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Comparing 1Q16 Adjusted Net Income of Major Coal Mining Companies

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Adjusted net income

Of the major coal (KOL) mining companies, Westmoreland Coal (WLB) is the only company to witness a rise in adjusted net income on a YoY (year-over-year) basis. The company’s adjusted net income rose from -$16 million in 1Q15 to $34 million in 1Q16.

Peabody Energy’s (BTUUQ) losses deepened from $129 million in 1Q15 to $138 million in 1Q16. Arch Coal (ACIIQ) and Cloud Peak Energy (CLD) also witnessed a similar trend. Cloud Peak’s losses increased from $2 million in 1Q15 to $32 million in 1Q16. Arch Coal’s losses increased from $113 million in 1Q15 to $147 million in 1Q16.

Alliance Resource Partners (ARLP) posted $28 million in adjusted net income in 1Q16, down from $70 million in 1Q15.

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What helped Westmoreland Coal?

According to Westmoreland Coal’s (WLB) company filings, the acquisition of San Juan Coal and a one-time tax benefit helped the company to report higher net income in 1Q16. The acquisition of San Juan Coal and its one-time tax benefit together contributed more than $50 million to Westmoreland Coal’s bottom line.

Off-balance-sheet risk

Off-balance-sheet risks include self-bonds and surety bonds. Recent bankruptcies in the coal (KOL) mining industry heightened regulatory pressure on reclamation bonding and self-bonding in particular. This could require the major coal mining companies to maintain sufficient collateral in place to meet these obligations.

Surety bonds are backed by collateral and could have a negative impact on a company’s liquidity position. On March 31, 2016, Peabody Energy topped its peers and posted $570 million in the form of surety bonds. Peabody Energy is closely followed by Westmoreland Coal’s $487 million. Cloud Peak Energy and Alliance Resource Partners posted $427 million and $234 million, respectively, in the form of surety bonds.

Among the major coal mining companies, Arch Coal posted the lowest surety bond value of $188 million.

Next, we’ll look at the leverage and liquidity positions of the major coal mining companies at the end of 1Q16.

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