Form 8-K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): December 23, 1996
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WESTMORELAND COAL COMPANY
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(Exact name of registrant as specified in its charter)
DELAWARE 0-752 23-1128670
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(State or other jurisdiction (Commission File (I.R.S. Employer
of incorporation or organization) Number Identification No.)
2 North Cascade Avenue, 14th Floor Colorado Springs, Colorado 80903
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number,
including area code: 719-442-2600
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Item 5. Other Events
The Company announced that it and four subsidiaries have filed
for protection under Chapter 11 of the Federal Bankruptcy Code in Colorado
to protect the Company's value from demands by United Mine Workers of
America (UMWA) Pension and Benefit Funds. Despite last ditch efforts by
Westmoreland, long standing company-initiated discussions with the Funds
aimed at a structured "win-win" settlement of over $160 million in retiree
benefit obligations remained unsuccessful as of this morning. Therefore,
the Company determined it must file in light of continuing demands and
litigation by the Funds to force Westmoreland to make payments beyond its
financial capacity, which would ultimately result in its liquidation at a
substantially diminished value. As reported on December 19, 1996, the
Company had hoped to settle its obligations through negotiation rather than
being forced to move the issue into bankruptcy court, but its attempts over
the last 14 months were rejected by the Funds.
Item 7. Financial Statements and Exhibits
(c)
No. Description
99.11 Press release dated December 23, 1996
SIGNATURE
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: December 23, 1996 By:/s/ Robert J. Jaeger
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Robert J. Jaeger
Senior Vice President-Finance
Treasurer and Controller
Exhibit 99.11
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Westmoreland Coal Company
Files for Protection From
UMWA Benefit Funds
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Colorado Springs, CO -- December 23, 1996 -- Westmoreland Coal Company
(NYSE:WCX) announced today that it and four subsidiaries have filed for
protection under Chapter 11 of the Federal Bankruptcy Code in Colorado to
protect the Company's value from demands by United Mine Workers of America
(UMWA) Pension and Benefit Funds. Despite last ditch efforts by
Westmoreland, long standing company-initiated discussions with the Funds
aimed at a structured "win-win" settlement of over $160 million in retiree
benefit obligations remained unsuccessful as of this morning. Therefore,
the Company determined it must file in light of continuing demands and
litigation by the Funds to force Westmoreland to make payments beyond its
financial capacity, which would ultimately result in its liquidation at a
substantially diminished value. As reported on December 19, 1996, the
Company had hoped to settle its obligations through negotiation rather than
being forced to move the issue into bankruptcy court, but its attempts over
the last 14 months were rejected by the Funds.
Christopher K. Seglem, Chairman, President and CEO stated, "Westmoreland is
trying to serve obligations, not escape them. We do not dispute our
obligation to provide 100%, lifetime health benefits to UMWA retirees under
the Federal Coal Act passed in 1992. We do, however, challenge an
interpretation and the administration of that Act which would result in the
forced liquidation of our 142-year old Company. Liquidation would destroy
millions of dollars in value, eliminate jobs, and leave unfunded as much as
$200 million in remaining liabilities, including some related to the very
beneficiaries sought to be protected by this legislation. That is an
irresponsible and needless course of action by the UMWA Funds."
"Westmoreland's approach is to maximize the Company's value by preserving
it as an ongoing entity. This approach assures the greatest possible
contribution to Benefit Fund retirees, and also protects other
stakeholders, including unrelated retirees, other coal producers, workers
compensation recipients, customers, employees, shareholders, and the
public, which may eventually be called upon to shoulder the cost of these
benefits if the industry and its successor businesses cannot. Westmoreland
will not voluntarily allow liquidation of the Company only to partially
fund certain UMWA benefits under these circumstances. Our duty is to
resist that and to do the right thing for these retirees and other
stakeholders. Westmoreland has sought court protection in an effort to
safeguard the interests of all constituencies and maximize the value of the
enterprise on all their behalves."
ADDITIONAL BACKGROUND INFORMATION ATTACHED
#
For further information contact Diane Jones (719) 448-5814
or Wendy Petty at the Jefferson Group (303) 837-1110 ext. 239
WESTMORELAND OVERVIEW
Company. Westmoreland Coal Company, which relocated to Colorado Springs
from Philadelphia, Pennsylvania in 1995, is the oldest independent coal
producer in the United States. It is now a significant independent power
producer as well. By the late 1980's Westmoreland was experiencing
significant periodic financial losses caused by the high cost of operating
its unionized Eastern properties and declining coal prices. Beginning in
1992, the Company initiated a turnaround effort which included
discontinuation of unprofitable operations, the sale of non-core assets,
and elimination of its bank debt. That effort is virtually complete today,
and the Company's current coal and energy operations are solid and cash
producing. Westmoreland's value is greatest as a unified ongoing
enterprise, partly because of nearly $175 million worth of off balance
sheet tax assets (net operating loss carryforwards), the value of which
would be lost if the Company liquidated or sold off its major income
producing business units, Westmoreland Resources, Inc. (coal) or
Westmoreland Energy, Inc. (independent power). As a public company (NYSE:
WCX), Westmoreland's efforts and financial status are well documented.
1992 Coal Act. However, this 142-year old Company carries the burden of
substantial "heritage costs," including lifetime, 100% medical benefits for
union retirees and their dependents as guaranteed by the Coal Industry
Retiree Health Benefits Act of 1992 ("Coal Act"). Under the direction of
various UMWA Benefit Funds, the Coal Act requires coal companies who signed
any National Bituminous Coal Wage Agreement since 1950, related parties and
successors, to provide lifetime medical benefits to United Mine Workers of
America (UMWA) employees who retired before October of 1994 and their
dependents. These obligations are joint and several, creating a "last
man's club" among coal producers and their successors. Westmoreland's cash
payments to the Funds exceed $14 million per year and include support of
beneficiaries who never worked for Westmoreland or any of its affiliates,
but whose employers have already gone out of business. Westmoreland faces
additional cash liabilities under the Coal Act of approximately $4 million
in "catch up" costs for newly assigned additional beneficiaries and $21
million to secure future health benefit obligations, as well as another
$14 million for UMWA Pension Plan withdrawal because of the Company's
imminent termination of union operations in Appalachia. These liabilities
total over $200 million on a present value basis, and over $700 million on
a pay-as-you-go cash basis. The Company's other benefit costs include
workers compensation expenses of over $5 million per year.
Problem. Although Westmoreland is trying to support the provision of
benefits to Funds' retirees, it is unable to cover fully their enormous
annual cash costs along with its other obligations. Even though
Westmoreland has sold assets to generate positive cash flow up until now,
such sales cannot continue indefinitely and do not produce enough cash to
enable the Company to meet its continued obligations to the Funds for the
long term. Continued asset sales now, combined with a failure of the Funds
to reach a timely long-term agreement, would result in the eventual total
liquidation of the Company at less than its full value as an ongoing
business. Liquidation of the Company would leave hundreds of millions of
dollars of liabilities to be funded by someone else. It is inevitable,
therefore, that some portion of the cost of benefits currently borne by
Westmoreland will be transferred to the Funds and in turn, at least for
now, to the other coal producers who, like Westmoreland, are jointly and
severally liable and by law must contribute to them.
Over One Year of Unfruitful Discussions with the Benefit Funds.
Recognizing it would not be able to fund the benefit costs and in pursuit
of a fair and realistic approach to advantage all concerned, Westmoreland
initiated discussions with the UMWA Benefit Funds in November 1995. The
Funds demanded that Westmoreland continue paying benefits "as the price of
admission" for discussions so, the Company was forced to continue selling
assets in order to pay benefits during this period. Westmoreland offered
several proposals which would provide for contributions in excess of what
the Funds would receive in a liquidation. These proposals included
provisions for ongoing contributions. The Funds failed to accept any of
Westmoreland's proposals and offered no counter proposals. With
Westmoreland behind in payments, and with the Company facing ongoing
liquidity constraints imposed by continued payment of benefits, its
healthcare administrator suspended administration of benefits on November
27, 1996. Coal Act beneficiaries were then transferred to the Funds where
comparable benefits are provided. The rest of the Company's employees and
retirees continue to receive their benefits from the Company. The Funds'
response was to sue Westmoreland to force continued payment. On December
13, 1996, saying "it is immaterial to the (Benefit Funds) Trustees whether
Westmoreland obtains the necessary funds through liquidation or otherwise,"
the Funds proposed a lump sum payment by Westmoreland of $110 million,
their first and only offer after 14 months of discussions. Westmoreland
could not pay anything close to this amount, even if it did liquidate.
Westmoreland's Position and Commitment. Westmoreland can't pay the full
cost of these benefits, but the Company wants to contribute and help assure
the beneficiaries are secure now and in the future. Westmoreland's
approach maximizes the Company's value, thereby producing the greatest
possible contribution to Benefit Funds retirees, and protects other
stakeholders, including unrelated retirees, coal producers, workers
compensation recipients, customers, employees, shareholders and the public.
Unless a structured settlement with the Funds can be achieved, much value
will be lost. Assets will be sold at "going out of business" prices. Jobs
will be destroyed, retirees will be hurt, and other obligations will be
unfulfilled. Benefit costs of other coal producers will be needlessly
increased. The public may eventually have to bear costs the industry
cannot. All this may be minimized, if not avoided, by Westmoreland's
approach which emphasizes the preservation and creation of value through
continued operation rather than its destruction through liquidation.
Westmoreland will not voluntarily allow liquidation of the Company,
especially at a great loss of value, only to partially fund certain UMWA
retiree obligations and at the expense of its other statutory obligations
and its responsibility to beneficiaries, employees, customers, suppliers,
partners, shareholders, its industry, and the public. Accordingly, the
Company has sought court protection in an effort to safeguard the interests
of all constituencies and maximize the value of the enterprise on all their
behalves.
