Attached files
| file | filename |
|---|---|
| 8-K/A - AMENDMENT NO. 1 TO FORM 8-K - WESTMORELAND COAL Co | f8ka1_013112.htm |
| EX-99.4 - EXHIBIT 99.4 - WESTMORELAND COAL Co | exh99-4.htm |
| EX-23.1 - EXHIBIT 23.1 - WESTMORELAND COAL Co | exh23-1.htm |
Exhibit 99.5
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The following unaudited pro forma combined financial information is based on the historical financial statements of Westmoreland Coal Company and Kemmerer Mine, adjusted to reflect the proposed Kemmerer Acquisition and this offering. The unaudited pro forma combined balance sheet gives effect to the Kemmerer Acquisition and the related financing transactions as if they had occurred on December 31, 2011. The unaudited pro forma combined statement of operations gives effect to the Kemmerer Acquisition and the related financing transactions as if they had occurred on January 1, 2011.
For purposes of this unaudited pro forma combined consolidated financial information, the Kemmerer Acquisition price has been allocated to the tangible assets acquired and liabilities assumed based on a preliminary estimate of fair value of those assets and liabilities. The actual amounts recorded upon the finalization of the purchase price allocation may differ materially from the information presented in the accompanying unaudited pro forma combined consolidated financial information.
Estimates of fair value assigned on the unaudited pro forma combined financial statements presented are preliminary and subject to change, and those changes may be significant. The unaudited pro forma combined financial information is for informational purposes only and is not intended to represent or to be indicative of the combined results of operations or financial position that Westmoreland Coal Company would have reported had the Kemmerer Acquisition been completed as of the dates set forth in this unaudited pro forma combined financial information and should not be taken as indicative of our future combined results of operations or financial position. The actual results may differ significantly from that reflected in the unaudited pro forma combined financial information for a number of reasons, including, but not limited to, differences between the assumptions used to prepare the unaudited pro forma combined financial information and actual results. The unaudited pro forma combined financial information should be read in conjunction with Westmoreland Coal Company’s consolidated financial statements in the 2011 10-K .
- 1 -
Westmoreland Coal Company and Subsidiaries
Unaudited Pro Forma Combined Balance Sheet
December 31, 2011
(In thousands)
|
Historical
|
Pro Forma
|
||||||||||||||||
|
Westmoreland
Coal Company
|
Kemmerer
Mine
|
Adjustments
|
Combined
|
||||||||||||||
|
|
|||||||||||||||||
|
Assets
|
|
|
|
|
|||||||||||||
|
Current assets:
|
|||||||||||||||||
| $ | 119,365 |
(a)
|
|||||||||||||||
| (72,523 | ) |
(b)
|
|||||||||||||||
|
Cash and cash equivalents
|
$ | 30,783 | $ | - | (29,448 | ) |
(c)
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$ | 48,177 | ||||||||
|
Receivables:
|
|||||||||||||||||
|
Trade
|
46,235 | - | - | 46,235 | |||||||||||||
|
Contractual third party reclamation receivables
|
11,259 | - | - | 11,259 | |||||||||||||
|
Other
|
3,493 | - | - | 3,493 | |||||||||||||
| 60,987 | - | - | 60,987 | ||||||||||||||
|
Inventories
|
25,696 | 10,018 | (465 | ) |
(d)
|
35,249 | |||||||||||
|
Other current assets
|
4,987 | - | - | 4,987 | |||||||||||||
|
Total current assets
|
122,453 | 10,018 | 16,929 | 149,400 | |||||||||||||
|
Property, plant and equipment:
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|||||||||||||||||
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Land and mineral rights
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84,338 | 227,761 | (202,393 | ) |
(d)
|
109,706 | |||||||||||
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Capitalized asset retirement cost
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113,863 | 7,795 | 7,308 |
(d)
|
128,966 | ||||||||||||
|
Plant and equipment
|
527,127 | 188,133 | (84,845 | ) |
(d)
|
630,415 | |||||||||||
| 725,328 | 423,689 | (279,930 | ) | 869,087 | |||||||||||||
|
Less accumulated depreciation, depletion and amortization
|
328,596 | 278,678 | (278,678 | ) |
(d)
|
328,596 | |||||||||||
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Net property, plant and equipment
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396,732 | 145,011 | (1,252 | ) | 540,491 | ||||||||||||
|
Advanced coal royalties
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2,552 | - | - | 2,552 | |||||||||||||
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Reclamation deposits
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71,939 | - | - | 71,939 | |||||||||||||
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Restricted cash and bond collateral
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58,305 | - | 24,700 |
(c)
|
83,005 | ||||||||||||
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Contractual third party reclamation receivables
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87,674 | - | - | 87,674 | |||||||||||||
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Intangible assets
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4,879 | - | - | 4,879 | |||||||||||||
| (4,000 | ) |
(b)
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|||||||||||||||
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Other assets
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14,638 | - | 4,748 |
(c)
|
15,386 | ||||||||||||
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Investment in subs
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- | - | - | - | |||||||||||||
|
Total Assets
|
$ | 759,172 | $ | 155,029 | $ | 41,125 | $ | 955,326 | |||||||||
See Notes to Unaudited Pro Forma Combined Financial Statements
- 2 -
Westmoreland Coal Company and Subsidiaries
Unaudited Pro Forma Combined Balance Sheet (cont.)
December 31, 2011
(In thousands)
|
Historical
|
Pro Forma
|
||||||||||||||||
|
Westmoreland
Coal Company
|
Kemmerer
Mine
|
Adjustments
|
Combined
|
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Liabilities and Shareholders' Deficit
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Current liabilities:
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Current installments of long-term debt
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$ | 20,795 | $ | - | $ | - | $ | 20,795 | |||||||||
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Accounts payable and accrued expenses:
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|||||||||||||||||
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Trade
|
45,326 | 835 | 933 |
(e)
|
47,094 | ||||||||||||
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Production taxes
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25,605 | - | - | 25,605 | |||||||||||||
|
Workers’ compensation
|
911 | - | - | 911 | |||||||||||||
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Postretirement medical benefits
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13,179 | - | - | 13,179 | |||||||||||||
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SERP
|
391 | - | - | 391 | |||||||||||||
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Deferred revenue
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9,852 | - | - | 9,852 | |||||||||||||
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Asset retirement obligations
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19,765 | - | - | 19,765 | |||||||||||||
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Other current liabilities
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8,298 | - | - | 8,298 | |||||||||||||
|
Total current liabilities
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144,122 | 835 | 933 | 145,890 | |||||||||||||
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Long-term debt, less current installments
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261,474 | - | 119,365 |
(a)
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380,839 | ||||||||||||
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Workers’ compensation, less current portion
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10,715 | - | - | 10,715 | |||||||||||||
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Excess of pneumoconiosis benefit obligation over trust assets
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6,565 | 2,421 | (2,421 | ) |
(f)
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6,565 | |||||||||||
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Postretirement medical benefits, less current portion
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245,462 | 55,670 | (6,670 | ) |
(f)
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294,462 | |||||||||||
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Pension and SERP obligations, less current portion
|
28,991 | 11,306 | 518 |
(f)
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40,815 | ||||||||||||
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Deferred revenue, less current portion
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65,834 | - | - | 65,834 | |||||||||||||
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Asset retirement obligations, less current portion
|
227,713 | 22,045 | (6,942 | ) |
(f)
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242,816 | |||||||||||
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Intangible liabilities
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7,644 | - | - | 7,644 | |||||||||||||
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Other liabilities
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10,510 | - | - | 10,510 | |||||||||||||
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Total Liabilities
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1,009,030 | 92,277 | 104,783 | 1,206,090 | |||||||||||||
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Shareholders' deficit:
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|||||||||||||||||
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Preferred stock of $1.00 par value
|
160 | - | - | 160 | |||||||||||||
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Common stock of $2.50 par value
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34,527 | - | - | 34,527 | |||||||||||||
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Other paid-in capital
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126,288 | - | - | 126,288 | |||||||||||||
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Accumulated other comprehensive loss
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(121,455 | ) | - | - | (121,455 | ) | |||||||||||
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Accumulated deficit
|
(281,141 | ) | 62,752 | (63,658 | ) | (282,047 | ) | ||||||||||
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Total Westmoreland Coal Company shareholders' deficit
|
(241,621 | ) | 62,752 | (63,658 | ) | (242,527 | ) | ||||||||||
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Noncontrolling interest
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(8,237 | ) | - | - | (8,237 | ) | |||||||||||
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Total deficit
|
(249,858 | ) | 62,752 | (63,658 | ) | (250,764 | ) | ||||||||||
|
Total Liabilities and Shareholders' Deficit
|
$ | 759,172 | $ | 155,029 | $ | 41,125 | $ | 955,326 | |||||||||
See Notes to Unaudited Pro Forma Combined Financial Statements
- 3 -
Westmoreland Coal Company and Subsidiaries
Unaudited Pro Forma Combined Statement of Operations
For the year ended December 31, 2011
(In thousands, except for per share data)
|
Historical
|
Pro Forma
|
||||||||||||||||
|
Westmoreland
Coal Company
|
Kemmerer
Mine
|
Adjustments
|
Combined
|
||||||||||||||
|
|
|
|
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|
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Revenues
|
$ | 501,713 | $ | 144,112 | $ | - | $ | 645,825 | |||||||||
|
Cost and expenses:
|
|||||||||||||||||
| (193 | ) |
(g)
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|||||||||||||||
|
Cost of sales
|
392,787 | 128,875 | (280 | ) |
(h)
|
521,189 | |||||||||||
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Depreciation, depletion and amortization
|
45,594 | 13,871 | (854 | ) |
(i)
|
58,611 | |||||||||||
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Selling and administrative
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40,276 | - | - | 40,276 | |||||||||||||
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Heritage health benefit expenses
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18,575 | - | - | 18,575 | |||||||||||||
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Loss on sales of assets
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640 | - | - | 640 | |||||||||||||
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Other operating income
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(6,785 | ) | - | - | (6,785 | ) | |||||||||||
| 491,087 | 142,746 | (1,327 | ) | 632,506 | |||||||||||||
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Operating income
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10,626 | 1,366 | 1,327 | 13,319 | |||||||||||||
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Other income (expense):
|
|||||||||||||||||
| (13,438 | ) |
(j)
|
|||||||||||||||
| (548 | ) |
(k)
|
|||||||||||||||
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Interest expense
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(29,769 | ) | - | (464 | ) |
(l)
|
(44,219 | ) | |||||||||
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Loss on extinguishment of debt
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(17,030 | ) | - | - | (17,030 | ) | |||||||||||
|
Interest income
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1,444 | - | - | 1,444 | |||||||||||||
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Other income
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(2,572 | ) | - | - | (2,572 | ) | |||||||||||
| (47,927 | ) | - | (14,450 | ) | (62,377 | ) | |||||||||||
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Income (loss) before income taxes
|
(37,301 | ) | 1,366 | (13,123 | ) | (49,058 | ) | ||||||||||
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Income tax (benefit) expense
|
(426 | ) | - | - |
(m)
|
(426 | ) | ||||||||||
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Net income (loss)
|
(36,875 | ) | 1,366 | (13,123 | ) | (48,632 | ) | ||||||||||
|
Less net loss attributable to noncontrolling interest
|
(3,775 | ) | - | - | (3,775 | ) | |||||||||||
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Net income (loss) attributable to the Parent company
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(33,100 | ) | 1,366 | (13,123 | ) | (44,857 | ) | ||||||||||
|
Less preferred stock dividend requirements
|
1,360 | - | - | 1,360 | |||||||||||||
|
Net income (loss) applicable to common shareholders
|
$ | (34,460 | ) | $ | 1,366 | $ | (13,123 | ) | $ | (46,217 | ) | ||||||
|
Net income (loss) per share applicable to common
shareholders:
|
|||||||||||||||||
|
Basic and diluted
|
$ | (2.61 | ) | $ | (3.50 | ) | |||||||||||
|
Weighted average number of common shares
Outstanding - Basic and diluted
|
13,192 | 13,192 | |||||||||||||||
See Notes to Unaudited Pro Forma Combined Financial Statements
- 4 -
Notes to Unaudited Pro Forma Combined Financial Statements
1. Acquisition of Kemmerer Mine
On December 23, 2011, Westmoreland Coal Company (the “Company”), through a wholly-owned subsidiary, entered into a Purchase and Sale Agreement (the “Purchase Agreement”) with Chevron Mining, Inc., a Missouri corporation (“Seller”), pursuant to which the Company agreed to purchase from Seller the Kemmerer surface coal mine, associated processing facilities and other related real and personal property assets located in Kemmerer, Wyoming.
On December 23, 2011, the Company paid the seller a $4.0 million cash deposit which was credited toward the purchase price during the closing of the acquisition.
On January 31, 2012, the Company closed on the acquisition of the Kemmerer Mine from the Seller. In addition, on January 31, 2012, the Company completed the issuance and sale of $125,000,000 aggregate principal amount of 10.75% Senior Secured Notes (the “Notes”) due 2018 at a price equal to 95.4916% of their face value.
Other than inventory, the Company did not acquire working capital in the acquisition so working capital of the Kemmerer Mine is not reflected in the pro forma balance sheet. However going forward, the Company will have working capital requirements related to the Kemmerer Mine.
The purchase consideration for the Kemmerer Mine is estimated at $153.3 million, which includes $76.5 million paid in cash, plus the assumption of approximately $76.8 million of liabilities. The net proceeds of the Notes financed the $76.5 million cash portion of the purchase consideration, $24.7 million to satisfy the cash bonding obligations for the Kemmerer Mine and cash transaction costs for the Kemmerer Acquisition and the Notes of approximately $6.1 million. The balance of the net proceeds will be used to fund working capital requirements necessary to integrate the Kemmerer operations with the Company’s.
The Kemmerer Acquisition has been accounted for under the acquisition method of accounting which requires the total purchase consideration to be allocated to the assets acquired and liabilities assumed based on estimates of fair value.
The allocation of the purchase price is preliminary pending the completion of various analyses and the finalization of estimates. During the measurement period (which is not to exceed one year from the acquisition date), additional assets or liabilities may be recognized if new information is obtained about facts and circumstances that existed as of the acquisition date that, if known, would have resulted in the recognition of those assets or liabilities as of that date. The preliminary allocation may be adjusted after obtaining additional information regarding, among other things, asset valuations, liabilities assumed and revisions of previous estimates.
A summary of the estimated purchase consideration and a preliminary allocation of the estimated purchase consideration follows (in millions):
Estimated Purchase Consideration
|
Cash paid
|
$ | 76.5 | ||
|
|
||||
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Estimated fair value of liabilities assumed:
|
||||
|
Postretirement medical cost obligations
|
49.0 | |||
|
Asset retirement obligations
|
15.1 | |||
|
Pension obligations
|
11.8 | |||
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Accrued liabilities
|
0.9 | |||
|
Total estimated fair value of liabilities assumed
|
76.8 | |||
|
Total estimated purchase consideration
|
$ | 153.3 |
- 5 -
|
Allocation of Estimated Purchase Consideration
|
||||
|
Inventories
|
$ | 9.5 | ||
|
Land and mineral rights
|
25.4 | |||
|
Capitalized asset retirement costs
|
15.1 | |||
|
Plant and equipment
|
103.3 | |||
|
Total
|
$ | 153.3 |
2. Basis of Pro Forma Presentation
The unaudited pro forma combined balance sheet gives effect to the Kemmerer Acquisition and the related financing transactions as if they had occurred on December 31, 2011. The unaudited pro forma combined statement of operations gives effect to the Kemmerer Acquisition and the related financing transactions as if they had occurred on January 1, 2011.
3. Pro Forma Adjustments
The unaudited pro forma combined financial information gives effect to fair value adjustments attributed to the Kemmerer Acquisition and the related offering of Notes. The purchase consideration has been preliminarily allocated to the assets acquired and liabilities assumed based on estimates of fair value.
The unaudited pro forma combined financial statements do not include the effects of any operating efficiencies or cost savings that may be achieved or acquisition and integration expenses.
The pro forma adjustments to the unaudited pro forma combined balance sheet as of December 31, 2011 follow:
(a) Proceeds from the Notes, less debt discount.
(b) Record cash paid for acquisition, less $4.0 million deposit made in December 2011.
(c) Cash requirements for bonding and transaction costs.
(d) Fair value adjustments of assets.
(e) Acquisition costs that have been expensed and charged to accumulated deficit.
(f) Fair value adjustments of liabilities. The decreases in postretirement medical benefits and asset retirement obligations were primarily due to higher discounts rates used when estimating fair value. The Kemmerer Mine’s liability related to its pneumoconiosis benefit obligation has been reduced to zero as these obligations will be covered under the Company’s worker’s compensation insurance policy.
The pro forma adjustments to the unaudited pro forma combined statements of operations for the year ended December 31, 2011 are of a recurring nature and follow:
(g) Adjust the accretion expense of the asset retirement obligations as a result of adjustments to record this item at fair market value.
(h) Adjust the net periodic benefit cost of postretirement medical and pension obligations as a result of adjustments to record these items at fair market value.
(i) Adjust the DD&A expense of the coal reserves; capitalized asset retirement costs; and plant and equipment as a result of adjustments to record these items at fair market value.
(j) Record interest expense on the debt obtained for the acquisition.
(k) Record the amortization of the debt discount on the debt obtained for the acquisition.
- 6 -
(l) Record the amortization of debt issuance costs related to the debt obtained for the acquisition.
(m) The Company currently has provided a full valuation allowance against net deferred tax assets. The Company believes that the Kemmerer Acquisition would not result in an immediate change in the Company’s assessment regarding the valuation allowance. As such, no income tax adjustments from the Kemmerer acquisition have been reflected in the unaudited pro forma combined financial information.
- 7 -