<PAGE> 1
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, 1996
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.)
2 North Cascade Avenue, 14th Floor
Colorado Springs, Colorado 80903
- ---------------------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number,
including area code... 719-442-2600
------------
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 May 1, 1996: 6,965,328
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1
FINANCIAL STATEMENTS
WESTMORELAND COAL COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
March 31, 1996 Dec. 31, 1995
-------------- -------------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS ASSETS
Cash and cash equivalents $ 6,321 $ 11,711
Notes and accounts receivable
Coal sales 3,554 3,024
Notes 1,111 2,295
Other 3,066 2,956
-------- --------
7,731 8,275
Less allowance for
doubtful accounts 1,030 2,515
-------- --------
6,701 5,760
Inventories:
Coal 485 645
Mine supplies 134 134
Other 165 161
-------- --------
784 940
Other current assets 803 921
-------- --------
TOTAL CURRENT ASSETS 14,609 19,332
Property, plant and equipment
Land and mineral rights 30,142 30,029
Plant and equipment 222,243 255,149
-------- --------
252,385 285,178
Less accumulated depreciation
and depletion 192,940 225,310
-------- --------
59,445 59,868
Investment in Independent
Power Operations 49,489 49,069
Investment in DTA 19,131 19,326
Workers compensation bond 9,960 9,960
Prepaid pension cost 8,270 7,612
Other assets 3,575 1,940
-------- --------
TOTAL ASSETS $164,479 $167,107
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1
FINANCIAL STATEMENTS
WESTMORELAND COAL COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
March 31, 1996 Dec. 31, 1995
-------------- -------------
(Unaudited)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' (DEFICIT)
CURRENT LIABILITIES
Current installments of
long-term debt $ 1,107 $ 1,462
Accounts payable and accrued
expenses 12,166 8,027
Accrual for workers' compensation 5,491 5,494
Accrual for postretirement
medical costs 10,400 10,400
Taxes on income 64 2,905
Other 235 7,155
--------- ---------
TOTAL CURRENT LIABILITIES 29,463 35,443
Long-term debt 2,699 3,131
Accrual for pneumoconiosis
benefits 12,213 13,871
Accrual for workers' compensation 26,795 28,130
Accrual for postretirement
medical costs 75,941 73,373
Accrual for reclamation costs 10,309 10,311
Other liabilities 19,581 15,558
Deferred income taxes 14,688 14,827
Minority interest 10,440 10,569
SHAREHOLDERS' (DEFICIT)
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 6,965,328 shares
at 3/31/96 and 12/31/95 17,402 17,402
Other paid-in capital 94,641 94,641
Accumulated (deficit) (150,268) (150,724)
--------- ---------
TOTAL SHAREHOLDERS' (DEFICIT) (37,650) (38,106)
--------- ---------
TOTAL LIABILITIES
AND SHAREHOLDERS' (DEFICIT) $ 164,479 $ 167,107
========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE> 4
WESTMORELAND COAL COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(in thousands except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1996 1995*
-------- --------
<S> <C> <C>
Revenues:
Coal $ 10,552 $ 40,788
Independent Power-
equity in earnings and fees 4,351 4,895
Services 1,457 --
-------- --------
16,360 45,683
Costs and expenses:
Cost of coal sold 11,387 38,811
Cost of sales -independent power
and services 2,098 378
Depreciation, depletion and
amortization 509 5,039
Selling and administrative 2,618 4,274
Heritage Costs 3,630 5,885
Pension Costs (854) (413)
-------- --------
19,388 53,974
Operating (loss) (3,028) (8,291)
Gains on the sales of assets 2,441 9,515
Interest expense (125) (342)
Interest income 396 625
Other income 1,400 514
-------- --------
Income before income tax expense
(benefit) and minority interest 1,084 2,021
Income tax expense (benefit):
Current 319 495
Deferred (2) (137)
-------- --------
317 358
Minority interest 311 185
-------- --------
Net income 456 1,478
Less preferred stock dividends
in arrears (1,222) (1,222)
-------- --------
Net income (loss) applicable to
common shareholders $ (766) $ 256
======== ========
Net income (loss) per share applicable
to common shareholders $ (.11) $ .04
======== ========
Weighted average number of common
shares outstanding 6,965 6,959
======== ========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
* Certain amounts have been reclassified to conform to the current
presentation.
4
<PAGE> 5
WESTMORELAND COAL COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31, 1996 1995
- --------------------------------------------------------------------------------
(in thousands)
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 456 $ 1,478
Adjustments to reconcile net income
(loss) to net cash (used) provided by
operating activities:
Gains on the sales of assets (2,441) (9,515)
Reversal of income tax accrual (3,540) --
Equity earnings from independent
power projects (4,232) (2,735)
Recognition of development fee income -- (1,750)
Cash distributions from independent
power projects 2,705 1,880
Depreciation, depletion and
amortization 509 5,039
Increase (decrease) in deferred
income taxes (139) (137)
Minority interest in WRI's income 311 185
Changes in assets and liabilities,
net of noncash transactions:
Accounts receivable, net of allowance
for doubtful accounts (719) 10,738
Inventories 156 (1,224)
Accounts payable and accrued expenses (2,781) (5,777)
Income taxes payable 699 5
Accrual for postretirement
medical costs 2,568 1,891
Accrual for worker's compensation (1,338) 121
Accrual for pneumoconiosis
benefits (1,658) (618)
Other liabilities 4,023 (717)
Other (822) 665
-------- --------
Net cash (used in)operating activities (6,243) (471)
-------- --------
Cash flows from investing activities:
Fixed assets additions (137) (188)
(Increase) decrease in notes receivable (222) 1,405
Net proceeds from sales of assets 2,441 10,068
-------- --------
Net cash provided by investing
activities 2,082 11,285
-------- --------
Cash flows from financing activities:
Hampton lease buyout premium -- (1,103)
Repayment of long-term debt (789) (1,521)
Dividends paid to minority shareholders (440) --
-------- --------
Net cash used in financing activities (1,229) (2,624)
-------- --------
Net increase (decrease) in cash
and cash equivalents (5,390) 8,190
Cash and cash equivalents,
beginning of period 11,711 15,453
-------- --------
Cash and cash equivalents,
end of period $ 6,321 $ 23,643
======== ========
</TABLE>
5
<PAGE> 6
Supplemental disclosures of cash flow information:
<TABLE>
<CAPTION>
Cash paid during the period for:
<S> <C> <C>
Interest $ 227 $ 467
Income taxes $ 0 $ 903
</TABLE>
Supplemental disclosure on non-cash investing activities:
In the first quarter of 1995, $8,000,000 was distributed from debt reserve
accounts of certain of the Company's independent power projects and were
substituted with bank letters of credit. The cash proceeds are restricted as to
use and were invested in certificates of deposit of the bank issuing the
letters of credit. The certificates of deposit collateralize the letters of
credit and are classified on the Company's Condensed Consolidated Balance
Sheets as an Investment in Independent Power Projects.
See accompanying notes to condensed consolidated financial statements.
6
<PAGE> 7
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, 1995. 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. CONTINGENCIES
Westmoreland Energy, Inc. ("WEI")
WEI PROJECT CONTINGENCIES
SOUTHAMPTON. The Southampton plant, a 70 megawatt coal-fired cogeneration
facility in Franklin, Virginia, supplies process steam to a nearby chemical
manufacturer and bulk electric power under contract to Virginia Electric and
Power Company ("Virginia Power") as a qualifying facility (QF) under the Public
Utility Regulatory Policies Act ("PURPA"). The plant began commercial operation
in 1992. On July 7, 1994, the Federal Energy Regulatory Commission ("FERC")
denied the request of LG&E-Westmoreland Southampton ("the Partnership", in
which WEI has a 30% interest) for a waiver of certain QF requirements and
directed the Partnership to show cause as to why it should not be required to
file new cost-based rates for its 1992 electric sales to Virginia Power.
The Partnership filed a request for rehearing and a motion to consider its
request for rehearing as timely filed, or in the alternative, to treat its
request for rehearing as a motion for reconsideration, in August 1994, one day
out of time. The Partnership is seeking a reversal of FERC's prior order, or,
in the alternative, a clarification of FERC's order stating that, with the
exception of rates, the Partnership remains a QF for 1992 exempt from
regulation as a public utility under the Public Utility Holding Company Act
("PUHCA"), utility laws of Virginia and various portions of the Federal Power
Act.
7
<PAGE> 8
In late August 1994, Virginia Power filed a motion for leave to respond to the
Partnership's request for rehearing and response to request for rehearing, and
a response to the Partnership's show cause order. In September 1994, the
Partnership filed with FERC its answer to Virginia Power's motion and response.
Also in September 1994, FERC granted itself an extension of time to act on the
Partnership's request for rehearing, tolling the 30-day period in which FERC
was to have acted on the Partnership's rehearing request. The parties have
fully briefed and submitted to FERC their respective motions with respect to
the request for rehearing and are awaiting FERC's decision. As FERC had not
acted on the Partnership's request for rehearing, in December 1995, the
Partnership filed with FERC a motion to request a settlement conference.
Virginia Power subsequently filed a response in which it did not object to the
proposed settlement conference. The parties are awaiting FERC action, but
expect a settlement proceeding to be initiated in the first half of 1996.
The Company believes that FERC will grant the Partnership the relief that it is
seeking and, accordingly, the ultimate resolution of the matter is not expected
to have a material adverse effect on its consolidated results of operations,
its financial condition or liquidity. However, in light of FERC's July 7, 1994
order, and the arguable lateness of the filing of the request for rehearing one
day out of time, the Company cannot predict what action FERC ultimately will
take. Possible consequences from an adverse decision include refunds, third
party lawsuits, and potential regulatory and other problems under PUHCA,
Virginia utility law and the Federal Power Act, the scope and amount of which
cannot be determined at this time.
ROANOKE VALLEY I. The Company owns a 50% interest in Westmoreland-LG&E Partners
("WLP"), the sole owner of Roanoke Valley I, a cogeneration facility selling
electric power to Virginia Power and steam energy to Patch Rubber Company.
Under the Power Purchase Agreement ("PPA") between WLP and Virginia Power, WLP
is entitled to receive capacity payments based on availability. From May 1994
through March 1996, Virginia Power withheld approximately $8,700,000 of these
capacity payments during periods of forced outages. To date, the Company has
not realized any income on its 50% portion of the capacity payments being
withheld by Virginia Power. In October 1994, WLP filed a complaint against
Virginia Power seeking damages of at least $5,700,000, contending that Virginia
Power breached the PPA in withholding such payments. In June 1995, the Circuit
Court of the City of Richmond, Virginia denied Virginia Power's motion to
dismiss WLP's complaint. In
8
<PAGE> 9
November 1995, Virginia Power filed with the court a motion for summary
judgment, and a hearing on the motion was held in early December 1995. In late
January 1996, the court denied Virginia Power's motion for summary judgment.
The customer filed a second summary judgment motion on March 1, 1996. On March
18, 1996, the Court granted the customer's second summary judgment motion and
effectively dismissed the complaint. The ROVA partnership is evaluating its
options, including possible appeal of the Court's decision granting summary
judgment. Regardless of the outcome, the Company believes Roanoke Valley I will
operate profitability and generate positive cash flows.
RENSSELAER. The Company has been informed through public filings that Niagara
Mohawk Power Corporation ("NIMO")(which is the purchasing utility for the
Company's Rensselaer cogeneration facility in which the Company has a 50%
interest) believe that, absent significant relief from its power purchase
arrangements with independent power producers (including qualifying
cogenerators), it may be forced either to file voluntary bankruptcy or attempt
to condemn and purchase the cogeneration facilities through eminent domain. The
Company intends to oppose any efforts by NIMO to nullifiy its contract for the
Rensselaer project.
2. CAPITAL STOCK
The Company's preferred stock was issued in July, 1992. 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 declaration and payment
of preferred stock dividends was suspended in the second quarter of 1994 in
connection with extension agreements of the Company's principal lenders. Upon
the expiration of these extension agreements, the Company paid a quarterly
dividend on April 1, 1995 and July 1, 1995. Pursuant to the requirements of
Delaware law, the preferred stock dividend was suspended in the third quarter
of 1995 as a result of recognition of losses and the subsequent shareholders'
deficit. The six quarterly dividends which are in arrears (dividend payment
dates July 1, 1994, October 1, 1994, January 1, 1995, October 1, 1995, January
1, 1996 and April 1, 1996) amount to $7,330,800 in the aggregate ($12.75 per
preferred share). Common stock dividends may not be declared until the
preferred stock dividends that are in arrears are made current.
9
<PAGE> 10
There are statutory restrictions limiting the payment of preferred stock
dividends under Delaware law, the state in which the Company is incorporated.
Under Delaware law, the Company is permitted to pay preferred stock dividends
only: (1) out of surplus, surplus being the amount of shareholders' equity in
excess of the par value of the Company's two classes of stock; or (2) in the
event there is no surplus, out of net profits for the fiscal year in which a
preferred stock dividend is declared (and/or out of net profits from the
preceding fiscal year), but only to the extent that shareholders' equity
exceeds the par value of the preferred stock ($575,000). The Company had a
shareholders' deficit at March 31, 1996 of $37,650,000.
Under the terms of the Preferred Shareholder Agreement, the preferred
shareholders are entitled to elect two directors because the Company is in
arrears on six preferred dividends. The Company intends to hold a special
meeting of the preferred shareholders to elect those directors this year.
10
<PAGE> 11
- --------------------------------------------------------------------------------
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
MATERIAL CHANGES IN FINANCIAL CONDITION
FROM DECEMBER 31, 1995 TO MARCH 31,1996
LIQUIDITY
Cash used by operating activities was $6,243,000, and $471,000 in the first
quarter of 1996 and 1995, respectively. The increase in cash used in 1996 is
attributable to a significant reduction in accounts receivable collections in
the first quarter of 1996 compared to the first quarter of 1995 and idle costs
from the Virginia Division while it remains on standby. See the Consolidated
Statements of Cash Flows for additional information.
Cash provided by investing activities was $2,082,000 and $11,285,000 in the
first quarter of 1996 and 1995, respectively. Included in the first quarter of
1996 were cash proceeds of $2,441,000 for the sale of coal reserves to Ark Land
Company. Included in the first quarter of 1995 were proceeds of $9,045,000
related to the sale of the assets of
11
<PAGE> 12
the Company's Hampton Division. Fixed asset additions were $137,000 and
$188,000 in the first quarter of 1996 and 1995, respectively.
Cash used in financing activities totaled $1,229,000 and $2,624,000 in the
first quarter of 1996 and 1995, respectively. Repayment of long-term debt
amounted to $789,000 and $1,521,000 in the first quarter of 1996 and 1995,
respectively.
The Company's consolidated cash and cash equivalents at March 31, 1996 totaled
$6,321,000 (including $3,133,000 at WRI). At December 31, 1995, cash and cash
equivalents totaled $11,711,000 (including $3,213,000 at WRI). None of the
Company's cash and cash equivalents was or is restricted as to use or
disposition. The cash at WRI, a 60% owned subsidiary, is available to the
Company only through dividends. In addition, the Company had restricted cash,
which was not classified as cash and cash equivalents on the Company's
Condensed Consolidated Balance Sheets, of $17,960,000 at March 31, 1996 and at
December 31, 1995. The $17,960,000 is comprised of two items: a $9,960,000
interest-bearing cash deposit account, which collateralizes the Company's
outstanding surety bonds for its workers' compensation self-insurance programs;
and $8,000,000 invested in certificates of deposit at March 31, 1996 which is
classified on the Company's Condensed Consolidated Balance Sheets as an
Investment in Independent Power Projects. The $8,000,000 in certificates of
deposit represents cash proceeds which were transferred from debt reserve
accounts of certain of the Company's independent power projects and were
substituted with bank letters of credit. The cash proceeds are restricted as to
use and were invested in certificates of deposit of the bank issuing the
letters of credit. The certificates of deposit collateralize the letters of
credit.
LIQUIDITY OUTLOOK
The major factor impacting the Company's liquidity outlook is its significant
"heritage costs". These heritage costs consist primarily of cash payments for
postretirement medical benefits, workers' compensation costs and UMWA pension
benefits. The Company also is obligated for its own pension and pneumoconiosis
benefits; however, both of these future obligations enjoy a funding surplus at
present. The Company has ongoing cash expenditures in excess of $15,000,000 per
12
<PAGE> 13
year for postretirement medical benefits which could continue over the next
approximately 45 years and approximately $6,500,000 per year for workers'
compensation benefits which will decline to zero over the next 20 years. The
Company is required under the national contract with the UMWA to pay amounts
based on hours worked or tons processed to the UMWA Retirement Funds with
respect to unionized employees. Since this is a multiemployer plan, under
ERISA, a contributing company is liable for its share of unfunded vested
liabilities upon termination or withdrawal from the plan. The Company's
liability for complete withdrawal is estimated to be approximately $17,800,000,
however, there has been no determination by the UMWA trustees that the Company
has incurred a partial or complete withdrawal. If the Company is required to
fund a withdrawal, it would be over several years and would start on an
unspecified date.
The Company's current principal sources of cash flow include cash distributions
from its independent power projects, dividends from WRI and cash from
operations of DTA. Management believes that cash generated from these sources
and cash reserves alone may not be sufficient to pay the Company's heritage
costs and operating expenses for the next 12 months. The Company hopes to
improve its very near-term cash reserve position in a number of ways including
using independent contractors to mine coal at the Virginia Division or by
divesting all or part of that Division, by selling certain other non-strategic
assets and by receiving cash from liquidation of certain assets given as
collateral by Adventure Resources. The Company has begun to seek further cost
reductions wherever feasible and prudent, and attempt to reduce or defer
certain postretirement medical, workers' compensation and related payments. No
assurance can be given that future operations will generate cash as expected or
the aforementioned actions will be executed in the time frame and to the extent
management anticipates.
Under a Federal law (the Coal Industry Retiree Health Benefit Act of 1992), the
Company is required to provide postretirement medical benefits for UMWA miners
by making premium payments into three benefit plans: (i) the UMWA Combined
Benefit Fund (the "Combined Fund"), a multiemployer plan which benefits miners
who retired before January 1, 1976 or who retired thereafter but whose last
employer did not provide benefits pursuant to an operator-specific Individual
Employer Plan ("IEP"), (ii) an IEP for miners who retired
13
<PAGE> 14
after January 1, 1976 and (iii) the 1992 UMWA Benefits Plan, a multiemployer
plan which benefits (A) miners who were eligible to retire on February 1, 1993,
who did retire on or before September 30, 1994 and whose former employers are
no longer in business, (B) miners receiving benefits under an IEP whose former
employer goes out of business and ceases to maintain the IEP, and (C) new
spouses or new dependents of retirees in the Combined Fund who would be
eligible for coverage thereunder but for the fact that the Combined Fund closed
to new beneficiaries as of July 20, 1992. The premiums paid by the Company
cover its own retirees, its current workforce and its allocated portion of the
pool of retired miners whose previous employers have gone out of business.
The Company met all of its premium obligations through the end of 1995, but has
not paid a premium to the Combined Fund in 1996. The Company's current annual
premiums to the Combined Fund are approximately $5,000,000. The Company has
made a proposal to the staff of the Combined Fund to address these late
premiums and a portion of its future premiums, and discussions are ongoing. The
Company may modify its proposal based on these discussions, but its objective
is to conserve cash for acquisitions so that it can give the Combined Fund
adequate assurance that the Company will not only be able to make up its
current premiums but be able to pay future obligations as well. The Company has
requested the Combined Fund staff to consider the Company's proposal and the
Company's financial situation and present the proposal to the plan trustees.
Any decision in this matter must be made by the plan trustees, who could reject
any proposal from the Company. The trustees could initiate legal action to
recover overdue premiums. If the Company is required to pay all premiums on a
current basis, it could experience liquidity problems if current plans as
described above do not materialize.
In addition, the Coal Industry Retiree Health Benefit Act of 1992 (the "Act")
authorized the Trustees of the 1992 UMWA Benefit Plan to implement security
provisions pursuant to the Act. In 1995, the Trustees issued security
provisions which give contributors to the Plan several options, all of which
would require the Company to commit or restrict cash, for satisfying the Act's
security requirements, and set the level of security to be provided by the
Company at approximately $22,000,000. The Act required the security to be
provided by January 1, 1996; however, the Company has not yet provided
14
<PAGE> 15
security as required under any of the options. Instead, the Company has
proposed to the staff of the 1992 UMWA Benefit Plan that Company assets be used
as collateral for its obligation. Although discussions remain ongoing,
management believes the Company will be able to satisfy the security
requirements through a mutually agreeable alternative, however, there can be no
assurance the 1992 UMWA Benefit Plan trustees will accept such an alternative
and will not initiate legal action to enforce its security requirements.
The Company's current sources of cash flow, as described above, will not be
sufficient by themselves to cover operating expenses and the Company's
"heritage costs" on a long-term basis. Management of the Company believes it
can only restore the Company to profitability or meet ongoing cash requirements
by adopting a strategy of acquiring income-producing businesses and properties
that will generate earnings and cash flow and applying the Company's
substantial net tax loss carryforwards to that income. Management of the
Company has devoted significant time and effort to this strategy, with one
small acquisition being completed in 1995, and the preliminary identification
of additional candidates. The time required to implement an acquisition
strategy is impossible to estimate, and no assurances can be given that the
Company can successfully implement the strategy or achieve long-term viability.
15
<PAGE> 16
- --------------------------------------------------------------------------------
RESULTS OF OPERATIONS:
QUARTER ENDED MARCH 31,1996 COMPARED
TO QUARTER ENDED MARCH 31,1995
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1996 1995
-------- --------
(in thousands)
<S> <C> <C>
Coal Operations:
Virginia Division $ (2,559) $ (4,781)
Westmoreland Resources, Inc. 1,050 699
Westmoreland Coal Sales Company 444 535
Heritage costs (3,630) (5,885)
Net corporate expenses (2,130) (3,472)
Pension costs 854 413
-------- --------
Total Coal Operations (5,971) (12,491)
-------- --------
Independent Power Operations:
Westmoreland Energy, Inc. 3,309 4,200
Corona Group (366)
-------- --------
Total Independent Power Operations 2,943 4,200
-------- --------
Operating loss $ (3,028) $ (8,291)
-------- --------
Gains on the sales of assets $ 2,441 $ 9,515
======== ========
</TABLE>
* Certain amounts have been reclassed to agree with current classifications.
Details of tons sold (in thousands) and average revenue per ton sold were as
follows:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1996 1995
------ ------
<S> <C> <C>
By Segment:
Virginia Division* -- 863
Westmoreland Resources, Inc. 1,098 1,006
------ ------
Total Westmoreland Operations 1,098 1,869
For Others 119 76
------ ------
Total Tons Sold 1,217 1,945
====== ======
Average revenue per ton sold:
Westmoreland Resources, Inc. $ 7.31 $ 7.15
------ ------
*Includes tons:
Sold by Pine Branch Mining Incorporated -- 70
Purchased from unaffiliated producers -- 251
</TABLE>
16
<PAGE> 17
COAL OPERATIONS
Coal operations which includes substantial heritage costs reported operating
losses of $5,971,000 and $12,491,000 for the first quarter of 1996 and 1995,
respectively. The improvement is primarily attributable to decreases in
operating costs due to the idling of Virginia Division and Pine Branch mining
operations during the third quarter of 1995.
Those business units reporting significant changes in results of operations are
discussed below.
VIRGINIA DIVISION - $2,222,000 BETTER
The Virginia Division had operating losses of $2,559,000 and $4,781,000 in the
first quarter of 1996 and 1995, respectively. The Company idled the Virginia
Division and Pine Branch Mining in the third quarter of 1995 and is maintaining
the properties on a standby basis except for portions currently being operated
by two mining contractors. Associated with this idling was the recognition of
certain future liabilities. Operating losses in 1996 represent costs incurred
while the properties remain on standby. The Company continues to seek buyers
and/or operators for its Virginia Division assets and facilities. Depending
upon the structure of such transactions, the Company may be able to recover
some of the above referenced charges.
17
<PAGE> 18
WESTMORELAND RESOURCES, INC. (WRI) - $351,000 BETTER
WRI is a large surface mining operation located in eastern Montana which had
operating income of $1,050,000 and $699,000 in the first quarter of 1996 and
1995, respectively. Included in the first quarter 1996 results were additional
coal sales of approximately 10% compared to the first quarter of 1995. Also
included in 1996 were additional coal BTU premiums of approximately $200,000
compared to the same period in 1995 due to better than expected coal quality.
HERITAGE COSTS - $2,255,000 BETTER
Heritage costs were $3,630,000 and $5,885,000 for the first quarter of 1996 and
1995, respectively. The first quarter of 1995 included $1,711,000 of workers'
compensation charges. As a result of the idling of the Virginia Division and
Pine Branch the Company does not expect to incur any additional workers'
compensation charges during 1996 and, therefore, none have been accrued.
NET CORPORATE EXPENSES - $1,342,000 BETTER
Net corporate expenses were $2,130,000 and $3,436,000 in the first quarter of
1996 and 1995, respectively. Expenses in 1996 decreased due to downsizing and
relocation of the Corporate office.
INDEPENDENT POWER OPERATIONS - $1,257,000 WORSE
The Company's Independent Power Operations, through its wholly-owned
subsidiary, WEI, recorded operating income of $2,943,000 and $4,200,000 in the
first quarter of 1996 and 1995, respectively. The decline is due to $1,750,000
of deferred development fees received in prior years in connection with the
ROVA I and Rensselaer Projects which were recognized as income in the first
quarter of 1995. Currently, there are no development fees to be recognized in
the future.
GAINS ON THE SALES OF ASSETS - $7,074,000 WORSE
In January, 1996 the Company sold to Ark Land Company certain coal reserves
held under lease from Ark. Cash proceeds from the transaction was $2,441,000,
all of which was recorded as a gain during the first quarter.
18
<PAGE> 19
In January of 1995 the Company sold the assets of its Hampton Division located
in Boone and Logan Counties, West Virginia to Burco Resources Corporation and
Wind River Resources Corporation and sold its Hampton Division mineral lease to
the lessor, Penn Virginia, for $9,045,000 in cash. The net proceeds to the
Company were approximately $7,376,000 after payments related to a capital
lease. The elimination of this capital lease resulted in a further reduction of
the Company's long-term debt. The Company wrote off a substantial portion of
the Hampton Division's assets in 1993. The gain on the sale was $9,090,000
after the reversal of certain liabilities. The purchasers assumed the
reclamation and environmental liabilities associated with the Hampton Division
as part of the sales transaction. In February 1995, the Company sold the
Virginia Division's Dump Train for cash of $945,000 and the related gain on the
sale was $425,000.
19
<PAGE> 20
PART II - OTHER INFORMATION
ITEM 6
EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibit 27 - Financial Data Schedule.
b) Reports on Form 8-K - No reports on Form 8-K were filed by
the Company during the quarter ended March 31, 1996.
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 15, 1996 /s/ ROBERT J. JAEGER
----------------------------------
Robert J. Jaeger
Senior Vice President of
Finance, Treasurer and
Controller
/s/ LARRY W. MIKKOLA
----------------------------------
Larry W. Mikkola
Assistant Controller
20
<PAGE> 21
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
27 - Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1996
<CASH> 6,321
<SECURITIES> 0
<RECEIVABLES> 7,731
<ALLOWANCES> 1,030
<INVENTORY> 784
<CURRENT-ASSETS> 14,609
<PP&E> 252,385
<DEPRECIATION> 192,941
<TOTAL-ASSETS> 164,479
<CURRENT-LIABILITIES> 29,463
<BONDS> 0
<COMMON> 17,402
0
575
<OTHER-SE> (55,627)
<TOTAL-LIABILITY-AND-EQUITY> 164,479
<SALES> 16,360
<TOTAL-REVENUES> 16,360
<CGS> 13,485
<TOTAL-COSTS> 19,388
<OTHER-EXPENSES> (4,237)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 125
<INCOME-PRETAX> 1,084
<INCOME-TAX> 317
<INCOME-CONTINUING> 456
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 456
<EPS-PRIMARY> (.11)
<EPS-DILUTED> (.11)
</TABLE>
