WESTMORELAND COAL Co - FORM 10-Q

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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

__________________________________________

FORM 10-Q

__________________________________________

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2016

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File No. 001-11155

___________________________________________

(Exact name of registrant as specified in its charter)

__________________________________________



Delaware	23-1128670
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

9540 South Maroon Circle, Suite 200 Englewood, CO	80112
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (855) 922-6463

__________________________________________

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer	o		Accelerated filer	x
Non-accelerated filer	o	(Do not check if a smaller reporting company.)	Smaller reporting company	o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o No x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of October 28, 2016: 18,570,642 shares of common stock, $0.01 par value.

Table of Contents

TABLE OF CONTENTS



		PAGE
PART I - FINANCIAL INFORMATION		3
Item 1	Consolidated Financial Statements (Unaudited)	3
	Notes to Consolidated Financial Statements	9
Item 2	Management's Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3	Quantitative and Qualitative Disclosures About Market Risk	33
Item 4	Controls and Procedures	33
PART II - OTHER INFORMATION		34
Item 1	Legal Proceedings	34
Item 1A	Risk Factors	34
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	34
Item 4	Mine Safety Disclosures	35
Item 6	Exhibits	35
SIGNATURES		36
SCHEDULE 1		37
EXHIBIT INDEX		44

Table of Contents

PART I - FINANCIAL INFORMATION

ITEM 1

FINANCIAL STATEMENTS

WESTMORELAND COAL COMPANY AND SUBSIDIARIES

Consolidated Balance Sheets

(Unaudited)



	September 30, 2016		December 31, 2015
	(In thousands)
Assets
Current assets:
Cash and cash equivalents	$	28,914	$	22,936
Receivables:
Trade	140,063		134,141
Loan and lease receivables	5,394		6,157
Contractual third-party reclamation receivables	12,985		8,020
Other	20,018		11,598
	178,460		159,916
Inventories	128,685		121,858
Other current assets	24,711		16,103
Total current assets	360,770		320,813
Property, plant and equipment:
Land and mineral rights	600,160		476,447
Plant and equipment	879,718		790,677
	1,479,878		1,267,124
Less accumulated depreciation, depletion and amortization	642,791		554,008
Net property, plant and equipment	837,087		713,116
Loan and lease receivables, less current portion	49,389		49,313
Advanced coal royalties	17,470		19,781
Reclamation deposits	74,043		77,364
Restricted investments and bond collateral	144,454		140,807
Contractual third-party reclamation receivables, less current portion	155,249		86,915
Investment in joint venture	27,815		27,374
Intangible assets, net of accumulated amortization of $4.0 million and $15.9 million at September 30, 2016 and December 31, 2015, respectively	27,492		29,190
Other assets	25,883		11,904
Total Assets	$	1,719,652	$	1,476,577

See accompanying Notes to Consolidated Financial Statements.

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WESTMORELAND COAL COMPANY AND SUBSIDIARIES

Consolidated Balance Sheets (Continued)

(Unaudited)



	September 30, 2016			December 31, 2015
	(In thousands)
Liabilities and Shareholders’ Deficit
Current liabilities:
Current installments of long-term debt	$	90,736		$	38,852
Revolving lines of credit	—			1,970
Accounts payable and accrued expenses:
Trade and other accrued liabilities	121,266			109,850
Interest payable	13,611			15,527
Production taxes	55,589			46,895
Postretirement medical benefits	13,855			13,855
SERP	368			368
Deferred revenue	23,203			10,715
Asset retirement obligations	51,088			43,950
Other current liabilities	34,578			30,688
Total current liabilities	404,294			312,670
Long-term debt, less current installments	1,035,013			979,073
Workers’ compensation, less current portion	4,908			5,068
Excess of black lung benefit obligation over trust assets	17,865			17,220
Postretirement medical benefits, less current portion	286,952			285,518
Pension and SERP obligations, less current portion	42,790			44,808
Deferred revenue, less current portion	18,740			24,613
Asset retirement obligations, less current portion	450,869			375,813
Intangible liabilities, net of accumulated amortization of $10.6 million and $9.8 million at September 30, 2016 and December 31, 2015, respectively	2,669			3,470
Other liabilities	36,760			30,208
Total liabilities	2,300,860			2,078,461
Shareholders’ deficit:
Common stock of $0.01 par value
Authorized 30,000,000 shares; issued and outstanding 18,570,642 shares at September 30, 2016 and 18,162,148 shares at December 31, 2015	186			182
Other paid-in capital	246,450			240,721
Accumulated other comprehensive loss	(150,726		)	(171,300		)
Accumulated deficit	(675,523		)	(672,219		)
Total Westmoreland Coal Company shareholders’ deficit	(579,613		)	(602,616		)
Noncontrolling interest	(1,595		)	732
Total deficit	(581,208		)	(601,884		)
Total Liabilities and Deficit	$	1,719,652		$	1,476,577

See accompanying Notes to Consolidated Financial Statements.

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WESTMORELAND COAL COMPANY AND SUBSIDIARIES

Consolidated Statements of Operations

(Unaudited)



	Three Months Ended September 30,						Nine Months Ended September 30,
	2016			2015			2016			2015
	(In thousands, except per share data)
Revenues	$	370,683		$	349,796		$	1,081,651		$	1,070,240
Cost, expenses and other:
Cost of sales	278,765			292,973			842,680			880,162
Depreciation, depletion and amortization	33,112			34,459			101,788			106,781
Selling and administrative	30,518			29,383			94,209			84,611
Heritage health benefit expenses	3,265			2,801			9,502			8,022
Loss (gain) on sale/disposal of assets	548			1,135			(1,369		)	2,148
Restructuring charges	—			—			—			656
Derivative loss	5,442			5,815			2,164			6,717
Income from equity affiliates	(1,547		)	(463		)	(4,127		)	(4,141		)
Other operating loss (gain)	3,368			(1,000		)	5,065			(1,000		)
	353,471			365,103			1,049,912			1,083,956
Operating income (loss)	17,212			(15,307		)	31,739			(13,716		)
Other income (expense):
Interest expense	(29,494		)	(26,831		)	(90,673		)	(76,870		)
Loss on extinguishment of debt	—			(5,385		)	—			(5,385		)
Interest income	1,374			1,555			5,521			6,262
Gain (loss) on foreign exchange	220			1,679			(1,531		)	2,474
Other income	303			356			435			1,082
	(27,597		)	(28,626		)	(86,248		)	(72,437		)
Loss before income taxes	(10,385		)	(43,933		)	(54,509		)	(86,153		)
Income tax expense (benefit)	(1,625		)	4,087			(49,660		)	13,596
Net loss	(8,760		)	(48,020		)	(4,849		)	(99,749		)
Less net income (loss) attributable to noncontrolling interest	(239		)	(1,458		)	(1,545		)	(4,850		)
Net loss applicable to common shareholders	$	(8,521	)	$	(46,562	)	$	(3,304	)	$	(94,899	)
Net loss per share applicable to common shareholders:
Basic and diluted	$	(0.46	)	$	(2.59	)	$	(0.18	)	$	(5.32	)
Weighted average number of common shares outstanding:
Basic and diluted	18,570			17,986			18,458			17,846

See accompanying Notes to Consolidated Financial Statements.

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WESTMORELAND COAL COMPANY AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income (Loss)

(Unaudited)



	Three Months Ended September 30,						Nine Months Ended September 30,
	2016			2015			2016			2015
	(In thousands)
Net loss	$	(8,760	)	$	(48,020	)	$	(4,849	)	$	(99,749	)
Other comprehensive income (loss)
Pension and other postretirement plans:
Amortization of accumulated actuarial gains or losses, pension	1,294			996			3,884			3,263
Adjustments to accumulated actuarial losses and transition obligations, pension	813			(253		)	786			(538		)
Amortization of accumulated actuarial gains or losses, transition obligations, and prior service costs, postretirement medical benefit	368			327			891			981
Adjustments of accumulated actuarial losses and transition obligations, postretirement medical benefit	—			—			984			—
Tax effect of other comprehensive income gains and losses	(1,039		)	(558		)	(2,410		)	(908		)
Change in foreign currency translation adjustment	(2,438		)	(20,802		)	16,184			(43,018		)
Unrealized and realized gains and losses on available-for-sale securities	535			165			255			(1,295		)
Other comprehensive income (loss), net of income taxes	(467		)	(20,125		)	20,574			(41,515		)
Comprehensive income (loss)	(9,227		)	(68,145		)	15,725			(141,264		)
Less: Comprehensive income (loss) attributable to noncontrolling interest	(240		)	(1,458		)	(1,532		)	(4,850		)
Comprehensive income (loss) attributable to common shareholders	$	(8,987	)	$	(66,687	)	$	17,257		$	(136,414	)

See accompanying Notes to Consolidated Financial Statements.

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WESTMORELAND COAL COMPANY AND SUBSIDIARIES

Consolidated Statements of Deficit

Nine Months Ended September 30, 2016

(Unaudited)



	Common Stock			Other Paid-In Capital			Accumulated Other Comprehensive Loss			Accumulated Deficit			Non-controlling Interest			Total Deficit
	Shares	Amount		Other Paid-In Capital			Accumulated Other Comprehensive Loss			Accumulated Deficit			Non-controlling Interest			Total Deficit
	(In thousands, except shares data)
Balance at December 31, 2015	18,162,148	$	182	$	240,721		$	(171,300	)	$	(672,219	)	$	732		$	(601,884	)
WMLP distributions	—	—		—			—			—			(795		)	(795		)
Common stock issued as compensation	342,353	3		5,922			—			—			—			5,925
Issuance of restricted stock	66,141	1		(193		)	—			—			—			(192		)
Net loss	—	—		—			—			(3,304		)	(1,545		)	(4,849		)
Other comprehensive income	—	—		—			20,574			—			13			20,587
Balance at September 30, 2016	18,570,642	$	186	$	246,450		$	(150,726	)	$	(675,523	)	$	(1,595	)	$	(581,208	)

See accompanying Notes to Consolidated Financial Statements.

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WESTMORELAND COAL COMPANY AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(Unaudited)



	Nine Months Ended September 30,
	2016			2015
	(In thousands)
Cash flows from operating activities:
Net loss	$	(4,849	)	$	(99,749	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation, depletion and amortization	101,788			106,781
Accretion of asset retirement obligation and receivable	21,534			21,251
Share-based compensation	5,925			5,588
Non-cash interest expense	6,879			4,617
Amortization of deferred financing costs	8,324			7,849
Loss on derivative instruments	2,164			6,717
Loss (gain) on foreign exchange	1,531			(2,474		)
Income from equity affiliates	(4,127		)	(4,141		)
Distributions from equity affiliates	5,177			4,328
Deferred income tax expense (benefit)	(48,490		)	14,887
Other	(4,359		)	3,968
Changes in operating assets and liabilities:
Receivables	(238		)	(14,327		)
Inventories	9,460			494
Accounts payable and accrued expenses	(2,327		)	(2,572		)
Interest payable	(3,720		)	7,398
Deferred revenue	4,314			(8,297		)
Other assets and liabilities	7,375			(21,528		)
Asset retirement obligations	(22,120		)	(9,908		)
Net cash provided by operating activities	84,241			20,882
Cash flows from investing activities:
Additions to property, plant and equipment	(30,619		)	(57,971		)
Change in restricted investments	270			(7,988		)
Cash received from restricted deposits	—			34,000
Cash payments related to acquisitions and other	(125,315		)	(35,887		)
Cash acquired related to acquisition, net	—			2,780
Proceeds from sales of assets	6,176			1,691
Receipts from loan and lease receivables	4,852			20,192
Payments related to loan and lease receivables	(2,141		)	(3,981		)
Other	(587		)	(287		)
Net cash used in investing activities	(147,364		)	(47,451		)
Cash flows from financing activities:
Borrowings from long-term debt, net of debt discount	122,250			199,363
Repayments of long-term debt	(43,876		)	(138,185		)
Borrowings on revolving lines of credit	313,900			142,823
Repayments on revolving lines of credit	(315,900		)	(152,412		)
Debt issuance costs and other refinancing costs	(7,246		)	(7,431		)
Other	(798		)	90
Net cash provided by financing activities	68,330			44,248
Effect of exchange rate changes on cash	771			(2,601		)
Net increase in cash and cash equivalents	5,978			15,078
Cash and cash equivalents, beginning of period	22,936			14,258
Cash and cash equivalents, end of period	$	28,914		$	29,336
Supplemental disclosures of cash flow information:
Cash paid for interest	$	79,099		$	61,399
Non-cash transactions:
Accrued purchases of property and equipment	$	4,166		$	2,718
Capital leases and other financing sources	19,830			14,967

See accompanying Notes to Consolidated Financial Statements.

Table of Contents

WESTMORELAND COAL COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1. BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements include accounts of Westmoreland Coal Company, or the Company, or Parent, and its subsidiaries and controlled entities including those of Westmoreland Resource Partners, LP (“WMLP”). All intercompany transactions and accounts have been eliminated in consolidation. The consolidated financial statements of the Company have been prepared in accordance with United States generally accepted accounting principles (“GAAP”) and require the use of management’s estimates. The financial information contained in this Quarterly Report on Form 10-Q is unaudited, but reflects all adjustments which in the opinion of management are necessary for a fair presentation of the financial information for the periods shown. Such adjustments are of a normal recurring nature. Certain prior period amounts have been reclassified to conform to current period presentation. The results of operations for the nine months ended September 30, 2016 are not necessarily indicative of results to be expected for the year ending December 31, 2016.

These unaudited quarterly consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015 (“2015 Form 10-K”).

Recently Adopted Accounting Pronouncements

In August 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-15 - Statement of Cash Flows (Accounting Standards Codification, or “ASC,” Topic 230): Classification of Certain Cash Receipts and Cash Payments, which requires an entity to elect either the cumulative earnings approach or the nature of the distribution approach when determining the classification of cash inflows from equity method investments on the statement of cash flows. For our Activated Carbon 50/50 joint venture accounted for under the equity method of accounting, we have elected to use the nature of the distribution approach. Under this approach, distributions are reported under operating cash flow unless the facts and circumstances of a specific distribution clearly indicate that it is a return of capital (e.g., a liquidating dividend or distribution of the proceeds from the joint venture’s sale of assets) in which case it is reported as an investing activity. The Company adopted this standard on September 30, 2016.

In April 2015, the FASB issued ASU 2015-03, Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs, which requires that debt issuance costs related to a recognized liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The Company adopted this standard on January 1, 2016 and retrospectively applied the guidance to prior periods.

Recently Issued Accounting Pronouncements

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, issued as a new Topic, ASC Topic 606. The new revenue recognition standard provides a five-step analysis of transactions to determine when and how revenue is recognized. The core principle of the guidance is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2015-14, issued in August 2015, deferred the effective date of ASU 2014-09 to fiscal years beginning after December 15, 2017. The Company can either adopt these standards retrospectively or as a cumulative-effect adjustment as of the date of adoption. The Company is currently evaluating the effect that adopting this new accounting guidance will have on its consolidated results of operations, cash flows and financial position.

In February 2016, the FASB issued ASU 2016-02, Leases (“ASU 2016-02”). The amendments in ASU 2016-02 require companies that lease assets to recognize on their balance sheets the assets and liabilities for the rights and obligations generated by contracts longer than one year. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018 with early adoption permitted. The guidance is required to be applied by the modified retrospective transition approach. The Company is currently evaluating the effect that adopting this new accounting guidance will have on its consolidated results of operations, cash flows and financial position.

2. ACQUISITION

Acquisition of San Juan

On January 31, 2016, Westmoreland San Juan, LLC (“WSJ”), a variable interest entity of the Company, acquired San Juan Coal Company (“SJCC”), which operates the San Juan mine in Farmington, New Mexico, and San Juan Transportation Company (“SJTC” and such transaction, the “San Juan Acquisition”) for a total cash purchase price of approximately $125.3

Table of Contents

WESTMORELAND COAL COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONT.)

million, subject to post-closing adjustments. The San Juan mine is the exclusive supplier of coal to the adjacent San Juan Generating Station (“SJGS”) under a coal supply agreement through 2022. The San Juan operations are included in the Company’s Coal - U.S. segment.

WSJ financed the San Juan Acquisition principally with a $125.0 million loan from NM Capital Utility Corporation (the “San Juan Loan”), an affiliate of Public Service Company of New Mexico (one of the owners of SJGS).

The San Juan Acquisition has been accounted for under the acquisition method of accounting that requires the total purchase consideration to be allocated to the assets acquired and liabilities assumed based on estimates of fair value.

The allocation of the purchase price is preliminary pending the completion of various estimates. During the measurement period (which is not to exceed one year from the acquisition date), additional assets or liabilities may be recognized if new information is obtained about facts and circumstances that existed as of the acquisition date that, if known, would have resulted in the recognition of those assets or liabilities as of that date. The preliminary allocation may be adjusted after obtaining additional information regarding, among other things, asset valuations, liabilities assumed and revisions of previous estimates, and these adjustments may be significant. Certain estimates in the San Juan purchase price allocation are classified as Level 3 fair value estimates.

A preliminary allocation of the purchase consideration follows (in millions):



	Provisional as of September 30, 2016
Purchase price:
Cash paid	$	125.3

Preliminary allocation of purchase price:
Assets:
Inventories - coal and supplies	$	8.8
Other receivables	10.0
Contractual third-party reclamation receivable	4.6
Total current assets	23.4
Land and mineral rights	108.3
Plant and equipment	73.5
Contractual third-party reclamation receivable	66.8
Other assets	10.4
Total assets	282.4
Liabilities:
Trade payables and other accrued liabilities	14.1
Production taxes	2.0
Other liabilities	9.9
Asset retirement obligations	4.6
Total current liabilities	30.6
Asset retirement obligations, less current portion	66.8
Postretirement medical	1.9
Deferred income taxes	48.5
Other liabilities	9.3
Total liabilities	157.1
Net fair value	$	125.3

Pro Forma Information

The following pro forma information has been prepared for illustrative purposes only and assumes the San Juan Acquisition occurred on January 1, 2015. The unaudited pro forma results have been prepared based on estimates and

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WESTMORELAND COAL COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONT.)

assumptions, which the Company believes are reasonable, however, they are not necessarily indicative of the consolidated results of operations had the acquisitions occurred on the dates indicated above, or of future results of operations.



	Three Months Ended September 30,			Nine Months Ended September 30,
	2015			2016			2015
	(In thousands, except per share data)
Total revenues
As reported	$	349,796		$	1,081,651		$	1,070,240
Pro forma	$	423,350		$	1,107,926		$	1,296,561

Operating income (loss)
As reported	$	(15,307	)	$	31,739		$	(13,716	)
Pro forma	$	(5,179	)	$	32,834		$	17,784

Net loss applicable to common shareholders
As reported	$	(46,562	)	$	(3,304	)	$	(94,899	)
Pro forma	$	(39,429	)	$	(2,879	)	$	(73,542	)

Net loss per share applicable to common shareholders (basic and diluted)
As reported	$	(2.59	)	$	(0.18	)	$	(5.32	)
Pro forma	$	(2.19	)	$	(0.16	)	$	(4.12	)

3. VARIABLE INTEREST ENTITY

As of September 30, 2016, the Company consolidated its 100% owned WSJ subsidiary which is a variable interest entity (“VIE”). WSJ’s classification as a VIE is due to another party having the potential right to receive WSJ’s residual returns. The Company is the primary beneficiary because it has the power to direct the activities that most significantly impact WSJ’s economic performance. Accordingly, the Company consolidated the operating results, assets and liabilities of WSJ. See Note 2 - Acquisition and Note 6 - Debt and Lines of Credit.

The following table presents the carrying amounts, after eliminating the effect of intercompany transactions, included in the Consolidated Balance Sheet that are for the use of or are the obligation of WSJ (in thousands):



	September 30, 2016
Assets	$	311,287
Liabilities	287,485
Net carrying amount	$	23,802

4. INVENTORIES

Inventories consisted of the following:



	September 30, 2016			December 31, 2015
	(In thousands)
Coal stockpiles	$	42,439		$	38,636
Coal fuel inventories	7,103			7,194
Materials and supplies	81,998			78,784
Reserve for obsolete inventory	(2,855		)	(2,756		)
Total	$	128,685		$	121,858

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WESTMORELAND COAL COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONT.)

5. RESTRICTED INVESTMENTS AND BOND COLLATERAL

The Company invests certain bond collateral, reclamation deposits, and other restricted investments in a limited selection of fixed-income investment options and receives the corresponding investment returns. These investments are not available to meet the Company’s general cash needs. These accounts include available-for-sale securities. Available-for-sale securities are reported at fair value with unrealized gains and losses excluded from earnings and reported in Accumulated other comprehensive loss.

The Company’s carrying value and estimated fair value of its restricted investments at September 30, 2016 were as follows:



	Restricted Investments and Bond Collateral		Reclamation Deposits		Total Restricted Investments
	(In thousands)
Cash and cash equivalents	$	64,307	$	2,309	$	66,616
Time deposits	2,470		—		2,470
Available-for-sale	77,677		71,734		149,411
	$	144,454	$	74,043	$	218,497

The Company’s carrying value and estimated fair value of its restricted investments at December 31, 2015 were as follows:



	Restricted Investments and Bond Collateral		Reclamation Deposits		Total Restricted Investments
	(In thousands)
Cash and cash equivalents	$	102,539	$	45,819	$	148,358
Time deposits	2,455		—		2,455
Available-for-sale	35,813		31,545		67,358
	$	140,807	$	77,364	$	218,171

Available-for-Sale Restricted Investments

The cost basis, gross unrealized holding gains and losses, and fair value of available-for-sale securities at September 30, 2016 were as follows:



	Restricted Investments and Bond Collateral			Reclamation Deposits			Total Restricted Investments
	(In thousands)
Cost basis	$	78,410		$	72,068		$	150,478
Gross unrealized holding gains	273			551			824
Gross unrealized holding losses	(1,006		)	(885		)	(1,891		)
Fair value	$	77,677		$	71,734		$	149,411

The cost basis, gross unrealized holding gains and losses, and fair value of available-for-sale securities at December 31, 2015 were as follows:



	Restricted Investments and Bond Collateral			Reclamation Deposits			Total Restricted Investments
	(In thousands)
Cost basis	$	36,715		$	31,977		$	68,692
Gross unrealized holding gains	167			521			688
Gross unrealized holding losses	(1,069		)	(953		)	(2,022		)
Fair value	$	35,813		$	31,545		$	67,358

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WESTMORELAND COAL COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONT.)

6. DEBT AND LINES OF CREDIT

The Company and its subsidiaries are subject to the following debt arrangements:



	Total Debt Outstanding
	September 30, 2016			December 31, 2015
	(In thousands)
8.75% Notes	$	350,000		$	350,000
WCC Term Loan Facility	324,705			327,172
San Juan Loan	110,000			—
WMLP Term Loan Facility	304,757			299,248
Capital lease obligations	61,579			71,168
Revolving Credit Facility	—			1,970
Other	14,930			7,251
Total debt	1,165,971			1,056,809
Less debt discount and debt issuance costs	(40,222		)	(36,914		)
Less current installments	(90,736		)	(40,822		)
Total debt outstanding, less current installments	$	1,035,013		$	979,073

The following table presents aggregate contractual debt maturities of all debt:



	September 30, 2016
	(In thousands)
2016	$	29,880
2017	81,178
2018	321,636
2019	19,090
2020	340,332
Thereafter	373,855
Total debt	$	1,165,971

8.75% Notes

The 8.75% senior secured notes mature on January 1, 2022 (“8.75% Notes”) and pay interest semiannually on January 1 and July 1 of each year at a fixed 8.75% interest rate. The 8.75% Notes are a primary obligation of the Parent and are guaranteed by Westmoreland Energy LLC, Westmoreland Mining LLC and Westmoreland Resources, Inc. and their respective subsidiaries (other than Absaloka Coal, LLC, Westmoreland Risk Management, Inc. and certain other immaterial subsidiaries), referred to as the “Guarantors.” The 8.75% Notes are not guaranteed by Westmoreland Canada LLC or any of its subsidiaries, Westmoreland San Juan, LLC or any of its subsidiaries, or Westmoreland Resources GP, LLC or WMLP, referred to as the “Non-guarantors.” As of September 30, 2016, we were in compliance with all covenants for the 8.75% Notes.

WCC Term Loan Facility

The term loan matures on December 16, 2020 (“WCC Term Loan Facility”) and pays interest on a quarterly basis at a variable interest rate which is set at our election of (i) one-, two-, three- or six-month London Interbank Offered Rate (“LIBOR”) plus 6.50% or (ii) a base rate (determined with reference to the highest of the prime rate, the Federal Funds Rate plus 0.05%, or one-month LIBOR plus 1.00%) plus 5.50%. As of September 30, 2016, the interest rate was 7.50%. The WCC Term Loan Facility is a primary obligation of the Parent and is guaranteed by the Guarantors. As of September 30, 2016, we were in compliance with all covenants of the WCC Term Loan Facility.

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WESTMORELAND COAL COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONT.)

San Juan Loan

We financed the San Juan Acquisition in part with the San Juan Loan, a senior secured $125.0 million term loan from NM Capital Utility Corporation, an affiliate of Public Service Company of New Mexico (one of the owners of SJGS). The San Juan Loan matures February 1, 2021 and pays interest and principal on a quarterly basis at an interest rate of (i) 7.25% (the “Margin Rate”) plus (ii) (A) the LIBOR for a three month period plus (B) a statutory reserve rate, which such Margin Rate increases incrementally during each year of the San Juan Loan term. As of September 30, 2016, the cash interest rate is 8.01%. It is a primary obligation of Westmoreland San Juan, LLC, is guaranteed by SJCC, and is secured by substantially all of SJCC’s assets. The San Juan Loan has no prepayment penalties. The agreements governing the San Juan Loan include representations and warranties and covenants regarding the ownership and operation of SJCC and the properties acquired in the San Juan Acquisition and standard special purpose bankruptcy remote entity covenants designed to preserve the separateness from Westmoreland of each of (i) WSJ, (ii) its direct parent company, Westmoreland San Juan Holdings, Inc., (iii) SJCC and (iv) SJTC (collectively, the “Westmoreland San Juan Entities”). Obligations under the San Juan Loan are recourse only to the Westmoreland San Juan Entities and their assets Westmoreland nor its subsidiaries (other than the Westmoreland San Juan Entities) is an obligor under the San Juan Loan in any respect. The agreement governing the San Juan Loan requires that all revenues of the Westmoreland San Juan Entities, aside from payments on certain leases, are deposited into a cash management collection account swept monthly for operating expenses, capital expenditures, and loan payment and prepayment. The assets and credit of SJCC are not available to satisfy the debts and other obligations of the Company other than those of the Westmoreland San Juan Entities.

WMLP Term Loan Facility

The term loan of WMLP matures in December 2018 (“WMLP Term Loan Facility”) and pays interest on a quarterly basis at a variable rate per annum equal to the LIBOR floor of (0.75%) plus 8.5% or the reference rate as defined in the financing agreement. As of September 30, 2016, the cash interest rate is 9.25%. The WMLP Term Loan Facility is a primary obligation of Oxford Mining Company, LLC, a wholly owned subsidiary of WMLP, is guaranteed by WMLP and its subsidiaries, and is secured by substantially all of WMLP’s and its subsidiaries’ assets. At September 30, 2016, we were in compliance with all covenants of the WMLP Term Loan Facility.

The WMLP Term Loan Facility also provides for Paid In Kind Interest (“PIK Interest”) at a variable rate per annum between 1.00% and 3.00% based on our consolidated total net leverage ratio as defined in the financing agreement. The rate of PIK Interest is recalculated on a quarterly basis with the PIK Interest added quarterly to the then-outstanding principal amount of the term loan under the financing agreement. PIK Interest under the financing agreement was $6.9 million for the nine months ended September 30, 2016. The outstanding term loan amount represents the principal balance of $291.0 million, plus PIK Interest of $13.7 million.

WMLP Revolving Credit Facility

The WMLP revolving line of credit (“WMLP Revolving Credit Facility”) permits WMLP to borrow up to the aggregate principal amount of $15.0 million and also allows letters of credit in an aggregate outstanding amount of up to $10.0 million, which reduces availability under the WMLP revolving credit facility on a dollar-for-dollar basis. At September 30, 2016, availability under the WMLP revolving credit facility was $15.0 million. The WMLP Revolving Credit Facility has a maturity date of December 31, 2017. We were in compliance with all covenant requirements of the WMLP Revolving Credit Facility as of September 30, 2016.

Capital Lease Obligations

During the nine months ended September 30, 2016, the Company entered into $10.0 million of new capital leases.

WCC Revolving Credit Facility

The Company amended the terms of its revolving line of credit (“WCC Revolving Credit Facility”) on September 30, 2016 and October 12, 2016, respectively. The September 30 amendment clarified the terms “Canadian Fixed Charges” and “US Fixed Charges” to allocate scheduled cash interest payments and to remove the allocation schedule of cash interest payments under the term “Interest Expense.” The October 12 amendment (1) replaced the previous lender, Bank of the West, with a new lender, East West Bank, (2) amended Interest Expense to remove certain dividend payments, (3) revised the term “Required Lenders” to constitute all lenders when only two unaffiliated lenders are party to the revolving credit facility, (4) removed the requirement of the delivery of a social responsibility questionnaire in connection with a Permitted Acquisition, (5) allowed for any Lender to provide the Swing Line Lender one day’s prior written notice prohibiting a US Swing Line Loan or Canadian Swing Line Loan, (6) removed Administrative Agent discretion on application of proceeds from the sale of Collateral, (7)

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WESTMORELAND COAL COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONT.)

adjusted Annual Projections reporting requirements to no longer require delivery of a balance sheet and (8) adjusted the waterfall treatment with respect to Proceeds of Collateral.

Under the WCC Revolving Credit Facility the Company has a total aggregate borrowing capacity of $60.0 million between June 15th and August 31st of each year, with an aggregate borrowing capacity of $50.0 million outside of these periods. The availability of the WCC Revolving Credit Facility consists of a $30.0 million sub-facility ($35.0 million with the seasonal increase) available to our U.S. borrowers and a $20.0 million sub-facility ($25.0 million with the seasonal increase) available to our Canadian borrowers. The facility may support an equal amount of letters of credit, with outstanding letter of credit balances reducing availability under the facility. At September 30, 2016, availability on the WCC Revolving Credit Facility was $36.3 million with an outstanding balance of $13.7 million supporting letters of credit and nothing drawn on the WCC Revolving Credit Facility. The WCC Revolving Credit Facility has a maturity date of December 31, 2018. We were in compliance with all covenant requirements of the WCC Revolving Credit Facility as of September 30, 2016.

Deferred Financing Costs

Due to the adoption of ASU 2015-03, Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs, debt issuance costs related to the Company’s debt liabilities are now reported in the balance sheet as a direct deduction from the face amount of the notes. The adoption of this standard resulted in the reclassification of $25.8 million of unamortized debt issuance costs from the non-current asset, Other assets, to a reduction of Long-term debt, less current portion on the consolidated balance sheet as of December 31, 2015.

7. POSTRETIREMENT MEDICAL BENEFITS AND PENSION

Postretirement Medical Benefits

The Company provides postretirement medical benefits to retired employees and their dependents as mandated by the Coal Industry Retiree Health Benefit Act of 1992 and pursuant to collective bargaining agreements. The Company also provides these benefits to qualified full-time employees pursuant to collective bargaining agreements.

The components of net periodic postretirement medical benefit cost are as follows:



	Three Months Ended September 30,				Nine Months Ended September 30,
	2016		2015		2016		2015
	(In thousands)
Components of net periodic benefit cost:
Service cost	$	763	$	1,054	$	2,507	$	3,163
Interest cost	3,075		2,907		9,278		8,722
Amortization of deferred items	368		327		891		981
Total net periodic benefit cost	$	4,206	$	4,288	$	12,676	$	12,866

The following table shows the net periodic postretirement medical benefit costs that relate to current and former mining operations:



	Three Months Ended September 30,				Nine Months Ended September 30,
	2016		2015		2016		2015
	(In thousands)
Former mining operations	$	2,135	$	2,034	$	6,405	$	6,103
Current operations	2,071		2,254		6,271		6,763
Total net periodic benefit cost	$	4,206	$	4,288	$	12,676	$	12,866

The costs for the former mining operations are included in Heritage health benefit expenses and costs for current operations are included in Cost of sales and Selling and administrative expenses.

Pension

The Company provides pension benefits to qualified full-time employees pursuant to collective bargaining agreements.

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WESTMORELAND COAL COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONT.)

The Company incurred net periodic benefit costs of providing these pension benefits as follows:



	Three Months Ended September 30,						Nine Months Ended September 30,
	2016			2015			2016			2015
	(In thousands)
Components of net periodic benefit cost:
Service cost	$	373		$	436		$	1,242		$	1,318
Interest cost	2,564			1,831			7,926			5,780
Expected return on plan assets	(3,349		)	(2,435		)	(10,390		)	(7,744		)
Settlements	247			(1,529		)	247			(1,874		)
Amortization of deferred items	1,294			1,059			3,884			3,301
Total net periodic pension cost	$	1,129		$	(638	)	$	2,909		$	781

These costs are included in Cost of sales and Selling and administrative expenses. The Company made $0.6 million and $3.5 million of contributions to its pension plans in the nine months ended September 30, 2016 and 2015, respectively. The Company expects to make $0.1 million of contributions to its pension plans during the remainder of 2016.

8. DERIVATIVE INSTRUMENTS

The Company has power purchase contracts at its Roanoke Valley Power Facility (“ROVA”) to manage exposure to power price fluctuations. These contracts cover the period from April 2014 to March 2019 and contracted power prices range from $41.05 to $55.20 per megawatt hour, with a weighted average contract price of $44.00 over the remaining contract lives. The contracts are not designated as hedging instruments, and accordingly their fair value is recognized on the Consolidated Balance Sheets, with changes in fair value recognized in the Consolidated Statement of Operations. Fair value is based on a comparison of contracted prices to projected future market prices which are Level 2 inputs based on the hierarchy defined in the fair value footnote.

The fair value of outstanding derivative instruments not designated as hedging instruments on the accompanying unaudited Consolidated Balance Sheets was as follows (in thousands):



Derivative Instruments	Balance Sheet Location	September 30, 2016		December 31, 2015
Contracts to purchase power	Other current liabilities	$	15,121	$	13,679
Contracts to purchase power	Other liabilities	24,043		23,656

The effect of derivative instruments not designated as hedging instruments on the accompanying unaudited Consolidated Statements of Operations was as follows (in thousands):



		Three Months Ended September 30,						Nine Months Ended September 30,
Derivative Instruments	Statement of Operations Location	2016			2015			2016			2015
Contracts to purchase power	Derivative loss	$	(5,442	)	$	(5,815	)	$	(2,164	)	$	(6,717	)

9. FAIR VALUE MEASUREMENTS

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy, as defined below, gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. For other fair value disclosures, see also Note 5 - Restricted Investments And Bond Collateral and Note 8 - Derivative Instruments.


•	Level 1, defined as observable inputs such as quoted prices in active markets for identical assets.


•	Level 2, defined as observable inputs other than Level 1 prices. These include quoted prices for similar assets or liabilities in an active market, quoted prices for identical assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

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WESTMORELAND COAL COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONT.)


•	Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.

The table below sets forth, by level, the Company’s financial assets and liabilities that are accounted for at fair value at September 30, 2016:



			Quoted Prices in Active Markets for Identical Assets or Liabilities		Significant Other Observable Inputs
	Fair Value		Level 1		Level 2
	(In thousands)
Assets:
Available-for-sale investments included in Restricted investments	$	77,677	$	77,677	$	—
Available-for-sale investments included in Reclamation deposits	71,734		71,734		—
Total assets	$	149,411	$	149,411	$	—
Liabilities:
Contracts to purchase power included in Other current liabilities and Other liabilities	$	39,164	$	—	$	39,164
Warrants issued by WMLP included in Other liabilities	610		610		—
Total liabilities	$	39,774	$	610	$	39,164

Long-term debt fair value estimates are based on observed prices for securities with an active trading market when available (Level 2) and otherwise using discount rate estimates based on interest rates (Level 3). As of September 30, 2016, the Company valued the WMLP Term Loan Facility and the San Juan Loan with Level 3 fair values. The estimated fair values of the Company’s debt with fixed and variable interest rates are as follows:



	Fixed Interest Rate				Variable Interest Rate
	Carrying Value		Fair Value		Carrying Value		Fair Value
	(In thousands)				(In thousands)
September 30, 2016	$	337,368	$	276,500	$	726,802	$	595,591
December 31, 2015	$	336,000	$	213,500	$	612,727	$	397,601

10. INCOME TAX

For interim income tax reporting the Company estimates its annual effective tax rate and applies this effective tax rate to its year-to-date pre-tax (loss) income. For the nine months ended September 30, 2015, the effective tax rate differed from the statutory rate primarily as a result of the U.S. and Canadian valuation allowances and the impact of the statutory rate change in Alberta, Canada. For the nine months ended September 30, 2016, the effective tax rate differed from the statutory rate primarily due to the U.S. and Canadian valuation allowances and for the recognition of changes in the Company’s net deferred tax assets due to the San Juan Acquisition.

As part of the San Juan Acquisition, the Company acquired $48.5 million in deferred tax liabilities. Changes in the acquiring company’s deferred tax assets or liabilities subsequent to a business combination are required to be recorded in income during the quarter in which the transaction occurs. Accordingly, the $48.5 million decrease in the Company’s net deferred tax assets resulted in the release of a corresponding $48.5 million valuation allowance and recognition of a tax benefit in the nine months ended September 30, 2016.

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WESTMORELAND COAL COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONT.)

11. STOCKHOLDERS’ DEFICIT AND ACCUMULATED OTHER COMPREHENSIVE LOSS

Changes in Accumulated Other Comprehensive Loss

The following table reflects the changes in accumulated other comprehensive loss by component:



	Pension			Postretirement medical benefits			Unrealized gains and losses on available-for-sale securities, net			Foreign currency translation adjustment			Tax effect of other comprehensive income gains			Accumulated other comprehensive income (loss)
	(In thousands)
Balance at December 31, 2015	$	(34,558	)	$	(31,086	)	$	(1,325	)	$	(69,901	)	$	(34,430	)	$	(171,300	)
Other comprehensive income (loss) before reclassifications	786			984			(139		)	16,184			(2,410		)	15,405
Amounts reclassified from accumulated other comprehensive income (loss)	3,884			891			394			—			—			5,169
Balance at September 30, 2016	$	(29,888	)	$	(29,211	)	$	(1,070	)	$	(53,717	)	$	(36,840	)	$	(150,726	)

The following table reflects the reclassifications out of accumulated other comprehensive loss for the three and nine months ended September 30, 2016 (in thousands):



Details about accumulated other comprehensive loss components	Amount reclassified from accumulated other comprehensive loss						Affected line item in the statement where net income (loss) is presented
	Three Months Ended September 30, 2016			Nine Months Ended September 30, 2016
Available-for-sale securities
Realized gains and losses on available-for-sale securities	$	116		$	394		Other income (loss)

Amortization of defined benefit pension items
Prior service costs	$	2		$	6		Cost of sales and Selling and administrative
Actuarial losses	1,292			3,878			Cost of sales and Selling and administrative
Total	$	1,294		$	3,884
Amortization of postretirement medical items
Prior service costs	$	(159	)	$	(477	)	Cost of sales and Selling and administrative
Actuarial losses	527			1,368			Cost of sales and Selling and administrative
Total	$	368		$	891

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WESTMORELAND COAL COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONT.)

12. SHARE-BASED COMPENSATION

The Company grants employees and non-employee directors restricted stock units. The Company recognized compensation expense from share-based arrangements shown in the following table:



	Three Months Ended September 30,				Nine Months Ended September 30,
	2016		2015		2016		2015
	(In thousands)
Recognition of fair value of restricted stock units, stock options and SARs over vesting period; and issuance of stock	$	1,391	$	1,100	$	3,733	$	2,924
Contributions of stock to the Company’s 401(k) plan	—		842		2,192		2,664
Total share-based compensation expense	$	1,391	$	1,942	$	5,925	$	5,588

Restricted Stock Units

Unamortized compensation expense is expected to be recognized over the next three years. A summary of outstanding restricted stock units as of September 30, 2016 is as follows:



	Units		Weighted Average Grant-Date Fair Value		Unamortized Compensation Expense (In thousands)
Non-vested at December 31, 2015	354,311		$	28.44
Granted	484,121		7.78
Vested	(92,719	)	26.46
Forfeited	(2,400	)	7.86
Non-vested at September 30, 2016	743,313		$	15.30	$	6,767

Stock Options

No stock options were granted, vested, or forfeited during the nine months ended September 30, 2016. A summary of stock options outstanding as of September 30, 2016 is as follows:



	Stock Options	Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (In years)	Aggregate Intrinsic Value (In thousands)		Unamortized Compensation Expense (In thousands)
Outstanding at September 30, 2016	109,306	$	22.16	1.4	$	—	$	—

SARs

There were no SARs granted during the nine months ended September 30, 2016. A summary of SARs activity for the nine months ended September 30, 2016 is as follows:



	SARs		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (In years)	Aggregate Intrinsic Value (In thousands)		Unamortized Compensation Expense (In thousands)
Outstanding at December 31, 2015	16,943		$	25.44
Expired	(16,943	)	25.44
Outstanding at September 30, 2016	—		$	—	0.0	$	—	$	—

During 2015, the Company contributed 269,567 common shares to match employees’ contributions to their 401k plans. For the nine months ended September 30, 2016, the Company contributed 342,353 common shares. In May 2016, the Company discontinued matching employees’ contributions with common shares and elected instead to match with cash contributions.

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WESTMORELAND COAL COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONT.)

13. EARNINGS PER SHARE

Basic earnings (loss) per share has been computed by dividing the net income (loss) applicable to common shareholders by the weighted average number of shares of common stock outstanding during each period. Net income (loss) applicable to common shareholders includes the adjustment for net income or loss attributable to noncontrolling interest. Diluted earnings (loss) per share is computed by including the dilutive effect of common stock that would be issued assuming conversion or exercise of outstanding stock options, stock appreciation rights and restricted stock units. No such items were included in the computations of diluted loss per share in the three and nine months ended September 30, 2016 and 2015 because the Company incurred a net loss applicable to common shareholders in those periods and the effect of inclusion would have been anti-dilutive.

The table below shows the number of shares that were excluded from the calculation of diluted loss per share because their inclusion would be anti-dilutive to the calculation:



	Three Months Ended September 30,		Nine Months Ended September 30,
	2016	2015	2016	2015
	(In thousands)
Restricted stock units, stock options and SARs	853	490	853	490

14. SEGMENT INFORMATION

Segment information is based on a management approach, which requires segmentation based upon the Company’s internal organization, reporting of revenue, and operating income. The Company’s operations are classified into six reporting segments: Coal - U.S., Coal - Canada, Coal - WMLP, Power, Heritage, and Corporate. On August 1, 2015, the Company contributed 100% of the outstanding equity interests in Westmoreland Kemmerer, LLC (“Kemmerer”) to WMLP (the “Kemmerer Drop”), and, accordingly, to enable comparability, all segment disclosures have been adjusted to remove financial information for Kemmerer from the Coal - U.S. segment and present it in the Coal - WMLP segment for each of the three and nine months ended September 30, 2016 and 2015.

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WESTMORELAND COAL COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONT.)

Summarized financial information by segment is as follows:



	Coal - U.S.⁽¹⁾		Coal - Canada		Coal - WMLP⁽²⁾			Power⁽³⁾			Heritage			Corporate⁽²⁾			Consolidated⁽⁴⁾⁽⁵⁾
	(In thousands)
Three Months Ended September 30, 2016
Revenues	$	168,860	$	96,480	$	90,320		$	21,554		$	—		$	(6,531	)	$	370,683
Restructuring charges	—		—		—			—			—			—			—
Depreciation, depletion, and amortization	14,820		6,786		11,555			—			—			(49		)	33,112
Operating income (loss)	18,346		4,559		5,970			(4,696		)	(3,326		)	(3,641		)	17,212
Total assets	770,300		504,034		382,098			40,760			16,288			6,172			1,719,652
Capital expenditures	4,824		11,313		2,251			—			—			—			18,388
Three Months Ended September 30, 2015
Revenues	$	132,018	$	107,752	$	94,785		$	22,017		$	—		$	(6,776	)	$	349,796
Restructuring charges	—		—		—			—			—			—			—
Depreciation, depletion, and amortization	9,524		7,023		15,471			2,470			—			(29		)	34,459
Operating income (loss)	482		4,009		(4,845		)	(7,976		)	(2,950		)	(4,027		)	(15,307		)
Total assets	539,497		537,465		431,338			172,182			16,152			(9,675		)	1,686,959
Capital expenditures	7,047		7,485		4,691			198			—			(4		)	19,417
Nine Months Ended September 30, 2016
Revenues	$	475,470	$	298,978	$	263,269		$	65,494		$	—		$	(21,560	)	$	1,081,651
Restructuring charges	—		—		—			—			—			—			—
Depreciation, depletion, and amortization	41,393		19,142		41,367			—			—			(114		)	101,788
Operating income (loss)	33,475		21,168		2,497			(3,766		)	(10,325		)	(11,310		)	31,739
Total assets	770,300		504,034		382,098			40,760			16,288			6,172			1,719,652
Capital expenditures	12,038		13,801		4,780			—			—			—			30,619
Nine Months Ended September 30, 2015
Revenues	$	419,505	$	317,157	$	300,908		$	64,001		$	—		$	(31,331	)	$	1,070,240
Restructuring charges	—		—		656			—			—			—			656
Depreciation, depletion, and amortization	28,199		26,899		44,282			7,430			—			(29		)	106,781
Operating income (loss)	8,403		23,397		(6,151		)	(16,594		)	(8,699		)	(14,072		)	(13,716		)
Total assets	539,497		537,465		431,338			172,182			16,152			(9,675		)	1,686,959
Capital expenditures	18,908		21,413		19,918			1,305			—			(3,573		)	57,971

____________________


(1)	The San Juan Acquisition was completed on January 31, 2016. For the three and nine months ended September 30, 2016, revenues for the Westmoreland San Juan Entities were $51.7 million and $128.3 million, respectively, and operating income was $14.0 million and $22.2 million, respectively.

(2)

The Coal - WMLP segment recorded revenues of $6.2 million and $20.5 million for intersegment revenues to the Coal - U.S. segment for the three and nine months ended September 30, 2016, respectively and $5.9 million and $24.6 million for the three and nine months ended September 30, 2015, respectively. Eliminations for intersegment revenues and cost of sales are presented within the Corporate segment.


(3)	Total assets as of September 30, 2016 reflect a $133.1 million asset impairment in the Power segment that was recorded during the fourth quarter of 2015. No such impairment had been recorded as of September 30, 2015.


(4)	Deferred tax assets of $14.5 million as of September 30, 2015 were reclassified into liabilities on adoption of ASU 2015-17 - Income Taxes: Balance Sheet Classification of Deferred Taxes.


(5)	Unamortized debt issuance costs of $26.8 million as of September 30, 2015 were reclassified from other non-current assets into long-term debt on adoption of ASU 2015-03, Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs.

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WESTMORELAND COAL COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONT.)

15. CONTINGENCIES

The Company is a party to or receives notification of routine claims, lawsuits and regulatory proceedings with respect to various matters. The Company provides for costs related to contingencies when a loss is probable and the amount is reasonably estimable. After conferring with counsel, it is the opinion of management that the ultimate resolution of pending claims will not have a material adverse effect on the consolidated financial condition, results of operations, or liquidity of the Company.

16. SUBSEQUENT EVENTS

Eighth Amendment to Second Amended and Restated Loan and Security Agreement

On October 12, 2016, the Company executed an amendment to its revolving credit facility. The terms of the amendment are described above in Note 6 - Debt and Lines of Credit.

WMLP Series B Convertible Unit Exchange

On October 28, 2016, the Company exchanged its 4,512,500 common units representing limited partner interests in WMLP (“Common Units”) for 4,512,500 Series B Convertible Units representing limited partner interests in WMLP (the “Series B Units”). The Series B Units do not share in distributions with the Common Units and are convertible on a one-for-one basis into Common Units on the day after the record date for a cash distribution on the Common Units in which WMLP is unable to make such a distribution without exceeding its restricted payment basket under the WMLP Term Loan Facility and the WMLP Revolving Credit Facility. The Series B Units will also convert automatically upon a change of control or a dissolution or liquidation of WMLP. The Series B Units have the same voting rights as if they were outstanding Common Units and will vote together with the Common Units as a single class. In addition, the Series B Units are entitled to vote as a separate class on any matters that materially adversely affect the rights or preferences of the Series B Units in relation to other classes of partnership interests or as required by law.

Table of Contents


ITEM 2	— MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains “forward-looking statements.” Forward-looking statements can be identified by words such as “anticipates,” “intends,” “plans,” “seeks,” “believes,” “estimates,” “expects” and similar references to future periods. Examples of forward-looking statements include, but are not limited to, statements we make about recent acquisitions and their anticipated effects on us, and our expectation that our cash from operations, cash on hand and available borrowing capacity will be sufficient to meet our investing, financing, and working capital requirements for the foreseeable future.

Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Our actual results may differ materially from those contemplated by the forward-looking statements. We therefore caution you against relying on any of these forward-looking statements. They are statements neither of historical fact nor guarantees or assurances of future performance. Important factors that could cause actual results to differ materially from those in the forward-looking statements include political, economic, business, competitive, market, weather and regulatory conditions and the following:


•	The effect of legal and administrative proceedings, settlements, investigations and claims, including any related to citations and orders issued by regulatory authorities, and the availability of related insurance coverage;


•	Existing and future legislation and regulation affecting both our coal mining operations and our customers’ coal usage, governmental policies and taxes, including those aimed at reducing emissions of elements such as mercury, sulfur dioxides, nitrogen oxides, particulate matter or greenhouse gases;


•	The effect of the Environmental Protection Agency’s and Canadian and provincial governments’ inquiries and regulations on the operations of the power plants to which we provide coal;


•	Our ability to manage the San Juan Entities following the San Juan Acquisition;


•	Our substantial level of indebtedness and our ability to adhere to financial covenants related to our borrowing arrangements;


•	Changes in our post-retirement medical benefit and pension obligations and the impact of the recently enacted healthcare legislation on our employee health benefit costs;


•	Inaccuracies in our estimates of our coal reserves;


•	Our potential inability to expand or continue current coal operations due to limitations in obtaining bonding capacity for new mining permits, and/or increases in our mining costs as a result of increased bonding expenses;


•	The effect of prolonged maintenance or unplanned outages at our operations or those of our major power generating customers;


•	The inability to control costs, recognize favorable tax credits and/or receive adequate train traffic at our open market mine operations;


•	Our ability to realize growth opportunities and cost synergies as a result of the acquisition of our Canadian mines;


•	The ability or inability of our hedging arrangement with respect to our ROVA facility to generate cash flow due to the fully hedged position through March 2019;


•	Competition within our industry and with producers of competing energy sources;


•	Our relationships with, and other conditions affecting, our customers;


•	The availability and costs of key supplies or commodities, such as diesel fuel, steel and explosives;


•	Potential title defects or loss of leasehold interests in our properties, which could result in unanticipated costs or an inability to mine the properties; and


•	Other factors that are described under the heading “Risk Factors” found in our reports filed with the Securities and Exchange Commission, including our 2015 Form 10-K.

Unless otherwise specified, the forward-looking statements in this report speak as of the filing date of this report. Factors or events that could cause our actual results to differ may emerge from time-to-time, and it is not possible for us to predict all of them. We undertake no obligation to publicly update any forward-looking statements, whether because of new information, future developments or otherwise, except as may be required by law.

Table of Contents

WESTMORELAND COAL COMPANY AND SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (CONT.)

Overview

Westmoreland Coal Company is the oldest independent coal company in the United States. Our coal operations include surface coal mines in the United States and Canada, underground coal mines in Ohio and New Mexico, a char production facility, and a 50% interest in an activated carbon plant. We also own the general partner of, and a majority of the equity interests in, WMLP, a publicly-traded coal master limited partnership. Our power operations include two coal-fired power generation units in North Carolina. We classify our business into four operating segments (Coal - U.S., Coal - Canada, Coal - WMLP and Power) and two non-operating segments (Heritage and Corporate). Our Heritage segment primarily includes the costs of benefits we provide to former mining operation employees and our Corporate segment consists primarily of corporate administrative and business development expenses.

We are a holding company and conduct our operations through subsidiaries. We have significant cash requirements to fund our ongoing debt obligations, pension contributions, heritage health benefit costs, and corporate overhead costs. The principal sources of cash flow to us are distributions from our operating subsidiaries.

San Juan Acquisition and Related Financing

On January 31, 2016, WSJ, a special purpose subsidiary of the Company, acquired SJCC, which operates the San Juan mine in Farmington, New Mexico, and SJTC for a total cash purchase price of approximately $125.3 million, subject to post-closing adjustments. The San Juan mine is the exclusive supplier of coal to the adjacent SJGS under a coal supply agreement through 2022. For details of the financing structure, see Note 6 - Debt and Lines of Credit.

Results of Operations

Three Months Ended September 30, 2016 Compared to Three Months Ended September 30, 2015

Consolidated Results of Operations

The following table shows the comparative consolidated results and changes between periods:



	Three Months Ended September 30,
							Increase / (Decrease)
	2016			2015			$		%
	(In thousands)
Revenues	$	370,683		$	349,796		$	20,887	6.0	%
Net loss applicable to common shareholders	(8,521		)	(46,562		)	38,041		81.7	%
Adjusted EBITDA⁽¹⁾	71,201			47,966			23,235		48.4	%

____________________


(1)	Adjusted EBITDA, a non-GAAP measure, is defined and reconciled to net loss at the end of this “Results of Operations” section.

Consolidated revenue increased due to $51.7 million in revenue generated by our January 2016 San Juan acquisition, offset by softness at other locations. Our net loss improved by $38.0 million as a result of $32.5 million in improved operating income. Consolidated Adjusted EBITDA increased as a result of strong operating results in our Coal-US and Coal-WMLP offset slightly by lower loan and lease receivable payments in our Coal-Canada segment.

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WESTMORELAND COAL COMPANY AND SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (CONT.)

Coal - U.S. Segment Operating Results

As a result of the Kemmerer Drop, results for all periods presented reflect Kemmerer as part of the Coal - WMLP segment and not part of the Coal - U.S. segment:



	Three Months Ended September 30,
					Increase / (Decrease)
	2016		2015		$		%
	(In thousands, except ton data)
Revenues	$	168,860	$	132,018	$	36,842	27.9	%
Operating income	18,346		482		17,864		3,706.2	%
Adjusted EBITDA⁽¹⁾	36,701		14,758		21,943		148.7	%
Tons sold—millions of equivalent tons	6.9		6.0		0.9		15.0	%

____________________


(1)	Adjusted EBITDA, a non-GAAP measure, is defined and reconciled to net loss at the end of this “Results of Operations” section.

Revenue increased as a result of $51.7 million in revenue generated by our San Juan acquisition. This increase was offset by decreases from the expected expiration of certain contracts as well as cost reduction initiatives at cost plus mines leading to corresponding decreases in revenue. Operating income grew primarily as a result of $14.0 million contributed by our San Juan acquisition. The increase in Adjusted EBITDA was driven by $18.5 million contributed by our San Juan acquisition as well as strong demand arising from favorable weather. Weather conditions are inherently unpredictable and could have positive or negative impacts on demand in future periods.

Coal - Canada Segment Operating Results



	Three Months Ended September 30,
					Increase / (Decrease)
	2016		2015		$			%
	(In thousands, except ton data)
Revenues	$	96,480	$	107,752	$	(11,272	)	(10.5	)%
Operating income	4,559		4,009		550			13.7	%
Adjusted EBITDA⁽¹⁾	17,549		23,659		(6,110		)	(25.8	)%
Tons sold—millions of equivalent tons	5.1		6.2		(1.1		)	(17.7	)%

____________________


(1)	Adjusted EBITDA, a non-GAAP measure, is defined and reconciled to net loss at the end of this “Results of Operations” section.

Revenue decreased primarily as a result of lower tons sold and lower realized export market pricing at our Coal Valley mine. Future price changes are inherently unpredictable and such changes may or may not continue in the future. The decrease in Adjusted EBITDA was driven by an accelerated loan and lease receivable payment received in the prior year that was not expected to recur at the same level in the current year.

Coal - WMLP Segment Operating Results

As a result of the Kemmerer Drop, results for all periods presented reflect Kemmerer as part of the Coal - WMLP segment and not part of the Coal - U.S. segment:



	Three Months Ended September 30,
						Increase / (Decrease)
	2016		2015			$			%
	(In thousands, except ton data)
Revenues	$	90,320	$	94,785		$	(4,465	)	(4.7	)%
Operating income (loss)	5,970		(4,845		)	10,815			*
Adjusted EBITDA⁽¹⁾	22,686		15,648			7,038			45.0	%
Tons sold—millions of equivalent tons	1.9		1.6			0.3			18.8	%

____________________


(1)	Adjusted EBITDA, a non-GAAP measure, is defined and reconciled to net loss at the end of this “Results of Operations” section.

* Not meaningful

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WESTMORELAND COAL COMPANY AND SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (CONT.)

Revenue decreased primarily as a result of continued pricing softness in Ohio. Whether this decrease persists in future years is dependent upon fluctuations in market demand in the region. Operating income and Adjusted EBITDA increased primarily due to lower fuel and labor costs at our Ohio mines.

Power Segment Operating Results



	Three Months Ended September 30,
							Increase / (Decrease)
	2016			2015			$			%
	(In thousands)
Revenues	$	21,554		$	22,017		$	(463	)	(2.1	)%
Operating loss	(4,696		)	(7,976		)	3,280			41.1	%
Adjusted EBITDA⁽¹⁾	507			75			432			576.0	%

____________________


(1)	Adjusted EBITDA, a non-GAAP measure, is defined and reconciled to net loss at the end of this “Results of Operations” section.

Operating loss improved due to $2.5 million less depreciation expense in 2016 as a result of the fourth quarter 2015 impairment charge.

Nine Months Ended September 30, 2016 Compared to Nine Months Ended September 30, 2015

Consolidated Results of Operations

The following table shows the comparative consolidated results and changes between periods:



	Nine Months Ended September 30,
							Increase / (Decrease)
	2016			2015			$		%
	(In thousands)
Revenues	$	1,081,651		$	1,070,240		$	11,411	1.1	%
Net loss applicable to common shareholders	(3,304		)	(94,899		)	91,595		96.5	%
Adjusted EBITDA⁽¹⁾	178,994			159,275			19,719		12.4	%

____________________


(1)	Adjusted EBITDA, a non-GAAP measure, is defined and reconciled to net loss at the end of this “Results of Operations” section.

Consolidated revenue increased due to $128.3 million in revenue generated by our San Juan acquisition, offset by softness at other locations. Our net loss improved by $91.6 million as a result of a $45.5 million increase in operating income as well as a $63.3 million increase in income tax benefit. The income tax benefit was primarily a result of the first quarter release of our valuation allowance on our net operating loss deferred tax asset arising from the San Juan acquisition. These increases in net income were offset by a $13.8 million increase in interest expense due to our higher debt levels arising from the San Juan acquisition. Consolidated Adjusted EBITDA increased as a result of strong operating results in our Coal - U.S. and Coal - WMLP segments slightly offset by lower loan and lease receivable payments in our Coal - Canada segment.

Coal - U.S. Segment Operating Results

As a result of the Kemmerer Drop, results for all periods presented reflect Kemmerer as part of the Coal - WMLP segment and not part of the Coal - U.S. segment:



	Nine Months Ended September 30,
					Increase / (Decrease)
	2016		2015		$		%
	(In thousands, except ton data)
Revenues	$	475,470	$	419,505	$	55,965	13.3	%
Operating income	33,475		8,403		25,072		298.4	%
Adjusted EBITDA⁽¹⁾	85,999		49,209		36,790		74.8	%
Tons sold—millions of equivalent tons	17.6		17.2		0.4		2.3	%

____________________

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WESTMORELAND COAL COMPANY AND SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (CONT.)


(1)	Adjusted EBITDA, a non-GAAP measure, is defined and reconciled to net loss at the end of this “Results of Operations” section.

Revenue increased as a result of $128.3 million in revenue generated by our San Juan acquisition. This increase was offset by decreases from the expected expiration of certain contracts as well as cost reduction initiatives at cost plus mines leading to corresponding decreases in revenue. Operating income grew primarily as a result of $22.2 million contributed by our San Juan acquisition. The increase in Adjusted EBITDA was driven by $35.6 million contributed by our San Juan acquisition. Adjusted EBITDA also benefited from the absence of a prior-year customer outage.

Coal - Canada Segment Operating Results



	Nine Months Ended September 30,
					Increase / (Decrease)
	2016		2015		$			%
	(In thousands, except ton data)
Revenues	$	298,978	$	317,157	$	(18,179	)	(5.7	)%
Operating income	21,168		23,397		(2,229		)	(9.5	)%
Adjusted EBITDA⁽¹⁾	55,701		81,497		(25,796		)	(31.7	)%
Tons sold—millions of equivalent tons	16.5		17.5		(1.0		)	(5.7	)%

____________________


(1)	Adjusted EBITDA, a non-GAAP measure, is defined and reconciled to net loss at the end of this “Results of Operations” section.

Revenue decreased primarily as a result of a weaker Canadian Dollar compared to the prior year. Whether this decrease persists in future periods is dependent upon fluctuations in the Canadian and U.S. Dollar exchange rate. The decrease in Adjusted EBITDA was driven by an accelerated loan and lease receivable payment received in the second and third quarters of last year that returned to normal levels in the current year. In addition, the segment encountered record rainfall creating less efficient operating conditions at some facilities.

Coal - WMLP Segment Operating Results

As a result of the Kemmerer Drop, results for all periods presented reflect Kemmerer as part of the Coal - WMLP segment and not part of the Coal - U.S. segment:



	Nine Months Ended September 30,
						Increase / (Decrease)
	2016		2015			$			%
	(In thousands, except ton data)
Revenues	$	263,269	$	300,908		$	(37,639	)	(12.5	)%
Operating income (loss)	2,497		(6,151		)	8,648			*
Adjusted EBITDA⁽¹⁾	58,268		49,826			8,442			16.9	%
Tons sold—millions of equivalent tons	5.6		6.0			(0.4		)	(6.7	)%

____________________


(1)	Adjusted EBITDA, a non-GAAP measure, is defined and reconciled to net loss at the end of this “Results of Operations” section.

* Not meaningful

Power Segment Operating Results



	Nine Months Ended September 30,
							Increase / (Decrease)
	2016			2015			$		%
	(In thousands)
Revenues	$	65,494		$	64,001		$	1,493	2.3	%
Operating loss	(3,766		)	(16,594		)	12,828		77.3	%
Adjusted EBITDA⁽¹⁾	(2,227		)	(3,152		)	925		29.3	%

____________________


(1)	Adjusted EBITDA, a non-GAAP measure, is defined and reconciled to net loss at the end of this “Results of Operations” section.

Table of Contents

WESTMORELAND COAL COMPANY AND SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (CONT.)

Operating loss decreased due to a loss on our power derivative of $2.2 million during the first nine months of 2016 compared to a loss of $6.7 million during the first nine months of 2015, as well as $7.4 million lower depreciation expense in 2016 as a result of the fourth quarter 2015 impairment charge.

Reconciliation of Net Loss to Adjusted EBITDA

The discussion in “Results of Operations” includes references to our Adjusted EBITDA results. EBITDA is defined as earnings before interest expense, interest income, income taxes, depreciation, depletion, amortization and accretion expense. EBITDA and Adjusted EBITDA are supplemental measures of financial performance that are not required by, or presented in accordance with, generally accepted accounting principles (“GAAP”). EBITDA and Adjusted EBITDA are key metrics used by us to assess our operating performance and as a basis for strategic planning and forecasting and we believe that EBITDA and Adjusted EBITDA are useful to an investor in evaluating our operating performance because these measures:


•	are used widely by investors to measure a company’s operating performance without regard to items excluded from the calculation of such terms, which can vary substantially from company to company depending upon accounting methods and book value of assets, capital structure and the method by which assets were acquired, among other factors;


•	are used by rating agencies, lenders and other parties to evaluate our creditworthiness; and


•	help investors to more meaningfully evaluate and compare the results of our operations from period to period by removing the effect of our capital structure and asset base from our operating results.

Neither EBITDA nor Adjusted EBITDA is a measure calculated in accordance with GAAP. The items excluded from EBITDA and Adjusted EBITDA are significant in assessing our operating results. EBITDA and Adjusted EBITDA have limitations as analytical tools, and should not be considered in isolation from, or as a substitute for, analysis of our results as reported under GAAP. For example, EBITDA and Adjusted EBITDA:


•	do not reflect our cash expenditures, or future requirements for capital and major maintenance expenditures or contractual commitments;


•	do not reflect income tax expenses or the cash requirements necessary to pay income taxes;


•	do not reflect changes in, or cash requirements for, our working capital needs; and


•	do not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments, on certain of our debt obligations.

In addition, although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and EBITDA and Adjusted EBITDA do not reflect any cash requirements for such replacements. Other companies in our industry and in other industries may calculate EBITDA and Adjusted EBITDA differently from the way that we do, limiting their usefulness as comparative measures. Because of these limitations, EBITDA and Adjusted EBITDA should not be considered as measures of discretionary cash available to us to invest in the growth of our business. We compensate for these limitations by relying primarily on our GAAP results and using EBITDA and Adjusted EBITDA only as supplemental data.

Table of Contents

WESTMORELAND COAL COMPANY AND SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (CONT.)

The tables below show how we calculated EBITDA and Adjusted EBITDA, including a breakdown by segment, and reconcile Adjusted EBITDA to net loss, the most directly comparable GAAP financial measure.



	Three Months Ended September 30,						Nine Months Ended September 30,
	2016			2015			2016			2015
	(In thousands)
Reconciliation of Net Loss to Adjusted EBITDA
Net loss	$	(8,760	)	$	(48,020	)	$	(4,849	)	$	(99,749	)

Income tax expense (benefit)	(1,625		)	4,087			(49,660		)	13,596
Interest income	(1,374		)	(1,555		)	(5,521		)	(6,262		)
Interest expense	29,494			26,831			90,673			76,870
Depreciation, depletion and amortization	33,112			34,459			101,788			106,781
Accretion of ARO and receivable	7,237			7,142			21,534			21,250
Amortization of intangible assets and liabilities	(226		)	(250		)	(653		)	(756		)
EBITDA	57,858			22,694			153,312			111,730

Restructuring charges	—			—			—			656
Loss (gain) on foreign exchange	(220		)	(1,679		)	1,531			(2,474		)
Loss on extinguishment of debt	—			5,385			—			5,385
Acquisition related costs⁽¹⁾	—			3,070			568			4,470
Customer payments received under loan and lease receivables ⁽²⁾	2,582			8,731			7,969			24,252
Derivative loss	5,442			5,815			2,164			6,717
Loss on sale/disposal of assets and other adjustments	4,148			2,008			7,525			2,951
Share-based compensation	1,391			1,942			5,925			5,588
Adjusted EBITDA	$	71,201		$	47,966		$	178,994		$	159,275

____________________


(1)	Includes the impact of cost of sales related to the sale of inventory written up to fair value in the acquisition of Westmoreland Resources GP, LLC, the general partner of WMLP.


(2)	Represents a return of and on capital. These amounts are not included in operating income or operating cash flows, as the capital outlays are treated as loan and lease receivables, but are included within Adjusted EBITDA so that the cash received by the Company is treated consistently with all other contracts within the Company that do not result in loan and lease receivable accounting.



	Three Months Ended September 30,						Nine Months Ended September 30,
	2016			2015			2016			2015
	(In thousands)
Adjusted EBITDA by Segment
Coal - U.S.	$	36,701		$	14,758		$	85,999		$	49,209
Coal - Canada	17,549			23,659			55,701			81,497
Coal - WMLP	22,686			15,648			58,268			49,826
Power	507			75			(2,227		)	(3,152		)
Heritage	(3,326		)	(2,950		)	(10,325		)	(8,699		)
Corporate	(2,916		)	(3,224		)	(8,422		)	(9,406		)
Total	$	71,201		$	47,966		$	178,994		$	159,275

Table of Contents

WESTMORELAND COAL COMPANY AND SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (CONT.)

Liquidity and Capital Resources

We had the following liquidity at September 30, 2016 and December 31, 2015:



	September 30, 2016		December 31, 2015
	(In millions)
Cash and cash equivalents	$	28.9	$	22.9
Availability under our Revolving Credit Facility	36.3		28.2
Availability under WMLP Revolving Credit Facility	15.0		15.0
Total	$	80.2	$	66.1

We anticipate that our cash from operations, cash on hand and available borrowing capacity will be sufficient to meet our investing, financing, and working capital requirements for the foreseeable future. During the third quarter of 2016 we announced that NRG Texas Power provided notice that it will terminate the lignite supply agreement at the Jewett mine two years early on December 31, 2016. This contract termination is not expected to have a material impact on our cash flows in the foreseeable future.

We conduct our operations through subsidiaries. We have significant cash requirements to fund our debt obligations, ongoing heritage health benefit costs, pension contributions, and corporate overhead expenses. The principal sources of cash flow to the parent company are distributions from our operating subsidiaries. The cash at all of our subsidiaries is immediately available, except Westmoreland Risk Management, Inc. (“WRMI”), the Westmoreland San Juan Entities, and WMLP. The cash at our captive insurance entity, WRMI, is available to us through dividends and is subject to maintaining a statutory minimum level of capital, which is $0.25 million. The cash at the Westmoreland San Juan Entities is governed as described in Note 6 - Debt and Lines of Credit.

In October 2016, the Company exchanged its 4,512,500 Common Units for 4,512,500 Series B Units. The Series B Units do not share in distributions with the Common Units and are convertible on a one-for-one basis into Common Units on the day after the record date for a cash distribution on the Common Units in which WMLP is unable to make such a distribution without exceeding its restricted payment basket under the WMLP Term Loan Facility and the WMLP Revolving Credit Facility. The Series B Units will also convert automatically upon a change of control or a dissolution or liquidation of WMLP. The Series B Units have the same voting rights as if they were outstanding Common Units and will vote together with the Common Units as a single class. In addition, the Series B Units are entitled to vote as a separate class on any matters that materially adversely affect the rights or preferences of the Series B Units in relation to other classes of partnership interests or as required by law. As the Series B Units do not share in distributions with the Common Units we will not receive quarterly cash distributions from WMLP unless and until the Series B Units are converted to Common Units.

Debt Obligations

See Note 6 - Debt and Lines of Credit for a description of our different debt facilities. From time to time depending on market conditions and available cash, we intend to strategically repurchase our outstanding debt.

Restricted Group and Unrestricted Group Results

Under the indenture governing the 8.75% Notes (the “Indenture”), the WCC Term Loan Facility and the Revolving Credit Facility, WSJ, Westmoreland Resources GP, LLC, WMLP and all of WMLP’s subsidiaries are designated as “unrestricted subsidiaries” (the “Unrestricted Group”). All of our other subsidiaries are restricted subsidiaries (the “Restricted Group”).

Table of Contents

WESTMORELAND COAL COMPANY AND SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (CONT.)

The Indenture requires summary information for the Restricted Group and Unrestricted Group provided as follows:



	Restricted Group			Unrestricted Group			Total
	(In thousands)
Balance sheet information as of September 30, 2016:
Cash and cash equivalents	$	4,058		$	24,856		$	28,914
Total current assets	229,576			131,194			360,770
Total assets	1,018,282			701,370			1,719,652
Total current liabilities	247,653			156,641			404,294
Total debt	700,894			424,855			1,125,749
Total liabilities	1,612,924			687,936			2,300,860

Statement of operations information for the nine months ended September 30, 2016:
Revenues	$	690,076		$	391,575		$	1,081,651
Operating costs and expenses	683,034			366,878			1,049,912
Operating income	7,042			24,697			31,739
Other income and expenses	(44,610		)	(41,638		)	(86,248		)
Loss before income taxes	(37,568		)	(16,941		)	(54,509		)
Income tax benefit	(49,660		)	—			(49,660		)
Net income (loss)	12,092			(16,941		)	(4,849		)
Less net loss attributable to noncontrolling interest	—			(1,545		)	(1,545		)
Net income (loss) attributable to the Parent company	$	12,092		$	(15,396	)	$	(3,304	)

For the nine months ended September 30, 2016, Adjusted EBITDA associated with the Restricted Group and Unrestricted Group was $85.2 million and $93.8 million, respectively.

Non-guarantor Restricted Subsidiaries Results

The Indenture requires summary information for Absaloka Coal, LLC, WRMI, Westmoreland Canada LLC, the Canadian Subsidiaries and our Netherlands subsidiary (collectively, the “Non-Guarantor Restricted Subsidiaries”) which is provided as follows:



	September 30, 2016	Percent of Consolidated Total
Total assets	754,612	43.9	%
Total debt	36,988	3.3	%
Total liabilities	223,815	9.7	%

	Nine Months Ended September 30, 2016	Percent of Consolidated Total
Revenue	298,978	27.6	%
Adjusted EBITDA	56,015	31.3	%

Our non-guarantor Canadian Subsidiaries had availability of up to $20.0 million under the Canadian tranche of the WCC Revolving Credit Facility as of September 30, 2016.

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WESTMORELAND COAL COMPANY AND SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (CONT.)

Historical Sources and Uses of Cash

The following table summarizes net cash provided by (used in) operating activities, investing activities, and financing activities for the nine months ended September 30, 2016 and 2015:



	Nine Months Ended September 30,
	2016			2015
	(In thousands)
Cash provided by (used in):
Operating activities	$	84,241		$	20,882
Investing activities	(147,364		)	(47,451		)
Financing activities	68,330			44,248

For the first nine months of 2016, our operating activities generated $84.2 million in cash flows as a result of our continued execution on our mine mouth strategy. Investing activities used $147.4 million in cash, including $125.3 million used to acquire the San Juan mine. Financing activities provided $68.3 million in cash, most notably $122.3 million in borrowings to finance the San Juan Acquisition. This was offset by $43.9 million in repayments of long-term debt including a $15.0 million payment on San Juan debt and the remainder primarily being comprised of capital lease repayments.

Asset Retirement Obligations, Contractual Third-party Reclamation Receivables, Reclamation Deposits and Reclamation Bond Collateral

The asset retirement obligations and related contractual third-party reclamation receivables, reclamation deposits and reclamation bond collateral for each of the Company’s operating segments at September 30, 2016 are summarized below:



	Asset Retirement Obligations		Contractual Third-Party Reclamation Receivables		Reclamation Deposits		Restricted Investments and Bond Collateral
	(In thousands)
Coal - U.S.	$	323,362	$	162,870	$	74,043	$	16,309
Coal - Canada	120,057		5,364		—		52,237
Coal - WMLP	57,443		—		—		37,765
Power	1,095		—		—		—
Other restricted investments:
Power derivative collateral (ROVA)	—		—		—		22,200
Other	—		—		—		15,943
Total	$	501,957	$	168,234	$	74,043	$	144,454

Other restricted investments include various investments not associated with reclamation obligations. Reclamation spend, net of customer receipts for reclamation, was $23.9 million for the nine months ended September 30, 2016.

Critical Accounting Policies and Estimates

Please refer to the corresponding section in Part II, Item 7 of our 2015 Form 10-K for a discussion of our accounting policies and estimates.

Recent Accounting Pronouncements

See Note 1 - Basis Of Presentation of the Notes to the Unaudited Consolidated Financial Statements included in “Part I — Item 1 — Financial Statements.”

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Off-Balance Sheet Arrangements

In the normal course of business, we are a party to certain off-balance sheet arrangements. These arrangements include financial instruments with off-balance sheet risk such as bank letters of credit and performance or surety bonds. We utilize surety bonds and letters of credit issued by financial institutions to third parties to assure the performance of our obligations relating to reclamation, workers’ compensation obligations, postretirement medical benefit obligations, and other obligations. These arrangements are not reflected in our consolidated balance sheets, and we do not expect any material adverse effects on our financial condition, results of operations or cash flows to result from these off-balance sheet arrangements.

Our off-balance sheet arrangements are discussed in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our 2015 Form 10-K.


ITEM 3	— QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Other than the changes below, there have been no material changes in our market risk since December 31, 2015. For additional information, refer to the “Quantitative and Qualitative Disclosures about Market Risk” in Item 7A of our 2015 Form 10-K.

Commodity Price Risk

We are exposed to commodity price risk on sales of power at our ROVA facility. We have entered into derivative contracts to purchase power in the future at fixed prices. Such derivative contracts are structured to manage our exposure to changing power prices and not for trading. For the nine months ended September 30, 2016 and 2015, we incurred a loss of $2.2 million and $6.7 million, respectively, from these derivative contracts. Since any resales which we may make in the open market under these derivative contracts would be made at prevailing market prices, we may be subject to further losses under these hedging arrangements in the event that the market price for power falls below the level of our hedged position. Based on current market pricing trends, we may experience further losses under these hedging arrangements before the market price for power regains a level which is commensurate with our hedged position. If these trends continue, these losses could continue to adversely impact our results of operations and cash flows, and anticipated future cash losses are likely to be material.


ITEM 4	— CONTROLS AND PROCEDURES.

As required by Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), management has evaluated, with the participation of our chief executive officer and chief financial officer, the effectiveness of our disclosure controls and procedures as of September 30, 2016. Disclosure controls and procedures are designed to provide reasonable assurance that material information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the rules and forms of the Securities and Exchange Commission. Disclosure controls and procedures also include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in our reports that we file or submit under the Exchange Act is accumulated and communicated to management, including our chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding our required disclosure. Based on that evaluation, our management, including our chief executive officer and chief financial officer, concluded that the disclosure controls and procedures were effective as of such date.

On January 31, 2016, we closed on the San Juan Acquisition. As a result of this acquisition, we are in the process of reviewing the internal controls of the San Juan mine operations and, if necessary, will make appropriate changes as we incorporate our controls and procedures into the acquired operations. Except for the San Juan Acquisition, there have been no changes in internal control over financial reporting that occurred during the nine months ended September 30, 2016, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II

OTHER INFORMATION


ITEM 1	— LEGAL PROCEEDINGS.

We are subject, from time-to-time, to various proceedings, lawsuits, disputes, and claims (“Actions”) arising in the ordinary course of our business. Many of these Actions raise complex factual and legal issues and are subject to uncertainties. We cannot predict with assurance the outcome of Actions brought against us. Accordingly, adverse developments, settlements, or resolutions may occur and may result in a negative impact on income in the quarter of such development, settlement, or resolution. However, we do not believe that the outcome of any current Action would have a material adverse effect on our financial results.


ITEM 1A	— RISK FACTORS.

We have disclosed under the heading “Risk Factors” in our 2015 Form 10-K, the risk factors that we believe materially affect our business, financial condition or results of operations. Please see below for additions to our risk factor disclosure. You should carefully consider the risk factors set forth in the 2015 Form 10-K, the additional risk factors set forth below and the other information set forth elsewhere in this Form 10-Q. You should be aware that these risk factors and other information may not describe every risk facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and or operating results.

Risks Related to the Exchange of our Common Units in WMLP for Series B Units of WMLP

The exchange of our Common Units in WMLP for Series B Units of WMLP will negatively affect our cash flow.

Since acquiring the GP and a significant limited partner interest in WMLP, we have received quarterly cash distributions from WMLP. Unlike the Common Units and the Series A Units, the Series B Units are not entitled to receive such distributions. As a result, our exchanging 4,512,500 Common Units for the same amount of Series B Units will cause us to forfeit cash distributions associated with the Common Units, resulting in a decrease of approximately $601,516 in quarterly cash flow based on WMLP’s current quarterly distribution amount of $0.1333 per Common Unit. This negative impact to our cash flow could have a negative impact on our business and results of operations as a whole.

The conversion of Series B Units of WMLP back to Common Units in WMLP is anticipated to result in additional tax losses being allocated to us that may occur over multiple years.

The Series B Units are convertible on a one-for-one basis into Common Units on the day after the record date for a cash distribution on the Common Units in which WMLP is unable to make such a distribution without exceeding its restricted payment basket under the WMLP Term Loan Facility and the WMLP Revolving Credit Facility. The Series B Units will also convert automatically upon a change of control or a dissolution or liquidation of WMLP. Upon the conversion of Series B Units to Common Units, allocations of income, gain, loss or deduction will be made to cause the Common Units received to be fungible with the Common Units held by others. It is anticipated that this will result in an allocation of losses or deductions to WMLP. While the conversion of a Series B Unit occurs at a particular time, the allocations may occur over multiple years. If the allocations do not occur in the same year as the conversion, we will have fewer losses or deductions in that year than otherwise might be the case.


ITEM 2	— UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

The Company’s purchases of its common stock during the three months ended September 30, 2016 were as follows:

____________________


(1)	Shares purchased as indicated in this table represent the withholding of a portion of restricted shares to cover taxes on vested restricted shares and were not made pursuant to a publicly announced share repurchase plan or program.

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In July 2016, the Company learned that transactions in Westmoreland Common Stock in the San Juan Salaried Employee 401(k) Plan (the “Transitional 401(k) Plan”), a one year transitional plan governing a small group of San Juan Coal Company participants until it is merged into the Company’s existing 401(k) Plan, were executed without such transitional plan being explicitly referenced on the Company’s previously filed registration statement on Form S-8 covering 401(k) plan interests and so may be considered unregistered sales of Westmoreland Common Stock. The transactions in Westmoreland Common Stock in the Transitional 401(k) Plan may have included: (i) initial investment of salary reduction contributions from employees, (ii) fixed matching source funds from Westmoreland and (iii) intra-plan transfers of funds by participants out of other investments into Westmoreland Common Stock (collectively, the “Transactions”). The Transactions took place between February 24, 2016 and August 2, 2016, with a total of 29,479 shares at an average price paid per share of $6.91.


ITEM 4	— MINE SAFETY DISCLOSURES.

On July 21, 2010, Congress enacted the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”). Section 1503(a) of the Dodd-Frank Act contains reporting requirements regarding mine safety. Mine safety violations or other regulatory matters, as required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K, are included as Exhibit 95.1 to this report on Form 10-Q.


ITEM 6	— EXHIBITS.

See Exhibit Index at the end of this report.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



		WESTMORELAND COAL COMPANY

Date:	November 1, 2016	/s/ Jason W. Veenstra
		Jason W. Veenstra
		Chief Financial Officer (Principal Financial Officer and A Duly Authorized Officer)

Date:	November 1, 2016	/s/ Nathan M. Troup
		Nathan M. Troup
		Chief Accounting Officer and Corporate Controller (Principal Accounting Officer and A Duly Authorized Officer)

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WESTMORELAND COAL COMPANY

SCHEDULE I — CONDENSED BALANCE SHEETS

(Parent Company Information — See Notes to Condensed Financial Statements)



	September 30, 2016		December 31, 2015
	(In thousands)
Assets
Current assets:
Cash and cash equivalents	$	1,331	$	14,245
Receivables:
Intercompany receivable	37,391		27,732
Other	1,756		3,053
	39,147		30,785
Other current assets	1,268		1,048
Total current assets	41,746		46,078
Property, plant and equipment:
Plant and equipment	4,254		4,096
Less accumulated depreciation, depletion and amortization	3,347		3,101
Net property, plant and equipment	907		995
Restricted investments	15,944		15,753
Investment in subsidiaries	113,656		143,952
Intercompany receivable/payable	248,630		200,140
Other assets	980		1,479
Total Assets	$	421,863	$	408,397

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WESTMORELAND COAL COMPANY

SCHEDULE I — CONDENSED BALANCE SHEETS

(Parent Company Information — See Notes to Condensed Financial Statements)



	September 30, 2016			December 31, 2015
	(In thousands)
Liabilities and Shareholders’ Deficit
Current liabilities:
Current installments of long-term debt	$	3,288		$	3,288
Revolving lines of credit	—			—
Accounts payable and accrued expenses:
Trade and other accrued liabilities	12,285			10,598
Interest payable	7,702			15,398
Workers’ compensation	575			590
Postretirement medical benefits	11,985			11,985
SERP	368			368
Intercompany payable	—			2,150
Other current liabilities	807			131
Total current liabilities	37,010			44,508
Long-term debt, less current installments	650,579			649,766
Workers’ compensation, less current portion	4,908			5,068
Excess of black lung benefit obligation over trust assets	17,865			17,220
Postretirement medical benefits, less current portion	239,410			239,122
Pension and SERP obligations, less current portion	39,745			40,516
Other liabilities	466			466
Intercompany payable	13,088			13,615
Total liabilities	1,003,071			1,010,281
Shareholders’ deficit:
Common stock	186			182
Other paid-in capital	246,450			240,721
Accumulated other comprehensive loss	(150,726		)	(171,300		)
Accumulated deficit	(675,523		)	(672,219		)
Total shareholders’ deficit	(579,613		)	(602,616		)
Noncontrolling interests in consolidated subsidiaries	(1,595		)	732
Total deficit	(581,208		)	(601,884		)
Total Liabilities and Deficit	$	421,863		$	408,397

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WESTMORELAND COAL COMPANY

SCHEDULE I — CONDENSED STATEMENTS OF OPERATIONS

(Parent Company Information — See Notes to Condensed Financial Statements)



	Three Months Ended September 30,						Nine Months Ended September 30,
	2016			2015			2016			2015
	(In thousands, except per share data)
Revenues	$	—		$	—		$	—		$	—
Cost, expenses and other:
Cost of sales	(498		)	(467		)	(1,473		)	(1,474		)
Depreciation, depletion and amortization	70			47			246			132
Selling and administrative	4,533			6,131			15,043			14,869
Heritage health benefit expenses	3,075			2,617			8,919			7,449
	7,180			8,328			22,735			20,976
Operating loss	(7,180		)	(8,328		)	(22,735		)	(20,976		)
Other income (expense):
Interest expense	(15,190		)	(15,945		)	(45,457		)	(49,643		)
Loss on extinguishment of debt	—			(5,385		)	—			(5,385		)
Interest income	4,258			4,216			12,960			13,080
Gain (loss) on foreign exchange	(1		)	(24		)	11			(26		)
Other income (expense)	5			—			29			(5		)
	(10,928		)	(17,138		)	(32,457		)	(41,979		)
Loss before income taxes and income (loss) of consolidated subsidiaries	(18,108		)	(25,466		)	(55,192		)	(62,955		)
Equity in income (loss) of consolidated subsidiaries	7,537			(20,436		)	250			(34,650		)
Loss before income taxes	(10,571		)	(45,902		)	(54,942		)	(97,605		)
Income tax expense (benefit)	(1,811		)	2,118			(50,093		)	2,144
Net loss	(8,760		)	(48,020		)	(4,849		)	(99,749		)
Less net loss attributable to noncontrolling interest	(239		)	(1,458		)	(1,545		)	(4,850		)
Net loss attributable to the Parent company	$	(8,521	)	$	(46,562	)	$	(3,304	)	$	(94,899	)

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WESTMORELAND COAL COMPANY

SCHEDULE I — CONDENSED STATEMENTS OF COMPREHENSIVE LOSS

(Parent Company Information — See Notes to Condensed Financial Statements)



	Three Months Ended September 30,						Nine Months Ended September 30,
	2016			2015			2016			2015
	(In thousands)
Net loss	$	(8,760	)	$	(48,020	)	(4,849		)	$	(99,749	)
Other comprehensive income (loss)
Pension and other postretirement plans:
Amortization of accumulated actuarial gains or losses, pension	1,294			996			3,884			3,263
Adjustments to accumulated actuarial losses and transition obligations, pension	813			(253		)	786			(538		)
Amortization of accumulated actuarial gains or losses, transition obligations, and prior service costs, postretirement medical benefit	368			327			891			981
Adjustments of accumulated actuarial losses and transition obligations, postretirement medical benefit	—			—			984			—
Tax effect of other comprehensive income gains and losses	(1,039		)	(558		)	(2,410		)	(908		)
Change in foreign currency translation adjustment	(2,438		)	(20,802		)	16,184			(43,018		)
Unrealized and realized gains and losses on available-for-sale securities	535			165			255			(1,295		)
Other comprehensive income (loss), net of income taxes	(467		)	(20,125		)	20,574			(41,515		)
Comprehensive income (loss)	(9,227		)	(68,145		)	15,725			(141,264		)
Less: Comprehensive income (loss) attributable to noncontrolling interest	(240		)	(1,458		)	(1,532		)	(4,850		)
Comprehensive income (loss) attributable to parent company	$	(8,987	)	$	(66,687	)	$	17,257		$	(136,414	)

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WESTMORELAND COAL COMPANY

SCHEDULE I — CONDENSED STATEMENTS OF CASH FLOWS

(Parent Company Information — See Notes to Condensed Financial Statements)



	Nine Months Ended September 30,
	2016			2015
	(In thousands)
Cash flows from operating activities:
Net loss	$	(4,849	)	$	(99,749	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation, depletion and amortization	246			132
Share-based compensation	3,340			2,566
Amortization of deferred financing costs	3,588			3,713
Loss (gain) on foreign exchange	(11		)	30
Equity in income (loss) of subsidiaries	(250		)	34,650
Deferred income tax expense (benefit)	(48,490		)	3,492
Distributions received from subsidiaries	9,025			1,828
Other	(2,442		)	3,537
Changes in operating assets and liabilities:
Receivables	1,297			800
Accounts payable and accrued expenses	(6,005		)	(1,383		)
Other assets and liabilities	1,751			(7,516		)
Net cash used in operating activities	(42,800		)	(57,900		)
Cash flows from investing activities:
Additions to property, plant and equipment	(162		)	(84		)
Change in restricted investments	(4,144		)	(178		)
Proceeds from Kemmerer Drop	—			115,000
Cash payments in escrow for future acquisitions	—			17,000
Proceeds from the sale of investments	3,859			—
Net cash provided by (used in) investing activities	(447		)	131,738
Cash flows from financing activities:
Borrowings from long-term debt, net of debt discount	—			75,000
Repayments of long-term debt	(2,466		)	(97,007		)
Borrowings on revolving lines of credit	248,900			121,434
Repayments on revolving lines of credit	(248,900		)	(131,010		)
Debt issuance costs and other refinancing costs	(93		)	(6,109		)
Transactions with Parent/affiliates	32,892			(33,995		)
Other	—			(322		)
Net cash provided by (used in) financing activities	30,333			(72,009		)
Net increase (decrease) in cash and cash equivalents	(12,914		)	1,829
Cash and cash equivalents, beginning of period	14,245			697
Cash and cash equivalents, end of period	$	1,331		$	2,526

WESTMORELAND COAL COMPANY

SCHEDULE I — NOTES TO CONDENSED FINANCIAL STATEMENTS

(Parent Company Information)


1.	LINES OF CREDIT AND LONG-TERM DEBT

The amounts outstanding under the Parent Company’s long-term debt consisted of the following as of the dates indicated:



	Total Debt Outstanding
	September 30, 2016			December 31, 2015
	(In thousands)
8.75% Notes due 2022	$	350,000		$	350,000
WCC Term Loan Facility due 2020	324,705			327,172
Revolving Credit Facility	—			—
Other	4,500			4,500
Total debt	679,205			681,672
Less debt discount and debt issuance costs	(25,338		)	(28,618		)
Less current installments	(3,288		)	(3,288		)
Total debt outstanding, less current installments	$	650,579		$	649,766

The following table presents aggregate contractual debt maturities of all long-term debt for the Parent Company:



	September 30, 2016
	(In thousands)
2016	$	822
2017	3,288
2018	7,788
2019	3,288
2020	314,019
Thereafter	350,000
Total	$	679,205

Under the Company’s WCC Revolving Credit Facility the Company has a total aggregate borrowing capacity of $60.0 million between June 15th and August 31st of each year, with an aggregate borrowing capacity of $50.0 million outside of these periods. The availability of the WCC Revolving Credit Facility consists of a $30.0 million sub-facility ($35.0 million with the seasonal increase) available to our U.S. borrowers and a $20.0 million sub-facility ($25.0 million with the seasonal increase) available to our Canadian borrowers. The facility may support an equal amount of letters of credit, with outstanding letter of credit balances reducing availability under the facility. At September 30, 2016, availability on the WCC Revolving Credit Facility was $36.3 million with an outstanding balance of $13.7 million supporting letters of credit and nothing drawn on the WCC Revolving Credit Facility. The WCC Revolving Credit Facility has a maturity date of December 31, 2018. We were in compliance with all covenant requirements of the WCC Revolving Credit Facility as of September 30, 2016.

WESTMORELAND COAL COMPANY

SCHEDULE I — NOTES TO CONDENSED FINANCIAL STATEMENTS

(Parent Company Information)

Due to the adoption of ASU 2015-03, Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs, debt issuance costs related to the Company’s debt liabilities are now reported in the balance sheet as a direct deduction from the face amount of the notes. The adoption of this standard resulted in the reclassification of $17.5 million of unamortized debt issuance costs from the non-current asset, Other assets, to a reduction of Long-term debt, less current portion on the consolidated balance sheet as of December 31, 2015.

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EXHIBIT INDEX



		Incorporated by Reference
Exhibit Number	Exhibit Description	Form	File Number	Exhibit	Filing Date	Filed Herewith

10.1	Seventh Amendment to Second Amended and Restated Loan and Security Agreement, dated September 30, 2016	8-K	001-11155	10.1	10/6/2016
10.2	Eighth Amendment to Second Amended and Restated Loan and Security Agreement, dated October 12, 2016	8-K	001-11155	10.1	10/13/2016
10.3	Exchange Agreement, dated as of October 28, 2016, by and between Westmoreland Coal Company and Westmoreland Resource Partners, LP					X
31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a)					X
31.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(a)					X
32	Certifications of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350					X
95.1	Mine Safety Disclosure					X
101.INS	XBRL Instance Document					X
101.SCH	XBRL Taxonomy Extension Schema Document					X
101.CAL	XBRL Taxonomy Calculation Linkbase Document					X
101.LAB	XBRL Taxonomy Label Linkbase Document					X
101.PRE	XBRL Taxonomy Presentation Linkbase Document					X
101.DEF	XBRL Taxonomy Definition Document					X

Attached as Exhibit 101 to this report are documents formatted in XBRL (Extensible Business Reporting Language). The financial information contained in the XBRL-related document is “unaudited” or “unreviewed.”

Total Number
of Shares
Purchased ⁽¹⁾

Average Price
Paid per Share

August 1, 2016