SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. ____)
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WESTMORELAND COAL COMPANY
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Consent Statement, if other than the Registrant)
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WESTMORELAND COAL COMPANY
August 16, 2000
Dear Westmoreland Preferred Shareholder:
Recently you have been contacted by a group of dissident stockholders who seek
to remove us as directors representing the preferred shareholders. The nominees
proposed by this dissident group have been critical of your Company's management
and Board of Directors for the past three years. During Westmoreland's
bankruptcy they wanted to liquidate the Company, but were rebuffed when the
Court granted the Company's motion to be dismissed from Chapter 11. Last year
they launched a proxy fight by proposing their own candidates for the Board of
Directors, again urging at least a partial liquidation, and were rejected by
both common and preferred stockholders.
Now they are at it again, claiming that we do not represent preferred
shareholders' interests, despite the fact that we were re-elected by the
preferred stockholders in June, receiving over 575,000 votes, about 75 percent
of those cast. By continuing to demand management's attention, they divert
energy from the implementation of the business plan set forth in the 1999 Annual
Report, which the Company sent you in April.
There should be no doubt about our strong past and present commitment to
preferred shareholders. For example, in 1997 when we needed to file a plan of
reorganization during the bankruptcy, we proposed to give preferred shareholders
an 80 percent ownership of the new entity in recognition of their preference
rights! It's on the record. In 1998, during discussions surrounding our imminent
dismissal from bankruptcy, we proposed delivering $23 million in cash, plus debt
and equity securities, to preferred shareholders, in exchange for all preferred
shares. We believed our offer had a value in excess of $20 per depositary share
with potentially significant upside, and our offer would have been available to
all preferred shareholders. That's also on the record, in a letter to the Equity
Committee dated October 12, 1998. Led by one of the dissidents, the Equity
Committee rejected this offer and demanded a $20 million cash tender offer at
$19 per depositary share; this offer was available for less than half the
outstanding preferred shares. The Company accepted the Equity Committee's demand
and made the offer. When more shares were tendered than were permitted under the
agreement, we voluntarily initiated a second offer for an additional 631,000
depositary shares at $19 each. That, too, is on the record.
Just so there can be no possible misunderstanding of what our position is now
and has always been: WE BELIEVE WESTMORELAND SHOULD SATISFY THE UNPAID PREFERRED
STOCK DIVIDENDS AND RESUME THE DIVIDEND ON THE PREFERRED STOCK AS SOON AS IT CAN
LEGALLY AND SAFELY DO SO UNDER DELAWARE LAW AND THE COMPANY'S FINANCIAL
COVENANTS.
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At this time, the unavoidable fact is that the Company is prohibited by Delaware
law from paying any preferred stock dividends. The $27.8 million expended in the
two tender offers and the ongoing expense for post-retirement benefits,
approximately $22 million annually, have reduced the Company's current
stockholders' equity below the level required by law to pay preferred dividends.
However, we have been working with the rest of the Board and management to
rebuild shareholders' equity so that the Company can pay dividends.
We hope to do that by carrying out the Company's strategic plan, which is being
implemented as you read this letter. The Company intends to be opportunistic in
acquiring niche businesses in the energy sector (coal, gas, and power
production), where it can capitalize on the emerging market for increased levels
of low-cost electrical power and a cleaner environment. Your Company has over
$200 million of tax loss carryforwards (NOLs). We believe that the Company's
acquisition strategy, together with the other components of its strategic plan
and the use of its NOLs, will increase Westmoreland's operating profitability
and generate free cash flow for the payment of sustainable dividends and permit
reinvestment in growth.
As part of its strategic plan, the Company is also working hard to recover
substantial sums which we believe are owed to us by various third parties,
including Morrison-Knudsen and Virginia Power. The plan seeks to optimize the
value of the Company's existing core operations, but the Company is also
aggressively pursuing the possible sale of certain non-core assets where we
believe favorable values can be captured. On still another front, Westmoreland
is actively supporting recent federal legislative proposals to add prescription
drug benefits to Medicare. Over one-half of the Company's retiree medical costs
are for prescription drugs, and since its responsibility for future benefits are
carried on the balance sheet, passage of this legislation would improve the
Company's shareholders' equity account, which is calculated under generally
accepted accounting principles (GAAP) and audited annually by KPMG LLP.
We know that some of you are frustrated and we wish that it were possible to
move faster. Your fears and concerns are reported to us directly and promptly by
management and your interests are discussed at every Board meeting. We have had
the opportunity to speak to some of you personally. However, others are telling
you to be wary of directors you elected to protect your preferred interests, but
who own few, if any, preferred shares themselves. Our interests are aligned with
yours. So long as there are unpaid preferred stock dividends, under Delaware
law, no common stock dividend can be paid and the common stock price will
languish. The fact that we have personally invested, for ourselves and others,
millions of dollars in Westmoreland provides us with additional motivation and
focus to satisfy preferred stockholders' interests. As professional investors,
we have sat on the boards of other public companies and have unlocked
shareholder value in the past. We believe there is no better approach to serve
your economic interests, or ours, than the course which we have helped chart.
We also believe that the execution of the Company's strategic plan will leverage
the value of its knowledge, ability, and enviable tax position, resulting in
sustained profitability, increasing shareholders' equity, and a rising stock
price. Accumulated and regular preferred stock dividends can then be satisfied
in a way that should not jeopardize the value or survival of the Company. It is
our opinion that excellent progress in the implementation of the Company's
strategic plan is being made, and we will report to you on that progress as soon
as we are able.
<PAGE>
DUE TO THE PROGRESS BEING MADE IMPLEMENTING THE STRATEGIC PLAN, WE ARE GENUINELY
HOPEFUL THAT THE PREFERRED DIVIDEND CAN BE REINSTATED SOON. Furthermore, we are
proposing to the Board that the Company dedicate the $6 million of cash, which
is now held in escrow to secure the Company's compliance with the settlement
agreement that facilitated dismissal of the Company's bankruptcy case, to the
payment of accumulated preferred dividends, if those dividends are still
unsatisfied in the spring of 2002. We expect that these funds will become
available in the spring of 2002 if the Company remains in compliance with the
financial covenants established under the settlement agreement, and we believe
that, if the Company is successful in implementing its strategic plan, it will
be able to remain in compliance with these covenants. No responsible director
can promise you more than this.
We do not take the fiduciary responsibility entrusted to us lightly. Although it
is not our place to evaluate our own performance, we believe we are carrying out
our responsibilities in a prudent and ethical manner. We appreciate the time and
effort you have taken to read this letter and for your continuing support.
PLEASE DO NOT HESITATE TO CONTACT EITHER OF US PERSONALLY.
Sincerely,
Robert E. Killen Telephone (610) 296-7222, ext. 32
James W. Sight Telephone (913) 362-9133
STOCKHOLDERS SHOULD READ THE COMPANY'S CONSENT REVOCATION MATERIAL
CAREFULLY WHEN IT BECOMES AVAILABLE BEFORE MAKING ANY
VOTING DECISIONS.
<PAGE>
Certain information required by the Rules of the Securities and Exchange
Commission ("SEC")
Westmoreland Coal Company (the "Company") and the following Directors of the
Company may be deemed to be participants in the Company's solicitation: Thomas
J. Coffey, Pemberton Hutchinson, Robert E. Killen, William R. Klaus, Thomas W.
Ostrander, Christopher K. Seglem, and James W. Sight. Employee participants may
include Paul W. Durham (Assistant General Counsel and Secretary), Robert J.
Jaeger (Senior Vice President of Finance and Treasurer), Diane S. Jones (Vice
President, Corporate Business Development & Corporate Relations), W. Michael
Lepchitz (Vice President and General Counsel, and President and General Counsel,
Westmoreland Energy, Inc.) and Christopher K. Seglem (Chairman of the Board,
President and Chief Executive Officer). The above named individuals collectively
beneficially own approximately 1,527,720 shares, or approximately 20.3%, of the
Company's outstanding common stock (excluding shares of common stock that may be
obtained upon conversion of the Company's depositary shares ("Depositary
Shares"), each representing one-quarter of a share of the Company's Series A
Convertible Exchangeable Preferred Stock). Such individuals also collectively
beneficially own approximately 1,956 Depositary Shares, or approximately 0.2% of
the outstanding Depositary Shares, which are convertible into 3,341 shares of
the Company's common stock. Beneficial ownership is determined in accordance
with rules of the SEC; under these rules, a person is deemed to beneficially
own, among other things, shares subject to options exercisable currently or
within 60 days. Additional information about the directors and executive
officers is included in the Company's proxy statement for its 2000 Annual
Meeting of Stockholders, filed with the SEC on April 20, 2000, and is also
included in a consent revocation statement filed by the Company with the SEC in
response to the consent solicitation filed by the dissidents.
INVESTORS ARE URGED TO READ THE CONSENT REVOCATION STATEMENT WHEN IT BECOMES
AVAILABLE AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC BECAUSE THEY WILL
CONTAIN IMPORTANT INFORMATION. Investors will be able to obtain the documents
free of charge at the SEC's website (www.sec.gov). In addition, documents filed
by the Company with the SEC will be available free of charge from the Company by
contacting Diane S. Jones, Vice President, Corporate Business Development &
Corporate Relations, 2 North Cascade Ave., 14th Floor, Colorado Springs CO
80903, 719-442-2600.
