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Analyzing Walter Energy’s 1Q15 Costs and Profitability


Nov. 20 2020, Updated 2:14 p.m. ET

Net losses

Walter Energy’s (WLTG) net losses during 1Q15 came in at $80.2 million, compared with $92.2 million in 1Q14. However, the lower net losses were primarily a result of a $58.6 million gain on the extinguishment of debt. In March 2015, Walter Energy issued shares in exchange for $66.7 million of notes due in 2021. On a per-share basis, the losses came in at $1.08 in 1Q15 compared with $1.47 in 1Q14.

A lot of American coal producers (KOL), including Arch Coal (ACI), Alpha Natural Resources (ANR), and Peabody Energy (BTU), are employing various ways to prolong debt maturities or save on massive interest costs. Alpha Natural Resources (ANR) reduced its debt load during the quarter to save on interest costs.

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Debt falls, risk rises

As we saw in Part 5 of this series, Walter Energy (WLTG) issued shares in lieu of notes due in 2021 during 1Q15, which resulted in a drop in debt level. The company had total debt of $3.02 billion as of March 31, 2015, compared with $3.08 billion as of December 31, 2014.

Liquidity falls on cash burn

Walter Energy (WLTG) reported cash and cash equivalents of $434.7 million at the end of 1Q15, compared with $468.5 million as of December 31, 2014, as the company continued to burn cash. The company burned $12.9 million in operating cash during the quarter. Including capital expenditure, free cash burn came in at $30.2 million. Falling liquidity amid an extended product glut is bad for any company.


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