Form 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1994
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
for the transition period from __________ to ___________
Commission File Number
0-752 .
WESTMORELAND COAL COMPANY
(Exact name of registrant as specified in its charter)
DELAWARE 23-1128670
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
700 The Bellevue, 200 South Broad Street
Philadelphia, Pennsylvania 19102
(Address of principal executive offices) (Zip Code)
Registrant's telephone number,
including area code... 215-545-2500
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 X No ________
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of October 28, 1994: 6,956,179
PART I - FINANCIAL INFORMATION
ITEM 1
FINANCIAL STATEMENTS
WESTMORELAND COAL COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
Sept. 30, 1994 Dec. 31, 1993*
(unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 16,341 $ 24,262
Notes and accounts receivable:
Trade 29,612 52,403
Notes 5,654 2,612
Other 1,103 1,595
36,369 56,610
Less allowance for
doubtful accounts 5,786 6,296
30,583 50,314
Inventories:
Coal 3,024 10,293
Mine supplies 5,826 5,763
8,850 16,056
Assets of Kentucky Criterion
held for sale 39,330 -
Other current assets 2,034 3,609
TOTAL CURRENT ASSETS 97,138 94,241
Property, plant and equipment
Land and mineral rights 30,324 50,838
Plant and equipment 293,437 320,839
323,761 371,677
Less accumulated depreciation
and depletion 223,695 225,227
100,066 146,450
Net assets of discontinued
operations (WEI) - 12,972
Investment in cogeneration 20,234 -
Investment in DTA 19,967 -
Other assets 16,171 11,835
TOTAL ASSETS $ 253,576 $ 265,498
* Certain amounts have been reclassified to conform with current
classifications.
See accompanying notes to condensed consolidated financial statements.
WESTMORELAND COAL COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
Sept. 30, 1994 Dec. 31, 1993
(unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of
long-term debt $ 47,886 $ 28,101
Accounts payable and
accrued expenses 38,603 59,080
Accrual for postretirement
medical costs 8,075 9,185
Dividends payable - 1,222
Taxes on income 3,457 2,992
Deferred income taxes - 500
TOTAL CURRENT LIABILITIES 98,021 101,080
Long-term debt 13,239 15,933
Accrual for pneumoconiosis
benefits 16,500 17,475
Accrual for workers' compensation 22,696 20,782
Accrual for postretirement
medical costs 34,414 28,105
Other liabilities 19,604 25,242
Deferred income taxes 15,196 14,373
Minority interest 10,536 10,718
SHAREHOLDERS' EQUITY
Preferred stock of $1.00 par value
Authorized 5,000,000 shares;
Issued 575,000 shares 575 575
Common stock of $2.50 par value
Authorized 20,000,000 shares;
Issued 6,956,179 shares 17,390 17,389
Other paid-in capital 94,653 94,651
Accumulated deficit (89,248) (80,825)
TOTAL SHAREHOLDERS' EQUITY 23,370 31,790
TOTAL LIABILITIES
AND SHAREHOLDERS' EQUITY $ 253,576 $ 265,498
See accompanying notes to condensed consolidated financial statements.
WESTMORELAND COAL COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(in thousands except per share data)
(Unaudited)
Three Months Ended Nine Months Ended
September 30 September 30
1994 1993* 1994 1993*
Revenues:
Coal $ 91,678 $ 114,593 $ 295,444 $ 337,402
Cogeneration 4,603 1,247 7,437 2,650
Other 471 1,435 1,868 3,099
96,752 117,275 304,749 343,151
Cost and expenses:
Cost of coal sold 83,172 103,425 270,378 305,216
Cost of sales - Cogeneration 580 540 1,893 1,392
Cost of sales-Other 408 897 1,827 1,902
Depreciation, depletion
and amortization 4,141 5,479 12,695 16,505
Selling and administrative 7,536 8,850 21,103 21,593
95,837 119,191 307,896 346,608
Gain on sale of assets - - - 2,000
Income (loss)
from operations 915 (1,916) (3,147) (1,457)
Interest expense 1,595 1,097 3,877 3,466
Interest income 280 158 793 434
Other income 176 474 977 1,032
Loss from
operations before
income taxes (benefit)
and minority interest (224) (2,381) (5,254) (3,457)
Income taxes (benefit):
Current 266 164 1,106 1,552
Deferred - (134) 324 (396)
266 30 1,430 1,156
Minority interest 214 304 518 737
Net income (loss) (704) (2,715) (7,202) (5,350)
Less preferred stock dividends - 1,222 1,222 3,666
Net loss applicable
to common shareholders $ (704) $ (3,937) $ (8,424) $ (9,016)
Earnings (loss) per share applicable
to common shareholders:
Total $ (.10) $ (.57) $(1.21) $ (1.30)
Weighted average number of
common shares outstanding 6,955 6,954 6,955 6,954
* Restated to include Westmoreland Energy, Inc. as part of continuing
operations
WESTMORELAND COAL COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended September 30, 1994 1993(*)
(in thousands)
Cash flows from operating activities:
Net loss $ (7,202) $ (5,350)
Adjustments to reconcile net
loss to net cash provided (used) by
operating activities:
Equity earnings from cogeneration
projects (6,815) (2,352)
Cash received from cogeneration
projects 1,104 -
Depreciation, depletion and
amortization 10,900 16,505
Increase (decrease) in deferred
income taxes 323 (396)
Decrease in accrual for
pneumoconiosis benefits (975) (1,215)
Minority interest in subsidiary income 518 737
Decrease in trade receivables, net 22,391 12,562
Decrease in other receivables, net 390 911
Decrease in inventories 6,699 411
Decrease in accounts payable and
accrued expenses (16,851) (2,740)
Increase in income taxes payable 363 348
Increase in accrual for
postretirement medical costs 5,192 8,075
Increase in long-term accruals 110 2,069
Other 1,365 (11,221)
Net cash provided by operating
activities 17,512 18,344
Cash flows used in investing activities:
Decrease in Kentucky Criterion
assets held for sale 1,682 -
LG&E support fee payment (4,750) -
Fixed assets additions (4,551) (6,439)
Increase in notes and
long-term investments (870) (3)
Proceeds from sales of assets 98 2,231
Net cash used in investing activities (8,391) (4,211)
Cash flows used in financing activities:
Repayment of long-term debt, net (9,472) (6,244)
Cash transferred to collateralize
surety bonds (4,430) -
Dividends paid to shareholders (3,144) (3,826)
Other 4 (153)
Net cash used in financing activities (17,042) (10,223)
Net increase (decrease) in cash
and cash equivalents (7,921) 3,910
Cash and cash equivalents,
beginning of period 24,262 10,749
Cash and cash equivalents,
end of period $ 16,341 $ 14,659
(*) Restated to include Westmoreland Energy, Inc. as part of
continuing operations.
Supplemental disclosures of cash flow information:
Cash paid during nine months ended September 30, 1994 1993
Interest $ 3,978 $ 3,406
Income taxes, net $ 741 $ 1,241
Supplemental disclosure of non-cash financing activities:
The Company, in the second quarter 1994, recorded as a current
obligation and a non-current asset a $26,560,000 draw under a letter
of credit connected with Westmoreland Terminal Company (See Note 4 -
Westmoreland Terminal Company).
See accompanying notes to condensed consolidated financial statements.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The Notes contained herein should be read in conjunction with the
Notes to the Company's Consolidated Financial Statements filed on Form
10-K for the year ended December 31, 1993. The financial information
contained in this Form 10-Q is unaudited but reflects all adjustments
which are, in the opinion of management, necessary for a fair
presentation of the financial information for the periods shown. Such
adjustments are of a normal recurring nature.
1) PLAN OF REORGANIZATION
On July 28, 1994 Westmoreland Coal Company ("Westmoreland" or the
"Company") announced that a definitive agreement had been executed to
sell the assets of its wholly-owned subsidiary, Kentucky Criterion
Coal Company ("Criterion") to CONSOL of Kentucky, Inc., a member of
the CONSOL coal group ("CONSOL"). This agreement expires December 30,
1994; however CONSOL has the right to extend the agreement to a date
not later than March 30, 1995. The sale is subject to numerous third
party consents, all of which have been obtained or the parties have
indicated their willingness to give their consent except those related
to one party.
Westmoreland announced on November 8, 1994 that it had not been able
to obtain the consent of TECO Coal Corporation ("TECO"), an affiliate
of TECO Energy, Inc., on any reasonable terms for the assignment of
two coal supply subcontracts to CONSOL. The subcontracts are part of
an arrangement in which Criterion supplies 79.5% and TECO supplies
20.5% of the coal to two cogeneration projects.
The proceeds from the sale were necessary for the Company to satisfy
$39,250,000 of long term debt obligations which became due on
November 8, 1994.
In order to satisfy its long term debt obligations, Westmoreland and
several of its subsidiaries filed a form of reorganization
proceeding(the "Plan of Reorganization"), a so called "prepackaged"
filing, under Chapter 11 of the Federal Bankruptcy Code (the "Code")
in Delaware. The subsidiaries involved in the filing are Westmoreland
Coal Sales Company, Criterion Coal Company, Kentucky Criterion Coal
Company and Deane Processing Company. The Code provides for the
assignment of the sub-contracts without the consent of TECO. The
Company believes its right to assign these coal subcontracts and
complete the sale of Kentucky Criterion's assets without TECO's
consent in these circumstances is provided for in the Federal
Bankruptcy Code. The Company expects this form of filing to result in
an expeditious closing of the sale of the assets of Criterion to
CONSOL.
The Plan of Reorganization is premised on the necessity of
consummating the sale of the Criterion assets in order to realize
sufficient funds to satisfy $39,250,000 of the Company's long-term
debt obligations which matured on November 8, 1994 and to satisfy
$23,200,000 of equity funding commitments of Westmoreland Energy,
Inc.("WEI") which are due December 30, 1994. See Notes 3 and 4 for
further details.
Because the purpose of the Plan of Reorganization is to satisfy or
leave unaffected all of Westmoreland's debt obligations and
stockholders interests, Westmoreland expects that all relevant
constituencies will support it.
The Company obtained a court order on November 8, 1994 authorizing the
payment of prepetition claims to creditors who agree to conduct
business on normal terms. This ensures that all vendors providing
services and goods to the Company will be paid on a current basis.
The Company expects to resume payment of the preferred dividend after
the Criterion asset sale is completed and the debt due Westmoreland's
principal lenders is paid. The actual date of payment of dividends in
arrears and future dividends will be determined by Westmoreland's
Board of Directors.
2) KENTUCKY CRITERION COAL COMPANY
The cash purchase price for the Criterion assets to be paid by CONSOL
has been adjusted to $84,300,000 to account for the sale of certain
assets to another party. Cash at closing will also be subject to an
adjustment for coal inventories. In addition, $5,750,000 of the
purchase price will be held back by CONSOL to cover (a) $1,750,000 of
certain tax contingencies and (b) $4,000,000 related to the survival
at closing of TECO's potential right to supply 20.5% of the coal
requirements at two of WEI's cogeneration projects for years four
through twenty of those applicable projects. To the extent this
holdback exceeds the actual costs of such contingencies, the remaining
amount will be paid to Westmoreland with interest. The Company
anticipates the initial gain on the sale at the time of the closing,
net of taxes and other transaction costs, will be approximately
$38,000,000. Income related to the holdback will be recognized as
cash is received by Westmoreland.
Criterion accounted for $43,777,000(15%) and $37,664,000(11%) of the
Company's coal revenues during the first nine months of 1994 and
1993, respectively. Criterion contributed $6,426,000 and $7,875,000
to operating income during the first nine months of 1994 and 1993,
respectively.
The assets of Criterion have been reclassified as a separate item on
the Balance Sheet as a current asset. Results of operations will
continue to be shown as part of continuing operations in the
Statements of Income.
3) DEBT
Westmoreland's three principal credit facilities had an aggregate
outstanding balance of $44,336,000 at September 30, 1994. These
credit facilities are summarized below:
- - - a Revolving Credit Agreement with a total commitment and
outstanding balance of $7,188,000 as of September 30, 1994 and a
stated maturity date of July 15, 1994, since extended to
November 8,1994 (the "Revolver");
- - - 10% Senior Notes with an outstanding balance of $12,088,000 as of
September 30, 1994 and a stated maturity of July 15, 1994, since
extended to November 8, 1994 (the "10% Notes"); and
- - - A Reimbursement Obligation with an outstanding balance of
$25,060,000 as of September 30, 1994. The Reimbursement Obligation
arose on June 9, 1994 when the banks that had issued a letter of
credit to support Westmoreland's share of the bonds sold to finance
the DTA export terminal drew on that letter of credit. The amount
of the draw was $26,560,000. Westmoreland repaid $1,500,000 on
July 1, 1994 (the "Reimbursement Obligation"). The balance of the
Reimbursement Obligation was due on November 8, 1994.
The balance of these three credit facilities at November 11, 1994 was
$39,250,000.
The debt obligations of these three credit facilities are expected to
be paid in full after the sale of the assets of Criterion is
consummated. See Note 1.
4) COMMITMENTS AND CONTINGENCIES
Westmoreland Energy, Inc.
Westmoreland Energy, Inc. ("WEI"), a wholly-owned subsidiary of the
Company, is engaged in the business of developing and owning interests
in cogeneration and other non-regulated independent power plants.
(See the Project Status Summary Table filed as on exhibit.)
In 1993, Westmoreland offered WEI for sale in an effort to raise cash
to meet its maturing debt obligations and WEI was reclassified as a
discontinued operation in the financial statements. On August 25,
1994 Westmoreland announced that negotiations had terminated with a
group represented by LCRW Power Company, L.P.("LCRW"), for the
purchase of the assets of WEI.
Westmoreland is no longer offering WEI for sale and has reclassified
it as a continuing operation in the financial statements for the third
quarter of 1994.
WEI, through subsidiaries and 100%-owned partnerships, holds non-
controlling general and limited equity interests in partnerships which
were formed to build, own and operate cogeneration and other non-
regulated independent power plants. Generally, the lenders to these
partnerships have recourse only against these projects and the income
and revenues therefrom. The debt agreements contain various
restrictive covenants including restrictions on paying cash
distributions to the partners. WEI's equity interests in these
partnerships range from 1.25 percent to 50 percent.
WEI performs project development and venture management services for
the partnerships and has recognized related revenues of $622,000 and
$298,000 for the nine months ended September 30, 1994 and 1993,
respectively. WEI had a deferred development income balance of
$4,000,000 at September 30, 1994 and $3,913,000 at December 31, 1993,
respectively. The cash from this deferred development income was
received in prior periods. Income recognition of these fees is
deferred until the related project achieves commercial operation and
the required equity contribution is made. $1,750,000 of the deferred
income is expected to be recognized in the fourth quarter of 1994 and
$2,250,000 is expected to be recognized in the second half of 1995.
WEI had capitalized project acquisition costs of $1,147,000 at
September 30, 1994 and $1,182,000 at December 31, 1993. Such costs
are being amortized over the term of the power contracts of the
projects. Amortization for the nine months ended September 30, 1994
was not material to the financial statements.
WEI had subordinate loans receivable from project partnerships of
$3,195,000 at September 30, 1994 and $2,230,000 at December 31, 1993,
respectively.
Prior to May 1994 WEI had interests in four operating projects. Since
that time three additional projects became operational. Effective
July 1, 1994 the Company has elected to record project equity earnings
on a current basis, which conforms to the reporting procedures
followed by Westmoreland and all of their other subsidiaries. Prior
to July 1994 WEI's equity earnings were reported on a one month lag..
As a result of this reporting adjustment, the Company recognized four
months of equity earnings in the third quarter of 1994. The impact
increased third quarter 1994 earnings by approximately $600,000 The
impact on an annual basis is expected to be immaterial.
Equity Support Agreement
On April 15, 1993, the Company entered into an equity support
agreement (the "Equity Guarantee") with LG&E Power ("LG&E") whereby
WEI's and Westmoreland's obligation to fund the aggregate equity
commitments of the ROVA-I and Rensselaer Projects (up to $30,900,000)
and the anticipated equity commitment of the Roanoke Valley II Project
(up to $4,600,000) are guaranteed by LG&E. As consideration for this
Equity Guarantee, the Company pledged its interest in these projects
as security to LG&E. In addition, the Company is paying fees of 1.25
percent per annum on the aggregate amount of the Equity Guarantee and
has paid an additional fee of $4,750,000 in 1994. These fees are
being amortized over the period beginning on April 15, 1993 through
the required equity funding dates of the respective projects. A total
of $4,794,000 has been amortized from April 15, 1993 through September
30, 1994.
Project Equity Commitments Summary
The following summarizes the Company's outstanding equity commitments
related to WEI's cogeneration projects (in thousands):
Maximum Expected
Contractual Commitments (1994) $ 30,900 $ 23,200
Contractual Commitments (1995) 6,600 4,600
$ 37,500 $ 27,800
The Rensselaer and ROVA-I Projects achieved commercial operations in
April and May 1994, respectively. The estimated equity funding for
the Rensselaer($8,600,000) and the ROVA-I($14,600,000) Projects is due
on December 30, 1994.
The equity commitments for these cogeneration projects are expected to
be paid out of the proceeds of the sale of the assets of Criterion is
consummated. See Note 1.
Recent Developments Relating to Cogeneration Projects
Chapter 11 filing As a result of the Company's Chapter 11 filing,
technical defaults have resulted under certain loan documents with
WEI's project lenders. Remedies available to those lenders by reason
of a default would include, among other things, the imposition of
higher interest rates on their outstanding loans, the suspension of
further construction funding (if any), the imposition of restrictions
on project partner distributions, the acceleration of the principal
loan balances and foreclosures on the projects, and the acceleration
of the equity contributions to be made by the relevant project
partners.
Based upon discussions with the projects' lenders and other factors,
the Company has no information that causes it to anticipate that the
project lenders or others will take action as a result of the
technical defaults that would adversely affect the projects or the
Company's interest, or that would require changes in the operation of
the projects. Waivers of these defaults have been requested.
Southampton Project. WEI owns a 30% general partnership interest in
LG&E-Westmoreland Southampton ("Southampton Partnership"), which owns
the Southampton Project. The Southampton Project, which was engaged
in start-up and testing operations from September 1991 through March
1992, failed to meet FERC operating standards for a qualifying
facility ("QF") in 1992. The failure was due to three factors: (i)
the facility was not dispatched by Virginia Power on a baseload
schedule as anticipated, (ii) the facility was engaged in start-up and
testing operations during a portion of that year, and (iii) the
facility operator mistakenly delivered non-sequential steam to the
host over a significant period of time. On February 23, 1994, the
Southampton Partnership filed a request with the FERC for a waiver of
the FERC's QF operating standard for 1992. Virginia Power intervened
in the FERC proceeding, opposed the granting of a waiver, and alleged
that its power contract with the Southampton Partnership had been
breached due to the failure of the facility to maintain QF status in
1992.
On July 7, 1994, the FERC issued an order (1) denying the application
of the Southampton Partnership for a waiver of the FERC's QF operating
standard in 1992 with respect to the Southampton Project and (2)
directing the Southampton Partnership to show cause why it should not
be required to file rate schedules with the FERC governing its 1992
electricity sales for resale to Virginia Power. On August 9, 1994,
the Southampton Partnership filed a request for rehearing of FERC's
order or, alternatively, a motion for reconsideration. If the FERC
were to deny the requested waiver on rehearing and to determine that
the Southampton Partnership had been a "public utility" in 1992, then
the Southampton Partnership's 1992 actions could be subject to
regulation under the Federal Power Act and state laws and regulations;
two other cogeneration projects in which the Company holds ownership
interests could also be subject to such regulation; the Company and
certain of its subsidiaries could become subject to regulation in 1992
under the Public Utility Holding Company Act; and defaults might be
created under certain existing agreements. No assurance can be
provided as to the timing of the FERC's decision or the outcome. The
Company believes the risk is remote that FERC's denial of a waiver for
the Southampton facility will have a material adverse effect on the
financial condition of the Company.
Rensselaer Project WEI owns a 50% general partnership interest in
LG&E- Westmoreland Rensselaer (the "Rensselaer Partnership"), which
owns the Rensselaer Project. The Rensselaer Project failed to meet
the FERC's QF operating and efficiency standards in 1993 and may not
meet the QF efficiency standard in 1994 as a result of a single start-
up and testing period that overlapped both years and was prolonged due
to a delay in the construction of necessary gas pipeline facilities
and unexpected equipment problems. On October 17, 1994, the
Rensselaer Partnership filed a request with the FERC for waivers of
the applicable QF standards in 1993 and 1994. The time period for
interventions or protests with respect to the Rensselaer Partnership's
request for waivers has not yet expired. No assurance can be provided
as to the timing of the FERC's decision or the outcome. The Company
believes the risk is remote that FERC's denial of a waiver for the
Rensselaer facility will have a material adverse effect on the
financial condition of the Company.
ROVA I Project. WEI owns a 50% general partnership interest in
Westmoreland-LG&E Partners (the "ROVA I Partnership"), which owns the
ROVA I Project. Virginia Power has contracted to purchase power from
the ROVA I Project. In the second quarter of 1994, Virginia Power
disputed the ROVA I Partnership's interpretation of the provisions of
the power purchase agreement relating to "forced outage" days. The
ROVA I Partnership believes that Virginia Power is required to pay
the ROVA I Partnership for forced outage days, notwithstanding that
the ROVA I Project is not generating power on such days. Virginia
Power asserts that it is not required to do so.
Through November 14, 1994, Virginia Power has withheld approximately
$5.7 million from its monthly payments to the ROVA I Partnership
because of this dispute. The amount withheld has been included in the
monthly equity earnings from the project which the ROVA I Partnership
recognizes as income. If Virginia Power were to withhold payment for
each forced outage day that the ROVA I Partnership believes the ROVA I
Project is allowed under the power purchase agreement, the annual
revenue of the ROVA I Partnership would be reduced by approximately
$6.3 million. WEI and its partner in the ROVA I Partnership, LG&E,
attempted to resolve this dispute through negotiations with Virginia
Power. On October 31, 1994 the ROVA I Partnership filed a complaint
in the Circuit Court of the City of Richmond.against Virginia Power
seeking damages of at least $5,700,000, contending that Virginia Power
has breached the agreement to purchase power by withholding such
payments and has breached the implied covenant of good faith and fair
dealing. The Company believes that the ROVA I Partnership is entitled
to recover the withheld amounts and prevail in this matter, ensuring
future payments for forced outage days during the remaining 25 years
of the power purchase agreement. However, the Company is unable to
predict the outcome of this proceeding, or the amount Virginia Power
may be ordered to pay related to this matter.
Westmoreland Terminal Company
Westmoreland Terminal Company ("WTC"), a wholly-owned subsidiary of
the Company, has a 20% interest in Dominion Terminal Associates
("DTA"), a partnership formed for the construction and operation of a
coal-storage and vessel-loading facility in Newport News, Virginia.
DTA's annual throughput capacity is 20 million tons, and its ground
storage capacity is 1.7 million tons. The Company utilizes the
terminal's facilities for coal exporting and for supplying coal to
domestic customers via coastal waterways. The Company also leases the
ground storage space and the vessel-loading facilities to some of its
customers and to unaffiliated producers.
The facility began operations in March 1984. Financing was provided
through $132,800,000 of refunding 30-year, non-amortizing, tax-exempt
bonds (the "DTA Bonds"). Rates of interest on the DTA Bonds are reset
periodically (each 180 days or less). The holders of the DTA Bonds
have a right to put for repayment the DTA Bonds on each resetting
date. As a 20% owner, WTC and Westmoreland have a several obligation
for interest and principal obligations ($26,560,000 principal balance)
with respect to the DTA Bonds. Until June 9, 1994, these obligations
were supported by a letter of credit issued by a group of banks for
which Westmoreland is the ultimate obligor.
As reported previously, Westmoreland was in violation of certain
covenant requirements in connection with the guarantee obligations
supporting the letter of credit. As a result, on June 9, 1994 the
issuing banks elected to cause a $26,560,000 draw (the "Reimbursement
Obligation") under the letter of credit supporting Westmoreland's
share of the DTA Bonds. The proceeds of the draw were used to
purchase $26,560,000 (par value) of DTA Bonds. These repurchased DTA
Bonds secure Westmoreland's Reimbursement Obligation to the letter of
credit banks. On July 1, 1994, $1,500,000 of the amount due was paid
which reduced the outstanding balance to $25,060,000. The
Reimbursement Obligation is currently due.
In addition, the DTA partners have a Throughput and Handling Agreement
whereby WTC is committed to fund its proportionate share of DTA's
operating expenses. WTC's total cash funding obligations were
$2,152,000 during the first nine months of 1994 and $2,314,000 during
the first nine months of 1993.
The Company has taken steps to disengage from the export sales market
at this time due to poor margins and the amount of working capital
needed to participate in that market. The Company is currently
conducting studies to further evaluate the future of the export coal
market and to explore other potential uses of its share of the DTA
terminal facility. The Company is also evaluating the option of
selling its share of DTA. Based upon the results of these studies the
Company may write-down the carrying value of its investment in DTA at
a future date.
Adventure Resources, Inc.
Westmoreland Coal Company had been acting as a lender and Westmoreland
Coal Sales Company, a wholly-owned subsidiary of the Company, had been
acting as the exclusive sales agent for Adventure Resources, Inc.
("Adventure"), whose other affiliated companies include M.A.E.
Services Inc. and Maben Energy Corporation, when on December 2, 1992
Adventure and certain of its affiliates filed voluntary petitions for
reorganization under Chapters 7 and 11 of the Bankruptcy Code with the
United States Bankruptcy Court for the Southern District of West
Virginia. Subsequently, the Company continued as sales agent and
became a debtor-in-possesssion financier.
During 1992, the Company fully reserved $22,103,000 comprised of
$7,397,000 in notes, $5,842,000 of long-term loans receivable and
$8,864,000 in guarantees related to Adventure. The Company has been
making interest payments of approximately $840,000 annually on behalf
of Adventure on the $8,864,000 guarantee. All of these amounts
represent claims of the Company as a secured creditor in the
bankruptcy proceedings.
During the bankruptcy proceedings, as sales agent and debtor-in-
possession financier for Adventure, the Company purchased clean coal
production at the time it was produced and sold the production to
unaffiliated customers, thus financing inventory and accounts
receivable related to the sale of Adventure's coal production. Early
in 1994, the Company notified Adventure and its customers of its
intention to terminate its role as financier and to sell its interest
as sales agent.
Westmoreland announced on November 8, 1994 that it had reached
agreement with AMCI Coal Sales, Inc.("AMCI") and Adventure for AMCI to
replace Westmoreland Coal Sales Company as sales agent and financier
for Adventure. AMCI will provide inventory and receivable financing to
Adventure. This substitution and termination was pre-approved by the
United States Bankruptcy Court for the Southern District of West
Virginia on October 31, 1994, subject to the parties reaching
agreement on financial terms, which agreements were concluded on
November 8, 1994.
Upon transfer of its interest in Adventure's clean coal stockpile to
AMCI, Westmoreland received a note from AMCI for $1,000,000 payable
over 18 months. Westmoreland also transferred its interest in certain
trade receivables to AMCI for approximately $2,400,000 in cash. As a
part of this arrangement, Westmoreland agreed that its secured claims
in the Adventure bankruptcy would be limited to $10,000,000, payable
pursuant to two $5,000,000 notes. The first $5,000,000 interest
bearing note will be repaid to Westmoreland on a monthly basis
starting in December 1994 through January 1998 and requires two
balloon payments of $1,000,000 each in 1995 and in 1996. The required
balloon payments are tied to anticipated asset sales by Adventure. If
these balloon payments are not made, Westmoreland has the right to
foreclose on certain assets. The second $5,000,000 interest bearing
note will be paid monthly at $0.05 per ton for coal sold to current
customers plus additional monthly payments based on a percentage of
the coal sales price increases received by Adventure. Payments on
this second note will cease after June, 2002 regardless of the amount
paid. Westmoreland has agreed that the secured portion of its pre-
petition claims, all of which were fully reserved for by Westmoreland
in 1992, will be satisfied by these two notes. These notes are
collateralized by liens on certain assets of Adventure. The income
recognition of these payments will be recorded as the cash is
received. Westmoreland's remaining pre-petition claims will be
unsecured claims in the Adventure bankruptcy.
Sales to domestic customers from Adventure's production accounted for
$38,445,000(13%) and $29,077,000(9%) of Westmoreland's total coal
revenues during the first nine months of 1994 and 1993, respectively.
STRATEGIC REVIEW DEVELOPMENTS
The Company continues its strategic review of operations, including
its Eastern coal properties, as part of its plan to improve cash
flows, de-emphasize non-strategic or underperforming assets and
reposition the Company so that it can achieve meaningful and
sustainable profitability.
As part of this strategy, Westmoreland announced on October 31,1994
the sale of several properties located in West Virginia to Pine Valley
Coal Company, Inc. for $3,800,000 and assumption of certain
reclamation and environmental liabilities. The anticipated gain on
this transaction of approximately $4,000,000 will be recognized in the
fourth quarter of 1994. Additional gains on the sale will be
recognized as transfers of the operating and reclamation permits have
been completed. Included in the sale are Westmoreland's Eccles and
Triangle complexes and its Gallagher Research Facility. The Eccles
complex was last operated in 1986. Development of the Triangle
complex was begun in the late 1970s but ceased in 1980. It has never
been operated. Proceeds from this sale, less related expenses of
approximately $217,000 were deposited with Westmoreland's surety bond
underwriters to support its outstanding surety bonds.
On October 31, 1994 Westmoreland reported that the Company had issued
the Federal WARN Act notice to the 61 affected employees at the Wentz
Mine at the Virginia Division, which the Company had announced in 1993
would permanently shut down at the end of 1994. A number of employees
at the Wentz Preparation Plant adjacent to the mine were also notified
they would be laid off effective December 31, 1994. All liabilities
related to this shutdown and cutback were accrued for in the fourth
quarter of 1993.
The Company's continuing review of its operations and properties may
lead to one or more additional sales and/or shutdowns. The proceeds
from the sales of assets, including Criterion, are expected to be used
as needed to repay $39,250,000 of maturing debt obligations, to fund
WEI equity commitments for cogeneration projects, to reinvest in new
properties or businesses and for general corporate purposes.
Other
In addition to the contingencies discussed in this Note, the Company
and its subsidiaries had various claims and suits pending at September
30, 1994, all in the ordinary course of business.
5) CAPITAL STOCK
Preferred stock dividends at a rate of 8.5% per annum were paid quarterly
from the third quarter of 1992 through the first quarter of 1994. The
preferred stock was issued in July 1992. The last quarterly preferred
stock dividend was declared on February 25, 1994 and was paid on
April 1, 1994.
As part of its lender negotiations, Westmoreland announced on May 9, 1994
that it would suspend the declaration and payment of dividends on its
preferred stock in order to conserve its cash resources. The Company
expects to begin the payment of preferred stock dividends again after the
sale of the assets of Criterion are completed and maturing credit
obligations are repaid.
Dividends on the preferred stock are cumulative. As of October 1, 1994
there were $2,444,000 of undeclared, unpaid dividends.
Presently, common stock dividend payments are not permitted under the
covenants contained in the Company's principal credit facilities.
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
MATERIAL CHANGES IN FINANCIAL CONDITION
FROM DECEMBER 31, 1993 TO SEPTEMBER 30,1994
On November 8, 1994 in a proceeding captioned In re: Westmoreland Coal
Company et al., Consolidated Case Nos. 94-1066 - 94-1070 (PJW), the
Company and its subsidiaries Westmoreland Coal Sales Company,
Criterion Coal Company, Kentucky Criterion Coal Company and Deane
Processing Company filed a petition under Chapter 11 of the U.S.
Bankruptcy Court for the District of Delaware. The proceeding is
described more fully in Note 1 to the condensed Consolidated Financial
Statements included in this Form 10-Q.
Liquidity and Capital Resources
The Company expects to have adequate cash to meet its current and
projected needs during the period of its Chapter 11 bankruptcy
proceedings and thereafter.
Credit facilities
See Note 3 to the Condensed Consolidated Financial Statements.
Equity Commitments
The Company has equity commitments related to cogeneration projects
under construction, currently projected to be $23,200,000 for the
remainder of 1994, payable December 30, 1994. The Company expects to
fund these equity commitments from the proceeds of the Criterion
asset sale.
The Company paid fees totalling $4,750,000 in 1994 related to the
Equity Guarantee by LG&E which guarantees the payment of the funding
of the Company's portion of the equity commitment obligations related
to its cogeneration projects under construction. In addition, the
Company is paying fees of 1.25 percent per annum on the aggregate
amount of the Equity Guarantee.
Sale of assets
The Company announced on July 28, 1994 that it had reached a
definitive agreement to sell the assets of Criterion to CONSOL.
See Notes 1 and 2.
On April 18, 1994, the Company announced that it reached an
agreement in principle calling for the negotiation of a definitive
agreement to sell certain assets of WEI to several purchasers, all
represented by LCRW. On August 25, 1994 the Company announced that
negotiations were terminated and the assets of WEI are no longer
offered for sale. See Note 4 - Westmoreland Energy, Inc.
Westmoreland announced on October 31, 1994 the sale of several
properties located in West Virginia to Pine Valley Coal Company, Inc.
for $3,800,000 and assumption of certain reclamation and environmental
liabilities. The anticipated gain on this transaction of
approximately $4,000,000 will be recognized in the fourth quarter of
1994. Additional gains on the sale will be recognized as transfers of
the operating and reclamation permits have been completed. Included
in the sale are Westmoreland's Eccles and Triangle complexes and its
Gallagher Research Facility. The Eccles complex was last operated in
1986. Development of the Triangle complex was begun in the late 1970s
but ceased in 1980. It has never been operated. Proceeds from this
sale, less related expenses of approximately $217,000 were deposited
with Westmoreland's surety bond underwriters to support its
outstanding surety bonds.
The Company continues its strategic review of operations, including
its Eastern coal properties, as part of its plan to improve cash
flows, de-emphasize non-strategic or underperforming assets and
reposition the Company so that it can achieve meaningful and
sustainable profitability. This process may lead to the sale of one
or more additional properties. The proceeds from the sales of assets,
including Criterion, are expected to be used as needed to repay
$39,250,000 of maturing debt obligations, to fund WEI equity
commitments for cogeneration projects, to reinvest in new properties
or businesses and for general corporate purposes.
Surety Bonds
During 1993 the State of Virginia increased its bonding requirements
for the Company's self-insured workers' compensation and
pneumoconiosis benefit plans. As a result, the Company's surety
bond underwriter required a commitment for cash collateral for its
outstanding surety bonds. As of December 31, 1993, $1,000,000 was
deposited in a cash collateral account. Additional amounts of
$4,430,000 were deposited in the cash collateral account during the
first nine months of 1994. An additional $3,583,000 was deposited
in this account on November 3, 1994.
Other
Cash provided from operating activities totalled $17,512,000 and
$18,344,000 during the nine months ended September 30, 1994 and
September 30, 1993, respectively. The most significant source of
cash in 1994 was a $13,800,000 increase in cash provided due to the
Company's withdrawal from the export sales market and discontinuance
of relationships with certain unaffiliated producers. This amount is
comprised of:
o the collection of the export receivables balance at
December 31,1993 of $17,900,000;
o a reduction of the Company's coal export inventory on
December 31, 1993 of $4,000,000; offset by
o a reduction in payables related to unaffiliated producers of
$8,100,000.
Cash used in investing activities was $8,391,000 and $4,211,000 in
the nine month period ending September 30, 1994 and 1993,
respectively. During the first nine months of 1994 the Company paid
fees totalling $4,750,000 related to the Equity Guarantee by LG&E,
which guarantees the funding of the Company's portion of the equity
commitment obligations related to its cogeneration projects under
construction. The Company invested $4,551,000 and $6,439,000 in
capital assets during the first nine months of 1994 and 1993,
respectively. $2,800,000 of the 1994 additions were for underground
equipment at the Virginia Division and $1,100,000 was for relocating
a county road which was in the path of the mine plan at Westmoreland
Resources, Inc. in Montana.
Cash used in financing activities was $17,042,000 and $10,223,000
during the first nine months of 1994 and 1993, respectively. In 1994,
$4,430,000 was used to provide collateral for the surety bonds
previously discussed. Debt payments of $10,235,000 and $6,244,000
were paid in 1994 and 1993, respectively. Preferred stock dividends
in the amount of $2,444,000 and $3,666,000 were paid in 1994 and 1993,
respectively.
The Company's total debt to capitalization ratio (total debt,
including current portion of long-term debt, divided by the sum of
total debt, including current portion of long-term debt, minority
interest and shareholders' equity) was 64% at September 30, 1994 and
51% at December 31, 1993. The increase is primarily due to the
remaining balance of $25,060,000 for the Reimbursement Obligation,
which was incurred in the second quarter of 1994, related to the DTA
bonds.
The Company's cash and cash equivalents totalled $16,341,000
(including $2,755,000 of a 60% owned subsidiary) and $24,262,000
(including $2,772,000 of a 60% owned subsidiary) at September 30, 1994
and December 31, 1993, respectively. None of the cash and cash
equivalents was restricted as to use or disposition.
The Company's current ratio was .99 at September 30, 1994 compared
to .93 at December 31, 1993.
Capital Stock
See Note 5.
RESULTS OF OPERATIONS:
THIRD QUARTER ENDED SEPTEMBER 30, 1994 COMPARED
TO THIRD QUARTER ENDED SEPTEMBER 30, 1993
Three Months Ended
September 30,
1994 1993
(in thousands)
Coal operations:
Virginia Division $ 1,097 $ (291)
Hampton Division 645 (271)
Criterion Coal Co. 626 3,688
Pine Branch Mining Co. 182 (176)
Westmoreland Resources, Inc. 922 1,241
Westmoreland Coal Sales Co. (158) (394)
Net corporate expenses (3,081) (3,733)
West Virginia, idle costs (2,156) (1,902)
Total Coal (1,923) (1,838)
Cogeneration operations 3,085 (330)
Other operations (247) 252
Operating income (loss) $ 915 $(1,916)
Interest expense $ 1,595 $ 1,097
Other income $ 176 $ 474
Tons sold and coal production sources were as follows:
Three Months Ended
September 30,
1994 1993
Tons Sold:
Inland 3,504 3,422
Export 128 746
Total Tons Sold 3,632 4,168
Coal Sources:
Virginia Division * 1,224 1,227
Hampton Division 253 388
Criterion Coal Co. 472 509
Westmoreland Resources, Inc. 1,028 840
Total Westmoreland Operations 2,977 2,964
From unaffiliated producers 655 1,204
Total Coal Sources 3,632 4,168
* Includes tons:
Produced and sold by Pine Branch 98 67
Mining Co.
Purchased from Unaffiliated producers 244 181
342 248
Purchased coal is blended with Company produced coal to meet current
sales demand and offset uneven production levels. These tons are
included in Virginia Division's tonnage shown above.
COAL OPERATIONS
Virginia Division - $1,388,000 improvement
Virginia Division's improvement is due to increases in revenue per ton
under its two long-term contracts with Duke Power and Georgia Power.
Also, depreciation expense is significantly lower due to the write-
down of certain plant and equipment in the fourth quarter of 1993.
Hampton Division - $916,000 improvement
Hampton's results improved due to the elimination of losses related to
that portion of the Hampton operations that were shut down on April
30, 1994. The operating profit during the third quarter of 1994
relates to a large surface mine which continues to be operated by a
contractor on the Hampton property. This portion of the Hampton
operation was not included in the 1993 shut-down accruals.
Criterion Coal Company - $3,062,000 deterioration
Criterion's operating income decreased primarily due to a temporary
deterioration in geological conditions at certain mines. This
increased processing costs at the preparation plant as the percentage
of marketable coal decreased and the percentage of refuse and reject
increased. The higher reject percentage also caused additional
operating and maintenance costs at the plant. Mining conditions have
improved, and the Company expects to realize improved profits in the
fourth quarter. Criterion also recognized stockpile gains in the
third quarter of 1993 of approximately $700,000 compared to no
inventory gains in the third quarter of 1994.
Pine Branch Mining Co. - $358,000 improvement
Pine Branch experienced better productivity during the third quarter
of 1994 as a result of a new operating plan. The higher productivity
is expected to continue.
Westmoreland Resources, Inc.("WRI") - $319,000 deterioration
The decrease in earnings is due to lower "take or pay" payments
received during the third quarter of 1994 compared to the third
quarter of 1993 from contracts which have since expired. Also, the
price received from WRI's second largest customer was reduced as part
of the renegotiation of its contract. This reduction was partially
offset by higher levels of shipments during the third quarter of 1994.
Westmoreland Coal Sales Co. - $236,000 improvement
Westmoreland Coal Sales Co.'s results improved in the third quarter
of 1994 primarily due to the sale of a coal supply contract for
$480,000. Third quarter 1993 results also included $653,000 in
severance and related expenses for an August 1993 workforce
reduction. These improvements were partially offset by a 83%
decrease in export tons(618,000 tons). The Company has been taking
steps to identify, disengage from and eliminate business
relationships which require investments in working capital and offer
limited future return potential. Most of these relationships involve
the selling of coal for unaffiliated producers and export sales.
Export sales accounted for $2,683,000 (3%) and $23,153,000 (20%) of
the Company's Coal revenues during the third quarter of 1994 and
1993, respectively.
Net corporate expenses - $652,000 improvement
Included in third quarter 1993 is $1,147,000 in severance and related
expenses for an August 1993 workforce reduction compared to an
immaterial amount in 1994. This improvement was partially offset by
increased legal costs in the third quarter of 1994.
West Virginia, idle costs - $254,000 deterioration
These expenses increased due to increased retiree benefit costs,
particularly an increase in the Company's obligation to make increased
payments into the UMWA Benefit Trust Funds as a result of the Coal
Industry Retiree Health Benefit Act of 1992.
Cogeneration operations - $3,415,000 improvement
The increase in WEI's earnings is principally due to project earnings
from three cogeneration plants which began commercial operations in
1994. Included in the third quarter of 1993 are earnings of
approximately $3,600,000 related to amounts withheld by Virginia Power
for forced outage days at ROVA I. Prior to May 1994 WEI had interests
in four operating projects. Since that time three additional projects
became operational. Effective July 1, 1994 the Company has elected to
record project equity earnings on a current basis, which conforms to
the reporting procedures followed by Westmoreland and all of their
other subsidiaries. Prior to July 1994 WEI's equity earnings were
reported on a one month lag.. As a result of this reporting
adjustment, the Company recognized four months of equity earnings in
the third quarter of 1994. The impact increased third quarter 1994
earnings by approximately $600,000 The impact on an annual basis is
expected to be immaterial. See Note 4.
Other operations - $499,000 deterioration
The decrease in earnings from other operations was primarily due to a
62% decrease in tonnage and related revenues at Cleancoal Terminal.
Interest expense - $498,000 deterioration
Interest expense increased due to the Reimbursement Obligation,
related to the DTA bonds.
Other income - $298,000 deterioration
Other income decreased due to higher levels of scrap sales and
miscellaneous income recorded during the third quarter of 1993.
RESULTS OF OPERATIONS:
NINE MONTHS ENDED SEPTEMBER 30, 1994 COMPARED
TO NINE MONTHS ENDED SEPTEMBER 30, 1993
Nine Months Ended
September 30,
1994 1993
(in thousands)
Coal operations:
Virginia Division $ 1,649 $ 28
Hampton Division 1,225 (707)
Criterion Coal Co. 6,426 7,875
Pine Branch Mining Co. (1,499) (550)
Westmoreland Resources, Inc. 2,213 2,975
Westmoreland Coal Sales Co. 406 1,817
Net corporate expenses (7,913) (8,738)
West Virginia, idle costs (7,062) (5,654)
Total Coal (4,555) (2,954)
Cogeneration operations 2,243 1,120
Other operations (835) 377
Operating loss $ (3,147) $(1,457)
Tons sold and coal production sources were as follows:
Nine Months Ended
September 30,
1994 1993
Tons Sold:
Inland 10,594 9,875
Export 1,036 2,348
Total Tons Sold 11,630 12,223
Coal Sources:
Virginia Division * 3,545 3,668
Hampton Division 918 1,062
Criterion Coal Co. 1,518 1,366
Westmoreland Resources, Inc. 3,112 2,286
Total Westmoreland Operations 9,093 8,382
From unaffiliated producers 2,537 3,841
Total Coal Sources 11,630 12,223
* Includes tons:
Produced and sold by Pine Branch 196 170
Mining Co.
Purchased from Unaffiliated producers 603 565
799 735
Purchased coal is blended with Company produced coal to meet current
sales demand and offset uneven production levels. These tons are
included in Virginia Division's tonnage shown above.
COAL OPERATIONS
Virginia Division - $1,621,000 improvement
Virginia Division's improvement is due to increases in revenue per ton
under its two long-term contracts with Duke Power and George Power.
Also, depreciation expense is significantly lower due to the write-
down of certain plant and equipment in the fourth quarter of 1993.
Hampton Division - $1,932,000 improvement
Hampton's results improved due to the elimination of losses related to
that portion of the Hampton operations that were shut down on April
30, 1994. Reserves for these operating losses and shutdown costs were
accrued for in the fourth quarter of 1993. The operating profit
during the first nine months of 1994 relates to a large surface mine
which continues to be operated by a contractor on the Hampton
property. This portion of the Hampton operation was not included in
the 1993 shut-down accruals.
Criterion Coal Company - $1,449,000 deterioration
Criterion's operating income decreased primarily due to the
deterioration in geological conditions at certain mines in the third
quarter of 1994. This was partially offset by higher levels of
shipments in the first half of 1994 compared to the same period in
1993. Mining conditions have improved, and the Company expects to
realize improved profits in the fourth quarter of 1994.
Pine Branch Mining Co. - $949,000 deterioration
Pine Branch's operating results decreased largely due to unusually
adverse weather conditions in the first three months of 1994
contributing to poor production and increased costs. Partially
offsetting this decrease is increased productivity during the past
four months as a result of a new operating plan. The higher
productivity is expected to continue.
Westmoreland Resources, Inc. ("WRI") - $762,000 deterioration
The decrease in earnings is due to lower "take or pay" payments
received during the first nine months of 1994 compared to the same
period in 1993 from contracts which have since expired. Also, the
price received from WRI's second largest customer was reduced as part
of the renegotiation of its contract. This deterioration was
partially offset by earnings on higher levels of shipments in 1994.
Westmoreland Coal Sales Co. - $1,411,000 deterioration
Westmoreland Coal Sales' results in during the first nine months of
1994 were worse than the same period in 1993 primarily due to a
decrease in export tons and lower export margins. Export sales
decreased 1,312,000 tons(56%). This was partially offset in 1994 by
$1,130,000 in income from the sale of two coal supply contracts.
Export sales accounted for $29,488,000 (10%) and $69,161,000 (20%) of
the Company's Coal revenues during the first nine months of 1994 and
1993, respectively.
Net corporate expenses - $825,000 improvement
1994 reflects the lower employee-related expenses from the August 1993
workforce reduction.
West Virginia, idle costs - $1,408,000 deterioration
These expenses increased due to a $300,000 settlement of a dispute
involving an idled operation and increased retiree benefit costs,
particularly an increase in the Company's obligation to make increased
payments into the UMWA Benefit Trust Funds as a result of the Coal
Industry Retiree Health Benefit Act of 1992.
Cogeneration operations - $1,123,000 improvement
The increased operating results in 1994 is primarily from project
earnings from three cogeneration plants which began commercial
operations in 1994. The results for the first nine months of 1993
reflect a $2,000,000 gain on the sale of a portion of WEI's interest
in the Fort Lupton project.
Other operations - $1,212,000 deterioration
The decrease in earnings from other operations was primarily due to a
45% decrease in tonnage and related revenues at Cleancoal Terminal.
Inflation did not have a material impact on the Company's operations
in 1994.
PART II - OTHER INFORMATION
ITEM 1
LEGAL PROCEEDINGS
For a description of the proceedings filed by the Company and certain
of its subsidiaries in the U.S. Bankruptcy Court for the District of
Delaware, see the first paragraph under "Management's Discussion and
Analysis of Financial Condition and Results of Operation" in Part I of
this Form 10-Q and Note 1 to the Condensed Consolidated Financial
Statements included in this Form 10-Q, which is incorporated herein by
reference.
For a description of the proceeding filed with the Federal Energy
Regulatory Commission on February 23, 1994 and relating to the
Southampton Project, see Note 4 (Westmoreland Energy Inc. -- Recent
Developments Relating to Cogeneration Projects -- Southampton Project)
to the Condensed Consolidated Financial Statements included in this
Form 10-Q, which information is incorporated herein by reference.
For a description of the proceeding filed with the Federal Energy
Regulatory Commission on October 17, 1994 and relating to the
Rensselaer Project, see Note 4 (Westmoreland Energy Inc. -- Recent
Developments relating to Cogeneration Projects -- Rensselaer Project)
to the Condensed Consolidated Financial Statements included in this
Form 10-Q, which information is incorporated herein by reference.
For a description of the complaint filed by the Company with the
Circuit Court of the City of Richmond on October 31, 1994, and
relating to the ROVA I Project, see Note 4 (Westmoreland Energy Inc. -
- - - Recent Developments Relating to Cogeneration Projects -- ROVA I
Project) to the Condensed Consolidated Financial Statements included
in this Form 10-Q, which information is incorporated herein by
reference.
ITEM 6
EXHIBITS AND REPORTS ON FORM 8-K
a) WEI Project Status Summary.
b) On August 9, 1994 the Company filed a report on Form 8-K
announcing
that it had reached a definitive agreement in principle to sell
the
assets of its wholly-owned subsidiary, Kentucky Criterion Coal
Company, to CONSOL of Kentucky, Inc., a member of the CONSOL Coal
group, subject to an inventory adjustment at closing, and subject
to
third-party consents.
On August 31, 1994 the Company filed a report on Form 8-K
announcing
that it had terminated its negotiations with a purchaser group
represented by LCRW Power Company, L. P. for the sale of the
assets
of its wholly-owned subsidiary, Westmoreland Energy, Inc.
On September 12, 1994 the Company filed a report on Form 8-K
announcing that lenders associated with the Company's three
principal credit facilities had agreed to extend maturity dates
for the repayment of these facilities to November 1, 1994.
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 COAL COMPANY
Date: November 14, 1994
Francis J. Boyle
Senior Vice President,
Chief Financial Officer
and Treasurer
Thomas C. Sharpe
Controller
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-mos
<FISCAL-YEAR-END> DEC-31-1993
<PERIOD-END> sep-30-1994
<CASH> 16,341
<SECURITIES> 0
<RECEIVABLES> 36,369
<ALLOWANCES> 5,786
<INVENTORY> 8,850
<CURRENT-ASSETS> 97,138
<PP&E> 323,761
<DEPRECIATION> 223,695
<TOTAL-ASSETS> 253,576
<CURRENT-LIABILITIES> 98,471
<BONDS> 0
<COMMON> 17,390
0
575
<OTHER-SE> 5,405
<TOTAL-LIABILITY-AND-EQUITY> 253,576
<SALES> 304,749
<TOTAL-REVENUES> 304,749
<CGS> 270,378
<TOTAL-COSTS> 307,896
<OTHER-EXPENSES> 1,770
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,877
<INCOME-PRETAX> (5,322)
<INCOME-TAX> 1,880
<INCOME-CONTINUING> (7,202)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,202)
<EPS-PRIMARY> (1.21)
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<TABLE>
WESTMORELAND ENERGY, INC.
Project Status Summary
November 11, 1994
<CAPTION>
Roanoke Roanoke
Southampton Altavista Hopewell Valley I Valley II Ft. Drum Ft. Lupton Rensselaer
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Location Southampton, Altavista, Hopewell, Weldon, North Weldon, North Watertown, Ft. Lupton Rensselaer
Virginia Virginia Virginia Carolina Carolina New York Colorado New York
Status Operational Operational Operational Operational Construction Operational Operational Operational
Gross
Megawatt
Capacity 70 MW 70 MW 70 MW 180 MW 50 MW 55.5 MW 290 MW 81 MW
WEI
Equity
Ownership 30.0% 30.0% 30.0% 50.0% 50.0% 1.25% 4.49% 50.0%
Electri- North North
city Virginia Virginia Virginia Carolina Carolina Niagara Public Ser- Niagara
Purchaser Power Power Power Power Power Mohawk vice of CO Mohawk
Steam Hercules, The Lane Firestone Patch Patch U. S. Army Rocky Mt. BASF Corp.
Host Inc. Company,Inc Tire & Rubber Co. Rubber Co. Produce Ltd.
Rubber Co.
Fuel Type Coal Coal Coal Coal Coal Coal Natural Gas Natural Gas
Fuel United Coal Westmore- United TECO Coal Co./ TECO Coal Co./ Westmore- Thermo Western Gas
Supplier Co. land Coal Coal Co. Westmoreland Westmoreland land Co. Fuels, Inc. Marketing, Ltd.
Co. Coal Co. Coal Co.
Commer-
cial
Opera-
tions
Date 1992 1992 1992 May 1994 June 1995 1989 June 1994 April 1994
(projected)
</TABLE>
