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 March 31, 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 April 29, 1994: 6,955,477
PART I - FINANCIAL INFORMATION
ITEM 1
FINANCIAL STATEMENTS
WESTMORELAND COAL COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
March 31, 1994 Dec. 31, 1993*
(unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 15,486 $ 24,262
Notes and accounts receivable
Trade 43,037 52,403
Notes 2,596 2,611
Other 1,028 1,596
46,661 56,610
Less allowance for
doubtful accounts 6,296 6,296
40,365 50,314
Inventories
Coal 16,515 10,293
Mine supplies 6,195 5,763
22,710 16,056
Other current assets 2,904 3,609
TOTAL CURRENT ASSETS 81,465 94,241
Property, plant and equipment
Land and mineral rights 50,838 50,838
Plant and equipment 320,551 320,839
371,389 371,677
Less accumulated depreciation
and depletion 228,101 225,227
143,288 146,450
Net assets held for sale 15,172 12,972
Other assets 15,824 11,835
TOTAL ASSETS $ 255,749 $ 265,498
* Certain amounts have been reclassed to agree with current
classifications.
See accompanying notes to condensed consolidated financial statements.
WESTMORELAND COAL COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
March 31, 1994 Dec. 31, 1993
(unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of
long-term debt $ 26,696 $ 28,101
Accounts payable and
accrued expenses 55,781 59,080
Accrual for postretirement
medical costs 8,815 9,185
Dividends payable 1,222 1,222
Taxes on income 3,504 2,992
Deferred income taxes - 500
TOTAL CURRENT LIABILITIES 96,018 101,080
Long-term debt 14,925 15,933
Accrual for pneumoconiosis
benefits 17,150 17,475
Accrual for workers' compensation 21,021 20,782
Accrual for postretirement
medical costs 30,473 28,105
Other liabilities 24,539 25,242
Deferred income taxes 14,929 14,373
Minority interest 10,913 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 6,955,477 shares 17,389 17,389
Other paid-in capital 94,651 94,651
Retained earnings (86,834) (80,825)
TOTAL SHAREHOLDERS' EQUITY 25,781 31,790
TOTAL LIABILITIES
AND SHAREHOLDERS' EQUITY $ 255,749 $ 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
March 31
1994 1993*
Revenues:
Coal $ 97,344 $ 113,465
Other 816 852
98,160 114,317
Cost and expenses:
Cost of coal sold 90,359 102,841
Cost of sales -Other 908 482
Depreciation, depletion and
amortization 4,229 5,752
Selling and administrative 5,577 6,655
101,073 115,730
Income (loss) from continuing
operations (2,913) (1,413)
Interest expense 1,093 1,255
Interest income 258 81
Other income 246 386
Income (loss) from continuing
operations before income taxes
(benefit) and minority interest (3,502) (2,201)
Income taxes (benefit):
Current 513 757
Deferred 56 (134)
569 623
Minority interest 195 264
Income (loss) from continuing
operations (4,266) (3,088)
Income (loss) from discontinued
operation, net of taxes (521) 369
Net income (loss) (4,787) (2,719)
Less preferred stock dividend 1,222 1,222
Net income (loss) available to
common shareholders $ (6,009) $ (3,941)
Earnings (loss) per share available
to common shareholders:
Continuing operations $ (.79) $ (.62)
Discontinued operation (.07) .05
$ (.86) $ (.57)
Dividends per common share $ - $ - .
Common and common equivalent shares 6,955 6,954
See accompanying notes to condensed consolidated financial statements.
* Restated to reflect Westmoreland Energy, Inc. as a discontinued
operation.
WESTMORELAND COAL COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended March 31, 1994 1993
(in thousands)
Cash flows from operating activities:
Net loss $ (4,787) $ (2,719)
Adjustments to reconcile net
loss to net cash used by
operating activities:
Depreciation, depletion and
amortization 4,229 5,752
Increase (decrease) in deferred
income taxes 56 (134)
Decrease in accrual for
pneumoconiosis benefits (325) (394)
Minority interest in subsidiary income 195 264
Decrease in trade receivables,
net of allowance for
doubtful accounts 9,366 15,668
Decrease in other receivables,
net of allowance for
doubtful accounts 568 390
Increase in inventories (6,654) (2,146)
Decrease in accounts payable and
accrued expenses (3,299) (12,274)
Increase in income taxes payable 512 684
Increase in accrual for
postretirement medical benefits 1,998 3,157
Decrease in long-term accruals (464) (412)
Other 661 (1,227)
Net cash provided by operating
activities 2,056 6,609
Cash flows from investing activities:
Increase in net assets held for sale (2,200) (1,345)
Fixed assets additions (1,274) (1,088)
(Increase) decrease in notes and
long-term investments 32 (1,098)
Proceeds from sales of assets 45 34
Net cash used in investing activities (3,397) (3,497)
Cash flows from financing activities:
Repayment of long-term debt (2,413) (1,724)
Cash transferred to collateralize
surety bonds (3,800) -
Dividends paid to shareholders (1,222) (1,222)
Other - (153)
Net cash used in financing activities (7,435) (3,099)
Net increase (decrease) in cash
and cash equivalents (8,776) 13
Cash and cash equivalents,
beginning of period 24,262 10,749
Cash and cash equivalents,
end of period $ 15,486 $ 10,762
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 902 $ 905
Income taxes, net $ 6 $ 73
See accompanying notes to condensed consolidated financial statements.
1) COMMITMENTS AND CONTINGENCIES
Westmoreland Energy, Inc.
In 1993 Westmoreland Coal Company ("Westmoreland" or the "Company")
offered Westmoreland Energy, Inc. ("WEI") for sale and it is being
accounted for as a discontinued operation. The Company has reached an
agreement in principle, announced on April 18, 1994, to sell the assets
of WEI to several purchasers, all represented by LCRW Power Company,
L.P. The aggregate purchase price is subject to negotiation of a
definitive purchase agreement, but is expected to be in excess of
$50,000,000, plus the assumption of Westmoreland's remaining equity
commitments for projects under construction. The sale is subject to
negotiation of a definitive purchase agreement, board and financing
approvals, third party consents and regulatory approvals. Final closing
of the sale is expected to take place in the third quarter of 1994.
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 an exhibit.)
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 facilities.
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 related
to the partnerships and has recognized revenues of $90,000 and $80,000
for the three months ended March 31, 1994 and 1993, respectively. WEI
had deferred development income of $3,913,000 and $1,663,000 at March
31, 1994 and 1993, respectively. Income recognition of these fees is
deferred until the related project achieves commercial operation and the
equity contribution is made.
WEI has capitalized certain development costs. At March 31, 1994 and
1993, total capitalized development costs were $53,000 and $115,000,
respectively. In addition, WEI has capitalized certain project
acquisition costs of $1,182,000 at March 31, 1994. Such costs are being
amortized over the term of the power contracts of the projects.
Amortization for the three months ended March 31, 1994 was not material
to the financial statements.
WEI has subordinate loans receivable from project partnerships of
$3,139,000 and $860,000 at March 31, 1994 and 1993, respectively. The
loans receivable are classified on the Balance Sheet as part of Net
assets held for sale.
Equity Support Agreements
On April 15, 1993, the Company entered into an equity support agreement
with L G & E Power ("LG&E") whereby the equity commitments of the
Roanoke Valley I ("RV I") and Rensselaer projects (up to $30,900,000)
and a portion (up to $4,600,000) of the anticipated equity commitment of
the Roanoke Valley II project are guaranteed by LG&E. As consideration
for this guarantee, the Company has pledged its interest in these
projects as security to LG&E. In addition, the Company is obligated to
pay a fee of 1.25 percent per annum on the aggregate amount of the
guarantee and a fee of $4,750,000, of which $2,375,000 was paid on May
10, 1994 and the balance will be paid in equal installments on June 30,
1994 and August 1, 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 $3,270,000 has been amortized
through March 31, 1994.
Commitments & Contingencies Summary
The following summarizes the Company's remaining commitments and
contingencies as of May 16, 1994 related to WEI's projects (in
thousands):
Equity Funding Requirements -
Maximum Expected
Contractual Commitments (5/16-12/31/94) $ 30,900 $ 23,700
Contractual Commitments (1995) 6,600 4,600
$ 37,500 $ 28,300
Guarantee Fee - (5/16-12/31/94) $ 2,375 $ 2,375
Westmoreland Terminal Company
Westmoreland Terminal Company ("WTC"), a wholly-owned subsidiary of the
Company, has a 20% interest in Dominion Terminal Associates ("DTA"), a
consortium 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 facility began operations in March 1984. Current financing is
provided through $132,800,000 of refunding 30-year, non-amortizing, tax-
exempt bonds. Rates of interest on the bonds are set periodically and
the bonds provide that the bondholder has a put option at each rate
setting date, which can range from one day to 180 days. The refunding
bonds are supported by letters of credit, expiring in July 1994, which
would be utilized in the event that any bonds were tendered for payment.
The Company is the ultimate obligor for any drawdowns under the letter
of credit. As a result, WTC's portion of this issue ($26,560,000) is
effectively guaranteed by the Company. Under the terms of the Parent
Company Guaranty Agreement ("DTA Guaranty"), as amended, the Company is
required to meet various financial covenant tests. The Company is in
violation of the minimum net working capital and tangible net worth
tests contained in the DTA Guaranty.
Please refer to Management's Discussion and Analysis of Financial
Condition and Results of Operations - Liquidity for further details.
In addition, the partners have a Throughput and Handling Agreement
whereby WTC is committed to fund its proportionate share of DTA
operating expenses. WTC's total cash funding obligations were $707,000
during the first three months of 1994 and $894,000 during the first
three months of 1993.
Adventure Resources, Inc.
Westmoreland Coal Sales Company a wholly owned subsidiary of the Company
has 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. On December 2, 1992
Adventure filed voluntary petitions for reorganization under Chapter 11
of the Bankruptcy Code with the United States Bankruptcy Court for the
Southern District of West Virginia. As of March 31, 1994 the Company
has $7,397,000 in notes and $5,842,000 of long-term loans receivable
from Adventure. In addition, the Company has guaranteed payment of
certain defaulted obligations of Adventure totalling $8,864,000. All of
these amounts are fully reserved.
As sales agent for Adventure, the Company purchases all of Adventure's
clean coal production at the time it is produced thus carrying all
inventory and accounts receivable related to the sale of Adventure's
coal production. The Company continues to purchase coal from Adventure
but expects this relationship to terminate as of June 30, 1994.
The Company has been making quarterly interest payments on behalf of
Adventure on the $8,864,000 of guaranteed debt and is also contingently
liable for the February 1998 scheduled repayment of the full principal
balance.
Other
In addition to the contingencies discussed in this Note, the Company and
its subsidiaries had various claims and suits pending at March 31, 1994,
all in the ordinary course of business.
2) CAPITAL STOCK
Preferred stock dividends at a rate of 8.5% per annum have been paid
quarterly for 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 a result of its lender
negotiations, Westmoreland announced on May 9, 1994 that it would
suspend payment of dividends on its preferred stock. The Company
plans to begin payment of preferred dividends again after the sale of
the assets of WEI is completed.
Common stock dividend payments are restricted by covenants under the
Company's loan agreements. Currently the Company is not able to pay
common stock dividends based on these restrictive covenants.
_____________________________________________________________
The foregoing financial information 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.
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
MATERIAL CHANGES IN FINANCIAL CONDITION
FROM DECEMBER 31, 1993 TO MARCH 31,1994
Liquidity
The Company's principal credit facilities have an outstanding balance at
March 31, 1994 of $49,885,000 and have final maturities in July 1994.
As of March 31, 1994, Westmoreland was not in compliance with certain
of the financial covenants contained in the Amended Revolver maturing
July 1994, the 10% Notes due July 1994, the Company's Guarantee
Obligation in connection with a $26,560,000 letter of credit expiring in
July 1994 related to the financing of a portion of the Dominion Terminal
Associates ("DTA") coal terminal and an operating lease. Outstanding
borrowings under the Amended Revolver and 10% Senior Notes total
$23,325,000 at March 31, 1994.
The Company is engaged in negotiations with the institutions
participating in these credit arrangements to obtain waivers of these
defaults, modifications of the financial covenants and restructuring of
the facilities, including the extension of the maturities thereof
pending possible asset sales. As a part of its lender negotiations,
Westmoreland announced on May 9, 1994 that it would suspend payment of
dividends on its preferred stock in order to conserve cash resources.
The Company expects that the required waivers of its covenant defaults
will be obtained from the affected creditors and that the credit
facilities will be restructured in a manner that will delay the July
1994 maturities to be coordinated with the sale of WEI and other
assets. Although this outcome is expected, there can be no assurance
that the necessary credit facility modifications can be obtained or
that a sale of assets will be accomplished or, if accomplished, will
produce sufficient proceeds to discharge the Company's obligations. If
the credit facility modifications cannot be obtained and if the
creditors elect to accelerate the Company's debt, the Company would not
have sufficient cash to meet its obligations.
In addition to the debt of $23,325,000 and the letter of credit for
$26,560,000 maturing in July 1994, the Company, as of May 13, 1994, has
equity commitments related to cogeneration projects under construction,
currently projected to be $23,700,000 for the remainder of 1994.
$8,600,000 of this amount is payable in September 1994 and $15,100,000
is payable in December 1994. The Company is also committed to pay fees
totalling $4,750,000 in 1994 related to the Equity Support Agreement
with LG&E which insures the payment of the Company's portion of the
equity commitment obligations related to its cogeneration projects
under construction. $2,375,000 of the fees were paid on May 10, 1994,
$1,187,500 is payable on June 30, 1994 and $1,187,500 is payable on
August 1, 1994.
Westmoreland announced on April 18, 1994 that it had reached an
agreement in principle to sell the assets of WEI to several
purchasers, all represented by LCRW Power Company, L.P. The aggregate
purchase price is subject to negotiation of a definitive purchase
agreement, but is expected to be in excess of $50,000,000, plus the
assumption of Westmoreland's remaining equity commitments for projects
under construction. The sale is subject to negotiation of a
definitive purchase agreement, board and financing approvals, third
party consents and regulatory approvals. Final closing of the sale is
expected to take place in the third quarter of 1994. Management
intends to use the majority of the proceeds to pay down its maturing
debt and letter of credit obligations. The Company plans to begin
payment of preferred dividends again after the sale of the assets of
WEI is completed.
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. An additional $3,800,000 was
deposited in the cash collateral account in the first quarter of 1994.
The Company has agreed to provide up to an additional $5,200,000 in
this cash collateral account upon the sale of assets.
In addition the Company has been conducting a strategic review of its
coal mining and related operations which could result in the
divestment of certain of them. Substantially all of the net proceeds
of any asset sale will be utilized to pay down the remaining balance
of the $49,885,000 of outstanding obligations referenced above and to
collateralize outstanding surety bonds.
Cash provided by operating activities totalled $2,056,000 and
$6,609,000 during the three months ended March 31,1994 and March 31,
1993, respectively. The reasons for the $4,553,000 decrease in cash
provided by operating activities are summarized below.
- - - Unusually adverse weather conditions in the first quarter of 1994
hampered coal production and the transportation of coal shipments
and contributed to the increase in net losses.
- - - The inventory buildup at the end of the first quarter of 1994
versus 1993 was related to a low level of inventory at December 31,
1993 based upon projected decreased shipments through DTA during the
first quarter of 1994. The inventory at March 31, 1994 anticipated
higher shipments in April 1994. The Company shipped 156,000 tons
from DTA in April 1994 compared to shipments of 301,000 tons for the
entire first quarter of 1994.
- - - The net reduction in trade receivables and accounts payable during
the first quarter of 1994 compared to the net change in the first
quarter of 1993 resulted in an improvement in cash provided by
operating activities totalling $2,673,000. A reduction in tons sold
for unaffiliated producers during the first quarter of 1994 compared
to the first quarter of 1993 was primarily responsible for this
improvement.
Cash used in investing activities was $3,397,000 and $3,497,000 in the
three month period ending March 31, 1994 and 1993, respectively. The
Company invested $1,274,000 and $1,088,000 in capital assets during the
first quarter of 1994 and 1993, respectively. The majority of the 1994
additions was for underground equipment at the Virginia Division.
Included in Increase in net assets held for sale were additional loans
to cogeneration projects under construction totalling $1,086,000 during
the first quarter of 1994.
Cash used in financing activities was $7,435,000 and $3,099,000 during
the first three months of 1994 and 1993, respectively. $3,800,000 was
used in the first quarter of 1994 to provide collateral for the surety
bonds mentioned earlier. Additionally, scheduled debt payments of
$2,413,000 and $1,724,000 were paid in 1994 and 1993, respectively.
Preferred dividends in the amount of $1,222,000 were paid in 1994 and
1993.
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 53% at March 31, 1994 and 51%
at December 31, 1993.
The Company's cash and cash equivalents totalled $15,486,000 (including
$3,855,000 of a 60% owned subsidiary) and $24,262,000 (including
$2,772,000 of a 60% owned subsidiary) at March 31, 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 .85 at March 31, 1994 compared to .93
at December 31, 1993.
Preferred stock dividends at a rate of 8.5% per annum have been paid
quarterly for the third quarter of 1992 through the first quarter of
1994. The last quarterly preferred stock dividend was declared on
February 25, 1994 and was paid on April 1, 1994. As a result of its
lender negotiations, Westmoreland announced on May 9, 1994 that it
would suspend payment of dividends on its preferred stock. As
mentioned earlier, the Company plans to begin payment of preferred
dividends again after the sale of the assets of WEI is completed.
Common stock dividend payments are restricted by covenants under the
Company's loan agreements. Currently the Company is not able to pay
common stock dividends based on these restrictive covenants.
RESULTS OF OPERATIONS:
QUARTER ENDED MARCH 31,1994 COMPARED
TO QUARTER ENDED MARCH 31,1993
Three Months Ended
March 31,
1994 1993
(in thousands)
Coal Operations:
Virginia Division $ (568) $ 211
Hampton Division (30) (589)
Criterion Coal Co. 2,344 1,687
Westmoreland Resources, Inc. 784 1,044
Other Coal (5,086) (3,865)
Total Coal (2,556) (1,512)
Other Operations (357) 99
Income (loss) from
continuing operations $ (2,913) $(1,413)
Tons sold and coal production sources were as follows:
Three Months Ended
March 31,
1994 1993
Tons Sold:
Inland 3,230 3,293
Export 496 907
Total Tons Sold 3,726 4,200
Coal Sources:
Virginia Division 1,072 1,251
Hampton Division 306 319
Criterion Coal Co. 476 421
Westmoreland Resources, Inc. 995 834
Total Westmoreland Operations 2,849 2,825
From unaffiliated producers 877 1,375
Total Coal Sources 3,726 4,200
COAL OPERATIONS
Coal operations reported a loss of $2,556,000 for the first quarter of
1994 compared to a loss of $1,512,000 for the first quarter of 1993.
VIRGINIA DIVISION - $779,000 worse
Unusually adverse weather conditions and water accumulation in the
Pierrepont Mine in the first quarter of 1994 were largely responsible
for a 22% reduction in production tonnage from Company mines compared to
1993. The weather severely hampered shipments as tons sold for the
Virginia Division decreased 14% during the first quarter of 1994
compared to the first quarter of 1993. Some of these missed shipments
will be made up later in the year.
HAMPTON DIVISION - $559,000 better
Hampton's losses decreased due to the write-down of fixed assets and the
accrual of costs which were related to that portion of the Hampton
operations that were shut down on April 30, 1994. The reported loss of
$30,000 for the first 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 - $657,000 better
Criterion's sales tons and average revenue per ton increased in 1994
compared to 1993.
OTHER COAL - $1,221,000 worse
Other Coal operations, which include corporate expenses, idled
operations in West Virginia, the coal brokering and coal exporting
activities of Westmoreland Coal Sales Company and Pine Branch Mining Co.
("PBM") which is a strip mine operation on a mountaintop, lost
$5,100,000 in the first quarter of 1994 compared to a loss of $3,865,000
during the first quarter of 1993.
Unusually adverse weather conditions in the first quarter of 1994
contributed to poor production and increased costs as PBM's losses in
1994 increased $1,100,000 compared to 1993. PBM produced only 34,000
tons in 1994 compared to 54,000 tons in 1993. The majority of PBM's
production is sold by the Virginia Division and is included in
Virginia's tons sold.
Westmoreland Coal Sales' results in 1994 were worse than 1993 due to a
decrease in export tons and lower export margins. Export sales
decreased 411,000 tons(45%). This was partially offset in 1994 by
$650,000 in income from the sale of a coal supply contract. 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.
Corporate incurred significant bank and legal expenses in 1993 related
to amending its Revolving Loan Agreement. Additional improvement was
also related to lower Corporate headcount levels in 1994.
The expense for idled operations in West Virginia increased in 1994 due
to its obligation to make increased payments into the UMWA Benefit Trust
Funds as a result of the Coal Industry Retiree Health Benefit Act of
1992.
OTHER OPERATIONS
Earnings from other operations decreased $456,000 during the first
quarter of 1994 compared to the first quarter of 1993. This was
primarily due to increased operating costs at Cleancoal Terminal in 1994
associated with the harsh winter, high water levels on the river and
start-up costs associated with a new business of unloading coke from
barges.
DISCONTINUED OPERATIONS
The Company's cogeneration business unit, WEI, was offered for sale by
the Company in 1993 and is being accounted for as a discontinued
operation.
The change in WEI's earnings, from income of $369,000 to a loss of
$521,000 in 1994, is principally due to the amortization of the LG&E
equity guarantee fees which started in April 1994. (See Note 1 for
information regarding these fees.)
Inflation did not have a material impact on the Company's operations in
1994.
ACCOUNTING CHANGE
In 1992, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 112, "Employers' Accounting for
Postemployment Benefits" ("SFAS 112"). Under SFAS 112, the cost of
benefits provided to former or inactive employees, after employment but
before retirement, are required to be accrued. SFAS 112 requires an
employer to record the cost of postemployment benefits that are probable
and estimable either over the periods in which benefits accumulate or
vests or when the event occurs.
The Company adopted SFAS 112 on January 1, 1994. There was no impact on
earnings since the Company had previously accounted for postemployment
benefits on an accrual basis.
PART II - OTHER INFORMATION
ITEM 6
EXHIBITS AND REPORTS ON FORM 8-K
a) WEI Project Status Summary.
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: May 16, 1994
Francis J. Boyle
Senior Vice President,
Chief Financial Officer
and Treasurer
Thomas C. Sharpe
Controller
<TABLE>
WESTMORELAND ENERGY, INC.
Project Status Summary
March 31, 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 Construction Construction Operational Construction Construction
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%
Equity
Partner LG&E Power LG&E Power LG&E Power LG&E Power LG&E Power Jones Group Thermo, Inc. LG&E Power
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 June 1994 1995 1989 June 1994 April 1994
(projected) (projected) (projected)
</TABLE>
