WESTMORELAND COAL Co - FORM 8-K - EX-99.1 - EXHIBIT 99.1 - November 1, 2016

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 News Release
 
 
Westmoreland Reports Third Quarter 2016 Results; Updates Full-Year Guidance

Englewood, CO – November 1, 2016 - Westmoreland Coal Company (Nasdaq:WLB) today reported financial results for the third quarter and updated its 2016 guidance.

Third Quarter Highlights

•
Revenues of $370.7 million from 13.9 million tons sold
•
Net loss applicable to common shareholders of $8.5 million, or $0.46 per share
•
Adjusted EBITDA of $71.2 million, a new quarterly record

Nine Month Highlights

•
Revenues of $1,081.7 million from 39.7 million tons sold
•
Net loss applicable to common shareholders of $3.3 million, or $0.18 per share, including a sizable tax benefit
•
Adjusted EBITDA of $179.0 million
•
Cash flow provided by operating activities of $84.2 million
•
Free cash flow of $56.3 million

“We delivered record high quarterly adjusted EBITDA. These results were driven by solid demand and demonstrate the benefits of our diverse portfolio, ability to execute, and the strength of our business model. Similar to other quarters, we generated impressive free cash flow as a result of our focus on cost containment, cash flow initiatives, and capital spending management,” said Westmoreland Chief Executive Officer, Kevin Paprzycki. “During the quarter, we also acted quickly to better position Coal Valley when Newcastle pricing increased. We hedged 100% of the 2017 Coal Valley production at prices that will result in breakeven cash flow. This compares very favorably to the projected $10 million cash drag in 2016. We are aggressively evaluating all alternatives for these operations including potential monetization.”

Paprzycki commented on the outlook, “We have executed well this year and are on track to set another adjusted EBITDA record in the fourth quarter. This gives us confidence to tighten our guidance ranges so we now expect to produce full year 2016 adjusted EBITDA in the range of $255 million to $265 million and free cash flow in the range of $75 million to $85 million.”

Safety

Westmoreland’s commitment to safety in all aspects of its operations is again reflected in the safety metrics.
 
Nine Months Ended September 30, 2016
 
Reportable
 
Lost Time
U.S. Operations
1.93
 
1.15
U.S. National Average
3.22
 
2.41
Percentage
60%
 
48%
 
 
 
 
Canadian Operations
3.37
 
1.05

Consolidated and Segment Results

Consolidated adjusted EBITDA for the third quarter was $71.2 million, 48% above the same period in 2015. Contributing to this result was the adjusted EBITDA growth within Coal - U.S. driven by strong demand from the favorable summer weather, successful operations and the San Juan acquisition which continues to exceed expectations. The Coal - WMLP segment also contributed as it, too, benefited from the favorable weather, improved operations and more consistent customer uptime than experienced in the third quarter of 2015. Coal - Canada saw adjusted EBITDA decline 26%

1

primarily from the loan and lease receivable billings being $6.1 million less than the accelerated amount included during 2015’s third quarter.

Nine month consolidated adjusted EBITDA was $179.0 million, 12% higher than the same period last year. This result was influenced by the same factors: favorable weather-driven demand in the U.S. benefiting Coal - U.S. and Coal - WMLP; the addition of San Juan in January of 2016; and in Canada, lower year-to-date loan and lease receivable as well as record rainfall creating less efficient operating conditions at some facilities.

Cash Flow and Liquidity

Westmoreland’s free cash flow through September 30, 2016, was $56.3 million. Free cash flow is the net of cash flow provided by operations of $84.2 million, less capital expenditures of $30.6 million, plus net cash collected under certain contracts for loan and lease receivables of $2.7 million. Included in cash flow provided by operations were cash uses for interest expense of $79.1 million, for asset retirement obligations of $22.1 million, and a source of cash from working capital changes of $14.9 million.

At September 30, 2016, cash and cash equivalents on hand across the parent, San Juan and the MLP, totaled $28.9 million, a $6.0 million increase from year end. The increase was comprised of free cash flow generation of $56.3 million; proceeds from asset sales of $6.2 million; net cash debt reductions including capital lease payments of $45.9 million; cash used, net of loan proceeds received, to purchase San Juan of $3.1 million; cash used for debt issuance of $7.2 million; and cash required for bonding of $0.3 million.

Gross debt plus capital lease obligations at quarter end totaled $1,166.0 million. The increase from year end is attributable to the San Juan financing. There was $36.3 million available to draw, net of letters of credit, on the revolving credit facility.

Full-Year Guidance

Westmoreland’s updated 2016 guidance is:
 
 
Coal tons sold
50 - 55 million tons
Adjusted EBITDA
$255 - $265 million
Free cash flow
$75 - $85 million
Capital expenditures
$50 - $55 million
Cash interest
approximately $97 million

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 conduct a joint earnings conference call with Westmoreland Resource Partners, LP (NYSE:WMLP), on November 1, 2016, 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

Replay:         1-877-481-4010 or 1-919-882-2331
Replay ID:     10107

2

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). Its power operations include ownership of the two-unit ROVA coal-fired power plant in North Carolina. For more information, visit www.westmoreland.com.

For further information please contact

Gary Kohn, Vice President Investor Relations
1-720-354-4467
gkohn@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. Important factors that could cause actual results to differ materially from those in the forward-looking statements include political, economic, business, competitive, market, weather and regulatory conditions.

Any forward-looking statements made by Westmoreland in this news release speak only as of the date on which it was made. Westmoreland undertakes no obligation to publicly update any forward-looking statements, whether as a result of new information, future developments or otherwise, except as may be required by law.



























3

Westmoreland Coal Company and Subsidiaries
Summary Consolidated and Operating Segment Data (Unaudited)

 
Three Months Ended September 30,
 
 
 
 
 
Increase / (Decrease)
 
2016
 
2015
 
$
 
%
 
(In thousands, except tons sold data)
Westmoreland Consolidated
 
 
 
 
 
 
 
Revenues
$
370,683

 
$
349,796

 
$
20,887

 
6.0
 %
Operating income (loss)
17,212

 
(15,307
)
 
32,519

 
*

Adjusted EBITDA
71,201

 
47,966

 
23,235

 
48.4
 %
Tons sold—millions of equivalent tons
13.9

 
13.8

 
0.1

 
0.7
 %
 
 
 
 
 
 
 
 
Coal - U.S.
 
 
 
 
 
 
 
Revenues
$
168,860

 
$
132,018

 
$
36,842

 
27.9
 %
Operating income
18,346

 
482

 
17,864

 
3,706.2
 %
Adjusted EBITDA
36,701

 
14,758

 
21,943

 
148.7
 %
Tons sold—millions of equivalent tons
6.9

 
6.0

 
0.9

 
15.0
 %
 
 
 
 
 
 
 
 
Coal - Canada
 
 
 
 
 
 
 
Revenues
$
96,480

 
$
107,752

 
$
(11,272
)
 
(10.5
)%
Operating income
4,559

 
4,009

 
550

 
13.7
 %
Adjusted EBITDA
17,549

 
23,659

 
(6,110
)
 
(25.8
)%
Tons sold—millions of equivalent tons
5.1

 
6.2

 
(1.1
)
 
(17.7
)%
 
 
 
 
 
 
 
 
Coal - WMLP
 
 
 
 
 
 
 
Revenues
$
90,320

 
$
94,785

 
$
(4,465
)
 
(4.7
)%
Operating income (loss)
5,970

 
(4,845
)
 
10,815

 
*

Adjusted EBITDA
22,686

 
15,648

 
7,038

 
45.0
 %
Tons sold—millions of equivalent tons
1.9

 
1.6

 
0.3

 
18.8
 %
 
 
 
 
 
 
 
 
Power
 
 
 
 
 
 
 
Revenues
$
21,554

 
$
22,017

 
$
(463
)
 
(2.1
)%
Operating loss
(4,696
)
 
(7,976
)
 
3,280

 
41.1
 %
Adjusted EBITDA
507

 
75

 
432

 
576.0
 %

* Not meaningful





4

 
Nine Months Ended September 30,
 
 
 
 
 
Increase / (Decrease)
 
2016
 
2015
 
$
 
%
 
(In thousands, except tons sold data)
Westmoreland Consolidated
 
 
 
 
 
 
 
Revenues
$
1,081,651

 
$
1,070,240

 
$
11,411

 
1.1
 %
Operating income (loss)
31,739

 
(13,716
)
 
45,455

 
*

Adjusted EBITDA
178,994

 
159,275

 
19,719

 
12.4
 %
Tons sold—millions of equivalent tons
39.7

 
40.7

 
(1.0
)
 
(2.5
)%
 
 
 
 
 
 
 
 
Coal - U.S.
 
 
 
 
 
 
 
Revenues
$
475,470

 
$
419,505

 
$
55,965

 
13.3
 %
Operating income
33,475

 
8,403

 
25,072

 
298.4
 %
Adjusted EBITDA
85,999

 
49,209

 
36,790

 
74.8
 %
Tons sold—millions of equivalent tons
17.6

 
17.2

 
0.4

 
2.3
 %
 
 
 
 
 
 
 
 
Coal - Canada
 
 
 
 
 
 
 
Revenues
$
298,978

 
$
317,157

 
$
(18,179
)
 
(5.7
)%
Operating income
21,168

 
23,397

 
(2,229
)
 
(9.5
)%
Adjusted EBITDA
55,701

 
81,497

 
(25,796
)
 
(31.7
)%
Tons sold—millions of equivalent tons
16.5

 
17.5

 
(1.0
)
 
(5.7
)%
 
 
 
 
 
 
 
 
Coal - WMLP
 
 
 
 
 
 
 
Revenues
$
263,269

 
$
300,908

 
$
(37,639
)
 
(12.5
)%
Operating income (loss)
2,497

 
(6,151
)
 
8,648

 
*

Adjusted EBITDA
58,268

 
49,826

 
8,442

 
16.9
 %
Tons sold—millions of equivalent tons
5.6

 
6.0

 
(0.4
)
 
(6.7
)%
 
 
 
 
 
 
 
 
Power
 
 
 
 
 
 
 
Revenues
$
65,494

 
$
64,001

 
$
1,493

 
2.3
 %
Operating loss
(3,766
)
 
(16,594
)
 
12,828

 
77.3
 %
Adjusted EBITDA
(2,227
)
 
(3,152
)
 
925

 
29.3
 %

* Not meaningful

5

Westmoreland Coal Company and Subsidiaries
Consolidated Statements of Operations (Unaudited)

 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2016
 
2015
 
2016
 
2015
 
(In thousands, except per share data)
Revenues
$
370,683

 
$
349,796

 
$
1,081,651

 
$
1,070,240

Cost, expenses and other:
 
 
 
 
 
 
 
Cost of sales
278,765

 
292,973

 
842,680

 
880,162

Depreciation, depletion and amortization
33,112

 
34,459

 
101,788

 
106,781

Selling and administrative
30,518

 
29,383

 
94,209

 
84,611

Heritage health benefit expenses
3,265

 
2,801

 
9,502

 
8,022

Loss (gain) on sale/disposal of assets
548

 
1,135

 
(1,369
)
 
2,148

Restructuring charges
—

 
—

 
—

 
656

Derivative loss
5,442

 
5,815

 
2,164

 
6,717

Income from equity affiliates
(1,547
)
 
(463
)
 
(4,127
)
 
(4,141
)
Other operating loss (gain)
3,368

 
(1,000
)
 
5,065

 
(1,000
)
 
353,471

 
365,103

 
1,049,912

 
1,083,956

Operating income (loss)
17,212

 
(15,307
)
 
31,739

 
(13,716
)
Other income (expense):
 
 
 
 
 
 
 
Interest expense
(29,494
)
 
(26,831
)
 
(90,673
)
 
(76,870
)
Loss on extinguishment of debt
—

 
(5,385
)
 
—

 
(5,385
)
Interest income
1,374

 
1,555

 
5,521

 
6,262

Gain (loss) on foreign exchange
220

 
1,679

 
(1,531
)
 
2,474

Other income
303

 
356

 
435

 
1,082

 
(27,597
)
 
(28,626
)
 
(86,248
)
 
(72,437
)
Loss before income taxes
(10,385
)
 
(43,933
)
 
(54,509
)
 
(86,153
)
Income tax expense (benefit)
(1,625
)
 
4,087

 
(49,660
)
 
13,596

Net loss
(8,760
)
 
(48,020
)
 
(4,849
)
 
(99,749
)
Less net income (loss) attributable to noncontrolling interest
(239
)
 
(1,458
)
 
(1,545
)
 
(4,850
)
Net loss applicable to common shareholders
$
(8,521
)
 
$
(46,562
)
 
$
(3,304
)
 
$
(94,899
)
Net loss per share applicable to common shareholders:
 
 
 
 
 
 
 
Basic and diluted
$
(0.46
)
 
$
(2.59
)
 
$
(0.18
)
 
$
(5.32
)
Weighted average number of common shares outstanding:
 
 
 
 
 
 
 
Basic and diluted
18,570

 
17,986

 
18,458

 
17,846



6


Westmoreland Coal Company and Subsidiaries
Consolidated Balance Sheets (Unaudited)    
 
September 30,
2016
 
December 31,
2015
 
(In thousands)
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
28,914

 
$
22,936

Receivables:
 
 
 
Trade
140,063

 
134,141

Loan and lease receivables
5,394

 
6,157

Contractual third-party reclamation receivables
12,985

 
8,020

Other
20,018

 
11,598

 
178,460

 
159,916

Inventories
128,685

 
121,858

Other current assets
24,711

 
16,103

Total current assets
360,770

 
320,813

Property, plant and equipment:
 
 
 
Land and mineral rights
600,160

 
476,447

Plant and equipment
879,718

 
790,677

 
1,479,878

 
1,267,124

Less accumulated depreciation, depletion and amortization
642,791

 
554,008

Net property, plant and equipment
837,087

 
713,116

Loan and lease receivables, less current portion
49,389

 
49,313

Advanced coal royalties
17,470

 
19,781

Reclamation deposits
74,043

 
77,364

Restricted investments and bond collateral
144,454

 
140,807

Contractual third-party reclamation receivables, less current portion
155,249

 
86,915

Investment in joint venture
27,815

 
27,374

Intangible assets, net of accumulated amortization of $4.0 million and $15.9 million at September 30, 2016 and December 31, 2015, respectively
27,492

 
29,190

Other assets
25,883

 
11,904

Total Assets
$
1,719,652

 
$
1,476,577


7

Westmoreland Coal Company and Subsidiaries
Consolidated Balance Sheets (Continued) (Unaudited)    
 
September 30,
2016
 
December 31,
2015
 
(In thousands)
Liabilities and Shareholders’ Deficit
 
 
 
Current liabilities:
 
 
 
Current installments of long-term debt
$
90,736

 
$
38,852

Revolving lines of credit
—

 
1,970

Accounts payable and accrued expenses:
 
 
 
Trade and other accrued liabilities
121,266

 
109,850

Interest payable
13,611

 
15,527

Production taxes
55,589

 
46,895

Postretirement medical benefits
13,855

 
13,855

SERP
368

 
368

Deferred revenue
23,203

 
10,715

Asset retirement obligations
51,088

 
43,950

Other current liabilities
34,578

 
30,688

Total current liabilities
404,294

 
312,670

Long-term debt, less current installments
1,035,013

 
979,073

Workers’ compensation, less current portion
4,908

 
5,068

Excess of black lung benefit obligation over trust assets
17,865

 
17,220

Postretirement medical benefits, less current portion
286,952

 
285,518

Pension and SERP obligations, less current portion
42,790

 
44,808

Deferred revenue, less current portion
18,740

 
24,613

Asset retirement obligations, less current portion
450,869

 
375,813

Intangible liabilities, net of accumulated amortization of $10.6 million and $9.8 million at September 30, 2016 and December 31, 2015, respectively
2,669

 
3,470

Other liabilities
36,760

 
30,208

Total liabilities
2,300,860

 
2,078,461

Shareholders’ deficit:
 
 
 
Common stock of $0.01 par value
 
 
 
Authorized 30,000,000 shares; issued and outstanding 18,570,642 shares at September 30, 2016 and 18,162,148 shares at December 31, 2015
186

 
182

Other paid-in capital
246,450

 
240,721

Accumulated other comprehensive loss
(150,726
)
 
(171,300
)
Accumulated deficit
(675,523
)
 
(672,219
)
Total Westmoreland Coal Company shareholders’ deficit
(579,613
)
 
(602,616
)
Noncontrolling interest
(1,595
)
 
732

Total deficit
(581,208
)
 
(601,884
)
Total Liabilities and Deficit
$
1,719,652

 
$
1,476,577



8


Westmoreland Coal Company and Subsidiaries
Consolidated Statements of Cash Flows (Unaudited)    

 
Nine Months Ended September 30,
 
2016
 
2015
 
(In thousands)
Cash flows from operating activities:
 
 
 
Net loss
$
(4,849
)
 
$
(99,749
)
Adjustments to reconcile net loss to net cash provided by operating activities:
 
 
 
Depreciation, depletion and amortization
101,788

 
106,781

Accretion of asset retirement obligation and receivable
21,534

 
21,251

Share-based compensation
5,925

 
5,588

Non-cash interest expense
6,879

 
4,617

Amortization of deferred financing costs
8,324

 
7,849

Loss on derivative instruments
2,164

 
6,717

Loss (gain) on foreign exchange
1,531

 
(2,474
)
Income from equity affiliates
(4,127
)
 
(4,141
)
Distributions from equity affiliates
5,177

 
4,328

Deferred income tax expense (benefit)
(48,490
)
 
14,887

Other
(4,359
)
 
3,968

Changes in operating assets and liabilities:
 
 
 
Receivables
(238
)
 
(14,327
)
Inventories
9,460

 
494

Accounts payable and accrued expenses
(2,327
)
 
(2,572
)
Interest payable
(3,720
)
 
7,398

Deferred revenue
4,314

 
(8,297
)
Other assets and liabilities
7,375

 
(21,528
)
Asset retirement obligations
(22,120
)
 
(9,908
)
Net cash provided by operating activities
84,241

 
20,882

Cash flows from investing activities:
 
 
 
Additions to property, plant and equipment
(30,619
)
 
(57,971
)
Change in restricted investments
270

 
(7,988
)
Cash received from restricted deposits
—

 
34,000

Cash payments related to acquisitions and other
(125,315
)
 
(35,887
)
Cash acquired related to acquisition, net
—

 
2,780

Proceeds from sales of assets
6,176

 
1,691

Receipts from loan and lease receivables
4,852

 
20,192

Payments related to loan and lease receivables
(2,141
)
 
(3,981
)
Other
(587
)
 
(287
)
Net cash used in investing activities
(147,364
)
 
(47,451
)
Cash flows from financing activities:
 
 
 
Borrowings from long-term debt, net of debt discount
122,250

 
199,363

Repayments of long-term debt
(43,876
)
 
(138,185
)
Borrowings on revolving lines of credit
313,900

 
142,823

Repayments on revolving lines of credit
(315,900
)
 
(152,412
)
Debt issuance costs and other refinancing costs
(7,246
)
 
(7,431
)
Other
(798
)
 
90

Net cash provided by financing activities
68,330

 
44,248

Effect of exchange rate changes on cash
771

 
(2,601
)
Net increase in cash and cash equivalents
5,978

 
15,078

Cash and cash equivalents, beginning of period
22,936

 
14,258

Cash and cash equivalents, end of period
$
28,914

 
$
29,336

Supplemental disclosures of cash flow information:
 
 
 
Cash paid for interest
$
79,099

 
$
61,399


9


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 measure 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.


10

 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2016
 
2015
 
2016
 
2015
 
(In thousands)
Adjusted EBITDA by Segment
 
 
 
 
 
 
 
Coal - U.S.
$
36,701

 
$
14,758

 
$
85,999

 
$
49,209

Coal - Canada
17,549

 
23,659

 
55,701

 
81,497

Coal - WMLP
22,686

 
15,648

 
58,268

 
49,826

Power
507

 
75

 
(2,227
)
 
(3,152
)
Heritage
(3,326
)
 
(2,950
)
 
(10,325
)
 
(8,699
)
Corporate
(2,916
)
 
(3,224
)
 
(8,422
)
 
(9,406
)
Total
$
71,201

 
$
47,966

 
$
178,994

 
$
159,275

 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2016
 
2015
 
2016
 
2015
 
(In thousands)
Reconciliation of Net Loss to Adjusted EBITDA
 
 
 
 
 
 
 
Net loss
$
(8,760
)
 
$
(48,020
)
 
$
(4,849
)
 
$
(99,749
)
 
 
 
 
 
 
 
 
Income tax expense (benefit)
(1,625
)
 
4,087

 
(49,660
)
 
13,596

Interest income
(1,374
)
 
(1,555
)
 
(5,521
)
 
(6,262
)
Interest expense
29,494

 
26,831

 
90,673

 
76,870

Depreciation, depletion and amortization
33,112

 
34,459

 
101,788

 
106,781

Accretion of ARO and receivable
7,237

 
7,142

 
21,534

 
21,250

Amortization of intangible assets and liabilities
(226
)
 
(250
)
 
(653
)
 
(756
)
EBITDA
57,858

 
22,694

 
153,312

 
111,730

 
 
 
 
 
 
 
 
Restructuring charges
—

 
—

 
—

 
656

Loss (gain) on foreign exchange
(220
)
 
(1,679
)
 
1,531

 
(2,474
)
Loss on extinguishment of debt
—

 
5,385

 
—

 
5,385

Acquisition related costs (1)
—

 
3,070

 
568

 
4,470

Customer payments received under loan and lease receivables (2)
2,582

 
8,731

 
7,969

 
24,252

Derivative loss
5,442

 
5,815

 
2,164

 
6,717

Loss on sale/disposal of assets and other adjustments
4,148

 
2,008

 
7,525

 
2,951

Share-based compensation
1,391

 
1,942

 
5,925

 
5,588

Adjusted EBITDA
$
71,201

 
$
47,966

 
$
178,994

 
$
159,275

___________________
(1) 
Includes the impact of cost of sales related to the sale of inventory written up to fair value in the acquisition of Westmoreland Resources GP, LLC, the general partner of WMLP.
(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 by the Company is treated consistently with all other contracts within the Company that do not result in loan and lease receivable accounting.

Free Cash Flow

Free cash flow represents net cash provided (used) by operating activities less additions to property, plant and equipment (“CAPEX” or “capital expenditures”) plus net customer payments received under loan and lease receivable. Free cash flow is a non-GAAP measure and should not be considered as an alternative to cash and cash equivalents, cash flow from

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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
Nine Months Ended September 30,
 
2016
 
2015
 
(In thousands)
Net cash provided by operating activities
$
84,241

 
$
20,882

Less cash paid for property, plant and equipment
(30,619
)
 
(57,971
)
Net customer payments received under loan and lease receivables
2,711

 
16,211

Free cash flow
$
56,333

 
$
(20,878
)


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