Attached files
| file | filename |
|---|---|
| 8-K/A - 8-K/A - Westmoreland Resource Partners, LP | form8-k.htm |
| EX-23.1 - EXHIBIT 23.1 - Westmoreland Resource Partners, LP | ex-231.htm |
| EX-99.1 - EXHIBIT 99.1 - Westmoreland Resource Partners, LP | ex-991.htm |
| EX-99.2 - EXHIBIT 99.2 - Westmoreland Resource Partners, LP | exhibit992.htm |
Exhibit 99.3
WESTMORELAND RESOURCE PARTNERS, LP
INDEX TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
Introduction | |
Unaudited pro forma condensed consolidated balance sheet as of June 30, 2015 | |
Unaudited pro forma condensed consolidated statement of operations for the six months ended June 30, 2015 | |
Unaudited pro forma condensed consolidated statement of operations for the year ended December 31, 2014 | |
Notes to unaudited pro forma condensed consolidated financial statements | |
Introduction to the unaudited pro forma condensed consolidated financial statements of Westmoreland Resource Partners, LP
The unaudited pro forma condensed consolidated financial statements present the impact on Westmoreland Resource Partners, LP’s (collectively with its consolidated subsidiaries, the “Partnership”) results of operations and financial position attributable to the acquisition of Westmoreland Kemmerer LLC (formerly Westmoreland Kemmerer, Inc.) (“Kemmerer”) from Westmoreland Coal Company (“Westmoreland”) pursuant to the Purchase and Sale Agreement dated as of July 31, 2015 (the “Kemmerer PSA”) with an effective date for accounting purposes of August 1, 2015.
Pursuant to the Kemmerer PSA, the Partnership acquired an 100% ownership interest in Kemmerer, which owns mining operations and associated processing facilities, which are located in Lincoln County, Wyoming near Kemmerer, Wyoming.
The aggregate consideration paid by the Partnership to acquire Kemmerer was $230 million, consisting of approximately $115 million in cash, which was funded with borrowings under the Partnership’s existing credit facility and $115 million of Series A convertible units of Westmoreland Resource Partners, LP valued at $115 million. The Partnership's credit facility provides for a delayed draw of $120 million. Borrowings under the credit facility bears interest at a variable rate per annum equal to, at our option, the London Interbank Offered Rate (as defined in the credit facility) (“LIBOR”) (floor of 0.75% plus 8.5%) or the Reference Rate (as defined in the credit facility). As of December 31, 2014 and June 30, 2015, the credit facility had a cash interest rate of 9.25%, consisting of the LIBOR floor (0.75%) plus 8.5%, respectively.
The credit facility also provides for “PIK Interest” (paid-in-kind interest as defined in the credit facility) at a variable rate per annum between 1.00% and 3.00% based on our total net leverage ratio (as defined in the credit facility). The rate of PIK Interest is recalculated on a quarterly basis with the PIK Interest added quarterly to the then-outstanding principal amount of the term loan under the credit facility.
The unaudited pro forma condensed consolidated statement of operations for the six months ended June 30, 2015 and for the year ended December 31, 2014 and unaudited pro forma condensed consolidated balance sheet as of June 30, 2015 are based upon the historical consolidated financial statements of the Partnership and the historical financial statements of the Kemmerer.
The unaudited pro forma condensed consolidated balance sheet has been prepared as if Kemmerer was acquired on June 30, 2015. The unaudited pro forma condensed consolidated statement of operations have been prepared as if Kemmerer was acquired on January 1, 2015, in the case of the unaudited pro forma condensed consolidated statement of operations for the six months ended June 30, 2015, and January 1, 2014, in the case of the unaudited pro forma condensed consolidated statement of operations for the year ended December 31, 2014. The unaudited pro forma condensed consolidated financial statements have been prepared based on the assumption that the Partnership will continue to be treated as a partnership for U.S. federal and state income tax purposes and therefore will not be subject to U.S. federal income taxes or state income taxes. The unaudited pro forma condensed consolidated financial statements have also been prepared based on certain pro forma adjustments, as described in Note 2 — Pro forma adjustments.
The following financial statements are qualified in their entirety by reference to and should be read in conjunction with such historical financial statements and related notes contained in those reports: (i) Kemmerer's historical financial statements set forth in Exhibits 99.1 and 99.2 of this Current Report on Form 8-K as of and for the six months ended June 30, 2015 (unaudited) and as of and for the year ended December 31, 2014; (ii) the Partnership’s unaudited historical consolidated financial statements set forth in its Quarterly Report on Form 10-Q as of and for the six months ended June 30, 2015, as filed with the Securities and Exchange Commission (“SEC”); and (iii) the Partnership’s audited historical consolidated financial statements as of and for the year ended December 31, 2014 as filed with the Securities and Exchange Commission.
The pro forma adjustments reflected in the pro forma condensed consolidated financial statements are based upon currently available information and certain assumptions and estimates; therefore, the actual effects of these transactions will differ from the pro forma adjustments. However, the Partnership’s management considers the applied estimates and assumptions to provide a reasonable basis for the presentation of the significant effects of certain transactions that are expected to have a continuing impact on the Partnership. In addition, the Partnership’s management considers the pro forma adjustments to be factually supportable and to appropriately represent the expected impact of items that are directly attributable to the acquisition of Kemmerer by the Partnership.
The unaudited pro forma condensed consolidated financial statements are not necessarily indicative of the results that would have occurred if the Partnership had acquired Kemmerer on the dates indicated, nor are they indicative of the future operating results of the Partnership.
WESTMORELAND RESOURCE PARTNERS SUCCESSOR | |||||||||||||||||||
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET | |||||||||||||||||||
AS OF JUNE 30, 2015 | |||||||||||||||||||
(in thousands) | |||||||||||||||||||
WMLP Historical | Kemmerer Historical | Pro Forma Adjustments Eliminations | Pro Forma Adjustments Other | WMLP Pro Forma | |||||||||||||||
(a) | (b) | (c) | |||||||||||||||||
ASSETS | |||||||||||||||||||
Current assets: | |||||||||||||||||||
Cash and cash equivalents | $ | 12,766 | $ | 99 | $ | — | 120,000 | c | $ | 14,727 | |||||||||
(115,000 | ) | c | |||||||||||||||||
(3,138 | ) | e | |||||||||||||||||
Accounts receivable: | |||||||||||||||||||
Trade | 14,020 | 11,471 | — | (1,121 | ) | d | 24,370 | ||||||||||||
Other | — | 97 | — | — | 97 | ||||||||||||||
Total accounts receivable | 26,786 | 11,667 | — | 741 | 39,194 | ||||||||||||||
Inventories | 14,870 | 11,370 | — | — | 26,240 | ||||||||||||||
Deferred income taxes | — | 856 | (856 | ) | — | — | |||||||||||||
Prepaid expenses | 2,264 | 1,449 | — | — | 3,713 | ||||||||||||||
Total current assets | 43,920 | 25,342 | (856 | ) | 741 | 69,147 | |||||||||||||
Property, plant and equipment, at costs: | |||||||||||||||||||
Land and mineral rights | 75,794 | 21,301 | — | — | 97,095 | ||||||||||||||
Plant and equipment | 134,291 | 124,529 | — | — | 258,820 | ||||||||||||||
210,085 | 145,830 | — | — | 355,915 | |||||||||||||||
Less accumulated depreciation, depletion and amortization | (19,170 | ) | (43,772 | ) | — | — | (62,942 | ) | |||||||||||
Net property, plant and equipment | 190,915 | 102,058 | — | — | 292,973 | ||||||||||||||
Advance coal royalties | 10,645 | — | — | — | 10,645 | ||||||||||||||
Restricted investments and bond collateral | 8,307 | 25,271 | — | — | 33,578 | ||||||||||||||
Intangible assets, net of accumulated amortization | 29,967 | — | — | — | 29,967 | ||||||||||||||
Deferred income taxes | — | 16,075 | (16,075 | ) | — | ||||||||||||||
Other non-current assets | 6,195 | — | — | 3,138 | e | 9,333 | |||||||||||||
Total assets | $ | 289,949 | $ | 168,746 | $ | (16,931 | ) | $ | 3,879 | $ | 445,643 | ||||||||
WESTMORELAND RESOURCE PARTNERS SUCCESSOR | |||||||||||||||||||
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET | |||||||||||||||||||
AS OF JUNE 30, 2015 | |||||||||||||||||||
(in thousands) | |||||||||||||||||||
WMLP Historical | Kemmerer Historical | Pro Forma Adjustments Eliminations | Pro Forma Adjustments Other | WMLP Pro Forma | |||||||||||||||
(a) | (b) | ||||||||||||||||||
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT) | |||||||||||||||||||
Current liabilities: | |||||||||||||||||||
Current installments of long-term debt | $ | 6 | $ | 2,574 | $ | — | $ | — | $ | 2,580 | |||||||||
Accounts payable and accrued expenses: | |||||||||||||||||||
Trade | 20,392 | 11,873 | — | (1,121 | ) | d | 31,144 | ||||||||||||
Deferred revenue | — | — | — | — | — | ||||||||||||||
Production taxes | 903 | 15,451 | — | — | 16,354 | ||||||||||||||
Accrued compensation | 767 | — | — | — | 767 | ||||||||||||||
Postretirement medical benefits | — | 436 | (436 | ) | — | — | |||||||||||||
Asset retirement obligation | 11,547 | 2,691 | — | — | 14,238 | ||||||||||||||
Other current liabilities | 1,382 | — | — | — | 1,382 | ||||||||||||||
Total current liabilities | 34,997 | 33,025 | (436 | ) | (1,121 | ) | 66,465 | ||||||||||||
Long-term debt, less current installments | 175,864 | 8,797 | — | 120,000 | c | 304,661 | |||||||||||||
Postretirement medical costs, less current portion | — | 62,566 | (62,566 | ) | — | — | |||||||||||||
Pension obligations | — | 17,557 | (17,557 | ) | — | — | |||||||||||||
Asset retirement obligation, less current portion | 21,339 | 16,770 | — | — | 38,109 | ||||||||||||||
Warrants | 1,504 | — | — | — | 1,504 | ||||||||||||||
Other liabilities | 1,020 | 210 | — | — | 1,230 | ||||||||||||||
Total liabilities | 234,724 | 138,925 | (80,559 | ) | 118,879 | 411,969 | |||||||||||||
Partners capital (deficit): | |||||||||||||||||||
Net sponsor investment | — | 29,439 | 63,628 | (93,067 | ) | c | — | ||||||||||||
Limited partner units | 21,863 | — | — | — | 21,863 | ||||||||||||||
Class A convertible limited partner units | — | — | — | 46,534 | c | 46,534 | |||||||||||||
General partner units | 33,362 | — | — | (68,467 | ) | c | (35,105 | ) | |||||||||||
Accumulated other comprehensive income | — | 382 | — | — | 382 | ||||||||||||||
Total partners' capital | 55,225 | 29,821 | 63,628 | (115,000 | ) | 33,674 | |||||||||||||
Total liabilities and partners' capital (deficit) | $ | 289,949 | $ | 168,746 | $ | (16,931 | ) | $ | 3,879 | $ | 445,643 | ||||||||
See accompanying notes to unaudited pro forma condensed consolidated financial statements.
WESTMORELAND RESOURCE PARTNERS SUCCESSOR | |||||||||||||||
UNAUDITED PRO FORMA CONDENSED STATEMENT OF OPERATIONS | |||||||||||||||
SIX MONTHS ENDED JUNE 30, 2015 | |||||||||||||||
(in thousands) | |||||||||||||||
WMLP Historical | Kemmerer Historical | Pro Forma Adjustments Other | WMLP Pro Forma | ||||||||||||
(a) | |||||||||||||||
Revenues: | |||||||||||||||
Coal revenues | $ | 116,786 | $ | 79,041 | $ | — | $ | 195,827 | |||||||
Royalty revenues | 3,521 | — | (3,445 | ) | d | 76 | |||||||||
Non-coal revenues | 6,775 | — | — | 6,775 | |||||||||||
Total Revenues | 127,082 | 79,041 | (3,445 | ) | 202,678 | ||||||||||
Costs and expenses: | |||||||||||||||
Cost of coal revenues (excluding depreciation, depletion and amortization) | 101,517 | 62,973 | (3,445 | ) | d | 158,128 | |||||||||
(2,917 | ) | g | |||||||||||||
Cost of non-coal revenues | 3,390 | — | — | 3,390 | |||||||||||
Depreciation, depletion and amortization | 19,743 | 9,067 | — | 28,810 | |||||||||||
Selling and administrative | 5,613 | 3,230 | — | 8,843 | |||||||||||
Loss on sale/disposal of assets | 1,685 | 16 | — | 1,701 | |||||||||||
Other operating expenses | — | 4 | — | 4 | |||||||||||
Restructuring charges | 656 | — | — | 656 | |||||||||||
Total cost and expenses | 132,604 | 75,290 | (6,362 | ) | 201,532 | ||||||||||
Operating income (loss) | (5,522 | ) | 3,751 | 2,917 | 1,146 | ||||||||||
Other (expense) income: | |||||||||||||||
Interest expense | (11,652 | ) | (291 | ) | (7,378 | ) | f | (19,321 | ) | ||||||
Interest income | — | 520 | — | 520 | |||||||||||
Change in fair value of warrants | 477 | — | — | 477 | |||||||||||
Other | — | 222 | — | 222 | |||||||||||
Total other expenses | (11,175 | ) | 451 | (7,378 | ) | (18,102 | ) | ||||||||
Net income (loss) before income taxes | (16,697 | ) | 4,202 | (4,461 | ) | (16,956 | ) | ||||||||
Income tax expense | — | (338 | ) | 338 | b | — | |||||||||
Net (loss) income | (16,697 | ) | 3,864 | (4,123 | ) | (16,956 | ) | ||||||||
Less net (loss) income allocated to general partner | (103 | ) | 3,864 | (14 | ) | 3,747 | |||||||||
Net income (loss) income allocated to limited partners | $ | (16,594 | ) | $ | — | $ | (4,109 | ) | $ | (20,703 | ) | ||||
Limited partners' net income (loss) per unit (basic and diluted) | |||||||||||||||
Common units | $ | (2.82 | ) | $ | (0.98 | ) | |||||||||
Series A convertible common units | $ | — | $ | (0.98 | ) | ||||||||||
Weighted average number of units used in computation of limited partners' net income (loss per unit (basic and diluted) | |||||||||||||||
Common units | 5,878,187 | 5,878,187 | |||||||||||||
Series A convertible common units | — | 15,251,989 | |||||||||||||
Limited partners' net income (loss) per unit (diluted) | |||||||||||||||
Common units | $ | (2.82 | ) | $ | (0.98 | ) | |||||||||
Series A convertible common units | $ | — | $ | (0.98 | ) | ||||||||||
Weighted average number of units used in computation of limited partners' net income (loss per unit (diluted) | |||||||||||||||
Common units | 5,878,187 | 5,878,187 | |||||||||||||
Series A convertible common units | — | 15,251,989 | |||||||||||||
WESTMORELAND RESOURCE PARTNERS SUCCESSOR | |||||||||||||||
UNAUDITED PRO FORMA CONDENSED STATEMENT OF OPERATIONS | |||||||||||||||
YEAR ENDED DECEMBER 31, 2014 | |||||||||||||||
(in thousands) | |||||||||||||||
WMLP Historical | Kemmerer Historical | Pro Forma Adjustments Other | WMLP Pro Forma | ||||||||||||
Revenues: | |||||||||||||||
Coal revenues | $ | 295,662 | $ | 170,508 | $ | — | $ | 466,170 | |||||||
Royalty revenues | 284 | — | — | 284 | |||||||||||
Non-coal revenues | 26,317 | — | — | 26,317 | |||||||||||
Total Revenues | 322,263 | 170,508 | — | 492,771 | |||||||||||
Costs and expenses: | |||||||||||||||
Cost of coal revenues (excluding depreciation, depletion and amortization) | 258,575 | 118,691 | (4,627 | ) | g | 372,639 | |||||||||
Cost of non-coal revenues | 1,700 | — | — | 1,700 | |||||||||||
Depreciation, depletion and amortization | 39,315 | 16,912 | — | 56,227 | |||||||||||
Selling and administrative | 20,510 | 5,335 | — | 25,845 | |||||||||||
Loss on sale/disposal of assets | (218 | ) | 309 | — | 91 | ||||||||||
Restructuring charges | 2,858 | — | — | 2,858 | |||||||||||
Total cost and expenses | 322,740 | 141,247 | (4,627 | ) | 459,360 | ||||||||||
Operating income (loss) | (477 | ) | 29,261 | 4,627 | 33,411 | ||||||||||
Other (expense) income: | |||||||||||||||
Interest expense | (27,787 | ) | (333 | ) | (14,866 | ) | f | (42,986 | ) | ||||||
Interest income | 4 | 429 | — | 433 | |||||||||||
Loss gain on debt extinguishment | (1,123 | ) | — | — | (1,123 | ) | |||||||||
Change in fair value of warrants | 822 | — | — | 822 | |||||||||||
Other | — | 254 | — | 254 | |||||||||||
Total other expenses | (28,084 | ) | 350 | (14,866 | ) | (42,600 | ) | ||||||||
Net income (loss) before income taxes | (28,561 | ) | 29,611 | (10,239 | ) | (9,189 | ) | ||||||||
Income tax expense | — | (4,292 | ) | 4,292 | b | — | |||||||||
Net (loss) income | (28,561 | ) | 25,319 | (5,947 | ) | (9,189 | ) | ||||||||
Less net loss attributable to noncontrolling interest | 1,270 | — | — | 1,270 | |||||||||||
Net loss attributable to WMLP unitholders | (27,291 | ) | 25,319 | (5,947 | ) | (7,919 | ) | ||||||||
Less net (loss) income allocated to general partner | (103 | ) | 25,319 | (21 | ) | 25,195 | |||||||||
Net income (loss) income allocated to limited partners | $ | (27,188 | ) | $ | — | $ | (5,926 | ) | $ | (33,114 | ) | ||||
Limited partners' net income (loss) per unit (basic and diluted) | |||||||||||||||
Common units | $ | (13.09 | ) | $ | (1.91 | ) | |||||||||
Series A convertible common units | $ | — | $ | (1.91 | ) | ||||||||||
Weighted average number of units used in computation of limited partners' net income (loss per unit (basic) | |||||||||||||||
Common units | 2,076,346 | 2,076,346 | |||||||||||||
Series A convertible common units | — | 15,251,989 | |||||||||||||
Notes to the unaudited pro forma condensed consolidated financial statements of
Westmoreland Resource Partners, LP
1. Basis of presentation
The unaudited pro forma condensed consolidated financial statements are based upon the historical consolidated financial statements of the Partnership and the historical financial statements of Kemmerer. The unaudited pro forma condensed consolidated financial statements present the impact of the acquisition of Kemmerer, which is described in the introduction to the unaudited pro forma condensed consolidated financial statements, on the Partnership’s results of operations, and present the impact of the Kemmerer acquisition on the unaudited pro forma condensed consolidated financial position.
2. Pro forma adjustments
The following adjustments for the Partnership have been prepared (i) as if the acquisition of Kemmerer occurred on January 1, 2014, in the case of the unaudited pro forma condensed consolidated statement of income for the year ended December 31, 2014, (ii) as if the acquisition of Kemmerer occurred on January 1, 2015, in the case of the unaudited pro forma condensed consolidated statement of income for the six months ended June 30, 2015, and (iii) as if the acquisition of Kemmerrer occurred on June 30, 2015, in the case of the unaudited pro forma condensed consolidated balance sheet:
a. | Reflects 100% of the historical results of Kemmerer |
b. | The exclusion of post-retirement medical benefits obligations, pension obligations and the related deferred income tax assets and liabilities, which were not contributed as part of the transaction. The assumption exists that the Partnership will continue to be treated as a partnership for U.S. federal and state income tax purposes and therefore will not be subject to U.S. federal income taxes or state income taxes. |
c. | The acquisition of Kemmerer by the Partnership with a preliminary fair value of approximately $230 million, including the payment of approximately $115 million of cash which was funded from $120 million of borrowings under the Partnership’s credit facility and the issuance of 15,251,989 Series A convertible units of Westmoreland Resource Partners, LP. The excess of cash and unit consideration paid over historical net book value of the assets acquired and liabilities assumed is recorded as a decrease to partners’ capital. |
d. | To reflect the elimination of transactions between the Partnership and Kemmerer. |
e. | To reflect capitalize cost incurred in connection with borrowings under the Partnership's credit facility. |
f. | The inclusion of cash interest expense on the Partnership’s approximately $120 million of borrowings under the Partnership’s credit facility, which bear cash interest at a variable rate of 9.25% and paid-in-kind ("PIK") interest at a variable rate of 3.00% at June 30, 2015. |
g. | The exclusion of post-retirement medical benefits expense and pension expense. |
3. Pro forma net income (loss) per limited common and general partner unit
Net income (loss) is allocated to the general partner and the limited partners (common and Series A convertible unit holders) in accordance with their respective ownership percentages, after giving effect to incentive distributions paid to the general partner. Basic and diluted net income (loss) per limited partner common unit is calculated by dividing limited partners’ interest in net income (loss) by the weighted average number of outstanding limited partner common units during the period.
Unvested share-based payment awards that contain non-forfeitable rights to distributions (whether paid or unpaid) are classified as participating securities and are included in our computation of basic and diluted net income per limited partner unit.
We compute earnings per unit using the two-class method. The two-class method requires that securities that meet the definition of a participating security be considered for inclusion in the computation of basic earnings per unit. Under the two-class method, earnings per unit is calculated as if all of the earnings for the period were distributed under the terms of our agreement, regardless of whether the general partner has discretion over the amount of distributions to be made in any particular period, whether those earnings would actually be distributed during a particular period from an economic or practical
perspective, or whether the general partner has other legal or contractual limitations on its ability to pay distributions that would prevent it from distributing all of the earnings for a particular period.
The two-class method does not impact our overall net income or other financial results; however, in periods in which aggregate net income exceeds our aggregate distributions for such period, it will have the impact of reducing net income per limited partner unit. This result occurs as a larger portion of our aggregate earnings, as if distributed, is allocated to the incentive distribution rights of the general partner, even though we make distributions on the basis of available cash and not earnings. In periods in which our aggregate net income does not exceed our aggregate distributions for such period, the two-class method does not have any impact on our calculation of earnings per limited partner unit.