10-Q 1 wlb-93015x10q.htm 10-Q 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 __________________________________________
FORM 10-Q
 __________________________________________
(Mark One)
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2015
or
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                 to                 
Commission File No. 001-11155
  ___________________________________________
WESTMORELAND COAL COMPANY
(Exact name of registrant as specified in its charter)
 __________________________________________
Delaware
23-1128670
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
 
 
9540 South Maroon Circle, Suite 200
Englewood, CO
80112
(Address of principal executive offices)
(Zip Code)
Registrant’s telephone number, including area code: (855) 922-6463
 __________________________________________
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes x No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
o
 
Accelerated filer
x
Non-accelerated filer
o
(Do not check if a smaller reporting company.)
Smaller reporting company
o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes o No x
Indicate the number of shares outstanding of each of the issuer's classes of common stock as of November 2, 2015: 18,064,956 shares of common stock, $0.01 par value.



TABLE OF CONTENTS
 


2

PART I - FINANCIAL INFORMATION
ITEM 1
FINANCIAL STATEMENTS


WESTMORELAND COAL COMPANY AND SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)
 
September 30,
2015
 
December 31,
2014
 
(In thousands)
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
29,336

 
$
14,258

Receivables:
 
 
 
Trade
146,522

 
143,052

Loan and lease receivables
6,304

 
10,493

Contractual third-party reclamation receivables
19,310

 
12,462

Other
15,081

 
19,923

 
187,217

 
185,930

Inventories
124,438

 
133,855

Deferred income taxes
14,451

 
13,083

Other current assets
15,795

 
13,645

Total current assets
371,237

 
360,771

Property, plant and equipment:
 
 
 
Land and mineral rights
494,950

 
500,226

Plant and equipment
1,012,900

 
956,112

 
1,507,850

 
1,456,338

Less accumulated depreciation, depletion and amortization
625,940

 
528,676

Net property, plant and equipment
881,910

 
927,662

Loan and lease receivables
51,099

 
73,180

Advanced coal royalties
17,958

 
17,508

Reclamation deposits
77,425

 
77,907

Restricted investments and bond collateral
137,672

 
164,389

Contractual third-party reclamation receivables, less current portion
96,086

 
104,021

Investment in joint venture
28,664

 
33,409

Intangible assets, net of accumulated amortization of $16.9 million and $15.3 million at September 30, 2015 and December 31, 2014, respectively
29,720

 
31,315

Other assets
36,451

 
39,416

Total Assets
$
1,728,222

 
$
1,829,578

See accompanying Notes to Consolidated Financial Statements.

3

WESTMORELAND COAL COMPANY AND SUBSIDIARIES
Consolidated Balance Sheets (Continued)
(Unaudited)
 
September 30,
2015
 
December 31,
2014
 
(In thousands)
Liabilities and Shareholders’ Deficit
 
 
 
Current liabilities:
 
 
 
Current installments of long-term debt
$
38,879

 
$
43,136

Revolving lines of credit
—

 
9,576

Accounts payable and accrued expenses:
 
 
 
Trade and other accrued liabilities
129,084

 
149,514

Interest payable
7,869

 
2,699

Production taxes
53,437

 
45,747

Workers’ compensation
656

 
671

Postretirement medical benefits
13,263

 
13,263

SERP
368

 
368

Deferred revenue
13,170

 
13,175

Asset retirement obligations
47,462

 
43,289

Other current liabilities
25,895

 
52,459

Total current liabilities
330,083

 
373,897

Long-term debt, less current installments
1,014,075

 
932,075

Workers’ compensation, less current portion
6,081

 
6,315

Excess of black lung benefit obligation over trust assets
11,919

 
11,252

Postretirement medical benefits, less current portion
293,268

 
293,156

Pension and SERP obligations, less current portion
44,256

 
49,779

Deferred revenue, less current portion
27,425

 
35,255

Asset retirement obligations, less current portion
402,145

 
409,456

Intangible liabilities, net of accumulated amortization of $14.3 million and $13.5 million at September 30, 2015 and December 31, 2014, respectively
3,737

 
4,538

Deferred income taxes
47,435

 
34,852

Other liabilities
37,014

 
28,448

Total liabilities
2,217,438

 
2,179,023

Shareholders’ deficit:
 
 
 
Preferred stock of $1.00 par value
 
 
 
Authorized 5,000,000 shares; no issued and outstanding shares at September 30, 2015 and 91,669 shares issued and outstanding at December 31, 2014
—

 
92

Common stock of $0.01 par value as of September 30, 2015 and $2.50 par value as of December 31, 2014
 
 
 
Authorized 30,000,000 shares; issued and outstanding 18,021,061 shares at September 30, 2015 and 17,102,777 shares at December 31, 2014
180

 
42,756

Other paid-in capital
238,705

 
185,644

Accumulated other comprehensive loss
(165,811
)
 
(124,296
)
Accumulated deficit
(563,804
)
 
(468,902
)
Total Westmoreland Coal Company shareholders’ deficit
(490,730
)
 
(364,706
)
Noncontrolling interest
1,514

 
15,261

Total deficit
(489,216
)
 
(349,445
)
Total Liabilities and Deficit
$
1,728,222

 
$
1,829,578

See accompanying Notes to Consolidated Financial Statements.

4

WESTMORELAND COAL COMPANY AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2015
 
2014
 
2015
 
2014
 
(In thousands, except per share data)
Revenues
$
349,796

 
$
337,830

 
$
1,070,240

 
$
805,989

Cost, expenses and other:
 
 
 
 
 
 
 
Cost of sales
292,973

 
285,524

 
880,162

 
670,467

Depreciation, depletion and amortization
34,459

 
28,175

 
106,781

 
68,713

Selling and administrative
29,383

 
24,434

 
84,611

 
68,551

Heritage health benefit expenses
2,801

 
3,315

 
8,022

 
10,246

Loss on sale/disposal of assets
1,135

 
119

 
2,148

 
114

Restructuring charges
—

 
3,265

 
656

 
11,207

Derivative loss
5,815

 
23,691

 
6,717

 
29,621

Income from equity affiliates
(463
)
 
(1,261
)
 
(4,141
)
 
(2,060
)
Other operating loss (income)
(1,000
)
 
—

 
(1,000
)
 
151

 
365,103

 
367,262

 
1,083,956

 
857,010

Operating loss
(15,307
)
 
(29,432
)
 
(13,716
)
 
(51,021
)
Other income (expense):
 
 
 
 
 
 
 
Interest expense
(26,831
)
 
(21,251
)
 
(76,870
)
 
(63,835
)
Loss on extinguishment of debt
(5,385
)
 
(13
)
 
(5,385
)
 
(12,648
)
Interest income
1,555

 
2,468

 
6,262

 
4,351

Gain (loss) on foreign exchange
1,679

 
(1,742
)
 
2,474

 
(5,883
)
Other income
356

 
118

 
1,082

 
697

 
(28,626
)
 
(20,420
)
 
(72,437
)
 
(77,318
)
Loss before income taxes
(43,933
)
 
(49,852
)
 
(86,153
)
 
(128,339
)
Income tax expense (benefit)
4,087

 
(718
)
 
13,596

 
2,979

Net loss
(48,020
)
 
(49,134
)
 
(99,749
)
 
(131,318
)
Less net loss attributable to noncontrolling interest
(1,458
)
 
—

 
(4,850
)
 
—

Net loss attributable to Westmoreland Coal Company
(46,562
)
 
(49,134
)
 
(94,899
)
 
(131,318
)
Less preferred stock dividend requirements
—

 
195

 
—

 
664

Net loss applicable to common shareholders
$
(46,562
)
 
$
(49,329
)
 
$
(94,899
)
 
$
(131,982
)
Net loss per share applicable to common shareholders:
 
 
 
 
 
 
 
Basic and diluted
$
(2.59
)
 
$
(2.95
)
 
$
(5.32
)
 
$
(8.49
)
Weighted average number of common shares outstanding:
 
 
 
 
 
 
 
Basic and diluted
17,986

 
16,729

 
17,846

 
15,554

See accompanying Notes to Consolidated Financial Statements.

5

WESTMORELAND COAL COMPANY AND SUBSIDIARIES
Consolidated Statements of Comprehensive Loss
(Unaudited)
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2015
 
2014
 
2015
 
2014
 
(In thousands)
Net loss
$
(48,020
)
 
$
(49,134
)
 
$
(99,749
)
 
$
(131,318
)
Other comprehensive income (loss):
 
 
 
 
 
 
 
Pension and other postretirement plans:
 
 
 
 
 
 
 
Amortization of accumulated actuarial gains or losses, pension
996

 
361

 
3,263

 
1,078

Adjustments to accumulated actuarial losses and transition obligations, pension
(253
)
 
(371
)
 
(538
)
 
(172
)
Amortization of accumulated actuarial gains or losses, transition obligations, and prior service costs, postretirement medical benefit
327

 
3

 
981

 
13

Tax effect of other comprehensive income gains
(558
)
 
(487
)
 
(908
)
 
(711
)
Change in foreign currency translation adjustment
(20,802
)
 
(14,642
)
 
(43,018
)
 
(5,364
)
Unrealized and realized gains and losses on available-for-sale securities
165

 
1,231

 
(1,295
)
 
1,231

Other comprehensive loss
(20,125
)
 
(13,905
)
 
(41,515
)
 
(3,925
)
Comprehensive loss attributable to the Parent company
$
(68,145
)
 
$
(63,039
)
 
$
(141,264
)
 
$
(135,243
)
See accompanying Notes to Consolidated Financial Statements.

6

WESTMORELAND COAL COMPANY AND SUBSIDIARIES
Consolidated Statements of Deficit
Nine Months Ended September 30, 2015
(Unaudited)

 
Preferred Stock
 
Common Stock
 
Other
Paid-In
Capital
 
Accumulated
Other
Comprehensive Loss
 
Accumulated
Deficit
 
Non-controlling
Interest
 
Total
Deficit
 
Shares
 
Amount
 
Shares
 
Amount
 
 
 
 
 
 
(In thousands, except shares data)
Balance at December 31, 2014
91,669

 
$
92

 
17,102,777

 
$
42,756

 
$
185,644

 
$
(124,296
)
 
$
(468,902
)
 
$
15,261

 
$
(349,445
)
Preferred dividends declared
—

 
—

 
—

 
—

 
—

 
—

 
(3
)
 
—

 
(3
)
WMLP distributions
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(535
)
 
(535
)
Common stock issued as compensation
—

 
—

 
128,480

 
97

 
5,491

 
—

 
—

 
—

 
5,588

Conversion and redemption of convertible notes and securities
(91,669
)
 
(92
)
 
604,557

 
1,511

 
(1,738
)
 
—

 
—

 
—

 
(319
)
Issuance of restricted stock
—

 
—

 
185,247

 
406

 
(3,644
)
 
—

 
—

 
—

 
(3,238
)
Change in WMLP Ownership Percentage
—


—


—


—


8,362


—


—


(8,362
)
 
—

Change in par value of common stock from $2.50 to $0.01
—

 
—

 
—

 
(44,590
)
 
44,590

 
—

 
—

 
—

 
—

Net loss
—

 
—

 
—

 
—

 
—

 
—

 
(94,899
)
 
(4,850
)
 
(99,749
)
Other comprehensive loss
—

 
—

 
—

 
—

 
—

 
(41,515
)
 
—

 
—

 
(41,515
)
Balance at September 30, 2015
—

 
$
—

 
18,021,061

 
$
180

 
$
238,705

 
$
(165,811
)
 
$
(563,804
)
 
$
1,514

 
$
(489,216
)
See accompanying Notes to Consolidated Financial Statements.

7

WESTMORELAND COAL COMPANY AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
 
Nine Months Ended September 30,
 
2015
 
2014
 
(In thousands)
Cash flows from operating activities:
 
 
 
Net loss
$
(99,749
)
 
$
(131,318
)
Adjustments to reconcile net loss to net cash provided by operating activities:
 
 
 
Depreciation, depletion and amortization
106,781

 
68,713

Accretion of asset retirement obligation and receivable
21,251

 
16,257

Share-based compensation
5,588

 
3,456

Loss on sale/disposal of assets
2,148

 
114

Non-cash interest expense
4,617

 
—

Amortization of deferred financing costs
7,849

 
2,365

Loss on extinguishment of debt
4,445

 
12,648

Loss on derivatives
6,717

 
29,621

Loss (gain) on foreign exchange
(2,474
)
 
5,883

Income from equity affiliates
(4,141
)
 
(2,060
)
Distributions from equity affiliates
4,328

 
2,948

Deferred income tax
14,887

 
3,344

Other
(2,625
)
 
524

Changes in operating assets and liabilities:
 
 
 
Receivables
(14,327
)
 
(24,520
)
Inventories
494

 
55,399

Accounts payable and accrued expenses
4,826

 
6,377

Deferred revenue
(8,297
)
 
(9,140
)
Accrual for workers’ compensation
(1,240
)
 
(178
)
Asset retirement obligations
(9,908
)
 
(5,881
)
Other assets and liabilities
(20,288
)
 
3,659

Net cash provided by operating activities
20,882

 
38,211

Cash flows from investing activities:
 
 
 
Additions to property, plant and equipment
(57,971
)
 
(35,646
)
Change in restricted investments and bond collateral and reclamation deposits
(22,392
)
 
(41,795
)
Cash released from escrow for acquisition
34,000

 
—

Cash payments related to acquisitions and other
(35,887
)
 
(322,637
)
Cash acquired related to acquisitions
2,780

 
8,103

Proceeds from the sale of restricted investments
14,404

 
7,279

Payments related to loan and lease receivables
(3,981
)
 
(2,514
)
Receipts from loan and lease receivables
20,192

 
5,057

Net proceeds from sales of assets and other
1,404

 
37,538

Net cash used in investing activities
(47,451
)
 
(344,615
)
Cash flows from financing activities:
 
 
 
Change in book overdrafts
950

 
(317
)
Borrowings from long-term debt, net of debt premium
199,363

 
454,219

Repayments of long-term debt
(138,185
)
 
(110,792
)
Borrowings on revolving lines of credit
142,823

 
15,000

Repayments on revolving lines of credit
(152,412
)
 
(15,000
)
Debt issuance costs and other refinancing costs
(7,431
)
 
(27,827
)
Proceeds from issuance of common shares
—

 
56,473

Other
(860
)
 
(247
)
Net cash provided by financing activities
44,248

 
371,509

Effect of foreign exchange rates on cash
(2,601
)
 
(2,525
)
Net increase (decrease) in cash and cash equivalents
15,078

 
62,580

Cash and cash equivalents, beginning of period
14,258

 
61,110

Cash and cash equivalents, end of period
$
29,336

 
$
123,690

Non-cash transactions:
 
 
 
Accrued purchases of property and equipment
$
2,718

 
$
9,555

Capital leases and other financing sources
14,967

 
15,484

See accompanying Notes to Consolidated Financial Statements.

8

WESTMORELAND COAL COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1.    BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements include accounts of Westmoreland Coal Company, or the Company, or Parent, and its subsidiaries and controlled entities. The Company’s principal activities are conducted in the United States and Canada. U.S. activities include the production and sale of coal from mines in Montana, Wyoming, North Dakota, Texas, and Ohio and the operation of the Roanoke Valley power plants, or ROVA, in North Carolina. Canadian activities include production and sale of coal from six surface mines in Alberta and Saskatchewan, selling char to the barbecue briquette industry, and a 50% interest in a joint venture which produces activated carbon. The Company’s activities are primarily conducted through wholly owned subsidiaries. See Item 1 - Business of the Company’s Annual Report on Form 10-K for the year ended December 31, 2014 (the “2014 Form 10-K”) for additional information.
All intercompany transactions and accounts have been eliminated in consolidation. The consolidated financial statements of the Company have been prepared in accordance with United States generally accepted accounting principles and require use of management’s estimates. The financial information contained in this Quarterly Report on Form 10-Q (this “Form 10-Q”) is unaudited, but reflects all adjustments, which are, in the opinion of management, necessary for a fair presentation of the financial information for the periods shown. Such adjustments are of a normal recurring nature. Certain prior amounts have been reclassified to conform to current period presentation. The results of operations for the nine months ended September 30, 2015 are not necessarily indicative of results to be expected for the year ending December 31, 2015.
These unaudited quarterly consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in the 2014 Form 10-K. The accounting principles followed by the Company are set forth in the Notes to the Company’s consolidated financial statements in its 2014 Form 10-K.
Recently Issued Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers, issued as a new Topic, Accounting Standards Codification (ASC) Topic 606. The new revenue recognition standard provides a five-step analysis of transactions to determine when and how revenue is recognized. The core principle of the guidance is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2015-14, issued in August 2015, deferred the effective date of ASU 2014-09 to fiscal years beginning after December 15, 2017. The Company can either adopt these standards retrospectively or as a cumulative-effect adjustment as of the date of adoption. The Company is currently evaluating the effect that adopting this new accounting guidance will have on its consolidated results of operations, cash flows and financial position.
In April 2015, the FASB issued ASU 2015-03, Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs, which requires that debt issuance costs related to a recognized liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The new guidance should be applied on a retrospective basis. The new guidance is effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years, with early adoption permitted. Management projects the impact to the financial statements resulting in balance sheet reclassification for which the Deferred financing costs, net account is recharacterized as a contra-liability reducing the Long-term debt, less current installments balance for each of the respective periods upon adoption.
In April 2015, the FASB issued ASU 2015-05, Internal-Use Software (Subtopic 350-40): Customer's Accounting for Fees Paid in a Cloud Computing Arrangement, which provides guidance for determining whether a cloud computing arrangement (also referred to as a hosting arrangement) related to internal-use software has a software license element and provides guidance on the appropriate accounting treatment. The new guidance should be applied on a retrospective basis. The new guidance is effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years, with early adoption permitted. The Company is currently evaluating the effect that adopting this new accounting guidance will have on its consolidated results of operations, cash flows and financial position.
In July 2015, the FASB issued ASU 2015-11, Inventory (Topic 330):Simplifying the Measurement of Inventory, which changes the requirement to measure inventory at the lower of cost or market for non last-in, first-out (LIFO) and non retail methods of measuring inventory, to requiring inventory measured at lower of cost or net realizable value. The new guidance is effective for financial statements issued for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years, with early adoption permitted. The Company does not foresee a material effect on its consolidated results of operations, cash flows, and financial position.


9
WESTMORELAND COAL COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONT.)

2.    ACQUISITIONS
Acquisition of Buckingham Coal Company, LLC
On January 1, 2015, Westmoreland completed the acquisition of Buckingham Coal Company, LLC, an Ohio-based coal supplier (“Buckingham”), pursuant to an agreement dated January 1, 2015 among WCC Land Holding Company, Inc., an affiliate of the Company, for an initial cash purchase price of $34.0 million, reduced by a working capital adjustment of $1.6 million (the “Buckingham Acquisition”). The Buckingham operations are included in the Company’s Coal - U.S. segment.
The Buckingham Acquisition has been accounted for under the acquisition method of accounting that requires the total purchase consideration to be allocated to the assets acquired and liabilities assumed based on estimates of fair value.
The allocation of the purchase price is preliminary pending the completion of various analyses and the finalization of estimates. During the measurement period (which is not to exceed one year from the acquisition date), additional assets or liabilities may be recognized if new information is obtained about facts and circumstances that existed as of the acquisition date that, if known, would have resulted in the recognition of those assets or liabilities as of that date. The preliminary allocation may be adjusted after obtaining additional information regarding, among other things, asset valuations, liabilities assumed and revisions of previous estimates, and these adjustments may be significant.
A summary of the purchase consideration and a preliminary allocation of the purchase consideration follows (in millions):
 
Provisional
as of
September 30,
2015
Purchase Price:
 
Cash paid - Initial payment
$
34.0

Cash received - Working capital adjustment
(1.6
)
Net cash consideration
$
32.4

 
 
Preliminary allocation of purchase price:
 
Assets:
 
     Cash and cash equivalents
$
2.8

     Inventories - materials and supplies
2.5

     Other current assets
0.1

Total current assets
5.4

     Land and mineral rights
13.2

     Plant and equipment
24.6

Total Assets
43.2

Liabilities:
 
     Trade payables and other accrued liabilities
(5.2
)
     Asset retirement obligations
(1.0
)
Total current liabilities
(6.2
)
     Asset retirement obligations, less current portion
(2.8
)
     Other liabilities
(1.8
)
Total Liabilities
(10.8
)
Net fair value
$
32.4


10
WESTMORELAND COAL COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONT.)

Acquisition of General Partner of Westmoreland Resource Partners, LP
On December 31, 2014, the Company completed the acquisition of Westmoreland Resources GP, LLC (the “GP”), the general partner of Westmoreland Resource Partners, LP (“WMLP”), referred to as the “GP Acquisition.” Concurrent with the GP Acquisition, Westmoreland contributed certain royalty-bearing coal reserves to WMLP in return for WMLP common units (the “Contribution” and together with the GP Acquisition, the “WMLP Transactions”).
Westmoreland paid $30.0 million in December 2014 and $3.5 million in January 2015 to acquire the GP; and received 4,512,500 common units of WMLP (on a post-split basis following a 12-to-1 reverse split of WMLP’s common and general partner units) as consideration for the Contribution.
In connection with the closing, WMLP’s name was changed to Westmoreland Resource Partners, LP from Oxford Resource Partners, LP and the name of the GP was changed to Westmoreland Resources GP, LLC from Oxford Resources GP, LLC. The common units of WMLP trade on the NYSE under the symbol “WMLP”.
The GP Acquisition has been accounted for under the acquisition method of accounting that requires the total purchase consideration to be allocated to the assets acquired and liabilities assumed based on estimates of fair value.
The allocation of the purchase price is preliminary pending the completion of various analyses and the finalization of estimates. During the measurement period (which is not to exceed one year from the acquisition date), additional assets or liabilities may be recognized if new information is obtained about facts and circumstances that existed as of the acquisition date that, if known, would have resulted in the recognition of those assets or liabilities as of that date. The preliminary allocation may be adjusted after obtaining additional information regarding, among other things, asset valuations, liabilities assumed and revisions of previous estimates, and these adjustments may be significant.

11
WESTMORELAND COAL COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONT.)

A summary of the purchase consideration and a preliminary allocation of the purchase consideration follows (in millions):
 
Provisional
as of
September 30,
2015
Purchase Price:
 
Cash paid at closing
$
30.0

Contingent consideration
3.5

Fair value of outstanding WMLP units (1)
10.8

Total purchase consideration
$
44.3

 
 
Preliminary allocation of purchase price:
 
Assets:
 
     Trade receivables and other
$
22.5

     Inventories - materials and supplies
7.4

     Inventories - coal
6.6

     Other current assets
1.3

Total current assets
37.8

     Land and mineral rights
39.5

     Plant and equipment
134.0

     Advanced coal royalties
9.2

     Restricted investments and bond collateral
10.6

     Intangible assets
31.0

     Other assets
0.2

Total Assets
262.3

Liabilities:
 
     Trade payables and other accrued liabilities
(19.1
)
     Asset retirement obligations
(7.8
)
     Other current liabilities
(4.0
)
Total current liabilities
(30.9
)
     Long-term debt, less current installments
(160.1
)
     Asset retirement obligations, less current portion
(23.9
)
     Warrants
(2.0
)
     Other liabilities
(1.1
)
Total Liabilities
(218.0
)
Net Assets
44.3

Non-controlling Interest
(10.8
)
Invested Equity
$
33.5

(1) Represents the market price of WMLP units outstanding using the December 31, 2014 closing price.
No goodwill was recorded in the GP Acquisition and $31.0 million of intangible assets to be amortized over a fifteen-year period were identified. The intangible asset identified in the GP Acquisition is a terminal lease at a dock in Ohio which was fair valued based on contract prices which were favorable to market prices.

12
WESTMORELAND COAL COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONT.)

Canadian Acquisition
On April 28, 2014, Westmoreland Coal Company acquired Prairie Mines & Royalty ULC (“PMRU”) and Coal Valley Resources Inc. (“CVRI”), collectively referred to as the “Canadian Subsidiaries.” The operations of the Canadian Subsidiaries (the “Canadian Operations”) include six producing thermal coal mines in the Canadian provinces of Alberta and Saskatchewan, a char production facility, and a 50% interest in an activated carbon plant. The purchase consideration included a $282.8 million initial cash payment made on April 28, 2014, a cash payment for a working capital adjustment of $39.8 million made on June 25, 2014, and assumed liabilities of $421.3 million.
Acquisition related costs of $33.1 million were expensed for the nine months ended September 30, 2014; which included a $14.2 million charge to Cost of sales related to the sale of inventory written up to fair value in the acquisition, $7.8 million of expenses included in Selling and administrative costs, $6.2 million of loss on foreign exchange as described in Note 11, and $4.9 million included in Interest expense related to a bridge facility commitment fee.
The Canadian Acquisition has been accounted for under the acquisition method of accounting that requires the total purchase consideration to be allocated to the assets acquired and liabilities assumed based on estimates of fair value.
The Company finalized the purchase price allocation for the Canadian Acquisition as of December 31, 2014. No goodwill was recorded in the acquisition and $37.0 million of intangible assets were identified in the acquisition.

13
WESTMORELAND COAL COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONT.)

A summary of the purchase consideration and allocation of the purchase consideration follows (in millions):
 
Final
as of
December 31,
2014
Purchase Price:
 
Cash paid - Initial payment
$
282.8

Cash paid - Working capital adjustment
39.8

Total cash consideration
$
322.6

 
 
Allocation of purchase price:
 
Assets:
 
     Cash and cash equivalents
$
26.2

     Receivables
78.1

     Inventories - materials and supplies
52.0

     Inventories - coal
79.8

     Loan and lease receivables
11.2

     Deferred tax assets
8.2

     Other current assets
3.4

Total current assets
258.9

     Land and mineral rights
202.6

     Plant and equipment
114.8

     Loan and lease receivables
79.1

     Contractual third-party reclamation receivables, less current portion
6.8

Investment in joint venture
36.0

Intangible assets
37.0

     Other assets
8.7

Total Assets
743.9

Liabilities:
 
     Current installments of long-term debt
(36.3
)
     Trade payables and other accrued liabilities
(136.1
)
     Asset retirement obligations
(7.8
)
Total current liabilities
(180.2
)
     Long-term debt, less current installments
(86.3
)
     Asset retirement obligations, less current portion
(122.9
)
     Deferred tax liabilities
(31.9
)
Total Liabilities
(421.3
)
Net fair value
$
322.6

The Company became responsible for remediation work for a breach on a containment pond at a currently inactive mine that occurred on October 31, 2013. The prior owner, Sherritt International Corporation, has indemnified Westmoreland against past and future liability stemming from the incident. Accordingly, an indemnification asset of $27.9 million and a corresponding liability was recorded at April 28, 2014.

14
WESTMORELAND COAL COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONT.)

Unaudited Pro Forma Information
The following unaudited pro forma information has been prepared for illustrative purposes only and assumes the acquisitions occurred on January 1, 2013, in the case of the Canadian Acquisition and the WMLP Transactions, and on January 1, 2014, in the case of the Buckingham Acquisition. The unaudited pro forma results have been prepared based on estimates and assumptions, which the Company believes are reasonable, however, they are not necessarily indicative of the consolidated results of operations had the acquisitions occurred on the dates indicated above, or of future results of operations.
(In thousands, except per share data)
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2014
 
2014
Total Revenues
 
 
 
As reported
$
337,830

 
$
805,989

Pro forma (unaudited)
$
465,094

 
$
1,366,820

 


 
 
Operating Income
 
 
 
As reported
$
(29,432
)
 
$
(51,021
)
Pro forma (unaudited)
$
(7,339
)
 
$
(14,678
)
 
 
 
 
Net loss applicable to common shareholders
 
 
 
As reported
$
(49,329
)
 
$
(131,982
)
Pro forma (unaudited)
$
(31,034
)
 
$
(95,373
)
 
 
 
 
Net loss per share applicable to common shareholders
 
 
 
As reported
$
(2.95
)
 
$
(8.49
)
Pro forma (unaudited)
$
(1.86
)
 
$
(6.13
)

3.    KEMMERER DROP
On August 1, 2015, we contributed 100% of the outstanding equity interests in Westmoreland Kemmerer, LLC (“Kemmerer”) to WMLP, a controlled and consolidated subsidiary, in exchange for $230 million in aggregate consideration, composed of $115 million of cash and $115 million in newly issued WMLP Series A Convertible Units (the "Series A Units" and such transaction, the “Kemmerer Drop”). In connection with the Kemmerer Drop, all employees of Kemmerer and related employee liabilities, including but not limited to post-retirement pension obligations and post-retirement health benefits, were transferred to us.
The Series A Units are convertible into common units representing limited partner interests of WMLP (“Common Units”), on a one-for-one basis, upon the earlier of (i) the date on which WMLP first makes a regular quarterly cash distribution to holders of Common Units in an amount equal to at least $0.22 per Common Unit, or (ii) a change of control of WMLP. Following the Kemmerer Drop, we hold an approximately 93.8% controlling interest in WMLP (on a fully diluted basis).
The Kemmerer Drop represents a reorganization of entities under common control. Accordingly, the net assets transferred are deemed to have transferred at the $99.6 million carrying value as of the date of transfer. No gain or loss was recognized.


15
WESTMORELAND COAL COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONT.)

4.    INVENTORIES
Inventories consisted of the following:
 
September 30, 2015
 
December 31, 2014
 
(In thousands)
Coal stockpiles
$
37,313

 
$
41,795

Coal fuel inventories
8,769

 
6,531

Materials and supplies
81,032

 
88,584

Reserve for obsolete inventory
(2,676
)
 
(3,055
)
Total
$
124,438

 
$
133,855


5.    RESTRICTED INVESTMENTS AND BOND COLLATERAL
The Company’s restricted investments and bond collateral consist of the following: 
 
September 30, 2015
 
December 31, 2014
 
(In thousands)
Coal - U.S. Segment:
 
 
 
Reclamation bond collateral:
 
 
 
Absaloka Mine
$
11,807

 
$
11,781

Rosebud Mine
3,145

 
3,145

Beulah Mine
1,270

 
1,270

Buckingham acquisition escrow
—

 
34,000

Coal - Canada Segment:
 
 
 
Reclamation bond collateral - PMRU
18,220

 
18,199

Reclamation bond collateral - CVRI
33,870

 
31,866

Coal - WMLP Segment:
 
 
 
Reclamation bond collateral - Ohio
8,255

 
10,634

Reclamation bond collateral - Kemmerer Mine
27,655

 
25,282

Power Segment:
 
 
 
Power contract collateral
17,700

 
12,600

Corporate Segment:
 
 
 
Postretirement medical benefit bonds
8,891

 
8,780

Workers’ compensation bonds
6,859

 
6,832

Total restricted investments and bond collateral
$
137,672

 
$
164,389

The Company invests its restricted investments and bond collateral accounts in a limited selection of fixed-income investment options and receives the investment returns on these investments. Funds in the restricted investments and bond collateral accounts are not available to meet the Company’s general cash needs.
These accounts include available-for-sale securities. Available-for-sale securities are reported at fair value with unrealized gains and losses excluded from earnings and reported in Accumulated other comprehensive loss.
The Company’s carrying value and estimated fair value of its restricted investments and bond collateral at September 30, 2015 were as follows:
 
Carrying Value
 
Fair Value
 
Fair Value Hierarchy
 
(In thousands)
 
 
Cash and cash equivalents
$
100,363

 
$
100,363

 
Level 1
Time deposits
2,455

 
2,455

 
Level 1
Available-for-sale
34,854

 
34,854

 
Level 1
 
$
137,672

 
$
137,672

 
 

16
WESTMORELAND COAL COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONT.)

Available-for-Sale Restricted Investments and Bond Collateral
The cost basis, gross unrealized holding gains and losses, and fair value of available-for-sale securities at September 30, 2015 were as follows (in thousands):
Cost basis
$
35,475

Gross unrealized holding gains
206

Gross unrealized holding losses
(827
)
Fair value
$
34,854

Maturities of available-for-sale securities were as follows at September 30, 2015: 
 
Cost Basis
 
Fair Value
 
(In thousands)
Due within one year
$
1,258

 
$
1,189

Due in five years or less
15,015

 
14,640

Due after five years to ten years
4,356

 
4,110

Due in more than ten years
14,846

 
14,915

 
$
35,475

 
$
34,854


6.    RESTRUCTURING CHARGES
In 2013, the Company entered into an agreement with Virginia Electric Power Company, to restructure the remaining five years of the ROVA contract (the "ROVA Restructuring Plan"). Total restructuring charges related to the ROVA Restructuring Plan were $5.5 million and all were recorded to the restructuring expense line item within our consolidated statements of operations as they were incurred. Restructuring expenses related to the ROVA Restructuring Plan impacted our Power Segment and all actions related to this restructuring plan have been completed.
During 2014, the Company initiated strategic changes related to the Canadian Acquisition and the GP Acquisition (collectively, the "Acquisition Restructuring Plans"). Total expected restructuring charges related to the Acquisition Restructuring Plans of $15.2 million have been recorded to the restructuring expense line item within our consolidated statements of operations as they were incurred. Charges related to the Acquisition Restructuring Plans were comprised of one-time employee termination benefits and impacted all segments except for our Power Segment. The restructuring actions were completed in 2014 for the Canadian Acquisition and are expected to be completed in 2015 for the GP Acquisition.
The table below represents the restructuring provision activity related to the restructuring plans:
 
ROVA Restructuring Plan
 
Acquisition Restructuring Plans
 
Total
 
(In millions)
Balance, December 31, 2013
$
5.1

 
$
—

 
$
5.1

Restructuring Charges
0.5

 
14.5

 
15.0

Cash Payments
(5.2
)
 
(5.7
)
 
(10.9
)
Balance, December 31, 2014
0.4

 
8.8

 
9.2

Restructuring Charges
—

 
0.7

 
0.7

Cash Payments
(0.4
)
 
(8.1
)
 
(8.5
)
Balance, September 30, 2015
$
—

 
$
1.4

 
$
1.4

    

17
WESTMORELAND COAL COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONT.)

7.    LINES OF CREDIT AND DEBT
As of September 30, 2015, the Company and its subsidiaries are subject to the following debt arrangements:
 
Total Debt Outstanding
 
September 30, 2015
 
December 31, 2014
 
(In thousands)
8.75% Notes due 2022
$
350,000

 
$
350,000

WCC Term Loan Facility due 2020
327,994

 
350,000

WMLP Term Loan Facility due 2018
297,414

 
175,000

Capital lease obligations
81,077

 
109,351

Revolving line of credit
—

 
9,576

Other
7,988

 
4,062

Debt discount
(11,519
)
 
(13,202
)
Total debt outstanding
1,052,954

 
984,787

Less current installments
(38,879
)
 
(52,712
)
Total debt outstanding, less current installments
$
1,014,075

 
$
932,075

The following table presents aggregate contractual debt maturities of all debt: 
 
As of September 30, 2015
 
(In thousands)
2015
$
11,594

2016
39,451

2017
31,213

2018
308,458

2019
8,450

Thereafter
665,307

Total
1,064,473

Less: debt discount
(11,519
)
Total debt
$
1,052,954

8.75% Notes due 2022 (the "8.75% Notes")
The 8.75% Notes were issued by the Parent and are guaranteed by Westmoreland Energy LLC, Westmoreland Mining LLC and Westmoreland Resources, Inc. and their respective subsidiaries (other than Absaloka Coal, LLC, Westmoreland Risk Management, Inc. and certain other immaterial subsidiaries). The 8.75% Notes are not guaranteed by Westmoreland Canada LLC or any of its subsidiaries, nor are they guaranteed by Westmoreland Resources GP, LLC or Westmoreland Resource Partners, LP, referred to as the "Non-guarantors."
WCC Term Loan Facility due 2020 (the "WCC Term Loan Facility")
The WCC Term Loan Facility is a primary obligation of the Parent and is guaranteed by Westmoreland Energy LLC, Westmoreland Mining LLC, Westmoreland Resources, Inc. and certain other direct and indirect subsidiaries of the Company (other than Absaloka Coal, LLC, Westmoreland Risk Management, Inc., certain other immaterial subsidiaries, and the Non-guarantors).
On January 22, 2015, the Company amended the WCC Term Loan Facility to increase the borrowings by $75.0 million, for an aggregate principal amount of $425.0 million as of that date (the "Term Loan Facility Add-on"). The amendments to the WCC Term Loan Facility were made in connection with the Buckingham Acquisition and for working capital purposes. Net proceeds were $71.0 million after a 2.5% discount, 1.5% broker fee, a consent fee of 1.17%, and $0.1 million of additional debt issuance costs.

18
WESTMORELAND COAL COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONT.)

In conjunction with the Kemmerer Drop, the Company amended the WCC Term Loan Facility to remove Kemmerer as a guarantor. In addition, $94.1 million of the proceeds received from WMLP related to the Kemmerer Drop were used to pay down the WCC Term Loan Facility.
WMLP Term Loan Facility due 2018 (the "WMLP Term Loan Facility")
The WMLP Term Loan Facility is a primary obligation of Oxford Mining Company, LLC, a wholly owned subsidiary of WMLP, is guaranteed by WMLP and its subsidiaries, and is secured by substantially all of WMLP's and its subsidiaries' assets.
Revolving Line of Credit (the "Revolving Credit Facility")
Pursuant to a June 2, 2015 amendment to the Revolving Credit Facility, Westmoreland has a total aggregate borrowing capacity of $75.0 million between June 15th and August 15th of each year, with an aggregate borrowing capacity of $50.0 million outside of these periods. As of September 30, 2015, the Company had no borrowings under the Revolving Credit Facility and had outstanding letters of credit in the amount of $21.1 million.
During the nine months ended September 30, 2015, the Company entered into $15.0 million of new capital leases.

8.    POSTRETIREMENT MEDICAL BENEFITS AND PENSION
Postretirement Medical Benefits
The Company provides postretirement medical benefits to retired employees and their dependents as mandated by the Coal Industry Retiree Health Benefit Act of 1992 and pursuant to collective bargaining agreements. The Company also provides these benefits to qualified full-time employees pursuant to collective bargaining agreements.
The components of net periodic postretirement medical benefit cost are as follows: 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
2015
 
2014
 
2015
 
2014
 
(In thousands)
 
(In thousands)
Components of net periodic benefit cost:
 
 
 
 
 
 
 
Service cost
$
1,054

 
$
822

 
$
3,163

 
$
2,467

Interest cost
2,907

 
3,203

 
8,722

 
9,610

Amortization of deferred items
327

 
4

 
981

 
13

Total net periodic benefit cost
$
4,288

 
$
4,029

 
$
12,866

 
$
12,090

The following table shows the net periodic postretirement medical benefit costs that relate to current and former mining operations: 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2015
 
2014
 
2015
 
2014
 
(In thousands)
 
(In thousands)
Former mining operations
$
2,034

 
$
2,402

 
$
6,103

 
$
7,210

Current operations
2,254

 
1,627

 
6,763

 
4,880

Total net periodic benefit cost
$
4,288

 
$
4,029

 
$
12,866

 
$
12,090

The costs for the former mining operations are included in Heritage health benefit expenses and costs for current operations are included in Cost of sales and Selling and administrative expenses.
Pension
The Company provides pension benefits to qualified full-time employees pursuant to collective bargaining agreements.

19
WESTMORELAND COAL COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONT.)

The Company incurred net periodic benefit costs of providing these pension benefits as follows:
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2015
 
2014
 
2015
 
2014
 
(In thousands)
 
(In thousands)
Components of net periodic benefit cost:
 
 
 
 
 
 
 
Service cost
$
436

 
$
500

 
$
1,318

 
$
1,500

Interest cost
1,831

 
1,747

 
5,780

 
5,240

Expected return on plan assets
(2,435
)
 
(2,154
)
 
(7,744
)
 
(6,461
)
Settlements
(1,529
)
 
—

 
(1,874
)
 
—

Amortization of deferred items
1,059

 
359

 
3,301

 
1,078

Total net periodic pension cost
$
(638
)
 
$
452

 
$
781

 
$
1,357


These costs are included in Cost of sales and Selling and administrative expenses.

The Company made $3.5 million of contributions to its pension plans in the nine months ended September 30, 2015. The Company expects to make $0.3 million of contributions to its pension plans during the remainder of 2015.

9.    HERITAGE HEALTH BENEFIT EXPENSES
The caption Heritage health benefit expenses used in the unaudited consolidated statements of operations refers to costs of benefits the Company provides to its former mining operation employees. The components of these expenses are as follows:
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2015
 
2014
 
2015
 
2014
 
(In thousands)
 
(In thousands)
Health care benefits
$
2,041

 
$
2,404

 
$
6,138

 
$
7,054

Combined benefit fund payments
462

 
342

 
1,387

 
1,366

Workers’ compensation benefits
102

 
120

 
324

 
380

Black lung benefits
196

 
449

 
173

 
1,446

Total
$
2,801

 
$
3,315

 
$
8,022

 
$
10,246


10.
ASSET RETIREMENT OBLIGATIONS , CONTRACTUAL THIRD-PARTY RECLAMATION RECEIVABLE AND RECLAMATION DEPOSITS
The asset retirement obligation ("ARO"), contractual third-party reclamation receivable, and reclamation deposits for each of the Company’s operating segments at September 30, 2015 are summarized below:
 
Asset
Retirement
Obligation
 
Contractual
Third-Party
Reclamation
Receivable
 
Reclamation
Deposits
 
(In thousands)
Coal - U.S.
$
279,864

 
$
109,758

 
$
77,425

Coal - Canada
116,061

 
5,638

 
—

Coal - WMLP
52,666

 
—

 
—

Power
1,016

 
—

 
—

Total
$
449,607

 
$
115,396

 
$
77,425


20
WESTMORELAND COAL COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONT.)

Asset Retirement Obligations
Changes in the Company’s asset retirement obligations were as follows: 
 
Nine Months Ended September 30,
 
2015
 
2014
 
(In thousands)
Asset retirement obligations, beginning of year (including current portion)
$
452,745

 
$
279,864

Accretion
29,265

 
23,329

Liabilities settled
(23,421
)
 
(18,759
)
Changes due to amount and timing of reclamation
4,612

 
—

Asset retirement obligations acquired
3,769

 
102,075

Changes due to foreign currency translation
(17,363
)
 
(1,702
)
Asset retirement obligations, end of period
449,607

 
384,807

Less current portion
(47,462
)
 
(29,529
)
Asset retirement obligations, less current portion
$
402,145

 
$
355,278

Contractual Third-Party Reclamation Receivables
At September 30, 2015, the Company recognized an asset of $115.4 million as contractual third-party reclamation receivables, representing the present value of customer obligations to reimburse the Company for future reclamation expenditures.
Reclamation Deposits
The Company’s reclamation deposits will be used to fund final reclamation activities. The Company’s carrying value and estimated fair value of its reclamation deposits at September 30, 2015 were as follows: 
 
Carrying Value
 
Fair Value
 
Fair Value Hierarchy
 
(In thousands)
 
 
Cash and cash equivalents
$
46,544

 
$
46,544

 
Level 1
Available-for-sale securities
30,881

 
30,881

 
Level 1
 
$
77,425

 
$
77,425


 
These accounts include available-for-sale securities. Available-for-sale securities are reported at fair value with unrealized gains and losses excluded from earnings and reported in Accumulated other comprehensive loss.
Available-for-Sale Reclamation Deposits
The cost basis, gross unrealized holding gains and losses, and fair value of available-for-sale securities at September 30, 2015 were as follows (in thousands):
Cost basis
$
31,141

Gross unrealized holding gains
573

Gross unrealized holding losses
(833
)
Fair value
$
30,881



21
WESTMORELAND COAL COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONT.)

Maturities of available-for-sale securities were as follows at September 30, 2015:
 
Cost Basis
 
Fair Value
 
(In thousands)
Within one year
$
—

 
$
—

Due in five years or less
16,804

 
16,601

Due after five years to ten years
5,424

 
5,262

Due in more than ten years
8,913

 
9,018

 
$
31,141

 
$
30,881


11.    DERIVATIVE INSTRUMENTS
The Company evaluates all of its financial instruments to determine if such instruments are derivatives, derivatives that qualify for the normal purchase normal sale exception, or contain features that qualify as embedded derivatives. All derivative financial instruments, except for derivatives that qualify for the normal purchase normal sale exception, are recognized on the balance sheet at fair value. Changes in fair value are recognized in earnings if they are not eligible for hedge accounting or in other comprehensive income if they qualify for cash flow hedge accounting.
In the first quarter of 2014, the Company entered into two foreign currency exchange forward contracts to purchase Canadian Dollars to manage a portion of its exposure to fluctuating rates of exchange on anticipated Canadian Dollar-denominated Canadian Acquisition cash flows. These two foreign currency contracts had a total notional amount of $348.3 million and were settled in April 2014.
During 2014, the Company entered into contracts to purchase power at its ROVA facility to manage exposure to power price fluctuations. These contracts cover the period from April 2014 to March 2019 and contracted power prices range from $41.05 to $56.33 per megawatt hour, with a weighted average contract price of $43.72 over the remaining contract lives. The fair value of these power price derivatives are based on comparing contracted prices to projected future prices.
The fair value of outstanding derivative instruments not designated as hedging instruments on the accompanying unaudited Consolidated Balance Sheets was as follows (in thousands): 
Derivative Instruments
 
Balance Sheet Location
 
September 30, 2015
 
December 31, 2014
Contracts to purchase power
 
Other current liabilities
 
$
10,138

 
$
8,265

Contracts to purchase power
 
Other liabilities
 
30,175

 
21,103

The effect of derivative instruments not designated as hedging instruments on the accompanying unaudited Consolidated Statements of Operations was as follows (in thousands): 
 
 
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
Derivative Instruments
 
Statement of
Operations Location
 
2015
 
2014
 
2015
 
2014
Canadian dollar foreign exchange forward contracts
 
Gain (loss) on foreign exchange
 
$
—

 
$
—

 
$
—

 
$
(6,209
)
Contracts to purchase power
 
Derivative loss
 
(5,815
)
 
(23,691
)
 
(6,717
)
 
(29,621
)

12.    FAIR VALUE MEASUREMENTS
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. See Notes 5, 10 and 11 for additional disclosures related to fair value measurements.
The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy, as defined below, gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs.
•
Level 1, defined as observable inputs such as quoted prices in active markets for identical assets.

22
WESTMORELAND COAL COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONT.)

•
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.
The table below sets forth, by level, the Company’s financial assets that are accounted for at fair value at September 30, 2015:
 
Level 1
(In thousands)
Assets:
 
Available-for-sale investments included in Restricted investments and bond collateral
$
34,854

Available-for-sale investments included in Reclamation deposits
30,881

Total assets
$
65,735

Long-term debt fair value estimates are based on observed prices for securities with an active trading market when available (Level 2) and otherwise using discount rate estimates based on interest rates (Level 3). As of September 30, 2015, the Company had no long-term debt with Level 3 fair values. The estimated fair values of the Company’s debt with fixed and variable interest rates are as follows:
 
Fixed Interest Rate
 
Variable Interest Rate
 
Carrying Value
 
Fair Value
 
Carrying Value
 
Fair Value
 
(In thousands)
 
(In thousands)
December 31, 2014
$
345,498

 
$
348,250

 
$
341,300

 
$
344,750

September 30, 2015
$
345,860

 
$
305,375

 
$
320,615

 
$
264,507

The Company uses derivative financial instruments, primarily foreign exchange contracts and forward contracts to purchase power, to reduce its exposure to market risks from changes in foreign exchange rates and changes in prices for power, respectively. The foreign exchange contracts are measured at fair value using quoted forward foreign exchange prices from counterparties corroborated by market-based pricing (Level 2). The contracts to purchase power are measured at fair value using forward pricing curves for power from counterparties corroborated by market-based pricing (Level 2). Additional information related to the Company’s derivative financial instruments is disclosed in Note 11 to the unaudited consolidated financial statements.
The Company’s non-recurring fair value measurements include asset retirement obligations (refer to Note 10).
The Company determines the estimated fair value of its asset retirement obligations by calculating the present value of estimated cash flows related to reclamation liabilities using Level 3 inputs. The significant inputs used to calculate such liabilities includes estimates of costs to be incurred, the Company’s credit adjusted discount rate, inflation rates and estimated dates of reclamation. The asset retirement liability is accreted to its present value each period and the capitalized asset retirement cost is depleted using the units-of-production method.
The fair value of assets and liabilities acquired through business combinations is calculated using a discounted-cash flow approach using Level 3 inputs. Cash flow estimates require forecasts and assumptions for many years into the future for a variety of factors.

13.     INCOME TAXES

For interim income tax reporting the Company estimates its annual effective tax rate and applies this effective tax rate to its year to date pre-tax (loss) income.  For the nine months ended September 30, 2015, the effective tax rate differed from the statutory rate primarily as a result of the U.S. and Canadian valuation allowances and the impact of the statutory rate change in Alberta, Canada. For the nine months ended September 30, 2014, the effective tax rate differed from the statutory rate primarily due to the U.S. valuation allowance and foreign operations.


23
WESTMORELAND COAL COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONT.)

14.    SHAREHOLDERS’ DEFICIT AND ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
Noncontrolling Interest
Following the WMLP Transactions, WMLP is a consolidated subsidiary and we recorded a noncontrolling interest totaling $15.3 million, which represents the equity attributable to the noncontrolling unitholders, who owned approximately 21% of the outstanding Common Unitsof WMLP at December 31, 2014. The Kemmerer Drop resulted in our acquisition of an additional 15% interest in WMLP (on a fully diluted basis) with a corresponding decrease in noncontrolling interest ownership. Accordingly, we recorded a decrease to noncontrolling interest of $8.4 million during the three months ended September 30, 2015. Activity in the noncontrolling interest is summarized as follows:
(in millions)
 
Beginning Balance as of December 31, 2014
$
15,261

Change in Parent's ownership
(8,362
)
Net loss allocated to noncontrolling interest
(4,850
)
Distributions to noncontrolling interest
(535
)
Ending Balance as of September 30, 2015
$
1,514

Preferred Stock
The Company paid less than $0.1 million of preferred stock dividends for the nine months ended September 30, 2015. During the first quarter of 2015, all of the Company’s outstanding shares of preferred stock were converted or redeemed, consisting of 88,494 shares of preferred stock being converted into 604,557 shares of common stock and 3,175 shares of preferred stock being redeemed under a mandatory redemption for $0.3 million. At September 30, 2015, there were no outstanding shares of preferred stock.
Changes in Accumulated Other Comprehensive Income (Loss)
The following table reflects the changes in accumulated other comprehensive income (loss) by component:
 
Pension
 
Postretirement
medical benefits
 
Unrealized gains and losses on available-for-sale
securities, net
 
Foreign currency translation adjustment
 
Tax effect of
other
comprehensive
income gains
 
Accumulated
other
comprehensive
income (loss)
 
(In thousands)
Balance at December 31, 2014
$
(36,065
)
 
$
(39,716
)
 
$
413

 
$
(17,880
)
 
$
(31,048
)
 
$
(124,296
)
Other comprehensive income (loss) before reclassifications
(576
)
 
—

 
(1,438
)
 
(43,018
)
 
(908
)
 
(45,940
)
Amounts reclassified from accumulated other comprehensive income (loss)
3,301

 
981

 
143

 
—

 
—

 
4,425

Balance at September 30, 2015
$
(33,340
)
 
$
(38,735
)
 
$
(882
)
 
$
(60,898
)
 
$
(31,956
)
 
$
(165,811
)

24
WESTMORELAND COAL COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONT.)

The following table reflects the reclassifications out of accumulated other comprehensive loss for the three and nine months ended months ended September 30, 2015 (in thousands):
Details about accumulated other comprehensive loss components
 
Amount reclassified from accumulated other
comprehensive loss(1)
 
Affected line item
in the statement
where net loss is presented
 
Three Months Ended September 30, 2015
 
Nine Months Ended September 30, 2015
 
Available-for sale securities
 
 
 
 
 
 
Realized gains and losses on available-for sale securities
 
$
19

 
$
143

 
Other income (loss)
 
 
 
 
 
 
 
Amortization of defined benefit pension items
 
 
 
 
 
 
Prior service costs
 
$
2

 
$
6

 
 
Actuarial losses
 
1,032

 
3,295

 
(2) 
Total
 
$
1,034

 
$
3,301

 
 
Amortization of postretirement medical items
 
 
 
 
 
 
Prior service costs
 
$
(159
)
 
$
(477
)
 
(3) 
Actuarial losses
 
486

 
1,458

 
(3) 
Total
 
$
327

 
$
981

 
 
____________________
(1)
Amounts in parentheses indicate amounts recognized as income. Amounts with no parenthesis were recognized as expenses or losses.
(2)
These accumulated other comprehensive loss components are included in the computation of net periodic pension cost. (See Note 8 - Pension for additional details)
(3)
These accumulated other comprehensive loss components are included in the computation of net periodic postretirement medical cost. (See Note 8 - Postretirement Medical Benefits for additional details)

15.     SHARE-BASED COMPENSATION
The Company grants employees and non-employee directors restricted stock units. Non-employee directors receive equity awards with a value of $90,000 after each annual meeting.
The Company recognized compensation expense from share-based arrangements shown in the following table:
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2015
 
2014
 
2015
 
2014
 
(In thousands)
Recognition of fair value of restricted stock units, stock options and SARs over vesting period; and issuance of stock
$
1,100

 
$
334

 
$
2,924

 
$
2,450

Contributions of stock to the Company’s 401(k) plan
842

 
677

 
2,664

 
1,006

Total share-based compensation expense
$
1,942

 
$
1,011

 
$
5,588

 
$
3,456


25
WESTMORELAND COAL COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONT.)

Restricted Stock Units
A summary of restricted stock award activity for the nine months ended September 30, 2015 is as follows: 
 
Units
 
Weighted
Average
Grant-Date
Fair Value
 
Unamortized
Compensation
Expense
(In thousands)
 
Non-vested at December 31, 2014
409,362

 
$
13.87

 
 
 
Granted
262,555

 
28.26

 
 
 
Vested
(247,528
)
 
10.53

 
 
 
Forfeited
(60,241
)
 
10.57

 
 
 
Non-vested at September 30, 2015
364,148

 
$
28.57

 
$
8,053

(1) 
____________________
(1)
Expected to be recognized over the next three years.
Stock Options
A summary of stock option activity for the nine months ended September 30, 2015 is as follows:
 
Stock Options
 
Weighted
Average
Exercise Price
 
Weighted
Average
Remaining
Contractual
Life
(In years)
 
Aggregate Intrinsic
Value
(In thousands)
 
Unamortized
Compensation
Expense
(In thousands)
Outstanding at December 31, 2014
110,806

 
$
22.15

 
 
 
 
 
 
Exercised
—

 
—

 
 
 
 
 
 
Expired
(1,500
)
 
21.40

 
 
 
 
 
 
Outstanding and exercisable at September 30, 2015
109,306

 
$
22.16

 
2.4
 
$
—

 
$
—

There were no stock options granted during the nine months ended September 30, 2015.
SARs
A summary of SARs activity for the nine months ended September 30, 2015 is as follows:
 
SARs
 
Weighted
Average Exercise Price
 
Weighted
Average
Remaining
Contractual
Life
(In years)
 
Aggregate Intrinsic
Value
(In thousands)
 
Unamortized
Compensation
Expense
(In thousands)
Outstanding at December 31, 2014
16,943

 
$
25.44

 
 
 
 
 
 
Exercised
—

 
—

 
 
 
 
 
 
Expired
—

 
—

 
 
 
 
 
 
Outstanding and exercisable at September 30, 2015
16,943

 
$
25.44

 
0.6
 
$
—

 
$
—

There were no SARs granted during the nine months ended September 30, 2015.

16.    EARNINGS PER SHARE
Basic earnings (loss) per share has been computed by dividing the net income (loss) applicable to common shareholders by the weighted average number of shares of common stock outstanding during each period. Net income (loss) applicable to common shareholders includes the adjustment for net income or loss attributable to noncontrolling interest. Diluted earnings (loss) per share is computed by including the dilutive effect of common stock that would be issued assuming conversion or exercise of outstanding convertible notes and securities, stock options, stock appreciation rights, and restricted stock units. No such items were included in the computations of diluted loss per share in the three and nine months ended

26
WESTMORELAND COAL COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONT.)

September 30, 2015 and 2014 because the Company incurred a net loss applicable to common shareholders in these periods and the effect of inclusion would have been anti-dilutive.
The table below shows the number of shares that were excluded from the calculation of diluted loss per share because their inclusion would be anti-dilutive to the calculation:
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2015
 
2014
 
2015

2014
 
(In thousands)
Convertible securities
—

 
626

 
—

 
626

Restricted stock units, stock options and SARs
490

 
568

 
490

 
568

Total shares excluded from diluted shares calculation
490

 
1,194

 
490

 
1,194


17.    BUSINESS SEGMENT INFORMATION
Segment information is based on a management approach, which requires segmentation based upon the Company’s internal organization, reporting of revenue, and operating income. The Company’s operations are classified into six reporting segments: Coal - U.S., Coal - Canada, Coal - WMLP, Power, Heritage, and Corporate and Eliminations. During the third quarter of 2015, we completed the Kemmerer Drop into WMLP. Accordingly, to enable comparability, all segment disclosures have been restated to remove Kemmerer from the Coal-US segment and place it in the Coal - WMLP segment.

27
WESTMORELAND COAL COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONT.)

Summarized financial information by segment is as follows:
 
Coal -
U.S.(1)
 
Coal - Canada(2)
 
Coal - WMLP(3)(4)
 
Power
 
Heritage
 
Corporate and Eliminations
 
Consolidated
 
(In thousands)
Three Months Ended September 30, 2015
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues
$
132,018

 
$
107,752

 
$
94,785

 
$
22,017

 
$
—

 
$
(6,776
)
 
$
349,796

Restructuring charges
—

 
—

 
—

 
—

 
—

 
—

 
—

Depreciation, depletion, and amortization
9,524

 
7,023

 
15,471

 
2,470

 
—

 
(29
)
 
34,459

Operating income (loss)
482

 
4,009

 
(4,845
)
 
(7,976
)
 
(2,950
)
 
(4,027
)
 
(15,307
)
Total assets
557,643

 
547,368

 
440,004

 
172,182

 
16,152

 
(5,127
)
 
1,728,222

Capital expenditures
7,047

 
7,485

 
4,691

 
198

 
—

 
(4
)
 
19,417

Three Months Ended September 30, 2014
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues
$
123,134

 
$
151,340

 
$
41,917

 
$
21,439

 
$
—

 
$
—

 
$
337,830

Restructuring charges
292

 
2,411

 
—

 
(40
)
 
—

 
602

 
3,265

Depreciation, depletion, and amortization
9,464

 
11,862

 
4,307

 
2,504

 
—

 
38

 
28,175

Operating income (loss)
(349
)
 
(1,453
)
 
5,142

 
(26,413
)
 
(3,915
)
 
(2,444
)
 
(29,432
)
Total assets
477,946

 
607,565

 
187,346

 
163,528

 
15,996

 
126,127

 
1,578,508

Capital expenditures
7,981

 
5,280

 
4,860

 
164

 
—

 
—

 
18,285

Nine Months Ended September 30, 2015


 
 
 
 







Revenues
$
419,505

 
$
317,157

 
$
300,908

 
$
64,001

 
$
—

 
$
(31,331
)

$
1,070,240

Restructuring charges
—

 
—

 
656

 
—

 
—

 
—

 
656

Depreciation, depletion, and amortization
28,199

 
26,899

 
44,282

 
7,430

 
—

 
(29
)

106,781

Operating income (loss)
8,403

 
23,397

 
(6,151
)
 
(16,594
)
 
(8,699
)
 
(14,072
)

(13,716
)
Total assets
557,643

 
547,368

 
440,004

 
172,182

 
16,152

 
(5,127
)

1,728,222

Capital expenditures
18,908

 
21,413

 
19,918

 
1,305

 
—

 
(3,573
)

57,971

Nine Months Ended September 30, 2014


 
 
 
 







Revenues
$
348,417


$
267,387

 
$
124,933

 
$
65,252


$
—


$
—


$
805,989

Restructuring charges
783

 
9,058

 
—

 
459

 
—

 
907

 
11,207

Depreciation, depletion, and amortization
28,029


20,533

 
12,523

 
7,512


—


116


68,713

Operating income (loss)
(3,356
)

(14,162
)
 
20,425

 
(34,147
)

(11,303
)

(8,478
)

(51,021
)
Total assets
477,946


607,565

 
187,346

 
163,528


15,996


126,127


1,578,508

Capital expenditures
17,898

 
12,775

 
4,529

 
419

 
—

 
25

 
35,646

____________________
(1)
The Buckingham Acquisition was completed on January 1, 2015. For the three and nine months ended September 30, 2015, revenues for Buckingham were $15.9 million and $61.4 million and operating losses were $2.0 million and $3.4 million, respectively.
(2)
The Canadian Operations were acquired on April 28, 2014, therefore, information for the nine months ended September 30, 2014 includes approximately five months of operations.
(3)
The operations reported under the segment Coal - WMLP were acquired on December 31, 2014, therefore, there is no activity for the three and nine months ended September 30, 2014.
(4)
The Coal - WMLP segment recorded revenues of $5.9 million and $24.6 million for intersegment revenues to the Coal - U.S. segment for the three and nine months ended September 30, 2015.

28
WESTMORELAND COAL COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONT.)

A reconciliation of segment income from operations to loss before income taxes follows: 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2015
 
2014
 
2015
 
2014
 
(In thousands)
Income (loss) from operations
$
(15,307
)
 
$
(29,432
)
 
$
(13,716
)
 
$
(51,021
)
Loss on extinguishment of debt
(5,385
)
 
(13
)
 
(5,385
)
 
(12,648
)
Interest expense
(26,831
)
 
(21,251
)
 
(76,870
)
 
(63,835
)
Interest income
1,555

 
2,468

 
6,262

 
4,351

Gain (loss) on foreign exchange
1,679

 
(1,742
)
 
2,474

 
(5,883
)
Other income
356

 
118

 
1,082

 
697

Loss before income taxes
$
(43,933
)
 
$
(49,852
)
 
$
(86,153
)
 
$
(128,339
)

18.    CONTINGENCIES

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

ITEM 2
— MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q contains “forward-looking statements.” Forward-looking statements can be identified by words such as “anticipates,” “intends,” “plans,” “seeks,” “believes,” “estimates,” “expects” and similar references to future periods. Examples of forward-looking statements include, but are not limited to, statements we make about recent acquisitions and their anticipated effects on us, and our expectation that our cash from operations, cash on hand and available borrowing capacity will be sufficient to meet our investing, financing, and working capital requirements for the foreseeable future.
Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Our actual results may differ materially from those contemplated by the forward-looking statements. We therefore caution you against relying on any of these forward-looking statements. They are statements neither of historical fact nor guarantees or assurances of future performance. Important factors that could cause actual results to differ materially from those in the forward-looking statements include political, economic, business, competitive, market, weather and regulatory conditions and the following:

•
Our ability to consummate the San Juan Acquisition and our ability to manage San Juan following the San Juan Acquisition;
•
Our ability to effectively manage WMLP;
•
Our substantial level of indebtedness and our ability to adhere to financial covenants related to our borrowing arrangements;
•
Changes in our post-retirement medical benefit and pension obligations and the impact of the recently enacted healthcare legislation on our employee health benefit costs;
•
Inaccuracies in our estimates of our coal reserves;
•
The effect of consummating financing, acquisition or disposition transactions;
•
Our potential inability to expand or continue current coal operations due to limitations in obtaining bonding capacity for new mining permits, and/or increases in our mining costs as a result of increased bonding expenses;
•
The effect of prolonged maintenance or unplanned outages at our operations or those of our major power generating customers;

29
WESTMORELAND COAL COMPANY AND SUBSIDIARIES
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONT.)

•
The inability to control costs, recognize favorable tax credits and/or receive adequate train traffic at our open market mine operations;
•
Our efforts to effectively integrate our Canadian subsidiaries with our existing business and our ability to manage our expanded operations following the Canadian Acquisition;
•
Our ability to realize growth opportunities and cost synergies as a result of the Canadian Acquisition;
•
The ability of our hedging arrangement with respect to our ROVA facility to generate free cash flow due to the fully hedged position through March 2019;
•
Competition within our industry and with producers of competing energy sources;
•
Our relationships with, and other conditions affecting, our customers;
•
The availability and costs of key supplies or commodities, such as diesel fuel, steel and explosives;
•
Potential title defects or loss of leasehold interests in our properties, which could result in unanticipated costs or an inability to mine the properties;
•
The effect of legal and administrative proceedings, settlements, investigations and claims, including any related to citations and orders issued by regulatory authorities, and the availability of related insurance coverage;
•
Existing and future legislation and regulation affecting both our coal mining operations and our customers’ coal usage, governmental policies and taxes, including those aimed at reducing emissions of elements such as mercury, sulfur dioxides, nitrogen oxides, particulate matter or greenhouse gases;
•
The effect of the Environmental Protection Agency’s and Canadian and provincial governments’ inquiries and regulations on the operations of the power plants to which we provide coal; and
•
Other factors that are described under the heading “Risk Factors” found in our reports filed with the Securities and Exchange Commission, including our 2014 Form 10-K and our subsequently filed Quarterly Reports on Form 10-Q.
Unless otherwise specified, the forward-looking statements in this report speak as of the filing date of this report. Factors or events that could cause our actual results to differ may emerge from time-to-time, and it is not possible for us to predict all of them. We undertake no obligation to publicly update any forward-looking statements, whether because of new information, future developments or otherwise, except as may be required by law.
Overview
Westmoreland Coal Company is the oldest independent coal company in the United States. Our coal operations include sub-bituminous and lignite surface coal mining in the Western United States and Canada, an underground bituminous coal mine in Ohio, a char production facility, and a 50% interest in an activated carbon plant. We also own the general partner of, and a majority of the equity interests in, WMLP (formerly Oxford Resource Partners, LP), a publicly-traded coal master limited partnership. We sold 44.8 million tons of coal in 2014 and 40.6 million tons through September 30, 2015, which includes tons sold at our Coal - WMLP segment. Our power operations include two coal-fired power generation units in North Carolina. We classify our business into six segments: Coal - U.S., Coal - Canada, Coal - WMLP, Power, Heritage and Corporate. Our principal operating segments are our Coal - U.S., Coal - Canada, Coal - WMLP and Power segments. Our two non-operating segments are our Heritage and Corporate segments. Our Heritage segment primarily includes the costs of benefits we provide to former mining operation employees and our Corporate segment consists primarily of corporate administrative expenses.
We are a holding company and conduct our operations through subsidiaries. We have significant cash requirements to fund our ongoing heritage health benefit costs and corporate overhead expenses. The principal sources of cash flow to us are distributions from our principal operating subsidiaries.
WMLP Transactions and Kemmerer Drop
On December 31, 2014, we completed the WMLP Transactions. We paid a total of $33.5 million in cash to acquire the GP and received 4,512,500 common units of WMLP (on a post-split basis following the 12-to-1 reverse split of WMLP’s units that occurred in connection with the closing of the GP Acquisition) as consideration for the Contribution. Subsequent to these transactions our ownership in WMLP represented approximately 79% of the outstanding equity interests in WMLP.
WMLP provides us with a platform to implement a value-creating “drop-down” strategy pursuant to which we intend to periodically contribute certain U.S. and Canadian coal assets to WMLP in exchange for a combination of cash and additional limited partner interests. During the third quarter of 2015 we completed the Kemmerer Drop for aggregate consideration of $230 million, including $115 million in cash and $115 million in Series A Units of WMLP, increasing our ownership interest in WMLP to approximately 94% on a fully diluted basis.

30

As the owner of the general partner of WMLP, we expect to optimize its operations and improve its financial performance. During the second quarter of 2015 WMLP resumed payments of quarterly distributions to WMLP unitholders, including us. We expect the combination of asset contributions and improved WMLP operations to result in the continued payment of quarterly distributions, as well as increasing future payments to us as a result of incentive distribution rights to which we are entitled as the owner of WMLP’s general partner.
Entry into San Juan Purchase Agreement
On July 1, 2015, we entered into a Stock Purchase Agreement (the "San Juan Purchase Agreement") with BHP Billiton New Mexico Coal, Inc., a Delaware corporation ("BHP"), pursuant to which, upon satisfaction or waiver of the conditions set forth in the San Juan Purchase Agreement, we will complete the purchase from BHP of all of the issued and outstanding capital stock of San Juan Coal Company and San Juan Transportation Company (the "San Juan Acquisition").
While each party’s obligation to complete the San Juan Acquisition is conditioned upon a number of conditions set forth in the San Juan Purchase Agreement, including receipt of all required regulatory approvals, we expect to close the San Juan Acquisition on December 31, 2015. There can be no assurance that the San Juan Acquisition will be completed on the anticipated timeframe, or at all, or that any anticipated benefits of the San Juan Acquisition will be realized.

Results of Operations
Items that Affect Comparability of Our Results
For 2015, our results included items that affect comparability of our results. The expense components of these items were as follows:
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2015
 
2014
 
2015
 
2014
 
(In thousands)
Derivative loss
$
(5,815
)
 
$
(23,691
)
 
$
(6,717
)
 
$
(29,621
)
Gain (loss) on foreign exchange
1,679

 
(1,742
)
 
2,474

 
(5,883
)
Restructuring charges
—

 
(3,265
)
 
(656
)
 
(11,207
)
Acquisition and transition costs
(3,070
)
 
(1,616
)
 
(4,470
)
 
(22,079
)
Loss on debt extinguishment
(5,385
)
 
(13
)
 
(5,385
)
 
(12,648
)
Incremental interest incurred before close of Canadian Acquisition
—

 
—

 
—

 
(11,191
)
Canadian Acquisition bridge facility commitment fee
—

 
—

 
—

 
(4,875
)
Impact (pre-tax)
$
(12,591
)
 
$
(30,327
)
 
$
(14,754
)
 
$
(97,504
)
Items recorded in 2015
•
We recorded $5.8 million and $6.7 million of derivative losses related to ROVA’s purchased-power contracts for the three and nine months ended September 30, 2015, respectively.
•
We recorded a $1.7 million and $2.5 million gain on foreign exchange for the three and nine months ended September 30, 2015, respectively, due to currency fluctuations.
•
We recorded $0.7 million of restructuring charges for the nine months ended September 30, 2015 related to the WMLP Transactions that are included in Restructuring charges.

31
WESTMORELAND COAL COMPANY AND SUBSIDIARIES
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONT.)

Items recorded in 2014
•
We recorded $1.6 million and $22.1 million of acquisition and transition costs for the three and nine months ended September 30, 2014, respectively, as a result of our Canadian Acquisition, which includes the impact on cost of sales related to the sale of inventory written up to fair value in the acquisition.
•
We recorded $12.6 million of loss on extinguishment of debt for the nine months ended September 30, 2014 primarily related to the payoff of the term debt held by Westmoreland Mining LLC. This loss included an $11.6 million make-whole payment with the remaining loss due to the write-off of unamortized debt issuance costs.
•
We recorded $3.3 million and $11.2 million of restructuring charges for the three and nine months ended September 30, 2014, respectively, related to a restructuring plan to reduce our overall cost structure. Most of the restructuring charges related to our Canadian Operations and included termination benefits and outplacement costs.
•
We recorded $23.7 million and $29.6 million of derivative losses for the three and nine months ended September 30, 2014, respectively, related to ROVA’s purchased power contracts.
•
We recorded $11.2 million of incremental interest expense for the nine months ended September 30, 2014 related to our issuance of $425 million aggregate principal amount of senior notes in connection with the Canadian Acquisition (the “Redeemed Notes”), which were redeemed in December 2014 in connection with our issuance of the 8.75% Notes. This incremental interest represents interest expense from the February 7, 2014 closing date of the Redeemed Notes to the April 28, 2014 closing date of the Canadian Acquisition.
•
We recorded a $1.7 million gain on foreign exchange for the three months ended September 30, 2014 and a $5.9 million loss on foreign exchange for the nine months ended September 30, 2014. The majority of this loss relates to two foreign currency exchange forward contracts to purchase Canadian Dollars in order to hedge a portion of our exposure to fluctuating rates of exchange on Canadian Dollar-denominated Canadian Acquisition cash flows.
•
We recorded $4.9 million of interest expense for the nine months ended September 30, 2014 related to the Canadian Acquisition bridge facility. Upon closing of a $425 million private offering, our bridge facility commitment expired unexercised and as a result; the related commitment fee of $4.9 million was expensed and is included in Interest expense.

Three Months Ended September 30, 2015 Compared to Three Months Ended September 30, 2014
Summary
The following table shows the comparative consolidated results and changes between periods:
 
Three Months Ended September 30,
 
 
 
 
 
Increase / (Decrease)
 
2015
 
2014
 
$
 
%
 
(In millions)
Revenues
$
349.8

 
$
337.8

 
$
12.0

 
3.6
 %
Net loss applicable to common shareholders
(46.6
)
 
(49.3
)
 
(2.7
)
 
(5.5
)%
Adjusted EBITDA(1)
48.0

 
41.7

 
6.3

 
15.1
 %
____________________
(1)
Adjusted EBITDA, a non-GAAP measure, is defined and reconciled to net loss at the end of this “Results of Operations” section.
Our third quarter 2015 revenues increased primarily due to the WMLP and Buckingham acquisitions. Net loss applicable to common shareholders increased by $15.0 million, excluding the $12.6 million of expenses during 2015 and $30.3 million of expenses during 2014 discussed above in Items that Affect Comparability of Our Results. The primary factors, in aggregate, driving this increase in net loss were:

32
WESTMORELAND COAL COMPANY AND SUBSIDIARIES
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONT.)

 
Three Months Ended September 30, 2015
 
(In millions)
Increase in Operating Income in our Coal - Canada Segment
$
2.4

Inclusion of Operating Loss from our Coal - WMLP Segment in the current year
(7.7
)
Increase in interest expense due to increased debt levels
(5.6
)
Increase in income tax expense due primarily to utilization of Net Operating Losses
(4.8
)
Net loss attributable to noncontrolling interest
1.5

Other factors
(0.8
)
Total
$
(15.0
)
Coal - U.S. Segment Operating Results
The following table shows comparative coal revenues, operating income, Adjusted EBITDA, sales volume, and percentage changes between periods. As a result of the Kemmerer Drop, results for all periods presented reflect Kemmerer as part of the Coal - WMLP segment and not part of the Coal - US segment: 
 
Three Months Ended September 30,
 
 
 
 
 
Increase / (Decrease)
 
2015
 
2014
 
$
 
%
 
(In thousands, except per ton data)
Revenues
$
132,018

 
$
123,134

 
$
8,884

 
7.2
 %
Operating income (loss)
482

 
(349
)
 
831

 
238.1
 %
Adjusted EBITDA(1)
14,758

 
14,923

 
(165
)
 
(1.1
)%
Tons sold—millions of equivalent tons
6.0


6.5

 
(0.5
)
 
(7.7
)%
____________________
(1)
Adjusted EBITDA, a non-GAAP measure, is defined and reconciled to net loss at the end of this “Results of Operations” section.
Our third quarter 2015 U.S. coal segment revenues increased primarily due to the Buckingham Acquisition.
U.S. coal Adjusted EBITDA decreased due to continued unfavorable weather conditions at our Jewett Mine as well as customer outages affecting several locations. Operating income and Adjusted EBITDA remained relatively consistent period over period.
Coal - Canada Segment Operating Results
The following table shows comparative coal revenues, operating income, Adjusted EBITDA, and sales volume between periods: 
 
Three Months Ended September 30,
 
 
 
Increase / (Decrease)
 
2015
 
2014
 
$
 
%
 
(In thousands, except per ton data)
Revenues
$
107,752

 
$
151,340

 
$
(43,588
)
 
(28.8
)%
Operating income (loss)
4,009

 
(1,453
)
 
5,462

 
(375.9
)%
Adjusted EBITDA(1)
23,659

 
22,307

 
1,352

 
6.1
 %
Tons sold—millions of equivalent tons
6.2

 
6.6

 
(0.4
)
 
(6.1
)%
____________________
(1)
Adjusted EBITDA, a non-GAAP measure, is defined and reconciled to net loss at the end of this “Results of Operations” section.
Third quarter 2015 revenue decreased due to lower export prices impacting the Coal Valley operations and the continued weakening of the Canadian Dollar. Operating income and Adjusted EBITDA increased as a result of operational improvements.

33
WESTMORELAND COAL COMPANY AND SUBSIDIARIES
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONT.)

Coal - WMLP Segment Operating Results
The following table shows comparative revenues, operating loss, Adjusted EBITDA, and sales volume between periods. As a result of the Kemmerer Drop, results for all periods presented reflect Kemmerer as part of the Coal - WMLP segment and not part of the Coal - US segment: 
 
Three Months Ended September 30,
 
 
 
 
 
Increase / (Decrease)
 
2015
 
2014
 
$
 
%
 
(In thousands, except per ton data)
Revenues
$
94,785

 
$
41,917

 
$
52,868

 
126.1
 %
Operating income (loss)
(4,845
)
 
5,142

 
(9,987
)
 
(194.2
)%
Adjusted EBITDA(1)
15,648

 
10,250

 
5,398

 
52.7
 %
Tons sold—millions of equivalent tons
1.6

 
1.1

 
0.5

 
45.5
 %
____________________
(1)
Adjusted EBITDA, a non-GAAP measure, is defined and reconciled to net loss at the end of this “Results of Operations” section.
The changes between both periods presented is the result of both Kemmerer and WMLP being included in our 2015 results, with only Kemmerer reflected in 2014. The Ohio-based operations of the Coal - WMLP segment encountered a longer than expected customer shut-down, adversely impacting the results of the quarter.
Power Segment Operating Results
The following table shows comparative power revenues, operating income, Adjusted EBITDA, and percentage changes between periods: 
 
Three Months Ended September 30,
 
 
 
 
 
Increase / (Decrease)
 
2015
 
2014
 
$
 
%
 
(In thousands)
Revenues
$
22,017

 
$
21,439

 
$
578

 
2.7
 %
Operating income (loss)
(7,976
)
 
(26,413
)
 
18,437

 
(69.8
)%
Adjusted EBITDA(1)
75

 
(175
)
 
250

 
(142.9
)%
____________________
(1)
Adjusted EBITDA, a non-GAAP measure, is defined and reconciled to net loss at the end of this “Results of Operations” section.
Our third quarter 2015 power segment revenues and Adjusted EBITDA were relatively consistent, with both periods reflecting softer power demand and pricing as a result of mild weather. The operating loss improved largely as a result of $17.8 million less in derivative losses on our power contract.
Heritage Segment Operating Results
The following table shows comparative heritage segment’s operating expenses and percentage change between periods:
 
Three Months Ended September 30,
 
 
 
 
 
Increase / (Decrease)
 
2015
 
2014
 
$
 
%
 
(In thousands)
Heritage segment operating expenses
$
2,950

 
$
3,915

 
$
(965
)
 
(24.6
)%
Our third quarter 2015 heritage segment operating expenses were lower than the third quarter of 2014 primarily as a result of reductions in our actuarially determined black lung liabilities and post-retirement health benefits, lower claims activity, and lower professional services fees.

34
WESTMORELAND COAL COMPANY AND SUBSIDIARIES
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONT.)

Corporate Segment Operating Results
The following table shows comparative corporate segment’s operating expenses and percentage change between periods:
 
Three Months Ended September 30,
 
 
 
 
 
Increase / (Decrease)
 
2015
 
2014
 
$
 
%
 
(In thousands)
Corporate segment operating expenses
$
4,027

 
$
2,444

 
$
1,583

 
64.8
%
Our third quarter 2015 corporate segment operating expenses increased compared with the third quarter of 2014 due primarily to growth in corporate charges such as stock compensation expenses and other professional services.
Nonoperating Results
Our interest expense for the three months ended September 30, 2015 increased by $5.6 million compared to the three months ended September 30, 2014 primarily due to higher debt levels. We also incurred a $5.4 million loss on early extinguishment of debt due to the early repayment of approximately $94 million of our term loan in connection with the receipt of proceeds from the Kemmerer Drop. Our income tax expense increased by $4.8 million for the three months ended September 30, 2015 due to the Canadian Acquisition when compared to the three months ended September 30, 2014. Our net loss attributable to noncontrolling interest for the three months ended September 30, 2015 was $1.5 million related to the December 31, 2014 GP Acquisition.
Nine Months Ended September 30, 2015 Compared to Nine Months Ended September 30, 2014
Summary
The following table shows the comparative consolidated results and changes between periods:
 
Nine Months Ended September 30,
 
 
 
 
 
Increase / (Decrease)
 
2015
 
2014
 
$
 
%
 
(In millions)
 
 
Revenues
$
1,070.2

 
$
806.0

 
$
264.2

 
32.8
 %
Net loss applicable to common shareholders
(94.9
)
 
(132.0
)
 
(37.1
)
 
(28.1
)%
Adjusted EBITDA(1)
159.3

 
110.5

 
48.8

 
44.2
 %
____________________
(1)
Adjusted EBITDA, a non-GAAP measure, is defined and reconciled to net loss at the end of this “Results of Operations” section.
Our revenues for the nine months ended September 30, 2015 increased primarily due to the Canadian, WMLP and Buckingham acquisitions.

35
WESTMORELAND COAL COMPANY AND SUBSIDIARIES
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONT.)

Our net loss applicable to common shareholders for the nine months ended September 30, 2015 increased by $45.7 million, excluding $14.8 million of expenses during 2015 and $97.5 million of expenses during 2014 discussed above in Items that Affect Comparability of Our Results. The primary factors, in aggregate, driving this increase in net loss were:
 
Nine Months Ended September 30, 2015
 
(In millions)
Increase in Operating Income at our Coal - US Segment
$
4.0

Increase in Operating Income at our Coal - Canada Segment
14.3

Inclusion of Operating Loss from our Coal - WMLP Segment in the current year
(22.3
)
Increased Operating Loss at our Power Segment
(5.8
)
Increase in Interest Expense
(29.1
)
Increase in Income Tax Expense
(10.6
)
Net Loss attributable to noncontrolling interest
4.9

Other factors
(1.1
)
Total
$
(45.7
)
Coal - U.S. Segment Operating Results
The following table shows comparative coal revenues, operating income, Adjusted EBITDA, sales volume, and percentage changes between periods. As a result of the Kemmerer Drop, results for all periods presented reflect Kemmerer as part of the Coal - WMLP segment and not part of the Coal - US segment: 
 
Nine Months Ended September 30,
 
 
 
 
 
Increase / (Decrease)
 
2015
 
2014
 
$
 
%
 
(In thousands, except per ton data)
 
 
Revenues
$
419,505

 
$
348,417

 
$
71,088

 
20.4
 %
Operating income (loss)
8,403

 
(3,356
)
 
11,759

 
(350.4
)%
Adjusted EBITDA(1)
49,209

 
44,911

 
4,298

 
9.6
 %
Tons sold—millions of equivalent tons
17.2

 
17.6

 
(0.4
)
 
(2.3
)%
____________________
(1)
Adjusted EBITDA, a non-GAAP measure, is defined and reconciled to net loss at the end of this “Results of Operations” section.
Our U.S. coal segment revenues for the nine months ended September 30, 2015 increased primarily due to the Buckingham acquisition. Operating income improved as a result of 2014 acquisition costs related to the Sherritt acquisition not recurring in 2015. Both Operating income and Adjusted EBITDA increased due to strong 2015 first-half revenue and cost control at our WRI mine.
Coal - Canada Segment Operating Results
The following table shows comparative coal revenues, operating income, Adjusted EBITDA, and sales volume between periods: 
 
Nine Months Ended September 30,
 
 
 
Increase / (Decrease)
 
2015
 
2014
 
$
 
%
 
(In thousands, except per ton data)
 
 
Revenues
$
317,157

 
$
267,387

 
$
49,770

 
18.6
 %
Operating income (loss)
23,397

 
(14,162
)
 
37,559

 
(265.2
)%
Adjusted EBITDA(1)
81,497

 
44,295

 
37,202

 
84.0
 %
Tons sold—millions of equivalent tons
17.5

 
10.7

 
6.8

 
63.6
 %
____________________
(1)
Adjusted EBITDA, a non-GAAP measure, is defined and reconciled to net loss at the end of this “Results of Operations” section.

36
WESTMORELAND COAL COMPANY AND SUBSIDIARIES
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONT.)

The Canadian Acquisition was completed on April 28, 2014; therefore, there are only five months of activity for the nine months ended September 30, 2014. The growth in revenue and operating income improvement is primarily due to the number of months in each period presented as well as operational improvements between the two periods.
Coal - WMLP Segment Operating Results
The following table shows comparative revenues, operating loss, Adjusted EBITDA, and sales volume between periods. As a result of the Kemmerer Drop, results for all periods presented reflect Kemmerer as part of the Coal - WMLP segment and not part of the Coal - US segment: 
 
Nine Months Ended September 30,
 
 
 
 
 
Increase / (Decrease)
 
2015
 
2014
 
$
 
%
 
(In thousands, except per ton data)
Revenues
$
300,908

 
$
124,933

 
$
175,975

 
140.9
 %
Operating income (loss)
(6,151
)
 
20,425

 
(26,576
)
 
(130.1
)%
Adjusted EBITDA(1)
49,826

 
34,594

 
15,232

 
44.0
 %
Tons sold—millions of equivalent tons
6.0

 
3.2

 
2.8

 
87.5
 %
____________________
(1)
Adjusted EBITDA, a non-GAAP measure, is defined and reconciled to net loss at the end of this “Results of Operations” section.
The changes between both periods presented is the result of both Kemmerer and WMLP being included in our 2015 results, with only Kemmerer reflected in 2014.
Power Segment Operating Results
The following table shows comparative power revenues, operating income, Adjusted EBITDA, and percentage changes between periods: 
 
Nine Months Ended September 30,
 
 
 
 
 
Increase / (Decrease)
 
2015
 
2014
 
$
 
%
 
(In thousands)
 
 
Revenues
$
64,001

 
$
65,252

 
$
(1,251
)
 
(1.9
)%
Operating income (loss)
(16,594
)
 
(34,147
)
 
(17,553
)
 
51.4
 %
Adjusted EBITDA(1)
(3,152
)
 
3,868

 
(7,020
)
 
(181.5
)%
____________________
(1)
Adjusted EBITDA, a non-GAAP measure, is defined and reconciled to net loss at the end of this “Results of Operations” section.
Our power segment revenues for the nine months ended September 30, 2015 were down slightly compared to the same period in the prior year primarily due to favorable weather conditions in the first half of 2014 relative to this year. Operating income improved largely as a result of $22.9 million less derivative losses on our power contract.
Heritage Segment Operating Results
The following table shows comparative heritage segment’s operating expenses and percentage change between periods:
 
Nine Months Ended September 30,
 
 
 
 
 
Increase / (Decrease)
 
2015
 
2014
 
$
 
%
 
(In thousands)
 
 
Heritage segment operating expenses
$
8,699

 
$
11,303

 
$
(2,604
)
 
(23.0
)%
Our heritage segment operating expenses for the nine months ended September 30, 2015 were lower than for the nine months ended September 30, 2014 primarily as a result of reductions in our actuarially determined black lung liabilities and post-retirement health benefits and lower claims activity.

37
WESTMORELAND COAL COMPANY AND SUBSIDIARIES
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONT.)

Corporate Segment Operating Results
The following table shows comparative corporate segment’s operating expenses and percentage change between periods:
 
Nine Months Ended September 30,
 
 
 
 
 
Increase / (Decrease)
 
2015
 
2014
 
$
 
%
 
(In thousands)
 
 
Corporate segment operating expenses
$
14,072

 
$
8,478

 
$
5,594

 
66.0
%
Our corporate segment operating expenses for the nine months ended September 30, 2015 increased compared with the nine months ended September 30, 2014 due to increases in various corporate expenses such as an intercompany business interruption claim filed with our captive insurance company, resulting in a loss reflected at corporate, stock compensation expense, and other professional services.
Nonoperating Results
Our interest expense for the nine months ended September 30, 2015 increased by $13.0 million compared to the nine months ended September 30, 2014 primarily due to higher debt levels. In the nine months ended September 30, 2015 we also incurred a $5.4 million loss on early extinguishment of debt due to the early repayment of approximately $94 million of our term loan in connection with the receipt of proceeds from the Kemmerer Drop, compared to $12.6 million for repayment of debt for the nine months ended September 30, 2014. Our income tax expense increased by $10.6 million for the nine months ended September 30, 2015 due to the Canadian Acquisition when compared to the nine months ended September 30, 2014. Our net loss attributable to noncontrolling interest for the nine months ended September 30, 2015 was $4.9 million related to the GP Acquisition on December 31, 2014.
Reconciliation of Net Income (Loss) to Adjusted EBITDA
The discussion in “Results of Operations” includes references to our Adjusted EBITDA results. EBITDA is defined as earnings before interest expense, interest income, income taxes, depreciation, depletion, amortization and accretion expense. EBITDA and Adjusted EBITDA are supplemental measures of financial performance that are not required by, or presented in accordance with, GAAP. EBITDA and Adjusted EBITDA are key metrics used by us to assess our operating performance and we believe that EBITDA and Adjusted EBITDA are useful to an investor in evaluating our operating performance because these measures: 
•
are used widely by investors to measure a company’s operating performance without regard to items excluded from the calculation of such terms, which can vary substantially from company to company depending upon accounting methods and book value of assets, capital structure and the method by which assets were acquired, among other factors; and
•
help investors to more meaningfully evaluate and compare the results of our operations from period to period by removing the effect of our capital structure and asset base from our operating results.
Neither EBITDA nor Adjusted EBITDA is a measure calculated in accordance with GAAP. The items excluded from EBITDA and Adjusted EBITDA are significant in assessing our operating results. EBITDA and Adjusted EBITDA have limitations as analytical tools, and should not be considered in isolation from, or as a substitute for, analysis of our results as reported under GAAP. For example, EBITDA and Adjusted EBITDA: 
•
do not reflect our cash expenditures, or future requirements for capital and major maintenance expenditures or contractual commitments;
•
do not reflect income tax expenses or the cash requirements necessary to pay income taxes;
•
do not reflect changes in, or cash requirements for, our working capital needs; and
•
do not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments, on certain of our debt obligations.
In addition, although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and EBITDA and Adjusted EBITDA do not reflect any cash requirements for such replacements. Other companies in our industry and in other industries may calculate EBITDA and Adjusted EBITDA

38
WESTMORELAND COAL COMPANY AND SUBSIDIARIES
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONT.)

differently from the way that we do, limiting their usefulness as comparative measures. Because of these limitations, EBITDA and Adjusted EBITDA should not be considered as measures of discretionary cash available to us to invest in the growth of our business. We compensate for these limitations by relying primarily on our GAAP results and using EBITDA and Adjusted EBITDA only as supplemental data.
The tables below show how we calculated Adjusted EBITDA, including a breakdown by segment, and reconciles Adjusted EBITDA to net loss, the most directly comparable GAAP financial measure.
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2015
 
2014
 
2015
 
2014
 
(In thousands)
Reconciliation of Net Loss to Adjusted EBITDA
 
 
 
 
 
 
 
Net loss
$
(48,020
)
 
$
(49,134
)
 
$
(99,749
)
 
$
(131,318
)
 
 
 
 
 
 
 
 
Income tax expense (benefit)
4,087

 
(718
)
 
13,596

 
2,979

Interest income
(1,555
)
 
(2,468
)
 
(6,262
)
 
(4,351
)
Interest expense
26,831

 
21,251

 
76,870

 
63,835

Depreciation, depletion and amortization
34,459

 
28,175

 
106,781

 
68,713

Accretion of ARO and receivable
7,142

 
6,969

 
21,250

 
16,257

Amortization of intangible assets and liabilities
(250
)
 
75

 
(756
)
 
385

EBITDA
22,694

 
4,150

 
111,730

 
16,500

 
 
 
 
 
 
 
 
Restructuring charges
—

 
3,265

 
656

 
11,207

Loss (gain) on foreign exchange
(1,679
)
 
1,742

 
(2,474
)
 
5,883

Loss on extinguishment of debt
5,385

 
13

 
5,385

 
12,648

Acquisition related costs (1)
3,070

 
1,616

 
4,470

 
22,079

Customer payments received under loan and lease receivables (2)
8,731

 
4,545

 
24,252

 
7,830

Derivative loss
5,815

 
23,691

 
6,717

 
29,621

Loss (gain) on sale/disposal of assets and other adjustments
2,008

 
1,675

 
2,951

 
1,232

Share-based compensation
1,942

 
1,011

 
5,588

 
3,456

Adjusted EBITDA
$
47,966

 
$
41,708

 
$
159,275

 
$
110,456

____________________
(1)
Includes the impact of cost of sales related to the sale of inventory written up to fair value in the GP Acquisition.
(2)
Represents a return of and on capital. These amounts are not included in operating income or operating cash flows, as the capital outlays are treated as loan and lease receivables, but are included within Adjusted EBITDA so that the cash received by the Company is treated consistently with all other contracts within the Company that do not result in loan and lease receivable accounting.
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2015
 
2014
 
2015
 
2014
 
(In thousands)
Adjusted EBITDA by Segment
 
 
 
 
 
 
 
Coal - U.S.
$
14,758

 
$
14,923

 
$
49,209

 
$
44,911

Coal - Canada
23,659

 
22,307

 
81,497

 
44,295

Coal - WMLP
15,648

 
10,250

 
49,826

 
34,594

Power
75

 
(175
)
 
(3,152
)
 
3,868

Heritage
(2,950
)
 
(3,914
)
 
(8,699
)
 
(11,303
)
Corporate
(3,224
)
 
(1,683
)
 
(9,406
)
 
(5,909
)
Total
$
47,966

 
$
41,708

 
$
159,275

 
$
110,456


39
WESTMORELAND COAL COMPANY AND SUBSIDIARIES
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONT.)

Liquidity and Capital Resources
We had the following liquidity at September 30, 2015 and December 31, 2014: 
 
September 30,
 
December 31,
 
2015
 
2014
 
(In millions)
Cash and cash equivalents
$
29.3

 
$
14.3

Corporate revolving line of credit
28.9

 
16.9

Total
$
58.2

 
$
31.2

We anticipate that our cash from operations, cash on hand and available borrowing capacity will be sufficient to meet our investing, financing, and working capital requirements for the foreseeable future.
We conduct our operations through subsidiaries. We have significant cash requirements to fund our debt obligations, ongoing heritage health benefit costs, pension contributions, and corporate overhead expenses. The principal sources of cash flow to the parent company are distributions from our principal operating subsidiaries. The cash at all of our subsidiaries is immediately available, except Westmoreland Risk Management, Inc. (“WRMI”) and WMLP. The cash at our captive insurance entity, WRMI, is available to us through dividends and is subject to maintaining a statutory minimum level of capital, which is two hundred fifty thousand dollars. The cash at WMLP is available to us through quarterly distributions. WMLP resumed quarterly distributions with the payment of $0.20 per unit in May 2015, and paid a quarterly distribution of $0.20 per unit in August 2015, which, if maintained at that level, equates to $4.6 million annually. Based on our current ownership in WMLP, we would expect to receive approximately 79.1% of WMLP’s cash distributions payable on its Common Units, as well as distributions of either cash or additional Series A Units, at WMLP’s election, on the Series A Units we hold.
Under the WCC Term Loan Facility, we are required to pay a portion of our Excess Cash Flow (as defined by the credit agreement) for each fiscal year, beginning with the fiscal year ending December 31, 2015.
On June 2, 2015, the Company amended the revolving line of credit (the “Revolving Credit Facility”) to permit Westmoreland and the other U.S. borrowers thereunder to borrow up to an additional $25.0 million between June 15th and August 15th of each year.
Debt Obligations
8.75% Notes
The 8.75% Notes were outstanding in the principal amount of $350.0 million at September 30, 2015. The 8.75% Notes bear a fixed interest rate of 8.75% payable semiannually, on January 1 and July 1 of each year, commencing July 1, 2015. The 8.75% Notes mature on January 1, 2022. As of September 30, 2015, we were in compliance with all covenants for the 8.75% Notes.
Restricted Group and Unrestricted Group Results
Under the indenture governing the 8.75% Notes (the “Indenture”), the WCC Term Loan Facility and the Revolving Credit Facility; the GP, WMLP and all of WMLP’s subsidiaries were automatically designated as “unrestricted subsidiaries” (the “Unrestricted Group”) following the closing of the WMLP Transactions. All of our other subsidiaries are restricted subsidiaries (the “Restricted Group”).
The Indenture requires summary information for the Restricted Group and Unrestricted Group which is provided as follows:

40
WESTMORELAND COAL COMPANY AND SUBSIDIARIES
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONT.)

 
Restricted Group
 
Unrestricted Group
 
Total
 
(In thousands)
Balance sheet information as of September 30, 2015:
 
 
 
 
 
Cash and cash equivalents
$
17,688

 
$
11,648

 
$
29,336

Total current assets
$
297,076

 
$
74,161

 
$
371,237

Total assets
$
1,288,218

 
$
440,004

 
$
1,728,222

Total current liabilities
$
266,164

 
$
63,919

 
$
330,083

Total debt
$
744,765

 
$
308,189

 
$
1,052,954

Total liabilities
$
1,803,995

 
$
413,443

 
$
2,217,438

 
 
 
 
 
 
Statement of operations information for the nine months ended September 30, 2015:
 
 
 
 
 
Revenues
$
863,307

 
$
206,933

 
$
1,070,240

Operating costs and expenses
866,881

 
217,075

 
1,083,956

Operating income (loss)
(3,574
)
 
(10,142
)
 
(13,716
)
Other income and expenses
(52,978
)
 
(19,459
)
 
(72,437
)
Loss before income taxes
(56,552
)
 
(29,601
)
 
(86,153
)
Income tax expense
13,596

 
—

 
13,596

Net loss
(70,148
)
 
(29,601
)
 
(99,749
)
Less net loss attributable to noncontrolling interest
—

 
(4,850
)
 
(4,850
)
Net loss attributable to the Parent company
$
(70,148
)
 
$
(24,751
)
 
$
(94,899
)
For the nine months ended September 30, 2014, the Adjusted EBITDA for the Restricted Group was the same as the Company’s consolidated Adjusted EBITDA and nil for the Unrestricted group since the WMLP Transactions closed on December 31, 2014. For the nine months ended September 30, 2015, Adjusted EBITDA associated with the Restricted Group and Unrestricted Group was $109.4 million and $49.8 million, respectively.
Non-guarantor Restricted Subsidiaries Results
The Indenture requires summary information for non-guarantor subsidiaries (as defined in the Indenture) which is provided as follows:

Absaloka Coal, LLC, Westmoreland Canada LLC, WRMI, the Canadian Subsidiaries and our Netherlands subsidiary (collectively, the “non-guarantor Restricted Subsidiaries”) had 884.6 million in total assets as of September 30, 2015, representing approximately 51.2% of our consolidated total assets, and generated $317.2 million in revenue for the nine months ended September 30, 2015 representing approximately 29.6% of our consolidated revenue and generated Adjusted EBITDA of $80.2 million representing approximately 50.3% of our consolidated Adjusted EBITDA. As of September 30, 2015, our non-guarantor Restricted Subsidiaries had $59.7 million of total indebtedness and $525.2 million of total liabilities, and our non-guarantor Canadian Subsidiaries had availability of up to $20.0 million under the Canadian tranche of the Revolving Credit Facility.
WCC Term Loan Facility
    
The WCC Term Loan Facility had an outstanding principal amount of $328.0 million at September 30, 2015. The WCC Term Loan Facility matures on December 16, 2020. We may elect to have borrowings under the WCC Term Loan Facility bear interest at a per annum rate of (i) one, two-, three- or six-month LIBOR plus 6.50% or (ii) a base rate (determined with reference to the highest of the prime rate, the Federal Funds Rate plus 0.05%, and one-month LIBOR plus 1.00%) plus 5.50%. The interest rate at September 30, 2015 was 7.50%. On August 5, 2015, $94.1 million of the proceeds received from WMLP related to the Kemmerer Drop were used to pay down the WCC Term Loan Facility. The quarterly principal payment due is $0.8 million. As of September 30, 2015, we were in compliance with all covenants of the WCC Term Loan Facility.

41
WESTMORELAND COAL COMPANY AND SUBSIDIARIES
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONT.)

Revolving Credit Facility
The Revolving Credit Facility has a maximum borrowing amount of $50.0 million in the aggregate, with an additional seasonal increase to the maximum borrowing amount between June 15th and August 15th of each year, consisting of a $30.0 million sub-facility ($55.0 million with the seasonal increase) available to our U.S. borrowers and $20.0 million sub-facility available to our Canadian borrowers. The facility may support an equal amount of letters of credit, which would reduce the balance available under the facility. At September 30, 2015, availability on the Revolving Credit Facility was $28.9 million with $21.1 million supporting letters of credit. The Revolving Credit Facility has a maturity date of December 31, 2018. We were in compliance with all covenant requirements of the Revolving Credit Facility as of September 30, 2015.
WMLP Term Loan Facility
As of September 30, 2015, the outstanding balance on the WMLP Term Loan Facility was $297.4 million, which matures in December 2018. This amount represents the principal balance of $292.8 million, plus paid-in-kind interest of $4.6 million. At September 30, 2015, the WMLP Term Loan Facility had a cash interest rate of 9.25%. As of September 30, 2015, WMLP was in compliance with all covenants under the terms of the WMLP Term Loan Facility.
Capital Leases
During the nine months ended September 30, 2015, we entered into $15.0 million of new capital leases.
Heritage Health Costs and Pension Contributions
Our liquidity continues to be affected by payments of our heritage health and pension obligations as follows: 
 
Nine Months Ended September 30,
 
2015 Remaining
Expected
Amounts
 
2015
 
2014
 
 
(In millions)
Postretirement medical benefits
$
10.4

 
$
8.6

 
$
1.8

Combined Benefit Fund premiums
1.4

 
1.4

 
0.6

Workers’ compensation benefits
0.3

 
0.3

 
0.1

Total heritage health payments
$
12.1

 
$
10.3

 
$
2.5

 
 
 
 
 
 
Pension contributions
$
3.5

 
$
4.1

 
$
0.3

Historical Sources and Uses of Cash
The following table summarizes net cash provided by (used in) operating activities, investing activities, and financing activities for the three and nine months ended September 30, 2015 and September 30, 2014: 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2015
 
2014
 
2015
 
2014
 
(In thousands)
Cash provided by (used in):
 
 
 
 
 
 
 
Operating activities
$
8,832

 
$
27,638

 
$
20,882

 
$
38,211

Investing activities
(22,923
)
 
16,376

 
(47,451
)
 
(344,615
)
Financing activities
8,281

 
40,553

 
44,248

 
371,509


42
WESTMORELAND COAL COMPANY AND SUBSIDIARIES
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONT.)

In the current year our cash flows were impacted by the following transactions:
 
Three Months Ended
 
Nine Months Ended
 
 
 
September 30, 2015
 
Statement of Cash Flow Impact
 
(In millions)
 
 
Cash interest paid, including semi-annual interest payments commencing July 1, 2015
$
(29.8
)
 
$
(54.9
)
 
Cash used by operating activities
Repayment of customer advance
$
—

 
$
(17.0
)
 
Cash used by operating activities
Increase in working capital primarily driven by Buckingham Acquisition and other
$
(4.0
)
 
$
(12.9
)
 
Cash used by operating activities
Payments made in reduction of asset retirement obligations
$
(4.2
)
 
$
(15.0
)
 
Cash used by operating activities
Increases in bond collateral for mining operations and forward power purchase contracts
$
(9.5
)
 
$
(7.3
)
 
Cash used by operating activities
Payments in settlement of our restructuring liabilities
$
(1.0
)
 
$
(8.5
)
 
Cash used by operating activities
Fees paid related to debt refinancings, acquisitions, and the Kemmerer Drop
$
(7.1
)
 
$
(17.5
)
 
Cash used by operating activities and financing activities
Payments to reduce capital lease obligations, including approximately $5.0 million of early payments to facilitate the Kemmerer Drop
$
(8.8
)
 
$
(38.1
)
 
Cash used in financing activities
Net repayments on revolving lines of credit, primarily paying off Buckingham Acquisition
$
(2.5
)
 
$
(9.6
)
 
Cash used in financing activities
These net cash outflows were offset by cash flows from operating activities, the proceeds from additional borrowings on the WCC Term Loan Facility, and proceeds from additional borrowings on the WMLP Term Loan Facility related to the Kemmerer Drop.
Cash used in investing activities decreased from $344.6 million for the nine months ended September 30, 2014 to $47.5 million for the nine months ended September 30, 2014 primarily due to spending $321.0 million less on acquisitions in 2015. Cash provided by financing activities decreased from $371.5 million for the nine months ended September 30, 2014 to $47.5 million for the nine months ended September 30, 2015 primarily due to the Canadian Acquisition debt, offset by the Add-on to the WCC Term Loan Facility and the WMLP Term Loan Facility.
Critical Accounting Policies and Estimates
Please refer to the corresponding section in Part II, Item 7 of our 2014 Form 10-K for a discussion of our accounting policies and estimates.
Recent Accounting Pronouncements
See Note 1 of the Notes to the Unaudited Consolidated Financial Statements included in “Part I — Item 1 — Financial Statements.”
Off-Balance Sheet Arrangements
In the normal course of business, we are a party to certain off-balance sheet arrangements. These arrangements include financial instruments with off-balance sheet risk such as bank letters of credit and performance or surety bonds. We utilize surety bonds and letters of credit issued by financial institutions to third parties to assure the performance of our obligations relating to reclamation, workers’ compensation obligations, postretirement medical benefit obligations, and other obligations. These arrangements are not reflected in our consolidated balance sheets, and we do not expect any material adverse effects on our financial condition, results of operations or cash flows to result from these off-balance sheet arrangements.
Our off-balance sheet arrangements are discussed in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our 2014 Form 10-K.
ITEM 3
— QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

43

Other than the changes below, there have been no material changes in our market risk since December 31, 2014. For additional information, refer to the “Quantitative and Qualitative Disclosures about Market Risk” in Item 7A of our 2014 Form 10-K.
Commodity Price Risk
We are exposed to commodity price risk on sales of power at our ROVA facility. We have entered into derivative contracts to purchase power in the future at fixed prices. Such derivative contracts are structured to manage our exposure to changing power prices and not for trading. For the nine months ended September 30, 2015 and 2014, we incurred derivative losses from these derivative contracts of $6.7 million and $29.6 million, respectively. Since any resales which we may make in the open market under these derivative contracts would be made at prevailing market prices, we may be subject to further losses under these hedging arrangements in the event that the market price for power falls below the level of our hedged position. Based on current market pricing trends, we may experience further losses under these hedging arrangements before the market price for power regains a level which is commensurate with our hedged position. If these trends continue, these losses could continue to adversely impact our results of operations and cash flows, and anticipated future cash losses are likely to be material.

Foreign Currency Exchange Rates
We are exposed to the effects of changes in exchange rates primarily from the Canadian dollar at our Canadian Operations. We may enter into derivative contracts to manage exposure to fluctuations in foreign currency exchange rates. All decisions on derivative contracts are authorized and executed pursuant to our policies and procedures, which do not allow the use of financial instruments for trading purposes. There were no foreign currency derivative contracts outstanding as of September 30, 2015.
A description of our accounting policies for derivative financial instruments is included in Notes 1 and 11 to the consolidated financial statements.
ITEM 4
— CONTROLS AND PROCEDURES.
As required by Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), management has evaluated, with the participation of our chief executive officer and chief financial officer, the effectiveness of our disclosure controls and procedures as of September 30, 2015. Disclosure controls and procedures are designed to provide reasonable assurance that material information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the rules and forms of the Securities and Exchange Commission. Disclosure controls and procedures also include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in our reports that we file or submit under the Exchange Act is accumulated and communicated to management, including our chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding our required disclosure. Based on that evaluation, our management, including our chief executive officer and chief financial officer, concluded that the disclosure controls and procedures were effective as of such date.
On December 31, 2014, we closed on the GP Acquisition and on January 1, 2015, we closed on the Buckingham Acquisition. As a result of these acquisitions, we are in the process of reviewing the internal controls of WMLP operations and the Buckingham operations and, if necessary, will make appropriate changes as we incorporate our controls and procedures into the acquired operations. Except for the acquisitions, there have been no changes in internal control over financial reporting that occurred during the nine months ended September 30, 2015, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.


44

PART II
OTHER INFORMATION

ITEM 1
— LEGAL PROCEEDINGS.
We are subject, from time-to-time, to various proceedings, lawsuits, disputes, and claims (“Actions”) arising in the ordinary course of our business. Many of these Actions raise complex factual and legal issues and are subject to uncertainties. We cannot predict with assurance the outcome of Actions brought against us. Accordingly, adverse developments, settlements, or resolutions may occur and may result in a negative impact on income in the quarter of such development, settlement, or resolution. However, we do not believe that the outcome of any current Action would have a material adverse effect on our financial results.
ITEM 1A
— RISK FACTORS.
We have disclosed under the heading “Risk Factors” in our 2014 Form 10-K, the risk factors that we believe materially affect our business, financial condition or results of operations. Except as provided below, there have been no material changes from the risk factors previously disclosed. You should carefully consider the risk factors set forth in the 2014 Form 10-K and the other information set forth elsewhere in this Form 10-Q. You should be aware that these risk factors and other information may not describe every risk facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and or operating results.

Our hedging arrangement in connection with the ROVA agreement (the “Consolidated Agreement”) with Dominion North Carolina Power (“DNCP”) may result in losses if the market price for power drops below the level of our hedged position and, under certain circumstances, requires us to post additional collateral. 
Under the Consolidated Agreement with respect to our ROVA facility, we forego dispatching the ROVA units in low demand periods and maintain them in idle status. During such low demand periods, we meet DNCP’s power needs with fixed-price purchased power when doing so is more economically attractive than our physically operating the ROVA plants to generate power. Alternatively, we operate the ROVA plants, sell our produced power to DNCP and resell the fixed-price purchased power in the open market. When we operate the ROVA plants and resell our fixed price purchased power into the open market, any such resales are made at prevailing market rates. In the event that the prevailing market price for power falls below the level of our hedged position during periods when we are reselling the fixed price purchased power in the open market, those resales result in losses to us. For the nine months ended September 30, 2015, we incurred losses related to these hedging arrangements of $6.7 million. Based on current market pricing trends, we expect to experience losses from time to time under these hedging arrangements when the market price for power is not commensurate with our hedged position. 
Further, we are required to post collateral to cover certain projected long-term losses under these hedging arrangements based on the market price for power. The amount of such collateral may be significant and may negatively impact our liquidity.
ITEM 2
— UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
The Company’s purchases of its common stock during the three months ended September 30, 2015 were as follows:
Period
Total Number
of Shares
Purchased (1)
 
Average Price
Paid per Share
July 21, 2015
105

 
$
28.65

August 14, 2015
214

 
$
22.06

____________________
(1)
Shares purchased as indicated in this table represent the withholding of a portion of restricted shares to cover taxes on vested restricted shares and were not made pursuant to a publicly announced share repurchase plan or program.
ITEM 4
— MINE SAFETY DISCLOSURE.
On July 21, 2010, Congress enacted the Dodd-Frank Wall Street Reform and Consumer Protection Act, or the Dodd-Frank Act. Section 1503(a) of the Dodd-Frank Act contains reporting requirements regarding mine safety. Mine safety violations and other regulatory matters, as required by Section 1503(a) of the Dodd-Frank Act and Item 104 of Regulation S-K, are included as Exhibit 95.1 to this Form 10-Q.

45

ITEM 6
— EXHIBITS.

See Exhibit Index at the end of this report.

46

SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
 
 
WESTMORELAND COAL COMPANY
 
 
 
Date:
November 4, 2015
/s/ Kevin A. Paprzycki
 
 
Kevin A. Paprzycki
 
 
Chief Financial Officer
(Principal Financial Officer and A Duly Authorized Officer)
 
 
 
Date:
November 4, 2015
/s/ Nathan M. Troup
 
 
Nathan M. Troup
 
 
Chief Accounting Officer and Corporate Controller
(Principal Accounting Officer and A Duly Authorized Officer)


47

WESTMORELAND COAL COMPANY
SCHEDULE I — CONDENSED BALANCE SHEETS
(Parent Company Information — See Notes to Consolidated Financial Statements)

 
September 30,
2015
 
December 31,
2014
 
(In thousands)
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
2,526

 
$
697

Receivables:
 
 
 
Intercompany receivable
28,016

 
—

Other
2,357

 
3,157

 
30,373

 
3,157

Deferred income taxes
4,548

 
4,548

Other current assets
1,101

 
770

Total current assets
38,548

 
9,172

Property, plant and equipment:
 
 
 
Plant and equipment
4,161

 
4,079

Less accumulated depreciation, depletion and amortization
3,108

 
2,976

Net property, plant and equipment
1,053

 
1,103

Restricted investments and bond collateral
15,750

 
32,612

Investment in subsidiaries
266,679

 
373,562

Intercompany receivable/payable
200,140

 
215,401

Other assets
19,967

 
19,804

Total Assets
$
542,137

 
$
651,654


48

WESTMORELAND COAL COMPANY
SCHEDULE I — CONDENSED BALANCE SHEETS
(Parent Company Information — See Notes to Consolidated Financial Statements)
 
September 30,
2015
 
December 31,
2014
 
(In thousands)
Liabilities and Shareholders’ Deficit
 
 
 
Current liabilities:
 
 
 
Current installments of long-term debt
$
6,788

 
$
7,000

Revolving lines of credit
—

 
9,576

Accounts payable and accrued expenses:
 
 
 
Trade and other accrued liabilities
12,641

 
14,824

Interest payable
7,815

 
2,437

Workers’ compensation
656

 
671

Postretirement medical benefits
11,530

 
11,094

SERP
368

 
368

Intercompany payable
—

 
21,988

Other current liabilities
364

 
1,225

Total current liabilities
40,162

 
69,183

Long-term debt, less current installments
663,187

 
683,298

Workers’ compensation, less current portion
6,081

 
6,315

Excess of black lung benefit obligation over trust assets
11,919

 
11,252

Postretirement medical benefits, less current portion
246,052

 
186,376

Pension and SERP obligations, less current portion
41,591

 
25,178

Deferred income taxes
8,040

 
4,548

Other liabilities
420

 
626

Intercompany payable
13,901

 
14,323

Total liabilities
1,031,353

 
1,001,099

Shareholders’ deficit:
 
 
 
Preferred stock
—

 
92

Common stock
180

 
42,756

Other paid-in capital
238,705

 
185,644

Accumulated other comprehensive loss
(165,811
)
 
(124,296
)
Accumulated deficit
(563,804
)
 
(468,902
)
Total shareholders’ deficit
(490,730
)
 
(364,706
)
Noncontrolling interests in consolidated subsidiaries
1,514

 
15,261

Total deficit
(489,216
)
 
(349,445
)
Total Liabilities and Deficit
$
542,137

 
$
651,654


49

WESTMORELAND COAL COMPANY
SCHEDULE I — CONDENSED STATEMENTS OF OPERATIONS
(Parent Company Information — See Notes to Consolidated Financial Statements)

 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2015
 
2014
 
2015
 
2014
 
(In thousands, except per share data)
Revenues
$
—

 
$
—

 
$
—

 
$
—

Cost, expenses and other:
 
 
 
 
 
 
 
Cost of sales
(467
)
 
(1,037
)
 
(1,474
)
 
(1,508
)
Depreciation, depletion and amortization
47

 
70

 
132

 
225

Selling and administrative
6,131

 
5,124

 
14,869

 
22,092

Heritage health benefit expenses
2,617

 
3,099

 
7,449

 
9,602

Loss on sale/disposal of assets
—

 
—

 
—

 
—

Restructuring charges
—

 
663

 
—

 
1,460

 
8,328

 
7,919

 
20,976

 
31,871

Operating loss
(8,328
)
 
(7,919
)
 
(20,976
)
 
(31,871
)
Other income (expense):
 
 
 
 
 
 
 
Interest expense
(15,945
)
 
(18,302
)
 
(49,643
)
 
(55,584
)
Loss on extinguishment of debt
(5,385
)
 
—

 
(5,385
)
 
(64
)
Interest income
4,216

 
7,891

 
13,080

 
8,160

Gain (loss) on foreign exchange
(24
)
 
(148
)
 
(26
)
 
(5,382
)
Other income (expense)
—

 
5

 
(5
)
 
7

 
(17,138
)
 
(10,554
)
 
(41,979
)
 
(52,863
)
Loss before income taxes and income of consolidated subsidiaries
(25,466
)
 
(18,473
)
 
(62,955
)
 
(84,734
)
Equity in income of subsidiaries
(20,436
)
 
(31,128
)
 
(34,650
)
 
(47,274
)
Loss before income taxes
(45,902
)
 
(49,601
)
 
(97,605
)
 
(132,008
)
Income tax expense (benefit)
2,118

 
(467
)
 
2,144

 
(690
)
Net loss
(48,020
)
 
(49,134
)
 
(99,749
)
 
(131,318
)
Less net loss attributable to noncontrolling interest
(1,458
)
 
—

 
(4,850
)
 
—

Net loss attributable to the Parent company
$
(46,562
)
 
$
(49,134
)
 
$
(94,899
)
 
$
(131,318
)


50

WESTMORELAND COAL COMPANY
SCHEDULE I — COMPREHENSIVE LOSS
(Parent Company Information — See Notes to Consolidated Financial Statements)

 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2015
 
2014
 
2015
 
2014
 
(In thousands)
 
(In thousands)
Net loss
$
(48,020
)
 
$
(49,134
)
 
(99,749
)
 
$
(131,318
)
Other comprehensive income (loss)
 
 
 
 
 
 
 
Pension and other postretirement plans:
 
 
 
 
 
 
 
Amortization of accumulated actuarial gains or losses, pension
996

 
361

 
3,263

 
1,078

Adjustments to accumulated actuarial losses and transition obligations, pension
(253
)
 
(371
)
 
(538
)
 
(172
)
Amortization of accumulated actuarial gains or losses, transition obligations, and prior service costs, postretirement medical benefits
327

 
3

 
981

 
13

Tax effect of other comprehensive income gains or losses
(558
)
 
(487
)
 
(908
)
 
(711
)
Change in foreign currency translation adjustment
(20,802
)
 
(14,642
)
 
(43,018
)
 
(5,364
)
Unrealized and realized gains and losses on available-for-sale securities
165

 
1,231

 
(1,295
)
 
1,231

Other comprehensive income (loss)
(20,125
)
 
(13,905
)
 
(41,515
)
 
(3,925
)
Comprehensive loss attributable to Westmoreland Coal Company
$
(68,145
)
 
$
(63,039
)
 
$
(141,264
)
 
$
(135,243
)


51

WESTMORELAND COAL COMPANY
SCHEDULE I — CONDENSED STATEMENTS OF CASH FLOWS
(Parent Company Information — See Notes to Consolidated Financial Statements)
 
Nine Months Ended September 30,
 
2015
 
2014
 
(In thousands)
Cash flows from operating activities:
 
 
 
Net loss
$
(99,749
)
 
$
(131,318
)
Adjustments to reconcile net loss to net cash provided by operating activities:
 
 
 
Equity in income of subsidiaries
34,650

 
47,274

Depreciation, depletion and amortization
132

 
225

Non-cash tax benefits
(908
)
 
(711
)
Share-based compensation
2,566

 
2,256

Amortization of deferred financing costs
3,713

 
620

Loss on extinguishment of debt
4,445

 
64

Loss on foreign exchange
30

 
5,382

Changes in operating assets and liabilities:
 
 
 
Receivables, net
800

 
(240
)
Excess of black lung benefit obligation over trust assets
667

 
2,093

     Deferred income tax
3,492

 
—

Accounts payable and accrued expenses
(1,383
)
 
126

Accrual for workers’ compensation
(249
)
 
(179
)
Accrual for postretirement medical benefits
(3,186
)
 
(1,428
)
Pension and SERP obligations
439

 
256

Other assets and liabilities
(5,187
)
 
(7,996
)
Distributions received from subsidiaries
1,828

 
92,100

Net cash provided by (used in) operating activities
(57,900
)
 
8,524

Cash flows from investing activities:
 
 
 
Additions to property, plant and equipment
(84
)
 
16

Change in restricted investments and bond collateral and reclamation deposits
(178
)
 
(48,244
)
Proceeds from Kemmerer drop down to WMLP
115,000

 
—

Cash payments related to Canadian acquisition
—

 
(282,788
)
Investment of common shares
—

 
(2,992
)
Cash received from escrow for acquisition
17,000

 
—

Net cash provided by (used in) investing activities
131,738

 
(334,008
)
Cash flows from financing activities:
 
 
 
Borrowings from long-term debt, net of debt discount and premium
75,000

 
454,219

Repayments of long-term debt
(97,007
)
 
(1,015
)
Borrowings on revolving lines of credit
121,434

 
—

Repayments of revolving lines of credit
(131,010
)
 
—

Debt issuance costs and other refinancing costs
(6,109
)
 
(16,168
)
Dividends/distributions
(3
)
 
(664
)
Proceeds from issuance of common shares
—

 
56,473

Redemption of preferred stock
(319
)
 
—

Exercise of stock options
—

 
417

Transactions with Parent/affiliates
(33,995
)
 
(97,859
)
Net cash provided by financing activities
(72,009
)
 
395,403

Net increase in cash and cash equivalents
1,829

 
69,919

Cash and cash equivalents, beginning of year
697

 
25,326

Cash and cash equivalents, end of year
$
2,526

 
$
95,245


52
WESTMORELAND COAL COMPANY
SCHEDULE I — NOTES TO FINANCIAL STATEMENTS
(Parent Company Information — See Notes to Consolidated Financial Statements)



1.
LINES OF CREDIT AND LONG-TERM DEBT
The amounts outstanding under the Parent Company’s long-term debt consisted of the following as of the dates indicated: 
 
Total Debt Outstanding
 
September 30, 2015
 
December 31, 2014
 
(In thousands)
8.75% Notes due 2022
$
350,000

 
$
350,000

WCC Term Loan Facility due 2020
327,994

 
350,000

Revolving line of credit
—

 
9,576

Other
3,500

 
3,500

Debt discount
(11,519
)
 
(13,202
)
Total debt outstanding
669,975

 
699,874

Less current installments
(6,788
)
 
(16,576
)
Total debt outstanding, less current installments
$
663,187

 
$
683,298

The following table presents aggregate contractual debt maturities of all long-term debt for the Parent Company: 
 
As of September 30, 2015
 
(In thousands)
2015
$
4,322

2016
3,288

2017
3,288

2018
3,288

2019
3,288

Thereafter
664,020

Total
681,494

Less: debt discount
(11,519
)
Total debt
$
669,975


On January 22, 2015, the Company amended the WCC Term Loan Facility to increase the borrowings by $75.0 million under the facility, for an aggregate principal amount of $425.0 million as of that date. The amendments to the WCC Term Loan Facility were made in connection with the Buckingham Acquisition. Net proceeds were $71.0 million after a 2.5% discount, 1.5% broker fee, a consent fee of 1.17%, and $0.1 million of additional debt issuance costs.
On June 2, 2015, the Company amended the revolving line of credit (the “Revolving Credit Facility”) to permit Westmoreland and the other U.S. borrowers thereunder to borrow up to an additional $25.0 million between June 15th and August 15th of each year. As a result, the U.S. sub-facility has a maximum available borrowing amount of $55.0 million during these periods, yielding a total aggregate borrowing capacity of $75.0 million when added to the Canadian sub-facility. Outside of these periods, the Revolving Credit Facility has a maximum available borrowing amount of $50.0 million. As of September 30, 2015, the Company had no borrowings under the Revolving Credit Facility and had outstanding letters of credit in the amount of $21.1 million.


53

EXHIBIT INDEX
 
 
Incorporated by Reference
 
Exhibit
Number
Exhibit Description
Form
File
Number
Exhibit
Filing
Date
Filed
Herewith
 
 
 
 
 
 
 
2.1
Amended and Restated Contribution Agreement, dated July 31, 2015, by and between Westmoreland Resource Partners, LP and Westmoreland Coal Company
8-K
001-11155
2.1
8/4/2015
 
2.2
Stock Purchase Agreement, dated as of July 1, 2015, by and between BHP Billiton New Mexico Coal, Inc. and Westmoreland Coal Company
 
 
 
 
X
31.1
Certification of Chief Executive Officer pursuant to Rule 13a-14(a)
 
 
 
 
X
31.2
Certification of Chief Financial Officer pursuant to Rule 13a-14(a)
 
 
 
 
X
32
Certifications of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350
 
 
 
 
X
95.1
Mine Safety Disclosure
 
 
 
 
X
101.INS
XBRL Instance Document
 
 
 
 
X
101.SCH
XBRL Taxonomy Extension Schema Document
 
 
 
 
X
101.CAL
XBRL Taxonomy Calculation Linkbase Document
 
 
 
 
X
101.LAB
XBRL Taxonomy Label Linkbase Document
 
 
 
 
X
101.PRE
XBRL Taxonomy Presentation Linkbase Document
 
 
 
 
X
101.DEF
XBRL Taxonomy Definition Document
 
 
 
 
X

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

54