million has been removed from the balance sheet and related financing costs from the statements of operations. The intercompany debt of $732 million was settled through a series of transactions and equity transfers within Sherritt prior to Westmoreland Coal Company’s acquisition of the Canadian Subsidiaries. As a result, Westmoreland Coal Company did not have any cash flows related to the settlement of the intercompany debt.
(c) | Reflects the following pro forma adjustments to financing: |
Amounts released from Restricted investments and bond collateral at closing of the acquisition: | |||
Proceeds for the issuance of the 10.75% Senior Secured Notes, net of commitment fees | $ | 454,219 | |
WML Debt reserve release | 13,100 | ||
467,319 | |||
Senior Notes escrow release | 16,900 | ||
Cash outflows: | |||
Make-whole fees for the early extinguishment of the term debt issued by Westmoreland Mining, LLC, or WML, referred to herein as the WML Notes | (11,487 | ) | |
Repayment of principal on the WML Notes | (81,000 | ) | |
Debt issuance costs | (6,718 | ) | |
$ | 385,014 | ||
(d) | Reflects debt issuance costs of $6.7 million from issuing the 10.75% Senior Secured Notes and the write off of $1.2 million of unamortized debt issuance costs for the early extinguishment of the WML Notes. |
(e) | Reflects a reduction for the repayment of the current portion of the WML Notes of $18.0 million and the noncurrent portion of the WML Notes of $63.0 million. |
(f) | Reflects the following pro forma adjustments to cash flows related to the acquisition (in thousands): |
Initial payment for Canadian Subsidiaries | $ | 282,788 | |
Estimated payment for Canadian Subsidiaries for working capital adjustment | 40,000 | ||
322,788 | |||
Settlement of foreign currency derivative related to initial payment for the Canadian Subsidiaries | 6,503 | ||
Other acquisition costs | 5,800 | ||
Bonding related to the environmental requirements in connection with the Canadian Acquisition | 48,085 | ||
Elimination of PMRL and CVRI cash and cash equivalents at March 31, 2014 | 53,061 | ||
$ | 436,237 | ||
(g) | Reflects adjustments to record amounts at estimated fair value. Management has used certain estimates and assumptions in estimating fair value, however, a detailed analysis has not been completed on the individual assets and liabilities of the Canadian Subsidiaries and actual results may differ materially from these estimates. |
The detailed estimated preliminary purchase price allocation is as follows (in thousands):
Cash to be paid | $ | 322,788 | |
Assumption of capital leases obligations | 129,478 | ||
$ | 452,266 | ||
Allocation: | |||
Trade receivables | $ | 57,792 | |
Inventories | 146,296 | ||
Leases and loans receivable | 95,576 | ||
Land and mineral reserves | 249,829 | ||
Property, plant and equipment | 114,367 | ||
Other assets | 8,632 | ||
Deferred tax assets | 7,026 | ||
Less assumption of other liabilities: | |||
Asset retirement obligations | (123,126 | ) | |
Trade payables | (80,313 | ) | |
Deferred tax liabilities | (23,813 | ) | |
$ | 452,266 | ||
The pro forma adjustments to the unaudited pro forma condensed combined statement of operations are of a recurring nature and follow:
(h) | Reflects the interest expense of the 10.75% Senior Secured Notes. Also includes amortization of debt issuance costs (11.7% assumed effective interest rate) related to the debt obtained for the Canadian Acquisition and amortization of debt premium (9.2% assumed effective interest rate). |
(i) | Reflects the adjustment to the accretion expense of the asset retirement obligations as a result of adjustments to record these items at fair market value. |
(j) | Reflects the adjustment to depreciation, depletion and amortization expense of the land and mineral rights and plant and equipment as a result of adjustments to record these items at fair market value. |
(k) | Reflects the income tax effect of the pro forma adjustments based on a 34% statutory rate for Westmoreland Coal Company and an estimated Canadian statutory rate of 26% for PMRL and CVRI. Adjustments have been made under the assumption that Westmoreland Coal Company and CVRI have full valuation allowances recorded against their net deferred tax assets. |
Appendix A
Pro Forma Balance Sheet Adjustments
As of March 31, 2014
(In thousands)
IFRS to US GAAP | Currency | Reclassifications | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Pushdown | Inventory | ARO | Pension | Equity Method | Lease Receivable | Deferred Taxes | IFRS to US GAAP | Reclassifi- cations | |||||||||||||||||||||||||||||||||||||||||||||||||||
(1) | (2) | (3) | (4) | (5) | (6) | (7) | Subtotal | (8) | (9) | (10) | (11) | (12) | Subtotal | Total | |||||||||||||||||||||||||||||||||||||||||||||
Assets | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Current assets: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cash and cash equivalents | $ | — | $ | — | $ | — | $ | — | $ | (1,122 | ) | $ | — | $ | — | $ | (1,122 | ) | $ | (5,587 | ) | $ | — | $ | — | $ | — | $ | — | $ | — | $ | (6,709 | ) | |||||||||||||||||||||||||
Current - Trade Receivables | — | — | — | — | (2,320 | ) | — | — | (2,320 | ) | (6,096 | ) | — | — | — | — | — | (8,416 | ) | ||||||||||||||||||||||||||||||||||||||||
Inventories | — | (6,703 | ) | (1,001 | ) | — | (1,718 | ) | — | — | (9,422 | ) | (12,773 | ) | — | — | — | — | — | (22,195 | ) | ||||||||||||||||||||||||||||||||||||||
Lease receivables | — | — | — | — | — | (6,936 | ) | — | (6,936 | ) | (1,230 | ) | — | — | — | — | — | (8,166 | ) | ||||||||||||||||||||||||||||||||||||||||
Deferred tax assets | — | — | — | — | — | — | 5,769 | 5,769 | (550 | ) | — | — | — | — | — | 5,219 | |||||||||||||||||||||||||||||||||||||||||||
Other current assets | — | — | — | — | (25 | ) | — | — | (25 | ) | (19,457 | ) | — | — | — | (1,610 | ) | (1,610 | ) | (21,092 | ) | ||||||||||||||||||||||||||||||||||||||
Total current assets | — | (6,703 | ) | (1,001 | ) | — | (5,185 | ) | (6,936 | ) | 5,769 | (14,056 | ) | (45,693 | ) | — | — | — | (1,610 | ) | (1,610 | ) | (61,359 | ) | |||||||||||||||||||||||||||||||||||
Property, plant and equipment: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Plant and equipment | — | — | 10,811 | — | (38,087 | ) | 157,119 | — | 129,843 | (154,531 | ) | — | — | 100,548 | — | 100,548 | 75,860 | ||||||||||||||||||||||||||||||||||||||||||
Less accumulated depreciation, depletion and amortization | — | — | 11,179 | — | (5,661 | ) | 74,097 | — | 79,615 | (107,458 | ) | — | — | — | — | — | (27,843 | ) | |||||||||||||||||||||||||||||||||||||||||
Net property, plant and equipment | — | — | (368 | ) | — | (32,426 | ) | 83,022 | — | 50,228 | (47,073 | ) | — | — | 100,548 | — | 100,548 | 103,703 | |||||||||||||||||||||||||||||||||||||||||
Lease receivables | — | — | — | — | — | (77,038 | ) | — | (77,038 | ) | (8,834 | ) | — | — | 42,444 | — | 42,444 | (43,428 | ) | ||||||||||||||||||||||||||||||||||||||||
Other assets | — | — | — | — | 35,658 | — | — | 35,658 | (4,576 | ) | — | — | — | 1,610 | 1,610 | 32,692 | |||||||||||||||||||||||||||||||||||||||||||
Total Assets | $ | — | $ | (6,703 | ) | $ | (1,369 | ) | $ | — | $ | (1,953 | ) | $ | (952 | ) | $ | 5,769 | $ | (5,208 | ) | $ | (106,176 | ) | $ | — | $ | — | $ | 142,992 | $ | — | $ | 142,992 | $ | 31,608 | |||||||||||||||||||||||
Appendix A (continued)
Pro Forma Balance Sheet Adjustments (continued)
As of March 31, 2014
(In thousands)
IFRS to US GAAP | Currency | Reclassifications | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Pushdown | Inventory | ARO | Pension | Equity Method | Lease Receivable | Deferred Taxes | IFRS to US GAAP | Reclassifi- cations | |||||||||||||||||||||||||||||||||||||||||||||||||||
(1) | (2) | (3) | (4) | (5) | (6) | (7) | Subtotal | (8) | (9) | (10) | (11) | (12) | Subtotal | Total | |||||||||||||||||||||||||||||||||||||||||||||
Liabilities and Shareholders' Deficit | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Current liabilities: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Current installments of long-term debt | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | (28,574 | ) | $ | — | $ | — | $ | — | $ | 38,008 | $ | 38,008 | $ | 9,434 | ||||||||||||||||||||||||||||
Trade payables | — | — | — | — | (1,234 | ) | — | — | (1,234 | ) | (8,467 | ) | — | — | — | — | — | (9,701 | ) | ||||||||||||||||||||||||||||||||||||||||
Asset retirement obligation | — | — | — | — | — | — | — | — | (1,844 | ) | (2,575 | ) | — | — | — | (2,575 | ) | (4,419 | ) | ||||||||||||||||||||||||||||||||||||||||
Other current liabilities | — | — | — | — | — | — | — | — | (4,922 | ) | 2,575 | — | — | (38,008 | ) | (35,433 | ) | (40,355 | ) | ||||||||||||||||||||||||||||||||||||||||
Preferred shares note | — | — | — | — | — | — | — | — | (69,745 | ) | — | (662,349 | ) | — | — | (662,349 | ) | (732,094 | ) | ||||||||||||||||||||||||||||||||||||||||
Total current liabilities | — | — | — | — | (1,234 | ) | — | — | (1,234 | ) | (113,552 | ) | — | (662,349 | ) | — | — | (662,349 | ) | (777,135 | ) | ||||||||||||||||||||||||||||||||||||||
Long-term debt, less current installments | — | — | — | — | — | — | — | — | — | — | — | — | 91,470 | 91,470 | 91,470 | ||||||||||||||||||||||||||||||||||||||||||||
Asset retirement obligation, less current portion | — | — | 7,469 | — | (719 | ) | — | — | 6,750 | (15,115 | ) | — | — | — | — | — | (8,365 | ) | |||||||||||||||||||||||||||||||||||||||||
Deferred tax liabilities | — | — | (1,003 | ) | — | — | — | 5,769 | 4,766 | (2,054 | ) | — | — | — | — | — | 2,712 | ||||||||||||||||||||||||||||||||||||||||||
Other liabilities | — | — | — | (219 | ) | — | — | — | (219 | ) | (9,375 | ) | — | — | — | (91,470 | ) | (91,470 | ) | (101,064 | ) | ||||||||||||||||||||||||||||||||||||||
Total Liabilities | — | — | 6,466 | (219 | ) | (1,953 | ) | — | 5,769 | 10,063 | (140,096 | ) | — | (662,349 | ) | — | — | (662,349 | ) | (792,382 | ) | ||||||||||||||||||||||||||||||||||||||
Shareholders' deficit: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Common Stock | — | — | — | — | — | — | — | — | (24,550 | ) | — | — | — | — | — | (24,550 | ) | ||||||||||||||||||||||||||||||||||||||||||
Other Paid in Capital | — | — | — | — | — | — | — | — | (1,935 | ) | — | — | — | — | — | (1,935 | ) | ||||||||||||||||||||||||||||||||||||||||||
Accumulated other comprehensive loss | — | — | — | 247 | — | (952 | ) | — | (705 | ) | 26,547 | — | — | — | — | — | 25,842 | ||||||||||||||||||||||||||||||||||||||||||
Accumulated earnings (deficit) | — | (6,703 | ) | (7,835 | ) | (28 | ) | — | — | — | (14,566 | ) | 33,858 | — | 662,349 | 142,992 | — | 805,341 | 824,633 | ||||||||||||||||||||||||||||||||||||||||
Total shareholders' deficit | — | (6,703 | ) | (7,835 | ) | 219 | — | (952 | ) | — | (15,271 | ) | 33,920 | — | 662,349 | 142,992 | — | 805,341 | 823,990 | ||||||||||||||||||||||||||||||||||||||||
Total Liabilities and Shareholders' Deficit | $ | — | $ | (6,703 | ) | $ | (1,369 | ) | $ | — | $ | (1,953 | ) | $ | (952 | ) | $ | 5,769 | $ | (5,208 | ) | $ | (106,176 | ) | $ | — | $ | — | $ | 142,992 | $ | — | $ | 142,992 | $ | 31,608 | |||||||||||||||||||||||
Appendix A (continued)
Pro Forma Statement of Operations Adjustments
Three months ended March 31, 2014
(In thousands)
IFRS to US GAAP | Currency | Reclassifications | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Pushdown | Inventory | ARO | Pension | Equity Method | Lease Receivable | Deferred Taxes | IFRS to US GAAP | Reclassifi- cations | |||||||||||||||||||||||||||||||||||||||||||||||||||
(1) | (2) | (3) | (4) | (5) | (6) | (7) | Subtotal | (8) | (9) | (10) | (11) | (12) | Subtotal | Total | |||||||||||||||||||||||||||||||||||||||||||||
Revenues | $ | — | $ | — | $ | — | $ | — | $ | (3,909 | ) | $ | 2,946 | $ | — | $ | (963 | ) | $ | (17,944 | ) | $ | — | $ | — | $ | — | $ | — | $ | — | $ | (18,907 | ) | |||||||||||||||||||||||||
Costs and expenses: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cost of sales | — | (3,535 | ) | (439 | ) | — | (2,188 | ) | — | — | (6,162 | ) | (13,805 | ) | — | — | — | 1,426 | 1,426 | (18,541 | ) | ||||||||||||||||||||||||||||||||||||||
Depreciation, depletion, and amortization | — | — | (1,177 | ) | — | (386 | ) | 1,947 | — | 384 | (2,419 | ) | — | — | — | 155 | 155 | (1,880 | ) | ||||||||||||||||||||||||||||||||||||||||
Income from equity affiliates | — | — | — | — | (1,396 | ) | — | — | (1,396 | ) | 131 | — | — | — | — | — | (1,265 | ) | |||||||||||||||||||||||||||||||||||||||||
Selling and administrative | — | — | — | 119 | — | — | — | 119 | (554 | ) | — | — | — | (155 | ) | (155 | ) | (590 | ) | ||||||||||||||||||||||||||||||||||||||||
Loss (gain) on sales of assets | — | — | — | — | — | — | — | — | — | — | — | — | (56 | ) | (56 | ) | (56 | ) | |||||||||||||||||||||||||||||||||||||||||
Obed incident response costs | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
Restructuring charges | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
Impairment loss | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
Other operating income | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
— | (3,535 | ) | (1,616 | ) | 119 | (3,970 | ) | 1,947 | — | (7,055 | ) | (16,646 | ) | — | — | — | 1,369 | 1,369 | (22,332 | ) | |||||||||||||||||||||||||||||||||||||||
Operating income (loss) | — | 3,535 | 1,616 | (119 | ) | 61 | 999 | — | 6,092 | (1,297 | ) | — | — | — | (1,369 | ) | (1,369 | ) | 3,425 | ||||||||||||||||||||||||||||||||||||||||
Other income (expense): | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Interest expense | — | — | (856 | ) | — | (61 | ) | — | — | (917 | ) | 734 | — | — | — | 1,369 | 1,369 | 1,187 | |||||||||||||||||||||||||||||||||||||||||
Interest income | — | — | — | — | — | (1,276 | ) | — | (1,276 | ) | (228 | ) | — | — | — | — | — | (1,504 | ) | ||||||||||||||||||||||||||||||||||||||||
Other income | 15,336 | — | — | — | — | — | — | 15,336 | — | — | — | — | — | — | 15,336 | ||||||||||||||||||||||||||||||||||||||||||||
15,336 | — | (856 | ) | — | (61 | ) | (1,276 | ) | — | 13,143 | 506 | — | — | — | 1,369 | 1,369 | 15,018 | ||||||||||||||||||||||||||||||||||||||||||
Income (loss) before income taxes | 15,336 | 3,535 | 760 | (119 | ) | — | (277 | ) | — | 19,235 | (791 | ) | — | — | — | — | — | 18,444 | |||||||||||||||||||||||||||||||||||||||||
Income tax expense (benefit) | 2,000 | 921 | 134 | (91 | ) | — | (72 | ) | — | 2,891 | (284 | ) | — | — | — | — | — | 2,607 | |||||||||||||||||||||||||||||||||||||||||
Net income (loss) | $ | 13,336 | $ | 2,614 | $ | 626 | $ | (28 | ) | $ | — | $ | (205 | ) | $ | — | $ | 16,344 | $ | (507 | ) | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 15,837 | ||||||||||||||||||||||||||
_____________________
(1) | Under IFRS, pushdown accounting was not permitted for standalone financial statements, while under US GAAP, pushdown accounting is required when the subsidiary is 100% owned by the parent. |
(2) | Adjustments to inventories and cost of sales for pit inventories related to the inclusion of stripping costs into inventories under IFRS and exclusion of stripping costs under US GAAP. |
(3) | Under IFRS, the determination of the present value of the asset retirement obligation (ARO) is adjusted each reporting period to current discount rates, while under US GAAP, changes in discount rates are only applied to changes in estimates. |
(4) | Under US GAAP, pension benefits expense includes the amortization of actuarial losses and transition obligations resulting in a $0.12 million increase in selling and administrative expense. |
(5) | Under IFRS, the operations of the Bienfait joint venture are accounted for using proportional consolidation, while under US GAAP, it is accounted for using equity method accounting. |
(6) | Under IFRS, certain arrangements with customers treat activities as leasing activities, while under US GAAP, these activities are treated as normal operating activities and the related assets are treated as property of the Company. |
(7) | Under IFRS, deferred tax assets and liabilities are recorded as long term while, under US GAAP they are recorded as current or long term, as appropriate. |
(8) | Currency adjustments: Balance sheet currency translations were calculated at the March 31, 2014 historical spot rate of 1.1053 for CAD/USD. The Statement of operations was translated at the historical average rate of 1.1035 of CAD/USD. |
(9) | Obed incident reclamation liabilities of $2.6 million were recorded under current ARO and reclassified to Other current liabilities. |
(10) | Elimination from Intercompany debt of approximately $662.3 million (CAD732.1 million) since the debt was settled prior to the closing of the Canadian Acquisition. |
(11) | $100.5 million of Property, plant and equipment and $42.4 million of Lease receivables were reclassed to intangibles under the column "Removal of Royalty and Highvale" related to the impairment recorded by Sherrritt as of December 31, 2013. |
(12) | This column includes reclassifications to conform to the Company's presentation as follows: (1) $1.6 million of deferred financing costs was reclassified from current to noncurrent, (2) $38.0 million and $91.5 million of current and long-term capital lease obligations, respectively, were reclassified to debt obligations, (3) accretion expense of $1.4 million included in interest expense was reclassified to cost of sales, (4) gain on sale of assets of $0.06 million included in interest expense was reclassified to gain on sale of assets and (5) $0.16 million of depreciation expense recorded in selling and administrative were reclassified to depreciation, depletion and amortization. |
Appendix B
Pro Forma Statement of Operations Adjustments
Three months ended March 31, 2013
(In thousands)
IFRS to US GAAP | Currency | Reclassifi- cations | |||||||||||||||||||||||||||||||||||||
Pushdown | Inventory | ARO | Pension | Equity Method | Lease Receivable | IFRS to US GAAP | |||||||||||||||||||||||||||||||||
(1) | (2) | (3) | (4) | (5) | (6) | Subtotal | (7) | (8) | Total | ||||||||||||||||||||||||||||||
Revenues | $ | — | $ | — | $ | — | $ | — | $ | (3,589 | ) | $ | 3,125 | $ | (464 | ) | $ | (1,374 | ) | $ | — | $ | (1,837 | ) | |||||||||||||||
Costs and expenses: | |||||||||||||||||||||||||||||||||||||||
Cost of sales | 2,686 | 2,271 | (305 | ) | — | (1,809 | ) | — | 2,844 | (1,167 | ) | 1,758 | 3,434 | ||||||||||||||||||||||||||
Depreciation, depletion, and amortization | (1,029 | ) | — | 655 | — | (364 | ) | 2,100 | 1,363 | (197 | ) | 149 | 1,314 | ||||||||||||||||||||||||||
Income from equity affiliates | — | — | — | — | (1,452 | ) | — | (1,452 | ) | 13 | (1,439 | ) | |||||||||||||||||||||||||||
Selling and administrative | — | — | — | 707 | — | — | 707 | (55 | ) | (149 | ) | 503 | |||||||||||||||||||||||||||
Loss (gain) on sales of assets | — | — | — | — | — | — | — | — | 2,719 | 2,719 | |||||||||||||||||||||||||||||
Impairment loss | (11,848 | ) | — | — | — | — | — | (11,848 | ) | — | — | (11,848 | ) | ||||||||||||||||||||||||||
Other operating income | — | — | — | — | — | — | — | (3 | ) | (3 | ) | ||||||||||||||||||||||||||||
(10,191 | ) | 2,271 | 350 | 707 | (3,624 | ) | 2,100 | (8,387 | ) | (1,410 | ) | 4,477 | (5,320 | ) | |||||||||||||||||||||||||
Operating income (loss) | 10,191 | (2,271 | ) | (350 | ) | (707 | ) | 36 | 1,025 | 7,924 | 36 | (4,477 | ) | 3,483 | |||||||||||||||||||||||||
Other income (expense): | |||||||||||||||||||||||||||||||||||||||
Interest expense | — | — | (1,135 | ) | — | (36 | ) | — | (1,171 | ) | 55 | 4,477 | 3,361 | ||||||||||||||||||||||||||
Interest income | — | — | — | — | — | (1,382 | ) | (1,382 | ) | (20 | ) | — | (1,402 | ) | |||||||||||||||||||||||||
Other income | 15,176 | — | — | — | — | — | 15,176 | — | — | 15,176 | |||||||||||||||||||||||||||||
15,176 | — | (1,135 | ) | — | (36 | ) | (1,382 | ) | 12,624 | 35 | 4,477 | 17,135 | |||||||||||||||||||||||||||
Income (loss) before income taxes | 25,367 | (2,271 | ) | (1,485 | ) | (707 | ) | — | (357 | ) | 20,547 | 71 | — | 20,618 | |||||||||||||||||||||||||
Income tax expense (benefit) | 4,630 | (592 | ) | (387 | ) | (3,544 | ) | — | (93 | ) | 14 | 57 | — | 72 | |||||||||||||||||||||||||
Net income (loss) | $ | 20,737 | $ | (1,679 | ) | $ | (1,098 | ) | $ | 2,837 | $ | — | $ | (264 | ) | $ | 20,533 | $ | 13 | $ | — | $ | 20,546 | ||||||||||||||||
_____________________
(1) | Under IFRS, pushdown accounting was not permitted for standalone financial statements, while under US GAAP, pushdown accounting is required when the subsidiary is 100% owned by the parent. |
(2) | Adjustments to inventories and cost of sales for pit inventories related to the inclusion of stripping costs into inventories under IFRS and exclusion of stripping costs under US GAAP. |
(3) | Under IFRS, the determination of the present value of the asset retirement obligation (ARO) is adjusted each reporting period to current discount rates, while under US GAAP, changes in discount rates are only applied to changes in estimates. |
(4) | Under US GAAP, pension benefits expense includes the amortization of actuarial losses and transition obligations resulting in a $0.7 million increase in selling and administrative expense. |
(5) | Under IFRS, the operations of the Bienfait joint venture are accounted for using proportional consolidation, while under US GAAP, it is accounted for using equity method accounting. |
(6) | Under IFRS, certain arrangements with customers treat activities as leasing activities, while under US GAAP, these activities are treated as normal operating activities and the related assets are treated as property of the Company. |
(7) | Currency adjustments: The Statement of operations was translated at the historical average rate of 1.0089 of CAD/USD. |
(8) | This column includes reclassifications to conform to the Company's presentation as follows: (1) accretion expense of $1.8 million included in interest expense was reclassified to cost of sales, (2) gain on sale of assets of $2.7 million included in interest expense was reclassified to gain on sale of assets and (3) $0.15 million of depreciation expense recorded in selling and administrative were reclassified to depreciation, depletion and amortization. |