UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q  
(Mark One)
☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended September 30, 2017
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
Commission file number: 001-34815
_________________________
Westmoreland Resource Partners, LP
(Exact name of registrant as specified in its charter)
____________________________________________________
Delaware
77-0695453
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
9540 South Maroon Circle, Suite 300 Englewood, CO
80112
(Address of principal executive offices)
(Zip Code)
Registrant’s telephone number, including area code: (855) 922-6463
 _________________________________________
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
o
 
Accelerated filer
o
Non-accelerated filer
x
(Do not check if a smaller reporting company.)
Smaller reporting company
o
 
 
 
Emerging growth company
o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of October 27, 2017 , 1,284,840 common units representing limited partner interests in Westmoreland Resource Partners, LP (“Common Units”) were outstanding. The Common Units trade on the New York Stock Exchange under the ticker symbol “WMLP.” 


TABLE OF CONTENTS  

2


PART I - FINANCIAL INFORMATION
ITEM 1 - CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

WESTMORELAND RESOURCE PARTNERS, LP AND SUBSIDIARIES
Consolidated Balance Sheets (Unaudited)

 
September 30, 2017
 
December 31, 2016
 
(In thousands)
Assets
 
Current assets:
 
 
 
Cash and cash equivalents
$
22,348

 
$
15,094

Receivables
41,294

 
37,587

Inventories
14,948

 
17,559

Other current assets
3,855

 
6,728

Total current assets
82,445

 
76,968

Property, plant and equipment:
 
 
 
Land, mineral rights, property, plant and equipment
366,452

 
359,748

Less accumulated depreciation, depletion and amortization
(155,524
)
 
(124,130
)
Net property, plant and equipment
210,928

 
235,618

Advanced coal royalties
8,643

 
8,815

Restricted investments
39,208

 
37,741

Intangible assets, net of accumulated amortization of $5.7 million and $4.1 million at September 30, 2017 and December 31, 2016, respectively
25,317

 
27,148

Deposits and other assets
807

 
617

Total Assets
$
367,348

 
$
386,907

Liabilities and Partners’ Capital (Deficit)
 
 
 
Current liabilities:
 
 
 
Current installments of long-term debt
$
4,220

 
$
3,819

Accounts payable and accrued expenses:
 
 
 
Trade
16,178

 
19,397

Deferred revenue
1,778

 
3,547

Production taxes
19,370

 
16,319

Asset retirement obligations
10,483

 
10,775

Other current liabilities
2,094

 
3,284

Total current liabilities
54,123

 
57,141

Long-term debt, less current installments
318,800

 
313,827

Asset retirement obligations, less current portion
34,409

 
41,402

Other liabilities
2,249

 
2,647

Total liabilities
409,581

 
415,017

Partners’ capital (deficit):
 
 
 
Limited partners (1,284,840 and 1,221,060 units outstanding as of September 30, 2017 and December 31, 2016, respectively)
27,133

 
28,261

Series A Convertible Units (16,793,429 and 15,656,551 units outstanding as of September 30, 2017 and December 31, 2016, respectively)
(55,286
)
 
(46,103
)
Series B Convertible Units (4,512,500 units outstanding as of September 30, 2017 and December 31, 2016)
(45,962
)
 
(43,360
)
General partner (35,291 units outstanding as of September 30, 2017 and December 31, 2016)
31,718

 
33,281

Accumulated other comprehensive income (loss)
164

 
(189
)
Total Westmoreland Resource Partners, LP deficit
(42,233
)
 
(28,110
)
Total Liabilities and Partners’ Capital
$
367,348

 
$
386,907


See accompanying Notes to Consolidated Financial Statements (Unaudited). 

3


WESTMORELAND RESOURCE PARTNERS, LP AND SUBSIDIARIES
Consolidated Statements of Operations and Comprehensive Loss (Unaudited)

 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2017
 
2016
 
2017
 
2016
 
(In thousands, except per unit data)
Revenues
$
85,606

 
$
90,309

 
$
241,462

 
$
263,258

Costs and expenses:
 
 
 
 
 
 
 
Cost of sales
61,952

 
65,949

 
181,225

 
200,110

Depreciation, depletion and amortization
9,692

 
11,554

 
30,153

 
41,366

Selling and administrative
4,484

 
3,178

 
12,095

 
9,290

Loss (gain) on sales of assets
27

 
302

 
(335
)
 
1,938

Loss on impairment
—

 
3,366

 
—

 
8,067

Total cost and expenses
76,155

 
84,349

 
223,138

 
260,771

Operating income
9,451

 
5,960

 
18,324

 
2,487

Other (expense) income:
 
 
 
 
 
 
 
Interest expense
(10,989
)
 
(10,438
)
 
(32,121
)
 
(30,533
)
Interest income
221

 
216

 
660

 
635

Other income
63

 
68

 
172

 
122

Change in fair value of warrants
(106
)
 
(82
)
 
437

 
(268
)
Total other expenses
(10,811
)
 
(10,236
)
 
(30,852
)
 
(30,044
)
Net loss
(1,360
)
 
(4,276
)
 
(12,528
)
 
(27,557
)
Less net loss allocated to general partner
(3
)
 
(7
)
 
(22
)
 
(44
)
Net loss allocated to limited partners
$
(1,357
)
 
$
(4,269
)
 
$
(12,506
)
 
$
(27,513
)
 
 
 
 
 
 
 
 
Net loss
$
(1,360
)
 
$
(4,276
)
 
$
(12,528
)
 
$
(27,557
)
Unrealized and realized gain (loss) on available-for-sale securities
102

 
(29
)
 
353

 
233

Comprehensive loss attributable to the Partnership
$
(1,258
)
 
$
(4,305
)
 
$
(12,175
)
 
$
(27,324
)
 
 
 
 
 
 
 
 
Net loss per common limited partner unit, basic and diluted:
$
(0.04
)
 
$
(0.27
)
 
$
(0.49
)
 
$
(1.33
)
 
 
 
 
 
 
 
 
Weighted average number of common limited partner units outstanding, basic and diluted:
1,285

 
5,900

 
1,271

 
5,895

 
 
 
 
 
 
 
 
Cash distribution paid per limited partner common unit
$
0.1333

 
$
0.2000

 
$
0.3999

 
$
0.6000

Cash distribution paid per Series A convertible unit
—

 
0.2000

 
—

 
0.4000

Cash distribution paid per general partner unit
0.1333

 
0.2000

 
0.3999

 
0.6000


See accompanying Notes to Consolidated Financial Statements (Unaudited). 

4

WESTMORELAND RESOURCE PARTNERS, LP AND SUBSIDIARIES
Consolidated Statements of Partners’ Capital (Deficit) (Unaudited)

 
 
Limited Partners
 
 
 
 
 
 
 
Total Partners' Deficit
 
Common
 
Series A Convertible
 
Series B Convertible
 
Liquidation
 
Total
 
General Partner
 
Accumulated Other Comprehensive Income (Loss)
 
 
Units
 
Capital
 
Units
 
Deficit
 
Units
 
Deficit
 
Units
 
Capital
 
Units
 
Deficit
 
Units
 
Capital
 
 
 
(In thousands, except units data)
Balance at December 31, 2016
1,221,060

 
$
28,261

 
15,656,551

 
$
(46,103
)
 
4,512,500

 
$
(43,360
)
 
856,698

 
$
—

 
22,246,809

 
$
(61,202
)
 
35,291

 
$
33,281

 
$
(189
)
 
$
(28,110
)
Net loss
—

 
(721
)
 
—

 
(9,183
)
 
—

 
(2,602
)
 
—

 
—

 
—

 
(12,506
)
 
—

 
(22
)
 
—

 
(12,528
)
Equity-based compensation
—

 
164

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
164

 
—

 
—

 
—

 
164

Issuance of units to LTIP participants
63,780

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
63,780

 
—

 
—

 
—

 
—

 
—

Other comprehensive income
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
353

 
353

Distribution for acquisition of Johnson Run (Note 12)
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(1,526
)
 
—

 
(1,526
)
Paid-in-kind Series A convertible unit distribution
—

 
—

 
1,136,878

 
—

 
—

 
—

 
—

 
—

 
1,136,878

 
—

 
—

 
—

 
—

 
—

Cash distribution to unitholders
—

 
(571
)
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(571
)
 
—

 
(15
)
 
—

 
(586
)
Balance at September 30, 2017
1,284,840

 
$
27,133

 
16,793,429

 
$
(55,286
)
 
4,512,500

 
$
(45,962
)
 
856,698

 
$
—

 
23,447,467

 
$
(74,115
)
 
35,291

 
$
31,718

 
$
164

 
$
(42,233
)
 
See accompanying Notes to Consolidated Financial Statements (Unaudited). 

5

WESTMORELAND RESOURCE PARTNERS, LP AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited)

 
Nine Months Ended September 30,
 
2017
 
2016
 
(In thousands)
Cash flows from operating activities:
 
 
 
Net loss
$
(12,528
)
 
$
(27,557
)
Adjustments to reconcile net loss to net cash provided by operating activities:
 
 
 
Depreciation, depletion and amortization
30,153

 
41,366

Accretion of asset retirement obligations
4,008

 
4,209

Equity-based compensation
164

 
190

Impairment charges
—

 
8,067

Non-cash interest expense
6,981

 
6,879

Amortization of deferred financing costs
2,145

 
1,953

Other
(231
)
 
2,206

Changes in operating assets and liabilities:
 
 
 
Receivables, net
(3,707
)
 
(6,200
)
Inventories
3,458

 
5,099

Accounts payable and accrued expenses
(233
)
 
(9,100
)
Interest payable
(250
)
 
241

Deferred revenue
(1,769
)
 
2,301

Other assets and liabilities
3,570

 
3,201

Asset retirement obligations
(8,906
)
 
(7,413
)
Net cash provided by operating activities
22,855

 
25,442

Cash flows from investing activities:
 
 
 
Additions to property, plant, equipment and other
(8,725
)
 
(4,780
)
Advance royalties payments
(493
)
 
(33
)
Proceeds from sales of restricted investments
6,129

 
3,087

Purchases of and change in restricted investments
(7,347
)
 
(6,064
)
Net proceeds from sales of assets
592

 
498

Net cash used in investing activities
(9,844
)
 
(7,292
)
Cash flows from financing activities:
 
 
 
Repayments of long-term debt
(3,645
)
 
(3,171
)
Cash distributions to unitholders
(586
)
 
(9,823
)
Acquisition under common control of Johnson Run
(1,526
)
 
—

Net cash used in financing activities
(5,757
)
 
(12,994
)
Net increase in cash and cash equivalents
7,254

 
5,156

Cash and cash equivalents, beginning of the period
15,094

 
3,710

Cash and cash equivalents, end of the period
$
22,348

 
$
8,866

Supplemental disclosures of cash flow information:
 
 
 
Cash paid for interest
$
23,244

 
$
21,460

Non-cash transactions:
 
 
 
Accrued purchases of property and equipment
$
411

 
$
721

Property, plant and equipment acquired with debt
—

 
9,259

 
See accompanying Notes to Consolidated Financial Statements (Unaudited).

6

WESTMORELAND RESOURCE PARTNERS, LP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1. BASIS OF PRESENTATION
The accompanying consolidated financial statements (unaudited) include the accounts and operations of Westmoreland Resource Partners, LP (the “Partnership”) and its consolidated subsidiaries and have been prepared in accordance with United States Generally Accepted Accounting Principles (“GAAP”) and require the use of management’s estimates. The financial information contained in this Quarterly Report on Form 10-Q (“Quarterly Report”) is unaudited, but reflects all adjustments which, in the opinion of management, are necessary for a fair presentation of the financial information for the periods shown. Such adjustments are of a normal recurring nature. Certain prior-period amounts have been reclassified to conform with the financial statement line items used by Westmoreland Coal Company (“WCC”), the parent of our general partner Westmoreland Resources GP, LLC (the “GP”). The results of operations for the nine months ended September 30, 2017 are not necessarily indicative of results to be expected for the year ending December 31, 2017.
These unaudited quarterly consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes to the consolidated financial statements included in the Partnership’s Annual Report on Form 10-K for the year ended December 31, 2016 (“ 2016 Form 10-K”). There were no changes to our significant accounting policies from those disclosed in the audited consolidated financial statements and notes to the consolidated financial statements thereto contained in our 2016 Form 10-K, except as described below.
Recently Issued Accounting Pronouncements
In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02,  Leases (Topic 842) which requires companies leasing assets to recognize on their balance sheet a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term on contracts longer than one year. The lessee is permitted to make an accounting policy election to not recognize lease assets and lease liabilities for short-term leases. How leases are recorded on the balance sheet represents a significant change from previous GAAP guidance as described in Accounting Standards Codification (“ASC”) Topic 840, Leases . ASU 2016-02 maintains a distinction between finance leases and operating leases similar to the distinction under previous lease guidance for capital leases and operating leases.
ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, and early adoption is permitted. Adoption of the new lease accounting standard will require the Partnership to apply the new standard to the earliest period using a modified retrospective approach. The Partnership is currently in the process of evaluating the impact of the new standard, including the evaluation of the impact, if any, on changes to business processes, systems and controls to support recognition and disclosure under the new guidance, however, at this time is unable to determine the impact this standard will have on the financial statements and related disclosures.
In January 2016, the FASB issued ASU 2016-01,  Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities  which updates certain aspects of recognition, measurement, presentation and disclosure of financial instruments. This standard is effective for interim and annual periods beginning after December 15, 2017. We are currently evaluating the effect adopting this guidance will have on our consolidated financial statements and footnote disclosures.
In May 2014, the FASB issued ASU 2014-09,  Revenue from Contracts with Customers which was issued as a new Topic, ASC Topic 606. The new revenue recognition standard supersedes all existing revenue recognition guidance. Under this ASU, an entity should recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2015-14, issued in August 2015, deferred the effective date of ASU 2014-09 to the first quarter of 2018, with early adoption permitted in the first quarter of 2017. The Partnership intends to adopt the amended guidance as of January 1, 2018.
In March, April, May, and December 2016, the FASB issued the following updates, respectively, to provide supplemental adoption guidance and clarification to ASU 2014-09. These standards must be adopted concurrently upon the adoption of ASU 2014-09. We are currently evaluating the potential effects of adopting the provisions of these updates.
•
ASU 2016-08,  Revenue from Contracts with Customers: Principal versus Agent Considerations (Reporting Revenue Gross versus Net) .
•
ASU 2016-10,  Revenue from Contracts with Customers: Identifying Performance Obligations and Licensing .

7
WESTMORELAND RESOURCE PARTNERS, LP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONT.

•
ASU 2016-12,  Revenue from Contracts with Customers: Narrow-Scope Improvements and Practical Expedients .
•
ASU 2016-19,  Technical Corrections and Improvements .

We have established an implementation team to execute a multi-phase plan to adopt the requirements of the new standard. The team has finalized its conclusions on how the guidance will be applied to our coal sales contracts and the Partnership does not believe the implementation of the new standard will have a material impact on its consolidated financial statements. The team is continuing to evaluate the expanded disclosures required by the new standard and reviewing our system capabilities, processes, and internal controls over financial reporting to ensure the appropriate information will be available for these disclosures.
Under the new standard, companies may use either of the following transition methods: (i) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients; or (ii) a modified retrospective approach with the cumulative effect of initially adopting ASU 2014-09 recognized at the date of adoption (which includes additional footnote disclosures). We will be adopting the standard under the full retrospective approach.
2. INVENTORIES
Inventories consisted of the following:
 
September 30, 2017
 
December 31, 2016
 
(In thousands)
Coal stockpiles
$
4,217

 
$
4,518

Materials and supplies
10,781

 
13,091

Reserve for obsolete inventory
(50
)
 
(50
)
Total
$
14,948

 
$
17,559

3. RESTRICTED INVESTMENTS
The Partnership invests certain bond collateral in a limited selection of fixed-income investment options and receives the investment returns on these investments. These investments are not available to meet the Partnership’s general cash needs. These investments include available-for-sale securities. Available-for-sale securities are reported at fair value with unrealized gains and losses excluded from earnings and reported in Accumulated other comprehensive income (loss) .
The carrying value and estimated fair value of our restricted investments were as follows:
 
September 30, 2017
 
December 31, 2016
 
(In thousands)
Cash and cash equivalents
$
7,994

 
$
8,581

Available-for-sale securities
31,214

 
29,160

 
$
39,208

 
$
37,741


Available-for-Sale Restricted Investments

The cost basis, gross unrealized holding gains and losses and fair value of available-for-sale securities were as follows:
 
September 30, 2017
 
December 31, 2016
 
(In thousands)
Cost basis
$
31,050

 
$
29,349

Gross unrealized holding gains
431

 
167

Gross unrealized holding losses
(267
)
 
(356
)
Fair value
$
31,214

 
$
29,160



8
WESTMORELAND RESOURCE PARTNERS, LP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONT.

4. IMPAIRMENT CHARGES
In April 2016, we entered into an agreement to purchase  1.0 million  tons of coal (“purchased coal”) from a third party through December 31, 2017. The purchased coal has been used to fulfill specific customer sales orders under preexisting long-term sales agreements. As a result of the purchased coal agreement, we down-sized our work force and incurred a  $0.3 million  severance charge for the three months ended June 30, 2016 and an impairment charge on excess equipment of  $4.2 million  for the three months ended June 30, 2016. Impairment charges for the three months ended September 30, 2016 were  $3.2 million on a shovel which was parted and scrapped. There were  no  impairment charges incurred for the nine months ended September 30, 2017 .
5. DEBT AND LINES OF CREDIT
Debt consisted of the following:
 
September 30, 2017
 
December 31, 2016
 
(In thousands)
Term Loan
$
311,628

 
$
306,189

Capital lease obligations
14,407

 
16,351

Other
430

 
589

Total debt outstanding
326,465

 
323,129

Less debt issuance costs
(3,445
)
 
(5,483
)
Less current installments
(4,220
)
 
(3,819
)
Total debt outstanding, less current installments
$
318,800

 
$
313,827

The following table presents remaining aggregate contractual debt maturities of all long-term debt:  
 
September 30, 2017
 
(In thousands)
2017
$
1,660

2018
315,804

2019
4,105

2020
1,694

2021
1,586

Thereafter
1,616

Total debt
$
326,465


Credit Facilities
Covenant Compliance
Our lending arrangements contain, among other terms, events of default and various affirmative and negative covenants, financial covenants and cross-default provisions. We are in compliance with all covenants and conditions under our debt agreements as of September 30, 2017, and based on our quarterly projections, we anticipate that we will maintain compliance with the financial covenants and have sufficient liquidity to meet our obligations as they become due within one year after the date of the filing of this Quarterly Report. Continuing to meet our obligations and to comply with our financial covenants depends on our ability to generate adequate cash flows and refinance or extend the maturity of debt obligations as they become due. Certain affirmative covenants provide that an audit opinion on our consolidated financial statements that includes an explanatory paragraph expressing substantial doubt about the Partnership's ability to continue as a going concern constitutes an event of default, which would cause the term loan of the Partnership ("Term Loan") to become immediately due and payable. Should we be unable to comply with any future covenant, we will be required to seek a waiver of such covenant to avoid an event of default. Covenant waivers and modifications may be expensive to obtain, or, potentially, unavailable.

9
WESTMORELAND RESOURCE PARTNERS, LP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONT.

Term Loan
Pursuant to the financing agreement (“2014 Financing Agreement”), dated as of December 31, 2014, by and among Oxford Mining Company, LLC, the Partnership and each of its subsidiaries, lenders from time to time party thereto, and U.S. Bank National Association, as administrative agent, the Term Loan matures on December 31, 2018 and pays interest on a quarterly basis at a variable rate equal to the 3-month London Interbank Offered Rate (“LIBOR”) at each period end ( 1.30% as of September 30, 2017 ), subject to a floor of 0.75% , plus  8.50% or the reference rate, as defined in the 2014 Financing Agreement. As of September 30, 2017 , the cash interest rate was 9.80% . The Term Loan is a primary obligation of Oxford Mining Company, LLC, a wholly owned subsidiary of the Partnership, is guaranteed by the Partnership and its subsidiaries, and is secured by substantially all of the Partnership’s and its subsidiaries’ assets.
The 2014 Financing Agreement also provides for Paid-In-Kind Interest (“PIK Interest”) at a variable rate between 1.00% and 3.00% based on our consolidated total net leverage ratio, as defined in the 2014 Financing Agreement. The rate of PIK Interest is determined on a quarterly basis with the PIK Interest added quarterly to the then-outstanding principal amount of the Term Loan. PIK Interest under the 2014 Financing Agreement was $2.3 million and $7.0 million for the three and nine months ended September 30, 2017 , respectively. The outstanding Term Loan amount as of September 30, 2017 represents the principal balance of $288.6 million , plus PIK Interest of $23.1 million .
The 2014 Financing Agreement requires mandatory prepayment of principal with proceeds from the receipt of oil and gas royalties. During the three and nine months ended September 30, 2017 , respectively, we paid down $0.3 million and $1.5 million of the Term Loan with such proceeds.
The 2014 Financing Agreement limits cash distributions to an aggregate amount not to exceed $15.0 million (“Restricted Distributions”), if we have: (i) a consolidated total net leverage ratio of greater than 3.75 , or fixed charge coverage ratio of less than 1.00 (as such ratios are defined in the 2014 Financing Agreement), or (ii) liquidity of less than $7.5 million , after giving effect to such cash distribution and applying our availability under the Revolver. As of September 30, 2017 , our consolidated total net leverage ratio is in excess of 3.75 , and we have made $14.8 million in Restricted Distributions. With the declaration of distribution on October 27, 2017 , we will have utilized the full $15.0 million limit on Restricted Distributions and we will be restricted from making any further distributions under the terms of the 2014 Financing Agreement unless we meet the above ratios and liquidity requirements.
Revolver
On October 23, 2015, the Partnership and its subsidiaries entered into a loan and security agreement with the lenders party thereto and Canadian Imperial Bank of Commerce (formerly known as The PrivateBank and Trust Company), as administrative agent (the "Revolver"), which permits borrowings up to the aggregate principal amount of  $15.0 million , subject to borrowing base calculations as defined in the agreement and letters of credit in an aggregate outstanding amount of up to  $10.0 million , which reduces availability under the Revolver on a dollar-for-dollar basis. At September 30, 2017 , availability under the Revolver was $14.8 million . The Revolver contains the same limitations on Restricted Distributions as described above under the 2014 Financing Agreement. The Revolver has a maturity date of December 31, 2017.
Capital Lease Obligations
The Partnership engages in leasing transactions for equipment utilized in its mining operations. The Partnership did not enter into any new capital leases during the nine months ended September 30, 2017 .
6. DISTRIBUTIONS OF AVAILABLE CASH
We distribute 100% of our available cash within 45 days after the end of each quarter to unitholders of record and to our GP, subject to the conditions and limitations within the 2014 Financing Agreement and the loan and security agreement governing the Revolver. Available cash is determined at the end of each quarter and is generally defined in the Partnership’s Fourth Amended and Restated Agreement of Limited Partnership, as amended (the “Partnership Agreement”), as all cash and cash equivalents on hand at the end of each quarter less reserves established by our GP in its reasonable discretion for future cash requirements. These reserves are retained to provide for the conduct of our business, the payment of debt principal and interest, to provide funds for future distributions for any one or more of the next four quarters, and to comply with applicable law. Our available cash may also include, if our GP so determines, all or any portion of the cash on hand on the date of determination of available cash for the quarter resulting from working capital borrowings made subsequent to the end of such quarter.

We made cash distributions as follows (in thousands):

10
WESTMORELAND RESOURCE PARTNERS, LP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONT.

 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2017
 
2016
 
2017
 
2016
Limited partner common units
$
171

 
$
1,148

 
$
505

 
$
3,438

Series A convertible units
—

 
3,132

 
—

 
6,263

General partner units
5

 
8

 
15

 
23

Warrants
22

 
33

 
66

 
99

    
Both our 2014 Financing Agreement and loan and security agreement governing the Revolver restrict us from making cash distributions in excess of $15.0 million in the aggregate when certain ratios and liquidity requirements are not met. As of September 30, 2017 , one of these ratios was not met, and we do not foresee it being met in the near future. As of September 30, 2017 , we have made $14.8 million in Restricted Distributions. On October 27, 2017 , we announced a quarterly cash distribution for the quarter ended September 30, 2017 ("Third Quarter Distribution"), of $0.1155 per limited partner common unit, general partner unit and warrant with distribution rights. This $0.1155 distribution is a per-unit reduction of $0.0178 from the prior quarter distribution of $0.1333 per limited partner common unit, general partner unit and warrant with distribution rights as a result of our cumulative distributions exhausting the $15.0 million in allowed Restricted Distributions. The cash distribution totaling approximately $0.2 million will be paid on November 14, 2017 to all common unitholders and warrant holders of record as of November 7, 2017 . Additionally, we declared a paid-in-kind unit distribution of $0.1155 per Series A Convertible Unit. If we are unable to either refinance or modify our Term Loan or meet the required ratios noted in Note 5. Debt And Lines Of Credit to the consolidated financial statements (unaudited), we will no longer be permitted to make Restricted Distributions, including any cash distributions to WCC, subsequent to payment of the Third Quarter Distribution.

7. FAIR VALUE MEASUREMENTS
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy, as defined below, gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. For other fair value disclosures, see also Note 3. Restricted Investments to the consolidated financial statements (unaudited).
•
Level 1, defined as observable inputs such as quoted prices in active markets for identical assets.
•
Level 2, defined as observable inputs other than Level 1 prices. These include quoted prices for similar assets or liabilities in an active market, quoted prices for identical assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
•
Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.

The book values of cash and cash equivalents, receivables and accounts payable are considered to be representative of their respective fair values because of the immediate short-term maturity of these financial instruments.

In connection with our refinancing in June 2013, certain of the second lien lenders and lender affiliates received warrants entitling them to purchase common units. The warrants are measured at fair value at each balance sheet date. As of September 30, 2017 , the fair value of each warrant was $2.85 , based on the following: spot price of $2.97 per unit as traded on the New York Stock Exchange, with an exercise price of $0.12 per unit. The fair value of the warrants are a Level 1 measurement.

Long-term debt fair value estimates are based on observed prices for securities with an active trading market when available (Level 2) and otherwise using discount rate estimates based on interest rates (Level 3). As of September 30, 2017 , the Partnership valued the Term Loan with Level 3 fair values. The estimated fair values of the Partnership’s debt with fixed and variable interest rates are as follows:
 
Fixed Interest Rate
 
Variable Interest Rate
 
Carrying Value
 
Fair Value
 
Carrying Value
 
Fair Value
 
(In thousands)
September 30, 2017
$
14,837

 
$
14,837

 
$
308,183

 
$
210,349

December 31, 2016
16,940

 
16,940

 
300,706

 
277,867


8. UNIT-BASED COMPENSATION

We grant employees and non-employee directors restricted common units under our Long-Term Incentive Plan (“LTIP”). We recognized compensation expense from unit-based arrangements as shown in the following table:
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2017
 
2016
 
2017
 
2016
 
(In thousands)
Recognition of fair value of restricted common units over the vesting period
$
83

 
$
63

 
$
164

 
$
190

A summary of restricted common unit award activity for the nine months ended September 30, 2017 is as follows:
 
Units
 
Weighted Average Grant-Date Fair Value
 
Unamortized Compensation Expense
(In thousands)
Unvested balance at December 31, 2016
63,780

 
$
3.92

 
 
Granted
82,240

 
3.04

 
 
Vested
(63,780
)
 
3.92

 
 
Unvested balance at September 30, 2017
82,240

 
$
3.04

 
$
128


9. COMMITMENTS AND CONTINGENCIES
Coal Sales Contracts
We are committed under long-term contracts to sell coal that meets certain quality requirements at specified prices. Many of these prices are subject to cost pass-through or cost adjustment provisions that mitigate some risk from rising costs. Quantities sold under some of these contracts may vary from year to year within certain limits at the option of the customer or us. As of September 30, 2017 , the remaining terms of our long-term contracts range from one to nine years.

Purchase Commitments
In April 2016, we entered into a fixed price agreement to purchase 1.0 million tons of coal from a third party through December 31, 2017. Through September 30, 2017 we have purchased 0.9 million coal tons under the purchase commitment.

From time to time, we purchase coal from third parties in order to meet quality or delivery requirements under our customer contracts. We buy coal on the spot market, and the cost of that coal is dependent upon the market price and quality of the coal.

Litigation

There have been no material changes in our litigation since December 31, 2016 . For additional information, refer to Note 21. Commitments and Contingencie s to the consolidated financial statements of our 2016 Form 10-K.


11
WESTMORELAND RESOURCE PARTNERS, LP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONT.

Guarantees
Our GP and the Partnership guarantee certain obligations of our subsidiaries. We believe that these guarantees will expire without any liability to the guarantors, and therefore will not have a material adverse effect on our financial position, liquidity or operations.

10. PARTNERS' CAPITAL AND CONVERTIBLE UNITS
Our capital accounts are comprised of approximately 0.15% beneficial general partner interests and 99.85% limited partner interests as of September 30, 2017 . Our limited partners have limited rights of ownership as provided for under our Partnership Agreement and the right to participate in our distributions. Our GP manages our operations and participates in our distributions, including certain incentive distributions pursuant to the incentive distribution rights, which are nonvoting limited partner interests held by our GP. Pursuant to our Partnership Agreement, our GP participates in losses and distributions based on its interest. The GP’s participation in the allocation of losses and distributions is not limited and therefore, such participation can result in a deficit to its capital account. Allocation of losses and distributions, including distributions for previous transactions between entities under common control, has resulted in a deficit to certain limited partners’ capital accounts included in our consolidated balance sheets.
Series A Convertible Units
WCC, the owner of our GP, holds and participates in distributions on our Series A Convertible Units. Series A Convertible Units have the right to share in distributions from us on a pro-rata basis with the common units. All or any portion of each distribution payable in respect to the Series A Convertible Units (the “Series A Convertible Unit Distribution”) may, at our Board of Directors’ ("Board") election, be paid in Series A paid-in-kind Units (“Series A PIK Units”). To the extent any portion of the Series A Convertible Unit Distribution is paid in Series A PIK Units for any quarter, the distribution to the holders of incentive distribution rights shall be reduced by that portion of the distribution that is attributable to the payment of those Series A PIK Units. The Series A Convertible Units will convert into common units, on a one -for-one basis, at the earlier of the date on which we first make a regular quarterly cash distribution with respect to any quarter to holders of common units in an amount at least equal to $0.22 per common unit or upon a change of control. The Series A Convertible Units have the same voting rights as if they were outstanding common units and will vote together with the common units as a single class. In addition, the Series A Convertible Units are entitled to vote as a separate class on any matters that materially adversely affect the rights or preferences of the Series A Convertible Units in relation to other classes of partnership interests or as required by law.
Series B Convertible Units
On October 28, 2016, we issued 4,512,500 Series B Convertible Units representing limited partner interests in the Partnership (the “Series B Units”) to WCC in exchange for WCC’s 4,512,500 common units (the “Exchange”). Upon issuance of the Series B Units in the Exchange, WCC’s common units were canceled. The Series B Units do not share in distributions with the common units and are convertible at the option of the holder on a one -for-one basis into common units on the day after the record date for a cash distribution on the common units in which the Partnership is unable to make such a distribution without exceeding its restricted payment basket under the 2014 Financing Agreement. The Series B Units will convert automatically upon a change of control or a dissolution or liquidation of the Partnership. The Series B Units have the same voting rights as if they were outstanding common units and will vote together with the common units as a single class. In addition, the Series B Units are entitled to vote as a separate class on any matters that materially adversely affect the rights or preferences of the Series B Units in relation to other classes of partnership interests or as required by law. Concurrently with the Exchange, we entered into Amendment No. 2 to the Partnership Agreement, which established the terms of the Series B Units.
Liquidation Units
All subordinated units were transferred to WCC in connection with our GP being acquired on December 31, 2014. These units were then converted to liquidation units which have no distribution or voting rights, other than in connection with liquidation. For tax purposes, liquidation units are allocated additional taxable income but no additional taxable loss compared to other unit classes.
Warrants
In June 2013, in connection with a prior credit facility, certain lenders and lender affiliates received warrants entitling them to purchase 166,557 common units at $0.12 per unit. The warrants participate in distributions whether or not exercised.

12
WESTMORELAND RESOURCE PARTNERS, LP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONT.

Outstanding Units
 
September 30, 2017
 
December 31, 2016
Limited partner common units
1,284,840

 
1,221,060

Series A convertible units
16,793,429

 
15,656,551

Series B convertible units
4,512,500

 
4,512,500

Liquidation units
856,698

 
856,698

Warrants
166,557

 
166,557

General partner units
35,291

 
35,291

Net Income (Loss) Attributable to Limited Partners
Net income (loss) is allocated to the GP and the limited partners in accordance with their respective ownership percentages, after giving effect to distributions and declared distributions on Series A Convertible Units, and General Partner units, including incentive distribution rights. Basic and diluted limited partners’ net income (loss) per common unit is calculated by dividing limited partners’ interest in net income (loss) by the weighted average number of outstanding limited partner units during the period. We determined basic and diluted limited partners’ net loss per common unit as follows (in thousands, except per unit amounts):
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2017
 
2016
 
2017
 
2016
Net loss attributable to the Partnership
$
(1,360
)
 
$
(4,276
)
 
$
(12,528
)
 
$
(27,557
)
Less:
 
 
 
 
 
 
 
Paid and declared distributions on Series A convertible units
1,940

 
2,087

 
6,302

 
8,349

Series A convertible units share of undistributed loss
(2,573
)
 
(4,789
)
 
(14,311
)
 
(28,106
)
Series B convertible units share of undistributed loss
(695
)
 
—

 
(3,947
)
 
—

Paid and declared distributions on General Partner units
4

 
8

 
14

 
23

General Partner units share of undistributed loss
(6
)
 
(11
)
 
(31
)
 
(63
)
Paid and declared distributions on Warrants
19

 
22

 
63

 
88

Net loss available to limited partners
$
(49
)
 
$
(1,593
)
 
$
(618
)
 
$
(7,848
)
 
 
 
 
 
 
 
 
Weighted average number of common units used in computation of Limited Partners' net loss per common unit (basic and diluted)
1,285

 
5,900

 
1,271

 
5,895

Limited Partners' net loss per common unit (basic and diluted)
$
(0.04
)
 
$
(0.27
)
 
$
(0.49
)
 
$
(1.33
)

11. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
The following table reflects the changes in accumulated other comprehensive income (loss) arising from our available-for-sale securities (net of tax):
 
Accumulated Other Comprehensive Income (Loss)
 
(In thousands)
Balance at December 31, 2016
$
(189
)
Other comprehensive income before reclassification
362

Amounts reclassified from accumulated other comprehensive loss
(9
)
Balance at September 30, 2017
$
164


The following table reflects the reclassifications out of accumulated other comprehensive income (loss) for the three and nine months ended September 30, 2017 :

13
WESTMORELAND RESOURCE PARTNERS, LP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONT.

 
 
Amount reclassified from accumulated other comprehensive income (loss)
 
Affected line item in the statements where presented
Details about accumulated other comprehensive income (loss) components
 
Three Months Ended September 30, 2017
 
Nine Months Ended September 30, 2017
 
 
 
(In thousands)
 
Realized gains on available-for-sale securities
 
$
(23
)
 
$
(9
)
 
Other income
    
12. RELATED PARTY TRANSACTIONS
In 2015, the Partnership and the GP entered into an administrative and operational services agreement (the “Services Agreement”). The Services Agreement is terminable by either party upon 120 days’ written notice prior to the end of any fiscal year. Under the terms of the Services Agreement, our GP provides services through its employees, or employees of its affiliates, to us and is reimbursed for all related costs incurred on our behalf. Pursuant to the Services Agreement, the Partnership engaged the GP to continue providing services such as general administrative and management, engineering, operations (including mining operations), geological, corporate development, real property, marketing, and other services to the Partnership. Administrative services include without limitation legal, finance and accounting, treasury, insurance administration and claims processing, risk management, health, safety and environmental, information technology, human resources, credit, payroll, internal audit and tax. Under the Services Agreement the Partnership pays the GP a fixed annual management fee of $2.2 million for certain executive and administrative services and reimburses the GP at cost for other expenses. Pursuant to Amendment 3 to the Services Agreement dated September 29, 2017, the current terms of the Services Agreement expires on March 31, 2018, and automatically renews for successive one year periods unless terminated. The primary reimbursements to our GP under the Service Agreement during the three and nine months ended September 30, 2017 were for employee-related costs. Reimbursable costs under the Services Agreement totaling $1.2 million and $2.7 million were included in accounts payable as of September 30, 2017 and December 31, 2016 , respectively. In December 2016, the Partnership prepaid the GP for the 2017 annual management fee of $2.2 million , of which $0.5 million was included in Other current assets at September 30, 2017 .
On January 9, 2017, the Partnership acquired surface coal reserves (“Johnson Run”) through conveyance of leases and recoupable advance royalty payments from Buckingham Coal Company, LLC, a wholly owned subsidiary of WCC, for $1.7 million .
Finally, we sold coal to a subsidiary of WCC, which generated $3.2 million and $15.3 million in revenues for the three and nine months ended September 30, 2017 , respectively, and $6.2 million and $20.5 million in revenues for the three and nine months ended September 30, 2016 , respectively.
13. SEGMENT INFORMATION
We operate in one business segment. We operate surface coal mines in Ohio and Wyoming, selling high-value thermal coal to utilities, industrial customers, municipalities and other coal-related entities primarily in the Midwest and Wyoming. All of our operations have similar economic characteristics including but not limited to coal quality, geology, coal marketing opportunities, mining and transportation methods and regulatory issues. Our operating and executive management makes its decisions based on consolidated reports. Our Ohio operating subsidiaries share customers and a particular customer may receive coal from any one of such Ohio operating subsidiaries. We also lease or sublease coal reserves to others through our Ohio operations in exchange for a per ton royalty rate.
14. SUBSEQUENT EVENTS
The Partnership has evaluated subsequent events in accordance with ASC 855, Subsequent Events , through the filing date of this Quarterly Report, and determined that no events have occurred that have not been disclosed elsewhere in the notes to the consolidated financial statements (unaudited) that would require adjustments to disclosures in the consolidated financial statements (unaudited).

14

Item 2 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the consolidated financial statements (unaudited) and notes to the consolidated financial statements (unaudited) thereto included elsewhere in this Quarterly Report and the audited consolidated financial statements and notes to the consolidated financial statements thereto and management’s discussion and analysis of financial condition and results of operations for the year ended December 31, 2016 included in our 2016 Form 10-K filed with the United States Securities and Exchange Commission (the “SEC”). This discussion contains forward-looking statements that reflect management’s current views with respect to future events and financial performance. Our actual results may differ materially from those anticipated in these forward-looking statements or as a result of certain factors such as those set forth below under “Cautionary Note Regarding Forward-Looking Statements.”
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report and other materials we have filed or will file with the SEC (as well as information included in our other written or oral statements) contain or will contain certain statements that are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on our expectations and assumptions at the time they are made and are not guarantees of future performance. Because forward looking statements relate to the future, they involve certain risks, uncertainties and assumptions that are difficult to predict. Actual outcomes and results may differ materially from those expressed in, or implied by, our forward-looking statements. Words such as “expects,” “intends,” “anticipates,” “believes,” “estimates,” “guides,” “provides guidance,” “provides outlook” and other similar expressions or future or conditional verbs such as “may,” “will,” “should,” “would,” “could,” and “might” are intended to identify such forward-looking statements. Readers of this Quarterly Report should not rely solely on the forward-looking statements and should consider all uncertainties and risks discussed in the “Risk Factors” section and throughout this Quarterly Report. The statements are only as of the date they are made, and the Partnership undertakes no obligation to update any forward-looking statement. Possible events or factors that could cause results or performance to differ materially from those expressed in our forward-looking statements include but are not limited to the following:
•
Our substantial level of indebtedness and our ability to adhere to financial covenants related to our borrowing     arrangements or to address upcoming maturities of the Revolver and the Term Loan through refinancing or maturity extensions;
•
The effect of consummating financing, acquisition and/or disposition transactions;
•
Seasonal variations and inclement weather which may cause fluctuations in our operating results, profitability, cash flow and working capital needs;
•
The effect of legal and administrative proceedings, settlements, investigations and claims, including any related to citations and orders issued by regulatory authorities, and the availability of related insurance coverage;
•
Existing and future legislation and regulation affecting both our coal mining operations and our customers’ coal usage, governmental policies and taxes, including those aimed at reducing emissions of elements such as mercury, sulfur dioxides, nitrogen oxides, particulate matter or greenhouse gases;
•
The effect of the Environmental Protection Agency’s inquiries and regulations on the operations of the power plants to which we provide coal;
•
Inaccuracies in our estimates of our coal reserves;
•
Our potential inability to expand or continue current coal operations due to limitations in obtaining bonding capacity for new mining permits, and/or increases in our mining costs as a result of increased bonding expenses;
•
The effect of prolonged maintenance or unplanned outages at our operations or those of our major power generating customers;
•
The inability to control costs and/or recognize favorable tax credits;
•
Competition within our industry and with producers of competing energy sources;
•
Our relationships with, and other conditions affecting, our customers, including how power prices affect our customers’ decisions to run their plants;
•
The availability and costs of key supplies or commodities, such as diesel fuel, steel and explosives;
•
Potential title defects or loss of leasehold interests in our properties, which could result in unanticipated costs or an inability to mine the properties;
•
The inability to renew our mineral leases or material changes in lease royalties;
•
Our ability to pay our quarterly distributions which substantially depends upon our future operating performance (which may be affected by prevailing economic conditions in the coal industry), debt covenants, and financial, business and other factors, some of which are beyond our control (see additional information in our discussion below under Cash Distributions );

15

•
Our potential need to recognize additional impairment and/or restructuring expenses associated with our operations, as well as any changes to previously identified impairment or restructuring expense estimates; and
•
Other factors that are described under the heading “Risk Factors” found in our reports filed with the SEC, including our Annual Reports on Form 10-K and our Quarterly Reports on Form 10-Q.
Overview
We sell the majority of our coal under multi-year agreements to electric generation companies. These contracts often contain price escalation and adjustment provisions, pursuant to which the price for our coal may be periodically revised in line with broad economic indicators such as the consumer price index, commodity-specific indices such as the PPI-light fuel oils index, and/or changes in our actual costs. For our contracts that are not cost-protected in nature, we have exposure to inflation and price risk for supplies used in the normal course of production, such as diesel fuel and explosives. We manage these items through strategic sourcing contracts in normal quantities with our suppliers and may use derivatives from time to time.
Recent Trends and Activities
One of the major factors affecting the volume of coal that we sell in any given period is the demand for coal-generated electric power, as well as the specific demand for coal by our customers. Numerous factors affect the demand for electric power and the specific demands of customers including weather patterns, the presence of hydro- or wind-generated energy in our particular energy grids, environmental and legal challenges, political influences, energy policies, economic conditions, power plant outages and other factors discussed herein. During the three and nine months ended September 30, 2017 , our financial results were impacted by several more specific trends and activities, which are described below.
•
Coal Pricing. Our operations in Ohio are exposed to changes in the price of coal on the open market. In recent quarters, the price of coal has been volatile and has generally been pressured by reduced demand, political pressures, and the price of competing products, such as natural gas, that are used in electric power generation. While approximately 72% of our coal tons are sold under supply contracts that are more than one year in duration, terms can vary significantly and may have pricing provisions that may increase or decrease the price of our coal based on broad economic indicators. Recent pricing pressure has resulted in depressed revenues, net income and Adjusted EBITDA in our Ohio markets in recent quarters. Whether pricing and volume softness in this region persists in future periods is dependent upon fluctuations in market demand in the region.
•
Weather. During the first nine months of 2017, we experienced unfavorable weather patterns in the markets in which we operate. In particular, during the first quarter, our operations in Wyoming experienced unusually high amounts of precipitation, which restricted our ability to supply coal and lowered our coal tons sold and our revenues in the first quarter of 2017. While some of this decline in revenues was offset in the second and third quarters by customers seeking to replenish stockpiles, a trend that we believe will continue throughout the fourth quarter, weather conditions are inherently unpredictable and could have positive or negative impacts on operating conditions in future periods.
•
Key contract renewals. During the second quarter of 2017, we amended our coal supply agreement with PacifiCorp to sell additional tons of coal during 2018 in response to PacifiCorp's plan to operate Unit 3 at its Naughton generating station through the end of 2018. While this amendment will result in more cash and more revenues from this agreement through 2018, it will also result in revenue recognition being deferred into later periods when lower priced coal tons are sold. Accordingly, third quarter 2017 revenues related to this contract were negatively impacted. Revenues from this contract are expected to be lower than previously expected through the remainder of 2017 as more revenues will be deferred into 2018.
•
Cost Reduction Activities. Since 2016, we and our parent affiliate, WCC, have sought to reduce costs throughout our organizations. Cost reduction activities during 2016 resulted in disciplined capital expenditure decisions, lower inventory costs, reduced headcount and a decreased reliance on outside services. These factors, in turn, have resulted in lower depreciation, cost of coal revenues and selling and administrative expenses in the 2017 periods as compared to 2016 periods. Cost reduction activities are ongoing.

16

•
Debt Maturity and Capital Structure Review. In light of the December 31, 2018 maturity of our Term Loan, we and our parent affiliate, WCC, proactively engaged separate financial advisors to assess the capital structures of our respective companies. Management and our Board, with the assistance of our advisors, are evaluating options to address the upcoming Term Loan maturity. WCC has publicly stated that it is seeking a resolution that is both accretive and de-leveraging to WCC. The objectives and intent of WCC may not be consistent with ours. Any action we choose to pursue will be evaluated by management, our Board and our advisors or an independent committee, as required under our Partnership Agreement. Costs associated with this process were $0.6 million for the three and nine months ended September 30, 2017 . These costs are estimated to be $6.7 million for the full year 2017 .
Results of Operations  
Three Months Ended September 30, 2017 Compared to Three Months Ended September 30, 2016
Summary Financial Data
Three Months Ended September 30,
 
Increase / (Decrease)
 
2017
 
2016
 
$
 
%
 
(In millions)
Revenues
$
85.6

 
$
90.3

 
$
(4.7
)
 
(5.2
)%
Operating income
$
9.5

 
$
6.0

 
$
3.5

 
58.3
 %
Net loss
$
(1.4
)
 
$
(4.3
)
 
$
2.9

 
67.4
 %
Adjusted EBITDA 1
$
21.2

 
$
22.7

 
$
(1.5
)
 
(6.6
)%
 
 
 
 
 
 
 
 
Tons sold
2.0

 
2.0

 
—

 
—
 %
____________________
1 Adjusted EBITDA, a non-GAAP measure, is defined and reconciled to net loss at the end of this “Results of Operations” section.

Revenues
Total revenues decreased 5.2% and coal tons sold were flat in the third quarter of 2017 compared with the third quarter of 2016 . The decline in revenues was driven by pressured volumes and pricing in our Ohio market, offset by stronger volumes and pricing in Wyoming as we continue to replenish customer stockpiles after the unusually high precipitation in the first quarter.
Operating income and net loss
Operating income increased to $9.5 million in the third quarter of 2017 compared to $6.0 million in the third quarter of 2016 . Net loss improved to $1.4 million in the third quarter of 2017 compared to $4.3 million in the third quarter of 2016 . In addition to the decreases in revenue noted above, operating income and net loss during the quarter were impacted by the following:
•
Depreciation, depletion and amortization (“DD&A”) expense decreased $1.9 million during the three months ended September 30, 2017 compared to the same period in 2016 as a result of a smaller and aging fleet of equipment at our Ohio operations as well as our cost reduction activities described earlier.
•
During the third quarter of 2016, we incurred an impairment charge of $3.4 million related to the write-down of excess equipment. No such impairment charge was taken in 2017.
•
Cost of coal revenues (excluding DD&A expense) decreased $4.0 million during the third quarter of 2017 compared to the same period in 2016 as a result of cost reduction activities described earlier.
Adjusted EBITDA
Adjusted EBITDA decreased to $21.2 million compared to $22.7 million in the three months ended September 30, 2017 and 2016 , respectively. This decrease was largely driven by declines in revenues, offset by decreases in costs of coal revenues (excluding DD&A expense), as discussed previously. Adjusted EBITDA excludes the impact of DD&A expense and the impairment charges discussed above.

17

Nine Months Ended September 30, 2017 Compared to Nine Months Ended September 30, 2016

Summary Financial Data
Nine Months Ended September 30,
 
Increase / (Decrease)
 
2017
 
2016
 
$
 
%
 
(In millions)
Revenues
$
241.5

 
$
263.3

 
$
(21.8
)
 
(8.3
)%
Operating income
$
18.3

 
$
2.5

 
$
15.8

 
632.0
 %
Net loss
$
(12.5
)
 
$
(27.6
)
 
$
15.1

 
54.7
 %
Adjusted EBITDA 1
$
52.9

 
$
58.3

 
$
(5.4
)
 
(9.3
)%
 
 
 
 
 
 
 
 
Tons sold
5.6

 
5.9

 
(0.3
)
 
(5.1
)%
____________________
1 Adjusted EBITDA, a non-GAAP measure, is defined and reconciled to net loss at the end of this “Results of Operations” section.

Revenues
In the first nine months of 2017 , total revenues declined $21.8 million , or 8.3% , compared with the same period in 2016 . This decline was driven by ongoing price and volume pressures in our Ohio market, offset slightly by increased revenue at Kemmerer driven by slightly higher volumes.
Operating income and net loss
During the nine months ended September 30, 2017 , we generated operating income of $18.3 million , as compared to operating income of $2.5 million during the nine months ended September 30, 2016 . Net loss improved to $12.5 million during the nine months ended September 30, 2017 , compared to $27.6 million for the same period in 2016 . In addition to the decreases in revenue noted above, operating income and net loss during the quarter were impacted by the following:
•
Cost of coal revenues (excluding DD&A expense) decreased $18.8 million , or 9.4% , in the first nine months of 2017 compared to the same period in 2016 . This decline was driven primarily by the cost reduction activities described earlier.
•
DD&A expense decreased $11.2 million during the first nine months of 2017 compared to the same period in 2016 . This decline was largely the result of a smaller and aging fleet of equipment at our Ohio operations as well as our cost reduction activities described earlier.
•
During the first nine months of 2016, we incurred restructuring and impairment charges of $8.1 million related to downsizing and the write-down of excess equipment. No such impairment charge was taken in 2017.
Adjusted EBITDA
Adjusted EBITDA declined $5.4 million compared to the same period a year ago to $52.9 million in the nine months ended September 30, 2017 . Adjusted EBITDA excludes the impact of DD&A expense and the impairment charges discussed above. As such, the decline in Adjusted EBITDA was driven primarily by the decline in revenues, offset by the impacts of cost savings initiatives.

Non-GAAP Financial Measures
Adjusted EBITDA
EBITDA and Adjusted EBITDA are supplemental measures of financial performance that are not required by, or presented in accordance with, GAAP. EBITDA and Adjusted EBITDA are key metrics used by us to assess our operating performance, and we believe that EBITDA and Adjusted EBITDA are useful to an investor in evaluating our 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 our creditworthiness; and

18

•
help investors to more meaningfully evaluate and compare the results of our operations from period to period by removing the effect of our capital structure and asset base from our operating results.
Neither EBITDA nor Adjusted EBITDA is a measure calculated in accordance with GAAP. The items excluded from EBITDA and Adjusted EBITDA are significant in assessing our operating results. EBITDA and Adjusted EBITDA have limitations as analytical tools, and should not be considered in isolation from, or as a substitute for, analysis of our results as reported under GAAP. For example, EBITDA and Adjusted EBITDA:
•
do not reflect our cash expenditures or future requirements for capital and major maintenance expenditures or contractual commitments;
•
do not reflect changes in, or cash requirements for, our 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 our 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. Other companies in our industry and in other industries may calculate EBITDA and Adjusted EBITDA differently from the way that we do, limiting their usefulness as comparative measures. Because of these limitations, EBITDA and Adjusted EBITDA should not be considered as measures of discretionary cash available to us to invest in the growth of our business. We compensate for these limitations by relying primarily on our GAAP results and using EBITDA and Adjusted EBITDA only as supplemental data.
Distributable Cash Flow

Distributable cash flow represents Adjusted EBITDA less cash changes in deferred revenue, cash reclamation and mine closure expenditures, reserve replacement and maintenance capital expenditures, and cash interest expense (net of interest income). Cash interest expense represents the portion of our interest expense accrued and paid in cash during the reporting periods presented or that we will pay in cash in future periods as the obligations become due. Other maintenance capital expenditures represent expenditures for coal reserve replacement, and for plant, equipment and mine development. Cash reclamation expenditures represent the reduction to our reclamation and mine closure costs resulting from cash payments. Earnings attributable to the noncontrolling interest are not available for distribution to our unitholders and accordingly are deducted.

Distributable cash flow should not be considered as an alternative to net income (loss) attributable to our unitholders, income from operations, cash flows from operating activities or any other measure of performance presented in accordance with GAAP. Although distributable cash flow is not a measure of performance calculated in accordance with GAAP, we believe distributable cash flow is useful to investors because this measurement is used by many analysts and others in the industry as a performance measurement tool to evaluate our operating and financial performance, facilitating comparison with the performance of other publicly traded limited partnerships.
The tables below show how we calculated EBITDA, Adjusted EBITDA and distributable cash flow and reconcile EBITDA, Adjusted EBITDA and distributable cash flow to net loss, the most directly comparable GAAP financial measure. 

19

Reconciliation of EBITDA, Adjusted EBITDA and Distributable Cash Flow to Net Loss
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2017
 
2016
 
2017
 
2016
 
(In thousands)
Reconciliation of EBITDA, Adjusted EBITDA and Distributable Cash Flow to Net Loss
 
 
 
 
 
 
 
Net loss
$
(1,360
)
 
$
(4,276
)
 
$
(12,528
)
 
$
(27,557
)
Interest expense, net of interest income
10,768

 
10,222

 
31,461

 
29,898

Depreciation, depletion and amortization
9,692

 
11,554

 
30,153

 
41,366

Accretion of ARO
1,336

 
1,430

 
4,008

 
4,209

EBITDA
20,436

 
18,930

 
53,094

 
47,916

Advisory fees
589

 
—

 
589

 
—

Impairment charges
—

 
3,366

 
—

 
8,067

Loss (gain) on sale of assets
27

 
302

 
(335
)
 
1,938

Share-based compensation
83

 
63

 
164

 
190

Other non-cash and non-recurring costs 1
43

 
14

 
(609
)
 
146

Adjusted EBITDA
21,178

 
22,675

 
52,903

 
58,257

Deferred revenue
(394
)
 
2,301

 
(1,769
)
 
2,301

Reclamation and mine closure costs
(4,478
)
 
(3,483
)
 
(9,685
)
 
(9,107
)
Maintenance capital expenditures and other capitalized items
(1,671
)
 
(2,171
)
 
(8,725
)
 
(5,499
)
Cash interest expense, net of interest income
(7,849
)
 
(7,182
)
 
(22,584
)
 
(21,073
)
Distributable Cash Flow
$
6,786

 
$
12,140

 
$
10,140

 
$
24,879

____________________
1 Includes non-cash activity from the change in fair value of investments and warrants.

Liquidity and Capital Resources 
Liquidity  
We had the following cash and cash equivalents and availability under our Revolver at September 30, 2017 and December 31, 2016 :
 
September 30, 2017
 
December 31, 2016
 
(In millions)
Cash and cash equivalents
$
22.3

 
$
15.1

Availability under the Revolver
14.8

 
15.0

Total
$
37.1

 
$
30.1

We anticipate that our cash from operations, cash on hand and available borrowing capacity will be sufficient to meet our investing, financing and working capital requirements for the foreseeable future.
Our business is capital intensive and requires substantial capital expenditures for, among other things, purchasing, maintaining and upgrading equipment used in developing and mining our coal, and acquiring reserves. Our principal liquidity needs are to finance current operations, replace reserves, fund capital expenditures, including costs of acquisitions from time to time, service our debt and pay quarterly cash distributions to our unitholders. Our primary sources of liquidity to meet these needs have been cash generated by our operations, borrowings under the 2014 Financing Agreement and availability under our Revolver.
Our ability to satisfy our working capital requirements, meet debt service obligations and fund planned capital expenditures substantially depends upon our future operating performance, which may be affected by prevailing economic conditions in the coal industry. To the extent our future operating cash flow or access to financing sources and the costs thereof are materially different than expected, our future liquidity may be adversely affected.

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Debt Obligations  
See Note 5. Debt And Lines Of Credit to the consolidated financial statements (unaudited) for a description of our debt and available lines of credit.

As of September 30, 2017 , the outstanding balance on our Term Loan was $311.6 million . This amount represents the principal balance of $288.6 million , plus PIK Interest of $23.1 million as of September 30, 2017 . As of September 30, 2017 , our Term Loan had a cash interest rate of 9.80% , consisting of LIBOR of 1.30% plus 8.50% . The Term Loan matures on December 31, 2018. Additionally, as of September 30, 2017 , we had not drawn on our Revolver and our borrowing availability was $14.8 million . The Revolver matures on December 31, 2017.

We are in compliance with all covenants and conditions under our debt agreements as of September 30, 2017 . Continuing to meet our obligations and to comply with our covenants depends on our ability to generate adequate cash flows and refinance or extend the maturity of our debt obligations as they become due. Based on our quarterly projections, we anticipate that we will maintain compliance with the financial covenants and have sufficient liquidity to meet our obligations as they become due within one year after the date of the filing of this Quarterly Report.

Certain affirmative covenants in our 2014 Financing Agreement provide that, among other things, an audit opinion on our consolidated financial statements that includes an explanatory paragraph expressing substantial doubt about the Partnership's ability to continue as a going concern constitutes an event of default, which would cause the Term Loan to become immediately due and payable. If the pending December 31, 2018 maturity of the Term Loan is not addressed by the time we file our Annual Report on Form 10-K for the year ended December 31, 2017 ("2017 Form 10-K"), management is likely to conclude in our 2017 Form 10-K that absent successfully executing management's plans to refinance our debt, we would be unable to meet our obligations as they become due. We may be unable to conclude it is probable that management's plans will be successful. Such a conclusion would likely lead to an explanatory paragraph expressing substantial doubt about the Partnership's ability to continue as a going concern in the auditor's opinion.

In light of the December 31, 2018 maturity of our Term Loan, we and our parent affiliate, WCC, proactively engaged separate financial advisors to assess the capital structures of our respective companies. We are in discussions with the current lenders to address the upcoming Term Loan maturity. Should these discussions not result in amendments or maturity extensions to the Term Loan, our other options to address the December 31, 2018 maturity date may be limited. WCC has publicly stated that it is seeking a resolution that is both accretive and de-leveraging to WCC. Such approach may be at conflict with our objectives and any such resolution will be evaluated by management, our Board, and our advisors or an independent committee, as required under our Partnership Agreement.

Cash Distributions  
Our Partnership Agreement requires that we distribute 100% of our available cash within 45 days after the end of each quarter to unitholders of record and to our GP, subject to certain restrictions under our 2014 Financing Agreement and the loan and security agreement governing the Revolver, described further below. Under our Partnership Agreement, available cash is determined at the end of each quarter and generally defined as cash generated from our business in excess of the amount of cash reserves established by our GP to provide for the conduct of our business, to comply with applicable law, to make payments related to any of our debt instruments or other agreements, or to provide for future distributions to our unitholders for any one or more of the next four quarters. Our available cash may also include, if our GP so determines, all or any portion of the cash on hand on the date of determination of available cash for the quarter resulting from working capital borrowings made subsequent to the end of such quarter.

Both our 2014 Financing Agreement and loan and security agreement governing the Revolver restrict us from making cash distributions in excess of $15.0 million in the aggregate when certain ratios or liquidity requirements are not met (see Note 5. Debt And Lines Of Credit to the consolidated financial statements (unaudited)). As of September 30, 2017 , one of these ratios was not met, and we do not foresee it being met in the near future.


21

As of September 30, 2017 , we have distributed $14.8 million in cash that counts toward the $15.0 million in aggregate Restricted Distribution payments. On October 27, 2017 , we announced a quarterly cash distribution for the quarter ended September 30, 2017 , of $0.1155 per limited partner common unit, general partner unit and warrant with distribution rights and a distribution of Series A PIK Units in lieu of a cash distribution for holders of Series A Convertible Units. This Third Quarter Distribution, totaling cash of approximately $0.2 million , will be paid on November 14, 2017 to all common unitholders and warrant holders of record as of November 7, 2017 . If we are unable to either refinance or modify our Term Loan or meet the required ratios noted in Note 5. Debt And Lines Of Credit to the consolidated financial statements (unaudited), we will not be permitted to make any further Restricted Distributions subsequent to payment of the Third Quarter Distribution.

Historical Sources and Uses of Cash
The following table summarizes net cash provided by (used in) operating, investing and financing activities for the nine months ended September 30, 2017 and 2016 :
 
Nine Months Ended September 30,
 
2017
 
2016
 
(In thousands)
Net cash provided by (used in):
 
 
 
Operating activities
$
22,855

 
$
25,442

Investing activities
(9,844
)
 
(7,292
)
Financing activities
(5,757
)
 
(12,994
)
We increased our cash balances by $7.3 million during the nine months ended September 30, 2017, driven by cash provided by operating activities of $22.9 million , offset primarily by capital expenditures of $8.7 million and repayments of long-term debt of $3.6 million . In addition, during the nine months ended September 30, 2017, we distributed $0.6 million in cash distributions to unitholders compared with $9.8 million during the nine months ended September 30, 2016.
Critical Accounting Policies and Estimates
Please refer to the corresponding section in Part II - Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations of our 2016 Form 10-K for a discussion of our accounting policies and estimates.

Recent Accounting Pronouncements
See Note 1. Basis Of Presentation to the consolidated financial statements (unaudited).
Off-Balance Sheet Arrangements
In the normal course of business, we are a party to certain off-balance sheet arrangements. These arrangements include financial instruments with off-balance sheet risk such as bank letters of credit and performance or surety bonds. We utilize surety bonds and letters of credit issued by financial institutions to third parties to assure the performance of our obligations relating to reclamation and other obligations. These arrangements are not reflected in our consolidated balance sheets, and we do not expect any material adverse effects on our financial condition, results of operations or cash flows to result from these off-balance sheet arrangements.
There have been no material changes to our off-balance sheet arrangements since December 31, 2016. Our off-balance sheet arrangements are discussed in Part II - Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations of our 2016 Form 10-K.
Item 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes in our market risk since December 31, 2016 . For additional information, refer to Part II - Item 7A - Quantitative and Qualitative Disclosures about Market Risk of our 2016 Form 10-K.

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Item 4 - CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

As required by Rules 13a-15(b) and 15d-15(b) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), management has evaluated, with the participation of our chief executive officer and chief financial officer, the effectiveness of our disclosure controls and procedures as of September 30, 2017 . Disclosure controls and procedures are designed to provide reasonable assurance that material information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the rules and forms of the SEC. Disclosure controls and procedures also include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in our reports that we file or submit under the Exchange Act is accumulated and communicated to management, including our chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding our required disclosure. Based on that evaluation, our management, including our chief executive officer and chief financial officer, concluded that the disclosure controls and procedures were effective as of such date.

Changes in Internal Control over Financial Reporting

Beginning January 1, 2017, the Partnership implemented a new enterprise resource planning (“ERP”) system which will improve the timeliness and quality of information (including financial information) to all appropriate levels of Partnership personnel. The integration was not in response to any identified deficiency or material weakness in the Partnership’s internal control over financial reporting. The integration of the ERP system will likely affect the processes included in our internal controls over financial reporting and will require testing for operating effectiveness.

Also beginning January 1, 2017 and in connection with the implementation of the new ERP system discussed immediately above, the Partnership initiated the centralization of controls from our local office in Coshocton, Ohio to the Partnership’s corporate offices in Englewood, CO. The centralization was not in response to any identified deficiency or material weakness in the Partnership’s internal controls over financial reporting. The centralization will be completed throughout 2017 and will affect the processes that constitute our internal controls over financial reporting. The centralized control framework will require testing for operating effectiveness.


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PART II - OTHER INFORMATION

Item 1 - LEGAL PROCEEDINGS
We are subject, from time-to-time, to various proceedings, lawsuits, disputes, and claims (“Actions”) arising in the ordinary course of our business. Many of these Actions raise complex factual and legal issues and are subject to uncertainties. We cannot predict with assurance the outcome of Actions brought against us. Accordingly, adverse developments, settlements or resolutions may occur and may result in a negative impact on income in the quarter of such development, settlement, or resolution. However, we do not believe that the outcome of any current Action would have a material adverse effect on our financial results. See Note 9. Commitments And Contingencies to the consolidated financial statements (unaudited) for a description of any pending legal proceedings, which information is incorporated herein by reference.
Item 1A - RISK FACTORS
We have disclosed under the heading “Risk Factors” in our 2016 Form 10-K, the risk factors that we believe materially affect our business, financial condition or results of operations. There are no material changes from the risk factors previously disclosed, except for the additional risk factor identified below. You should carefully consider the risk factors set forth in the 2016 Form 10-K and the other information set forth elsewhere in this Quarterly Report. You should be aware that these risk factors and other information may not describe every risk that we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.
Our 2014 Financing Agreement contains operating and financial restrictions that restrict our distributions, business and financing activities.
Our 2014 Financing Agreement contains significant restrictions on our ability to incur additional liens or indebtedness, make fundamental changes or dispositions, make changes in the nature of our business, make certain investments, loans or advances, create certain lease obligations, make capital expenditures in excess of a certain amount, enter into transactions with affiliates, issue equity interests, and modify indebtedness, organizational and certain other documents. The 2014 Financing Agreement also contains covenants requiring us to maintain certain financial ratios and limits our ability to pay distributions to our unitholders, allowing such distributions only under specified circumstances.

The provisions of the 2014 Financing Agreement may affect our ability to obtain future financing, pursue attractive business opportunities, and allow for flexibility in planning for, and reacting to, changes in business conditions. In addition, a failure to comply with the provisions of the 2014 Financing Agreement could result in a default or an event of default that could enable our lenders to declare the outstanding principal of our debt under the 2014 Financing Agreement, together with accrued and unpaid interest, to be immediately due and payable following the receipt of notice as described in the 2014 Financing Agreement. In particular, certain affirmative covenants in the 2014 Financing Agreement provide that, among other things, an audit opinion on our consolidated financial statements that includes a going concern explanatory paragraph constitutes an event of default causing the Term Loan to become immediately due and payable following the receipt of notice as described in the 2014 Financing Agreement. If the pending December 31, 2018 maturity of the Term Loan is not addressed by the time our 2017 Form 10-K is filed, management is likely to conclude in our 2017 Form 10-K that absent management’s plans, we would be unable to meet our obligations as they become due. We may be unable to conclude it is probable that management's plans will be successful. Such a conclusion would constitute substantial doubt about the entity’s ability to continue as a going concern, and would likely lead to explanatory language in the auditor's opinion, resulting in an event of default and causing the Term Loan to become immediately due and payable following the receipt of notice as described in the 2014 Financing Agreement. If the payment of such debt is accelerated, our assets may be insufficient to repay such debt in full, and our unitholders could experience a partial or total loss of their investment.

Our ability to comply with the covenants and restrictions contained in the 2014 Financing Agreement may be affected by events beyond our control that could hinder our ability to meet our financial forecasts, including prevailing economic, financial and industry conditions. If market or other economic conditions deteriorate, our ability to comply with these covenants may be impaired. If we violate any of the covenants or restrictions in the 2014 Financing Agreement, our indebtedness under the 2014 Financing Agreement may become immediately due and payable, and our lenders' commitment to make further loans to us may terminate. We might not have, or be able to obtain, sufficient funds to make these accelerated payments. In addition, our obligations under the 2014 Financing Agreement are secured by substantially all of our assets and, if we are unable to repay our indebtedness under the 2014 Financing Agreement, the lenders could seek to foreclose on such assets.


24

Our unitholders may be required to pay taxes on income from us even if the unitholders do not receive any cash distributions from us.
Because a unitholder is treated as a partner to whom we allocate taxable income, which could be different in amount than the cash we distribute, a unitholder’s allocable share of our taxable income (including cancellation of indebtedness income, if any, or related to the disposition of our assets, if any) is taxable to it, which may require the payment of federal income taxes and, in some cases, state and local income taxes on its share of our taxable income even if it receives no cash distributions from us. Our unitholders may not receive cash distributions from us equal to their share of our taxable income or even equal to the tax liability that results from that income. 

Item 4 - MINE SAFETY DISCLOSURES
On July 21, 2010, Congress enacted the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”). Section 1503(a) of the Dodd-Frank Act contains reporting requirements regarding mine safety. Mine safety violations or other regulatory matters, as required by Section 1503(a) of the Dodd-Frank Act and Item 104 of Regulation S-K, are included as Exhibit 95.1 to this Quarterly Report.

25

Item 6 - EXHIBITS
EXHIBIT INDEX
Those exhibits marked with a (*) refer to management contracts or compensatory plans or arrangements. Portions of the exhibits marked with a (†) are the subject of a Confidential Treatment Request under 5 U.S. § 552(b)(4) and 17 C.F.R. §§ 200.80(b)(4), 200.83 and 240.24b-2. Omitted material for which confidential treatment has been requested has been filed separately with the SEC.
 
 
 
 
Incorporated by Reference
 
 
Exhibit Number
 
Exhibit Description
 
Form
 
File Number
 
Exhibit
 
Filing Date
 
Filed Herewith
 
Third Amendment to 2017 Coal Supply Agreement, by and between PacifiCorp and Westmoreland Kemmerer, LLC, to be effective as of July 1, 2017†
 
10-Q
 
001-34815
 
10.2
 
8/04/2017
 
 
 
Amendment No. 2 to the Services Agreement, dated September 1, 2017, by and between Westmoreland Resource Partners, LP and Westmoreland Resources GP, LLC
 
8-K
 
001-34815
 
10.1
 
9/08/2017
 
 
 
Amendment No. 3 to the Services Agreement, dated September 29, 2017, by and between Westmoreland Resource Partners, LP and Westmoreland Resources GP, LLC
 
8-K
 
001-34815
 
10.1
 
9/29/2017
 
 
 
Certification of Chief Executive Officer pursuant to Rule 13a-14(a)
 
 
 
 
 
 
 
 
 
X
 
Certification of Chief Financial Officer pursuant to Rule 13a-14(a)
 
 
 
 
 
 
 
 
 
X
 
Certifications of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350
 
 
 
 
 
 
 
 
 
X
 
Mine Safety Disclosure
 
 
 
 
 
 
 
 
 
X
101.INS
 
XBRL Instance Document
 
 
 
 
 
 
 
 
 
X
101.SCH
 
XBRL Taxonomy Extension Schema Document
 
 
 
 
 
 
 
 
 
X
101.CAL
 
XBRL Taxonomy Calculation Linkbase Document
 
 
 
 
 
 
 
 
 
X
101.LAB
 
XBRL Taxonomy Label Linkbase Document
 
 
 
 
 
 
 
 
 
X
101.PRE
 
XBRL Taxonomy Presentation Linkbase Document
 
 
 
 
 
 
 
 
 
X
101.DEF
 
XBRL Taxonomy Definition Document
 
 
 
 
 
 
 
 
 
X
Attached as Exhibit 101 to this report are documents formatted in XBRL (Extensible Business Reporting Language). The financial information contained in the XBRL-related document is “unaudited” or “unreviewed.”


 

26

SIGNATURES
   Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 
 
WESTMORELAND RESOURCE PARTNERS, LP
 
 
By: 
WESTMORELAND RESOURCES GP, LLC, its general partner  
 
 
 
 
Date:
October 31, 2017
By: 
/s/ Nathan M. Troup
 
 
 
Nathan M. Troup
 
 
 
Interim Chief Financial Officer
 
 
 
(Principal Financial Officer and A Duly Authorized Officer)  




27