SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1994
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from __________ to ________.
Commission File No. 0-752
WESTMORELAND COAL COMPANY
(Exact name of registrant as specified in its charter)
Delaware 23-1128670
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
700 The Bellevue, 200 S. Broad Street, Philadelphia, Pennsylvania 19102
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (215)
545-2500
Securities registered pursuant to Section 12(b) of the Act:
TITLE OF EACH CLASS NAME OF STOCK EXCHANGE
ON WHICH
REGISTERED
Common Stock, par value $2.50 per share New York Stock
Exchange
Depository Shares, each representing New York Stock
Exchange
a one-quarter share of Series A Convertible
Exchangeable Preferred Stock
Preferred Stock Purchase Rights New York Stock
Exchange
Securities registered pursuant to Section 12(g) of the Act:
TITLE OF EACH CLASS NAME OF STOCK EXCHANGE
ON WHICH
REGISTERED
Series A Convertible Exchangeable New York Stock
Exchange
Preferred Stock, par value $1.00 per share
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months, and (2) has been subject to
such filing requirements for the past 90 days.
Yes x No _______
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy
or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K.
____x____
The aggregate market value of voting stock held by non-affiliates as of
February 27, 1995 is estimated to be $67,144,000. Voting stock held by
affiliates is designated as voting stock beneficially held by executive
officers and directors and by holders of more than 10% of the
outstanding voting stock.
There were 6,960,881 shares outstanding of the registrant's Common
Stock, $2.50 Par Value (the registrant's only class of common stock),
as of February 27, 1995.
There were 2,300,000 depository shares, each representing one quarter
of a share of the registrant's Preferred Stock, $0.25 Par Value per
depository share, outstanding as of February 27, 1995.
The following documents have been incorporated by reference into the
Parts of this Form 10-K (i.e., Part I, Part II, etc.) indicated in
parentheses:
Definitive proxy statement to be filed on or about April 28, 1995.
(Part III)
Westmoreland Coal Company's 1994 Annual Report to Shareholders:
Management's Discussion and Analysis of Financial Condition and Results
of Operations, Five-Year Review, Consolidated Financial Statements, the
Notes to the Consolidated Financial Statements and Market Information
on Capital Stock. (Part II)
PART I
ITEM 1 - BUSINESS
Westmoreland Coal Company's (the "Company") principal business is the
production and sale of coal in the United States and until recently
the marketing of coal on a worldwide basis. Marketed coal has in the
past included significant amounts produced by unaffiliated producers.
Beginning in 1992, the Company commenced a strategic review of
operations as part of a plan to improve cash flows, eliminate
non-strategic or underperforming assets and to reposition itself to
achieve meaningful and sustainable profitability. Pursuant to this
plan, the Company has sold or shut down a number of assets and
operations, paid off the majority of its principal debt obligations,
withdrawn from the export market and substantially reduced its
representation of unaffiliated producers. As part of this effort the
Company successfully filed and completed a pre-packaged plan of
reorganization (the "Plan of Reorganization") under Chapter 11 of the
Federal Bankruptcy Code in the fourth quarter of 1994.
The Company is also engaged in the business of developing and owning
interests in cogeneration and other non-regulated independent power
plants, through its wholly-owned subsidiary, Westmoreland Energy,
Inc.("WEI"). The Company's investment in WEI has grown over the past
several years and increased substantially in 1994.
COAL OPERATIONS
Coal Production
The Company produces coal in the Eastern and Western United States.
Eastern operations are conducted on 60,000 acres of reserves located
in Virginia through the Virginia Division and a wholly-owned
subsidiary, Pine Branch Mining Incorporated ("Pine Branch"). A
portion of the reserves in Virginia extend underground into eastern
Kentucky. Powder River Basin coal is produced by Westmoreland
Resources, Inc. ("WRI") from reserves owned by the Crow Indians in
Montana.
The following sections describe the Company's current production
facilities, as well as certain mining operations closed or sold.
Virginia Division. The Company's Virginia Division consists of eight
mines of which five are underground mines operated by the Company and
three are underground mines operated by independent contractors.
After closing the Wentz mine and reducing employment at the Wentz
preparation plant at the end of 1994, the Company continues to operate
two preparation plants and one transloading facility. The Virginia
Division shipped 4,512,000 tons, 4,878,000 tons and 4,708,000 tons of
coal in 1994, 1993 and 1992, respectively, including coal produced by
independent contractors, coal purchased from Pine Branch and coal
purchased from off-property locations. As of December 31, 1994, the
Virginia Division properties employed 664 people.
The Company is continuing its efforts to improve the
competitiveness and profitability of its Virginia Division
through cost control, productivity improvement and closure of
non-essential high cost operations. By July 1996, the Virginia
Division will lose the benefit of two coal supply contracts
having sales prices substantially above the current market price
for similar types of coal. The Georgia Power Company coal supply
contract, with shipments of 942,000 tons in 1994, expires in
April 1995. The above market price of the Duke Power Company
coal supply contract, with shipments of 2,792,000 tons in 1994,
expires in July 1996; however, the contract can be extended
through December 31, 2000 provided the parties can reach an
agreement on the sales price after July 1996. It is likely that
the new sales price would be at current market prices. In 1994,
shipments to these two customers accounted for approximately 83%
of the Virginia Division's sales tons. In 1994, the Company's
Virginia Division experienced an operating loss of $3,726,000,
including approximately $18,000,000 of non-cash expenses for
depreciation and postretirement medical costs. The Virginia
Division will not be able to operate profitably or generate
positive cash flow from operations after July 1996, even after
excluding the ongoing fixed cash costs of idled operations
(estimated to be in excess of $10,000,000 annually), which
primarily consist of postretirement medical and workers'
compensation benefits, unless market prices for eastern coals
increase significantly and/or the Company is able to
substantially reduce the cost per ton of the coal produced. The
projected cash flows during the next two years, including
anticipated cash shutdown costs but excluding postretirement
medical costs, exceed the carrying value of the assets at
December 31, 1994. Therefore, the Virginia Division's assets are
not deemed to be impaired at this time.
The Company is reviewing its options, which include the possible
future sale, downsizing or shutdown of all or a portion of the
Virginia Division, at which time the Company may be required to
recognize, for accounting purposes, a significant portion of its
postretirement medical liabilities. The total amount of the
postretirement medical liabilities which would be expensed at the
time the Virginia Division's shutdown, downsizing or sale occurs
is not known at this time, however the impact of this non-cash
expense on shareholders' equity could affect the Company's
ability to pay preferred stock dividends. Refer to Note 10 to
the Consolidated Financial Statements for further information
regarding the actuarially estimated net present value of
postretirement medical benefits related to the Company's self-
insured single employer plans and the UMWA Benefit Trust Funds
which are multiemployer plans. Refer to Note 12 to the
Consolidated Financial Statements for additional information
regarding dividend restrictions under Delaware law.
Pine Branch Mining Incorporated. Pine Branch is a wholly-owned
subsidiary of the Company with surface mining operations on reserves
subleased from the Virginia Division. Pine Branch began operations in
1992 and consists of one mine. Pine Branch also performs reclamation
work for the Virginia Division at certain sites that were previously
abandoned by independent contractors. Pine Branch shipped 270,000
tons, 215,000 tons, and 117,000 tons of coal in 1994, 1993 and 1992
respectively. The majority of Pine Branch's production (188,000 tons,
174,000 tons and 73,000 tons in 1994, 1993 and 1992, respectively) is
sold to the Virginia Division where it is processed and loaded into
railcars for shipment to customers.
Westmoreland Resources, Inc. WRI is 60% owned by the Company.
Morrison Knudsen Corporation owns 24% and Penn Virginia Equities
Corporation owns 16%. WRI operates one large surface mine on
approximately 15,000 acres of subbituminous coal reserves in eastern
Montana. WRI shipped 4,364,000 tons, 3,224,000 tons and 3,491,000
tons of coal in 1994, 1993 and 1992, respectively. Morrison Knudsen
Corporation currently mines WRI's coal reserves under a contract with
WRI. The Company received cash dividends from WRI of $1,500,000 and
$540,000 in 1994 and 1993, respectively, however, WRI did not pay a
cash dividend in 1992.
Criterion Coal Company. The Company sold the assets of Criterion Coal
Company, a wholly-owned subsidiary, and its affiliated companies,
("Criterion") on December 22, 1994 to CONSOL of Kentucky,
Inc.("CONSOL"). Criterion consisted of six mines, including two
surface mines and four underground mines, and a preparation plant.
All of the mining operations were conducted by independent contractors
on Criterion's properties. Refer to Management's Discussion and
Analysis of Financial Condition and Results of Operations and Note 2
to the Consolidated Financial Statements for additional information
regarding the sale of Criterion.
Hampton Division. From January 1994 through April 1994, the Hampton
Division operations consisted of two underground mines, a large
surface mine, a central machine shop and a preparation plant. It
operated on approximately 14,000 acres in West Virginia and employed
130 people. The Hampton Division, except for a contractor-operated
surface mine with an annual production capacity of approximately
840,000 tons and the loadout portion of the preparation plant, was
closed down in May 1994. This action was necessitated by high
production costs and market conditions, including the termination of
an above-market coal sales contract. The Company sold the assets of
its Hampton Division in January 1995 and concurrently sold the related
mining lease back to the lessor, Penn Virginia Resources Corporation.
Refer to Management's Discussion and Analysis of Financial Condition
and Results of Operations and Note 2 to the Consolidated Financial
Statements for additional discussion related to the sale of the
Hampton Division.
Coal Marketing
The Company markets coal primarily through its wholly-owned
subsidiary, Westmoreland Coal Sales Company, Inc. ("WCSC"),
headquartered in Philadelphia, Pennsylvania.
Most of the coal now sold by WCSC is processed at and shipped from
Company properties to electric utilities within the United States.
Historically, WCSC has also sold steam and metallurgical coal into the
domestic and export markets. A significant portion of this coal was
produced by unaffiliated producers. These markets and affiliations
have increasingly suffered from decreasing prices, declining demand
and/or higher costs and limited supply. Activities related to
unaffiliated producers tied up a substantial amount of the Company's
working capital. During the five year period from 1990 through 1994,
the Company established $4,801,000 in reserves for potentially
uncollectible accounts receivable related to coal sold for
unaffiliated producers. Additionally, in 1992 the Company fully
reserved $20,489,000 of loans, a debt guarantee and other related
items on behalf of Adventure Resources, Inc. ("Adventure"), an
unaffiliated producer. Refer to the Adventure Resources, Inc. section
of Note 7 to the Consolidated Financial Statements for further details
related to the establishment of this reserve.
During 1994 the Company withdrew from the export market and severed
most of its relationships with remaining unaffiliated producers. The
Company's retrenchment in these areas helped conserve capital for
Company coal production and independent power activities in the face
of significantly reduced debt resources available to the Company.
The following tables show, for each of the past five years, tons sold
and revenues derived from Company and unaffiliated production as well
as revenues from domestic and export activities. Included in Company
tonnage below are amounts of produced tonnage purchased from non-
Company properties, but processed through Company facilities.
Coal Sales in Tons (tons in 000's)
Year Total Company Produced Sold for Others
1994 14,815 12,031 2,784
1993 16,687 11,551 5,136
1992 19,380 11,774 7,606
1991 20,627 11,570 9,057
1990 20,279 11,679 8,600
Coal Revenues ($'s in 000's)
Year Total Company Produced Sold for Others
1994 370,166 286,970 83,196
1993 465,256 307,468 157,788
1992 536,289 309,243 227,046
1991 567,075 284,399 282,676
1990 551,099 283,831 267,268
Coal Revenues ($'s in 000's)
Year Total Domestic Export
1994 370,166 340,489 29,677
1993 465,256 365,429 99,827
1992 536,289 399,130 137,159
1991 567,075 395,162 171,913
1990 551,099 372,479 178,620
Curtailment of the representation of unaffiliated producers reduced
substantially the requirements for capital by the Company. WCSC was
the exclusive sales agent for Adventure, whose other affiliated
companies include M.A.E. Services, Inc. and Maben Energy Corporation.
As sales agent for Adventure, the Company purchased all of Adventure's
clean coal production at the time it was produced and carried all
inventory and accounts receivable related to the sale of Adventure's
coal production. Adventure supplied 1,664,000 tons of the total sales
tons purchased by the Company from unaffiliated producers in 1994. On
December 2, 1992 Adventure, and certain of its affiliated companies,
filed voluntary petitions for reorganization under Chapter 11 of the
Bankruptcy Code with the United States Bankruptcy Court for the
Southern District of West Virginia. In 1992, the Company fully
reserved the $20,489,000 of loans, a debt guarantee and other related
items on behalf of Adventure. Pursuant to a plan, whose terms were
fully discussed and negotiated with Adventure and related customers,
the Company terminated its obligation to buy coal from Adventure and
to provide financial support as of November 8, 1994.
In January 1993, another large coal operation for which the Company
acted as sales agent stopped producing coal. The Company sold
2,178,000 tons for this producer in 1992.
As a result of its asset dispositions, withdrawal from the export
market and reduction in activities related to unaffiliated producers
during 1994, the Company closed related sales and field offices
located in Banner, Kentucky; Beckley, West Virginia; and Charlotte,
North Carolina.
Criterion and the Hampton Division were responsible for 26% of the
tons sold and 31% of the coal revenues derived from Company production
in 1994. The following tables show, for each of the past five years,
tons sold and revenue derived from coal produced at Criterion and the
Hampton Division.
Coal Sales in Tons (tons in 000's)
Year Total Criterion Hampton
1994 3,073 1,954 1,119
1993 3,414 1,853 1,561
1992 3,531 1,786 1,745
1991 3,143 1,600 1,543
1990 2,715 1,380 1,335
Revenues ($ in 000's)
Year Total Criterion Hampton
1994 89,436 55,800 33,636
1993 105,711 51,837 53,874
1992 104,242 48,940 55,302
1991 93,233 43,449 49,784
1990 82,898 38,943 43,955
Approximately 81% of the tonnage sold by the Company in 1994 was sold
under contracts calling for deliveries over a period longer than one
year ("long-term contracts"). The table below presents total sales
tonnage and the amount of coal tonnage sold under long-term contracts
for the last five years:
Total Sales Sales Under Long-
Tonnage (000s) Term Contracts
Tons (000s) %
1994 14,815 11,981 81%
1993 16,687 12,774 77%
1992 19,380 13,867 72%
1991 20,627 13,969 68%
1990 20,279 14,761 73%
The table below presents total sales tonnage the Company expects to
ship under existing long-term contracts for the next five years from
the Company's mining operations at WRI and the Virginia Division:
Projected Sales Tonnage
Under Existing Long-
Term Contracts (000s)
Virginia
Division WRI Total
1995 3,471 4,020 7,491
1996 1,820 4,400 6,220
1997 70 4,400 4,470
1998 70 4,400 4,470
1999 40 4,400 4,440
The decrease in future long-term contract sales tonnage is due to: (1)
the expiration in April 1995 of the Georgia Power Company contract,
with shipments of 942,000 tons in 1994, and; (2) the assumed July 1996
expiration of the Duke Power Company contract, with shipments of
2,792,000 tons in 1994. However, although not reflected in the above
table, the Duke Power Company contract can be extended through
December 31, 2000, provided the parties can reach agreement on the
sales price after July 1996. It is likely that the new sales price
would be at current market prices.
The majority of the coal produced by WRI is sold under long-term
contracts. The long-term contract with its largest customer expires
in 2005 and accounted for 60% of the tons sold by WRI in 1994.
WRI has entered into an option agreement whereby it agreed to sell up
to an additional 200,000,000 tons of coal through December 31, 2050 to
a current customer under a long-term contract. As compensation for
the option granted, WRI receives 1 1/4 cents, payable quarterly (with
applicable price adjustments) for each optioned ton. The option may
be exercised at any time in whole or in part through December 31,
2007. If exercised, the sales price will be based on the market price
at the time the option is exercised. WRI recorded income totalling
$2,961,000 (net of a negotiated $300,000 reduction) and $3,202,000
during 1994 and 1993, respectively, relative to the option agreement.
No coal has been delivered under the option agreement.
In 1994, the 10 largest customers of the Company accounted for 70% of
its coal revenues. Its two largest customers, Duke Power Company and
Georgia Power Company, accounted for 28% and 12%, respectively, of the
Company's coal revenues in 1994 and are expected to account for
approximately 65% and 8%, respectively, of the Company's coal revenues
in 1995. No other customer accounted for as much as 10% of the
Company's 1994 coal revenues. WRI's customers accounted for
$30,728,000 in coal revenues in 1994 from the sale of 4,364,000 tons
of coal, which represent 8% of the Company's total 1994 coal revenues
and 29% of the Company's total tons sold in 1994.
Cleancoal Terminal Company ("Cleancoal"), a wholly-owned subsidiary of
the Company, is a rail-to-barge transloading and storage facility on
the Ohio River in Kentucky between Louisville, Kentucky and
Cincinnati, Ohio. The terminal ceased operations in January 1995 as a
result of continuing operating losses and an agreement to sell
Cleancoal's assets in 1995 to an indirect wholly-owned subsidiary of
the CSX Corporation. Refer to Note 3 of the Consolidated Financial
Statements for more details related to the Cleancoal sale. The
majority of Cleancoal's employees were laid off on January 31, 1995.
The terminal was utilized by the Company to blend and transport coal
from producers in Kentucky for shipments to midwestern, southern and
foreign markets. Cleancoal has an annual transloading capacity of
6,000,000 tons. In a highly competitive market, Cleancoal transloaded
1,304,000 tons, 2,511,000 tons and 2,144,000 tons in 1994, 1993 and
1992, respectively.
Westmoreland Terminal Company, a wholly-owned subsidiary of the
Company, has a 20% interest in Dominion Terminal Associates ("DTA"),
the owner of a coal storage and vessel-loading facility in Newport
News, Virginia. DTA's annual throughput capacity is 22,000,000 tons,
and its ground storage capacity is 1,700,000 tons. In 1994, DTA
loaded 12,340,000 tons, including 1,250,000 tons for the Company. The
terminal was utilized by the Company for most of its coal exporting
and intracoastal business. Presently, the Company utilizes the
terminal to supply domestic customers via intracoastal waterways and
leases ground storage space and vessel-loading capacity and facilities
to others. Refer to Note 7 of the Consolidated Financial Statements
for further information regarding DTA.
INDEPENDENT POWER OPERATIONS
WEI is engaged in the business of developing and owning interests in
cogeneration and other non-regulated independent power plants.
Cogeneration is a power production process that provides for the
sequential generation of two or more useful forms of energy (e.g.,
electricity and steam) from a single primary fuel source (e.g., coal).
The key elements of a cogeneration project are a long-term contract
for the sale of electricity, another long-term contract for the sale
of the steam or other thermal energy, long-term contracts for the fuel
supply, a suitable site, required permits and project financing. The
economic benefits of cogeneration can be substantial because, in
addition to generating electricity, a significant portion of the
energy is used to produce steam or high temperature water (thermal
energy) for industrial processes. Electricity is sold to utilities
and in certain situations to end-users of electrical power, including
large industrial facilities. Thermal energy from the cogeneration
plant is sold to commercial enterprises and other institutions. Large
industrial users of thermal energy include plants in the chemical
processing, petroleum refining, food processing, pharmaceutical, pulp
and paper industries.
A significant market has developed in the United States for power
generated by cogeneration and other independent power plants. This
development was fostered by the energy crises of the 1970's, which led
to the enactment of legislation that encouraged companies to enter the
cogeneration and independent power generation industry by reducing
regulatory requirements and facilitating the sale of electricity by
such companies to utilities. WEI is currently pursuing development
opportunities within the United States.
Opportunities are also available in many foreign countries for
independent power companies to develop, own and operate electrical
power facilities. Using its experience in the United States, WEI has
pursued opportunities in China, Western Europe and Mexico.
WEI, through various subsidiaries, currently has interests in eight
independent power projects which are summarized in the table filed as
Exhibit 99 to this report. The Roanoke Valley I ("ROVA I" or "ROVA I
Project"), the Rensselaer and the Ft. Lupton projects became
operational during 1994, bringing the number of projects in commercial
service to seven. WEI has a 50% interest in both the ROVA I and
Rensselaer projects and made equity funding investments for them
totalling $23,178,000 in 1994. The Ft. Lupton project did not require
equity funding by WEI. Refer to Note 6 of the Consolidated Financial
Statements for additional information concerning WEI.
As part of its plan to raise cash to address short-term liquidity
requirements, the Company offered WEI for sale in 1993. During the
third quarter of 1994, the Company announced that WEI was no longer
being offered for sale.
GENERAL
Employees and Labor Relations
The Company, including subsidiaries, employed 829 people on December
31, 1994 compared with 1,090 on December 31, 1993. Included in these
figures are 576 and 758 employees represented by the United Mine
Workers of America ("UMWA"), at December 31, 1994 and December 31,
1993, respectively.
The Independent Bituminous Coal Bargaining Alliance ("IBCBA"), an
alliance of four coal companies, including Westmoreland Coal
Company, was formed in 1992 to negotiate a wage agreement with the
UMWA. The IBCBA and the UMWA successfully reached an interim
agreement on July 1, 1993. A successor five year agreement between
the Company and the UMWA, which retained the major features of the
interim agreement, became effective as of December 16, 1993 (the
"1993 Agreement"). The 1993 Agreement provides for the Company and
the UMWA at the local level to work together to reduce health care
costs, maximize the utilization of the Company's investments,
recognize special local operating and competitive conditions,
provide flexibility in work and scheduling, create incentive
programs, recognize employees' skills and performance, involve and
integrate employees and the UMWA in the success of their mines and
the Company, and improve overall labor management relations.
Pursuant to the interim agreement and the 1993 Agreement, the
Company implemented a managed care network in southwest Virginia,
where most of its active employees are located, and in West
Virginia, where most of its retired employees are located, in an
effort to control health care costs. Participation for retired
employees covered by the Coal Industry Health Benefit Act of 1992 is
voluntary. The 1993 Agreement provided for a wage increase of $.50
per hour, retroactive to February 1, 1993, the date on which the
prior five-year agreement expired. The 1993 Agreement also provides
for additional wage increases of $.40 per hour on December 16, 1994
and December 16, 1995, and for additional wage reopeners in 1996 and
1997.
Competition
The coal industry is highly competitive, and the Company competes
(principally on price and quality of coal) with many other coal
producers of all sizes. The Company, including the production of WRI,
accounted for an estimated 1% of coal production in the United States
in 1994. The nation's largest coal producer accounted for an
estimated 9% of coal production in the United States in 1994. Coal
production in the United States reached a record level in 1994. Coal
usage by electric utilities reached record levels in 1994. Coal fired
generation was responsible for 56% of all electricity generated within
the United States.
The Company's steam coal production also competes with other energy
sources in the production of electricity. For example, a significant,
but indirect, cause of lower coal demand in the future in the electric
utility sector could be low gas prices which could encourage utilities
to meet a substantial portion of future electricity growth with
natural gas-fired capacity additions. Such a strategy would displace
some potential new coal-fired capacity.
WEI is subject to increasing competition with respect to the
development of new cogeneration projects from unregulated affiliates
of utility companies, affiliates of fuel and equipment suppliers and
other independent developers. WEI ranks approximately fortieth in
size in the independent power industry with net ownership of 233
megawatts of generation capacity, including 25 megawatts for a project
under construction, as compared to its largest competitor which has
net ownership of approximately 5,700 megawatts of generation capacity.
Mining Safety and Health Legislation
The Company is subject to state and federal legislation prescribing
mining health and safety standards, including the Federal Coal Mine
Safety and Health Act of 1969 and the 1977 Amendments thereto. In
addition to authorizing fines and other penalties for violations, the
Act empowers the Mine Safety and Health Administration to suspend or
halt offending operations.
Energy Regulation
WEI's cogeneration operations are subject to the provisions of various
laws and regulations, including the federal Public Utilities
Regulatory Policies Act of 1978 ("PURPA"). PURPA provides qualifying
cogeneration facility status ("QF") to operations such as WEI's which
allows those facilities to operate with certain exemptions from
substantial federal and state regulation, including regulation of the
rates at which electricity can be sold.
The most significant recent change in energy regulation was the
passage of the National Energy Policy Act of 1992 ("EP Act").
Companies can now apply for Exempt Wholesale Generator ("EWG") status
with the Federal Energy Regulatory Commission ("FERC"). An EWG
project can provide electrical energy without the requirement to sell
thermal energy to a user. The EP Act permits an EWG project to also
be a QF project. An EWG that is not a QF project must have its power
rates approved. An EWG project that is a QF project can receive
avoided cost rates that are not subject to approval by FERC. WEI
received EWG status and power rate approval for its ROVA I project in
December 1993 as permitted in its power purchase agreement. In order
to provide additional flexibility, in March 1995 WEI received EWG
status for all of its other projects except Ft. Lupton and Fort Drum.
WEI intends to maintain the QF status for all its current projects
except ROVA I. For projects developed in the future, a case-by-case
determination of QF and/or EWG status will be completed to optimize
project returns. Refer to the 'Recent Developments Relating to
Independent Power Projects' section of Note 6 to the Consolidated
Financial Statements for further information regarding QF issues and
ROVA I's "forced outage" issue.
Protection of the Environment
Mining Operations. The Company believes its mining operations are
substantially in compliance with applicable federal, state and local
environmental laws and regulations, including those relating to
surface mining and reclamation, and it is the policy of the Company to
operate in compliance with such standards. Present compliance is
largely a result of capital expenditures and maintenance and
monitoring activities. In 1994 the Company invested approximately
$597,000 for capital additions and accrued approximately $1,245,000
against earnings in order to comply with environmental regulations
applicable to its mining operations. The $1,245,000 accrual does not
include a $3,135,000 credit to earnings resulting from a reversal of
reclamation accruals in connection with the sales of inactive
properties in West Virginia and the assets of Criterion in Kentucky.
Actual cash paid to perform reclamation in 1994 amounted to
$1,000,000. In 1993 the Company invested approximately $413,000 for
capital additions and charged $7,247,000 to earnings which included a
$4,235,000 accrual as part of the Company's mine closure costs. In
addition, reclamation fees imposed by the Federal Surface Mining
Control and Reclamation Act of 1977 (the "Surface Mining Act")
amounted to approximately $2,414,000 in 1994.
The Company projects that in 1995 it will spend approximately $100,000
for capital additions and it will expense approximately $930,000 for
maintenance and monitoring activities to meet environmental
requirements for operations it continues to own. The reduction in
overall expenditures for environmental purposes is largely due to the
asset dispositions that took place in 1994 and early 1995, pursuant to
which the buyers assumed reclamation and environmental liabilities.
Expenditures could change either to reflect the impact of new
regulations or because presently unforeseeable conditions may be
imposed on future mining permits.
The Surface Mining Act regulations set forth standards, limitations
and requirements for surface mining operations and for the surface
effects of underground mining operations. Under the regulatory scheme
contemplated by the Surface Mining Act, the Federal Office of Surface
Mining ("OSM") issued regulations which set the minimum standards to
which State agencies concerned with the regulation of coal mining must
adhere. States that wish to regulate such coal mining must present
their regulatory plans to OSM for approval. Once a State plan
receives final approval, the State agency has primary regulatory
authority over mining within the State, and OSM acts principally in a
supervisory role. State agencies may impose standards more stringent
than those required by OSM. The three states in which the Company
currently mines coal, Virginia, Kentucky and Montana, have all
submitted regulatory plans to OSM, and these plans have received final
approval. There would be potential risk to the Company in the event
it, or any of its independent contractors, fails to satisfy the
obligations created by the Surface Mining Act. Independent
contractors mining on Company properties, pursuant to their
agreements with the Company, are primarily responsible for compliance
with environmental laws relating to those properties. In the event,
however, that any of its independent contractors fail to satisfy their
obligations under the Surface Mining Act, the Company, depending upon
the circumstances, might have, and has had, to carry out such
obligations in order to avoid having its existing permits revoked or
applications for new permits or permit modifications blocked.
Compliance with the Surface Mining Act regulations has been costly for
the Company and the coal mining industry in general.
In 1990 certain amendments were enacted to the Clean Air Act ("1990
Amendments"). As the first major revisions to the Clean Air Act since
1977, the 1990 Amendments vastly expanded the scope of federal
regulations and enforcement in several significant respects. In
particular, the 1990 Amendments require that the United States
Environmental Protection Agency issue new regulations related to ozone
non-attainment, air toxics and acid rain. Phase I of the acid rain
provisions required, among other things, that electric utilities
reduce their sulfur dioxide emissions to less than 2.5 lbs per million
Btu by January 1, 1995. Phase II requires an additional reduction in
emissions to less than 1.2 lbs per million Btu by January 1, 2000.
The 1990 Amendments allow utilities the freedom to choose the manner
in which they will effect compliance with the required emission
standards, including switching to lower sulfur coal, scrubbing and
using SO2 credit allowances. The Company currently anticipates little
or no impact from the ozone non-attainment and air toxic provisions of
the 1990 Amendments.
Independent Power. The environmental laws and regulations applicable
to the projects in which WEI participates primarily involve the
discharge of emissions into the water and air, but can also include
wetlands preservation and noise regulation. These laws and
regulations in many cases require a lengthy and complex process of
obtaining licenses, permits and approvals from federal, state and
local agencies. Meeting the requirements of each jurisdiction with
authority over a project can delay or sometimes prevent the completion
of a proposed project, as well as require extensive modifications to
existing projects. The partnership owners of the projects in which
WEI has its interests have the primary responsibility for obtaining
the required permits and complying with the relevant environmental
laws.
The Clean Air Act and the 1990 Amendments contain provisions that
regulate the amount of sulfur dioxide and nitrogen oxides that may be
emitted by a project. Most of the projects in which WEI has
investments are fueled by low sulfur coal and are not expected to be
significantly affected by the acid rain provisions of the 1990
Amendments. New domestic projects will be required to obtain
allowance offsets for SO2 emissions if they do not meet emission
standards.
Segment Information
For financial information about Westmoreland's industry segments and
export sales for the years 1994, 1993 and 1992 refer to Note 16 to the
Consolidated Financial Statements.
For a discussion of certain factors affecting the business of
Westmoreland in 1994, 1993 and 1992 refer to Management's Discussion
and Analysis of Financial Condition and Results of Operations, and the
Notes to the Consolidated Financial Statements.
ITEM 2 - PROPERTIES
As of December 31, 1994, the Company owned or leased coal properties
located in Virginia, West Virginia, Kentucky and Montana. The
Company's estimated demonstrated reserves (excluding reserves deemed
by the Company to be uneconomic to mine) in owned or leased property
on December 31, 1994 in the three eastern states were 36,552,000 tons
and in Montana were 664,495,000 tons. In the three eastern states the
Company also owned or leased 320,467,000 tons currently classified by
the Company as Unassigned Uneconomic. Unassigned Uneconomic tonnages
are legally recoverable with current technology, but require
significant capital expenditures and construction of new mine openings
and are not in the Company's mining plans today, because they cannot
be mined profitably based on current projected economic conditions.
Nearly all of the Company's eastern reserves are leased from others
including 334,848,000 tons under lease from Penn Virginia Resources
Corporation, a wholly-owned subsidiary of Penn Virginia Corporation,
("Penn Virginia") which controlled an 18.95% and 18.96% voting
interest in the Company at December 31, 1994 and December 31, 1993,
respectively. All leases with Penn Virginia run to exhaustion of the
coal reserves. Properties located in Montana are leased by WRI from
the Crow Tribe of Indians and run to exhaustion. The balance of the
Company's leases are for varying terms, including to exhaustion. In
January 1995, as part of its sale of the Hampton Division, the Company
sold back coal reserve leases in West Virginia (the Hampton Division)
of 62,875,000 tons to the lessor, Penn Virginia. These reserves
consisted of 8,091,000 tons of demonstrated reserves and the balance
were Unassigned Uneconomic reserves. Refer to Notes 2 and 11 to the
Consolidated Financial Statements for additional discussion about this
sale.
The following table shows the Company's estimated demonstrated coal
reserve base and production in 1994. The term "demonstrated coal
reserve base" is as defined in the "Coal Resource Classification
System of the U.S. Geological Survey" (Circular 891). This
represents the sum of the measured and indicated reserve bases and
includes assigned and unassigned economic reserves.
Summary of Demonstrated Coal Reserve Base and Production Tons
as of December 31, 1994
(in thousands)
Total Demonstrated
1994 Unassigned Coal Reserve
Production Sulfur <1> Assigned <2> Economic<3> Base
Eastern Operations
Virginia <4>
Steam 3,504 1.05/1.24 20,796 5,741 26,537
Metallurgical 189 .58 0 1,924 1,924
West Virginia <5>
Steam 980 .77/.85 8,091 0 8,091
Kentucky <6>
Steam 1,886 .76/.95/1.35 0 0 0
Subtotal-Steam 6,370 28,887 5,741 34,628
Subtotal-Met 189 0 1,924 1,924
Subtotal Eastern
Operations 6,559 28,887 7,665 36,552
Western Operations
Montana
Steam 4,364 .65 664,495 0 664,495
Total All Operations 10,923 693,382 7,665 701,047
<FN>
<1> Percent Sulfur applies to the 1994 production tonnages.
<2> Assigned tonnages are legally recoverable through existing facilities based on current
mining plans with current technology and the Company's infrastructure.
<3> Unassigned Economic tonnages require significant capital expenditures and construction of
new mine openings before mining could begin and are legally and economically recoverable
with current technology and the Company's infrastructure.
<4> A portion of the reserves in Virginia extend underground into eastern Kentucky. Those reserves
are included with Virginia reserves.
<5> These reserves were sold back to the lessor in January 1995. See Notes 2 and 11 to the
Consolidated Financial Statements.
<6> These reserves were sold in December 1994. See Note 2 to the Consolidated Financial Statements.
</FN>
Estimates of reserves in the eastern states are based mainly upon
yearly evaluations made by the Company's professional engineers and
geologists. The Company periodically modifies estimates of reserves
under lease which may increase or decrease previously reported
amounts. The reserve evaluations are based on new information
developed by bore-hole drilling, examination of outcrops,
acquisitions, dispositions, production, changes in mining methods,
abandonments and other information.
Coal reserves in Montana represent recoverable tonnage held under the
terms of the Crow Tribe Lease, as amended in 1982, and other minor
leases. These reserves were estimated to be 799,803,000 tons as of
January 1, 1980 based principally upon a report by independent
consulting geologists, prepared in February 1980. The reserves
consist of two main seams and a stray seam between the upper and lower
main seams. Currently, the upper seam, with estimated assigned
reserves of 250,000,000 tons, is the only seam being mined in response
to a quality modification currently required by a significant
customer. Annually, estimated remaining recoverable reserves are
reduced by production in the upper main seam and by the amount of
reserves in the lower and stray seams bypassed after mining the upper
main seam.
In addition to the coal reserves mentioned above, as of December 31,
1994 the Company owns several coal preparation and loading facilities
in Virginia and West Virginia. WRI owns and operates a dragline and
coal crushing and loading facilities at its mine in Montana.
Refer to Note 6 to the Consolidated Financial Statements for a
description of the properties in which WEI has an interest.
ITEM 3 - LEGAL PROCEEDINGS
Bankruptcy Proceedings
On November 8, 1994, the Company filed a petition under Chapter 11 of
the Federal Bankruptcy Code seeking the confirmation of a so-called
"pre-packaged" Plan of Reorganization. This measure was taken to
obtain protection from the Company's principal lenders pending the
closing of the sale of the assets of Criterion which closing was also
facilitated by the filing. The Federal Bankruptcy Court approved the
Company's Plan of Reorganization on December 16, 1994. As approved in
the Plan of Reorganization, the Company proceeded to complete its sale
of the assets of Criterion on December 22, 1994 and paid in full its
maturing debt obligations, at which time it emerged from bankruptcy.
Refer to Note 1 to the Consolidated Financial Statements for
additional information concerning the Company's Plan of
Reorganization.
Westmoreland Energy, Inc.
WEI owns a 50% partnership interest in Westmoreland-LG&E Partners (the
"ROVA Partnership"). The ROVA Partnership's principal customer
contracted to purchase the electricity generated by ROVA I under a
long-term contract. In the second quarter of 1994, that customer
disputed the ROVA Partnership's interpretation of the provisions of
the contract dealing with the payment of the capacity purchase price
when the facility experiences a forced outage day. A forced outage
day is a day when ROVA I is not able to generate a specified level of
electrical output. The ROVA Partnership believes that the customer is
required to pay the ROVA Partnership the full capacity purchase price
unless forced outage days exceed a contractually stated annual number.
The customer asserts that it is not required to do so.
Through December 31, 1994, the customer withheld approximately
$5,856,000 of capacity purchase price payments to the ROVA Partnership
because of this dispute. On October 31, 1994, the ROVA Partnership
filed a complaint in the Circuit Court of the City of Richmond,
Virginia to recover these amounts and to confirm that such payments
may not be withheld in the future. On December 12, 1994 the customer
filed a motion to dismiss the complaint and on March 17, 1995 the
Court granted this motion. The ROVA Partnership is evaluating its
legal options which include the possibility of an appeal of this
ruling. The capacity purchase price withheld had been included in the
revenues and earnings of the ROVA Partnership until a reserve was
recorded as of December 31, 1994 for the full amount withheld by the
customer. WEI had recognized its 50% share of the withheld payments
in earnings in the second, third and fourth quarters of 1994. In the
fourth quarter of 1994, WEI's revenues were reduced by $2,928,000,
representing its 50% share of the disputed amount. The customer has
withheld an additional $872,000 from the ROVA Partnership through
March 24, 1995. No earnings are being recognized by WEI in 1995 for
payments withheld by the customer relating to forced outage days. The
Company believes that the ROVA Partnership's position is correct.
However, the Company is unable to predict the outcome of this
proceeding, or the amount, if any, that the customer may be ordered to
pay related to this matter. Additionally, WEI has been evaluating
ways to minimize the number of forced outage days in the future.
Regardless of the outcome, the Company believes ROVA I will continue
to operate profitably and generate positive cash flows. Refer to the
Recent Developments Relating to Independent Power Projects' section of
Note 6 to the Consolidated Financial Statements for a discussion of
other legal issues involving WEI.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
This item is inapplicable.
Executive Officers of the Registrant
Below is a table showing the executive officers of the Company, their
ages as of March 1, 1995, positions held and year of election to their
present offices. No family relationships exist among them. All of
the officers are elected annually by the Board of Directors and serve
at the pleasure of the Board of Directors.
Name Age Position(s) Held Since
(1) Christopher K. Seglem 48 President and 1992
Chief Executive Officer 1993
(2) Ronald W. Stucki 50 Senior Vice President-
Operations 1992
(3) Matthew S. Sakurada 42 President,
Westmoreland Energy, Inc. 1994
(4) Joseph W. Lee 51 President,
Westmoreland Coal Sales Company 1991
(5) Francis J. Boyle 49 Senior Vice President, Chief
Financial Officer and Treasurer 1993
(6) Theodore E. Worcester 54 Senior Vice President and 1992
General Counsel 1990
(7) R. Page Henley, Jr. 59 Senior Vice President-
Development 1992
(8) Thomas C. Sharpe 42 Controller 1994
____________________________
(1) Effective January 1988, Mr. Seglem was elected to the positions
of Vice President, General Counsel, and Secretary for the
Company. In November 1988 he was elected a Senior Vice
President of the Company. In May 1990, he relinquished the
position of Secretary. In December 1990, he was elected an
Executive Vice President of the Company, at which time he
relinquished the position of General Counsel. In June 1992, he
was elected President and Chief Operating Officer, and in
December 1992 he was elected a Director of the Company. In
June 1993, he was elected Chief Executive Officer of the
Company, at which time he relinquished the position of Chief
Operating Officer. He is a member of the bar of Pennsylvania.
(2) Mr. Stucki was General Manager and Vice President of Colorado
Westmoreland Inc. (a former wholly-owned subsidiary of the
Company) until the operation was sold to Cyprus Coal Company
("Cyprus") in November 1988, where he continued employment and
became Vice President of the Colorado and Wyoming operations. He
left Cyprus to rejoin the Company as Senior Vice President-
Operations in July 1992. Mr. Stucki is a registered professional
engineer.
(3) Mr. Sakurada was elected Vice President-Project Development of
the WEI in 1988, which position he held until he was elected Vice
President and General Manager of WEI in 1993. Mr. Sakurada was
elected President of WEI on April 13, 1994. Mr. Sakurada is a
registered professional engineer.
(4) Mr. Lee was elected Vice President-Purchasing and Northern Sales
of WCSC in 1988, which position he held until he was elected
Senior Vice President of WCSC on July 1, 1991. Mr. Lee was
elected President of WCSC on August 1, 1991.
(5) Mr. Boyle was Chief Financial Officer and Senior Vice President
of El Paso Natural Gas Company from 1985 through 1992. He was
elected Senior Vice President, Chief Financial Officer and
Treasurer of the Company, effective August 9, 1993.
(6) Mr. Worcester was a member of the law firm of Sherman & Howard,
with its principal office in Denver, Colorado, from 1972, and a
partner in the firm from 1978 until December 1990, at which time
he was elected Vice President & General Counsel of the Company.
In June 1992, he was elected Senior Vice President while
retaining his position of General Counsel of the Company. He is
a member of the bar of Colorado.
(7) Mr. Henley was elected Vice President-Development and Government
Affairs in May 1988, which position he held until he was elected
Senior Vice President-Development and Government Affairs in May
1990. In June 1992, he was elected Senior Vice President-
Government Affairs. In 1993, Mr. Henley was also elected Vice
President, General Counsel and Secretary of the Company's WEI
subsidiary, and undertook additional duties, including project
development. In 1994, Mr. Henley was elected Senior Vice
President-Development of the Company, and retained his position
as Vice President of the Company's WEI subsidiary. He is a
member of the bars of West Virginia and Virginia.
(8) Mr. Sharpe was elected Assistant Controller of the Company in
March 1989, which position he held until he was appointed Acting
Controller on April 7, 1994. He was elected Controller of the
Company on May 3, 1994.
Each of the foregoing persons held the offices indicated at the
time of the Company's bankruptcy filing and emergence from
bankruptcy.
PART II
ITEM 5 - MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
Reference is hereby made to the section entitled "Market Information
on Capital Stock" in Exhibit 13.
ITEM 6 - SELECTED FINANCIAL DATA
Reference is hereby made to the section entitled "Five-Year Review" in
Exhibit 13.
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Reference is hereby made to the section entitled "Management's
Discussion and Analysis of Financial Condition and Results of
Operations" in Exhibit 13.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Reference is hereby made to Financial Statements and related Notes in
Exhibit 13.
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
This item is inapplicable.
PART III
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
ITEM 11 - EXECUTIVE COMPENSATION
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
For Items 10-13, inclusive, except for information concerning
executive officers of Westmoreland included as an unnumbered item in
Part I above, reference is hereby made to Westmoreland's definitive
proxy statement dated April 28, 1995, to be filed in accordance with
Regulation 14A pursuant to Section 14(a) of the Securities Exchange
Act of 1934, which is incorporated herein by reference thereto.
PART IV
ITEM 14- EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND REPORTS ON FORM
8-K
a) 1. The financial statements filed herewith are the Consolidated
Balance Sheets of the Company and subsidiaries as of December
31, 1994 and December 31, 1993, and the related Consolidated
Statements of Income, Shareholders' Equity and Cash Flows for
each of the years in the three-year period ended December 31,
1994 together with the related Notes and the Summary of
Significant Accounting Policies which are contained in
Exhibit 13.
2. The financial statement schedule (Schedule VIII) - Valuation
and qualifying accounts filed herewith is included at the end
of this report.
3. The following exhibits are filed herewith as required by Item
601 of Regulation S-K:
(2) Plan of acquisition, reorganization, arrangement,
liquidation or succession
(a) Westmoreland's Plan of Reorganization was
confirmed by an order of the United States
Bankruptcy Court for the District of Delaware on
December 16, 1994, and upon complying with the
conditions of the order, Westmoreland emerged
from bankruptcy on December 22, 1994. A copy of
the confirmed Plan of Reorganization was filed
as an Exhibit to Westmoreland's Report on Form
8-K filed December 30, 1994, which is
incorporated herein by reference thereto.
(3) (a) Articles of incorporation:
Restated Certificate of Incorporation, filed
with the Office of the Secretary of State of
Delaware on February 21, 1995.
(b) Bylaws, as amended on June 6, 1994.
(4) Instruments defining the rights of security holders
(a) Certificate of Designation of Series A
Convertible Exchangeable Preferred Stock of the
Company defining the rights of holders of such
stock, filed July 8, 1992 as an amendment to the
Company's Certificate of Incorporation, and
filed as Exhibit 3(a) to Westmoreland's Form 10-
K for 1992.
(b) Form of Indenture between Westmoreland and
Fidelity Bank, National Association, as Trustee
relating to the Exchange Debentures. Reference is
hereby made to Exhibit 4.1 to Form S-2
Registration 33-47872 filed May 13, 1992, and
Amendments 1 through 4 thereto, which Exhibit is
incorporated herein by reference.
(c) Form of Exchange Debenture Reference is hereby
made to Exhibit 4.2 to Form S-2 Registration 33-
47872 filed May 13, 1992, and Amendments 1 through
4 thereto, which Exhibit is incorporated herein by
reference.
(d) Form of Deposit Agreement among Westmoreland,
First Chicago Trust Company of New York, as
Depository and the holders from time to time of
the Depository Receipts. Reference is hereby made
to Exhibit 4.3 to Form S-2 Registration 33-47872
filed May 13, 1992, and Amendments 1 through 4
thereto, which Exhibit is incorporated herein by
reference.
(e) Form of Certificate of Designation for the
Series A Convertible Exchangeable Preferred
Stock. Reference is hereby made to Exhibit 4.4
to Form S-2 Registration 33-47872 filed May 13,
1992, and Amendments 1 through 4 thereto, which
Exhibit is incorporated herein by reference.
(f) Specimen certificate representing the common
stock of Westmoreland, filed as Exhibit 4(c) to
Westmoreland's Registration Statement on Form S-
2, Registration No. 33-1950, filed December 4,
1985, is hereby incorporated by reference.
(g) Specimen certificate representing the
Preferred Stock. Reference is hereby made to
Exhibit 4.6 to Form S-2 Registration 33-47872
filed May 13, 1992, and Amendments 1 through 4
thereto, which Exhibit is incorporated herein
by reference.
(h) Form of Depository Receipt. Reference is
hereby made to Exhibit 4.7 to Form S-2
Registration 33-47872 filed May 13, 1992, and
Amendments 1 through 4 thereto, which Exhibit
is incorporated herein by reference.
(i) In accordance with paragraph (b)(4)(iii) of
Item 601 of Regulation S-K, Westmoreland
hereby agrees to furnish to the Commission,
upon request, copies of all other long-term
debt instruments.
(10) Material Contracts
(a) On January 5, 1982, the Board of Directors of
Westmoreland adopted a Management by
Objectives Plan ("MBO Plan") for senior
management. A description of this MBO Plan is
set forth on page 9 of Westmoreland's
definitive proxy statement dated March 31,
1982, which description is incorporated herein
by reference thereto.
(b) Westmoreland Coal Company 1982 Incentive
Stock Option and Stock Appreciation Rights
Plan--Reference is hereby made to Exhibit
10(b) to Westmoreland's Annual Report on Form
10-K for 1981 (SEC File #0-752), which Exhibit
10(b) is incorporated herein by reference
thereto.
(c) Westmoreland Coal Company 1985 Incentive
Stock Option and Stock Appreciation Rights
Plan--Reference is hereby made to Exhibits
10(d) to Westmoreland's Annual Report on Form
10-K for 1984 (SEC File #0-752), which Exhibit
10(d) is incorporated herein by reference
thereto.
(d) Agreement dated July 1, 1984 between Georgia
Power Company and Westmoreland. Reference is
hereby made to pages 33 - 79, inclusive, of
Westmoreland's Annual Report on Form 10-K for
1985 (SEC File #0-752), which pages 33 - 79,
inclusive, is incorporated herein by reference
thereto.
(e) Letter agreement dated June 11, 1987 relating
to the coal supply agreement between Georgia
Power Company and Westmoreland Coal Company.
See (10)(d) above.
(f) Agreement dated January 1, 1986 between Mill-
Power Supply Company, agent for Duke Power
Company, and Westmoreland Coal Sales Company,
agent for Westmoreland, which is incorporated
herein by reference thereto. Reference is
hereby made to pages 80 - 103, inclusive, of
Westmoreland's Annual Report on Form 10-K for
1985 (SEC File #0-752), which pages are
incorporated herein by reference thereto.
(g) In 1990, the Board of Directors established an
Executive Severance Policy for certain executive
officers, which provides a severance award in the
event of termination of employment. Reference is
hereby made to Exhibit 10(h) to Westmoreland's
Annual Report on Form 10-K for 1990 (SEC File #0-
752), which Exhibit 10(h) is incorporated herein by
reference thereto.
(h) Westmoreland Coal Company 1991 Non-Qualified Stock
Option Plan for Non-Employee Directors - Reference
is hereby made to Exhibit 10(i) to Westmoreland's
Annual Report on Form 10-K for 1990 (SEC File #0-
752), which Exhibit 10(i) is incorporated herein by
reference thereto.
(i) Effective January 1, 1992, the Board of Directors
established a Supplemental Executive Retirement
Plan ("SERP") for certain executive officers and
other key individuals, to supplement Westmoreland's
Retirement Plan by not being limited to certain
Internal Revenue Code limitations. A description
of this SERP is set forth on page 11 of
Westmoreland's definitive proxy statement dated
June 9, 1992, which description is incorporated
herein by reference thereto.
(j) Amended Coal Mining Agreement between Westmoreland
Resources, Inc. and Crow Tribe of Indians, dated
November 26, 1974, as further amended in 1982,
filed as Exhibit (10)(a) to Westmoreland's
Quarterly Report on Form 10-Q for the quarter ended
March 31, 1992, is incorporated by reference
thereto.
(k) Amendment and Restatement of Virginia Lease
between Penn Virginia Resources Corporation and
Westmoreland, effective as of July 1, 1988, as
further amended May 6, 1992, filed as Exhibit
10(b) to Westmoreland's Quarterly Report on Form
10-Q for the quarter ended March 31, 1992, is
incorporated by reference thereto.
(l) Amendment and Restatement of Hampton Lease
between Penn Virginia Resources Corporation and
Westmoreland, effective as of July 1, 1988, as
further amended May 6, 1992, filed as Exhibit
10(c) to Westmoreland's Quarterly Report on Form
10-Q for the quarter ended March 31, 1992, is
incorporated by reference thereto.
(m) Acquisition Agreement, dated May 6, 1992 by and
among Westmoreland, Penn Virginia Resources
Corporation and Penn Virginia Equities
Corporation, including as Exhibit A thereto, a
form of agreement to be executed by the parties
on the Closing Date described therein, filed as
Exhibit 10(d) to Westmoreland's Quarterly Report
on Form 10-Q for the quarter ended March 31,
1992, is incorporated by reference thereto.
(n) Agreement dated July 9, 1992 by and among
Westmoreland, Penn Virginia Resources Corporation
and Penn Virginia Equities Corporation, with
respect to (i) registration rights granted to Penn
Virginia, (ii) the number of directors which Penn
Virginia for a period of two years may designate
to be elected to Westmoreland's Board of Directors
and (iii) other conditions, as set forth therein,
which is discussed in Item 13 of Westmoreland's
Form 10-K for 1992.
(o) Agreement dated October 9, 1992 by and among
Westmoreland, Penn Virginia Resources Corporation
and Penn Virginia Equities Corporation amending
and modifying prior agreements by and among the
parties as set forth therein, which is discussed
in Item 13 of Westmoreland's Form 10-K for 1992.
(p) Effective February 1, 1995, the Board of Directors
established a Long-Term Incentive Stock Plan for
officers and other salaried employees of
Westmoreland and its subsidiaries, subject to
shareholder approval. A description of this Plan
is set forth in Westmoreland's definitive proxy to
be dated on or before April 28, 1995, which
description is incorporated herein by reference
thereto.
(q) On July 28, 1994, the Company reached a definitive
agreement to sell the assets of its wholly-owned
subsidiary, Criterion Coal Company and its
affiliates to CONSOL of Kentucky, Inc. The sale
was consummated on December 22, 1994, upon
complying with the order of the Bankruptcy Court
for the District of Delaware, on which date the
Company emerged from bankruptcy. A copy of the
agreement of sale, and pertinent amendments and
supplements thereto are attached as an Exhibit.
(13) Westmoreland Coal Company's 1994 Annual
Report to Shareholders: Management's
Discussion and Analysis of Financial
Condition and Results of Operations, Five-
Year Review, Consolidated Financial
Statements, the Notes to the Consolidated
Financial Statements and Market Information
on Capital Stock.
(21) Subsidiaries of the Registrant
(23) Consent of Independent Certified Public Accountants
(27) Financial data Schedule
(99) WEI Project Chart
b) Reports on Form 8-K.
(1) On November 3, 1994 Westmoreland Coal Company filed a
Report on Form 8-K. This report contained discussion that
Westmoreland's lenders had agreed to extend the date of
repayment of Westmoreland restructured debt until November
8, 1994 and its press release dated November 1, 1994 as an
exhibit.
(2) On December 30, 1994 Westmoreland Coal Company filed a
Report on Form 8-K. This report contained discussions
related to the sale of the assets of its subsidiary,
Criterion Coal Company, to CONSOL of Kentucky, Inc. and to
the confirmation of Westmoreland's Plan of Reorganization
by the Bankruptcy Court for the District of Delaware and
its emergence from bankruptcy on December 22, 1994, upon
complying with the Court's order, and the press releases
dated December 16, 1994 and December 22, 1994,
respectively.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
and Exchange Act of 1934, the registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly
authorized.
WESTMORELAND COAL COMPANY
March 31, 1995 By /s/ Francis J. Boyle
Francis J. Boyle
Senior Vice President,
Chief Financial
Officer & Treasurer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf
of the registrant and in the capacities and on the dates indicated.
Signature Title Date
Principal Executive Officer:
President,
Chief Executive Officer
/s/ Christopher K. Seglem and Director March 31, 1995
Christopher K. Seglem
Directors:
/s/ Pemberton Hutchinson Chairman of the Board March 31,
1995
Pemberton Hutchinson
/s/ E. B. Leisenring, Jr. Director March 31,
1995
E. B. Leisenring, Jr.
/s/ William R. Klaus Director March 31,
1995
William R. Klaus
/s/ Brenton S. Halsey Director March 31, 1995
Brenton S. Halsey
/s/ Edwin E. Tuttle Director March 31, 1995
Edwin E. Tuttle
/s/ Lennox K. Black Director March 31, 1995
Lennox K. Black
Principal Accounting Officer:
/s/ Thomas C. Sharpe Controller March 31, 1995
Thomas C. Sharpe
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Westmoreland Coal Company:
Under date of March 24, 1995, we reported on the consolidated
balance sheets of Westmoreland Coal Company and subsidiaries as
of December 31, 1994 and 1993, and the related statements of
income, shareholders' equity, and cash flows for each of the
years in the three-year period ended December 31, 1994, as
contained in the annual report on Form 10-K for the year 1994.
In connection with our audits of the aforementioned consolidated
financial statements, we also have audited the related
consolidated financial statement schedule VIII. This
consolidated financial statement schedule is the responsibility
of the Company's management. Our responsibility is to express an
opinion on this financial statement schedule based on our audits.
In our opinion, such financial statement schedule, when
considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly, in all material
respects, the information set forth therein.
KPMG Peat Marwick LLP
Philadelphia, PA
March 24, 1995
Schedule VIII
WESTMORELAND COAL COMPANY AND SUBSIDIARIES
Valuations and Qualifying Accounts
Years ended December 31, 1994, 1993 and 1992
(in thousands)
Additions
Balance at (deductions) Other
beginning charged (credited) additions Balance at
of year to earnings (deductions) end of year
Year ended December 31, 1994:
Allowance for doubtful accounts $ 28,530 (2,738) (5,421) 20,371 <B>
Accrual for workers' compensation $ 26,457 5,107 (4,384) 27,180
Accrual for pneumoconiosis benefits $ 17,475 (2,471) - 15,004
Accrual for postretirement medical
benefits $ 37,290 21,053 (13,863) 44,480
Year ended December 31, 1993:
Allowance for doubtful accounts $ 31,813 (257) (3,026) 28,530 <B>
Accrual for workers' compensation $ 16,370 17,204 (7,117) 26,457
Accrual for pneumoconiosis benefits $ 19,522 (2,047) - 17,475
Accrual for postretirement medical
costs $ - 48,721 <A> (11,431) 37,290
Year ended December 31, 1992:
Allowance for doubtful accounts $ 2,416 29,055 342 31,813
Accrual for workers' compensation $ 10,879 11,033 (5,542) 16,370
Accrual for pneumoconiosis benefits $ 21,501 (1,979) - 19,522
Amounts above include current and non-current valuation accounts.
<FN>
<A> See Note 10 to the Consolidated Financial Statements.
<B> Includes reserves of $18,854,000 and $22,234,000 as of December 31, 1994 and 1993,
respectively, netted against Other Assets in the Company's Consolidated Balance Sheets.
</FN>