Company Quick10K Filing
Quick10K
Westmoreland Coal
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
10-Q 2015-09-30 Quarter: 2015-09-30
10-Q 2015-06-30 Quarter: 2015-06-30
10-Q 2015-03-31 Quarter: 2015-03-31
10-K 2014-12-31 Annual: 2014-12-31
10-Q 2014-09-30 Quarter: 2014-09-30
10-Q 2014-06-30 Quarter: 2014-06-30
10-Q 2014-03-31 Quarter: 2014-03-31
10-K 2013-12-31 Annual: 2013-12-31
8-K 2019-03-15 Bankruptcy, Shareholder Rights, Officers, Regulation FD, Exhibits
8-K 2019-03-14 Regulation FD, Exhibits
8-K 2019-01-10 Officers
8-K 2019-01-02 Regulation FD, Exhibits
8-K 2018-12-18 Regulation FD, Other Events, Exhibits
8-K 2018-12-12 Officers, Regulation FD, Exhibits
8-K 2018-10-10 Bankruptcy, Shareholder Rights, Exhibits
8-K 2018-10-09 Enter Agreement, Bankruptcy, Off-BS Arrangement, Off-BS Arrangement, Regulation FD, Other Events, Exhibits
8-K 2018-10-05 Other Events
8-K 2018-09-26 Other Events
8-K 2018-09-18 Officers
8-K 2018-09-11 Enter Agreement, Exhibits
8-K 2018-08-16 Enter Agreement, Exhibits
8-K 2018-08-01
8-K 2018-06-28 Officers, Other Events
8-K 2018-06-11 Enter Agreement, Exhibits
8-K 2018-05-25 Leave Agreement
8-K 2018-05-21 Enter Agreement, Regulation FD, Other Events, Exhibits
8-K 2018-04-20
8-K 2018-04-13 Officers, Exhibits
8-K 2018-03-29 Officers
8-K 2018-03-23
8-K 2018-03-12
8-K 2018-03-07 Earnings, Officers, Exhibits
CF CF Industries 9,100
ARI Apollo Commercial Real Estate Finance 2,530
RUSHA Rush Enterprises 1,510
CRESY Cresud 526
HIBB Hibbett Sports 386
ADES Advanced Emissions Solutions 242
IDSA Industrial Services of America 12
SRTR Strategic Realty Trust 0
YAPPA Yappa Worldoporated 0
RMES Red Metal Resources 0
WLB 2018-09-30
Part I - Financial Information
Item 1 - Consolidated Financial Statements (Unaudited)
Item 2- Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3 - Quantitative and Qualitative Disclosures About Market Risk
Item 4 - Controls and Procedures
Part II - Other Information
Item 1 - Legal Proceedings
Item 1A - Risk Factors
Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds
Item 4 - Mine Safety Disclosures
Item 6 - Exhibits
EX-10.1 q32018exhibit_101.htm
EX-31.1 q32018exhibit_311.htm
EX-31.2 q32018exhibit_312.htm
EX-32 q32018exhibit_32.htm
EX-95.1 q32018exhibit_951.htm

Westmoreland Coal Earnings 2018-09-30

WLB 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 q32018wlb.htm 10-Q Document

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, 2018
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
  ___________________________________________
wlblogonamea07.jpg
(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 300 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 every Interactive Data File required to be submitted 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 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, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
o
 
Accelerated filer
x
Non-accelerated filer
o
 
Smaller reporting company
o
 
 
 
Emerging growth company
o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of October 30, 2018: 18,788,532 shares of common stock, $0.01 par value.



TABLE OF CONTENTS
 


2


PART I - FINANCIAL INFORMATION
ITEM 1 - CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
WESTMORELAND COAL COMPANY AND SUBSIDIARIES
Consolidated Balance Sheets (Unaudited)

September 30, 2018
 
December 31, 2017
Assets
(In thousands)
Current assets:
 
Cash and cash equivalents
$
93,590

 
$
103,247

Receivables:
 
 
 
Trade
88,823

 
89,311

Other
15,114

 
17,697

Total receivables
103,937

 
107,008

Inventories
109,845

 
106,795

Unbilled revenues
45,345

 
63,874

Other current assets
35,154

 
11,517

Total current assets
387,871

 
392,441

Land, mineral rights, property, plant and equipment
1,252,628

 
1,665,740

Less accumulated depreciation, depletion and amortization
(685,166
)
 
(923,905
)
Net land, mineral rights, property, plant and equipment
567,462

 
741,835

Advanced coal royalties
12,637

 
21,404

Restricted investments, reclamation deposits and bond collateral
207,461

 
200,194

Unbilled revenues, less current portion
222,447

 
225,245

Investment in joint venture
25,364

 
27,763

Other assets
44,615

 
55,036

Total Assets
$
1,467,857

 
$
1,663,918

Liabilities and Shareholders’ Deficit
 
 
 
Current liabilities:
 
 
 
Current installments of long-term debt
$
1,085,121

 
$
983,427

Accounts payable and accrued expenses:
 
 
 
Trade and other accrued liabilities
119,503

 
121,489

Interest payable
41,478

 
22,840

Production taxes
45,780

 
41,688

Postretirement medical benefits
14,734

 
14,734

Deferred revenue
2,648

 
3,201

Asset retirement obligations
50,958

 
48,429

Other current liabilities
9,370

 
9,401

Total current liabilities
1,369,592

 
1,245,209

Long-term debt, less current installments
12,408

 
64,980

Postretirement medical benefits, less current portion
319,626

 
317,407

Pension and SERP obligations, less current portion
41,395

 
43,585

Asset retirement obligations, less current portion
412,461

 
426,038

Other liabilities
35,273

 
31,477

Total liabilities
2,190,755

 
2,128,696

Shareholders’ deficit:
 
 
 
Common stock of $0.01 par value: Authorized 30,000,000 shares; Issued and outstanding 18,788,532 shares at September 30, 2018 and 18,771,643 shares at December 31, 2017
188

 
188

Other paid-in capital
252,338

 
250,494

Accumulated other comprehensive loss
(165,493
)
 
(158,699
)
Accumulated deficit
(798,491
)
 
(552,263
)
Total shareholders’ deficit
(711,458
)
 
(460,280
)
Noncontrolling interests in consolidated subsidiaries
(11,440
)
 
(4,498
)
Total deficit
(722,898
)
 
(464,778
)
Total Liabilities and Shareholders’ Deficit
$
1,467,857

 
$
1,663,918

See accompanying Notes to Consolidated Financial Statements (Unaudited).

3


WESTMORELAND COAL COMPANY AND SUBSIDIARIES
Consolidated Statements of Operations (Unaudited)
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2018
 
2017
 
2018
 
2017
 
(In thousands, except per share data)
Revenues
$
328,890

 
$
365,014

 
$
900,880

 
$
1,039,341

Cost, expenses and other:
 
 
 
 
 
 
 
Cost of sales (exclusive of depreciation, depletion and amortization, shown separately)
270,808

 
280,311

 
723,033

 
837,651

Depreciation, depletion and amortization
26,693

 
38,066

 
79,124

 
114,131

Selling and administrative
39,801

 
26,398

 
113,095

 
83,300

Heritage health benefit expenses
904

 
1,044

 
2,706

 
3,036

(Gain) loss on sale/disposal of assets
(969
)
 
236

 
(3,366
)
 
202

Loss on impairment

 

 
143,324

 

Derivative gain

 
(4,667
)
 

 
(6,571
)
Income from equity affiliates
(984
)
 
(1,355
)
 
(2,092
)
 
(4,274
)
Other operating loss (income)
5

 

 
(18
)
 

 
336,258

 
340,033

 
1,055,806

 
1,027,475

Operating (loss) income
(7,368
)
 
24,981

 
(154,926
)
 
11,866

Other (expense) income:
 
 
 
 
 
 
 
Interest expense
(32,769
)
 
(30,017
)
 
(93,668
)
 
(89,388
)
Gain (loss) on extinguishment of debt
17

 

 
(1,821
)
 

Interest income
1,513

 
1,012

 
3,730

 
2,942

(Loss) gain on foreign exchange
(1,070
)
 
(1,733
)
 
505

 
(3,337
)
Other expense
(1,519
)
 
(6,974
)
 
(7,401
)
 
(11,990
)
 
(33,828
)
 
(37,712
)
 
(98,655
)
 
(101,773
)
Loss before income taxes
(41,196
)
 
(12,731
)
 
(253,581
)
 
(89,907
)
Income tax expense (benefit)
289

 
(256
)
 
(457
)
 
(1,030
)
Net loss
(41,485
)
 
(12,475
)
 
(253,124
)

(88,877
)
Less net loss attributable to noncontrolling interest
(945
)
 
(78
)
 
(6,927
)
 
(715
)
Net loss applicable to common shareholders
$
(40,540
)
 
$
(12,397
)
 
$
(246,197
)
 
$
(88,162
)
 
 
 
 
 
 
 
 
Net loss per share applicable to common shareholders:
 
 
 
 
 
 
 
Basic and diluted
$
(2.16
)
 
$
(0.66
)
 
$
(13.16
)
 
$
(4.72
)
Weighted average number of common shares outstanding:
 
 

 
 
 
 
Basic and diluted
18,776

 
18,742

 
18,704

 
18,672

See accompanying Notes to Consolidated Financial Statements (Unaudited).

4


WESTMORELAND COAL COMPANY AND SUBSIDIARIES
Consolidated Statements of Comprehensive Loss (Unaudited)
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2018
 
2017
 
2018
 
2017
 
(In thousands)
Net loss
$
(41,485
)
 
$
(12,475
)
 
$
(253,124
)
 
$
(88,877
)
Other comprehensive income (loss)
 
 
 
 
 
 
 
Pension and other postretirement plans:
 
 
 
 
 
 
 
Amortization of accumulated actuarial gains and prior service costs, pension
264

 
588

 
503

 
1,765

Adjustments to accumulated actuarial gains and transition obligations, pension
(141
)
 
(112
)
 
(186
)
 
189

Amortization of accumulated actuarial gains, transition obligations, and prior service costs, postretirement medical benefits
171

 
964

 
2,109

 
2,893

Tax effect of other comprehensive loss (income)
144

 
(684
)
 
(758
)
 
(2,889
)
Foreign currency translation adjustment gain (loss)
4,692

 
9,426

 
(7,852
)
 
17,455

Unrealized and realized (losses) gains on available-for-sale debt securities
(334
)
 
278

 
(611
)
 
1,474

Other comprehensive income (loss), net of income taxes
4,796

 
10,460

 
(6,795
)
 
20,887

Comprehensive loss
(36,689
)
 
(2,015
)
 
(259,919
)
 
(67,990
)
Less: Comprehensive loss attributable to noncontrolling interest
(945
)
 
(78
)
 
(6,927
)
 
(715
)
Comprehensive loss attributable to common shareholders
$
(35,744
)
 
$
(1,937
)
 
$
(252,992
)
 
$
(67,275
)
See accompanying Notes to Consolidated Financial Statements (Unaudited).

5


WESTMORELAND COAL COMPANY AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited)
 
Nine Months Ended September 30,
 
2018
 
2017
 
(In thousands)
Cash flows from operating activities:
 
 
 
Net loss
$
(253,124
)
 
$
(88,877
)
Adjustments to reconcile net loss to net cash provided by operating activities:
 
 
 
Depreciation, depletion and amortization
79,124

 
114,131

Accretion of asset retirement obligation
26,002

 
33,796

Share-based compensation
1,845

 
3,846

Loss on impairment
143,324

 

Non-cash interest expense
13,028

 
6,981

Amortization of deferred financing costs
6,459

 
8,183

Non-cash loss on extinguishment of debt
1,420

 

Gain on derivative instruments

 
(6,571
)
(Gain) loss on foreign exchange
(505
)
 
3,337

Income from equity affiliates
(2,092
)
 
(4,274
)
Distributions from equity affiliates
3,642

 
4,970

Deferred income tax benefit
(416
)
 
(998
)
Other
(3,842
)
 
3,341

Changes in operating assets and liabilities:
 
 
 
Receivables
2,193

 
(1,223
)
Inventories
(5,890
)
 
19,713

Accounts payable and accrued expenses
4,124

 
(26,965
)
Interest payable
22,151

 
(7,165
)
Deferred revenue
(577
)
 
(6,085
)
Unbilled revenues
21,135

 
(19,959
)
Other assets and liabilities
(19,776
)
 
17,977

Asset retirement obligations
(29,634
)
 
(33,004
)
Net cash provided by operating activities
8,591

 
21,154

Cash flows from investing activities:
 
 
 
Additions to property, plant and equipment
(25,309
)
 
(25,365
)
Proceeds from sales of restricted investments
29,801

 
33,686

Purchases of restricted investments
(29,239
)
 
(38,594
)
Cash payments related to acquisitions and other

 
(3,580
)
Proceeds from sales of assets
3,162

 
774

Receipts from loan and lease receivables

 
50,488

Other
(581
)
 
(1,384
)
Net cash (used in) provided by investing activities
(22,166
)
 
16,025

Cash flows from financing activities:
 
 
 
Borrowings from long-term debt, net of debt discount
86,700

 

Repayments of long-term debt
(72,766
)
 
(64,078
)
Borrowings on revolving lines of credit
122,400

 
236,100

Repayments on revolving lines of credit
(122,400
)
 
(225,560
)
Debt issuance costs and other refinancing costs
(2,664
)
 

Other

 
(550
)
Net cash provided by (used in) financing activities
11,270

 
(54,088
)
Effect of exchange rate changes on cash
1,997

 
321

Net decrease in cash and cash equivalents, including restricted cash
(308
)
 
(16,588
)
Cash and cash equivalents, including restricted cash, beginning of period
152,439

 
129,615

Cash and cash equivalents, including restricted cash, end of period
$
152,131

 
$
113,027

Supplemental disclosures of cash flow information:
 
 
 
Cash paid for interest
$
53,477

 
$
81,478

Non-cash transactions:
 
 
 
Accrued purchases of property and equipment
$
3,223

 
$
3,508

Capital leases and other financing sources
616

 
503

San Juan longwall financing
8,643

 

 
 
 
 
Cash and cash equivalents, including restricted cash, end of period
 
 
 
Cash and cash equivalents
$
93,590

 
$
44,143

Restricted cash in Restricted investments, reclamation deposits and bond collateral
58,541

 
68,884

 
$
152,131

 
$
113,027


See accompanying Notes to Consolidated Financial Statements (Unaudited).

6


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 (the "Company" or "WCC"), and its subsidiaries and controlled entities including those of Westmoreland Resource Partners, LP ("WMLP"). All intercompany transactions and accounts have been eliminated in consolidation. The consolidated financial statements of the Company have been prepared in accordance with United States Generally Accepted Accounting Principles (“GAAP”) and require the use of management’s estimates. The financial information contained in this Quarterly Report on Form 10-Q ("Quarterly Report") is unaudited, but reflects all adjustments which, in the opinion of management, are necessary for a fair presentation of the financial information for the periods shown. Such adjustments are of a normal recurring nature. Certain prior period amounts have been reclassified to conform to current period presentation. The results of operations for the nine months ended September 30, 2018 are not necessarily indicative of results to be expected for the year ending December 31, 2018.
These unaudited quarterly consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017 ("2017 Form 10-K"). There were no changes to our significant accounting policies from those disclosed in the audited consolidated financial statements and notes to the consolidated financial statements thereto contained in our 2017 Form 10-K, except as described below in the section titled "Recently Issued Accounting Pronouncements."
Filing Under Chapter 11 of the United States Bankruptcy Code
On October 9, 2018 (the “Petition Date”), the Company and certain of its subsidiaries, including WMLP (collectively, the “Debtors”), filed voluntary petitions (the “Bankruptcy Petitions”) for relief under Chapter 11 of Title 11 of the United States Code (the “Bankruptcy Code”) in the United States Bankruptcy Court for the Southern District of Texas (the “Bankruptcy Court”). The Company’s Canadian entities and Westmoreland Risk Management, Inc. ("WRMI") are excluded from the Bankruptcy Petitions. The Bankruptcy Court has entered an order granting the Debtors motion seeking to jointly administer all of the Debtors’ Chapter 11 cases (the “Chapter 11 Cases”) under the caption "In re Westmoreland Coal Company, et al." and case number 18-35672 (DJR). The Debtors will continue to operate their businesses as “debtors-in-possession” under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court.
For the duration of the Chapter 11 Cases, the Company’s operations and its ability to develop and execute its business plan are subject to risks and uncertainties associated with the Chapter 11 Cases. As a result of these risks and uncertainties, the Company’s assets, liabilities, officers and/or directors could be significantly different following the outcome of the Chapter 11 Cases, and the description of its operations, properties and capital plans included in these financial statements may not accurately reflect its operations, properties and capital plans following the Chapter 11 Cases.
The Debtors have filed a series of first day motions with the Bankruptcy Court that seek authorization to continue to conduct their business without interruption, and the Bankruptcy Court has entered orders approving these motions on an interim basis. The Bankruptcy Court hearing to consider approval of these motions on a final basis is currently scheduled for November 13, 2018. These motions are designed primarily to minimize the effect of bankruptcy on the Debtors’ operations, customers and employees. The Company expects ordinary-course operations to continue substantially uninterrupted during and after the commencement of the Chapter 11 Cases. Employees should expect no change in their daily responsibilities and to be paid in the ordinary course of business.
Restructuring Support Agreement
In connection with its Chapter 11 filing, on October 9, 2018, the Company executed a restructuring support agreement (the “RSA”), with members of an ad hoc group of noteholders and lenders (the “Ad Hoc Group”) under (i) the Company’s senior secured 8.75% notes due 2022 (such notes, collectively, the “Prepetition First Lien Notes”) governed by that certain Indenture, dated as of December 16, 2014 (as amended, restated, supplemented or otherwise modified from time to time, the “Prepetition First Lien Notes Indenture”), by and among the Company, the guarantors named therein, and U.S. Bank National Association, as trustee and collateral agent, (ii) the Company’s Credit Agreement, dated as of December 16, 2014 (as amended, restated, supplemented or otherwise modified from time to time, the “Prepetition First Lien Credit Agreement”, and the loan governed thereby, the “Prepetition First Lien Term Loan”), by and among the Company, as borrower, the guarantors and lenders named therein and Wilmington Savings Fund Society, FSB, as agent, and (iii) the Terms of Bridge Loans, attached as Exhibit L to the Prepetition First Lien Credit Agreement, dated as of May 21, 2018, among the Company, Westmoreland San Juan, LLC and

7

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

Prairie Mines & Royalty ULC, as borrowers, the guarantors and lenders named therein, and Wilmington Savings Fund Society, FSB, as administrative agent and collateral agent (as amended, restated, supplemented or otherwise modified from time to time, the “Prepetition Bridge Loan Agreement”).
Pursuant to the terms of the RSA, and the Sale Term Sheet and Plan Term Sheet attached as exhibits thereto, the Company and the Ad Hoc Group have agreed on the principal terms of a Chapter 11 plan of reorganization pursuant to which the holders of the Prepetition First Lien Notes and Prepetition First Lien Term Loan will credit bid for and acquire the Company’s core assets and, in the event that any of the Company’s non-core assets (as set forth on a schedule to the Sale Term Sheet) are not acquired by a third party, to credit bid for and acquire such non-core assets. On October 25, 2018, the Debtors filed the proposed Chapter 11 plan contemplated by the RSA with the Bankruptcy Court. No date is currently set for the Bankruptcy Court to consider confirmation of the Chapter 11 plan, but pursuant to the RSA, the Bankruptcy Court order confirming the Chapter 11 Plan must be entered on or before February 14, 2019.
The RSA contemplates the approval by the Bankruptcy Court of the DIP Credit Agreement described below under the heading “Debtor-in-Possession Financing.”
The RSA includes an agreed timeline for the Chapter 11 Cases that, if met, would result in the Company closing on a qualified bid and/or confirming a Chapter 11 plan and emerging from bankruptcy on or before February 28, 2019. The proposed terms of the DIP Credit Agreement and the proposed terms of the plan of reorganization set forth in the RSA are to be effectuated through the Chapter 11 Cases and remain subject to Bankruptcy Court approval.
Debtor-in-Possession Financing
In connection with the Chapter 11 Cases, on October 9, 2018, the Debtors filed a motion (the “DIP Motion”) seeking, among other things, interim and final approval of debtor-in-possession financing on terms and conditions set forth in a proposed Debtor-in-Possession Credit Agreement (the “DIP Credit Agreement”) among the Company, as borrower, the financial institutions or other entities from time to time parties thereto, as lenders (the “DIP Lenders”), and Wilmington Savings Fund Society, FSB, as administrative agent and collateral agent (the “Agent”). The initial lenders under the DIP Credit Agreement are expected to be one or more of the lenders under the Prepetition Bridge Loan Agreement or the affiliates of such lenders. The DIP Credit Agreement, if approved by the Court as proposed, would contain the following terms:
a $110 million super-priority senior debtor-in-possession term loan ("DIP Loan");
following approval by the Bankruptcy Court, proceeds of the DIP Credit Agreement could be used by the Debtors to (i) refinance approximately $90 million in outstanding principal obligations, as well as any accrued but unpaid interest, fees, expenses and other costs, under the Prepetition Bridge Loan Agreement, (ii) pay certain costs, fees and expenses related to the Chapter 11 Cases, (iii) make payments in respect of certain “adequate protection” obligations and (iv) fund working capital needs, capital improvements and expenditures of the Company and its subsidiaries, in all cases subject to the terms of the DIP Credit Agreement and applicable orders of the Bankruptcy Court;
the maturity date of the DIP Credit Agreement is expected to be the earlier to occur of: (i) May 21, 2019 (as such date may be extended under the DIP Credit Agreement), (ii) the date of termination in whole of all of the commitments thereunder, (iii) November 8, 2018, if the final order has not been entered into prior to the expiration of such date (or such later date, but no longer than 90 days following the entry of the interim order), (iv) the sale of all or substantially all of the assets of the Debtors pursuant to Section 363 or 1123 of the Bankruptcy Code, and (v) the date of substantial consummation of an acceptable reorganization plan pursuant to an order of the Bankruptcy Court;
interest would accrue at a rate per year equal to (i) with respect to Base Rate loans, the Base Rate plus 7.25% and (ii) with respect to LIBOR loans, the LIBOR Rate plus 8.25%;
the Company would be required to pay the following fees pursuant to the terms of the DIP Credit Agreement:
Agent Fees: Separately agreed upon between the Company and the Administrative Agent.
Exit Yield Enhancement Fee: Upon any repayment of any principal amount of the loans, a fee equal to 0.75% of such principal amount repaid.
Undrawn Commitment Fee: a fee equal to the undrawn amount under the DIP Credit Agreement multiplied by the LIBOR Rate plus 2.00%.
the obligations and liabilities of the Company under the DIP Credit Agreement would be secured by a valid, binding, continuing, enforceable, fully perfected first priority, senior priming lien on, and security interest in, all of the Collateral (as defined in the DIP Credit Agreement), including prepetition Collateral; and
the proposed debtor-in-possession financing would be subject to customary covenants, prepayment events, events of default and other provisions.

8

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


On October 10, 2018, the Bankruptcy Court entered an order approving the Debtors’ entry into the DIP Credit Agreement on an interim basis, and the Debtors promptly closed the DIP Credit Agreement following the entry of this order. The Bankruptcy Court hearing to consider approval of the DIP Credit Agreement on a final basis is currently scheduled for November 13, 2018. The foregoing description of the DIP Credit Agreement does not purport to be complete and is qualified in its entirety by reference to the final, executed DIP Credit Agreement, as approved by the Bankruptcy Court.
For periods subsequent to filing the Bankruptcy Petitions, the Company will apply the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 852, Reorganizations, in preparing its consolidated financial statements. ASC 852 requires that the financial statements distinguish transactions and events that are directly associated with the reorganization from the ongoing operations of the business. Accordingly, certain revenues, expenses, realized gains and losses and provisions for losses that are realized or incurred in the bankruptcy proceedings will be recorded in a reorganization line item on the consolidated statements of operations. In addition, the pre-petition obligations that may be impacted by the bankruptcy reorganization process will be classified on the consolidated balance sheet as liabilities subject to compromise. These liabilities are reported at the amounts expected to be allowed by the Bankruptcy Court, which may differ from the ultimate settlement amounts.
Ability to Continue as a Going Concern
    
We have significant cash requirements to fund our debt obligations, ongoing heritage health benefit costs, pension contributions and corporate overhead expenses. Our consolidated cash and cash equivalents balance as of September 30, 2018 was $93.6 million. However, this balance includes cash and cash equivalents of $25.8 million at WMLP as of September 30, 2018 that are restricted and unavailable to WCC. The cash and cash equivalents at WMLP is governed as described in Note 7 - Debt And Lines Of Credit. Our consolidated cash and cash equivalents balance includes proceeds of the initial draw on our Bridge Loan, which pursuant to such transaction we negotiated Forbearances of certain of our debt covenants and restrictions from greater than 75% of our lenders and note holders under our Term Loan and 8.75% Notes, respectively, as described below and further described in Note 7 - Debt And Lines Of Credit.

The significant risks and uncertainties related to the Company’s liquidity and Chapter 11 Cases described above raise substantial doubt about the Company’s ability to continue as a going concern. As such, the accompanying consolidated financial statements (unaudited) are prepared on a going concern basis and do not include any adjustments that might result from uncertainty about our ability to continue as a going concern, other than the reclassification of certain long-term debt to current debt and the related debt issuance costs to current liabilities and current assets, respectively. If the Company cannot continue as a going concern, adjustments to the carrying values and classification of its assets and liabilities and the reported amounts of income and expenses could be required and could be material.

On May 21, 2018, we entered into the Bridge Loan agreement, as described further in Note 7 - Debt And Lines Of Credit, which provided an additional $110 million term loan, consisting of an initial funding of $90 million and an undrawn delayed draw funding of up to $20 million. Approximately $48.5 million of the initial $90 million in proceeds of the Bridge Loan was used to extinguish in full the Company’s Revolver and San Juan Loan. The remaining proceeds will be used to fund working capital. The extinguishment of the San Juan Loan has eliminated certain previous restrictions and now operating cash flows generated at the San Juan mine are available for use by the Company. The Bridge Loan has a maturity date of May 21, 2019.

Concurrently with the execution of the Bridge Loan on May 21, 2018, the Company entered into a forbearance agreement with greater than 75% of note holders ("Supporting Note Holders") of the Company’s 8.75% Notes in which the Supporting Note Holders agreed to forbear from exercising certain rights and remedies under the Indenture or the related security documents until the earlier of a) September 30, 2018, or b) a termination event (as defined in such agreement) ("Note Forbearance"). Additionally, the Company entered into a fourth amendment to its Term Loan Credit Agreement, greater than 75% of the lenders thereunder ("Supporting Lenders") agreed to forbear from exercising certain rights and remedies under the Term Loan Credit Agreement or the related security documents until the earlier of a) September 30, 2018, or b) a termination event (as defined in such agreement) ("Term Loan Forbearance," and together with the Note Forbearance, the "Forbearances").

As of November 1, 2018, the Company was in default under certain of its debt instruments. The Company’s filing of the Chapter 11 Cases described above constitutes an event of default that accelerated the Company’s obligations under its Term Loan and 8.75% Notes. Additionally, the filing of the Chapter 11 Cases constituted a “termination event” under the Forbearances. Other events of default, including cross-defaults, are present, including the receipt of a going concern explanatory paragraph from the Company’s independent registered public accounting firm on the Company’s consolidated financial statements. Under the Bankruptcy Code, the creditors under these debt agreements are stayed from taking any action against the

9

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

Company as a result of an event of default. See Note 7 - Debt And Lines Of Credit for additional details about the Company’s debt.

As disclosed in our Current Report on Form 8-K filed April 16, 2018, we received a notification of deficiency from the Listing Qualifications Department of the Nasdaq Stock Market (“Nasdaq”) based on the Company’s failure to pay certain fees required by Listing Rule 5250(f). Nasdaq has informed the Company that as a result of this deficiency, the Company will be delisted unless the Company appeals Nasdaq’s decision. We have not appealed Nasdaq’s decision, resulting in the suspension of trading of our common stock effective April 25, 2018, and formal delisting of our common stock on June 6, 2018. The Company’s common stock currently trades over-the-counter under the ticker symbol "WLBA."
Recently Adopted Accounting Pronouncements
In March 2017, the FASB issued Accounting Standards Update ("ASU") 2017-07, Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Cost (“new benefit cost standard”), which requires separate presentation of service costs and all other components of net benefit costs in the Consolidated Statements of Operations. Under this ASU, service cost is included in the same line item as other compensation costs arising from services rendered by employees during the period, with all other components of net benefit costs in the Consolidated Statements of Operations (unaudited) outside of Operating (loss) income. The amendments in this update require retrospective application. Prior to the adoption of the new benefit cost standard, the service cost portion of net periodic benefit cost from pension and postretirement medical benefit were presented in Cost of sales (exclusive of depreciation, depletion and amortization, shown separately) and Selling and administrative while the remaining components of net period benefit cost were included in Selling and administrative and Heritage health benefit expenses.

The Company adopted the new benefit cost standard effective January 1, 2018, at which point all of the service cost portion of net periodic benefit cost from pension and postretirement medical benefit are presented in Cost of sales (exclusive of depreciation, depletion and amortization, shown separately) with the remaining components of net periodic benefit cost are presented in Other expense outside of Operating (loss) income. Refer to "Impacts to Previously Reported Results" below for the impact of adoption of the new benefit cost standard on our consolidated financial statements.
In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (“new cash flows standard”), which requires all entities that have restricted cash or restricted cash equivalents to explain the changes during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents in the Consolidated Statements of Cash Flows. As a result, amounts generally described as restricted cash and restricted cash equivalents that are included in other financial statement captions of the Consolidated Balance Sheets should be included with cash and cash equivalents when reconciling the beginning of period and end of period total amounts shown on the Consolidated Statements of Cash Flows. The ASU should be adopted using a retrospective transition method to each period presented. The Company adopted the new cash flows standard effective January 1, 2018 and applied the ASU retrospectively to the periods presented in the Company's Consolidated Statements of Cash Flows (unaudited). Refer to “Impacts to Previously Reported Results” below for the impact of adoption of the new cash flows standard on our consolidated financial statements.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606) (“new revenue standard”), which supersedes all previously existing revenue recognition guidance. Under this guidance, an entity should recognize revenue when it transfers 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. The standard allows for initial application to be performed retrospectively to each period presented or as a cumulative effect adjustment as of the date of adoption. During 2016, the FASB clarified the implementation guidance on principal versus agent, identifying performance obligations and licensing, practical expedients, and made technical corrections on various topics.

The Company adopted the new revenue standard effective January 1, 2018 using the full retrospective method. Accordingly, certain prior period balances have been restated to reflect the financial results of the Company in accordance with the new standard. This includes the cumulative effect of the adoption reflected as an adjustment to the opening balance of Accumulated deficit for the earliest balance sheet period presented.

As a result of the adoption of the new revenue standard, the timing of the recognition of revenue related to certain long-term coal supply agreements that contain provisions for future payments from customers to reimburse our costs incurred during final reclamation is accelerated as compared to the recognition pattern under the previous revenue standard. The contract asset created from the accelerated recognition of revenue related to customer payments related to final reclamation is classified as

10

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

Unbilled revenues and Unbilled revenues, less current portion in the Consolidated Balance Sheets (unaudited). See Note 2 - Revenue for a more detailed description of accounting for customer payments related to final reclamation.

Additionally, upon adoption of the new revenue standard we revised the recognition period of certain deferred revenues from customer up-front payments that were previously being amortized to revenue over the full term of their respective coal supply agreements. Under the new revenue standard, we concluded that these payments provided the customer with a material right for a period shorter in duration than the full term of the coal supply agreements.

Refer to "Impacts to Previously Reported Results" below for the impact of adoption of the new revenue standard on our consolidated financial statements (unaudited).

Impacts to Previously Reported Results

The adoption of the new benefit cost standard, new cash flows standard and new revenue standard resulted in the following adjustments to previously reported results, with no change to the Consolidated Statement of Comprehensive Loss for the three months ended September 30, 2017:











































11

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

Consolidated Balance Sheet as of December 31, 2017

 
As Reported
 
Adjustments for New Revenue Standard
 
Additional Reclassifications
 
As Adjusted
 
(In thousands)
Assets
 
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
 
Cash and cash equivalents
$
103,247

 
$

 
$

 
$
103,247

Receivables:
 
 
 
 
 
 
 
Trade
103,611

 

 
(14,300
)
 
89,311

Other
17,697

 

 

 
17,697

Total receivables
121,308

 

 
(14,300
)
 
107,008

Inventories
106,795

 

 

 
106,795

Unbilled revenues

 
49,574

 
14,300

 
63,874

Other current assets
11,517

 

 

 
11,517

Total current assets
342,867

 
49,574

 

 
392,441

Land, mineral rights, property, plant and equipment
1,665,740

 

 

 
1,665,740

Less accumulated depreciation, depletion and amortization
(923,905
)
 

 

 
(923,905
)
Net land, mineral rights, property, plant and equipment
741,835

 

 

 
741,835

Advanced coal royalties
21,404

 

 

 
21,404

Restricted investments, reclamation deposits and bond collateral
200,194

 

 

 
200,194

Unbilled revenues, less current portion

 
225,245

 

 
225,245

Investment in joint venture
27,763

 

 

 
27,763

Other assets
55,036

 

 

 
55,036

Total Assets
$
1,389,099

 
$
274,819

 
$

 
$
1,663,918

 
 
 
 
 
 
 
 
Liabilities and Shareholders’ Deficit
 
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
 
Current installments of long-term debt
$
983,427

 
$

 
$

 
$
983,427

Accounts payable and accrued expenses:
 
 
 
 
 
 
 
Trade and other accrued liabilities
121,489

 

 

 
121,489

Interest payable
22,840

 

 

 
22,840

Production taxes
41,688

 

 

 
41,688

Postretirement medical benefits
14,734

 

 

 
14,734

Deferred revenue
5,068

 
(1,867
)
 

 
3,201

Asset retirement obligations
48,429

 

 

 
48,429

Other current liabilities
9,401

 

 

 
9,401

Total current liabilities
1,247,076

 
(1,867
)
 

 
1,245,209

Long-term debt, less current installments
64,980

 

 

 
64,980

Postretirement medical benefits, less current portion
317,407

 

 

 
317,407

Pension and SERP obligations, less current portion
43,585

 

 

 
43,585

Deferred revenue, less current portion
1,984

 
(1,984
)
 

 

Asset retirement obligations, less current portion
426,038

 

 

 
426,038

Other liabilities
31,477

 

 

 
31,477

Total liabilities
2,132,547

 
(3,851
)
 

 
2,128,696

Shareholders’ deficit:
 
 
 
 
 
 
 
Common stock of $0.01 par value: Authorized 30,000,000 shares; Issued and outstanding 18,771,643 shares at December 31, 2017
188

 

 

 
188

Other paid-in capital
250,494

 

 

 
250,494

Accumulated other comprehensive loss
(160,525
)
 
1,826

 

 
(158,699
)
Accumulated deficit
(829,107
)
 
276,844

 

 
(552,263
)
Total shareholders’ deficit
(738,950
)
 
278,670

 

 
(460,280
)
Noncontrolling interests in consolidated subsidiaries
(4,498
)
 

 

 
(4,498
)
Total deficit
(743,448
)
 
278,670

 

 
(464,778
)
Total Liabilities and Shareholders' Deficit
$
1,389,099

 
$
274,819

 
$

 
$
1,663,918







12

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

Consolidated Statement of Operations for the three months ended September 30, 2017

 
As Reported
 
Adjustments for New Revenue Standard
 
Adjustments for New Net Periodic Benefit Cost Standard
 
As Adjusted
 
(In thousands, except per share data)
Revenues
$
358,011

 
$
7,003

 
$

 
$
365,014

Cost, expenses and other:
 
 
 
 
 
 
 
Cost of sales (exclusive of depreciation, depletion and amortization, shown separately)
280,012

 

 
299

 
280,311

Depreciation, depletion and amortization
38,066

 

 

 
38,066

Selling and administrative
28,115

 

 
(1,717
)
 
26,398

Heritage health benefit expenses
3,349

 

 
(2,305
)
 
1,044

Loss on sale/disposal of assets
236

 

 

 
236

Derivative gain
(4,667
)
 

 

 
(4,667
)
Income from equity affiliates
(1,355
)
 

 

 
(1,355
)
 
343,756

 

 
(3,723
)
 
340,033

Operating income
14,255

 
7,003

 
3,723

 
24,981

Other (expense) income:
 
 
 
 
 
 
 
Interest expense
(30,017
)
 

 

 
(30,017
)
Interest income
1,012

 

 

 
1,012

Loss on foreign exchange
(1,739
)
 
6

 

 
(1,733
)
Other expense
(3,251
)
 

 
(3,723
)
 
(6,974
)
 
(33,995
)
 
6

 
(3,723
)
 
(37,712
)
Loss before income taxes
(19,740
)
 
7,009

 

 
(12,731
)
Income tax benefit
(440
)
 
184

 

 
(256
)
Net loss
(19,300
)
 
6,825

 

 
(12,475
)
Less net loss attributable to noncontrolling interest
(78
)
 

 

 
(78
)
Net loss applicable to common shareholders
$
(19,222
)
 
$
6,825

 
$

 
$
(12,397
)
 
 
 
 
 
 
 
 
Net loss per share applicable to common shareholders:
 
 
 
 
 
 
 
Basic and diluted
$
(1.03
)
 
$
0.37

 
$

 
$
(0.66
)
Weighted average number of common shares outstanding:
 
 
 
 
 
 
 
Basic and diluted
18,742

 

 

 
18,742

















13

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

Consolidated Statement of Operations for the nine months ended September 30, 2017

 
As Reported
 
Adjustments for New Revenue Standard
 
Adjustments for New Net Periodic Benefit Cost Standard
 
As Adjusted
 
(In thousands, except per share data)
Revenues
$
1,020,772

 
$
18,569

 
$

 
$
1,039,341

Cost, expenses and other:
 
 
 
 
 
 
 
Cost of sales (exclusive of depreciation, depletion and amortization, shown separately)
836,525

 

 
1,126

 
837,651

Depreciation, depletion and amortization
114,131

 

 

 
114,131

Selling and administrative
88,706

 

 
(5,406
)
 
83,300

Heritage health benefit expenses
9,953

 

 
(6,917
)
 
3,036

Loss on sale/disposal of assets
202

 

 

 
202

Derivative gain
(6,571
)
 

 

 
(6,571
)
Income from equity affiliates
(4,274
)
 

 

 
(4,274
)
 
1,038,672

 

 
(11,197
)
 
1,027,475

Operating (loss) income
(17,900
)
 
18,569

 
11,197

 
11,866

Other (expense) income:
 
 
 
 
 
 
 
Interest expense
(89,388
)
 

 

 
(89,388
)
Interest income
2,942

 

 

 
2,942

Loss on foreign exchange
(3,391
)
 
54

 

 
(3,337
)
Other expense
(793
)
 

 
(11,197
)
 
(11,990
)
 
(90,630
)
 
54

 
(11,197
)
 
(101,773
)
Loss before income taxes
(108,530
)
 
18,623

 

 
(89,907
)
Income tax benefit
(1,406
)
 
376

 

 
(1,030
)
Net loss
(107,124
)
 
18,247

 

 
(88,877
)
Less net loss attributable to noncontrolling interest
(715
)
 

 

 
(715
)
Net loss applicable to common shareholders
$
(106,409
)
 
$
18,247

 
$

 
$
(88,162
)
 
 
 
 
 
 
 
 
Net loss per share applicable to common shareholders:
 
 
 
 
 
 
 
Basic and diluted
$
(5.70
)
 
$
0.98

 
$

 
$
(4.72
)
Weighted average number of common shares outstanding:
 
 
 
 
 
 
 
Basic and diluted
18,672

 

 

 
18,672

















14

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

Consolidated Statement of Comprehensive Loss for the nine months ended September 30, 2017

 
As Reported
 
Adjustments for New Revenue Standard
 
As Adjusted
 
(In thousands)
Net loss
$
(107,124
)
 
$
18,247

 
$
(88,877
)
Other comprehensive income (loss)
 
 
 
 
 
Pension and other postretirement plans:
 
 
 
 
 
Amortization of accumulated actuarial gains and prior service costs, pension
1,765

 

 
1,765

Adjustments to accumulated actuarial gains and transition obligations, pension
189

 

 
189

Amortization of accumulated actuarial gains, transition obligations, and prior service costs, postretirement medical benefits
2,893

 

 
2,893

Tax effect of other comprehensive income
(2,503
)
 
(386
)
 
(2,889
)
Foreign currency translation adjustment gains
17,455

 

 
17,455

Unrealized and realized gains on available-for-sale debt securities
1,474

 

 
1,474

Other comprehensive income, net of income taxes
21,273

 
(386
)
 
20,887

Comprehensive loss
(85,851
)
 
17,861

 
(67,990
)
Less: Comprehensive loss attributable to noncontrolling interest
(715
)
 

 
(715
)
Comprehensive loss attributable to common shareholders
$
(85,136
)
 
$
17,861

 
$
(67,275
)


































15

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

Consolidated Statement of Cash Flows for the nine months ended September 30, 2017

 
As Reported
 
Adjustments for New Revenue Standard
 
Adjustments for New Cash Flows Standard
 
As Adjusted
 
(In thousands)
Cash flows from operating activities:
 
 
 
 
 
 
 
Net loss
$
(107,124
)
 
$
18,247

 
$

 
$
(88,877
)
Adjustments to reconcile net loss to net cash provided by operating activities:
 
 
 
 
 
 
 
Depreciation, depletion and amortization
114,131

 

 

 
114,131

Accretion of asset retirement obligation
33,796

 

 

 
33,796

Share-based compensation
3,846

 

 

 
3,846

Non-cash interest expense
6,981

 

 

 
6,981

Amortization of deferred financing costs
8,183

 

 

 
8,183

Gain on derivative instruments
(6,571
)
 

 

 
(6,571
)
Loss on foreign exchange
3,391

 
(54
)
 

 
3,337

Income from equity affiliates
(4,274
)
 

 

 
(4,274
)
Distributions from equity affiliates
4,970

 

 

 
4,970

Deferred income tax benefit
(1,374
)
 
376

 

 
(998
)
Other
3,341

 

 

 
3,341

Changes in operating assets and liabilities:
 
 
 
 
 
 


Receivables
(1,223
)
 

 

 
(1,223
)
Inventories
19,713

 

 

 
19,713

Accounts payable and accrued expenses
(26,965
)
 

 

 
(26,965
)
Interest payable
(7,165
)
 

 

 
(7,165
)
Deferred revenue
(7,475
)
 
1,390

 

 
(6,085
)
Unbilled revenues

 
(19,959
)
 

 
(19,959
)
Other assets and liabilities
17,977

 

 

 
17,977

Asset retirement obligations
(33,004
)
 

 

 
(33,004
)
Net cash provided by operating activities
21,154

 

 

 
21,154

Cash flows from investing activities:
 
 
 
 
 
 
 
Additions to property, plant and equipment
(25,365
)
 

 

 
(25,365
)
Proceeds from sales of restricted investments
33,686

 

 

 
33,686

Purchases of restricted investments
(37,945
)
 

 
(649
)
 
(38,594
)
Cash payments related to acquisitions and other
(3,580
)
 

 

 
(3,580
)
Proceeds from sales of assets
774

 

 

 
774

Receipts from loan and lease receivables
50,488

 

 

 
50,488

Other
(1,384
)
 

 

 
(1,384
)
Net cash provided by investing activities
16,674

 

 
(649
)
 
16,025

Cash flows from financing activities:
 
 
 
 
 
 
 
Repayments of long-term debt
(64,078
)
 

 

 
(64,078
)
Borrowings on revolving lines of credit
236,100

 

 

 
236,100

Repayments on revolving lines of credit
(225,560
)
 

 

 
(225,560
)
Other
(550
)
 

 

 
(550
)
Net cash used in financing activities
(54,088
)
 

 

 
(54,088
)
Effect of exchange rate changes on cash
321

 

 

 
321

Net decrease in cash and cash equivalents, including restricted cash
(15,939
)
 

 
(649
)
 
(16,588
)
Cash and cash equivalents, including restricted cash, beginning of period
60,082

 

 
69,533

 
129,615

Cash and cash equivalents, including restricted cash, end of period
$
44,143

 
$

 
$
68,884

 
$
113,027

Supplemental disclosures of cash flow information:
 
 
 
 
 
 
 
Cash paid for interest
$
81,478

 
$

 
$

 
$
81,478

Non-cash transactions:
 
 
 
 
 
 
 
Accrued purchases of property and equipment
$
3,508

 
$

 
$

 
$
3,508

Capital leases and other financing sources
503

 

 

 
503


Recently Issued Accounting Pronouncements

16

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

In February 2018, the FASB issued ASU 2018-02, Income Statement-Reporting Comprehensive Income (Topic 220) Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. ASU 2018-02 provides an option to reclassify stranded tax effects within accumulated other comprehensive loss to retained earnings due to the change in the U.S. federal tax rate in the Tax Cuts and Jobs Act of 2017. The ASU is effective for public companies for fiscal years beginning after December 15, 2018, and interim periods therein with early adoption permitted. The Company is currently in the process of analyzing the standard, but does not expect the adoption to have a material impact to our financial statements.
In August 2016, the FASB issued ASC 2018-14, Compensation - Retirement Benefits - Defined Benefit Plans - General (Topic 715-20): Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans, which eliminates certain disclosure requirements for employers that sponsor defined benefits pension or other postretirement plans, and requires public entities to disclose certain new information. The new guidance is effective for public entities for fiscal years beginning after December 15, 2020. The amendments in this update require retrospective application for all periods presented upon their effective date. We will adopt the new guidance in the fourth quarter of 2018 and the adoption of this guidance will not have a material impact on the consolidated financial statements.
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which requires companies leasing assets to recognize on their balance sheet a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term on contracts longer than one year. The new guidance is effective for fiscal years beginning after December 15, 2018, using a modified retrospective approach, with early adoption permitted.
In July 2018, the FASB issued ASU 2018-11, Leases (Topic 842):Targeted Improvements, which includes two main provisions. The first is an additional optional transition method to adopt the new leasing standard at the adoption date through recognition of a cumulative-effect adjustment to the opening balance of retaining earnings in the period of adoption. The second provides lessors with a practical expedient, by class of underlying asset, to not separate non-lease components from the associated lease component and, instead, to account for those components as a single component, if certain criteria are met.
The Company has established an implementation team to execute a multi-phase plan to adopt the requirements of the new standard. The team is in the process of finalizing the quantitative and qualitative analysis in accordance with the plan. The team is also reviewing system capabilities, processes and internal controls over financial reporting to ensure the implementation in the first quarter of 2019.
In August 2018, the FASB issued ASC 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement, which eliminates certain disclosure requirements for fair value measurements for all entities, and requires public entities to disclose certain new information while modifying certain disclosure requirements. The new guidance is effective for all entities for fiscal years beginning after December 15, 2019 and for interim periods within those fiscal years, with early adoption permitted. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. We will adopt the new guidance in the first quarter of 2020 and the adoption of this guidance will not have a material impact on the consolidated financial statements.
2. REVENUE
We produce and sell thermal coal primarily to investment grade utility customers, typically under long-term, cost-protected contracts. The majority of our coal is sold domestically within the country it is produced. We own one mine that produces thermal coal which is exported primarily to the Asia-Pacific market via rail and ocean vessel under reserved port capacity. Lesser amounts of revenue (“Other revenues”) are generated from ash hauling services, royalties from oil and gas leases and sales of various mining byproducts.
Under ASC 606, revenue is recognized when a customer obtains control of promised goods or services in an amount that reflects the consideration we expect to receive in exchange for those goods or services. We measure revenue based on the consideration specified in the contract, and revenue is recognized when the performance obligations in the contract are satisfied. A performance obligation is a promise in a contract to transfer a distinct good or service to the customer. The transaction price of a contract is allocated to each distinct performance obligation and recognized as revenue when or as the customer receives the benefit of the performance obligation.

17

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

For all of our coal sales contracts, performance obligations consist of the delivery of each ton of coal to the customer as our promise is to sell multiple distinct units of a commodity at a point in time. The transaction price principally consists of fixed consideration in the form of a base price per ton of coal with additional variable consideration comprised of adjustments to the base price based on quality measurements. Certain of our coal sales contracts contain additional variable consideration comprised of various index-based adjustments, adjustments based on changes in underlying production costs and reimbursements of various costs such as royalties and taxes.
Many of our coal sales contracts contain set minimums for deliveries of tons of coal. However, we are also party to a number of coal sales contracts that contain no tonnage delivery minimums, and thus all deliveries are considered customer options. Further, certain of these contracts contain a commitment from the customer to make payments to us for our performance of final reclamation. As our performance of final reclamation does not transfer a good or service to the customer, we must estimate the amount of consideration we believe we will be entitled to and recognize it on a per ton basis over the period to which the commitment creates a material right to the customer. Prior to the adoption of the new revenue standard, this revenue was generally recognized at the time final reclamation was performed. Under the new revenue standard, this recognition of revenue in advance of when we are contractually permitted to bill our customer results in a contract asset presented as unbilled revenues in our Consolidated Balance Sheets (unaudited) until the amount is ultimately billable to the customer. Although there is a significant delay between the customer’s receipt of the goods and the customer’s payment of final reclamation costs that represent consideration for the goods, there is no recognition of a significant financing component as we meet a scope-out exception as the difference between the promised consideration and the cash selling price of the good was for reasons other than the provision of financing to the customer.

Contract Balances
Contract assets and contract liabilities are the result of timing differences between revenue recognition, billings and cash collections. We recognize contract assets in those instances where billing occurs subsequent to revenue recognition and our right to invoice the customer is conditioned on something other than the passage of time. These instances include customer commitments to make payments for final reclamation and certain contracts with tiered pricing in which per ton revenue has exceeded per ton contract price to date. We recognize contract liabilities in those instances where billing occurs prior to revenue recognition, which occurs for certain contracts with tiered pricing in which the per ton contract price has exceeded per ton revenue to date, or when we have received consideration prior to satisfaction of performance obligations.
The following table presents the activity in our contract assets and liabilities for the nine months ended September 30, 2018 (in thousands):

Contract Assets(1):
 
Balance as of December 31, 2017
$
274,699

Additions
16,250

Transfers to Receivables
(42,617
)
Balance as of September 30, 2018
$
248,332

 
 
Contract Liabilities(2):
 
Balance as of December 31, 2017
$
3,201

Additions
5,949

Transfers to Revenues
(6,502
)
Balance as of September 30, 2018
$
2,648

_________________________
(1) Includes current balances of $25.9 million and $49.6 million reported within Unbilled revenues in the Consolidated Balance Sheets (unaudited) as of September 30, 2018 and December 31, 2017, respectively, and includes non-current balances of $222.4 million and $225.2 million reported within Unbilled revenues, less current portion in the Consolidated Balance Sheets (unaudited) as of September 30, 2018 and December 31, 2017, respectively. The remaining balances of $19.5 million and $14.3 million included within Unbilled revenues in the Consolidated Balance Sheets (unaudited) as of September 30, 2018 and December 31, 2017, respectively, relate to amounts recognized as revenue but are only billable upon the passage of time and are therefore not contract assets.
(2) Comprised entirely of current balances of $2.6 million and $3.2 million reported within Deferred revenue in the Consolidated Balance Sheets (unaudited) as of September 30, 2018 and December 31, 2017, respectively.



18

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

Included in the contract asset balances as of September 30, 2018 and December 31, 2017 are $245.0 million and $251.2 million, respectively, related to revenue recognized at the time performance obligations were satisfied, for which the right to invoice will not occur until final reclamation is performed.

Remaining Performance Obligations

The majority of our revenues are derived from variable consideration in the form of base price for optional tons in excess of minimum tonnage requirements, cost-plus consideration, reimbursements of various expenses, quality and index based adjustments and payments for final reclamation. Additional revenues are derived from short-term coal sales contracts, primarily for export deliveries to the Asia-Pacific market.

The remainder of our revenues relate to the fixed consideration from our long-term coal sales contracts. The following table includes the estimated remaining transaction price for our long-term coal sales contracts which have minimum tonnage commitments, representing the fixed consideration from our long-term coal sales contracts, as well as $94.2 million related to material rights created from customers’ commitments to pay for final reclamation. The amounts in the following table generally exclude, based on the following practical expedients that we elected to apply, (i) variable consideration within contracts in which such variable consideration is allocated entirely to wholly unsatisfied performance obligations; and (ii) remaining performance obligations for contracts with an original expected duration of one year or less. These amounts, as of September 30, 2018, represent estimated minimum revenues that we will invoice or transfer from contract liabilities and recognize in future periods (in thousands):
 
Estimated Revenues
Three months ended December 31, 2018
$
83,497

2019
231,792

2020
169,150

2021
149,870

2022
76,409

Thereafter
192,905

Total
$
903,623

Significant Judgments
The estimation of variable consideration comprised of future payments from customers for final reclamation is subject to many variables and requires significant judgment. Key factors in this estimate include estimates of disturbed acreage as determined from engineering data, estimates of equipment, labor, and other costs to reclaim the disturbed acreage and timing of these cash flows. These estimates and assumptions are generally consistent with those used in our calculation of asset retirement obligations.
3. VARIABLE INTEREST ENTITY

As of September 30, 2018, Westmoreland San Juan, LLC ("WSJ") had completely paid off and terminated the San Juan Loan, which resulted in the Company consolidating the financials of its 100% ownership in WSJ with our other similarly situated subsidiaries. WSJ was previously a variable interest entity (“VIE”) due to another party having the potential right to receive WSJ’s residual returns, which, as of the pay down of the San Juan Loan on May 22, 2018, has been eliminated. The Company had been the primary beneficiary because it had the power to direct the activities that most significantly impacted WSJ’s economic performance.

The following table presents the carrying amounts, after eliminating the effect of intercompany transactions, included in the Consolidated Balance Sheets (unaudited) that are for the use of or are the obligation of WSJ as a VIE:
 
September 30, 2018
 
December 31, 2017
 
(In thousands)
Assets
$

 
$
309,025

Liabilities

 
167,529

Net carrying amount
$

 
$
141,496


19

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


4. INVENTORIES
Inventories consisted of the following:
 
September 30, 2018
 
December 31, 2017
 
(In thousands)
Coal stockpiles
$
44,126

 
$
38,145

Materials and supplies
70,059

 
73,517

Reserve for obsolete inventory
(4,340
)
 
(4,867
)
Total
$
109,845

 
$
106,795


5. RESTRICTED INVESTMENTS, RECLAMATION DEPOSITS AND BOND COLLATERAL
Coal segments maintain government-required bonds, which require posting of bond collateral, that assure compliance with applicable federal and state regulations relating to the performance of final reclamation activities. The amounts deposited in the bond collateral account secure the bonds issued by the bonding company. The Corporate segment is required to obtain surety bonds in connection with its self-insured workers’ compensation plan and certain healthcare plans. The Company’s surety bond underwriters require collateral to issue these bonds.
The Company invests certain bond collateral, reclamation deposits and other restricted investments in a limited selection of fixed-income investment options and receives the corresponding investment returns. These investments are not available to meet the Company’s general cash needs. These investments include available-for-sale debt securities, which are reported at fair value with unrealized gains and losses excluded from earnings and reported in Accumulated other comprehensive loss in the Consolidated Balance Sheets (unaudited). On disposal, the resulting gain or loss is reported in Other expense in the Consolidated Statements of Operations (unaudited).
The Company’s carrying value and estimated fair value of Restricted investments, reclamation deposits and bond collateral as of September 30, 2018 were as follows:
 
Restricted Investments and Bond Collateral
 
Reclamation Deposits
 
Total Restricted Investments, Reclamation Deposits and Bond Collateral
 
(In thousands)
Cash and cash equivalents
$
46,049

 
$
12,492

 
$
58,541

Time deposits
700

 

 
700

Available-for-sale debt securities
78,082

 
70,138

 
148,220

 
$
124,831

 
$
82,630

 
$
207,461

The Company’s carrying value and estimated fair value of Restricted investments, reclamation deposits and bond collateral as of December 31, 2017 were as follows:
 
Restricted Investments and Bond Collateral
 
Reclamation Deposits
 
Total Restricted Investments, Reclamation Deposits and Bond Collateral
 
(In thousands)
Cash and cash equivalents
$
42,549

 
$
6,643

 
$
49,192

Time deposits
2,467

 

 
2,467

Available-for-sale debt securities
78,157

 
70,378

 
148,535

 
$
123,173

 
$
77,021

 
$
200,194


20

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

Available-for-Sale Debt Securities
The cost basis, gross unrealized holding gains and losses, and fair value of available-for-sale debt securities as of September 30, 2018 were as follows:
 
Restricted Investments and Bond Collateral
 
Reclamation Deposits
 
Total Restricted Investments, Reclamation Deposits and Bond Collateral
 
(In thousands)
Cost basis
$
78,834

 
$
70,602

 
$
149,436

Gross unrealized holding gains
533

 
533

 
1,066

Gross unrealized holding losses
(1,285
)
 
(997
)
 
(2,282
)
Fair value
$
78,082

 
$
70,138

 
$
148,220

The cost basis, gross unrealized holding gains and losses, and fair value of available-for-sale debt securities as of December 31, 2017 were as follows:
 
Restricted Investments and Bond Collateral
 
Reclamation Deposits
 
Total Restricted Investments, Reclamation Deposits and Bond Collateral
 
(In thousands)
Cost basis
$
78,564

 
$
70,576

 
$
149,140

Gross unrealized holding gains
521

 
617

 
1,138

Gross unrealized holding losses
(928
)
 
(815
)
 
(1,743
)
Fair value
$
78,157

 
$
70,378

 
$
148,535



21

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

6. LOSS ON IMPAIRMENT
During the second quarter of 2018, the Company recorded an asset impairment charge to various assets within our Coal - U.S. and Coal - WMLP segments in the amounts of $65.6 million and $77.7 million, respectively, in Loss on impairment in the Consolidated Statements of Operations (unaudited). The Company determined that indicators of impairment existed with respect to the following:
AEP Generation Resources Inc. (“AEP”) declined WMLP’s bid to supply coal to AEP’s Conesville Power Plant Units 5 and 6 for periods subsequent to the expiration of the parties' current contract which expires on December 31, 2018. Coal sales under the Ohio Operations’ current coal supply contract to AEP’s Conesville Power Plant Units 5 and 6 represented a substantial portion of the Coal - WMLP segment revenues generated from the Ohio Operations for the year ended December 31, 2017.
a current period operating loss and a projection of continuing losses associated with the use of a long lived asset group based on reassessments of our life of mine models as part of our restructuring efforts.
The Company performed a recoverability analysis as of June 30, 2018 and determined that the net undiscounted cash flows were less than the carrying values for the Ohio mines, Absaloka mine, Beulah mine and Buckingham mine long-lived assets groups within the Coal - WMLP and Coal - U.S. segments. As a result, the Company estimated the fair value of the long-lived asset groups using a discounted cash flow analysis using marketplace participant assumptions which constituted Level 3 fair value inputs. The discounted cash flow analysis is dependent on a number of significant management estimates about future performance including sales volumes and prices, which are based on projected revenues based on expected economic conditions, costs to produce, income taxes, capital spending, working capital changes and the after-tax weighted average cost of capital. The estimates of costs to produce include labor, fuel, explosives, supplies and other major components of mining. The Company estimated the fair value of certain property, plant and equipment and intangible assets using the market approach. To the extent that the carrying values of the long-lived asset groups exceeded the respective fair values, the Company recorded an asset impairment charge, as can be seen by segment and asset type in the table below for the nine months ended September 30, 2018.
 
Reportable Segment
 
 
 
Coal - U.S.
 
Coal - WMLP
 
Consolidated
 
(In thousands)
Asset impairment charges:
 
 
 
 
 
Land, mineral rights, property, plant and equipment, net
$
59,262

 
$
50,717

 
$
109,979

Advanced coal royalties
4,719

 
3,145

 
7,864

Other assets
1,668

 
23,813

 
25,481

 
$
65,649

 
$
77,675

 
$
143,324


22

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

7. DEBT AND LINES OF CREDIT
The Company and its subsidiaries are subject to the following debt arrangements:
 
Total Debt Outstanding
 
September 30, 2018
 
December 31, 2017
 
(In thousands)
Bridge Loan
$
90,000

 
$

8.75% Notes
350,000

 
350,000

Term Loan
319,773

 
320,595

San Juan Loan

 
56,640

WMLP Term Loan
323,394

 
312,734

Capital lease obligations
22,060

 
33,113

Other debt
13,034

 
2,826

Total debt
1,118,261


1,075,908

Less debt discount and issuance costs, net
(20,732
)
 
(27,501
)
Less current installments, net of debt discount and issuance costs
(1,085,121
)
 
(983,427
)
Total non-current debt
$
12,408

 
$
64,980


The following table presents remaining aggregate contractual debt maturities of all debt as of September 30, 2018 (in thousands): 
Maturity Date(1)
Debt Held by WMLP
 
All Other Debt
 
Total Debt Outstanding
2018
$
324,781

 
$
8,357

 
$
333,138

2019
4,499

 
107,604

 
112,103

2020
1,766

 
317,560

 
319,326

2021
1,664

 
31

 
1,695

2022
1,999

 
350,000

 
351,999

Thereafter

 

 

Total debt
$
334,709

 
$
783,552

 
$
1,118,261

________________________
(1) Debt obligations are scheduled based on their contractual maturities and are not reflective of any potential accelerations discussed in Note 1 - Basis Of Presentation "Ability to Continue as a Going Concern."

Covenant Compliance

See Note 1 - Basis Of Presentation "Ability to Continue as a Going Concern" for matters regarding covenant compliance.

Bridge Loan Agreement

On May 21, 2018, the Company entered into a credit agreement (the “Bridge Loan Agreement”) with an ad hoc group of the Company’s existing first lien lenders and creditors (the “Existing Secured Creditors”) under the 8.75% Notes and Term Loan (defined and discussed below) (the “Existing Secured Debt”). Pursuant to the Bridge Loan Agreement, the Company accessed an additional $110 million term loan, consisting of $90 million in initial funding and an undrawn delayed draw funding of up to an additional $20 million ("Bridge Loan"), secured by a first lien on substantially all of the Company's U.S. and Canadian assets, including 35% of the equity in the holding company for the Company’s Canadian business not previously securing the Existing Secured Debt, and guaranteed by all of our material U.S. and Canadian subsidiaries (other than Westmoreland Resources GP, LLC, Westmoreland Resource Partners, LP, and its subsidiaries, and Westmoreland Risk Management Inc.), in each case, subject to customary exceptions.

Net proceeds of the Bridge Loan were $84.0 million, after a 3.33% discount and $2.7 million of additional debt issuance costs, and were used in part to pay off and fully extinguish the Revolver and San Juan Loan, as described below. The Bridge Loan bears a variable interest rate which is set at our quarterly election of a Base Rate or LIBO Rate, each as defined in the Bridge

23

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

Loan Agreement. The Base Rate consists of 7.25% plus the highest of (i) the Prime Lending Rate (as defined in the Bridge Loan Agreement), (ii) the overnight Federal Funds Rate (as defined in the Bridge Loan Agreement) plus 0.50%, or (iii) the one-month London Interbank Offered Rate (“LIBOR”) plus 1.00%. The LIBO Rate consists of 8.25% plus the higher of (i) LIBOR offered rate as administered by the ICE Benchmark Administration, or (ii) 1.00%. Interest is payable quarterly. As of September 30, 2018, we have elected the LIBO Rate, resulting in a cash interest rate of 10.56%. The Bridge Loan has a maturity date of May 21, 2019.

As part of the Bridge Loan, the Existing Secured Creditors have agreed to subordinate the liens securing the Existing Secured Debt to the liens securing the Bridge Loan. In addition, the Company and its U.S. subsidiaries have granted to the Existing Secured Creditors a lien on substantially all of their U.S. assets securing the Bridge Loan that did not previously secure the Existing Secured Debt. All of the Company’s material U.S. subsidiaries that did not previously guarantee the Existing Secured Debt, including the San Juan Entities, as well as certain Canadian subsidiaries, have also provided guarantees for the Existing Secured Debt.

The filing of the Chapter 11 Cases constitutes an event of default that accelerated the Company’s obligations under the Bridge Loan. However, under the Bankruptcy Code, the creditors under the Bridge Loan are stayed from taking any action against the Company as a result of the default. See also Note 1 - Basis Of Presentation included above.

8.75% Notes

Pursuant to our senior note indenture, dated as of December 16, 2014, by and among the Company, the guarantors named therein, and U.S. Bank National Association, as trustee and notes collateral agent (the “Indenture”), our senior secured 8.75% notes (“8.75% Notes”) were issued at a 1.292% discount and 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 are a primary obligation of the Company and are guaranteed by Westmoreland Energy LLC, Westmoreland Mining LLC and Westmoreland Resources, Inc. and their respective subsidiaries (other than Absaloka Coal, LLC, Westmoreland Risk Management, Inc. and certain other immaterial subsidiaries), referred to as the “Guarantors.” The 8.75% Notes are not guaranteed by Westmoreland Canada LLC or any of its subsidiaries, Westmoreland San Juan, LLC or any of its subsidiaries, or Westmoreland Resources GP, LLC or WMLP, referred to as the “Non-guarantors.”

The 8.75% Notes contain customary affirmative covenants, negative covenants, events of default, as well as certain customary cross-default provisions. The filing of the Chapter 11 Cases constitutes an event of default that accelerated the Company’s obligations under the Indenture and a “termination event” under the Note Forbearance. However, under the Bankruptcy Code, holders of the 8.75% Notes are stayed from taking any action against the Company as a result of the default. See also Note 1 - Basis Of Presentation included above.

Term Loan

Pursuant to our credit agreement, dated as of December 22, 2014, by and among the Company, the lenders from time to time party thereto, and Wilmington Savings Fund Society, FSB, as administrative agent (replaced Bank of Montreal as administrative agent pursuant to the third amendment to the term loan credit agreement dated May 2, 2018) as amended (“Term Loan Credit Agreement”), the $350.0 million term loan was issued at a 2.50% discount and accrues interest on a quarterly basis at a variable interest rate which is set at our election 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 (as defined in the Term Loan Credit Agreement) plus 0.05%, or one-month LIBOR plus 1.00%) plus 5.50% (the "Term Loan"). As of September 30, 2018, the cash interest rate was 8.89%. The Term Loan is a primary obligation of WCC and is guaranteed by the Guarantors.

The Term Loan contains customary affirmative covenants, negative covenants, events of default, as well as certain customary cross-default provisions. The filing of the Chapter 11 Cases constitutes an event of default that accelerated the Company’s obligations under the Term Loan and a “termination event” under the Term Loan Forbearance. However, under the Bankruptcy Code, the creditors under the Term Loan are stayed from taking any action against the Company as a result of the default. See also Note 1 - Basis Of Presentation included above.

Term Loan Add-on

On January 22, 2015, the Company amended the Term Loan to increase the borrowings by $75.0 million, for an aggregate principal amount of $425.0 million as of that date. The amendments to the Term Loan were made in connection with the acquisition of Buckingham Coal Company, LLC. Net proceeds were $71.0 million after a 2.50% discount, 1.50% broker fee, a consent fee of 1.17%, and $0.1 million of additional debt issuance costs. With this addition, the quarterly principal payment due

24

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

commencing March 31, 2015 is $1.1 million. Under the Term Loan, we are required to offer a portion of our excess cash flows to the Term Loan lenders for each fiscal year, beginning with the fiscal year ended December 31, 2015.

In conjunction with the Kemmerer Drop (as defined and described in Note 2. Acquisitions to the consolidated financial statements in WMLP's 2017 Form 10-K), the Company amended the Term Loan 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 Term Loan.
San Juan Loan

On January 31, 2016, Westmoreland San Juan, LLC ("WSJ"), previously a special purpose subsidiary of the Company, acquired San Juan Coal Company (“SJCC”), which operates the San Juan mine in Farmington, New Mexico, and San Juan Transportation Company ("SJTC")(the “San Juan Acquisition”) for a total cash purchase price of $121.0 million after customary post-closing adjustments. The San Juan mine is the exclusive supplier of coal to the adjacent San Juan Generating Station (“SJGS”) under a coal supply agreement with tonnage and pricing adjusting quarterly through 2022. Pursuant to the loan agreement, dated as of February 1, 2016, by and among WSJ, its direct parent company, Westmoreland San Juan Holdings, Inc., SJCC and SJTC (collectively, the “Westmoreland San Juan Entities”) as guarantors, and NM Capital Utility Corporation (an affiliate of Public Service Company of New Mexico, part owner of SJGS) as lender, we financed the San Juan Acquisition principally with a $125.0 million loan (“San Juan Loan”).

On May 22, 2018, we paid $50.6 million of the outstanding balances of principal and interest to extinguish the San Juan Loan. We recognized a loss on extinguishment of debt of $0.6 million based on remaining balances of debt discount, debt issuances costs and third-party costs to effectuate the extinguishment of the San Juan Loan.

WMLP Term Loan