SCHEDULE 14A
(RULE 14a-101)
SCHEDULE 14A INFORMATION
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WESTMORELAND COAL COMPANY
-------------------------
(Name of Registrant as Specified In Its Charter)
------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
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<PAGE>
----------------------------
Westmoreland Turnaround Plan
Takes Hold As Second Quarter
Net Losses Fall
----------------------------
Colorado Springs, CO - August 14, 2000 -- Westmoreland Coal Company (AMEX: WLB)
today reported a further reduction in net losses for the second quarter 2000 of
16.5% compared with first quarter 2000 and 50.6% compared with second quarter
1999. The reduction in net losses for the second quarter 2000 compared to second
quarter 1999 were largely due to increased revenue from coal and power
operations and lower general, administrative and heritage costs. Incurring no
significant one-time events, the net loss for second quarter 2000 improved to
$2.1 million, notwithstanding the continuing, significant negative effect of
over $5.2 in retiree related benefit costs incurred by the Company in the second
quarter of 2000. The net loss was a $0.4 million improvement over first quarter
2000 and a $2.1 million improvement over second quarter 1999, which was also
burdened by costs related to a proxy contest in 1999 initiated unsuccessfully by
a small group of dissident shareholders.
As part of a turnaround strategy, Westmoreland, the oldest independent coal
company in the United States, is aggressively implementing a growth strategy to
overcome the heavy burden of health benefits for coal industry retirees and
their dependents including those federally mandated by the Coal Industry Retiree
Health Benefits Act of 1992. Annual expenses of over $22 million for those
benefits will cause Westmoreland to post losses until new, profitable operations
can be brought on-line.
WESTMORELAND'S GROWTH STRATEGY - The growth plan, which was first presented in
Westmoreland's 1999 Annual Report delivered to shareholders in late spring,
calls for optimizing existing core operations in conjunction with the
exploitation of niche opportunities that can capitalize on the changing energy
marketplace which seeks more, lower-cost power and a cleaner environment.
Relying on its experience and understanding of the energy business, the
Company's acquisition of profitable businesses in niche markets will allow the
Company to utilize its tax loss carryforwards ("NOLs") of over $200 million to
shield the taxable income of those businesses. This will result in higher rates
of return and generate greater cash flows which will be available for further
investment and growth, operating expenses, and dividends to shareholders.
The Company is actively pursuing opportunities in coal, oil and gas, and power
production. It recently confirmed that it is engaged in exclusive negotiations
to purchase certain assets of Knife River Coal Company, an affiliate of
Montana-Dakota Utilities.
<PAGE>
LIQUIDITY AND SHAREHOLDERS' EQUITY - Consolidated cash and cash equivalents at
June 30, 2000 totaled $11.1 million, including $7.7 million at Westmoreland
Resources, Inc. ("WRI") which is available to the Company through dividends. In
addition, the Company has restricted cash of $19.1 million. The Company's
principal current sources of cash flow include cash distributions from the
independent power projects, dividends from Westmoreland Resources, Inc. and
interest earned on cash reserves. Other future potential sources of cash that
might become available to the Company include (1) reimbursement of the Company's
expenditures to repair the dragline at WRI, (2) recoveries from Virginia Power
in connection with the ROVA "forced outage" issue, (3) amounts which may become
available in connection with the Contingent Promissory Note ("Note") executed as
part of the Company's dismissal from bankruptcy in 1998, (4) strategic asset
sales, (5) overfundings of benefit plans, (6) cash flow from new investments,
and (7) reductions in heritage costs due to normal attrition and potential
prescription drug legislation.
After recognition for presentation purposes of $0.4 million for unpaid preferred
dividends for the second quarter of 2000, net loss applicable to common
shareholders was $2.5 million compared to a loss of $4.9 million for the same
period in 1999. Common stock dividends may not be declared until preferred
dividends that are accumulated but unpaid are made current. The Company
distributed over $27.8 million to preferred shareholders in 1999 through two
tender offers which reduced shareholders' equity and cash. In part as a result
of the two tenders, the Company is currently constrained from payment of the
accumulated, but unpaid preferred dividends. The constraints include specific
provisions of Delaware Law that require threshold levels of shareholders' equity
before dividends can be paid, and the need to remain in compliance with the
financial ratio requirements contained in the Note. Failure to comply with the
Note could result in the forfeit of up to $12 million to the UMWA Benefit Funds.
Shareholders' deficit was $1.5 million at June 30, 2000.
MANAGEMENT COMMENT - Christopher K. Seglem, Westmoreland's Chairman, President
and CEO said: "The progress we have made with our efforts to reduce costs and to
maximize the income generated from our current core operations is evidenced by
the operating income contributions of $1.1 million by our coal operations and
over $4.1 million by the independent power operations this quarter. But, as we
have previously pointed out, these efforts alone cannot overcome losses
generated by the federally mandated benefit costs for coal industry retirees and
their dependents. Thus, timely, deliberate execution of our growth strategy is
vital to the Company, and we are making good progress in this regard. Our plan
should unlock the value of the Company's tax assets leading to greater cash
flows and profitability and ultimately, increase the value of the Company for
its stockholders."
FIRST HALF 2000 FINANCIAL RESULTS - Net loss was $4.6 million for the first half
of 2000 compared with net income of $8.3 million for the same period in 1999.
The 1999 net income was driven by a one-time $17.0 million gain resulting from
the sale of the Rensselaer Project, offset by certain one-time selling and
administrative costs. Excluding the effect of the Rensselaer earnings and
one-time events, first half 2000 net income improved by approximately $1.5
million over 1999. Net loss applicable to common shareholders was $5.5 million
for the first half of 2000 compared with net income of $7.0 million for the same
period in 1999.
Westmoreland will file its second quarter 2000 Form 10-Q with the SEC today. Any
person interested in receiving a copy of the second quarter 2000 Form 10-Q or
1999 Form 10-K can request copies by writing to the Company at the following
address: Westmoreland Coal Company, 2 North Cascade Avenue, 14th Floor, Colorado
Springs, CO, 80903. The Forms are also available electronically through the
SEC's EDGAR system. To receive a copy of the Company's Annual Report or
documents filed with the SEC, please contact Diane Jones at (719) 442-2600.
<PAGE>
Westmoreland Coal Company, headquartered in Colorado Springs, CO, emerged from
Chapter 11 on January 4, 1999, satisfying all debt obligations with interest and
preserving 100% of its shareholders' interests. It is now implementing a
strategic plan for expansion and growth through the acquisition and development
of opportunities in the changing energy marketplace. The Company's current core
operations are Powder River Basin coal mining through its 80%-owned subsidiary
Westmoreland Resources, Inc. and independent power production through its wholly
owned subsidiary Westmoreland Energy, Inc. The Company also holds a 20% interest
in Dominion Terminal Associates, a coal shipping and terminal facility in
Newport News, Virginia.
Certain statements in this press release which are not
historical facts or information are "forward-looking
statements" within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Any statements contained herein that
are not statements of historical fact may be deemed to be
forward-looking statements. For example, words such as
"may," "will," "should," "estimates," "predicts,"
"potential," "continue," "strategy," "believes,"
"anticipates," "plans," "expects," "intends," and similar
expressions are intended to identify forward-looking
statements. Such forward-looking statements involve known
and unknown risks, uncertainties and other factors which may
cause the actual results, levels of activity, performance or
achievements of the Company, or industry results, to be
materially different from any future results, levels of
activity, performance or achievements expressed or implied
by such forward-looking statements. Such factors include,
among others, the following: general economic and business
conditions; the ability of the Company to implement its
business strategy; the Company's access to financing; the
Company's ability to successfully identify new business
opportunities; the Company's ability to achieve anticipated
cost savings and profitability targets; changes in the
industry; competition; the Company's ability to utilize its
tax net operating losses; the ability to reinvest excess
cash at an acceptable rate of return; weather conditions;
the availability of transportation; price of alternative
fuels; costs of coal produced by other countries; demand for
electricity; the effect of regulatory and legal proceedings
and other factors discussed in Item 1 of the Company's Form
10-K for the year ended December 31, 1999. As a result of
the foregoing and other factors, no assurance can be given
as to the future results and achievement of the Company.
Neither the Company nor any other person assumes
responsibility for the accuracy and completeness of these
statements.
THE ATTACHED FINANCIAL RESULTS SHOULD BE READ IN CONJUNCTION WITH THE COMPANY'S
COMPLETE FINANCIAL STATEMENTS CONTAINED IN FORM 10-Q FOR THE SECOND QUARTER OF
2000.
STOCKHOLDERS SHOULD READ THE COMPANY'S CONSENT REVOCATION MATERIAL CAREFULLY
WHEN IT BECOMES AVAILABLE BEFORE MAKING ANY VOTING DECISIONS.
# # #
<PAGE>
<TABLE>
Westmoreland Coal Company and Subsidiaries
Consolidated Balance Sheets
-----------------------------------------------------------------------------------------------------
(Unaudited)
June 30, 2000 December 31, 1999
-----------------------------------------------------------------------------------------------------
(in thousands)
<CAPTION>
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 11,128 $ 20,122
Receivables:
Trade 3,479 2,156
Excess of trust assets over pneumoconiosis benefit
obligation - 6,397
Terminated pension plan, net - 500
Other 690 621
-----------------------------------------------------------------------------------------------------
4,169 9,674
Other current assets 938 1,180
-----------------------------------------------------------------------------------------------------
Total current assets 16,235 30,976
-----------------------------------------------------------------------------------------------------
Property, plant and equipment:
Land and mineral rights 10,641 10,572
Plant and equipment 66,013 66,231
-----------------------------------------------------------------------------------------------------
76,654 76,803
Less accumulated depreciation and depletion 41,128 40,245
-----------------------------------------------------------------------------------------------------
35,526 36,558
Investment in independent power projects 48,458 45,225
Investment in Dominion Terminal Associates (DTA) 4,434 4,672
Workers' compensation bond 3,761 4,748
Prepaid pension cost 3,971 3,897
Excess of trust assets over pneumoconiosis benefit
obligation 5,691 5,255
Security deposits 15,368 10,148
Other assets 644 818
-----------------------------------------------------------------------------------------------------
Total Assets $ 134,088 $ 142,297
=====================================================================================================
(Continued)
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
Westmoreland Coal Company and Subsidiaries
Consolidated Balance Sheets (Continued)
-----------------------------------------------------------------------------------------------------
(Unaudited)
June 30, 2000 December 31, 1999
-----------------------------------------------------------------------------------------------------
(in thousands)
<CAPTION>
<S> <C> <C>
Liabilities and Shareholders' Equity (Accumulated Deficit)
Current liabilities:
Current installments of long-term debt $ - $ 220
Accounts payable and accrued expenses 5,863 5,942
Workers compensation 3,200 3,200
Postretirement medical costs 10,130 10,130
UMWA 1974 Pension Plan obligation 1,234 1,128
Other accrued expenses 956 970
Reorganization expenses 73 400
Reclamation costs 100 100
-----------------------------------------------------------------------------------------------------
Total current liabilities 21,556 22,090
-----------------------------------------------------------------------------------------------------
Long-term debt, less current installments - 1,343
Accrual for workers compensation 13,581 15,072
Accrual for postretirement medical costs 80,244 78,643
1974 UMWA Pension Plan obligations 10,060 10,751
Accrual for reclamation costs, less current portion 2,433 2,537
Other liabilities 2,014 1,930
Minority interest 5,705 6,874
Commitments and contingent liabilities
Shareholders' equity (accumulated deficit)
Preferred stock of $1.00 par value
Authorized 5,000,000 shares;
Issued and outstanding 208,708
shares at June 30, 2000 and
December 31, 1999 209 209
Common stock of $2.50 par value
Authorized 20,000,000 shares;
Issued and outstanding 7,069,663
shares at June 30, 2000 and December 31, 1999 17,674 17,669
Other paid-in capital 67,318 67,315
Accumulated deficit (86,706) (82,136)
-----------------------------------------------------------------------------------------------------
Total shareholders' equity (accumulated deficit) (1,505) 3,057
-----------------------------------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity
(Accumulated Deficit) $ 134,088 $ 142,297
=====================================================================================================
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
Westmoreland Coal Company and Subsidiaries
Consolidated Statements of Income
----------------------------------------------------------------------------------------------------------------------------
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
------------------------------------------------------ ----------------- ---------------- ----------------- ----------------
(in thousands except per share data)
<CAPTION>
<S> <C> <C> <C> <C>
Revenues:
Coal $ 10,722 $ 8,675 $ 19,815 $ 17,234
Independent power - equity in earnings 4,208 4,116 8,210 26,707
DTA - share of losses (435) (397) (865) (718)
------------------------------------------------------ ----------------- ---------------- ----------------- ----------------
14,495 12,394 27,160 43,223
------------------------------------------------------ ----------------- ---------------- ----------------- ----------------
Costs and expenses:
Cost of sales - coal 9,086 7,670 16,623 14,963
Depreciation, depletion and amortization 458 378 883 744
Selling and administrative 1,576 2,102 3,177 6,777
Heritage costs 5,229 6,882 10,605 12,477
Pension benefit (37) (55) (438) (110)
Doubtful account recoveries - (83) - (91)
------------------------------------------------------ ----------------- ---------------- ----------------- ----------------
16,312 16,894 30,850 34,760
Operating income (loss) (1,817) (4,500) (3,690) 8,463
Other income (expense):
Gains on sales of assets - 50 - 69
Interest expense (214) (297) (481) (598)
Interest income 414 441 961 965
Minority interest (212) (149) (431) (375)
Other income (expenses) (250) 247 (929) (177)
------------------------------------------------------ ----------------- ---------------- ----------------- ----------------
Income (loss) before income taxes (2,079) (4,208) (4,570) 8,347
Income taxes - - - (45)
------------------------------------------------------ ----------------- ---------------- ----------------- ----------------
Net income (loss) (2,079) (4,208) (4,570) 8,302
Less preferred stock dividend requirements (444) (663) (888) (1,326)
------------------------------------------------------ ----------------- ---------------- ----------------- ----------------
Net income (loss) applicable to common
shareholders $ (2,523) $ (4,871) $ (5,458) $ 6,976
====================================================== ================= ================ ================= ================
Basic and diluted net income (loss) per share
applicable to common shareholders $ (.35) $ (.69) $ (.77) $ .99
Weighted average number of common shares
outstanding 7,070 7,020 7,070 7,020
====================================================== ================= ================ ================= ================
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
Westmoreland Coal Company and Subsidiaries
Consolidated Statements of Cash Flows
----------------------------------------------------------------------------------------------------------------------------
(Unaudited)
Six Months Ended June 30, 2000 1999
----------------------------------------------------------------------------------- -------------------- -------------------
(in thousands)
<CAPTION>
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (4,570) $ 8,302
Adjustments to reconcile net income to net cash provided by (used in) operating
activities:
Equity earnings from independent power projects (8,210) (26,707)
Cash received from independent power projects 4,977 44,106
Share of losses from DTA 865 718
Cash generated by DTA 126 665
Cash contributions to DTA (753) (838)
Depreciation, depletion and amortization 883 744
Stock compensation expense - 271
Gain on disposition of assets - (69)
Minority interest 431 375
Other 174 (18)
Changes in assets and liabilities:
Accounts receivable, net of allowance for doubtful accounts 5,505 1,987
Other current assets 242 (1,782)
Workers' compensation bond 987 364
Prepaid pension asset (74) (110)
Excess of trust assets over pneumoconiosis benefit obligation (436) 1,754
Accounts payable and accrued expenses (93) (3,322)
Income tax payable - (2,110)
Accrual for workers compensation (1,491) (1,777)
Accrual for postretirement medical costs 1,601 5,215
Consent judgment payment obligation - (39,006)
1974 UMWA Pension Plan obligations (585) (1,313)
Other liabilities (20) (347)
---------------------------------------------------------------------------------- -------------------- -------------------
Net cash used in operating activities before reorganization items (441) (12,898)
---------------------------------------------------------------------------------- -------------------- -------------------
Changes in reorganization items (327) (6,643)
---------------------------------------------------------------------------------- -------------------- -------------------
Net cash used in operating activities (768) (19,541)
---------------------------------------------------------------------------------- -------------------- -------------------
Cash flows from investing activities:
Fixed asset additions (381) (1,656)
Reimbursement from mine operator 530 -
Long-term deposits (5,220) (10,148)
Net proceeds from sales of assets - 69
---------------------------------------------------------------------------------- -------------------- -------------------
Net cash used in investing activities (5,071) (11,735)
---------------------------------------------------------------------------------- -------------------- -------------------
Cash flows from financing activities:
Repayment of long-term debt (1,563) (222)
Dividends paid to minority interest (1,600) -
Exercise of stock options 8 66
Purchase of preferred stock - (20,000)
---------------------------------------------------------------------------------- -------------------- -------------------
Net cash used in financing activities (3,155) (20,156)
---------------------------------------------------------------------------------- -------------------- -------------------
Net decrease in cash and cash equivalents (8,994) (51,432)
Cash and cash equivalents, beginning of period 20,122 84,073
================================================================================== ==================== ===================
Cash and cash equivalents, end of period $ 11,128 $ 32,641
================================================================================== ==================== ===================
Supplemental disclosures of cash flow information: Cash paid during the period for:
Interest $ 481 $ 5,446
Taxes $ - $ 2,110
</TABLE>
<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.
