Westmoreland Coal has reported a 22% decline in revenue for the third quarter of 2009 compared to the same quarter last year, primarily due to a 25.6% reduction in coal tonnage sold and a 13.8% reduction in power revenue.
The reduction in coal tonnage was driven by two customer outages, both of which followed planned maintenance shutdowns. One of these outages ended in July, and the remaining outage ended in late October. The reduction in power revenue was primarily driven by a planned five-year maintenance outage at the company’s Rova operations.
The company reported an operating loss of $9.75m in the third quarter of 2009 compared to an operating income of $2.32m in the same quarter last year. Its net loss for the 2009 quarter was $13.44m compared to $3.15m in the same quarter of 2008.
Net results for the 2009 quarter were negatively impacted by a $7.4m decrease in coal segment operating income. This decrease was primarily driven by the customer outages and included the benefit of $1.7m of earnings from Indian Coal Tax Credit monetization transaction.
The third quarter of 2009 was also negatively impacted by a $5m decrease in power segment operating income due to the planned five-year maintenance shutdown at Rova, a $1.3m increase in heritage costs driven by cost containment efforts, and a $0.3m decrease in interest income.
In October 2009, the company received a waiver from its lenders for its non-compliance with its WML loan covenants for the quarters ended June 30, 2009, and September 30, 2009, and for anticipated non-compliance for the quarters ended December 31, 2009, and March 31, 2010. Additionally, the company did not accord with a net worth covenant in its WRI Business Loan Agreement in the third quarter of 2009 and obtained a waiver for this non-compliance in October 2009.
As a result of the uncertainty of future compliance with the WML and WRI loan restrictions, the company classified a total of $142.3m of outstanding debt as current liabilities in its consolidated balance Sheet.
Keith Alessi, president and CEO of Westmoreland, said: “During the quarter we fully executed the freeze of one of our pension plans and the elimination of postretirement medical benefits for non-represented employees and retirees. We expect to see the resulting savings from these actions in future periods.
“We expect to see an increase in coal deliveries in the fourth quarter but it will probably be the first quarter of 2010 before we see deliveries return to historical levels. The quarter’s results reflected the planned five-year shutdown of our ROVA power operation for maintenance. The shutdown was extended further than budgeted due to extensive necessary repairs. This extension continued into the fourth quarter and will negatively impact that quarter’s results. Rova is expected to resume operations in November 2009.”