þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware | 23-1128670 | |
(State or other jurisdiction of | (I.R.S. Employer | |
incorporation or organization) | Identification No.) | |
2 North Cascade Avenue, 2nd Floor | ||
Colorado Springs, CO | 80903 | |
(Address of principal executive offices) | (Zip Code) |
Large accelerated filer o | Accelerated filer þ | Non-accelerated filer o | Smaller reporting company o | |||
(Do not check if a smaller reporting company.) |
PAGE | ||||||||
3 | ||||||||
3 | ||||||||
8 | ||||||||
29 | ||||||||
38 | ||||||||
38 | ||||||||
39 | ||||||||
39 | ||||||||
39 | ||||||||
39 | ||||||||
41 | ||||||||
42 | ||||||||
43 | ||||||||
Exhibit 10.1 | ||||||||
Exhibit 31.1 | ||||||||
Exhibit 31.2 | ||||||||
Exhibit 32 |
March 31, | December 31, | |||||||
2011 | 2010 | |||||||
(In thousands) | ||||||||
Assets |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 44,984 | $ | 5,775 | ||||
Receivables: |
||||||||
Trade |
49,776 | 50,578 | ||||||
Contractual third-party reclamation receivables |
7,638 | 7,743 | ||||||
Other |
3,620 | 4,545 | ||||||
61,034 | 62,866 | |||||||
Inventories |
26,180 | 23,571 | ||||||
Other current assets |
5,461 | 5,335 | ||||||
Total current assets |
137,659 | 97,547 | ||||||
Property, plant and equipment: |
||||||||
Land and mineral rights |
83,893 | 83,824 | ||||||
Capitalized asset retirement cost |
114,856 | 114,856 | ||||||
Plant and equipment |
509,013 | 506,661 | ||||||
707,762 | 705,341 | |||||||
Less accumulated depreciation, depletion and amortization |
(299,381 | ) | (288,386 | ) | ||||
Net property, plant and equipment |
408,381 | 416,955 | ||||||
Advanced coal royalties |
3,532 | 3,695 | ||||||
Reclamation deposits |
73,007 | 72,274 | ||||||
Restricted investments and bond collateral |
55,701 | 55,384 | ||||||
Contractual third-party reclamation receivables, less current portion |
88,514 | 87,739 | ||||||
Deferred income taxes |
2,900 | 2,458 | ||||||
Intangible assets, net of accumulated amortization of $9.5 million
and $9.1 million at March 31, 2011, and December 31, 2010,
respectively |
6,137 | 6,555 | ||||||
Other assets |
12,156 | 7,699 | ||||||
Total Assets |
$ | 787,987 | $ | 750,306 | ||||
3
March 31, | December 31, | |||||||
2011 | 2010 | |||||||
(In thousands) | ||||||||
Liabilities and Shareholders Deficit |
||||||||
Current liabilities: |
||||||||
Current installments of long-term debt |
$ | 17,673 | $ | 14,973 | ||||
Accounts payable and accrued expenses: |
||||||||
Trade |
44,354 | 46,247 | ||||||
Production taxes |
28,467 | 26,317 | ||||||
Workers compensation |
951 | 954 | ||||||
Postretirement medical benefits |
13,581 | 13,581 | ||||||
SERP |
304 | 304 | ||||||
Deferred revenue |
10,594 | 10,209 | ||||||
Asset retirement obligations |
15,235 | 14,514 | ||||||
Other current liabilities |
7,524 | 6,241 | ||||||
Total current liabilities |
138,683 | 133,340 | ||||||
Long-term debt, less current installments |
276,689 | 208,731 | ||||||
Revolving lines of credit |
| 18,400 | ||||||
Workers compensation, less current portion |
9,360 | 9,424 | ||||||
Excess of pneumoconiosis benefit obligation over trust assets |
2,726 | 2,246 | ||||||
Postretirement medical benefits, less current portion |
196,726 | 197,279 | ||||||
Pension and SERP obligations, less current portion |
19,683 | 20,462 | ||||||
Deferred revenue, less current portion |
73,025 | 75,395 | ||||||
Asset retirement obligations, less current portion |
227,117 | 227,129 | ||||||
Intangible liabilities, net of accumulated amortization $9.6
million at March 31, 2011, and $9.4 million at December 31,
2010, respectively |
8,409 | 8,663 | ||||||
Other liabilities |
9,496 | 11,592 | ||||||
Total liabilities |
961,914 | 912,661 | ||||||
Shareholders deficit: |
||||||||
Preferred stock of $1.00 par value Authorized 5,000,000 shares; Issued and outstanding 160,129 shares at March 31, 2011, and December 31, 2010 |
160 | 160 | ||||||
Common stock of $2.50 par value Authorized 30,000,000 shares; Issued and outstanding 13,155,263 shares at March 31, 2011, and 11,160,798 shares at December 31, 2010 |
32,887 | 27,901 | ||||||
Other paid-in capital |
120,748 | 98,466 | ||||||
Accumulated other comprehensive loss |
(57,507 | ) | (57,680 | ) | ||||
Accumulated deficit |
(264,632 | ) | (226,740 | ) | ||||
Total Westmoreland Coal Company shareholders deficit |
(168,344 | ) | (157,893 | ) | ||||
Noncontrolling interest |
(5,583 | ) | (4,462 | ) | ||||
Total deficit |
(173,927 | ) | (162,355 | ) | ||||
Total Liabilities and Shareholders Deficit |
$ | 787,987 | $ | 750,306 | ||||
4
Three Months Ended | ||||||||
March 31, | ||||||||
2011 | 2010 | |||||||
(In thousands, except | ||||||||
per share data) | ||||||||
Revenues |
$ | 127,764 | $ | 126,439 | ||||
Cost, expenses and other: |
||||||||
Cost of sales |
97,510 | 97,677 | ||||||
Depreciation, depletion and amortization |
11,245 | 11,392 | ||||||
Selling and administrative |
9,305 | 9,976 | ||||||
Heritage health benefit expenses |
3,778 | 3,915 | ||||||
Loss on sales of assets |
83 | 71 | ||||||
Other operating income |
(1,597 | ) | (1,906 | ) | ||||
120,324 | 121,125 | |||||||
Operating income |
7,440 | 5,314 | ||||||
Other income (expense): |
||||||||
Interest expense |
(6,967 | ) | (5,723 | ) | ||||
Loss on extinguishment of debt |
(17,030 | ) | | |||||
Interest income |
382 | 410 | ||||||
Other loss |
(3,017 | ) | (3,836 | ) | ||||
(26,632 | ) | (9,149 | ) | |||||
Loss before income taxes |
(19,192 | ) | (3,835 | ) | ||||
Income tax benefit from operations |
(460 | ) | (90 | ) | ||||
Net loss |
(18,732 | ) | (3,745 | ) | ||||
Less net loss attributable to noncontrolling interest |
(1,121 | ) | (890 | ) | ||||
Net loss attributable to the Parent company |
(17,611 | ) | (2,855 | ) | ||||
Less preferred stock dividend requirements |
340 | 340 | ||||||
Net loss applicable to common shareholders |
$ | (17,951 | ) | $ | (3,195 | ) | ||
Net loss per share applicable to common shareholders: |
||||||||
Basic and diluted |
$ | (1.45 | ) | $ | (0.30 | ) | ||
Weighted average number of common shares outstanding: |
||||||||
Basic and diluted |
12,369 | 10,521 | ||||||
Net loss (from above) |
$ | (18,732 | ) | $ | (3,745 | ) | ||
Other comprehensive loss: |
||||||||
Tax effect of other comprehensive income gains |
(110 | ) | | |||||
Amortization of accumulated actuarial gains or
losses and transition obligations, pension |
385 | 228 | ||||||
Amortization of accumulated actuarial gains or
losses transition obligations and prior service
costs, postretirement medical benefits |
(72 | ) | (68 | ) | ||||
Unrealized and realized gain on available-for-sale
securities |
(30 | ) | (499 | ) | ||||
Comprehensive loss |
$ | (18,559 | ) | $ | (4,084 | ) | ||
5
Class A | ||||||||||||||||||||||||||||
Convertible | Accumulated | Total | ||||||||||||||||||||||||||
Exchangeable | Other | Non- | Shareholders | |||||||||||||||||||||||||
Preferred | Common | Other Paid- | Compre- | Accumulated | controlling | Equity | ||||||||||||||||||||||
Stock | Stock | In Capital | hensive Loss | Deficit | Interest | (Deficit) | ||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||||
Balance at December 31, 2010 (160,129 preferred
shares and 11,160,798 common shares outstanding) |
$ | 160 | $ | 27,901 | $ | 98,466 | $ | (57,680 | ) | $ | (226,740 | ) | $ | (4,462 | ) | $ | (162,355 | ) | ||||||||||
Preferred dividends paid |
| | | | (20,281 | ) | | (20,281 | ) | |||||||||||||||||||
Common stock issued as compensation (104,019 shares) |
| 260 | 1,393 | | | | 1,653 | |||||||||||||||||||||
Common stock options exercised (12,500 shares) |
| 31 | 100 | | | | 131 | |||||||||||||||||||||
Conversion of convertible notes (1,877,946 shares) |
| 4,695 | 20,789 | | | | 25,484 | |||||||||||||||||||||
Net loss |
| | | | (17,611 | ) | (1,121 | ) | (18,732 | ) | ||||||||||||||||||
Tax effect of other comprehensive income gains |
| | | (110 | ) | | | (110 | ) | |||||||||||||||||||
Amortization of accumulated actuarial gains or
losses and transition obligations, pension |
| | | 385 | | | 385 | |||||||||||||||||||||
Amortization of accumulated actuarial gains or
losses, transition obligations and prior service
costs, postretirement medical benefits |
| | | (72 | ) | | | (72 | ) | |||||||||||||||||||
Unrealized losses on available-for-sale securities |
| | | (30 | ) | | | (30 | ) | |||||||||||||||||||
Balance at March 31, 2011 (160,129 preferred shares
and 13,155,263 common shares outstanding) |
$ | 160 | $ | 32,887 | $ | 120,748 | $ | (57,507 | ) | $ | (264,632 | ) | $ | (5,583 | ) | $ | (173,927 | ) | ||||||||||
6
Three Months Ended March 31, | ||||||||
2011 | 2010 | |||||||
(In thousands) | ||||||||
Cash flows from operating activities: |
||||||||
Net loss |
$ | (18,732 | ) | $ | (3,745 | ) | ||
Adjustments to reconcile net loss to net cash provided by operating activities: |
||||||||
Depreciation, depletion and amortization |
11,245 | 11,392 | ||||||
Accretion of asset retirement obligation and receivable |
2,700 | 3,003 | ||||||
Amortization of intangible assets and liabilities, net |
163 | 85 | ||||||
Non-cash tax benefits |
(110 | ) | | |||||
Share-based compensation |
1,653 | 1,363 | ||||||
Loss on sales of assets |
83 | 71 | ||||||
Non-cash interest expense |
| 388 | ||||||
Amortization of deferred financing costs |
635 | 523 | ||||||
Loss on extinguishment of debt |
17,030 | | ||||||
Gain on impairment and sales of investment securities |
| (659 | ) | |||||
Loss on derivative instruments |
3,079 | 4,515 | ||||||
Changes in operating assets and liabilities: |
||||||||
Receivables, net |
3,630 | (3,866 | ) | |||||
Inventories |
(2,609 | ) | (1,502 | ) | ||||
Excess of pneumoconiosis benefit obligation over trust assets |
480 | 347 | ||||||
Accounts payable and accrued expenses |
2,009 | 3,770 | ||||||
Deferred revenue |
(1,985 | ) | 617 | |||||
Accrual for workers compensation |
(67 | ) | (51 | ) | ||||
Asset retirement obligation |
(2,661 | ) | (1,875 | ) | ||||
Accrual for postretirement medical benefits |
(625 | ) | (361 | ) | ||||
Pension and SERP obligations |
(394 | ) | (39 | ) | ||||
Other assets and liabilities |
658 | (680 | ) | |||||
Net cash provided by operating activities |
16,182 | 13,296 | ||||||
Cash flows from investing activities: |
||||||||
Additions to property, plant and equipment |
(2,923 | ) | (4,337 | ) | ||||
Change in restricted investments and bond collateral and reclamation deposits |
(1,080 | ) | (592 | ) | ||||
Net proceeds from sales of assets |
22 | 379 | ||||||
Proceeds from the sale of investments |
| 1,119 | ||||||
Receivable from customer for property and equipment purchases |
(1,903 | ) | (510 | ) | ||||
Net cash used in investing activities |
(5,884 | ) | (3,941 | ) | ||||
Cash flows from financing activities: |
||||||||
Change in book overdrafts |
108 | 890 | ||||||
Borrowings from long-term debt, net of debt discount |
142,500 | | ||||||
Repayments of long-term debt |
(60,391 | ) | (8,112 | ) | ||||
Borrowings on revolving lines of credit |
50,700 | 28,400 | ||||||
Repayments of revolving lines of credit |
(69,100 | ) | (23,300 | ) | ||||
Debt issuance and other refinancing costs |
(14,756 | ) | | |||||
Preferred dividends paid |
(20,281 | ) | | |||||
Exercise of stock options |
131 | 8 | ||||||
Net cash provided by (used in) financing activities |
28,911 | (2,114 | ) | |||||
Net increase in cash and cash equivalents |
39,209 | 7,241 | ||||||
Cash and cash equivalents, beginning of period |
5,775 | 10,519 | ||||||
Cash and cash equivalents, end of period |
$ | 44,984 | $ | 17,760 | ||||
Non-cash transactions: |
||||||||
Capital leases |
$ | | $ | 866 |
7
1. | BASIS OF PRESENTATION |
2. | ACCOUNTING POLICIES |
8
3. | INVENTORIES |
March 31, | December 31, | |||||||
2011 | 2010 | |||||||
(In thousands) | ||||||||
Coal stockpiles |
$ | 694 | $ | 678 | ||||
Coal fuel inventories |
3,808 | 1,936 | ||||||
Materials and supplies |
22,258 | 21,538 | ||||||
Reserve for obsolete inventory |
(580 | ) | (581 | ) | ||||
Total |
$ | 26,180 | $ | 23,571 | ||||
4. | RESTRICTED INVESTMENTS AND BOND COLLATERAL |
March 31, | December 31, | |||||||
2011 | 2010 | |||||||
(In thousands) | ||||||||
Coal Segment: |
||||||||
Westmoreland Mining debt reserve account |
$ | 9,964 | $ | 7,514 | ||||
Reclamation bond collateral: |
||||||||
Rosebud Mine |
12,264 | 12,263 | ||||||
Absaloka Mine |
10,974 | 10,956 | ||||||
Jewett Mine |
3,001 | 3,001 | ||||||
Beulah Mine |
1,270 | 1,270 | ||||||
Power Segment: |
||||||||
Letter of credit account |
5,976 | 5,990 | ||||||
Debt protection account |
| 905 | ||||||
Repairs and maintenance account |
| 1,067 | ||||||
Ash reserve account |
| 602 | ||||||
Corporate Segment: |
||||||||
Workers compensation bonds |
6,390 | 6,350 | ||||||
Postretirement medical benefit bonds |
5,862 | 5,466 | ||||||
Total restricted investments and bond
collateral |
$ | 55,701 | $ | 55,384 | ||||
9
Carrying Value | Fair Value | |||||||
(In thousands) | ||||||||
Cash and cash equivalents |
$ | 42,606 | $ | 42,606 | ||||
Time deposits |
7,679 | 7,679 | ||||||
Held-to-maturity securities |
2,544 | 2,853 | ||||||
Available-for-sale securities |
2,872 | 2,872 | ||||||
$ | 55,701 | $ | 56,010 | |||||
Amortized cost |
$ | 2,544 | ||
Gross unrealized holding gains |
309 | |||
Fair value |
$ | 2,853 | ||
Amortized Cost | Fair Value | |||||||
(In thousands) | ||||||||
Due in five years or less |
$ | 659 | $ | 730 | ||||
Due after five years to ten years |
772 | 857 | ||||||
Due in more than ten years |
1,113 | 1,266 | ||||||
$ | 2,544 | $ | 2,853 | |||||
Cost basis |
$ | 2,566 | ||
Gross unrealized holding gains |
306 | |||
Fair value |
$ | 2,872 | ||
10
5. | LINES OF CREDIT AND LONG-TERM DEBT |
Total Debt Outstanding | ||||||||
March 31, | December 31, | |||||||
2011 | 2010 | |||||||
(In thousands) | ||||||||
Corporate: |
||||||||
Senior secured notes |
$ | 150,000 | $ | | ||||
Convertible notes |
| 18,495 | ||||||
Debt discount |
(7,383 | ) | (4,823 | ) | ||||
Westmoreland Mining, LLC: |
||||||||
Revolving line of credit |
| 1,500 | ||||||
Term debt |
125,000 | 125,000 | ||||||
Capital lease obligations |
17,184 | 18,407 | ||||||
Other term debt |
2,368 | 2,556 | ||||||
Westmoreland Resources, Inc.: |
||||||||
Revolving line of credit |
| 16,900 | ||||||
Term debt |
| 9,600 | ||||||
Capital lease obligations |
7,193 | 7,821 | ||||||
ROVA: |
||||||||
Term debt |
| 46,220 | ||||||
Debt premiums |
| 428 | ||||||
Total debt outstanding |
294,362 | 242,104 | ||||||
Less current portion |
(17,673 | ) | (14,973 | ) | ||||
Total debt outstanding, less current portion |
$ | 276,689 | $ | 227,131 | ||||
Remainder of 2011 |
$ | 12,934 | ||
2012 |
21,512 | |||
2013 |
24,815 | |||
2014 |
22,565 | |||
2015 |
21,910 | |||
Thereafter |
198,009 | |||
Total |
301,745 | |||
Less: debt discount |
(7,383 | ) | ||
Total debt |
$ | 294,362 | ||
11
6. | PENSION AND POSTRETIREMENT MEDICAL BENEFITS |
12
Three Months Ended | ||||||||
March 31, | ||||||||
2011 | 2010 | |||||||
(In thousands) | ||||||||
Components of net periodic benefit cost: |
||||||||
Service cost |
$ | 153 | $ | 196 | ||||
Interest cost |
1,120 | 1,606 | ||||||
Expected return on plan assets |
(1,106 | ) | (1,299 | ) | ||||
Amortization of deferred items |
385 | 228 | ||||||
Total net periodic benefit cost |
$ | 552 | $ | 731 | ||||
Three Months Ended | ||||||||
March 31, | ||||||||
2011 | 2010 | |||||||
(In thousands) | ||||||||
Components of net periodic benefit cost: |
||||||||
Service cost |
$ | 123 | $ | 141 | ||||
Interest cost |
2,627 | 2,752 | ||||||
Amortization of deferred items |
(72 | ) | (68 | ) | ||||
Total net periodic benefit cost |
$ | 2,678 | $ | 2,825 | ||||
Three Months Ended | ||||||||
March 31, | ||||||||
2011 | 2010 | |||||||
(In thousands) | ||||||||
Former mining operations |
$ | 2,314 | $ | 2,518 | ||||
Current operations |
364 | 307 | ||||||
Total net periodic benefit cost |
$ | 2,678 | $ | 2,825 | ||||
13
7. | HERITAGE HEALTH BENEFIT EXPENSES |
Three Months Ended | ||||||||
March 31, | ||||||||
2011 | 2010 | |||||||
(In thousands) | ||||||||
Health care benefits |
$ | 2,454 | $ | 2,676 | ||||
Combined benefit fund payments |
686 | 756 | ||||||
Workers compensation benefits |
158 | 136 | ||||||
Black lung benefits |
480 | 347 | ||||||
Total |
$ | 3,778 | $ | 3,915 | ||||
8. | ASSET RETIREMENT OBLIGATIONS, CONTRACTUAL THIRD-PARTY RECLAMATION RECEIVABLES, AND RECLAMATION DEPOSITS |
Contractual Third- | ||||||||||||
Asset Retirement | Party Reclamation | Reclamation | ||||||||||
Obligations | Receivables | Deposits | ||||||||||
(In thousands) | ||||||||||||
Rosebud |
$ | 107,247 | $ | 14,797 | $ | 73,007 | ||||||
Jewett |
80,816 | 80,816 | | |||||||||
Absaloka |
32,437 | 539 | | |||||||||
Beulah |
18,390 | | | |||||||||
Savage |
2,733 | | | |||||||||
ROVA |
729 | | | |||||||||
Total |
$ | 242,352 | $ | 96,152 | $ | 73,007 | ||||||
Three Months Ended | ||||||||
March 31, | ||||||||
2011 | 2010 | |||||||
(In thousands) | ||||||||
Asset retirement obligations, beginning of period |
$ | 241,643 | $ | 244,615 | ||||
Accretion |
5,019 | 4,792 | ||||||
Liabilities settled |
(4,310 | ) | (3,906 | ) | ||||
Asset retirement obligations, end of period |
242,352 | 245,501 | ||||||
Less current portion |
(15,235 | ) | (16,675 | ) | ||||
Asset retirement obligations, less current portion |
$ | 227,117 | $ | 228,826 | ||||
14
Contractual Third-Party Reclamation Receivables |
Reclamation Deposits |
Carrying Value | Fair Value | |||||||
(In thousands) | ||||||||
Cash and cash equivalents |
$ | 36,146 | $ | 36,146 | ||||
Held-to-maturity securities |
18,767 | 20,036 | ||||||
Time deposits |
15,903 | 15,903 | ||||||
Available-for-sale securities |
2,191 | 2,191 | ||||||
$ | 73,007 | $ | 74,276 | |||||
Amortized cost |
$ | 18,767 | ||
Gross unrealized holding gains |
1,341 | |||
Gross unrealized holding losses |
(72 | ) | ||
Fair value |
$ | 20,036 | ||
Amortized Cost | Fair Value | |||||||
(In thousands) | ||||||||
Due in five years or less |
$ | 7,529 | $ | 7,854 | ||||
Due after five years to ten years |
4,067 | 4,177 | ||||||
Due in more than ten years |
7,171 | 8,005 | ||||||
$ | 18,767 | $ | 20,036 | |||||
Cost basis |
$ | 2,000 | ||
Gross unrealized holding gains |
191 | |||
Fair value |
$ | 2,191 | ||
15
9. | DERIVATIVE INSTRUMENTS |
Stock Price | Bond Yield | |||
$13.57 |
4.55 | % |
Balance Sheet | March 31, | December 31, | ||||||||
Derivative Instruments | Location | 2011 | 2010 | |||||||
(In thousands) | ||||||||||
Convertible debt conversion feature |
Other liabilities | $ | | $ | 3,588 |
Three Months Ended | ||||||||||
Statement of | March 31, | |||||||||
Derivative Instruments | Operations Location | 2011 | 2010 | |||||||
(In thousands) | ||||||||||
Convertible debt
conversion feature |
Other income (loss) | $ | (3,079 | ) | $ | (4,521 | ) | |||
Warrant |
Other income (loss) | | 6 |
10. | FAIR VALUE MEASUREMENTS |
| 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. |
| Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions. |
16
Fair Value at | ||||
March 31, 2011 | ||||
Level 1 | ||||
(In thousands) | ||||
Assets: |
||||
Available-for-sale investments included in Restricted
investments and bond collateral |
$ | 2,872 | ||
Available-for-sale investments included in
Reclamation deposits |
2,191 | |||
Total assets |
$ | 5,063 | ||
Three Months Ended | ||||
March 31, 2011 | ||||
(In thousands) | ||||
Beginning balance |
$ | 3,588 | ||
Change in fair value |
3,079 | |||
Settlements |
(6,667 | ) | ||
Ending balance |
$ | | ||
Carrying Value | Fair Value | |||||||
(In thousands) | ||||||||
December 31, 2010 |
$ | 185,320 | $ | 196,483 | ||||
March 31, 2011 |
$ | 267,617 | $ | 278,465 |
11. | SHAREHOLDERS EQUITY |
17
12. | RESTRICTED STOCK UNITS, STOCK OPTIONS, AND STOCK APPRECIATION RIGHTS (SARs) |
Three Months Ended | ||||||||
March 31, | ||||||||
2011 | 2010 | |||||||
(In thousands) | ||||||||
Recognition of fair value of restricted stock
units, stock options, and stock appreciation
rights over vesting period; and issuance of common
stock |
$ | 569 | $ | 225 | ||||
Contributions of stock to the Companys 401(k) plan |
1,084 | 1,138 | ||||||
Total share-based compensation expense |
$ | 1,653 | $ | 1,363 | ||||
Restricted Stock Units |
Unamortized | ||||||||||||
Weighted Average | Compensation | |||||||||||
Grant-Date Fair | Expense | |||||||||||
Units | Value | (In thousands) | ||||||||||
Non-vested at December 31, 2010 |
192,697 | $ | 8.13 | |||||||||
Non-vested at March 31, 2011 |
192,697 | $ | 8.13 | $ | 1,118 | (1) | ||||||
1 | Expected to be recognized over the next two years. |
Stock Options |
Weighted | ||||||||||||||||||||
Average | ||||||||||||||||||||
Remaining | Aggregate | Unamortized | ||||||||||||||||||
Weighted | Contractual | Intrinsic | Compensation | |||||||||||||||||
Stock | Average | Life | Value | Expense | ||||||||||||||||
Options | Exercise Price | (in years) | (In thousands) | (In thousands) | ||||||||||||||||
Outstanding at December 31, 2010 |
318,590 | $ | 18.99 | |||||||||||||||||
Exercised |
(12,500 | ) | $ | 10.48 | $ | 49 | ||||||||||||||
Expired or forfeited |
(20,000 | ) | $ | 12.04 | ||||||||||||||||
Outstanding at March 31, 2011 |
286,090 | $ | 19.86 | 4.5 | $ | 17 | ||||||||||||||
Options exercisable at March 31, 2011 |
241,334 | $ | 19.57 | 4.0 | $ | 17 | $ | 131 | (1) | |||||||||||
1 | Expected to be recognized over the next three months. |
18
Weighted | ||||||||||||||||||||
Average | ||||||||||||||||||||
Remaining | Aggregate | Unamortized | ||||||||||||||||||
Weighted | Contractual | Intrinsic | Compensation | |||||||||||||||||
Average | Life | Value | Expense | |||||||||||||||||
SARs | Base Price | (in years) | (In thousands) | (In thousands) | ||||||||||||||||
Outstanding at December 31, 2010 |
118,934 | $ | 22.13 | |||||||||||||||||
Outstanding and exercisable at March 31, 2011 |
118,934 | $ | 22.13 | 4.2 | $ | | $ | | ||||||||||||
13. | EARNINGS PER SHARE |
Three Months Ended | ||||||||
March 31, | ||||||||
2011 | 2010 | |||||||
(In thousands) | ||||||||
Convertible notes and securities |
1,094 | 2,859 | ||||||
Restricted stock units, stock
options, SARs, and warrant
shares |
598 | 776 | ||||||
Total shares excluded from
diluted shares calculation |
1,692 | 3,635 | ||||||
14. | BUSINESS SEGMENT INFORMATION |
19
Coal | Power | Heritage | Corporate | Consolidated | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Three Months Ended March 31, 2011 |
||||||||||||||||||||
Revenues |
$ | 104,136 | $ | 23,628 | $ | | $ | | $ | 127,764 | ||||||||||
Depreciation, depletion, and
amortization |
8,613 | 2,553 | | 79 | 11,245 | |||||||||||||||
Operating income (loss) |
8,819 | 4,619 | (4,170 | ) | (1,828 | ) | 7,440 | |||||||||||||
Total assets |
516,725 | 206,894 | 12,541 | 51,827 | 787,987 | |||||||||||||||
Capital expenditures |
2,688 | 227 | | 8 | 2,923 | |||||||||||||||
Three Months Ended March 31, 2010 |
||||||||||||||||||||
Revenues |
$ | 103,550 | $ | 22,889 | $ | | $ | | $ | 126,439 | ||||||||||
Depreciation, depletion, and
amortization |
8,757 | 2,536 | | 99 | 11,392 | |||||||||||||||
Operating income (loss) |
7,352 | 4,172 | (4,255 | ) | (1,955 | ) | 5,314 | |||||||||||||
Total assets |
538,886 | 220,127 | 11,247 | 8,258 | 778,518 | |||||||||||||||
Capital expenditures |
3,829 | 68 | | 440 | 4,337 |
Three Months Ended | ||||||||
March 31, | ||||||||
2011 | 2010 | |||||||
(In thousands) | ||||||||
Operating income |
$ | 7,440 | $ | 5,314 | ||||
Interest expense |
(6,967 | ) | (5,723 | ) | ||||
Loss on extinguishment of debt |
(17,030 | ) | | |||||
Interest income |
382 | 410 | ||||||
Other loss |
(3,017 | ) | (3,836 | ) | ||||
Loss before income taxes |
$ | (19,192 | ) | $ | (3,835 | ) | ||
15. | CONTINGENCIES |
16. | SUPPLEMENTAL CONSOLIDATING FINANCIAL INFORMATION |
20
Non- | ||||||||||||||||||||||||
Parent/ | Guarantor | Guarantor | Consolidating | |||||||||||||||||||||
Assets | Issuer | Co-Issuer | Subsidiaries | Subsidiaries | Adjustments | Total | ||||||||||||||||||
Current assets: |
||||||||||||||||||||||||
Cash and cash equivalents |
$ | 36,770 | $ | 3,715 | $ | 161 | $ | 4,338 | $ | | $ | 44,984 | ||||||||||||
Receivables: |
||||||||||||||||||||||||
Trade |
| 13,880 | 9 | 35,887 | | 49,776 | ||||||||||||||||||
Contractual third-party reclamation
receivables |
| | 127 | 7,511 | | 7,638 | ||||||||||||||||||
Intercompany receivable/payable |
(20,135 | ) | | 10,050 | (23,504 | ) | 33,589 | | ||||||||||||||||
Other |
161 | 221 | 8,973 | 109 | (5,844 | ) | 3,620 | |||||||||||||||||
(19,974 | ) | 14,101 | 19,159 | 20,003 | 27,745 | 61,034 | ||||||||||||||||||
Inventories |
| 3,808 | 4,209 | 18,163 | | 26,180 | ||||||||||||||||||
Other current assets |
745 | 423 | 554 | 3,739 | | 5,461 | ||||||||||||||||||
Total current assets |
17,541 | 22,047 | 24,083 | 46,243 | 27,745 | 137,659 | ||||||||||||||||||
Property, plant and equipment: |
||||||||||||||||||||||||
Land and mineral rights |
| 1,156 | 17,806 | 64,931 | | 83,893 | ||||||||||||||||||
Capitalized asset retirement cost |
| 239 | 20,463 | 94,154 | | 114,856 | ||||||||||||||||||
Plant and equipment |
2,619 | 216,391 | 117,447 | 172,556 | | 509,013 | ||||||||||||||||||
2,619 | 217,786 | 155,716 | 331,641 | | 707,762 | |||||||||||||||||||
Less accumulated depreciation,
depletion and amortization |
(2,066 | ) | (44,709 | ) | (84,290 | ) | (168,316 | ) | | (299,381 | ) | |||||||||||||
Net property, plant and equipment |
553 | 173,077 | 71,426 | 163,325 | | 408,381 | ||||||||||||||||||
Advanced coal royalties |
| | 848 | 2,684 | | 3,532 | ||||||||||||||||||
Reclamation deposits |
| | | 73,007 | | 73,007 | ||||||||||||||||||
Restricted investments and bond collateral |
12,251 | 5,976 | 10,975 | 26,499 | | 55,701 | ||||||||||||||||||
Contractual third-party reclamation
receivables, less current portion |
| | 412 | 88,102 | | 88,514 | ||||||||||||||||||
Deferred income taxes |
| | | | 2,900 | 2,900 | ||||||||||||||||||
Intangible assets |
| 5,793 | | 344 | | 6,137 | ||||||||||||||||||
Investment in subsidiaries |
157,792 | | (717 | ) | 3,770 | (160,845 | ) | | ||||||||||||||||
Other assets |
7,385 | | 1,387 | 3,384 | | 12,156 | ||||||||||||||||||
Total assets |
$ | 195,522 | $ | 206,893 | $ | 108,414 | $ | 407,358 | $ | (130,200 | ) | $ | 787,987 | |||||||||||
21
Non- | ||||||||||||||||||||||||
Parent/ | Guarantor | Guarantor | Consolidating | |||||||||||||||||||||
Liabilities and Stockholders Deficit | Issuer | Co-Issuer | Subsidiaries | Subsidiaries | Adjustments | Total | ||||||||||||||||||
Current liabilities |
||||||||||||||||||||||||
Current installments of long-term debt |
$ | (735 | ) | $ | | $ | 2,296 | $ | 16,112 | $ | | $ | 17,673 | |||||||||||
Accounts payable and accrued expenses: |
||||||||||||||||||||||||
Trade |
2,688 | 9,733 | 3,067 | 35,015 | (6,149 | ) | 44,354 | |||||||||||||||||
Production taxes |
| 334 | 1,354 | 26,779 | | 28,467 | ||||||||||||||||||
Workers compensation |
951 | | | | | 951 | ||||||||||||||||||
Postretirement medical benefits |
12,198 | | | 1,383 | | 13,581 | ||||||||||||||||||
SERP |
304 | | | | | 304 | ||||||||||||||||||
Deferred revenue |
| 8,689 | 37 | 1,868 | | 10,594 | ||||||||||||||||||
Asset retirement obligations |
| | 3,184 | 12,051 | | 15,235 | ||||||||||||||||||
Other current liabilities |
2,571 | | 2,000 | 2,925 | 28 | 7,524 | ||||||||||||||||||
Total current liabilities |
17,977 | 18,756 | 11,938 | 96,133 | (6,121 | ) | 138,683 | |||||||||||||||||
Long-term debt, less current installments |
143,352 | | 4,897 | 128,440 | | 276,689 | ||||||||||||||||||
Workers compensation, less current portion |
9,360 | | | | | 9,360 | ||||||||||||||||||
Excess of pneumoconiosis benefit obligation over
trust assets |
2,726 | | | | | 2,726 | ||||||||||||||||||
Postretirement medical benefits, less current
portion |
168,953 | | | 27,773 | | 196,726 | ||||||||||||||||||
Pension and SERP obligations, less current portion |
15,709 | 150 | | 3,824 | | 19,683 | ||||||||||||||||||
Deferred revenue, less current portion |
| 65,050 | | 7,975 | | 73,025 | ||||||||||||||||||
Asset retirement obligations, less current portion |
| 728 | 29,253 | 197,136 | | 227,117 | ||||||||||||||||||
Intangible liabilities |
| 8,409 | | | | 8,409 | ||||||||||||||||||
Other liabilities |
473 | | 4,518 | 1,435 | 3,070 | 9,496 | ||||||||||||||||||
Intercompany receivable/payable |
10,899 | | 6,878 | 28,507 | (46,284 | ) | | |||||||||||||||||
Total liabilities |
369,449 | 93,093 | 57,484 | 491,223 | (49,335 | ) | 961,914 | |||||||||||||||||
Shareholders Deficit |
||||||||||||||||||||||||
Preferred stock |
160 | | | | | 160 | ||||||||||||||||||
Common stock |
32,887 | 5 | 110 | 132 | (247 | ) | 32,887 | |||||||||||||||||
Other paid-in capital |
120,748 | 52,699 | 16,583 | 52,717 | (121,999 | ) | 120,748 | |||||||||||||||||
Accumulated other comprehensive loss |
(57,507 | ) | (200 | ) | 94 | (14,113 | ) | 14,219 | (57,507 | ) | ||||||||||||||
Accumulated deficit |
(264,632 | ) | 61,296 | 34,143 | (122,601 | ) | 27,162 | (264,632 | ) | |||||||||||||||
Total Westmoreland Coal Company shareholders
deficit |
(168,344 | ) | 113,800 | 50,930 | (83,865 | ) | (80,865 | ) | (168,344 | ) | ||||||||||||||
Noncontrolling interest |
(5,583 | ) | | | | | (5,583 | ) | ||||||||||||||||
Total deficit |
(173,927 | ) | 113,800 | 50,930 | (83,865 | ) | (80,865 | ) | (173,927 | ) | ||||||||||||||
Total liabilities and stockholders deficit |
$ | 195,522 | $ | 206,893 | $ | 108,414 | $ | 407,358 | $ | (130,200 | ) | $ | 787,987 | |||||||||||
22
Non- | ||||||||||||||||||||||||
Parent/ | Guarantor | Guarantor | Consolidating | |||||||||||||||||||||
Assets | Issuer | Co-Issuer | Subsidiaries | Subsidiaries | Adjustments | Total | ||||||||||||||||||
Current assets: |
||||||||||||||||||||||||
Cash and cash equivalents |
$ | 271 | $ | 880 | $ | | $ | 4,624 | $ | | $ | 5,775 | ||||||||||||
Receivables: |
||||||||||||||||||||||||
Trade |
| 14,148 | 65 | 36,365 | | 50,578 | ||||||||||||||||||
Contractual third-party reclamation
receivables |
| | 135 | 7,608 | | 7,743 | ||||||||||||||||||
Intercompany receivable/payable |
| | 10,193 | (21,544 | ) | 11,351 | | |||||||||||||||||
Other |
66 | 198 | 4,917 | 1,530 | (2,166 | ) | 4,545 | |||||||||||||||||
66 | 14,346 | 15,310 | 23,959 | 9,185 | 62,866 | |||||||||||||||||||
Inventories |
| 1,935 | 4,624 | 17,012 | | 23,571 | ||||||||||||||||||
Other current assets |
796 | 224 | 469 | 3,944 | (98 | ) | 5,335 | |||||||||||||||||
Total current assets |
1,133 | 17,385 | 20,403 | 49,539 | 9,087 | 97,547 | ||||||||||||||||||
Property, plant and equipment: |
||||||||||||||||||||||||
Land and mineral rights |
| 1,156 | 17,806 | 64,862 | | 83,824 | ||||||||||||||||||
Capitalized asset retirement cost |
| 239 | 20,463 | 94,154 | | 114,856 | ||||||||||||||||||
Plant and equipment |
2,611 | 215,851 | 117,360 | 170,839 | | 506,661 | ||||||||||||||||||
2,611 | 217,246 | 155,629 | 329,855 | | 705,341 | |||||||||||||||||||
Less accumulated depreciation, depletion and
amortization |
(1,987 | ) | (42,156 | ) | (82,239 | ) | (162,004 | ) | | (288,386 | ) | |||||||||||||
Net property, plant and equipment |
624 | 175,090 | 73,390 | 167,851 | | 416,955 | ||||||||||||||||||
Advanced coal royalties |
| | 998 | 2,697 | | 3,695 | ||||||||||||||||||
Reclamation deposits |
| | | 72,274 | | 72,274 | ||||||||||||||||||
Restricted investments and bond collateral |
11,816 | 8,563 | 10,956 | 24,049 | | 55,384 | ||||||||||||||||||
Contractual third-party reclamation receivables |
| | 390 | 87,349 | | 87,739 | ||||||||||||||||||
Deferred income taxes |
| | | | 2,458 | 2,458 | ||||||||||||||||||
Intangible assets |
| 6,203 | | 352 | | 6,555 | ||||||||||||||||||
Investment in subsidiaries |
115,612 | | (717 | ) | 3,770 | (118,665 | ) | | ||||||||||||||||
Other assets |
2,060 | 401 | 1,683 | 3,555 | | 7,699 | ||||||||||||||||||
Total assets |
$ | 131,245 | $ | 207,642 | $ | 107,103 | $ | 411,436 | $ | (107,120 | ) | $ | 750,306 | |||||||||||
23
Non- | ||||||||||||||||||||||||
Parent/ | Guarantor | Guarantor | Consolidating | |||||||||||||||||||||
Liabilities and Stockholders Deficit | Issuer | Co-Issuer | Subsidiaries | Subsidiaries | Adjustments | Total | ||||||||||||||||||
Current liabilities |
||||||||||||||||||||||||
Current installments of long-term debt |
$ | | $ | | $ | 2,255 | $ | 12,718 | $ | | $ | 14,973 | ||||||||||||
Accounts payable and accrued expenses: |
||||||||||||||||||||||||
Trade |
5,187 | 8,549 | 3,283 | 31,709 | (2,481 | ) | 46,247 | |||||||||||||||||
Production taxes |
| 2 | 1,084 | 25,231 | | 26,317 | ||||||||||||||||||
Workers compensation |
954 | | | | | 954 | ||||||||||||||||||
Postretirement medical benefits |
12,198 | | | 1,383 | | 13,581 | ||||||||||||||||||
SERP |
304 | | | | | 304 | ||||||||||||||||||
Deferred revenue |
| 8,805 | 349 | 1,055 | | 10,209 | ||||||||||||||||||
Asset retirement obligations |
| | 3,371 | 11,143 | | 14,514 | ||||||||||||||||||
Other current liabilities |
249 | 782 | 3,138 | 2,164 | (92 | ) | 6,241 | |||||||||||||||||
Total current liabilities |
18,892 | 18,138 | 13,480 | 85,403 | (2,573 | ) | 133,340 | |||||||||||||||||
Long-term debt, less current installments |
13,671 | 46,648 | 15,166 | 133,246 | | 208,731 | ||||||||||||||||||
Revolving lines of credit, less current portion |
| | 16,900 | 1,500 | | 18,400 | ||||||||||||||||||
Workers compensation, less current portion |
9,424 | | | | | 9,424 | ||||||||||||||||||
Excess of pneumoconiosis benefit obligation over
trust assets |
2,246 | | | | | 2,246 | ||||||||||||||||||
Postretirement medical benefits, less current
portion |
169,677 | | | 27,602 | | 197,279 | ||||||||||||||||||
Pension and SERP obligations, less current portion |
16,105 | 154 | | 4,203 | | 20,462 | ||||||||||||||||||
Deferred revenue, less current portion |
| 67,308 | | 8,087 | | 75,395 | ||||||||||||||||||
Asset retirement obligations, less current portion |
| 715 | 28,967 | 197,447 | | 227,129 | ||||||||||||||||||
Intangible liabilities |
| 8,663 | | | | 8,663 | ||||||||||||||||||
Other liabilities |
4,153 | | 3,149 | 1,409 | 2,881 | 11,592 | ||||||||||||||||||
Intercompany receivable/payable |
59,432 | | (19,590 | ) | 26,424 | (66,266 | ) | | ||||||||||||||||
Total liabilities |
293,600 | 141,626 | 58,072 | 485,321 | (65,958 | ) | 912,661 | |||||||||||||||||
Shareholders Deficit |
||||||||||||||||||||||||
Preferred stock |
160 | | | | | 160 | ||||||||||||||||||
Common stock |
27,901 | 5 | 110 | 132 | (247 | ) | 27,901 | |||||||||||||||||
Other paid-in capital |
98,466 | 30 | 16,036 | 53,264 | (69,330 | ) | 98,466 | |||||||||||||||||
Accumulated other comprehensive income |
(57,680 | ) | (203 | ) | 120 | (14,353 | ) | 14,436 | (57,680 | ) | ||||||||||||||
Accumulated earnings (deficit) |
(226,740 | ) | 66,184 | 32,765 | (112,928 | ) | 13,979 | (226,740 | ) | |||||||||||||||
Total Westmoreland Coal Company shareholders
deficit |
(157,893 | ) | 66,016 | 49,031 | (73,885 | ) | (41,162 | ) | (157,893 | ) | ||||||||||||||
Noncontrolling interest |
(4,462 | ) | | | | | (4,462 | ) | ||||||||||||||||
Total equity (deficit) |
(162,355 | ) | 66,016 | 49,031 | (73,885 | ) | (41,162 | ) | (162,355 | ) | ||||||||||||||
Total liabilities and stockholders deficit |
$ | 131,245 | $ | 207,642 | $ | 107,103 | $ | 411,436 | $ | (107,120 | ) | $ | 750,306 | |||||||||||
24
Non- | ||||||||||||||||||||||||
Parent/ | Guarantor | Guarantor | Consolidating | |||||||||||||||||||||
Issuer | Co-Issuer | Subsidiaries | Subsidiaries | Adjustments | Total | |||||||||||||||||||
Revenues |
$ | | $ | 23,628 | $ | 14,824 | $ | 103,197 | $ | (13,885 | ) | $ | 127,764 | |||||||||||
Costs, expenses: |
||||||||||||||||||||||||
Cost of sales |
| 15,559 | 11,152 | 84,684 | (13,885 | ) | 97,510 | |||||||||||||||||
Depreciation, depletion and amortization |
79 | 2,553 | 2,051 | 6,562 | | 11,245 | ||||||||||||||||||
Selling and administrative |
2,379 | 897 | 1,008 | 5,021 | | 9,305 | ||||||||||||||||||
Heritage health benefit expenses |
3,576 | | | 202 | | 3,778 | ||||||||||||||||||
Loss on sales of assets |
| | | 83 | | 83 | ||||||||||||||||||
Other operating income |
| | (1,597 | ) | | | (1,597 | ) | ||||||||||||||||
6,034 | 19,009 | 12,614 | 96,552 | (13,885 | ) | 120,324 | ||||||||||||||||||
Operating income (loss) |
(6,034 | ) | 4,619 | 2,210 | 6,645 | | 7,440 | |||||||||||||||||
Other income (expense): |
||||||||||||||||||||||||
Interest expense |
(3,073 | ) | (428 | ) | (301 | ) | (3,184 | ) | 19 | (6,967 | ) | |||||||||||||
Loss on extinguishment of debt |
(7,873 | ) | (9,073 | ) | (84 | ) | | | (17,030 | ) | ||||||||||||||
Interest income |
60 | 6 | 68 | 267 | (19 | ) | 382 | |||||||||||||||||
Other income (loss) |
(3,079 | ) | | 33 | 29 | | (3,017 | ) | ||||||||||||||||
(13,965 | ) | (9,495 | ) | (284 | ) | (2,888 | ) | | (26,632 | ) | ||||||||||||||
Income (loss) from operations before income
taxes |
(19,999 | ) | (4,876 | ) | 1,926 | 3,757 | | (19,192 | ) | |||||||||||||||
Equity in income of subsidiaries |
(1,104 | ) | | | | 1,104 | | |||||||||||||||||
(18,895 | ) | (4,876 | ) | 1,926 | 3,757 | (1,104 | ) | (19,192 | ) | |||||||||||||||
Income tax (benefit) expense from operations |
(163 | ) | | 547 | 1,566 | (2,410 | ) | (460 | ) | |||||||||||||||
Net income (loss) |
(18,732 | ) | (4,876 | ) | 1,379 | 2,191 | 1,306 | (18,732 | ) | |||||||||||||||
Less net income attributable to
noncontrolling interest |
(1,121 | ) | | | | | (1,121 | ) | ||||||||||||||||
Net income (loss) attributable to the Parent
company |
$ | (17,611 | ) | $ | (4,876 | ) | $ | 1,379 | $ | 2,191 | $ | 1,306 | $ | (17,611 | ) | |||||||||
25
Non- | ||||||||||||||||||||||||
Parent/ | Guarantor | Guarantor | Consolidating | |||||||||||||||||||||
Issuer | Co-Issuer | Subsidiaries | Subsidiaries | Adjustments | Total | |||||||||||||||||||
Revenues |
$ | (33 | ) | $ | 22,889 | $ | 12,721 | $ | 103,253 | $ | (12,391 | ) | $ | 126,439 | ||||||||||
Costs, expenses: |
||||||||||||||||||||||||
Cost of sales |
| 15,045 | 11,637 | 83,419 | (12,424 | ) | 97,677 | |||||||||||||||||
Depreciation, depletion and amortization |
99 | 2,537 | 1,921 | 6,835 | | 11,392 | ||||||||||||||||||
Selling and administrative |
2,356 | 1,136 | 1,115 | 5,369 | | 9,976 | ||||||||||||||||||
Heritage health benefit expenses |
3,681 | | | 234 | | 3,915 | ||||||||||||||||||
Loss on sales of assets |
| | | 71 | | 71 | ||||||||||||||||||
Other operating income |
| | (1,906 | ) | | | (1,906 | ) | ||||||||||||||||
6,136 | 18,718 | 12,767 | 95,928 | (12,424 | ) | 121,125 | ||||||||||||||||||
Operating income (loss) |
(6,169 | ) | 4,171 | (46 | ) | 7,325 | 33 | 5,314 | ||||||||||||||||
Other income (expense): |
||||||||||||||||||||||||
Interest expense |
(724 | ) | (1,218 | ) | (641 | ) | (3,140 | ) | | (5,723 | ) | |||||||||||||
Interest income |
53 | 18 | (133 | ) | 477 | (5 | ) | 410 | ||||||||||||||||
Other income (loss) |
(4,424 | ) | 5 | | 583 | | (3,836 | ) | ||||||||||||||||
(5,095 | ) | (1,195 | ) | (774 | ) | (2,080 | ) | (5 | ) | (9,149 | ) | |||||||||||||
Income (loss) from operations before income
taxes |
(11,264 | ) | 2,976 | (820 | ) | 5,245 | 28 | (3,835 | ) | |||||||||||||||
Equity in income of subsidiaries |
(8,408 | ) | | | | 8,408 | | |||||||||||||||||
(2,856 | ) | 2,976 | (820 | ) | 5,245 | (8,380 | ) | (3,835 | ) | |||||||||||||||
Income tax (benefit) expense from operations |
| 32 | (246 | ) | 2,737 | (2,613 | ) | (90 | ) | |||||||||||||||
Net income (loss) |
(2,856 | ) | 2,944 | (574 | ) | 2,508 | (5,767 | ) | (3,745 | ) | ||||||||||||||
Less net income attributable to
noncontrolling interest |
| | | | (890 | ) | (890 | ) | ||||||||||||||||
Net income (loss) attributable to the Parent
company |
$ | (2,856 | ) | $ | 2,944 | $ | (574 | ) | $ | 2,508 | $ | (4,877 | ) | $ | (2,855 | ) | ||||||||
26
Non- | ||||||||||||||||||||||||
Parent/ | Guarantor | Guarantor | Consolidating | |||||||||||||||||||||
Statements of Cash Flows | Issuer | Co-Issuer | Subsidiaries | Subsidiaries | Adjustments | Total | ||||||||||||||||||
Cash flows from operating activities: |
||||||||||||||||||||||||
Net income (loss) |
$ | (18,732 | ) | $ | (4,875 | ) | $ | 1,378 | $ | 2,192 | $ | 1,305 | $ | (18,732 | ) | |||||||||
Adjustments to reconcile net loss to net cash provided by
operation activities: |
||||||||||||||||||||||||
Equity in income of subsidiaries |
(1,104 | ) | | | | 1,104 | | |||||||||||||||||
Depreciation, depletion, and amortization |
79 | 2,553 | 2,051 | 6,562 | | 11,245 | ||||||||||||||||||
Accretion of asset retirement obligation and receivable |
| 14 | 758 | 1,928 | | 2,700 | ||||||||||||||||||
Amortization of intangible assets and liabilities, net |
| 155 | | 8 | | 163 | ||||||||||||||||||
Non-cash tax benefits |
| | | | (110 | ) | (110 | ) | ||||||||||||||||
Share-based compensation |
1,653 | | | | | 1,653 | ||||||||||||||||||
Loss on sale of assets |
| | | 83 | | 83 | ||||||||||||||||||
Amortization of deferred financing costs |
377 | (21 | ) | 109 | 170 | | 635 | |||||||||||||||||
Loss on extinguishment of debt |
7,873 | 9,073 | 84 | | | 17,030 | ||||||||||||||||||
Gain (loss) on derivative |
3,079 | | | | | 3,079 | ||||||||||||||||||
Changes in operating assets and liabilities: |
||||||||||||||||||||||||
Receivables, net |
(95 | ) | 245 | (4,001 | ) | 3,803 | 3,678 | 3,630 | ||||||||||||||||
Inventories |
| (1,873 | ) | 415 | (1,151 | ) | | (2,609 | ) | |||||||||||||||
Excess of pneumoconiosis benefit obligation over trust assets |
480 | | | | | 480 | ||||||||||||||||||
Accounts payable and accrued expenses |
(2,499 | ) | 533 | (147 | ) | 7,791 | (3,669 | ) | 2,009 | |||||||||||||||
Deferred revenue |
| (2,374 | ) | (312 | ) | 701 | | (1,985 | ) | |||||||||||||||
Accrual for workers compensation |
(67 | ) | | | | | (67 | ) | ||||||||||||||||
Asset retirement obligations |
| | (673 | ) | (1,988 | ) | | (2,661 | ) | |||||||||||||||
Accrual for postretirement medical benefits |
(870 | ) | | | 245 | | (625 | ) | ||||||||||||||||
Pension and SERP obligations |
(193 | ) | | | (201 | ) | | (394 | ) | |||||||||||||||
Other assets and liabilities |
2,425 | (314 | ) | 1,202 | (2,425 | ) | (230 | ) | 658 | |||||||||||||||
Net cash provided by (used in) operating activities |
(7,594 | ) | 3,116 | 864 | 17,718 | 2,078 | 16,182 | |||||||||||||||||
Cash flows from investing activities: |
||||||||||||||||||||||||
Distributions received by subsidiaries |
11,700 | | | | (11,700 | ) | | |||||||||||||||||
Additions to property, plant and equipment |
(8 | ) | (227 | ) | (112 | ) | (2,576 | ) | | (2,923 | ) | |||||||||||||
Change in restricted investments and bond collateral and
reclamation deposits |
(440 | ) | 2,587 | (45 | ) | (3,182 | ) | | (1,080 | ) | ||||||||||||||
Net proceeds from sales of assets |
| | | 22 | | 22 | ||||||||||||||||||
Receivable from customer for property and equipment purchases |
| | | (1,903 | ) | | (1,903 | ) | ||||||||||||||||
Net cash provided by (used in) investing activities |
11,252 | 2,360 | (157 | ) | (7,639 | ) | (11,700 | ) | (5,884 | ) | ||||||||||||||
Cash flows from financing activities: |
||||||||||||||||||||||||
Bank overdrafts |
(146 | ) | | (674 | ) | 928 | | 108 | ||||||||||||||||
Borrowings of long-term debt, net of debt discount |
142,500 | | | | | 142,500 | ||||||||||||||||||
Repayments of long-term debt |
(2,532 | ) | (46,220 | ) | (10,230 | ) | (1,409 | ) | | (60,391 | ) | |||||||||||||
Borrowings on revolving lines of credit |
| 1,500 | 12,200 | 37,000 | | 50,700 | ||||||||||||||||||
Repayments on revolving lines of credit |
| (1,500 | ) | (29,100 | ) | (38,500 | ) | | (69,100 | ) | ||||||||||||||
Debt issuance and other refinancing costs |
(5,779 | ) | (9,077 | ) | 100 | | | (14,756 | ) | |||||||||||||||
Dividends/distributions |
(20,281 | ) | | | (11,700 | ) | 11,700 | (20,281 | ) | |||||||||||||||
Exercise of stock options |
131 | | | | | 131 | ||||||||||||||||||
Transactions with Parent/affiliates |
(81,051 | ) | 52,656 | 27,158 | 3,315 | (2,078 | ) | | ||||||||||||||||
Net cash provided by (used in) financing activities |
32,842 | (2,641 | ) | (546 | ) | (10,366 | ) | 9,622 | 28,911 | |||||||||||||||
Net increase (decrease) in cash and cash equivalents |
36,500 | 2,835 | 161 | (287 | ) | | 39,209 | |||||||||||||||||
Cash and cash equivalents, beginning of year |
271 | 880 | | 4,624 | | 5,775 | ||||||||||||||||||
Cash and cash equivalents, end of year |
$ | 36,771 | $ | 3,715 | $ | 161 | $ | 4,337 | $ | | 44,984 | |||||||||||||
27
Non- | ||||||||||||||||||||||||
Parent/ | Guarantor | Guarantor | Consolidating | |||||||||||||||||||||
Statements of Cash Flows | Issuer | Co-Issuer | Subsidiaries | Subsidiaries | Adjustments | Total | ||||||||||||||||||
Cash flows from operating activities: |
||||||||||||||||||||||||
Net income (loss) |
$ | (11,264 | ) | $ | 2,943 | $ | (573 | ) | $ | 2,507 | $ | 2,642 | $ | (3,745 | ) | |||||||||
Adjustments to reconcile net income (loss) to net cash provided
by operation activities: |
||||||||||||||||||||||||
Equity in income of subsidiaries |
(8,408 | ) | | | | 8,408 | | |||||||||||||||||
Depreciation, depletion, and amortization |
99 | 2,537 | 1,921 | 6,835 | | 11,392 | ||||||||||||||||||
Accretion of asset retirement obligation and receivable |
| 13 | 752 | 2,238 | | 3,003 | ||||||||||||||||||
Amortization of intangible assets and liabilities, net |
| 155 | | (70 | ) | | 85 | |||||||||||||||||
Share-based compensation |
1,363 | | | | | 1,363 | ||||||||||||||||||
Loss on sale of assets |
| | | 71 | | 71 | ||||||||||||||||||
Non-cash interest expense |
388 | | | | | 388 | ||||||||||||||||||
Amortization of deferred financing costs |
335 | (86 | ) | 125 | 149 | | 523 | |||||||||||||||||
Gain on impairments and sales of investment securities |
(97 | ) | | | (562 | ) | | (659 | ) | |||||||||||||||
Gain (loss) on derivative |
4,521 | (6 | ) | | | | 4,515 | |||||||||||||||||
Changes in operating assets and liabilities: |
||||||||||||||||||||||||
Receivables, net |
359 | (432 | ) | (2,540 | ) | (2,609 | ) | 1,356 | (3,866 | ) | ||||||||||||||
Inventories |
| (1,363 | ) | 116 | (255 | ) | | (1,502 | ) | |||||||||||||||
Excess of pneumoconiosis benefit obligation over trust assets |
347 | | | | | 347 | ||||||||||||||||||
Accounts payable and accrued expenses |
(322 | ) | 3,069 | 134 | 2,597 | (1,708 | ) | 3,770 | ||||||||||||||||
Deferred revenue |
| (572 | ) | | 1,189 | | 617 | |||||||||||||||||
Accrual for workers compensation |
(51 | ) | | | | | (51 | ) | ||||||||||||||||
Asset retirement obligations |
| | (188 | ) | (1,687 | ) | | (1,875 | ) | |||||||||||||||
Accrual for postretirement medical benefits |
(522 | ) | | | 161 | | (361 | ) | ||||||||||||||||
Pension and SERP obligations |
280 | 1 | | (320 | ) | | (39 | ) | ||||||||||||||||
Other assets and liabilities |
(634 | ) | (187 | ) | 680 | (417 | ) | (122 | ) | (680 | ) | |||||||||||||
Net cash provided by (used in) operating activities |
(13,606 | ) | 6,072 | 427 | 9,827 | 10,576 | 13,296 | |||||||||||||||||
Cash flows from investing activities: |
||||||||||||||||||||||||
Distributions received by subsidiaries |
8,100 | | | | (8,100 | ) | | |||||||||||||||||
Additions to property, plant and equipment |
(440 | ) | (68 | ) | (635 | ) | (3,194 | ) | | (4,337 | ) | |||||||||||||
Change in restricted investments and bond collateral and
reclamation deposits |
(579 | ) | 1,691 | 131 | (1,835 | ) | | (592 | ) | |||||||||||||||
Net proceeds from sales of assets |
| | | 379 | | 379 | ||||||||||||||||||
Proceeds from the sale of investments |
156 | | | 963 | | 1,119 | ||||||||||||||||||
Receivable from customer for property and equipment purchases |
| | | (510 | ) | | (510 | ) | ||||||||||||||||
Net cash provided by (used in) investing activities |
7,237 | 1,623 | (504 | ) | (4,197 | ) | (8,100 | ) | (3,941 | ) | ||||||||||||||
Cash flows from financing activities: |
||||||||||||||||||||||||
Bank overdrafts |
(76 | ) | | (14 | ) | 980 | | 890 | ||||||||||||||||
Borrowings of long-term debt |
| | | | | | ||||||||||||||||||
Repayments of long-term debt |
| (5,405 | ) | (1,118 | ) | (1,589 | ) | | (8,112 | ) | ||||||||||||||
Borrowings on revolving lines of credit |
| 3,800 | 20,100 | 4,500 | | 28,400 | ||||||||||||||||||
Repayments on revolving lines of credit |
| | (18,800 | ) | (4,500 | ) | | (23,300 | ) | |||||||||||||||
Debt issuance costs |
| | | | | | ||||||||||||||||||
Exercise of stock options |
8 | | | | | 8 | ||||||||||||||||||
Dividends/distributions |
| | | (8,100 | ) | 8,100 | | |||||||||||||||||
Transactions with Parent/affiliates |
6,186 | (163 | ) | (75 | ) | 4,628 | (10,576 | ) | | |||||||||||||||
Net cash provided by (used in) financing activities |
6,118 | (1,768 | ) | 93 | (4,081 | ) | (2,476 | ) | (2,114 | ) | ||||||||||||||
Net increase (decrease) in cash and cash equivalents |
(251 | ) | 5,927 | 16 | 1,549 | | 7,241 | |||||||||||||||||
Cash and cash equivalents, beginning of year |
755 | 138 | | 9,626 | | 10,519 | ||||||||||||||||||
Cash and cash equivalents, end of year |
$ | 504 | $ | 6,065 | $ | 16 | $ | 11,175 | $ | | 17,760 | |||||||||||||
28
| changes in our postretirement medical benefit and pension obligations and the impact of recently enacted healthcare legislation; |
| changes in our black lung obligations, changes in our experience related to black lung claims, and the impact of recently enacted healthcare legislation; |
| our potential inability to expand or continue current coal operations due to limitations in obtaining bonding capacity for new mining permits; |
| our potential inability to maintain compliance with debt covenant and waiver agreement requirements; |
| the potential inability of our subsidiaries to pay dividends to us due to restrictions in our debt arrangements, reductions in planned coal deliveries or other business factors; |
| risks associated with the structure of ROVAs contracts with its lenders, coal suppliers and power purchaser, which could dramatically affect the overall profitability of ROVA; |
| the effect of EPA inquiries and regulations on the operations of ROVA; |
| the effect of prolonged maintenance or unplanned outages at our operations or those of our major power generating customers, including unplanned outages at our customers due to the impact of weather-related variances; |
| future legislation and changes in regulations, governmental policies and taxes, including those aimed at reducing emissions of elements such as mercury, sulfur dioxides, nitrogen oxides, particulate matter or greenhouse gases; and |
| the other factors that are described in Risk Factors herein and under Part II, Item 1A and under Part I, Item 1A of the 2010 Form 10-K. |
29
Three Months Ended | ||||||||
March 31, | ||||||||
2011 | 2010 | |||||||
(In thousands) | ||||||||
Loss on extinguishment of debt |
$ | (17,030 | ) | $ | | |||
Fair value adjustment on derivatives and
related amortization of debt discount |
(3,215 | ) | (4,824 | ) | ||||
Impact |
$ | (20,245 | ) | $ | (4,824 | ) | ||
Items recorded in the three months ended March 31, 2011 |
- | As a result of the Parent Notes offering, we recorded $17.0 million of loss on extinguishment of debt. The loss included a $9.1 million make-whole payment for ROVAs debt and $7.9 million of non-cash write-offs of unamortized discount on debt and related capitalized debt costs and convertible debt conversion expense. |
- | Upon the retirement of our convertible debt, we recorded an expense of $3.1 million resulting from the mark-to-market accounting for the conversion feature in the notes with $0.1 million of interest expense of a related debt discount. |
30
Items recorded in the three months ended March 31, 2010 |
- | We recorded an expense of $4.5 million resulting from the mark-to-market accounting of the conversion feature in our convertible notes with $0.3 million of interest expense of a related debt discount. |
Three Months | ||||
Ended | ||||
March 31, 2011 | ||||
(In millions) | ||||
Increase in our coal segment operating income primarily
driven by the expiration of an unprofitable coal contract at our
Rosebud Mine |
$ | 1.5 | ||
Increase in interest expense primarily due to higher overall
debt levels resulting from the Parent Notes offering |
(1.4 | ) | ||
Decrease in other income primarily due to gains on sales of
securities during the first quarter of 2010 |
(0.6 | ) | ||
Increase in our power segment operating income resulting
primarily from contractual price increases |
0.4 | |||
Increase in income tax benefit related to lower taxable income |
0.4 | |||
Increase due to other factors |
0.3 | |||
$ | 0.6 | |||
31
Three Months Ended March 31, | ||||||||||||||||
Increase / (Decrease) | ||||||||||||||||
2011 | 2010 | $ | % | |||||||||||||
Revenues (in thousands) |
$ | 104,136 | $ | 103,550 | $ | 586 | 0.6 | % | ||||||||
Operating income (in thousands) |
8,819 | 7,352 | 1,467 | 20.0 | % | |||||||||||
Adjusted EBITDA (in thousands)1 |
21,285 | 20,237 | 1,048 | 5.2 | % | |||||||||||
Tons sold millions of equivalent tons |
5.6 | 6.3 | (0.7 | ) | (11.1 | )% | ||||||||||
Operating income per ton sold |
$ | 1.57 | $ | 1.17 | $ | 0.40 | $ | 34.9 | % |
1) | Adjusted EBITDA is defined and reconciled to net loss at the end of this Results of Operations section. |
Three Months Ended March 31, | ||||||||||||||||
Increase / (Decrease) | ||||||||||||||||
2011 | 2010 | $ | % | |||||||||||||
(In thousands) | ||||||||||||||||
Revenues |
$ | 23,628 | $ | 22,889 | $ | 739 | 3.2 | % | ||||||||
Operating income |
4,619 | 4,172 | 447 | 10.7 | % | |||||||||||
Adjusted EBITDA1 |
7,352 | 6,881 | 471 | 6.8 | % | |||||||||||
Megawatts hours |
435 | 435 | | |
1) | Adjusted EBITDA is defined and reconciled to net loss at the end of this Results of Operations section. |
32
Three Months Ended March 31, | ||||||||||||||||
Increase / (Decrease) | ||||||||||||||||
2011 | 2010 | $ | % | |||||||||||||
(In thousands) | ||||||||||||||||
Health care benefits |
$ | 2,454 | $ | 2,676 | $ | (222 | ) | (8.3 | )% | |||||||
Combined benefit fund payments |
686 | 756 | (70 | ) | (9.3 | )% | ||||||||||
Workers compensation benefits |
158 | 136 | 22 | 16.2 | % | |||||||||||
Black lung benefits |
480 | 347 | 133 | 38.3 | % | |||||||||||
Total heritage health benefit expenses |
3,778 | 3,915 | (137 | ) | (3.5 | )% | ||||||||||
Selling and administrative costs |
392 | 340 | 52 | 15.3 | % | |||||||||||
Heritage segment operating loss |
$ | 4,170 | $ | 4,255 | $ | (85 | ) | (2.0 | )% | |||||||
| are used widely by investors to measure a companys 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; and |
33
| 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. |
| 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. |
Three Months Ended March 31, | ||||||||
2011 | 2010 | |||||||
(In thousands) | ||||||||
Reconciliation of Adjusted EBITDA to net loss |
||||||||
Net loss |
$ | (18,732 | ) | $ | (3,745 | ) | ||
Income tax benefit from continuing operations |
(460 | ) | (90 | ) | ||||
Other loss |
3,017 | 3,836 | ||||||
Interest income |
(382 | ) | (410 | ) | ||||
Loss on extinguishment of debt |
17,030 | | ||||||
Interest expense |
6,967 | 5,723 | ||||||
Depreciation, depletion and amortization |
11,245 | 11,392 | ||||||
Accretion of ARO and receivable |
2,700 | 3,003 | ||||||
Amortization of intangible assets and liabilities |
163 | 85 | ||||||
EBITDA |
21,548 | 19,794 | ||||||
Loss on sale of assets |
83 | 71 | ||||||
Share-based compensation |
1,653 | 1,363 | ||||||
Adjusted EBITDA |
$ | 23,284 | $ | 21,228 | ||||
34
Three Months Ended March 31, | ||||||||
2011 | 2010 | |||||||
(In thousands) | ||||||||
Adjusted EBITDA by Segment |
||||||||
Coal |
$ | 21,285 | $ | 20,237 | ||||
Power |
7,352 | 6,881 | ||||||
Heritage |
(4,170 | ) | (4,255 | ) | ||||
Corporate |
(1,183 | ) | (1,635 | ) | ||||
Total |
$ | 23,284 | $ | 21,228 | ||||
35
2011 Remaining | ||||||||
Year-to-date | Expected | |||||||
2011 Actual | Amounts | |||||||
(In millions) | ||||||||
Postretirement medical benefits |
$ | 3.3 | $ | 10.3 | ||||
Pension contributions |
0.9 | 9.3 | ||||||
CBF premiums |
0.7 | 2.0 | ||||||
Workers compensation benefits |
0.2 | 0.8 |
Three Months Ended | ||||||||
March 31, | ||||||||
2011 | 2010 | |||||||
(In thousands) | ||||||||
Cash provided by (used in): |
||||||||
Operating activities |
$ | 16,182 | $ | 13,296 | ||||
Investing activities |
(5,884 | ) | (3,941 | ) | ||||
Financing activities |
28,911 | (2,114 | ) |
36
37
Effect of 1% | ||||
increase | ||||
or 1% decrease | ||||
(In thousands) | ||||
WML revolving line of credit |
$ | |
38
39
(A) | (B) | (C) | (D) | (E) | (F) | (G) | (H) | |||||||||||||||||||||||||
Proposed | Pending | |||||||||||||||||||||||||||||||
Section | Section | Section | Section | Section | Assessments | Legal | ||||||||||||||||||||||||||
Mine Name/ID | 104 S&S | 104(b) | 104(d) | 110(b)(2) | 107(a) | ($) | Fatalities | Action | ||||||||||||||||||||||||
Rosebud Mine & Crusher
Conveyor / 24-01747 |
1 | | | | | | J | | | |||||||||||||||||||||||
Absaloka Mine / 24-00910 |
2 | | 1 | I | | | 10,967 | | | |||||||||||||||||||||||
Savage Mine / 24-00106 |
1 | | | | | | J | | | |||||||||||||||||||||||
Jewett Mine / 41-03164 |
1 | | | | | | J | | | |||||||||||||||||||||||
Beulah Mine / 32-00043 |
| | | | | | | |
(A) | The total number of violations of mandatory health or safety standards that could significantly and substantially contribute to the cause and effect of a coal or other mine safety or health hazard under section 104 of the Mine Safety and Health Act of 1977 (30 U.S.C. 814) for which the operator received a citation from the Mine Safety and Health Administration. | |
(B) | The total number of orders issued under section 104(b) of such Act (30 U.S.C. 814(b)). | |
(C) | The total number of citations and orders for unwarrantable failure of the mine operator to comply with mandatory health or safety standards under section 104(d) of such Act (30 U.S.C. 814(d)). | |
(D) | The total number of flagrant violations under section 110(b)(2) of such Act (30 U.S.C. 820(b)(2)). | |
(E) | The total number of imminent danger orders issued under section 107(a) of such Act (30 U.S.C. 817(a)). | |
(F) | The total dollar value of proposed assessments from the Mine Safety and Health Administration under such Act (30 U.S.C. 801 et seq.). | |
(G) | The total number of mining-related fatalities. | |
(H) | Any pending legal action before the Federal Mine Safety and Health Review Commission involving such coal or other mine. | |
(I) | Absaloka Mine received an unwarrantable failure citation for failure to comply with a mandatory standard as a dangerous amount of coal dust was allowed to accumulate under the return side of Belt #1, where the belt leaves the primary crusher. Corrective measures for this condition were not noted in the Plant Examination Book for a period of 24 hours. | |
(J) | Not assessed as of April 30, 2011. |
40
10.1 | Form of Restricted Stock Unit Agreement with performance-based vesting |
|||
31.1 | Certification of Chief Executive Officer pursuant to Rule 13a-14(a) |
|||
31.2 | Certification of Chief Financial Officer pursuant to Rule 13a-14(a) |
|||
32 | Certifications of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C.
Section 1350 |
41
WESTMORELAND COAL COMPANY |
||||
Date: May 9, 2011 | /s/ Kevin A. Paprzycki | |||
Kevin A. Paprzycki | ||||
Chief Financial Officer and Treasurer
(A Duly Authorized Officer) |
||||
42
Incorporated by Reference | |||||||||||||
Exhibit Number |
Exhibit Description | Form | File Number |
Exhibit | Filing Date | Filed Herewith |
|||||||
10.1
|
Form of Restricted Stock Unit Agreement with Performance-based Vesting | 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 |
43
Name of Recipient: |
||
Performance-Based RSUs at Grant Date: |
||
Performance Criterion:
|
3-year Cumulative Free Cash Flow | |
Grant Date:
|
April 1, 2011 |
1. | Issuance of Restricted Stock Units. The performance-contingent RSUs are issued to
the Recipient on the Grant Date set forth above, in consideration of employment services
rendered and to be rendered by the Recipient to the Company. Each RSU represents one share of
the Companys common stock, $2.50 par value per share (the Common Stock) upon vesting in
accordance with Section 3. Unless and until performance is completed and the RSUs vest,
Recipient will have no right to receive the shares of Common Stock. |
2. | Issuance of RSUs. |
a. | Performance Period. The Performance Period consists of a cumulative
three-year measurement period. |
b. | Award. Subject to the terms of this Agreement and the Plan, the
Recipient is hereby granted the opportunity to earn the RSUs as shown above in
accordance with the terms of the remainder of this Agreement. |
c. | Settlement of Awards. |
i. | Form of Settlement. RSUs will be settled in shares
of Common Stock on the date that the RSUs vest if the performance criterion
has been met.
The Committee, at its sole discretion, can elect to pay any or all RSUs in the
form cash, equivalent to the closing stock price of shares of Common Stock on the
date that the RSUs vest. |
ii. | Distribution of RSUs. The shares of Common Stock
payable upon vesting of the RSUs shall be distributed to you as soon as
practical following the vesting date. Notwithstanding any other provisions of
this Agreement, the Company shall not be obligated to deliver the RSUs if the
delivery thereof shall constitute a violation of any provision of any law or
of any regulation of any governmental authority, and delivery of the RSUs may
be postponed for such period as may be required to comply with any
requirements under any law or regulation applicable to the issuance or
delivery of such shares. The Recipient agrees that his or her right to
receive the RSUs shall be subject to the vesting schedule set forth in Section
3 of this Agreement, the termination provisions set forth in Section 4 of this
Agreement, and the restrictions on transfer set forth in Section 5 of this
Agreement. |
3. | Vesting. |
a. | Vesting Schedule. Unless otherwise provided in this Agreement or the
Plan, the RSUs shall 100% vest on the third anniversary of the Grant Date upon the
successful achievement of the performance criterion. Should the Company fail to
achieve the performance criterion, all RSUs shall be forfeited. |
b. | Vesting upon Death or Disability. RSUs will be earned on a pro-rata
basis based on the date of death or Disability and will be paid out at the end of the
three-year period, with the payout determined based on the final performance
determination. For purposes of this Agreement, Disability is as used in the
Companys long-term disability plan, if any; if not defined in the long-term disability
plan, is a physical or mental infirmity which impairs the Recipients ability to
substantially perform his or her duties for a period of 180 consecutive days. |
c. | Reorganization Event. If the Company undergoes a Reorganization Event
(as defined in the Plan) other than a liquidation or dissolution, the RSUs will
represent a right to receive the cash, securities, or other property into which the
Common Stock of the Company was converted or for which it was exchanged pursuant to the
Reorganization Event. Upon a liquidation or dissolution of the Company, all
restrictions and conditions on all RSUs are automatically deemed terminated. |
4. | Termination of RSUs Upon Employment Termination. In the event that the Recipient
ceases to be employed by the Company for any reason or no reason, with or without cause, all
of the RSUs that are unvested as of the time of such employment termination shall be
terminated immediately and automatically, without the payment of any consideration to the
Recipient, effective as of such termination of employment. The Recipient shall have no
further rights with respect to any RSUs that are so terminated, and shall have no further
right to receive a distribution. If the Recipient is employed by a subsidiary of the Company,
any references in this Agreement to employment with the Company shall instead be deemed to
refer to employment with such subsidiary. |
5. | Restrictions on Transfer. The Recipient shall not sell, assign, transfer, pledge,
hypothecate, or otherwise dispose of, by operation of law or otherwise (collectively
transfer) any RSUs, or any interest therein, until such RSUs have vested. The Company
shall not be required to treat as owner of such RSUs any transferee to whom such RSUs have
been transferred in violation of any of the provisions of this Agreement. |
6. | Rights as a Shareholder. The Recipient shall have no right to vote the shares of
Common Stock or to act in respect of the Common Stock at any meeting of shareholders and is
not entitled to any dividends paid with respect to the Common Stock until issuance upon
vesting. |
7. | Provisions of the Plan. This Agreement is subject to the provisions of the Plan, a
copy of which will be furnished to you upon your request. |
8. | Tax Matters. |
a. | Acknowledgments. The Recipient acknowledges that he or she is
responsible for obtaining the advice of the Recipients own tax and financial advisors
with respect to the federal and state tax considerations resulting from Recipients
receipt of the RSUs. The Recipient understands that the Company will report to
appropriate taxing authorities the payment to the Recipient of compensation income upon
the vesting of the RSUs. The Recipient understands that the Recipient (and not the
Company) shall be responsible for the Recipients federal and state tax liability that
may arise in connection with the acquisition, vesting, and/or disposition of the RSUs. |
b. | Withholding. The Recipient acknowledges and agrees that the Company
has the right to deduct from payments of any kind otherwise due to the Recipient any
federal, state, local or other taxes of any kind required by law to be withheld with
respect to the RSUs. On each date on which RSUs vest, the Company shall deliver
written notice to the Recipient of the amount of withholding taxes due with respect to
the vesting of the RSUs that vest on
such date; provided, however, that the total tax withholding cannot exceed the Companys
minimum statutory withholding obligations (based on minimum statutory withholding rates
for federal and state tax purposes, including payroll taxes, that are applicable to such
supplemental taxable income). In satisfaction of its withholding obligations, the
Company shall reduce the cash distribution by the applicable withholding amount. Should
the RSUs be distributed in the form of shares of Company Stock, then the Company shall
reduce the number of RSUs deliverable to Recipient in respect of such vesting by the
number of RSUs that have a fair market value on such vesting date (calculated using the
last reported sale price of the common stock of the Company on the principal stock
exchange on which the Common Stock is traded on such vesting date) equal to the amount of
the Companys tax withholding obligation in connection with the vesting of such RSUs.
Any fractional number of RSUs resulting from tax withholding shall be rounded up to the
nearest whole number of RSUs. With respect to tax withholding amounts, the Company has
all of the rights specified in Section 9 of this Agreement and has no obligations to the
Recipient except as expressly stated in Section 9 of this Agreement. |
9. | Miscellaneous. |
a. | Authority of Compensation and Benefits Committee. In making any
decisions or taking any actions with respect to the matters covered by this Agreement,
the Compensation and Benefits Committee shall have all of the authority and discretion,
and shall be subject to all of the protections, provided for in the Plan. All decisions
and actions by the Compensation and Benefits Committee with respect to this Agreement
shall be made in the Compensation and Benefits Committees discretion and shall be
final and binding on the Recipient. |
b. | No Right to Continued Employment. The Recipient acknowledges and
agrees that, notwithstanding the fact that the vesting of the RSUs is contingent upon
his or her continued employment by the Company, this Agreement does not constitute an
express or implied promise of continued employment or confer upon the Recipient any
rights with respect to continued employment by the Company. |
c. | Governing Law. This Agreement shall be construed, interpreted, and
enforced in accordance with the internal laws of the State of Delaware without regard
to any applicable conflict of law provisions. |
d. | Conflicts and Interpretation. In the event of any conflict between
this Agreement and the Plan, this Agreement shall control. In the event of any
ambiguity in this Agreement, or any matters as to which this Agreement is
silent, the Plan shall govern, including, without limitation, the provisions thereof
pursuant to which the Compensation and Benefits Committee has the power, among others, to
(i) interpret the Plan, (ii) amend and repeal administrative rules, guidelines, and
practices relating to the Plan and (iii) make all other determinations deemed necessary
or advisable for the administration of the Plan. |
e. | Compliance with Internal Revenue Service Tax Code. |
i. | IRC Section 83. The RSUs granted under this Agreement
are governed by Section 83 of the Internal Revenue Code. |
ii. | IRC Section 409A. Section 409A of the Code imposes a
number of requirements on non-qualified deferred compensation plans and
arrangements. This Agreement and the Plan shall be operated in compliance
with Section 409A of the Code and each provision Plan shall be interpreted, to
the extent possible, to comply with Section 409A of the Code. Notwithstanding
any provision of the Plan to the contrary, in the event that the Employer
determines that any provision of the Plan is not in compliance with Section
409A of the Code, the Employer may (i) adopt such amendments to the Plan and
appropriate policies and procedures, including amendments and policies with
retroactive effect, that the Employer determines necessary or appropriate to
preserve the intended tax treatment of the Plan benefits provided by the Plan
and/or (ii) take such other actions as the Employer determines necessary or
appropriate to comply with the requirements of Section 409A of the Code. |
f. | Binding Agreement. Subject to the limitation on the transferability of
this grant contained herein, this Agreement will be binding upon and inure to the
benefit of the heirs, legatees, legal representatives, successors, and assigns of the
parties hereto. |
g. | Captions. Captions provided herein are for convenience only and are not
to serve as a basis for interpretation or construction of this Agreement. |
h. | Agreement Severable. In the event that any provision in this Agreement
will be held invalid or unenforceable, such provision will be severable from, and such
invalidity or unenforceability will not be construed to have any effect on, the
remaining provisions of this Agreement. |
i. | Modifications to the Agreement. This Agreement constitutes the entire
understanding of the parties on the subjects covered. The Employee expressly warrants
that he is not accepting this Agreement in reliance on any
promises, representations, or inducements other than those contained herein.
Modifications to this Agreement can be made only in an express written contract executed
by a duly authorized officer of the Company. |
j. | Recipients Acknowledgments. The Recipient acknowledges that he or she
has read this Agreement, has read the Plan and the Information About Restricted Stock
Units (Information), and understands the terms and conditions of this Agreement, the
Plan and the Information. |
WESTMORELAND COAL COMPANY |
||||
By: | /s/ Jennifer S. Grafton | |||
Name: | Jennifer S. Grafton | |||
Title: | General Counsel and Secretary |
I, Keith E. Alessi, certify that: |
1. | I have reviewed this Quarterly Report on Form 10-Q of Westmoreland Coal Company; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting. |
5. | The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
Date: May 9, 2011 | /s/ Keith E. Alessi | |||
Name: | Keith E. Alessi | |||
Title: | Chief Executive Officer and President | |||
I, Kevin A. Paprzycki, certify that: |
1. | I have reviewed this Quarterly Report on Form 10-Q of Westmoreland Coal Company; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting. |
5. | The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
Date: May 9, 2011 | /s/ Kevin A. Paprzycki | |||
Name: | Kevin A. Paprzycki | |||
Title: | Chief Financial Officer and Treasurer | |||
Dated: May 9, 2011 | /s/ Keith E. Alessi | |||
Name: | Keith E. Alessi | |||
Title: | Chief Executive Officer and President | |||
Dated: May 9, 2011 | /s/ Kevin A. Paprzycki | |||
Name: | Kevin A. Paprzycki | |||
Title: | Chief Financial Officer and Treasurer |