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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
(MARK ONE)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
----- OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
----- SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
FOR THE TRANSITION PERIOD FROM __________ TO ________.
COMMISSION FILE NO. 0-752
WESTMORELAND COAL COMPANY
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(Exact name of registrant as specified in its charter)
DELAWARE 23-1128670
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(STATE OR OTHER JURISDICTION OF (I. R. S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
14TH FLOOR, 2 NORTH CASCADE AVENUE, COLORADO SPRINGS, CO 80903
- --------------------------------------------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
Registrant's telephone number, including area code: (719) 442-2600
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Securities registered pursuant to Section 12(b) of the Act:
NAME OF STOCK EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
- ------------------- ----------------------
Common Stock, par value $2.50 per share New York Stock Exchange
Depository Shares, each representing New York Stock Exchange
a one-quarter share of Series A Convertible
Exchangeable Preferred Stock
Preferred Stock Purchase Rights New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
NAME OF STOCK EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
- ------------------- ----------------------
Series A Convertible Exchangeable New York Stock Exchange
Preferred Stock, par value $1.00 per share
2
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, and (2) has been subject to such filing
requirements for the past 90 days.
Yes x No
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K.
X
-----
The aggregate market value of voting stock held by non-affiliates as of
February 29, 1996 is estimated to be $32,862,000. Voting stock held by
affiliates is designated as voting stock beneficially held by executive
officers and directors and by holders of more than 10% of the outstanding
voting stock.
There were 6,965,328 shares outstanding of the registrant's Common Stock, $2.50
Par Value (the registrant's only class of common stock), as of February 29,
1996.
There were 2,300,000 depository shares, each representing one quarter of a
share of the registrant's Preferred Stock, $0.25 Par Value per depository
share, outstanding as of February 29, 1996.
The following documents have been incorporated by reference into the Parts of
this Form 10-K (i.e., Part I, Part II, etc.) indicated in parentheses:
Definitive proxy statement to be filed on or about April 26, 1996. (Part III)
Westmoreland Coal Company's 1995 Annual Report to Shareholders: Management's
Discussion and Analysis of Financial Condition and Results of Operations,
Five-Year Review, Consolidated Financial Statements, the Notes to the
Consolidated Financial Statements and Market Information on Capital Stock.
(Part II)
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PART I
ITEM 1 - BUSINESS
During the year ended December 31, 1995, Westmoreland Coal Company's (the
"Company") principal business was the production and sale of coal in the United
States. Unlike prior years, the Company's operations in 1995 did not include
the marketing and sale of a significant amount of coal produced by unaffiliated
producers. Beginning in 1992, the Company commenced a strategic review of
operations to eliminate underperforming assets and to attempt to achieve
sustainable profitability. Pursuant to this strategic review, the Company has
sold or shut down a number of assets and operations, paid off its bank debt,
withdrawn from the export market and substantially reduced marketing of coal
for unaffiliated producers.
Since the idling of the Company's Eastern operations in the third quarter of
1995, the Company's principal businesses have become, (i)the production and
sale of coal from the Powder River Basin in Eastern Montana; (ii) the ownership
of interests in cogeneration and other non-regulated independent power plants;
the provision of repair and maintenance services to utilities and power
projects; and (iii) the leasing of capacity at Dominion Terminal Associates, a
coal storage and vessel loading facility.
COAL OPERATIONS
COAL PRODUCTION
Through Westmoreland Resources, Inc. ("WRI"), the Company produces coal in the
Powder River Basin in eastern Montana from reserves owned by the Crow Indians.
Prior to the idling, eastern operations were conducted through the Virginia
Division and a wholly-owned subsidiary, Pine Branch Mining Incorporated ("Pine
Branch") on 60,000 acres of reserves located in Virginia and Kentucky.
Limited production by subcontractors and subleases remains.
The following sections describe the Company's currently owned mining and
production facilities some of which have been idled or closed.
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WESTMORELAND RESOURCES, INC. WRI is 60% owned by the Company. Morrison
Knudsen Corporation owns 24% and Penn Virginia Equities_Corporation owns 16%.
WRI operates one large surface mine on approximately 15,000 acres of
subbituminous coal reserves. WRI shipped 4,426,000 tons, 4,364,000 tons, and
3,224,000 tons of coal in 1995, 1994 and 1993, respectively. Morrison Knudsen
Corporation currently mines WRI's coal reserves on a contract basis. The
Company received cash dividends from WRI of $1,650,000, $1,500,000 and $540,000
in 1995, 1994 and 1993, respectively.
VIRGINIA DIVISION. The Company's Virginia Division consists of eight
underground mines. In 1995, the Company operated five of these mines, all of
which are now idled, and three were operated by independent contractors. The
Company's Virginia Division assets include two preparation plants and one
transloading facility. The Virginia Division shipped 2,007,000 tons,
4,512,000 tons, and 4,878,000 tons of coal in 1995, 1994 and 1993,
respectively, including coal produced by independent contractors, coal
purchased from Pine Branch and coal purchased from third party locations. As
of December 31, 1995, the Virginia Division properties employed 48 people.
The Company idled the Virginia Division 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 through unusual accounting charges.
Included in these charges were the writedown to the estimated net realizable
value of the remaining fixed assets of $18.9 million, the recognition of
postretirement medical costs of $34.3 million, the recognition of a potential
UMWA pension withdrawal liability of $20.0 million, severance and early
retirement costs of $8.6 million, and other costs totaling approximately $5.5
million. In addition, the Company recognized idling costs incurred during the
fourth quarter of 1995 while the property is on standby basis. 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 reverse some of the above referenced charges.
PINE BRANCH MINING INCORPORATED. Pine Branch is a wholly-owned subsidiary of
the Company with surface mining operations on reserves subleased from the
Virginia Division. Pine Branch began operations in 1992 and consists of one
mine. Pine Branch also performs reclamation work for the Virginia Division at
certain sites that were previously abandoned by independent contractors. The
operations of Pine Branch also were suspended during the third quarter of 1995.
As a result,
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certain charges and liabilities were incurred. Included in the charges were
$1,400,000 for the write-off of fixed assets, $121,000 of medical benefits, and
$900,000 for final reclamation obligations.
CRITERION COAL COMPANY. The Company sold the assets of Criterion Coal Company,
a wholly-owned subsidiary, and its affiliated companies, ("Criterion") on
December 22, 1994 to CONSOL of Kentucky, Inc.("CONSOL"). Criterion consisted of
six mines, including two surface mines and four underground mines, and a
preparation plant. All of the mining operations were conducted by independent
contractors on Criterion's properties. Refer to Note 3 to the Consolidated
Financial Statements for additional information regarding the sale of
Criterion.
HAMPTON DIVISION. The Company sold the assets of its Hampton Division in
January 1995 and concurrently sold the related mining lease back to the lessor,
Penn Virginia Resources Corporation. From January 1994 through April 1994, the
Hampton Division operations consisted of two underground mines, a large surface
mine, a central machine shop and a preparation plant. It operated on
approximately 14,000 acres in West Virginia and employed 130 people. Most of
the Hampton Division was closed down in May 1994 due to high production costs
and market conditions, including the termination of an above-market coal sales
contract. Refer to Note 3 to the Consolidated Financial Statements for
additional discussion related to the sale of the Hampton Division.
COAL MARKETING
Historically, Westmoreland Coal Sales Company, Inc. ("WCSC") has sold steam and
metallurgical coal to the domestic and export markets. Prior to 1995, a
significant portion of this coal was supplied by unaffiliated producers. The
majority of the Company's sales have been in the steam market and have suffered
from decreasing prices, declining demand for certain qualities of coal, higher
production costs and limited supply. Activities related to unaffiliated
producers also required that the Company provide a substantial amount of
working capital. During the five year period from 1990 through 1994, the
Company established $4,801,000 in reserves for potentially uncollectible
accounts receivable related to coal sold for unaffiliated producers.
Additionally, in 1992 the Company fully reserved $20,489,000 of loans, a debt
guarantee and other related items on behalf of Adventure Resources, Inc.
("Adventure"), an unaffiliated producer. WCSC was the exclusive sales agent for
Adventure Resources, whose other affiliated companies include M.A.E.
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Services, Inc. and Maben Energy Corporation. As sales agent for Adventure, the
Company purchased all of Adventure's clean coal production at the time it was
produced and carried all inventory and accounts receivable related to the sale
of Adventure's coal production. No coal was supplied from Adventure during
1995. Adventure supplied 1,664,000 tons of the total tons purchased by the
Company from unaffiliated producers in 1994. On December 2, 1992 Adventure,
and certain of its affiliated companies, 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. Pursuant to a
plan, whose terms were discussed and negotiated with Adventure and related
customers, the Company terminated its obligation to buy coal from Adventure and
to provide financial support as of November 8, 1994. Refer to the Adventure
Resources, Inc. section of Note 15 to the Consolidated Financial Statements for
further details related to the establishment of this reserve.
During 1994 the Company withdrew from the export market and severed most of its
relationships with remaining unaffiliated producers. Curtailment of the coal
marketing services provided to unaffiliated producers reduced substantially the
demands on the Company's working capital.
As a result of its asset dispositions, withdrawal from the export market and
reduction in activities related to unaffiliated producers during 1994, the
Company also closed related sales and field offices located in Banner,
Kentucky; Beckley, West Virginia; and Charlotte, North Carolina.
The following tables show, for each of the past five years, tons sold and
revenues derived from Company and unaffiliated production as well as revenues
from domestic and export activities. Included in Company tonnage below are
amounts of produced tonnage purchased from non-Company properties, but
processed through Company-owned facilities.
Coal Sales in Tons (tons in 000's)
Year Total Company Produced Sold for Others
---- ----- ---------------- ---------------
1995 7,063 6,590 473
1994 14,815 12,031 2,784
1993 16,687 11,551 5,136
1992 19,380 11,774 7,606
1991 20,627 11,570 9,057
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Coal Revenues ($'s in 000's)
Year Total Company Produced Sold for Others
---- ----- ---------------- ---------------
1995 111,303 95,181 16,122
1994 370,166 286,970 83,196
1993 465,256 307,468 157,788
1992 536,289 309,243 227,046
1991 567,075 284,399 282,676
Coal Revenues ($'s in 000's)
Year Total Domestic Export
---- ----- -------- ------
1995 111,303 111,303 -
1994 370,166 340,489 29,677
1993 465,256 365,429 99,827
1992 536,289 399,130 137,159
1991 567,075 395,162 171,913
Criterion and the Hampton Division accounted for 26% of the tons sold and 31%
of the coal revenues derived from Company production in 1994. The following
tables show, for each of the past five years, tons sold and revenue derived
from coal produced at Criterion and the Hampton Division.
Coal Sales in Tons (tons in 000's)
Year Total Criterion Hampton
---- ----- --------- -------
1995 - - -
1994 3,073 1,954 1,119
1993 3,414 1,853 1,561
1992 3,531 1,786 1,745
1991 3,143 1,600 1,543
Revenues ($ in 000's)
Year Total Criterion Hampton
---- ----- --------- -------
1995 - - -
1994 89,436 55,800 33,636
1993 105,711 51,837 53,874
1992 104,242 48,940 55,302
1991 93,233 43,449 49,784
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Approximately 60% of the tonnage sold by the Company in 1995 was pursuant to
contracts calling for deliveries over a period longer than one year ("long-term
contracts"). The table below presents total sales tonnage and the amount of
coal tonnage sold under long-term contracts for the last five years:
Total Sales Sales Under Long-
Tonnage (000s) Term Contracts Tons (000s) %
-------------- -----------------------------
1995 7,063 4,206 60%
1994 14,815 11,981 81%
1993 16,687 12,774 77%
1992 19,380 13,867 72%
1991 20,627 13,969 68%
1990 20,279 14,761 73%
The next table presents total sales tonnage the Company expects to ship under
existing long-term contracts for the next five years from the Company's mining
operations (all from WRI):
Projected Sales Tonnage
Under Existing Long-
Term Contracts (000s)
-----------------------
1996 4,400
1997 5,500
1998 5,200
1999 5,200
2000 3,200
In 1995, the three largest customers of the Company accounted for 78% of its
coal revenues. Duke Power Company, Georgia Power Company and Northern States
Power accounted for 52%, 13% and 13%, respectively, of the Company's coal
revenues in 1995. The Duke Power Contract was sold back to the utility during
the third quarter of 1995. The Georgia Power Contract expired during 1995 and
was not renewed. No other customer accounted for as much as 10% of the
Company's 1995 coal revenues.
The majority of the coal produced by WRI is sold under long-term contracts.
The long-term contract with its largest customer, Northern States Power,
expires in 2005 and accounted for 59% of the tons sold by WRI in 1995.
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WRI has also entered into an option agreement with Northern States Power
whereby it has agreed to sell up to an additional 200,000,000 tons of coal
through December 31, 2005. As compensation for granting the option, WRI
receives 1 1/4 cents, payable quarterly (with applicable price adjustments) for
each optioned ton. The option may be exercised at any time in whole or in part
through December 31, 2005. If exercised, the sales price will be based on the
market price at the time the option is exercised. WRI recorded income
totalling $3,014,000, $2,961,000 and $3,202,000 during 1995, 1994 and 1993
respectively, relative to the option agreement. No coal has been delivered
under the option agreement.
WRI's customers accounted for $31,088,000 in coal revenues in 1995 from the
sale of 4,426,000 tons of coal, which represent 28% of the Company's total 1995
coal revenues and 65% of the Company's total tons sold in 1995.
Cleancoal Terminal Company ("Cleancoal") a former wholly-owned subsidiary of
the Company, was a rail-to-barge transloading and storage facility on the Ohio
River in Kentucky between Louisville, Kentucky and Cincinnati, Ohio. The
terminal ceased operations in January 1995 as a result of continuing operating
losses and an agreement to sell Cleancoal's assets to an indirect wholly-owned
subsidiary of the CSX Corporation. The majority of Cleancoal's employees were
laid off on January 31, 1995. The sale transaction was completed during the
third quarter of 1995. The terminal was utilized by the Company to blend and
transport coal from primarily unaffiliated producers in Kentucky for shipments
to midwestern, southern and foreign markets. Cleancoal had an annual
transloading capacity of 6,000,000 tons. Cleancoal transloaded 1,304,000 tons
and 2,511,000 tons in 1994 and 1993, respectively but was unable to generate a
profit. No coal was transloaded during 1995. Refer to Note 3 of the
Consolidated Financial Statements for more details related to the Cleancoal
sale.
Westmoreland Terminal Company, a wholly-owned subsidiary of the Company, owns a
20% interest in Dominion Terminal Associates ("DTA"), the owner of a coal
storage and vessel-loading facility in Newport News, Virginia. Prior to 1995,
the terminal was utilized by the Company for most of its coal exporting and
intracoastal business. DTA's annual throughput capacity is 22,000,000 tons,
and its ground storage capacity is 1,700,000 tons. In 1995, DTA loaded
15,900,000 tons, including 1,461,000 tons for the Company. Presently, the
Company utilizes the terminal to lease ground storage space and
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vessel-loading capacity and facilities to others. Refer to Note 6 of the
Consolidated Financial Statements for further information regarding DTA.
INDEPENDENT POWER OPERATIONS
WEI is engaged in the businesses of owning and managing interests in
independent power projects. WEI, through various subsidiaries, currently has
interests in eight such power projects. The Roanoke Valley II project ("ROVA
II" or "ROVA II Project") became operational during 1995, bringing the number
of projects in commercial service to eight. WEI has a 50% interest in ROVA II
and made an equity funding investment of $4,611,000 in 1995. WEI also provides
repair and maintenance services to utilities and power projects through its
subsidiary Corona Engineering Corporation ("CEC"), located in Atlanta, Georgia.
Refer to Note 5 of the Consolidated Financial Statements for additional
information concerning WEI.
Independent power projects sell electricity through long term power contracts
to either utilities, or in some cases, to large industrial users. There are
three types of independent power projects: cogeneration projects which
sequentially provide two types of useful energy (e.g., electricity and steam)
from a single primary fuel (e.g., coal); small power producers which utilize
waste, biomass or other renewable resources as fuel; and exempt wholesale
generators ("EWG") which provide electrical energy without the requirement to
sell thermal energy or use waste or renewables as fuel sources. The key
elements of an independent power project are a long-term contract for the sale
of electricity, long- term contracts for the fuel supply, a suitable site,
required permits and project financing. Cogeneration projects require another
long-term contract for the sale of the steam or other thermal energy. The
economic benefits of cogeneration can be substantial because, in addition to
generating electricity, a significant portion of the energy is used to produce
steam or high temperature water (thermal energy) for industrial processes.
Electricity is sold to utilities and in certain situations, to end-users of
electrical power, including large industrial facilities. Thermal energy from
the cogeneration plant is sold to commercial enterprises and other
institutions. Large industrial users of thermal energy include plants in the
chemical processing, petroleum refining, food processing, pharmaceutical, pulp
and paper industries.
The demand for power generated by cogeneration and other independent power
plants was originally fostered by the energy crises of the
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1970's, which led to the enactment of legislation that encouraged companies to
enter the cogeneration and independent power generation industry by reducing
regulatory requirements and facilitating the sale of electricity by such
companies to utilities. However, the number of entrepreneurs who entered this
arena along with various market developments has dramatically limited the
number and quality of opportunities in the United States. First, the demand
for electrical power has not reached initial projections resulting in excess
supply and severe downward pressure on generation and prices. Second, public
and regulatory policy has reshifted its focus, now to open, competitive power
markets. Such changes threaten projects which are not cost competitive.
Third, as utilities have consolidated and otherwise positioned themselves to
address these pressures, they have become even more hostile and aggressive
toward independent power operators, other than their own unregulated
subsidiaries. As a result, the Company believes the domestic independent power
market has matured and will offer extremely limited opportunities for the
development of new projects. Most independent power producers are now
primarily focused on the international market place, in such places as China
and India, for development. The very large capital demands, lengthy
development periods, and international risks make such opportunities
unattractive to the Company. As a result, the Company has made a strategic
decision to focus its efforts on maximizing the return on its existing
investments.
On October 31, 1995, WEI, through its newly formed subsidiary,
Westmoreland-Corona, Inc., completed the purchase of The Corona Group Inc.
("Corona"). Corona and its subsidiaries offer technical services and repair
and maintenance services to the power generating industry, including utilities,
cogeneration facilities and independent power producers.
Corona was acquired for $2,771,000 in cash plus the assumption of $2,042,000 in
notes payable and other liabilities, in exchange for 100% of Corona's stock.
The acquisition was accounted for using the purchase method. The transaction
resulted in goodwill of $790,000 which is being amortized straight-line over a
period of fifteen years. The Company's 1995 financial statements include
results of operations from Corona for the period from November 1, 1995 to
December 31, 1995.
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GENERAL
EMPLOYEES AND LABOR RELATIONS
The Company, including subsidiaries, employed 137 people on December 31, 1995
compared with 829 on December 31, 1994. Included in these figures are 21
employees represented by the United Mine Workers of America ("UMWA") at
December 31, 1995, as compared to 576 such employees at December 31, 1994.
The Independent Bituminous Coal Bargaining Alliance ("IBCBA"), an alliance of
four coal companies, including Westmoreland Coal Company, was formed in 1992 to
negotiate a wage agreement with the UMWA. The IBCBA and the UMWA successfully
reached an interim agreement on July 1, 1993. A successor five year agreement
between the Company and the UMWA, which retained the major features of the
interim agreement, became effective as of December 16, 1993 (the "1993
Agreement"). The 1993 Agreement provides for the Company and the UMWA at the
local level to work together to reduce health care costs, maximize the
utilization of the Company's investments, recognize special local operating and
competitive conditions, provide flexibility in work and scheduling, create
incentive programs, recognize employees' skills and performance, involve and
integrate employees and the UMWA in the success of their mines and the Company,
and improve overall labor management relations. Pursuant to the interim
agreement and the 1993 Agreement, the Company implemented a managed care
network in southwest Virginia, where most of its formerly active employees are
located, and in West Virginia, where most of its retired employees are located,
in an effort to control health care costs. Participation in a managed care
network for retired employees covered by the Coal Industry Health Benefit Act
of 1992 is voluntary. The 1993 Agreement provided for a wage increase of $.50
per hour, retroactive to February 1, 1993, the date on which the prior
five-year agreement expired. The 1993 Agreement also provides for additional
wage increases of $.40 per hour on December 16, 1994 and December 16, 1995, and
for additional wage reopeners in 1996 and 1997. The effect of the UMWA
contract in the future should be minimal due to the scaled-down status of the
covered operations.
COMPETITION
The coal industry is highly competitive and the Company competes (principally
on price and quality of coal) with many other coal producers of all sizes. The
Company's production, including the
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production of WRI, accounted for less than 1% of coal production in the United
States in 1995. The nation's largest coal producer accounted for an estimated
9% of coal production in the United States in 1995. Coal production in the
United States reached a record level in 1994. Coal usage by electric utilities
reached record levels in 1994. Coal-fired generation was responsible for nearly
60% of all electricity generated within the United States in 1995.
The Company's steam coal production also competes with other energy sources in
the production of electricity. For example, a significant, but indirect, cause
of lower coal demand in the future in the electric utility sector could be low
natural gas prices which could encourage utilities to meet a substantial
portion of future electricity growth with natural gas-fired capacity additions.
Such a strategy would displace some potential new coal-fired capacity.
WEI is subject to increasing competition with respect to the development of new
cogeneration projects from unregulated affiliates of utility companies,
affiliates of fuel and equipment suppliers and other independent developers.
WEI ranks approximately fortieth in size in the independent power industry with
net ownership of 233 megawatts of generation capacity as compared to its
largest competitor which has net ownership in excess of 5,700 megawatts of
generation capacity.
MINING SAFETY AND HEALTH LEGISLATION
The Company is subject to state and federal legislation prescribing mining
health and safety standards, including the Federal Coal Mine Safety and Health
Act of 1969 and the 1977 Amendments thereto. In addition to authorizing fines
and other penalties for violations, the Act empowers the Mine Safety and Health
Administration to suspend or halt offending operations.
ENERGY REGULATION
WEI's cogeneration operations are subject to the provisions of various laws and
regulations, including the federal Public Utilities Regulatory Policies Act of
1978 ("PURPA"). PURPA provides qualifying cogeneration facility status ("QF")
to operations such as WEI's, which allows those facilities to operate with
certain exemptions from substantial federal and state regulation, including
regulation of the rates at which electricity can be sold.
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The most significant recent change in energy regulation was the passage of the
National Energy Policy Act of 1992 ("EP Act"). Companies can now apply for
Exempt Wholesale Generator ("EWG") status with the Federal Energy Regulatory
Commission ("FERC"). An EWG project can provide electrical energy without the
requirement to sell thermal energy to a user. The EP Act permits an EWG
project to also be a QF project. An EWG that is not a QF project must have its
power rates approved. An EWG project that is a QF project can receive avoided
cost rates that are not subject to approval by FERC. WEI received EWG status
and power rate approval for its ROVA I project in December 1993 as permitted in
its power purchase agreement. In order to provide additional flexibility, in
March 1995 WEI received EWG status for all of its other projects except Ft.
Lupton and Fort Drum. WEI intends to maintain the QF status for all its
current projects except ROVA I where returns can be maximized as an EWG as a
result of reduced operating costs. Refer to the 'Recent Developments Relating
to Independent Power Projects' section of Note 5 to the Consolidated Financial
Statements for further information regarding QF issues and ROVA I's "forced
outage" issue.
PROTECTION OF THE ENVIRONMENT
MINING OPERATIONS. The Company believes its mining operations are
substantially in compliance with applicable federal, state and local
environmental laws and regulations, including those relating to surface mining
and reclamation, and it is the policy of the Company to operate in compliance
with such standards. The Company maintains compliance primarily through
maintenance and monitoring activities. In 1995 the Company accrued
approximately $3,400,000 against operations in order to comply with
environmental regulations applicable to its mining operations. The entire
charge related to idling of the Company's Virginia Division and Pine Branch
operations. The Company estimates its total liabilities for reclamation are
approximately $10,311,000, all of which have been accrued as of December 31,
1995. Actual cash paid to perform reclamation in 1995 amounted to $210,000.
In 1994 the Company charged $1,245,000 to earnings which did not include a
$3,135,000 credit to earnings resulting from a reversal of reclamation accruals
in connection with the sales of inactive properties in West Virginia and the
assets of Criterion in Kentucky. In addition, reclamation fees imposed by the
Federal Surface Mining Control and Reclamation Act of 1977 (the "Surface Mining
Act") amounted to approximately $1,755,000, $2,414,000 and $2,077,000 in 1995,
1994 and 1993, respectively.
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The Company projects that 1996 charges for maintenance and monitoring
activities to meet environmental requirements for operations it continues to
own will be minimal due to the idle status of Eastern operations. The
reduction in overall charges, exclusive of idling costs for environmental
purposes, is largely due to the asset dispositions that took place in 1994 and
early 1995, pursuant to which the buyers assumed reclamation and environmental
liabilities. Future costs could change either to reflect the impact of new
regulations or because presently unforeseeable conditions may be imposed on
future mining permits.
The Surface Mining Act regulations set forth standards, limitations and
requirements for surface mining operations and for the surface effects of
underground mining operations. Under the regulatory scheme contemplated by the
Surface Mining Act, the Federal Office of Surface Mining ("OSM") issued
regulations which set the minimum standards to which State agencies concerned
with the regulation of coal mining must adhere. States that wish to regulate
such coal mining must present their regulatory plans to OSM for approval. Once
a State plan receives final approval, the State agency has primary regulatory
authority over mining within the State, and OSM acts principally in a
supervisory role. State agencies may impose standards more stringent than
those required by OSM. The two states in which the Company currently has
mining operations, active or idle, Virginia and Montana, have submitted
regulatory plans to OSM, and these plans have received final approval. There
would be potential risk to the Company in the event it, or any of its
independent contractors, fails to satisfy the obligations created by the
Surface Mining Act. Independent contractors mining on Company properties,
pursuant to their agreements with the Company, are primarily responsible for
compliance with environmental laws relating to those properties. In the event,
however, that any of its independent contractors fail to satisfy their
obligations under the Surface Mining Act, the Company, depending upon the
circumstances, might have, and has had, to carry out such obligations in order
to avoid having its existing permits revoked or applications for new permits or
permit modifications blocked. Compliance with the Surface Mining Act
regulations has been costly for the Company and the coal mining industry in
general.
In the event final reclamation is not performed in accordance with State and
Federal regulations, the Company has $12,000,000 and $18,000,000 of reclamation
bonds in place in Montana and Virginia, respectively, that assures compliance
with all applicable regulations.
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In 1990, certain amendments were enacted to the Clean Air Act ("1990
Amendments"). As the first major revisions to the Clean Air Act since 1977,
the 1990 Amendments vastly expanded the scope of federal regulations and
enforcement in several significant respects. In particular, the 1990
Amendments require that the United States Environmental Protection Agency issue
new regulations related to ozone non-attainment, air toxics and acid rain.
Phase I of the acid rain provisions required, among other things, that electric
utilities reduce their sulfur dioxide emissions to less than 2.5 lbs per
million Btu by January 1, 1995. Phase II requires an additional reduction in
emissions to less than 1.2 lbs per million Btu by January 1, 2000.
The 1990 Amendments allow utilities the freedom to choose the manner in which
they will effect compliance with the required emission standards, including
switching to lower sulfur coal, scrubbing and using SO2 credit allowances. The
Company currently anticipates little or no impact from the ozone non-attainment
and air toxic provisions of the 1990 Amendments.
INDEPENDENT POWER. The environmental laws and regulations applicable to the
projects in which WEI participates primarily involve the discharge of emissions
into the water and air, but can also include wetlands preservation and noise
regulation. These laws and regulations in many cases require a lengthy and
complex process of obtaining licenses, permits and approvals from federal,
state and local agencies. Meeting the requirements of each jurisdiction with
authority over a project can delay or sometimes prevent the completion of a
proposed project, as well as require extensive modifications to existing
projects. The partnership owners of the projects in which WEI has its
interests have the primary responsibility for obtaining the required permits
and complying with the relevant environmental laws.
The Clean Air Act and the 1990 Amendments contain provisions that regulate the
amount of sulfur dioxide and nitrogen oxides that may be emitted by a project.
Most of the projects in which WEI has investments are fueled by low sulfur coal
and are not expected to be significantly affected by the acid rain provisions
of the 1990 Amendments. New domestic projects will be required to obtain
allowance offsets for SO2 emissions if they do not meet emission standards.
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ITEM 2 - PROPERTIES
As of December 31, 1995, the Company owned or leased coal properties located in
Virginia and Montana. The Company's estimated demonstrated reserves in owned
or leased property on December 31, 1995 in Virginia were 23,179,000 tons and in
Montana were 657,423,000 tons. In Virginia the Company also owned or leased
264,848,000 tons currently classified by the Company as Unassigned Uneconomic.
Unassigned Uneconomic tonnages are legally recoverable with current technology,
but require significant capital expenditures and construction of new mine
openings and are not in the Company's mining plans today, because they cannot
be mined profitably based on current projected economic conditions. Nearly all
of the Company's eastern reserves are leased from others including 268,693,000
tons under lease from Penn Virginia Resources Corporation, a wholly-owned
subsidiary of Penn Virginia Corporation, ("Penn Virginia") which owns an 18.95%
and 18.96% voting interest in the Company at December 31, 1995 and December 31,
1994, respectively. All leases with Penn Virginia run to exhaustion of the
coal reserves. Properties located in Montana are leased by WRI from the Crow
Tribe of Indians and run to exhaustion. The balance of the Company's leases
are for varying terms, including to exhaustion. Certain reserves are owned in
fee. In January 1995, as part of its sale of the Hampton Division, the Company
sold back coal reserve leases in West Virginia (the Hampton Division) of
62,875,000 tons to the lessor, Penn Virginia. These reserves consisted of
8,091,000 tons of demonstrated reserves and the balance were Unassigned
Uneconomic reserves.
The following table shows the Company's estimated demonstrated coal reserve
base and production in 1995. The term "demonstrated coal reserve base" is as
defined in the "Coal Resource Classification System of the U.S. Geological
Survey" (Circular 891). This represents the sum of the measured and indicated
reserve bases and includes assigned and unassigned economic reserves.
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Summary of Demonstrated Coal Reserve Base and Production Tons
as of December 31, 1995
(in thousands)
Total Demonstrated
1995 Unassigned Coal Reserve
Production Sulfur (1) Assigned (2) Economic(3) Base
---------- ---------- ------------ ----------- ------------------
Eastern Operations
Virginia (4)
Steam 3,358 1.05/1.24 17,438 5,741 23,179
Western Operations
Montana
Steam 4,426 .64 657,423 0 657,423
----- ------- ------ -------
Total All Operations 7,784 674,861 5,741 680,602
===== ======= ====== =======
(1) Percent Sulfur applies to the 1995 production tonnages.
(2) Assigned tonnages are legally recoverable through existing facilities
based on current mining plans with current technology and the Company's
infrastructure.
(3) Unassigned Economic tonnages require significant capital expenditures and
construction of new mine openings before mining could begin and are
legally and economically recoverable with current technology and the
Company's infrastructure.
(4) A portion of the reserves in Virginia extend underground into eastern
Kentucky. Those reserves are included with Virginia reserves.
Estimates of reserves in Virginia are based mainly upon yearly evaluations made
by the Company's professional engineers and geologists. The Company
periodically modifies estimates of reserves under lease which may increase or
decrease previously reported amounts. The reserve evaluations are based on new
information developed by bore-hole drilling, examination of outcrops,
acquisitions, dispositions, production, changes in mining methods, abandonments
and other information.
Coal reserves in Montana represent recoverable tonnage held under the terms of
the Crow Tribe Lease, as amended in 1982, and other minor leases. These
reserves were estimated to be 799,803,000 tons as of January 1, 1980 based
principally upon a report by independent consulting geologists, prepared in
February 1980. The reserves consist of two main seams and a stray seam between
the upper and lower main seams. Currently, the upper seam, with estimated
assigned reserves of 244,000,000 tons, is the only seam being mined in response
to a quality modification required by a significant customer. Annually,
estimated remaining recoverable reserves are reduced by production in the upper
main seam and by the amount of reserves in the lower and stray seams bypassed
after mining the upper main seam.
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In addition to the coal reserves mentioned above, as of December 31, 1995 the
Company owns several coal preparation and loading facilities in Virginia. WRI
owns and operates a dragline and coal crushing and loading facilities at its
mine in Montana.
ITEM 3 - LEGAL PROCEEDINGS
BANKRUPTCY PROCEEDINGS
On November 8, 1994, the Company filed a petition under Chapter 11 of the
Federal Bankruptcy Code seeking the confirmation of a so-called "pre-packaged"
Plan of Reorganization. This measure was taken to obtain protection from the
Company's principal lenders pending the closing of the sale of the assets of
Criterion which closing was also facilitated by the filing. The Federal
Bankruptcy Court approved the Company's Plan of Reorganization on December 16,
1994. As approved in the Plan of Reorganization, the Company proceeded to
complete its sale of the assets of Criterion on December 22, 1994 and paid in
full its maturing debt obligations, at which time it emerged from bankruptcy.
Refer to Note 1 to the Consolidated Financial Statements for additional
information concerning the Company's Plan of Reorganization.
WESTMORELAND ENERGY, INC.
WEI owns a 50% partnership interest in Westmoreland-LG&E Partners (the "ROVA
Partnership"). The ROVA Partnership's principal customer contracted to
purchase the electricity generated by ROVA I under a long-term contract. In
the second quarter of 1994, that customer disputed the ROVA Partnership's
interpretation of the provisions of the contract dealing with the payment of
the capacity purchase price when the facility experiences a "forced outage"
day. A forced outage day is a day when ROVA I is not able to generate a
specified level of electrical output. The ROVA Partnership believes that the
customer is required to pay the ROVA Partnership the full capacity purchase
price unless forced outage days exceed a contractually stated annual number.
The customer asserts that it is not required to do so.
Through December 31, 1995, the customer withheld approximately $8,500,000 of
capacity purchase price payments to the ROVA Partnership because of this
dispute. The customer has withheld an additional $203,000 from the ROVA
Partnership through March 4, 1996. On October 31, 1994, the ROVA Partnership
filed a complaint in the Circuit Court of the City of Richmond, Virginia to
recover these amounts and to confirm that such payments may not be withheld in
the
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future. On December 12, 1994 the customer filed a motion to dismiss the
complaint and on March 17, 1995 the Court granted this motion. The ROVA
Partnership filed an amended complaint on April 17, 1995. On April 27, 1995
the customer filed another motion to dismiss the complaint. On August 23, 1995
the Court denied the customer's motion to dismiss and set a trial date of March
25, 1996. The customer filed two motions for summary judgement. The court
denied the customer's first motion for summary judgement on January 30, 1996;
however, on March 18, 1996 the Court granted the customer's second summary
judgement motion and effectively dismissed the complaint. The ROVA Partnership
is evaluating its options, including possible appeal of the Court's decision
granting summary judgement. A reserve was recorded as of December 31, 1994 for
the full amount withheld by the customer. WEI had recognized its 50% share of
the withheld payments in earnings in the second, third and fourth quarters of
1994. In the fourth quarter of 1994, WEI's revenues were reduced by
$2,928,000, representing its 50% share of the disputed amount. No earnings
were recognized by WEI in 1995 for payments withheld by the customer relating
to forced outage days. Regardless of the outcome, the Company believes ROVA I
will continue to operate profitably and generate positive cash flows.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
This item is inapplicable.
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Executive Officers of the Registrant
Below is a table showing the executive officers of the Company, their ages as
of March 1, 1996, positions held and year of election to their present offices.
No family relationships exist among them. All of the officers are elected
annually by the Board of Directors and serve at the pleasure of the Board of
Directors.
Name Age Position(s) Held Since
---- --- ------------------------- ----------
(1) Christopher K. Seglem 49 President and 1992
Chief Executive Officer 1993
(2) Ronald W. Stucki 51 Senior Vice President-
Operations 1992
(3) Theodore E. Worcester 55 Senior Vice President
of Law and Administration, 1995
General Counsel and l992
Corporate Secretary 1996
(4) R. Page Henley, Jr. 60 President Westmoreland
Coal Sales Company 1995
(5) Robert J. Jaeger 47 Senior Vice President of
Finance, Treasurer and
Controller 1996
____________________________
(1) Effective January 1988, Mr. Seglem was elected to the positions of
Vice President, General Counsel, and Secretary for the Company. In
November 1988 he was elected a Senior Vice President of the Company.
In May 1990, he relinquished the position of Secretary. In December
1990, he was elected an Executive Vice President of the Company, at
which time he relinquished the position of General Counsel. In June
1992, he was elected President and Chief Operating Officer, and in
December 1992 he was elected a Director of the Company. In June
1993, he was elected Chief Executive Officer of the Company, at
which time he relinquished the position of Chief Operating Officer.
He is a member of the bar of Pennsylvania.
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(2) Mr. Stucki was General Manager and Vice President of Colorado
Westmoreland Inc. (a former wholly-owned subsidiary of the Company)
until the operation was sold to Cyprus Coal Company ("Cyprus") in
November 1988, where he continued employment and became Vice
President of the Colorado and Wyoming operations. He left Cyprus to
rejoin the Company as Senior Vice President-Operations in July 1992.
Mr. Stucki is a registered professional engineer.
(3) Mr. Worcester was elected Vice President & General Counsel of the
Company in December 1990. In June 1992, he was elected Senior Vice
President while retaining his position of General Counsel of the
Company. In 1995, he was elected Senior Vice President of Law and
Administration and in 1996, Corporate Secretary, in addition to
his General Counsel position. He is a member of the bar of
Colorado.
(4) Mr. Henley was elected Vice President-Development and Government
Affairs in May 1988, which position he held until he was elected
Senior Vice President-Development and Government Affairs in May
1990. In June 1992, he was elected Senior Vice President-
Government Affairs. In 1993, Mr. Henley was also elected Vice
President, General Counsel and Secretary of the Company's WEI
subsidiary, and undertook additional duties, including project
development. In 1994, Mr. Henley was elected Senior Vice
President-Development of the Company, and retained his position as
Vice President of the Company's WEI subsidiary. In 1995 Mr. Henley
was elected president of Westmoreland Coal Sales Co. and
relinquished his position in WEI. He is a member of the bars of
West Virginia and Virginia.
(5) Mr. Jaeger held various financial positions at Penn Virginia
Corporation since 1976 and was Vice President and Chief Financial
Officer when he left in March 1995. He joined Westmoreland Energy,
Inc. in April 1995 as Vice President- Finance. He was elected Vice
President Finance, Treasurer and Controller of the Company in
September 1995. He was elected Senior Vice President-Finance,
Treasurer and Controller in February 1996. Mr. Jaeger is a
certified public accountant.
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PART II
ITEM 5 - MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
Reference is hereby made to the section entitled "Market Information on Capital
Stock" in Exhibit 13.
ITEM 6 - SELECTED FINANCIAL DATA
Reference is hereby made to the section entitled "Five-Year Review" in Exhibit
13.
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Reference is hereby made to the section entitled "Management's Discussion and
Analysis of Financial Condition and Results of Operations" in Exhibit 13.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Reference is hereby made to Financial Statements and related Notes in Exhibit
13.
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
This item is inapplicable.
PART III
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
ITEM 11 - EXECUTIVE COMPENSATION
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
For Items 10-13, inclusive, except for information concerning executive
officers of Westmoreland included as an unnumbered item in Part I above,
reference is hereby made to Westmoreland's definitive proxy statement dated
April 26, 1996, to be filed in accordance with
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Regulation 14A pursuant to Section 14(a) of the Securities Exchange Act of
1934, which is incorporated herein by reference thereto.
PART IV
ITEM 14- EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND REPORTS ON FORM 8-K
a) 1. The financial statements filed herewith are the Consolidated Balance
Sheets of the Company and subsidiaries as of December 31, 1995 and
December 31, 1994, and the related Consolidated Statements of Income,
Shareholders' Equity (Deficit) and Cash Flows for each of the years in
the three-year period ended December 31, 1995 together with the
related Notes and the Summary of Significant Accounting Policies which
are contained in Exhibit 13.
2. The financial statement schedule (Schedule II) - Valuation
account filed herewith is included at the end of is report.
3. The following exhibits are filed herewith as required by Item 601 of
Regulation S-K:
(2) Plan of acquisition, reorganization, arrangement, liquidation
or succession
(a) Westmoreland's Plan of Reorganization was confirmed
by an order of the United States Bankruptcy Court for
the District of Delaware on December 16, 1994, and
upon complying with the conditions of the order,
Westmoreland emerged from bankruptcy on December 22,
1994. A copy of the confirmed Plan of Reorganization
was filed as an Exhibit to Westmoreland's Report on
Form 8-K filed December 30, 1994, which is
incorporated herein by reference thereto.
(3) (a) Articles of incorporation:
Restated Certificate of Incorporation, filed with the
Office of the Secretary of State of Delaware on
February 21, 1995 and filed as Exhibit 3(a) to
Westmoreland's 10-K for 1994 which Exhibit is
incorporated herein by reference.
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(b) Bylaws, as amended on July 26, 1995.
(4) Instruments defining the rights of security holders
(a) Certificate of Designation of Series A Convertible
Exchangeable Preferred Stock of the Company defining
the rights of holders of such stock, filed July 8,
1992 as an amendment to the Company's Certificate of
Incorporation, and filed as Exhibit 3(a) to
Westmoreland's Form 10-K for 1992 and which Exhibit
is incorporated herein by reference.
(b) Form of Indenture between Westmoreland and Fidelity
Bank, National Association, as Trustee relating to
the Exchange Debentures. Reference is hereby made to
Exhibit 4.1 to Form S-2 Registration 33-47872 filed
May 13, 1992, and Amendments 1 through 4 thereto,
which Exhibit is incorporated herein by reference.
(c) Form of Exchange Debenture Reference is hereby made
to Exhibit 4.2 to Form S-2 Registration 33- 47872
filed May 13, 1992, and Amendments 1 through 4
thereto, which Exhibit is incorporated herein by
reference.
(d) Form of Deposit Agreement among Westmoreland, First
Chicago Trust Company of New York, as Depository and
the holders from time to time of the Depository
Receipts. Reference is hereby made to Exhibit 4.3 to
Form S-2 Registration 33-47872 filed May 13, 1992,
and Amendments 1 through 4 thereto, which Exhibit is
incorporated herein by reference.
(e) Form of Certificate of Designation for the Series A
Convertible Exchangeable Preferred Stock. Reference
is hereby made to Exhibit 4.4 to Form S-2
Registration 33-47872 filed May 13, 1992, and
Amendments 1 through 4 thereto, which Exhibit is
incorporated herein by reference.
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(f) Specimen certificate representing the common stock of
Westmoreland, filed as Exhibit 4(c) to Westmoreland's
Registration Statement on Form S-2, Registration No.
33-1950, filed December 4, 1985, is hereby
incorporated by reference.
(g) Specimen certificate representing the Preferred
Stock. Reference is hereby made to Exhibit 4.6 to
Form S-2 Registration 33-47872 filed May 13, 1992,
and Amendments 1 through 4 thereto, which Exhibit is
incorporated herein by reference.
(h) Form of Depository Receipt. Reference is hereby made
to Exhibit 4.7 to Form S-2 Registration 33-47872
filed May 13, 1992, and Amendments 1 through 4
thereto, which Exhibit is incorporated herein by
reference.
(I) In accordance with paragraph (b)(4)(iii) of Item 601
of Regulation S-K, Westmoreland hereby agrees to
furnish to the Commission, upon request, copies of
all other long-term debt instruments.
(10) Material Contracts
(a) On January 5, 1982, the Board of Directors of
Westmoreland adopted a Management by Objectives Plan
("MBO Plan") for senior management. A description of
this MBO Plan is set forth on page 9 of
Westmoreland's definitive proxy statement dated March
31, 1982, which description is incorporated herein by
reference thereto.
(b) Westmoreland Coal Company 1982 Incentive Stock Option
and Stock Appreciation Rights Plan-- Reference is
hereby made to Exhibit 10(b) to Westmoreland's Annual
Report on Form 10-K for 1981 (SEC File #0-752), which
Exhibit 10(b) is incorporated herein by reference
thereto.
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(c) Westmoreland Coal Company 1985 Incentive Stock Option
and Stock Appreciation Rights Plan-- Reference is
hereby made to Exhibits 10(d) to Westmoreland's
Annual Report on Form 10-K for 1984 (SEC File
#0-752), which Exhibit 10(d) is incorporated herein
by reference thereto.
(d) In 1990, the Board of Directors established an
Executive Severance Policy for certain executive
officers, which provides a severance award in the
event of termination of employment. Reference is
hereby made to Exhibit 10(h) to Westmoreland's Annual
Report on Form 10-K for 1990 (SEC File #0-752), which
Exhibit 10(h) is incorporated herein by reference
thereto.
(e) Westmoreland Coal Company 1991 Non-Qualified Stock
Option Plan for Non-Employee Directors - Reference is
hereby made to Exhibit 10(i) to Westmoreland's Annual
Report on Form 10-K for 1990 (SEC File #0-752), which
Exhibit 10(i) is incorporated herein by reference
thereto.
(f) Effective January 1, 1992, the Board of Directors
established a Supplemental Executive Retirement Plan
("SERP") for certain executive officers and other key
individuals, to supplement Westmoreland's Retirement
Plan by not being limited to certain Internal Revenue
Code limitations. A description of this SERP is set
forth on page 11 of Westmoreland's definitive proxy
statement dated June 9, 1992, which description is
incorporated herein by reference thereto.
(g) Amended Coal Mining Agreement between Westmoreland
Resources, Inc. and Crow Tribe of Indians, dated
November 26, 1974, as further amended in 1982, filed
as Exhibit (10)(a) to Westmoreland's Quarterly Report
on Form 10-Q for the quarter ended March 31, 1992, is
incorporated by reference thereto.
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(h) Amendment and Restatement of Virginia Lease between
Penn Virginia Resources Corporation and Westmoreland,
effective as of July 1, 1988, as further amended May
6, 1992, filed as Exhibit 10(b) to Westmoreland's
Quarterly Report on Form 10-Q for the quarter ended
March 31, 1992, is incorporated by reference thereto.
(i) Acquisition Agreement, dated May 6, 1992 by and among
Westmoreland, Penn Virginia Resources Corporation and
Penn Virginia Equities Corporation, including as
Exhibit A thereto, a form of agreement to be executed
by the parties on the Closing Date described therein,
filed as Exhibit 10(d) to Westmoreland's Quarterly
Report on Form 10-Q for the quarter ended March 31,
1992, is incorporated by reference thereto.
(j) Agreement dated July 9, 1992 by and among
Westmoreland, Penn Virginia Resources Corporation and
Penn Virginia Equities Corporation, with respect to
(i) registration rights granted to Penn Virginia,
(ii) the number of directors which Penn Virginia for
a period of two years may designate to be elected to
Westmoreland's Board of Directors and (iii) other
conditions, as set forth therein, which is discussed
in Item 13 of Westmoreland's Form 10-K for 1992.
(k) Agreement dated October 9, 1992 by and among
Westmoreland, Penn Virginia Resources Corporation and
Penn Virginia Equities Corporation amending and
modifying prior agreements by and among the parties
as set forth therein, which is discussed in Item 13
of Westmoreland's Form 10-K for 1992 which is
incorporated herein by reference.
(l) Effective February 1, 1995, the Board of Directors
established a Long-Term Incentive Stock Plan for
officers and other salaried employees of Westmoreland
and its subsidiaries, subject to shareholder
approval. A description of this Plan is set forth in
Westmoreland's definitive proxy to be dated on or
before April 28, 1995, which
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description is incorporated herein by reference
thereto.
(m) On July 28, 1994, the Company reached a definitive
agreement to sell the assets of its wholly- owned
subsidiary, Criterion Coal Company and its affiliates
to CONSOL of Kentucky, Inc. The sale was consummated
on December 22, 1994, upon complying with the order
of the Bankruptcy Court for the District of Delaware,
on which date the Company emerged from bankruptcy. A
copy of the agreement of sale, and pertinent
amendments and supplements thereto in item 10 of
Westmoreland's 1994 Form 10-K which is incorporated
herein by reference.
(n) Agreement dated June 29, 1995 by an among
Westmoreland and Penn Virginia Equities with respect
to amending the Termination date of the July 9, 1992
agreement among the same parties regarding
registration rights.
(13) Westmoreland Coal Company's 1995 Annual Report to
Shareholders: Management's Discussion and Analysis
of Financial Condition and Results of Operations,
Five-Year Review, Consolidated Financial Statements,
the Notes to the Consolidated Financial Statements
and Market Information on Capital Stock.
(21) Subsidiaries of the Registrant
(23) Consent of Independent Certified Public Accountants
(27) Financial data Schedule
(99) WEI Project Chart
b) Reports on Form 8-K.
(1) On December 15, 1995 the Company filed a Report on Form 8-K.
The report contained a Letter to Shareholders dated December
1, 1995 and a press release dated November 14, 1995.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and
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
March 27, 1996 By /s/ Robert J. Jaeger
---------------------------------
Robert J. Jaeger
Senior Vice President of
Finance, Treasurer and Controller
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature Title Date
- ----------------------- ------------------- ----
Principal Executive Officer: President, Chief Executive
/s/ Christopher K. Seglem Officer and Director April 9,1996
- ------------------------------
Christopher K. Seglem
Directors:
/s/ Pemberton Hutchinson Chairman of the Board March 27, 1996
- ------------------------------
Pemberton Hutchinson
/s/ E. B. Leisenring, Jr. Director March 27, 1996
- ------------------------------
E. B. Leisenring, Jr.
/s/ William R. Klaus Director March 27, 1996
- ------------------------------
William R. Klaus
/s/ Brenton S. Halsey Director March 27, 1996
- ------------------------------
Brenton S. Halsey
/s/ Edwin E. Tuttle Director March 27, 1996
- ------------------------------
Edwin E. Tuttle
/s/ Lennox K. Black Director March 27, 1996
- ------------------------------
Lennox K. Black
/s/ Thomas W. Ostrander Director March 27, 1996
- ------------------------------
Thomas W. Ostrander
/s/ James W. Sight Director March 27 , 1996
- ------------------------------
James W. Sight
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INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Westmoreland Coal Company:
Under date of March 25, 1996, we reported on the consolidated balance sheets of
Westmoreland Coal Company and subsidiaries as of December 31, 1995 and 1994,
and the related statements of operations, shareholders' equity (deficit), and
cash flows for each of the years in the three-year period ended December 31,
1995, as contained in the annual report on Form 10-K for the year 1995. In
connection with our audits of the aforementioned consolidated financial
statements, we also have audited the related consolidated financial statement
schedule II. This consolidated financial statement schedule is the
responsibility of the Company's management. Our responsibility is to express
an opinion on this financial statement schedule based on our audits.
In our opinion, such financial statement schedule, when considered in relation
to the basic consolidated financial statements taken as a whole, presents
fairly, in all material respects, the information set forth therein.
KPMG Peat Marwick LLP
Denver, Colorado
March 25, 1996
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Schedule II
WESTMORELAND COAL COMPANY AND SUBSIDIARIES
Valuation Account
Years ended December 31, 1995, 1994 and 1993
(in thousands)
Additions
Balance at (deductions) Other Balance
beginning charged (credited) additions at end
of year to earnings (deductions) of year
------------ ----------------- ------------ -------
Year ended December 31, 1995:
Allowance for doubtful accounts $20,371 (980) (9,078) 10,313 (A)
======= ==== ====== ======
Year ended December 31, 1994:
Allowance for doubtful accounts $28,530 (2,738) (5,421) 20,371 (A)
======= ==== ====== ======
Year ended December 31, 1993:
Allowance for doubtful accounts $31,813 (257) (3,026) 28,530 (A)
======= ==== ====== ======
Amounts above include current and non-current valuation accounts.
(A) Includes reserves of $7,798,000, $17,054,000 and $22,234,000 as of
December 31, 1995, 1994 and 1993, respectively, netted against Other Assets in
the Company's Consolidated Balance Sheets.
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INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- ----------- -----------
3.(3)(b) Bylaws, as amended on July 26, 1995.
10.(n) Agreement dated June 29, 1995 by an among
Westmoreland and Penn Virginia Equities with respect
to amending the Termination date of the July 9, 1992
agreement among the same parties regarding
registration rights.
13 Westmoreland Coal Company's 1995 Annual Report to
Shareholders: Management's Discussion and Analysis
of Financial Condition and Results of Operations,
Five-Year Review, Consolidated Financial Statements,
the Notes to the Consolidated Financial Statements
and Market Information on Capital Stock.
21 Subsidiaries of the Registrant
23 Consent of Independent Certified Public Accountants
27 Financial data Schedule
99 WEI Project Chart