As filed with the Securities and Exchange Commission on July 7, 2011
 
 
 Registration
No. 333-174723
 
   SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 
 Pre-Effective 
Amendment No. 1 to
 
 Form S-4
 REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
 
 WESTMORELAND COAL COMPANY
  Delaware
(State or Other Jurisdiction of 
Incorporation or Organization)
    
    1221
(Primary Standard Industrial
Classification Code Number)
    
    23-1128670
(I.R.S. Employer
Identification No.)
 (FOR CO-REGISTRANTS, PLEASE SEE TABLE OF CO-REGISTRANTS
ON THE FOLLOWING PAGE)
 2 North Cascade Avenue, 2nd Floor 
Colorado Springs, Colorado 80903
Telephone: (719) 442-2600
(Address, Including Zip Code, and Telephone Number, 
Including Area Code, of Registrants 
Principal Executive Offices)
    
    Jennifer S. Grafton
General Counsel and Secretary
Westmoreland Coal Company
2 North Cascade Avenue, 2nd Floor
Colorado Springs, Colorado 80903
Telephone: (719) 442-2600
(Name, Address, Including Zip Code, and
Telephone Number,
Including Area Code, of Agent for Service)
 
 With a copy to:   John Elofson
Davis Graham & Stubbs LLP
1550 Seventeenth Street, Suite 500
Denver, Colorado 80202
Telephone: 303-892-9400
 
 Approximate date of commencement of proposed sale to the public:
 o
 o
 o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
(Do not check if a smaller reporting company)
    
    Smaller reporting company o
 
 
 The Registrant hereby amends this registration statement on such date or dates as may be
necessary to delay its effective date until the Registrant shall file a further amendment which
specifically states that this registration statement shall thereafter become effective in
accordance with Section 8(a) of the Securities Act of 1933 or until this registration statement
shall become effective on such date as the Commission, acting pursuant to said Section 8(a) , may
determine.




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TABLE OF CO-REGISTRANTS
 State or OtherPrimary Standard
    
    
    
    
    
    
    Jurisdiction ofIndustrial
    
    
    I.R.S. Employer
    
    
    Incorporation orExact Name of Co-Registrant as Specified in its Charter
    
    Classification No.
    
    
    Identification No.
    
    
    OrganizationWestmoreland Partners
    
    
    4991
    
    
    
    33-0487790
    
    
    VirginiaWestmoreland Energy LLC
    
    
    4991
    
    
    
    61-1409081
    
    
    DelawareWestmoreland  North Carolina Power L.L.C.
    
    
    4991
    
    
    
    20-5102494
    
    
    VirginiaWEI-Roanoke Valley, Inc.
    
    
    4991
    
    
    
    23-2544944
    
    
    DelawareWestmoreland Roanoke Valley, L.P.
    
    
    4991
    
    
    
    23-2609738
    
    
    DelawareWestmoreland Resources, Inc.
    
    
    1221
    
    
    
    81-0364990
    
    
    DelawareWRI Partners, Inc.
    
    
    1221
    
    
    
    26-2703697
    
    
    DelawareWestmoreland Mining Services, Inc.
    
    
    1221
    
    
    
    27-2103673
    
    
    DelawareWestmoreland Coal Sales Company, Inc.
    
    
    1221
    
    
    
    23-1701997
    
    
    DelawareWestmoreland Power, Inc.
    
    
    1221
    
    
    
    84-1579965
    
    
    DelawareWCC Land Holding Company, Inc.
    
    
    1221
    
    
    
    27-3965489
    
    
    Delaware
 nd
 nd




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Subject to Completion, dated July 7, 2011
 
 PROSPECTUS
 
 WESTMORELAND COAL COMPANY
WESTMORELAND PARTNERS
Offer to Exchange
 $150,000,000 10.75% Senior Secured Notes due 2018
for $150,000,000 10.75% Senior Secured Notes due 2018
that have been registered under the Securities Act of 1933
 Terms of the Exchange Offer
 
    
    We are offering to exchange up to $150,000,000 of our outstanding unregistered
10.75% Senior Notes due 2018 (Restricted Notes) for Exchange Notes with substantially
identical terms that have been registered under the Securities Act of 1933, as amended
(Exchange Notes).
 
    
    The exchange offer expires at 5:00 p.m., New York City time, on          , 2011, unless we decide to extend the expiration date.
 
    
    We will exchange for an equal principal amount of Exchange Notes all Restricted
Notes that you validly tender and do not validly withdraw before the exchange offer
expires.
 
    
    Tenders of Restricted Notes may be withdrawn at any time prior to the
expiration date of the exchange offer.
 
    
    The exchange of Exchange Notes for Restricted Notes should generally not be a
taxable event for U.S. federal income tax purposes.
 
    
    The terms of the Exchange Notes are identical to the terms of the Restricted
Notes, except that the Exchange Notes will be registered under the Securities Act of
1933, as amended (the Securities Act) and there are certain differences relating to
transfer restrictions, registration rights and payment of additional interest in case
of non-registration. We will not list the Exchange Notes on any securities exchange.
 You should carefully consider the risk factors beginning on page 7 of this prospectus before
participating in the exchange offer.
  Neither the Securities and Exchange Commission nor any state securities commission has
approved or disapproved of these securities or passed upon the adequacy or accuracy of this
prospectus. Any representation to the contrary is a criminal offense.




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TABLE OF CONTENTS
 PROSPECTUS SUMMARY
    
    
    1RISK FACTORS
    
    
    7SELECTED HISTORICAL FINANCIAL DATA
    
    
    26RATIO OF EARNINGS TO FIXED CHARGES
    
    
    29USE OF PROCEEDS
    
    
    29THE EXCHANGE OFFER
    
    
    29QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    37BUSINESS, PROPERTIES AND LEGAL PROCEEDINGS
    
    
    38MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
    
    
    47CHANGE IN AUDITORS
    
    
    67DESCRIPTION OF THE EXCHANGE NOTES
    
    
    67CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
    
    
    131PLAN OF DISTRIBUTION
    
    
    131LEGAL MATTERS
    
    
    132EXPERTS
    
    
    132WHERE YOU CAN FIND MORE INFORMATION
    
    
    133INDEX TO FINANCIAL STATEMENTS
    
    
    134
 You should rely only on the information contained in this prospectus. We have not authorized
anyone to provide you with different information. The information contained in this prospectus is
accurate only as of its date. We are not making this exchange offer to, nor will we accept
surrenders for exchange from, holders of restricted Notes in any jurisdiction in which the exchange
offer would violate securities or blue sky laws or where it is otherwise unlawful.
  Industry and Market Data
  i




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Cautionary Note Regarding Forward-Looking Statements
  
    
    changes in our postretirement medical benefit and pension obligations and the
impact of the recently enacted healthcare legislation;
 
    
    changes in our black lung obligations, changes in our experience related to
black lung claims, and the impact of the recently enacted healthcare legislation;
 
    
    our potential inability to expand or continue current coal operations due to
limitations in obtaining bonding capacity for new mining permits;
 
    
    our potential inability to maintain compliance with debt covenant and waiver
agreement requirements;
 
    
    the potential inability of our subsidiaries to pay dividends to us due to
restrictions in our debt arrangements, reductions in planned coal deliveries or other
business factors;
 
    
    risks associated with the structure of ROVAs contracts with its lenders, coal
suppliers and power purchaser, which could dramatically affect the overall
profitability of ROVA;
 
    
    the effect of Environmental Protection Agency inquiries and regulations on the
operations of ROVA;
 
    
    the effect of prolonged maintenance or unplanned outages at our operations or
those of our major power generating customers, including the effects of the dispatch of
other forms of power, such as hydro;
 
    
    future legislation and changes in regulations, governmental policies and taxes,
including those aimed at reducing emissions of elements such as mercury, sulfur
dioxides, nitrogen oxides, particulate matter or greenhouse gases; and
    
    other factors, many of which are beyond our control.
 ii




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PROSPECTUS SUMMARY
 The following summary contains basic information about us and this exchange offer. It is
likely that this summary does not contain all of the information that is important to you. You
should read the entire prospectus, including the risk factors and the financial statements and
related notes included elsewhere herein, before making an investment decision. In addition, certain
statements include forward-looking information that involves risks and uncertainties. In this
prospectus, Westmoreland, the company, we, our and us refer to Westmoreland Coal Company
and its subsidiaries collectively, unless otherwise indicated or the context otherwise requires.
 Our Company
   Coal Segment:
 Power Segment:
 Heritage and Corporate Segments:
 1




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Our Executive Offices
 http://www.westmoreland.com
 Summary of the Terms of the Exchange Offer
 We are offering to exchange $150 million aggregate principal amount of our Exchange Notes for
$150 million aggregate principal amount of our Restricted Notes. The following is a brief summary
of the terms and conditions of the exchange offer. For a more complete description of the exchange
offer, you should read the discussion under the heading The Exchange Offer.
 Exchange Offer
    
    We are offering to exchange $1,000 principal amount of our 10.75% Senior Secured
Notes due 2018 registered under the Securities Act, which we refer to as Exchange
Notes, for each $1,000 principal amount of our outstanding 10.75% Senior Secured
Notes due 2018 issued on February 4, 2011 in a private offering, which we refer to
as Restricted Notes. In order to exchange a Restricted Note, you must follow the
required procedures and we must accept the Restricted Note for exchange. We will
exchange all Restricted Notes validly offered for exchange, or tendered, and not
validly withdrawn. As of the date of this prospectus, there is $150,000,000
aggregate principal amount of Restricted Notes outstanding.Expiration Date
    
    The exchange offer expires at 5:00
p.m. New York City time, on        
2011, unless we decide to extend the expiration date.Resale of the Exchange Notes
    
    Based on an interpretation by the staff of the Securities and Exchange Commission
(the SEC) set forth in no-action letters issued to third parties, we believe
that, as long as you are not a broker-dealer, the Exchange Notes issued pursuant to
the exchange offer in exchange for Restricted Notes may be offered for resale,
resold and otherwise transferred by you (unless you are our affiliate within the
meaning of Rule 405 under the Securities Act) without compliance with the
registration and prospectus delivery provisions of the Securities Act, provided
that:   you are acquiring the Exchange Notes in the ordinary course of your
business;     at the time of the commencement and consummation of the exchange offer, you
have not entered into any arrangement or understanding with any person to
participate in the distribution (within the meaning of the Securities Act) of the
Exchange Notes in violation of the provisions of the Securities Act; and   you are not acting on behalf of any person who could not truthfully make
the foregoing representations.If you are a broker-dealer and receive Exchange Notes for your own account in
exchange for Restricted Notes that you acquired as a result of market-making
activities or other trading activities, you must acknowledge that you will deliver
this prospectus in connection with any resale of the Exchange Notes. See Plan of
Distribution. However, by so acknowledging and by delivering this prospectus, you
will not be deemed to admit that you are an underwriter within the meaning of the
Securities Act. During the period ending 180 days after the consummation of the
exchange offer, subject to extension in limited circumstances, you may use this
prospectus for an offer to sell, a resale or other retransfer of Exchange Notes
received in exchange for Restricted Notes that you acquired through market-making
activities or other trading activities if you indicate in the letter of transmittal
that you will do so.
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Any holder of Restricted Notes who:   is our affiliate;   does not acquire Exchange Notes in the ordinary course of its business; or   tenders its Restricted Notes in the exchange offer with the intention to
participate, or for the purpose of participating, in a distribution of Exchange
Notes;cannot rely on the position of the staff of the SEC enunciated in Morgan Stanley &
Co. Incorporated(available June 5, 1991) and Exxon Capital Holdings Corporation
(available May 13, 1988), as interpreted in the SECs letter to Shearman & Sterling
(available July 2, 1993), or similar no-action letters and, in the absence of an
exemption therefrom, must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale of the Exchange
Notes.Consequences If You Do Not
Exchange Your Restricted
Notes
    
    As a result of the making of, and upon acceptance for exchange of all validly
tendered Restricted Notes pursuant to the terms of the exchange offer, we and the
guarantors will have fulfilled a covenant under the registration rights agreement.
Accordingly, there will be no increase in the interest rate on the Restricted Notes
under the circumstances described in the registration rights agreement. If you do
not tender your Restricted Notes in the exchange offer, you will continue to be
entitled to all of the rights and limitations applicable to the Restricted Notes as
set forth in the Indenture, except we and the guarantors will not have any further
obligation to you to provide for the exchange and registration of the Restricted
Notes under the registration rights agreement.All untendered Restricted Notes will continue to be subject to the restrictions on
transfer set forth in the Restricted Notes and in the Indenture. In general, the
Restricted Notes may not be offered or sold unless registered under the Securities
Act, except pursuant to an exemption from, or in a transaction not subject to, the
Securities Act and applicable state securities laws. Other than in connection with
the exchange offer, we and the guarantors do not currently anticipate that we will
register the outstanding Notes under the Securities Act. If you do not participate
or properly tender your Restricted Notes in the exchange offer, upon completion of
the exchange offer, the liquidity of the market for your Restricted Notes could be
adversely affected.Conditions
    
    The exchange offer is subject to certain customary conditions, which we may waive,
as described below under The Exchange OfferConditions to the Exchange Offer.Procedures for Tendering
Restricted Notes
    
    If you wish to accept the exchange offer, the following must be delivered to the
exchange agent:   your Restricted Notes by timely confirmation of book-entry transfer through The
Depository Trust Company (the DTC);   an agents message from the DTC, stating that the tendering participant agrees to
be bound by the letter of transmittal and the terms of the exchange offer; and   all other documents required by the letter of transmittal.These actions must be completed before the expiration of the exchange offer.You must comply with DTCs standard procedures for electronic tenders, by which you
will agree to be bound by the letter of transmittal.Withdrawal of Tenders
    
    You may withdraw your tender of Restricted Notes under the exchange offer at any
time prior to the expiration date.Fees and Expenses
    
    We will bear all expenses related to the exchange offer. Please refer to the
section in this prospectus entitled The Exchange OfferFees and Expenses.Use of Proceeds
    
    The issuance of the Exchange Notes will not provide us with any new proceeds. We
are making this exchange offer solely to satisfy our obligations under the
registration rights agreement.Tax Consequences
    
    The exchange of Exchange Notes for Restricted Notes in the exchange offer should
generally not be a taxable event for U.S. federal income tax purposes. Please read
Material U.S. Federal Income Tax Consequences.
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Exchange Agent
    
    Wells Fargo Bank, N.A. is serving as exchange agent in connection with the exchange
offer. You should direct questions and requests for assistance, for additional
copies of this prospectus or the letter of transmittal to the exchange agent
addressed as follows: Attn: Wells Fargo Bank, National Association, Corporate Trust
Operations, MAC N 9303-121, Sixth & Marquette Ave. Minneapolis Minnesota, 52479,
telephone number 800-334-5128.
 Summary of the Terms of the Exchange Notes
 This exchange offer applies to any and all outstanding Restricted Notes. The terms of the
Exchange Notes will be essentially the same as the Restricted Notes, except that (1) the Exchange
Notes will not be subject to the restrictions on transfer that apply to the Restricted Notes, (2)
the Exchange Notes will not be subject to the registration rights relating to the Restricted Notes,
and (3) the Exchange Notes will not contain provisions for payment of additional interest in case
of non-registration. The Exchange Notes issued in this exchange offer will evidence the same debt
as the Restricted Notes and both series of Notes will be entitled to the benefits of the same
indenture and treated as a single class of debt securities. In this document, we sometimes refer to
the Restricted Notes and the Exchange Notes together as the Notes.
 Issuers
    
    Westmoreland Coal Company; Westmoreland Partners.Securities
    
    $150,000,000 in aggregate principal amount of 10.750% Senior Secured Notes due 2018.Maturity
    
    February 1, 2018.Interest
    
    We will pay interest in cash on the principal amount of the Notes semiannually at the
rate of 10.750% per year, on February 1st and August 1st of each year, beginning on
August 1, 2011.Guarantees
    
    The Exchange Notes will be fully and unconditionally guaranteed, jointly and
severally, on a senior secured basis by WELLC and WRI, their respective subsidiaries
(other than Absaloka Coal, LLC, or Absaloka Coal) and by certain of our other
subsidiaries. Not all of our subsidiaries will be subsidiary guarantors. In
particular, WML and its subsidiaries, Absaloka Coal and WRM will be restricted
subsidiaries, but do not guarantee the Notes. Basin Resources, Inc. will be an
unrestricted subsidiary, but the indenture governing the Notes contains a covenant
limiting its activities. Westmoreland Terminal Co., Eastern Coal & Coke Co. and
Criterion Coal Co. are unrestricted subsidiaries. These entities have no or nominal
assets, conduct no operations and are in the process of dissolution.Security
    
    The Exchange Notes and the guarantees will be secured by (i) first-priority liens
on substantially all of our, the guarantors and Absaloka Coals tangible and
intangible assets, (ii) a first-priority lien on certain amounts paid by WML to us,
and (iii) a first-priority lien on the equity of WRM, in each case subject to
permitted liens and certain exclusions. Subject to certain conditions, we will have
the ability to
enter into a new revolving credit facility, which we refer to as the Revolving Credit
Facility, without the consent of holders of the Notes following this offering (see
 Revolving Credit Facility). If we do so, the Revolving Credit Facility will be
secured by a first-priority lien on our, the guarantors and Absaloka Coals
inventory, accounts receivable and proceeds thereof, or the Revolving Facility
First-Priority Collateral, and the Notes will then be secured by a second priority
lien on that collateral. Some of our assets are excluded from the collateral as
described in Description of the Notes Security.Ranking
    
    The Exchange Notes and the guarantees will be our and the guarantors senior
secured obligations and:   will rank equally in right of payment with all of our and the guarantors
respective existing and future senior indebtedness;   will rank effectively senior in right of payment to all of our, the
guarantors and Absaloka Coals respective existing and future unsecured
indebtedness;
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   will be effectively subordinated to indebtedness under the Revolving Credit
Facility, if we enter into such a facility, to the extent of the value of the
Revolving Facility First-Priority Collateral; and   will be structurally subordinated to all of the existing and future
liabilities (including trade payables but excluding intercompany liabilities) of each
of our subsidiaries that does not guarantee the Notes.



As of March 31, 2011, we had (i) $125.0 million of outstanding indebtedness under
WMLs existing credit agreements, including its term debt agreement, and (ii) $23.1
million of undrawn availability under WMLs revolving credit facility.Optional Redemption
    
    On or after February 1, 2015, we may redeem the Exchange Notes, in whole or in part,
at the redemption prices set forth under Description of the Exchange Notes.Prior to February 1, 2015, we may redeem up to 35% of the aggregate principal amount
of Exchange Notes at the redemption price set forth under Description of the
Exchange Notes with the net cash proceeds of certain equity offerings.Change of Control Offer
    
    If we experience a change of control (as defined in the indenture), the holders of
the Exchange Notes will have the right to require us to purchase their Exchange Notes
at a price in cash equal to 101% of the principal amount thereof, together with
accrued and unpaid interest and additional interest, if any, to the date of purchase.
See Description of the Exchange Notes.Asset Sale Offer or Event of Loss
Offer
    
    We may be required to offer to use a portion of the net proceeds of certain asset
sales and events of loss to purchase some of the Exchange Notes at 100% of the
principal amount thereof, together with accrued and unpaid interest and additional
interest, if any, to the date of purchase. See Description of the Exchange Notes.Excess Cash Flow Offer
    
    We may be required to offer to use 75% of our Excess Cash Flow, as defined under
Description of the Exchange Notes, for each fiscal year, beginning with the fiscal
year ended December 31, 2011, to purchase some of the Exchange Notes at 100% of the
principal amount thereof, together with accrued and unpaid interest, if any, to the
date of purchase. See Description of the Exchange Notes.Rights Offering
    
    After June 30, 2015, if the Total Leverage Ratio (as defined in Description of the
Exchange Notes) equals or exceeds 3.5 to 1.0, we will be required, subject to
certain conditions, to provide holders of the Exchange Notes with the right to
purchase additional Notes, with the proceeds of such sales to be used to repurchase
and/or redeem WMLs term debt.Certain Covenants
    
    The indenture governing the Exchange Notes contains covenants that will restrict our
ability and the ability of the co-issuer and our restricted subsidiaries to, among
other things:   incur additional indebtedness and issue preferred stock;   pay dividends on or make distributions in respect of capital stock or make
certain other restricted payments or investments;   enter into agreements that restrict distributions from restricted
subsidiaries;   enter into transactions with affiliates;   create or incur liens;   sell or otherwise dispose of assets;   enter into sale and leaseback transactions;   sell or issue capital stock of the co-issuer or the restricted subsidiaries;
or   merge or consolidate with or into other companies.These covenants are subject to important exceptions and qualifications that are
described in Description of the Exchange Notes.
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Absence of a Public Market for
the Exchange Notes
    
    The Exchange Notes generally will be freely transferable, but will also be new
securities for which there will not initially be a market. There can be no assurance
as to the development or liquidity of any market for the Exchange Notes. We do not
intend to apply for listing of the Exchange Notes on any securities exchange or for
the quotation of the Exchange Notes in any automated dealer quotation system.Risk Factors
    
    You should refer to the section of this prospectus entitled Risk Factors for a
discussion of the factors you should carefully consider before deciding to invest in
the Notes, including factors affecting forward-looking statements.
 6




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RISK FACTORS
 In addition to the other information set forth elsewhere in this prospectus the following
factors relating to the exchange offer and the Notes should be considered carefully in deciding
whether to participate in the exchange offer.
 Risks Related to the Exchange Offer
 If you fail to exchange the Restricted Notes, they will remain subject to transfer restrictions,
and it may be harder for you to resell and transfer your Restricted Notes.
  Late deliveries of Restricted Notes and other required documents could prevent a holder from
exchanging its Restricted Notes.
  Certain persons who participate in the exchange offer must deliver a prospectus in connection with
resales of the Exchange Notes.
 Exxon Capital Holdings Corp. Morgan Stanley & Co. Inc. Shearman & Sterling
 7




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There may not be a public market for the Exchange Notes, and you may find it difficult to sell your
Notes.
   
    
    our operating performance, financial condition and prospects, or the operating
performance, financial condition and prospects of companies in the coal and power
industries generally;
    
    our ability to complete the offer to exchange the Restricted Notes for the Exchange
Notes;
    
    the interest of securities dealers in making a market for the Notes;
    
    prevailing interest rates; and
    
    the market for similar securities.
  Risks Related to the Notes and the Collateral
 We have a substantial amount of indebtedness, which may adversely affect our cash flow, our ability
to operate our business and our ability to satisfy our obligations under the restricted Notes and
the exchange Notes.
  
    
    increase our vulnerability to adverse economic, industry or competitive
developments;
    
    result in an event of default if we fail to satisfy our obligations with respect to
the Notes or other debt or fail to comply with the financial and other restrictive
covenants contained in the indenture governing the Notes or agreements governing our
other indebtedness, which event of default could result in all of our debt becoming
immediately due and payable and could permit our lenders to foreclose on our assets
securing such debt;
    
    require a substantial portion of cash flow from operations to be dedicated to the
payment of principal and interest on our indebtedness, therefore reducing our ability
to use our cash flow to fund our operations, capital expenditures and future business
opportunities;
    
    make it more difficult for us to satisfy our obligations with respect to the Notes;
    
    increase our cost of borrowing;
    
    restrict us from making strategic acquisitions or causing us to make non-strategic
divestitures;
    
    limit our ability to service our indebtedness, including the Notes;
    
    limit our ability to obtain additional financing for working capital, capital
expenditures, debt service requirements, acquisitions and general corporate or other
purposes;
    
    limit our flexibility in planning for, or reacting to, changes in our business or
the industry in which we operate, placing us at a competitive disadvantage compared to
our competitors who are less highly leveraged and who therefore may be able to take
advantage of opportunities that our leverage prevents us from exploiting; and
 8




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##### 




    
    prevent us from raising the funds necessary to repurchase all Notes tendered to us upon
the occurrence of certain changes of control, which failure to repurchase would constitute
a default under the indenture governing the Notes.
  We may not be able to generate sufficient cash to service the Notes or our other indebtedness, and
may be forced to take other actions to satisfy our obligations under our indebtedness, which may
not be successful.
   The Notes will be structurally subordinated to indebtedness and other liabilities of our
non-guarantor subsidiaries.
  You generally will be required to accrue taxable income attributable to original issue discount on
the Notes before you receive cash attributable to such original issue discount. You may be required
to continue to accrue such taxable income even if we become unable to satisfy our payment
obligations under the Notes. Additionally, in the event we enter into bankruptcy, you may not have
a claim for all or a portion of any unamortized amount of the original issue discount on the Notes.
  9




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We are a holding company, and therefore our ability to repay our indebtedness, including the Notes,
is dependent on the cash flow generated by our subsidiaries and their ability to make distributions
to us.
  The indenture governing the Notes contains various covenants limiting the discretion of our
management in operating our business and could prevent us from capitalizing on business
opportunities and taking some corporate actions.
  
    
    incur additional indebtedness;
    
    issue certain preferred stock or redeemable stock;
    
    pay dividends on, repurchase or make distributions in respect of our capital stock
or make other restricted payments;
    
    make certain investments;
    
    sell, transfer or otherwise convey certain assets;
    
    create or incur liens;
    
    designate our subsidiaries as unrestricted subsidiaries;
    
    consolidate, merge, sell or otherwise dispose of all or substantially all of our
assets;
    
    enter into a new or different line of business; and
    
    enter into certain transactions with our affiliates.
   Notwithstanding our current indebtedness levels and restrictive covenants, we may still be able to
incur substantial additional debt or make certain restricted payments, which could exacerbate the
risks described above.
  10




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Certain of our assets may be subject to senior priority security interests on collateral that
secure the Notes on a junior basis. Therefore, your ability to receive payments on the Notes would
be subject to the prior satisfaction of all such obligations, to the extent of the value of such
collateral.
  There may not be sufficient collateral to pay all or any of the Notes.
    11




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Noteholders cannot rely on assets of WML and its subsidiaries to satisfy obligations under the
Notes.
  We may be unable to repay or repurchase the Notes at maturity.
  Some of our indebtedness is subject to floating interest rates, which would result in our interest
expense increasing if interest rates rise.
  If we are unable to enter into the Revolving Credit Facility at a time when we require additional
financing, our business, financial position, results of operations and liquidity could be
negatively impacted.
  12




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U.S. federal and state fraudulent transfer laws may permit a court to void, subordinate or limit
the Notes, the guarantees and/or the grant of collateral and, if that occurs, you may not receive
any payments on the Notes.
  
    
    we or any of the guarantors, as applicable, were insolvent or rendered
insolvent by reason of the issuance of the Notes or the incurrence of the guarantees;
    
    the issuance of the Notes or the incurrence of the guarantees left us or
any of the guarantors, as applicable, with an unreasonably small amount of capital or
assets to carry on its business;
    
    we or any of the guarantors intended to, or believed that we or such
guarantor would, incur debts beyond our or such guarantors ability to pay as they
mature; or
    
    we or any of the guarantors were a defendant in an action for money
damages, or had a judgment for money damages docketed against us or such guarantor if,
in either case, after final judgment, the judgment is unsatisfied.
   
    
    the sum of its debts, including contingent and unliquidated liabilities,
was greater than the fair saleable value of all of its assets;
 13




---



##### 




    
    the present fair saleable value of its assets was less than the amount
that would be required to pay its probable liability on its existing debts, including
contingent liabilities, as they become absolute and mature; or
    
    it could not pay its debts as they became due.
    We may not be able to repurchase the Notes upon a change of control.
    14




---



##### 



Holders of the Notes may not be able to determine when a change of control giving rise to their
right to have the Notes repurchased has occurred following a sale of substantially all of our
assets.
  In the event of a bankruptcy of us or any of the guarantors, holders of the Notes may be deemed to
have an unsecured claim to the extent that our obligations in respect of the Notes exceed the fair
market value of the collateral securing the Notes.
  The collateral securing the Notes may be diluted under certain circumstances.
  If we enter into the Revolving Credit Facility, the rights of holders of the Notes to the Revolving
Facility First-Priority Collateral, in which such holders will have a second-priority lien, will be
materially limited by an intercreditor agreement.
   15




---



##### 



The waiver in the proposed intercreditor agreement of rights of marshaling may adversely affect the
recovery rates of holders of the Notes in a bankruptcy or foreclosure scenario.
  Certain assets will be excluded from the collateral. In order to grant a security interest in
certain collateral, the consents of third parties (including the Crow Tribe) may be required and we
may be unable to obtain those consents.
   Your rights in the collateral may be adversely affected by the failure to perfect security
interests in certain collateral acquired in the future.
  16




---



##### 



Rights of holders of the Notes in the collateral may be adversely affected by the failure to create
or perfect security interests in certain collateral on a timely basis, and a failure to create or
perfect such security interests on a timely basis or at all may result in a default under the
indenture and other agreements governing the Notes. Furthermore, certain liens may be avoidable by
a trustee in bankruptcy.
  There are circumstances other than repayment or discharge of the Notes under which the collateral
securing the Notes and guarantees will be released automatically, without your consent or the
consent of the trustee.
  
    
    a sale, transfer or other disposal or liquidation of such collateral in a
transaction not prohibited under the indenture governing the Notes;
    
    with respect to collateral held by a guarantor, upon the release of such
guarantor from its guarantee (and its guarantee of any other indebtedness secured
equally and ratably with the Notes) in accordance with the indenture governing the
Notes, and
    
    with respect to collateral that will secure the Revolving Credit Facility
on a first-priority basis (if we enter into such a facility), upon any release, sale
or disposition (other than in connection with a cancellation or termination of the
Revolving Credit Facility) of such collateral pursuant to the terms of the Revolving
Credit Facility resulting in the release of the lien on such collateral securing the
Revolving Credit Facility.
  17




---



##### 



We will in most cases have control over the collateral, and the sale of particular assets by us
could reduce the pool of assets securing the Notes and the guarantees.
  The collateral is subject to condemnation risks, which may limit the ability of the holders of the
Notes to recover as secured creditors for losses to the collateral consisting of real property, and
which may have an adverse impact on our operations and results.
  The collateral is subject to casualty risks and potential environmental liabilities.
   Rights of holders of the Notes in the collateral may be adversely affected by bankruptcy
proceedings.
  
    
    the commencement or continuation of any action or proceeding against the
debtor that was or could have been commenced before the commencement of the bankruptcy
case to recover a claim against the debtor that arose before the commencement of the
bankruptcy case;
    
    any act to obtain possession of, or control over, property of the
bankruptcy estate or the debtor;
    
    any act to create, perfect or enforce any lien against property of the
bankruptcy estate; and
 18




---



##### 




    
    any act to collect or recover a claim against the debtor that arose
before the commencement of the bankruptcy case.
   The value of the collateral securing the Notes may not be sufficient to secure post-petition interest.
  Risks Related to our Business
 Risks associated with being highly leveraged.
  
    
    limit our ability to obtain additional debt financing in the future for working
capital, capital expenditures, acquisitions, or other general corporate purposes;
    
    require us to dedicate a substantial portion of our cash flow from operations to
debt service, reducing the availability of cash flow for other purposes; or
    
    increase our vulnerability to economic downturns, limit our ability to capitalize
on significant business opportunities, and restrict our flexibility to react to
changes in market or industry conditions.
 19




---



##### 



We may not generate sufficient cash flow at our operating subsidiaries to pay our operating
expenses, meet our debt service costs and pay our heritage and corporate costs.
   Our dependence on a small group of customers could adversely affect our revenues if such customers
reduce or suspend their coal purchases or if they become unable to pay for our coal.
   If our assumptions regarding our future expenses related to employee benefit plans are incorrect,
then expenditures for these benefits could be materially higher than we have assumed. In addition,
we may have exposure under those plans that extend beyond what our obligations would be with
respect to our own employees.
  20




---



##### 



Recent healthcare legislation contains amendments to the Black Lung Benefits Act that could
adversely affect our financial condition and results of operations.
  21




---



##### 



Inaccuracies in our estimates of our coal reserves could result in decreased profitability from
lower than expected revenues or higher than expected costs.
  
    
    quality of the coal;
    
    geological and mining conditions, which may not be fully identified by available
exploration data and/or may differ from our experiences in areas where we currently mine;
    
    the percentage of coal ultimately recoverable;
    
    the assumed effects of regulation, including the issuance of required permits,
taxes, including severance and excise taxes and royalties, and other payments to governmental
agencies;
    
    assumptions concerning the timing for the development of the reserves; and
    
    assumptions concerning equipment and productivity, future coal prices, operating
costs, including for critical supplies such as fuel, tires and explosives, capital
expenditures and development and reclamation costs.
  If the assumptions underlying our reclamation and mine closure obligations are materially
inaccurate, we could be required to expend greater amounts than anticipated.
    22




---



##### 



If the cost of obtaining new reclamation bonds and renewing existing reclamation bonds continues to
increase or if we are unable to obtain additional bonding capacity, our operating results could be
negatively affected.
  Our coal mining operations are subject to external conditions that could disrupt operations and
negatively affect our profitability.
   Our operations are vulnerable to natural disasters, operating difficulties and infrastructure
constraints, not all of which are covered by insurance, which could have an impact on its
productivity.
  23




---



##### 



Health, safety, environment and other regulations, standards and expectations evolve over time and
unforeseen changes could have an adverse effect on our results of operations and liquidity.
  Should our Indian Coal Tax Credit transaction be audited by the Internal Revenue Service, or IRS,
and the tax results contemplated thereby disallowed, the financial benefits of the transaction
would be reduced and we may be required to return payments received from a third party investor.
   Our future success depends upon our ability to continue acquiring and developing coal reserves that
are economically recoverable and to raise the capital necessary to fund our expansion.
  Union represented labor creates an increased risk of work stoppages and higher labor costs.
  24




---



##### 



Our revenues could be affected by unscheduled outages or if scheduled maintenance outages last
longer than anticipated.
  The profitability of ROVA could be severely affected beginning in 2014 due to differences in the
termination dates of our coal supply agreements and power purchase agreements.
  Permitting issues in Central Appalachia could put ROVAs coal supply at risk.
  25




---



##### 



We face intense competition to attract and retain employees. Further, managing Chief Executive
Officer and key executive succession and retention is critical to our success.
   
 SELECTED HISTORICAL FINANCIAL DATA
    26




---



##### 



Year Ended
    
    
    
    
    
    
    
    
    
    
    Three Months EndedDecember 31,
    
    
    
    
    
    
    
    
    
    
    March 31,2006
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    2010
    
    
    2010
    
    
    2011(Dollars in thousands)Consolidated Statement of Operations Data:RevenuesCoal
    
    $
    393,482
    
    
    $
    418,870
    
    
    $
    419,806
    
    
    $
    361,206
    
    
    $
    418,058
    
    
    $
    103,550
    
    
    $
    104,136Power
    
    
    50,925
    
    
    
    85,347
    
    
    
    89,890
    
    
    
    82,162
    
    
    
    87,999
    
    
    
    22,889
    
    
    
    23,628Total revenues
    
    
    444,407
    
    
    
    504,217
    
    
    
    509,696
    
    
    
    443,368
    
    
    
    506,057
    
    
    
    126,439
    
    
    
    127,764Cost and expenses:Cost of sales
    
    
    340,005
    
    
    
    400,346
    
    
    
    409,795
    
    
    
    373,070
    
    
    
    394,827
    
    
    
    97,677
    
    
    
    97,510Depreciation, depletion, and amortization
    
    
    29,340
    
    
    
    38,123
    
    
    
    41,387
    
    
    
    44,254
    
    
    
    44,690
    
    
    
    11,392
    
    
    
    11,245Selling and administrative
    
    
    42,409
    
    
    
    44,813
    
    
    
    40,513
    
    
    
    40,612
    
    
    
    39,481
    
    
    
    9,976
    
    
    
    9,305Heritage health benefit expenses
    
    
    32,821
    
    
    
    27,589
    
    
    
    33,452
    
    
    
    28,074
    
    
    
    14,421
    
    
    
    3,915
    
    
    
    3,778Restructuring charges
    
    
    
    
    
    
    4,523
    
    
    
    2,009
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Gain (loss) on sale of assets
    
    
    (4,785
    )
    
    
    (5,295
    )
    
    
    (1,425
    )
    
    
    191
    
    
    
    226
    
    
    
    71
    
    
    
    83Other operating income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11,059
    )
    
    
    (8,109
    )
    
    
    (1,906
    )
    
    
    (1,597
    )439,790
    
    
    
    510,099
    
    
    
    525,731
    
    
    
    475,142
    
    
    
    485,536
    
    
    
    121,125
    
    
    
    120,324Operating income (loss)
    
    
    4,617
    
    
    
    (5,882
    )
    
    
    (16,035
    )
    
    
    (31,774
    )
    
    
    20,521
    
    
    
    5,314
    
    
    
    7,440Other income (expense):Interest expense
    
    
    (19,234
    )
    
    
    (24,638
    )
    
    
    (23,130
    )
    
    
    (23,733
    )
    
    
    (22,992
    )
    
    
    (5,723
    )
    
    
    (6,967
    )Interest expense attributable to
beneficial conversion feature
    
    
    
    
    
    
    
    
    
    
    (8,146
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Loss on extinguishment of debt
    
    
    
    
    
    
    
    
    
    
    (5,178
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (17,030
    )Interest income
    
    
    6,089
    
    
    
    8,152
    
    
    
    5,125
    
    
    
    3,218
    
    
    
    1,747
    
    
    
    410
    
    
    
    382Other income (loss)
    
    
    73
    
    
    
    243
    
    
    
    (284
    )
    
    
    5,991
    
    
    
    (2,587
    )
    
    
    (3,836
    )
    
    
    (3,017
    )(13,072
    )
    
    
    (16,243
    )
    
    
    (31,613
    )
    
    
    (14,524
    )
    
    
    (23,832
    )
    
    
    (9,149
    )
    
    
    (26,632
    )Loss from continuing operations before
income taxes
    
    
    (8,455
    )
    
    
    (22,125
    )
    
    
    (47,648
    )
    
    
    (46,298
    )
    
    
    (3,311
    )
    
    
    (3,835
    )
    
    
    (19,192
    )Income tax (benefit) expense from
continuing operations
    
    
    2,405
    
    
    
    (8,895
    )
    
    
    919
    
    
    
    (17,136
    )
    
    
    (141
    )
    
    
    (90
    )
    
    
    (460
    )Loss from continuing operations
    
    
    (10,860
    )
    
    
    (13,230
    )
    
    
    (48,567
    )
    
    
    (29,162
    )
    
    
    (3,170
    )
    
    
    (3,745
    )
    
    
    (18,732
    )Income from discontinued operations, net
of income tax expense
    
    
    406
    
    
    
    1,725
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net loss
    
    
    (10,454
    )
    
    
    (11,505
    )
    
    
    (48,567
    )
    
    
    (29,162
    )
    
    
    (3,170
    )
    
    
    (3,745
    )
    
    
    (18,732
    )Less net income (loss) attributable to
noncontrolling interest
    
    
    2,244
    
    
    
    1,194
    
    
    
    
    
    
    
    (1,817
    )
    
    
    (2,645
    )
    
    
    (890
    )
    
    
    (1,121
    )Net loss attributable to Parent Company
    
    
    (12,698
    )
    
    
    (12,699
    )
    
    
    (48,567
    )
    
    
    (27,345
    )
    
    
    (525
    )
    
    
    (2,855
    )
    
    
    (17,611
    )Less preferred stock dividend requirements
    
    
    1,585
    
    
    
    1,360
    
    
    
    1,360
    
    
    
    1,360
    
    
    
    1,360
    
    
    
    340
    
    
    
    340Less premium on exchange of preferred
stock for common stock
    
    
    791
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net loss attributable to common shareholders
    
    $
    (15,074
    )
    
    $
    (14,059
    )
    
    $
    (49,927
    )
    
    $
    (28,705
    )
    
    $
    (1,885
    )
    
    $
    (3,195
    )
    
    $
    (17,951
    )Other Consolidated Financial Data:Cash flows provided by (used in):Operating activities
    
    
    29,434
    
    
    
    82,516
    
    
    
    55,245
    
    
    
    29,448
    
    
    
    45,353
    
    
    
    13,296
    
    
    
    16,182Investing activities
    
    
    (33,922
    )
    
    
    (43,259
    )
    
    
    (6,588
    )
    
    
    (38,597
    )
    
    
    (29,180
    )
    
    
    (3,941
    )
    
    
    (5,884
    )Financing activities
    
    
    20,010
    
    
    
    (46,259
    )
    
    
    (28,452
    )
    
    
    (20,273
    )
    
    
    (20,917
    )
    
    
    (2,114
    )
    
    
    28,911Capital expenditures
    
    
    20,852
    
    
    
    (30,412
    )
    
    
    (31,320
    )
    
    
    (34,546
    )
    
    
    (22,814
    )
    
    
    (4,337
    )
    
    
    (2,923
    )Adjusted EBITDA(2)
    
    
    40,482
    
    
    
    41,737
    
    
    
    38,795
    
    
    
    30,301
    
    
    
    81,616
    
    
    
    21,228
    
    
    
    23,284Ratio of Total Debt to Adjusted EBITDA
    
    
    7.6x
    
    
    
    6.5x
    
    
    
    6.9x
    
    
    
    8.4x
    
    
    
    3.0x
    
    
    
    11.9x
    
    
    
    12.6xOther Operating Data:Tons sold by mine:Absaloka
    
    
    7,079
    
    
    
    7,347
    
    
    
    6,418
    
    
    
    5,911
    
    
    
    5,467
    
    
    
    1,293
    
    
    
    1,399Rosebud
    
    
    12,430
    
    
    
    12,583
    
    
    
    13,026
    
    
    
    10,332
    
    
    
    12,231
    
    
    
    3,139
    
    
    
    2,361Jewett
    
    
    6,798
    
    
    
    6,781
    
    
    
    6,494
    
    
    
    5,080
    
    
    
    4,203
    
    
    
    906
    
    
    
    918Beulah
    
    
    2,702
    
    
    
    2,946
    
    
    
    3,046
    
    
    
    2,585
    
    
    
    2,898
    
    
    
    832
    
    
    
    782Savage
    
    
    376
    
    
    
    354
    
    
    
    359
    
    
    
    344
    
    
    
    353
    
    
    
    91
    
    
    
    98Power production:Megawatt hours (000s)
    
    
    1,639
    
    
    
    1,590
    
    
    
    1,641
    
    
    
    1,486
    
    
    
    1,620
    
    
    
    435
    
    
    
    435Capacity Factor
    
    
    92
    %
    
    
    86
    %
    
    
    89
    %
    
    
    81
    %
    
    
    88
    %
    
    
    95
    %
    
    
    96
    %
 27




---



##### 



Year Ended December 31,
    
    
    
    
    
    
    As of March 31,2006
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    2010
    
    
    2011(Dollars in thousands)
    
    
    
    
    
    
    (Unaudited)Balance Sheet Data:Cash and cash equivalents
    
    $
    26,738
    
    
    $
    19,736
    
    
    $
    39,941
    
    
    $
    10,519
    
    
    $
    5,775
    
    
    $
    44,984Working capital(3)
    
    
    (66,773
    )
    
    
    (94,674
    )
    
    
    (24,152
    )
    
    
    (74,976
    )
    
    
    (35,793
    )
    
    
    (1,024
    )Property, plant and
equipment, net
    
    
    431,452
    
    
    
    442,426
    
    
    
    443,400
    
    
    
    456,184
    
    
    
    416,955
    
    
    
    408,381Total assets
    
    
    761,382
    
    
    
    782,528
    
    
    
    812,967
    
    
    
    772,728
    
    
    
    750,306
    
    
    
    787,987Total debt(1)
    
    
    306,007
    
    
    
    271,448
    
    
    
    269,153
    
    
    
    254,695
    
    
    
    242,104
    
    
    
    294,362Shareholders deficit
    
    
    (180,431
    )
    
    
    (177,257
    )
    
    
    (217,598
    )
    
    
    (141,799
    )
    
    
    (162,355
    )
    
    
    (173,927
    )
 
 (1)
    
    Total debt includes revolving lines of credit, long-term debt and current maturities of
long-term debt excluding trade and other debt and is shown net of unamortized discounts.(2)
    
    Adjusted EBITDA is defined as net income (loss) before the items set forth in the table
below. We present Adjusted EBITDA because we consider it an important supplemental measure of
our performance and believe it is frequently used by securities analysts, investors, and other
interested parties in the evaluation of high yield issuers, many of which present Adjusted
EBITDA when reporting their operating results. This item should be considered in addition to,
but not as a substitute for or superior to, operating income, net income, operating cash flow
and other measures of financial performance prepared in accordance with GAAP. Management uses
Adjusted EBITDA as an internal measure of operating performance, to establish operational
goals, to allocate resources and to analyze business trends and financial performance. Other
companies in our industry may calculate Adjusted EBITDA differently than we do, limiting its
usefulness as a comparative measure.(3)
    
    Working capital is current assets minus current liabilities. Year Ended
    
    
    
    
    
    
    
    
    
    
    Three Months EndedDecember 31,
    
    
    
    
    
    
    
    
    
    
    March 31,2006
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    2010
    
    
    2010
    
    
    2011(Dollars in thousands)Consolidated EBITDA and Adjusted EBITDA
Reconciliation:Net loss
    
    $
    (10,454
    )
    
    $
    (11,505
    )
    
    $
    (48,567
    )
    
    $
    (29,162
    )
    
    $
    (3,170
    )
    
    $
    (3,745
    )
    
    $
    (18,732
    )Income from discontinued operations,
net of income tax expense
    
    
    (406
    )
    
    
    (1,725
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Income tax (benefit) expense from
continuing operations
    
    
    2,405
    
    
    
    (8,895
    )
    
    
    919
    
    
    
    (17,136
    )
    
    
    (141
    )
    
    
    (90
    )
    
    
    (460
    )Other (income) loss
    
    
    (73
    )
    
    
    (243
    )
    
    
    284
    
    
    
    (5,991
    )
    
    
    2,587
    
    
    
    3,836
    
    
    
    3,017Interest income
    
    
    (6,089
    )
    
    
    (8,152
    )
    
    
    (5,125
    )
    
    
    (3,218
    )
    
    
    (1,747
    )
    
    
    (410
    )
    
    
    (382
    )Loss on extinguishment of debt
    
    
    
    
    
    
    
    
    
    
    5,178
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17,030Interest expense attributable to
beneficial conversion feature
    
    
    
    
    
    
    
    
    
    
    8,146
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Interest expense
    
    
    19,234
    
    
    
    24,638
    
    
    
    23,130
    
    
    
    23,733
    
    
    
    22,992
    
    
    
    5,723
    
    
    
    6,967Depreciation, depletion and amortization
    
    
    29,340
    
    
    
    38,123
    
    
    
    41,387
    
    
    
    44,254
    
    
    
    44,690
    
    
    
    11,392
    
    
    
    11,245Accretion of ARO and receivable
    
    
    7,854
    
    
    
    9,844
    
    
    
    9,528
    
    
    
    9,974
    
    
    
    11,540
    
    
    
    3,003
    
    
    
    2,700Amortization of intangible assets and
liabilities, net
    
    
    493
    
    
    
    (2,043
    )
    
    
    598
    
    
    
    279
    
    
    
    590
    
    
    
    85
    
    
    
    163EBITDA
    
    
    42,304
    
    
    
    40,042
    
    
    
    35,478
    
    
    
    22,733
    
    
    
    77,341
    
    
    
    19,794
    
    
    
    21,548Restructuring charges
    
    
    
    
    
    
    4,523
    
    
    
    2,009
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Customer reclamation claim(1)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,825
    
    
    
    
    
    
    
    
    
    
    
    (Gain)/loss on sale of assets
    
    
    (4,785
    )
    
    
    (5,295
    )
    
    
    (1,425
    )
    
    
    191
    
    
    
    226
    
    
    
    71
    
    
    
    83Share-based compensation
    
    
    2,963
    
    
    
    2,467
    
    
    
    2,733
    
    
    
    2,552
    
    
    
    4,049
    
    
    
    1,363
    
    
    
    1,653Adjusted EBITDA
    
    $
    40,482
    
    
    $
    41,737
    
    
    $
    38,795
    
    
    $
    30,301
    
    
    $
    81,616
    
    
    $
    21,228
    
    
    $
    23,284
 
 (1)
    
    As a result of a contract dispute at Colstrip Unit 3&4 which occurred in 2008, in the fourth
quarter of 2009, we recorded a reduction in revenues by $6.5 million and an offsetting $1.7
million reduction in cost of sales for this claim. 28




---



##### 



RATIO OF EARNINGS TO FIXED CHARGES
  Year Ended December 31,
    
    
    
    
    
    
    Three Months Ended March 31,2006
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    2010
    
    
    2010
    
    
    2011Deficiency of
Earnings to Fixed
Charges
    
    $
    8,455
    
    
    $
    22,125
    
    
    $
    47,648
    
    
    $
    46,298
    
    
    $
    3,311
    
    
    $
    3,835
    
    
    $
    19,192
  
    
    earnings consist of loss from continuing operations before income taxes and fixed
charges; and
    
    fixed charges consist of interest (expensed), amortization of premiums, discounts
and deferred financing costs, and an estimate of the interest expense within rental
expense.
 
 USE OF PROCEEDS
  
 THE EXCHANGE OFFER
 The following summary of the registration rights agreement and letter of transmittal is not
complete and is subject to, and is qualified in its entirety by, all of the provisions of the
registration rights agreement and the letter of transmittal, each of which is filed as an exhibit
to the registration statement of which this prospectus is part. We urge you to read the entire
registration rights agreement carefully.
 Purpose and Effect of the Exchange Offer
  
    
    by June 4, 2011 (120 days after February 4, 2011), file a registration statement
(the exchange offer registration statement), with the SEC with respect to a
registered exchange offer to exchange each Restricted Note for a new Exchange Note
having terms substantially identical in all material respects to such Restricted Note;
    
    use our commercially reasonable efforts to cause the exchange offer registration
statement to be declared effective under the Securities Act by September 2, 2011 (210
days after February 4, 2011);
    
    promptly after the effectiveness of the exchange offer registration statement,
offer the Exchange Notes in exchange for the Restricted Notes; and
    
    keep the exchange offer open for not less than 20 business days (or longer if
required by applicable law) after the date notice of the exchange offer is mailed to
the holders of the Notes.
  29




---



##### 




    
    any change in law or in applicable interpretations thereof by the staff of the SEC does
not permit us to effect the exchange offer; or
    
    or if for any reason the exchange offer is not consummated within 255 calendar days
after February 4, 2011,
  
    
    the later of (in the case of change in law or interpretation) (x) the 60th day after
the date on which we are no longer permitted to file the exchange offer registration
statement and (y) July 4, 2011;
    
    in the case the exchange offer is not consummated by October 18, 2011; and
    
    in the case such holder is prohibited from participating in the exchange offer, such
holder may not resell the Exchange Notes acquired by it in the exchange offer to the
public without delivering a prospectus and that the prospectus contained in the exchange
offer registration statement is not appropriate or available for such resales, or such
holder is a broker-dealer and holds Restricted Notes acquired directly from us, the 45th
day after the date on which we receive notice from a holder.
   
    
    if the exchange offer registration statement is not filed with the SEC on or prior to
June 4, 2011; or
    
    if the exchange offer registration statement is not declared effective on or prior to
September 2, 2011; or
    
    if the exchange offer is not consummated on or prior to October 18, 2011; or
    
    if a shelf registration statement is not filed or declared effective when required; or
    
    if a registration statement is declared effective as required but thereafter fails to
remain effective or usable in connection with resales for more than 30 calendar days; or
    
    holders are unable to sell under Rule 144 as a result of our failure to meet the
adequate current public information requirement of Rule 144(c)(1).
   30




---



##### 



Terms of the Exchange Offer
   
    
    the Exchange Notes will have a different CUSIP number from the Restricted Notes;
    
    the Exchange Notes will be registered under the Securities Act and, therefore, the
global securities representing the Exchange Notes will not bear legends restricting
the transfer of interests in the Exchange Notes;
    
    the Exchange Notes will not be subject to the registration rights relating to the
Restricted Notes; and
    
    the Exchange Notes will not contain provisions for payment of additional interest
in case of non-registration.
    
    
    you are not an affiliate of ours, as defined in Rule 405 of the Securities Act
(or if you are such an affiliate, you must comply with the registration and
prospectus delivery requirements of the Securities Act to the extent applicable);
    
    you are not engaged in and do not intend to engage in, and have no arrangement or
understanding with any person to participate in, a distribution of Exchange Notes to
be issued in the exchange offer;
    
    you acquired the Exchange Notes issued in the exchange offer in the ordinary course
of your business;
 31




---



##### 




    
    you are not a broker-dealer that acquired the Restricted Notes from us or in
market-making transactions or other trading activities; and
    
    you are not acting on behalf of any person who could not truthfully and completely
make the foregoing representations.
  
    
    you cannot rely on the position of the SEC set forth in the no-action letters
referred to above; and
    
    you must comply with the applicable registration and prospectus delivery
requirements of the Securities Act in connection with a resale of the Exchange Notes.
     Expiration Date
  Extensions, Delays in Acceptance, Termination or Amendment
  
    
    delay accepting for exchange any Restricted Notes,
    
    extend the exchange offer,
    
    terminate the exchange offer, or
    
    to amend the terms of the exchange offer in any way we determine.
 32




---



##### 



Conditions to the Exchange Offer
  
    
    any law, statute, rule or regulation shall have been proposed, adopted or enacted,
or interpreted in a manner, which, in our reasonable judgment, would impair our
ability to proceed with the exchange offer;
 
    
    any action or proceeding is instituted or threatened in any court or by or before
the SEC or any other governmental agency with respect to the exchange offer which, in
our reasonable judgment, would impair our ability to proceed with the exchange offer;
 
    
    we have not obtained any governmental approval which we, in our reasonable
judgment, consider necessary for the completion of the exchange offer as contemplated
by this prospectus;
 
    
    any change, or any condition, event or development involving a prospective change,
shall have occurred or be threatened in the general economic, financial, currency
exchange or market conditions in the United States or elsewhere that, in our
reasonable judgment, would impair our ability to proceed with the exchange offer;
 
    
    any other change or development shall have occurred, including a prospective change
or development, that, in our reasonable judgment, has or may have a material adverse
effect on us, the market price of the Exchange Notes or the Restricted Notes or the
value of the exchange offer to us; or
 
    
    there shall have occurred (i) any suspension or limitation of trading in securities
generally on the New York Stock Exchange or the over-the-counter market; (ii) a
declaration of a banking moratorium by United States federal or New York authorities;
or (iii) a commencement or escalation of a war or armed hostilities involving or
relating to a country where we do business or other international or national
emergency or crisis directly or indirectly involving the United States.
   
    
    refuse to accept any Restricted Notes and return all tendered Restricted Notes to
the tendering holders and terminate the exchange offer;
 
    
    extend the exchange offer and retain all Restricted Notes tendered before the
expiration of the exchange offer, subject, however, to the rights of holders to
withdraw these Restricted Notes; or
 33




---



##### 




    
    waive unsatisfied conditions relating to the exchange offer and accept all properly
tendered Restricted Notes which have not been withdrawn. If this waiver constitutes a
material change to the exchange offer, we will disclose this change by means of a
prospectus supplement that will be distributed to the registered holders of the
Restricted Notes. If the exchange offer would otherwise expire, we will extend the
exchange offer for five to ten business days, depending on how significant the waiver
is and the manner of disclosure to registered holders.
   
    
    purchase or make offers for any Restricted Notes that remain outstanding subsequent
to the expiration date; and
 
    
    purchase Restricted Notes in the open market, in privately negotiated transactions
or otherwise.
  Procedures for Tendering
  
    
    you must instruct DTC and a DTC participant by completing the form Instructions to
DTC Participant From Beneficial Owner accompanying this prospectus of your intention
to tender your Restricted Notes for Exchange Notes; and
 
    
    DTC participants in turn need to follow the procedures for book-entry transfer as
set forth below under Book-Entry Transfer and in the letter of transmittal.
  The method of delivery of the form Instructions to DTC Participant From Beneficial Owner or
transmission of an agents message and all other required documents, as described under
"Book-Entry Transfer, to the exchange agent is at the election and risk of the tendering holder
of Restricted Notes. Instead of delivery by mail, we recommend that holders use an overnight or
hand delivery service. In all cases, sufficient time should be allowed to assure timely delivery to
the exchange agent prior to the expiration date. Delivery of documents to DTC in accordance with
its procedures does not constitute delivery to the exchange agent.
  34




---



##### 



Book-Entry Transfer
  
    
    confirmation of book-entry transfer of the Restricted Notes into the exchange
agents account; and
 
    
    receipt by the exchange agent of an agents message and all other required
documents specified in the letter of transmittal.
  As indicated above, delivery of documents to DTC in accordance with its procedures does not
constitute delivery to the exchange agent.
  
    
    the aggregate principal amount of Restricted Notes that have been tendered by the
participant;
 
    
    that such participant has received an appropriate letter of transmittal and agrees
to be bound by the terms of the letter of transmittal and the terms of the exchange
offer; and
 
    
    that we may enforce such agreement against the participant.
  Representations on Tendering Restricted Notes
  
    
    are not an affiliate of ours, as defined in Rule 405 of the Securities Act (or if
you are such an affiliate, you must comply with the registration and prospectus
delivery requirements of the Securities Act to the extent applicable);
 
    
    are not engaged in and do not intend to engage in, and have no arrangement or
understanding with any person to participate in, a distribution of Exchange Notes to
be issued in the exchange offer;
 
    
    acquired the Exchange Notes issued in the exchange offer in the ordinary course of
your business;
 
    
    are not a broker-dealer that acquired the Restricted Notes from us or in
market-making transactions or other trading activities; and
 35




---



##### 




    
    are not acting on behalf of any person who could not truthfully and completely make
the foregoing representations.
  Withdrawal of Tenders
    Fees and Expenses
    
    
    SEC registration fees;
 
    
    fees and expenses of the exchange agent and trustee;
 
    
    accounting and legal fees and printing costs; and
 
    
    related fees and expenses.
 Transfer Taxes
  36




---



##### 



Accounting Treatment
  Consequences of Failure to Properly Tender Restricted Notes in the Exchange
   
    
    holders may resell Restricted Notes only if an exemption from registration is
available or, outside the United States, to non-U.S. persons in accordance with the
requirements of Regulation S under the Securities Act; and
 
    
    the remaining Restricted Notes will bear a legend restricting transfer in the
absence of registration or an exemption.
  Neither we nor our board of directors make any recommendation to holders of Restricted Notes
as to whether to tender or refrain from tendering all or any portion of their Restricted Notes
pursuant to the exchange offer. Moreover, no one has been authorized to make any such
recommendation. Holders of Restricted Notes must make their own decision whether to tender pursuant
to the exchange offer and, if so, the aggregate amount of Restricted Notes to tender, after reading
this prospectus and the letter of transmittal and consulting with their advisors, if any, based on
their own financial position and requirements.
 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  Commodity Price Risk
  37




---



##### 



Interest Rate Risk
  Effect of 1% increaseor 1% decrease(In thousands)WMLs revolving line of credit
    
    $
    
 BUSINESS, PROPERTIES AND LEGAL PROCEEDINGS
 Overview
    Coal Segment
 General
  38




---



##### 



Total Cost ofTons Sold
    
    Property, Plant andMining
    
    
    
    
    
    
    
    (In thousands)
    
    Equipment
    
    Employees/LaborOperation
    
    Prior Operator
    
    Manner of Transport
    
    Machinery
    
    2008
    
    2009
    
    2010
    
    ($ in millions)
    
    Relations(1)
    
    Coal SeamMONTANARosebud
    
    Entech, Inc., a
    
      Conveyor belt
    
           4 drag-lines
    
    13,026
    
    10,332
    
    12,231
    
    $140.9
    
    383 employees;
    
        Rosebudsubsidiary of
    
           BNSF Rail
    
      Load-out facility
    
    
    
    
    
    
    
    
    
    297 representedMontana Power,
    
           Truck
    
    
    
    
    
    
    
    
    
    
    
    by Local 400 ofPurchased 2001
    
    
    
    
    
    
    
    
    
    
    
    
    
    the IUOEAbsaloka
    
    Washington Group
    
           BNSF Rail
    
           1 drag-line
    
    6,418
    
    5,911
    
    5,467
    
    $135.1
    
    170 employees; 131
    
       Rosebud-McKayInternational, Inc.
    
           Truck
    
     Load-out facility
    
    
    
    
    
    
    
    
    
    represented by Localas contract
    
    
    
    
    
    
    
    
    
    
    
    
    
    400 of the IUOEoperator, Endedcontract in 2007Savage
    
    Knife River
    
           Truck
    
           1 dragline
    
    359
    
    344
    
    353
    
    $4.6
    
    13 employees; 11
    
           PustCorporation, a
    
    
    
    
    
    
    
    
    
    
    
    
    
    represented by Localsubsidiary of MDU
    
    
    
    
    
    
    
    
    
    
    
    
    
    400 of the IUOEResources Group,Inc., Purchased2001TEXASJewett
    
    Entech, Inc., a
    
     Conveyor belt
    
           4 drag-lines
    
    6,494
    
    5,080
    
    4,203
    
    $32.1
    
    327 employees
    
           Wilcox Groupsubsidiary ofMontana Power,Purchased 2001NORTH DAKOTABeulah
    
    Knife River
    
     Conveyor belt
    
           2 drag-lines
    
    3,046
    
    2,585
    
    2,898
    
    $61.8
    
    149 employees; 118
    
           SchoolhouseCorporation, a
    
           BNSF Rail
    
     Load-out facility
    
    
    
    
    
    
    
    
    
    represented by Local
    
           Beulah-Zapsubsidiary of MDU
    
    
    
    
    
    
    
    
    
    
    
    
    
    1101 of the UMWAResources Group,Inc., Purchased2001TOTALS29,343
    
    24,252
    
    25,152
    
    $374.5
    
    1,042 employees
 
 (1)
    
    557 employees, or approximately 52% of our total employees, are represented by
collective bargaining agreements. The labor agreement at the Absaloka Mine, which covers 12%
of our workforce, expires during 2011. Properties
   39




---



##### 



Absaloka Mine
    
    Rosebud Mine
    
    Jewett Mine
    
    Beulah Mine
    
    Savage MineOwned by
    
    Westmoreland
    
    Western Energy
    
    Texas Westmoreland
    
    Dakota Westmoreland
    
    Westmoreland SavageResources, Inc.
    
    Company
    
    Coal Co.
    
    Corporation
    
    CorporationLocation
    
    
    
    Rosebud and
    
    Leon, Freestone andTreasure Counties,
    
    Limestone Counties,
    
    Mercer and OliverBig Horn County, MT
    
    MT
    
    TX
    
    Counties, ND
    
    Richland County, MTCoal reserves (thousands of tons)(1)Proven
    
    66,976
    
    200,333
    
    44,842
    
    45,248
    
    13,117Probable
    
    
    
    
    
    
    
    19,394
    
    Permitted reserves (thousands of tons)
    
    61,290
    
    115,642
    
    44,842
    
    21,682
    
    1,0232010 production (thousands of tons)
    
    5,466
    
    12,254
    
    4,171
    
    2,895
    
    352Estimated life of permitted reserves(2)
    
    2020
    
    2019
    
    2022
    
    2015
    
    2013Lessor
    
           Crow Tribe
    
     Federal Government
    
     Private parties
    
     Private parties
    
           Federal Government Private parties
    
           State of MT
    
           State of TX
    
           State of ND
    
           Private parties Great Northern
    
    
    
      Federal GovernmentPropertiesLease term
    
    Through exhaustion
    
    Varies
    
    Varies
    
    Varies
    
    VariesCurrent production capacity (thousands of tons)
    
    7,500
    
    13,300
    
    7,000
    
    3,400
    
    400Coal type
    
    Sub-bituminous
    
    Sub-bituminous
    
    Lignite
    
    Lignite
    
    LigniteMajor customers
    
           Xcel Energy
    
     Colstrip 1&2 owners
    
      NRG Texas Power LLC
    
           Otter Tail
    
           MDU Western Fuels Assoc.
    
     Colstrip 3&4 owners
    
    
    
           MDU
    
           Sidney Sugars       Midwest Energy
    
    
    
    
    
           Minnkota Rocky Mountain Power
    
    
    
    
    
     NorthwesternPublic ServiceDelivery method
    
    Rail / Truck
    
    Truck / Rail / Conveyor
    
    Conveyor
    
    Conveyor / Rail
    
    TruckApprox. heat content (BTU/lb.)(3)
    
    8,571
    
    8,534
    
    6,652
    
    7,002
    
    6,380Approx. sulfur content (%)(4)
    
    0.66
    
    0.64
    
    0.78
    
    0.76
    
    0.50Year current complex opened
    
    1974
    
    1968
    
    1985
    
    1963
    
    1958Total tons mined since inception (thousands of
tons)
    
    172,602
    
    431,931
    
    183,263
    
    102,251
    
    14,493
 
 (1)
    
    The SEC Industry Guide 7 defines reserves as that part of a mineral deposit, which could be
economically and legally extracted or produced at the time of the reserve determination.
Proven and probable coal reserves are defined by SEC Industry Guide 7 as follows:Proven (Measured) Reserves Reserves for which (a) quantity is computed from dimensions
revealed in outcrops, trenches, workings or drill holes; grade and/or quality are computed from
the results of detailed sampling and (b) the sites for inspection, sampling and measurement are
spaced so close and the geographic character is so well defined that size, shape, depth and
mineral content of reserves are well-established. 40




---



##### 



Probable (Indicated) Reserves Reserves for which quantity and grade and/or quality are
computed from information similar to that used for proven (measured) reserves, but the sites
for inspection, sampling and measurement are farther apart or are otherwise less adequately
spaced. The degree of assurance, although lower than that for proven (measured) reserves, is
high enough to assume continuity between points of observation.(2)
    
    Approximate year in which permitted reserves would be exhausted, based on current mine plan
and production rates. Our Jewett Mines permit is expected to be renewed in 2011 while the
other permit expires in 2014, but effectively they cover all of the Mines reserves for the
entire life of the mine. The Absaloka Mine permits expire in 2013 and 2014.(3)
    
    Approximate heat content applies to the coal mined in 2010.(4)
    
    Approximate sulfur content applies to the tons mined in 2010.   Customers
  Rosebud.
 Absaloka
 Savage
 41




---



##### 



Jewett
 Beulah
 Competition
   
    
    all of our mines are the most economic suppliers to each of their respective
principal customers, a result of a transportation advantage over our competitors in
that market;
 
    
    nearly all of the power plants we supply were specifically designed to use our
coal; and
 
    
    the plants we supply are among the lowest cost producers of electric power in their
respective regions and are among the cleaner producers of power from solid fossil
fuels.
 
    
    As a result of the foregoing, we believe that our current customers are more likely
to be dispatched to produce power and to continue purchasing coal extracted from our
mines.
   Material Effects of Regulation
  42




---



##### 



Mine Safety and Health .
  2010Lost Time Rate
    
    
    Reportable RateWCC Mines
    
    
    0.88
    
    
    
    1.31National Surface Mines
    
    
    1.23
    
    
    
    1.83
  Surface Mining Control and Reclamation Act.
  Clean Air Act and Related Regulations .
 43




---



##### 



Bonding Requirements .
 Resource Conservation and Recovery Act.
 Comprehensive Environmental Response, Compensation, and Liability Act.
 Climate Change Legislation and Regulations .
 44




---



##### 



Power Segment
 General
   Year
    
    Megawatt Hours
    
    
    Capacity Factor2010
    
    
    1,620,000
    
    
    
    88
    %2009
    
    
    1,486,000
    
    
    
    81
    %2008
    
    
    1,641,000
    
    
    
    89
    %
 45




---



##### 



Coal Supply
  Customer
  Material Effects of Regulation
 Material Effects of Regulation.
   Heritage Segment
    Corporate Segment
   46




---



##### 



Legal Proceedings
  MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 The following discussion should be read in conjunction with the historical financial
statements and other financial information appearing elsewhere in this prospectus, including
Selected Historical Financial Data. The following discussion contains forward-looking statements
that reflect our plans, estimates, and beliefs. Our actual results could differ materially from
those discussed in the forward-looking statements. Factors that could cause or contribute to these
differences include those discussed below and elsewhere in this prospectus, particularly in Risk
Factors. All references to years relate to the calendar year ended December 31 of the particular
year.
 Overview
   Recent Developments
  Legislation Enacted
  Healthcare Reform
  47




---



##### 



Accumulated other comprehensive
loss
    Results of Operations  Three Months Ended March 31, 2011 Compared to Three Months Ended March 31,
2010
 Items that Affect Comparability of Our Results
  Three Months EndedMarch 31,2011
    
    
    2010(In thousands)Loss on extinguishment of debt
    
    $
    (17,030
    )
    
    $
    Fair value adjustment on derivatives and
related amortization of debt discount
    
    
    (3,215
    )
    
    
    (4,824
    )Impact
    
    $
    (20,245
    )
    
    $
    (4,824
    )
 Items recorded in the three months ended March 31, 2011
 
    
    As a result of the Parent Notes offering, we recorded $17.0 million of loss
on extinguishment of debt. The loss included a $9.1 million make-whole payment for
ROVAs debt and $7.9
million of non-cash write-offs of unamortized discount on debt and related capitalized
debt costs and convertible debt conversion expense.
    
    Upon the retirement of our convertible debt, we recorded an expense of $3.1
million resulting from the mark-to-market accounting for the conversion feature in the
notes with $0.1 million of interest expense of a related debt discount.
 48




---



##### 



Items recorded in the three months ended March 31, 2010
 
    
    We recorded an expense of $4.5 million resulting from the mark-to-market
accounting of the conversion feature in our convertible notes with $0.3 million of
interest expense of a related debt discount.
 Three Months Ended March 31, 2011 Compared to Three Months Ended March 31, 2010
 Summary
  Items that
Affect Comparability of Our Results
 Three MonthsEndedMarch 31, 2011(In millions)Increase in our coal segment operating income primarily
driven by the expiration of an unprofitable coal contract at our
Rosebud Mine
    
    $
    1.5Increase in interest expense primarily due to higher overall
debt levels resulting from the Parent Notes offering
    
    
    (1.4
    )Decrease in other income primarily due to gains on sales of
securities during the first quarter of 2010
    
    
    (0.6
    )Increase in our power segment operating income resulting primarily from contractual price increases
    
    
    0.4Increase in income tax benefit related to lower taxable income
    
    
    0.4Increase due to other factors
    
    
    0.3$
    0.6
 49




---



##### 



Coal Segment Operating Results
  Three Months Ended March 31,Increase / (Decrease)2011
    
    
    2010
    
    
    $
    
    
    %Revenues (in thousands)
    
    $
    104,136
    
    
    $
    103,550
    
    
    $
    586
    
    
    
    0.6
    %Operating income (in thousands)
    
    
    8,819
    
    
    
    7,352
    
    
    
    1,467
    
    
    
    20.0
    %Adjusted EBITDA (in thousands)1
    
    
    21,285
    
    
    
    20,237
    
    
    
    1,048
    
    
    
    5.2
    %Tons sold  millions of equivalent tons
    
    
    5.6
    
    
    
    6.3
    
    
    
    (0.7
    )
    
    
    (11.1
    )%Operating income per ton sold
    
    $
    1.57
    
    
    $
    1.17
    
    
    $
    0.40
    
    
    $
    34.9
    %
 
 1)
    
    Adjusted EBITDA is defined and reconciled to net loss at the end of this Results of
Operations section.    Power Segment Operating Results
  Three Months Ended March 31,Increase / (Decrease)2011
    
    
    2010
    
    
    $
    
    
    %(In thousands)Revenues
    
    $
    23,628
    
    
    $
    22,889
    
    
    $
    739
    
    
    
    3.2
    %Operating income
    
    
    4,619
    
    
    
    4,172
    
    
    
    447
    
    
    
    10.7
    %Adjusted EBITDA1
    
    
    7,352
    
    
    
    6,881
    
    
    
    471
    
    
    
    6.8
    %Megawatts hours
    
    
    435
    
    
    
    435
    
    
    
    
    
    
    
    
 
 1)
    
    Adjusted EBITDA is defined and reconciled to net loss at the end of this Results of
Operations section.   50




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##### 



Heritage Segment Operating Results
  Three Months Ended March 31,Increase / (Decrease)2011
    
    
    2010
    
    
    $
    
    
    %(In thousands)Health care benefits
    
    $
    2,454
    
    
    $
    2,676
    
    
    $
    (222
    )
    
    
    (8.3
    )%Combined benefit fund payments
    
    
    686
    
    
    
    756
    
    
    
    (70
    )
    
    
    (9.3
    )%Workers compensation benefits
    
    
    158
    
    
    
    136
    
    
    
    22
    
    
    
    16.2
    %Black lung benefits
    
    
    480
    
    
    
    347
    
    
    
    133
    
    
    
    38.3
    %Total heritage health benefit expenses
    
    
    3,778
    
    
    
    3,915
    
    
    
    (137
    )
    
    
    (3.5
    )%Selling and administrative costs
    
    
    392
    
    
    
    340
    
    
    
    52
    
    
    
    15.3
    %Heritage segment operating loss
    
    $
    4,170
    
    
    $
    4,255
    
    
    $
    (85
    )
    
    
    (2.0
    )%
  Corporate Segment Operating Results
  Nonoperating Results (including interest expense, other income (expense) and income tax
benefit)
  Items that Affect Comparability of Our Results,
  Reconciliation of Adjusted EBITDA to Net Loss
  
    
    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.
 51




---



##### 




    
    do not reflect our cash expenditures, or future requirements for capital and major
maintenance expenditures or contractual commitments;
    
    do not reflect income tax expenses or the cash requirements necessary to pay income
taxes;
    
    do not reflect changes in, or cash requirements for, our working capital needs; and
    
    do not reflect the significant interest expense, or the cash requirements necessary
to service interest or principal payments, on certain of our debt obligations.
   Three Months Ended March 31,2011
    
    
    2010(In thousands)Reconciliation of Adjusted EBITDA to net lossNet loss
    
    $
    (18,732
    )
    
    $
    (3,745
    )Income tax benefit from continuing operations
    
    
    (460
    )
    
    
    (90
    )Other loss
    
    
    3,017
    
    
    
    3,836Interest income
    
    
    (382
    )
    
    
    (410
    )Loss on extinguishment of debt
    
    
    17,030
    
    
    
    Interest expense
    
    
    6,967
    
    
    
    5,723Depreciation, depletion and amortization
    
    
    11,245
    
    
    
    11,392Accretion of ARO and receivable
    
    
    2,700
    
    
    
    3,003Amortization of intangible assets and liabilities
    
    
    163
    
    
    
    85EBITDA
    
    
    21,548
    
    
    
    19,794Loss on sale of assets
    
    
    83
    
    
    
    71Share-based compensation
    
    
    1,653
    
    
    
    1,363Adjusted EBITDA
    
    $
    23,284
    
    
    $
    21,228
 Three Months Ended March 31,2011
    
    
    2010(In thousands)Adjusted EBITDA by SegmentCoal
    
    $
    21,285
    
    
    $
    20,237Power
    
    
    7,352
    
    
    
    6,881Heritage
    
    
    (4,170
    )
    
    
    (4,255
    )Corporate
    
    
    (1,183
    )
    
    
    (1,635
    )Total
    
    $
    23,284
    
    
    $
    21,228
 52




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##### 



Results of Operations  Years Ended December 31, 2010, 2009 and 2008
 Items that Affect Comparability of Our Results
  Year Ended December 31,
    
    2010
    
    
    2009
    
    
    2008(In thousands)Fair value adjustment on derivative and related amortization
of debt discount
    
    $
    (4,840
    )
    
    $
    5,076
    
    
    $
    Heritage legal claim settlement
    
    
    
    
    
    
    756
    
    
    
    Reclamation claim
    
    
    
    
    
    
    (4,825
    )
    
    
    Beneficial conversion feature interest expense
    
    
    
    
    
    
    
    
    
    
    (8,146
    )Loss on extinguishment of WML debt
    
    
    
    
    
    
    
    
    
    
    (3,834
    )Loss on extinguishment of ROVA debt
    
    
    
    
    
    
    
    
    
    
    (1,344
    )Settlement of coal royalty dispute
    
    
    
    
    
    
    
    
    
    
    (2,635
    )Gain on sale of interest in Ft. Lupton power project
    
    
    
    
    
    
    
    
    
    
    876Restructuring charges
    
    
    
    
    
    
    
    
    
    
    (2,009
    )Impact (pre-tax)
    
    $
    (4,840
    )
    
    $
    1,007
    
    
    $
    (17,092
    )Tax effect of other comprehensive income gains
    
    $
    
    
    
    $
    17,062
    
    
    $
    
 Items recorded in 2010
 
    
    We recorded expense of $3.4 million resulting from the mark-to-market
accounting of the conversion feature in our convertible notes, primarily due to an
increase in our stock price during 2010, with $1.4 million of interest expense of a
related debt discount.
 Items recorded in 2009
 
    
    We recorded an income tax benefit of $17.1 million related to a tax effect of
other comprehensive income gains, primarily related to a decrease in our
postretirement medical obligations.
    
    We recorded income of $6.1 million resulting from the mark-to-market
accounting of the conversion feature in our convertible notes and a decrease in the
value of our warrant offset with $1.0 million of interest expense of a related debt
discount.
    
    We recorded a gain of $0.8 million related to a settlement of past heritage
claims, as a result of efforts to reduce our heritage costs.
    
    We recorded $4.8 million in net expense related to the settlement of the
reclamation claim at our Rosebud Mine. This included a $6.5 million reduction in
revenue, offset with a $1.7 million reduction in cost of sales.
 Items recorded in 2008
 
    
    We recorded $8.1 million of expense related to the beneficial conversion
feature in the convertible notes we issued in March 2008, as the conversion price was
lower than the fair market value of our common stock at the time of issuance.
    
    We refinanced both our WML and ROVA debt during 2008 and as a result recorded
losses of $3.8 million and $1.3 million, respectively, for the extinguishment of debt.
    
    We recorded $2.6 million in net expense related to two coal royalty claims as
we reached an agreement with the U.S. Minerals Management Service and the Montana
Department of Revenue
 53




---



##### 



to settle two long-standing disputes. This included $12.8 million of cost of sales,
offset with $10.2 million of revenue.
    
    On July 2, 2008, we received $0.9 million for our royalty interest in the
gas-fired Ft. Lupton project and recognized a gain of $0.9 million on the sale.
    
    In 2007, we initiated a restructuring plan in order to reduce the overall
cost structure of the Company. As a result, in 2008 we recorded restructuring charges
of $2.0 million. Most of the restructuring charges related to termination benefits,
outplacement costs, and lease costs related to the consolidation of corporate office
space.
 2010 Compared to 2009
 Summary
  Items that Affect Comparability of Our Results
 2010(In millions)Increase in coal segment operating income driven by price
increases, new agreements, 2009 customer shutdowns, and
strong cost management performance at several mines
    
    $
    27.6Decrease in heritage segment operating costs primarily due
to the agreement we entered into to modernize how we provide
prescription drug benefits to retirees
    
    
    16.6Increase in our power segment operating income due to
increased megawatt hours sold and decreased maintenance
expenses due to planned and unplanned maintenance outages,
with no comparable outages occurring in 2010
    
    
    4.0Increase in the noncontrolling interest adjustment to reduce
losses from a partially owned consolidated coal segment
subsidiary
    
    
    0.8Gain on sale of securities
    
    
    0.7Total
    
    $
    49.7
 54




---



##### 



Coal Segment Operating Results
  Year Ended December 31,Increase / (Decrease)2010
    
    
    2009
    
    
    $
    
    
    %(In thousands)Revenues
    
    $
    418,058
    
    
    $
    361,206
    
    
    $
    56,852
    
    
    
    15.7
    %Operating income
    
    
    32,922
    
    
    
    476
    
    
    
    32,446
    
    
    
    6816.4
    %Adjusted EBITDA(1)
    
    
    81,681
    
    
    
    51,207
    
    
    
    30,474
    
    
    
    59.5
    %Tons sold  millions of equivalent tons
    
    
    25.2
    
    
    
    24.3
    
    
    
    0.9
    
    
    
    3.7
    %Operating income per ton sold
    
    $
    1.31
    
    
    $
    0.02
    
    
    $
    1.29
    
    
    
    6568.9
    %
 
 (1)
    
    Adjusted EBITDA is defined and reconciled to net loss at the end of
this Results of Operations section.  Items that Affect Comparability of Our Results,
 Power Segment Operating Results
  Year Ended December 31,Increase / (Decrease)2010
    
    
    2009
    
    
    $
    
    
    %(In thousands)Revenues
    
    $
    87,999
    
    
    $
    82,162
    
    
    $
    5,837
    
    
    
    7.1
    %Operating income
    
    
    11,721
    
    
    
    7,672
    
    
    
    4,049
    
    
    
    52.8
    %Adjusted EBITDA(1)
    
    
    22,664
    
    
    
    18,117
    
    
    
    4,547
    
    
    
    25.1
    %Megawatts hours
    
    
    1,620
    
    
    
    1,486
    
    
    
    134
    
    
    
    9.0
    %
 
 (1)
    
    Adjusted EBITDA is defined and reconciled to net loss at the
end of this Results of Operations section.   55




---



##### 



Heritage Segment Operating Results
  Year Ended December 31,Increase / (Decrease)2010
    
    
    2009
    
    
    $
    
    
    %(In thousands)Health care benefits
    
    $
    9,927
    
    
    $
    22,490
    
    
    $
    (12,563
    )
    
    
    (55.9
    )%Combined benefit fund payments
    
    
    2,953
    
    
    
    3,132
    
    
    
    (179
    )
    
    
    (5.7
    )%Workers compensation benefits (credits)
    
    
    81
    
    
    
    (485
    )
    
    
    566
    
    
    
    116.7
    %Black lung benefits
    
    
    1,460
    
    
    
    2,937
    
    
    
    (1,477
    )
    
    
    (50.3
    )%Total heritage health benefit expenses
    
    
    14,421
    
    
    
    28,074
    
    
    
    (13,653
    )
    
    
    (48.6
    )%Selling and administrative costs
    
    
    1,547
    
    
    
    3,696
    
    
    
    (2,149
    )
    
    
    (58.1
    )%Heritage segment operating loss
    
    $
    15,968
    
    
    $
    31,770
    
    
    $
    (15,802
    )
    
    
    (49.7
    )%
 Items that Affect Comparability of Our Results
 Corporate Segment Operating Results
  Nonoperating Results (including other income (expense), income tax benefit, and net loss
attributable to noncontrolling interest)
 Items that Affect Comparability
of Our Results
 Items that
Affect Comparability of our Results
  2009 Compared to 2008
 Summary
  56




---



##### 



Items that Affect Comparability of Our Results
 2009(In millions)Decrease in coal segment operating income driven by reduced tonnages sold due to the
2009 customer shutdowns and unfavorable energy market conditions, partially offset
with income from Indian Coal Tax Credit monetization transaction, and losses from a
partially owned consolidated subsidiary
    
    $
    (12.7
    )Decrease in our power segment operating income due to reduced megawatt hours sold,
increased maintenance expenses due to a planned major maintenance outage and a
significant 2009 unplanned outage
    
    
    (8.3
    )Decrease in heritage costs due to elimination of postretirement medical benefits for
non-represented employees costs in the third quarter of 2009, reduced workers
compensation expenses due to changes in interest rates and favorable claims
experience, offset by an increase in cost containment efforts and unfavorable
changes in the valuation of Black Lung benefits trust assets and liabilities due to
changes in interest rates
    
    
    2.9Decrease in corporate expenses due to cost control efforts and a reduction in stock
compensation expense
    
    
    2.7Favorable noncontrolling interest adjustment due to losses from a partially owned
consolidated subsidiary
    
    
    1.8Decrease in interest income partially offset with a decrease in interest expense due
to debt refinancing and an increase in other income
    
    
    (1.3
    )Decrease in income taxes driven by lower state taxable income due to customer outages
    
    
    1.0Total
    
    $
    (13.9
    )
 Coal Segment Operating Results
  Year Ended December 31,Increase / (Decrease)2009
    
    
    2008
    
    
    $
    
    
    %(In thousands)Revenues
    
    $
    361,206
    
    
    $
    419,806
    
    
    $
    (58,600
    )
    
    
    (14.0
    )%Operating income
    
    
    476
    
    
    
    15,211
    
    
    
    (14,735
    )
    
    
    (96.9
    )%Adjusted EBITDA(1)
    
    
    51,207
    
    
    
    57,743
    
    
    
    (6,536
    )
    
    
    (11.3
    )%Tons sold  millions of equivalent tons
    
    
    24.3
    
    
    
    29.3
    
    
    
    (5.0
    )
    
    
    (17.1
    )%Operating income per ton sold
    
    $
    0.02
    
    
    $
    0.52
    
    
    $
    (0.50
    )
    
    
    (96.2
    )%
 
 (1)
    
    Adjusted EBITDA is defined and reconciled to net loss at the end of
this Results of Operations section.   57




---



##### 



Power Segment Operating Results
  Year Ended December 31,Increase / (Decrease)2009
    
    
    2008
    
    
    $
    
    
    %(In thousands)Revenues
    
    $
    82,162
    
    
    $
    89,890
    
    
    $
    (7,728
    )
    
    
    (8.6
    )%Operating income
    
    
    7,672
    
    
    
    16,920
    
    
    
    (9,248
    )
    
    
    (54.7
    )%Adjusted EBITDA(1)
    
    
    18,117
    
    
    
    26,493
    
    
    
    (8,376
    )
    
    
    (31.5
    )%Megawatts hours
    
    
    1,486
    
    
    
    1,641
    
    
    
    (155
    )
    
    
    (9.4
    )%
 
 (1)
    
    Adjusted EBITDA is defined and reconciled to net loss at the
end of this Results of Operations section.  Items that Affect Comparability of Our Results .
 Heritage Segment Operating Results
  Year Ended December 31,Increase / (Decrease)2009
    
    
    2008
    
    
    $
    
    
    %(In thousands)Health care benefits
    
    $
    22,490
    
    
    $
    25,588
    
    
    $
    (3,098
    )
    
    
    (12.1
    )%Combined benefit fund payments
    
    
    3,132
    
    
    
    3,470
    
    
    
    (338
    )
    
    
    (9.7
    )%Workers compensation benefits (credits)
    
    
    (485
    )
    
    
    4,417
    
    
    
    (4,902
    )
    
    
    (111.0
    )%Black lung benefits (credits)
    
    
    2,937
    
    
    
    (23
    )
    
    
    2,960
    
    
    
    12,869.6
    %Total heritage health benefit expenses
    
    
    28,074
    
    
    
    33,452
    
    
    
    (5,378
    )
    
    
    (16.1
    )%Selling and administrative costs
    
    
    3,696
    
    
    
    2,045
    
    
    
    1,651
    
    
    
    80.7
    %Gain on sale of assets
    
    
    
    
    
    
    (25
    )
    
    
    25
    
    
    
    (100.0
    )%Heritage segment operating loss
    
    $
    31,770
    
    
    $
    35,472
    
    
    $
    (3,702
    )
    
    
    (10.4
    )%
 Items that Affect Comparability of Our Results,
 58




---



##### 



Corporate Segment Operating Results
 Items
that Affect Comparability of Our Results
 Nonoperating Results (including other income (expense), income tax benefit (expense), and
net loss attributable to noncontrolling interest)
 Items
that Affect Comparability of Our Results
 Items that
Affect Comparability of our Results
 Reconciliation of Adjusted EBITDA to Net Loss
  
    
    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.
  
    
    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.
 59




---



##### 



December 31,2010
    
    
    2009
    
    
    2008(In thousands)Reconciliation of Adjusted EBITDA to Net LossNet Loss
    
    $
    (3,170
    )
    
    $
    (29,162
    )
    
    $
    (48,567
    )Income tax (benefit) expense from continuing operations
    
    
    (141
    )
    
    
    (17,136
    )
    
    
    919Other (income) loss
    
    
    2,587
    
    
    
    (5,991
    )
    
    
    284Interest income
    
    
    (1,747
    )
    
    
    (3,218
    )
    
    
    (5,125
    )Loss on extinguishment of debt
    
    
    
    
    
    
    
    
    
    
    5,178Interest expense attributable to beneficial conversion feature
    
    
    
    
    
    
    
    
    
    
    8,146Interest expense
    
    
    22,992
    
    
    
    23,733
    
    
    
    23,130Depreciation, depletion and amortization
    
    
    44,690
    
    
    
    44,254
    
    
    
    41,387Accretion of ARO and receivable
    
    
    11,540
    
    
    
    9,974
    
    
    
    9,528Amortization of intangible assets and liabilities
    
    
    590
    
    
    
    279
    
    
    
    598EBITDA
    
    
    77,341
    
    
    
    22,733
    
    
    
    35,478Restructuring charges
    
    
    
    
    
    
    
    
    
    
    2,009Customer reclamation claim
    
    
    
    
    
    
    4,825
    
    
    
    (Gain)/loss on sale of assets
    
    
    226
    
    
    
    191
    
    
    
    (1,425
    )Share-based compensation
    
    
    4,049
    
    
    
    2,552
    
    
    
    2,733Adjusted EBITDA
    
    $
    81,616
    
    
    $
    30,301
    
    
    $
    38,795
 December 31,2010
    
    
    2009
    
    
    2008(In thousands)Adjusted EBITDA by SegmentCoal
    
    $
    81,681
    
    
    $
    51,207
    
    
    $
    57,743Power
    
    
    22,664
    
    
    
    18,117
    
    
    
    26,493Heritage
    
    
    (15,968
    )
    
    
    (31,770
    )
    
    
    (35,497
    )Corporate
    
    
    (6,761
    )
    
    
    (7,253
    )
    
    
    (9,944
    )Total
    
    $
    81,616
    
    
    $
    30,301
    
    
    $
    38,795
 Significant Anticipated Variances between 2010 and 2011 and Related Uncertainties
  
    
    We expect significantly higher overall levels of cash and liquidity
throughout 2011 as a result of the issuance of the Parent Notes, as well as increased
coal operating profits and decreased heritage health benefit expenditures;
    
    We expect to take a charge to our earnings in 2011 of approximately $20.0
million as a result of the issuance of the Parent Notes and the mark-to-market
accounting of the conversion feature in our convertible notes;
 60




---



##### 




    
    We expect an increase in the repayments of long-term debt resulting from our
WML Notes as well as from the various debt paid off with the proceeds of the Parent
Notes;
    
    We expect significantly higher overall levels of debt and interest expense
throughout 2011 as a result of the issuance of the Parent Notes;
    
    We expect to pay approximately $21.0 million of preferred stock dividends in
2011;
    
    We expect our overall coal tons delivered to decrease due to the December 31,
2010 expiration of a long-term coal supply contract at our Rosebud Mine. While this
decrease will drive a decrease in overall tonnage sold, we expect the expiration of
the contract to increase our profits and cash flow as our cost per ton sold was
significantly greater than the fixed price per ton we were receiving under the
contract;
    
    We expect our power operating profit to increase slightly due to the
significant maintenance expenses incurred in 2010 relating to a planned maintenance
shutdown. In addition, the ROVA credit agreements required us to perform certain
maintenance procedures that were not otherwise required. As a result, we expect the
termination of those agreements in connection with the completion of the Parent Notes
offering will result in further reductions in 2011 maintenance expenses;
    
    We expect an increase in our depreciation, depletion, and amortization
expense in 2011 due to increases in our asset reclamation obligation studies driving
increased depletion expense as well as slightly increased capital spending levels in
2011;
    
    We expect to make additional capital investments during 2011 in the range of
$40.0 to $50.0 million to improve our mining operations, decrease our equipment
maintenance costs, and increase our coal reserves. We expect these capital investments
to be funded through our mines operating cash flows or, if necessary, WMLs existing
credit facility or capital leases; and
    
    We expect an increase in our investments in bond collateral in the range of
$9.0 to $12.0 million primarily as a result of securing reclamation bonds for new
mining areas in 2011.
  Liquidity and Capital Resources
  Parent Notes Offering and Use of Proceeds
   61




---



##### 



Liquidity Limitations and Requirements
   2011 RemainingYear-to-date
    
    
    Expected2011 Actual
    
    
    Amounts(In millions)Postretirement medical benefits
    
    $
    3.3
    
    
    $
    10.3Pension contributions
    
    
    0.9
    
    
    
    9.3CBF premiums
    
    
    0.7
    
    
    
    2.0Workers compensation benefits
    
    
    0.2
    
    
    
    0.8
    62




---



##### 



Historical Sources and Uses of Cash for Three Months Ended March 31, 2011 Compared to
Three Months Ended March 31, 2010The following is a summary of cash provided by or used in each of the indicated types of
activities:
 Three Months EndedMarch 31,2011
    
    2010(In thousands)Cash provided by (used in):Operating activities
    
    $
    16,182
    
    
    $
    13,296Investing activities
    
    
    (5,884
    )
    
    
    (3,941
    )Financing activities
    
    
    28,911
    
    
    
    (2,114
    )
     Historical Sources and Uses of Cash for Year Ended December 31, 2010 Compared to Year Ended
December 31, 2009
  Years Ended December 31,2010
    
    2009(In thousands)Cash provided by (used in):Operating activities
    
    $
    45,353
    
    
    $
    29,448Investing activities
    
    
    (29,180
    )
    
    
    (38,597
    )Financing activities
    
    
    (20,917
    )
    
    
    (20,273
    )
    Other current liabilities
 63




---



##### 



Contractual Obligations and Commitments
  Payments Due by PeriodTotal
    
    2011
    
    2012
    
    2013
    
    2014
    
    2015
    
    After 2015(In thousands)Long-term debt obligations(1)
(principal and interest)
    
    $
    279,738
    
    
    
    51,731
    
    
    
    40,076
    
    
    
    61,264
    
    
    
    38,008
    
    
    
    35,880
    
    
    
    52,779Capital lease obligations (principal and
interest)
    
    
    30,293
    
    
    
    8,714
    
    
    
    8,319
    
    
    
    7,077
    
    
    
    4,461
    
    
    
    1,617
    
    
    
    105Operating lease obligations
    
    
    18,311
    
    
    
    6,665
    
    
    
    4,243
    
    
    
    2,827
    
    
    
    2,233
    
    
    
    1,625
    
    
    
    718Purchase obligations(2)
    
    
    105,534
    
    
    
    28,552
    
    
    
    28,552
    
    
    
    28,552
    
    
    
    17,077
    
    
    
    2,801
    
    
    
    Other long-term liabilities(3)
    
    
    1,096,065
    
    
    
    44,442
    
    
    
    41,937
    
    
    
    42,308
    
    
    
    54,298
    
    
    
    42,763
    
    
    
    870,317Totals
    
    $
    1,529,941
    
    
    
    140,104
    
    
    
    123,127
    
    
    
    142,028
    
    
    
    116,077
    
    
    
    84,686
    
    
    
    923,919ProForma long-term debt
obligations(4)(principal and
interest)
    
    $
    435,022
    
    
    
    26,098
    
    
    
    39,661
    
    
    
    43,918
    
    
    
    40,898
    
    
    
    41,355
    
    
    
    243,092
 
 (1)
    
    On February 4, 2011, we refinanced our convertible notes, WRIs term and revolving
line of credit and ROVAs term debt.(2)
    
    Our purchase obligations relate to coal supply agreements for our power plants.(3)
    
    Represents benefit payments for our postretirement medical benefits, black lung,
workers compensation, and combined benefit fund plans, as well as contributions for our
defined benefit pension plans and final reclamation costs.(4)
    
    Amounts shown are subsequent to the Parent Notes offering in February 2011. Critical Accounting Policies
 Postretirement Medical Benefits
     64




---



##### 



Postretirement Medical BenefitsHealth Care Cost Trend Rate
    
    1% Increase
    
    1% Decrease(In thousands)Effect on service and interest cost components
    
    $
    1,282
    
    
    $
    (1,079
    )Effect on postretirement medical benefit obligation
    
    $
    22,565
    
    
    $
    (19,116
    )
 Asset Retirement Obligations, Final Reclamation Costs and Reserve Estimates
   Income Taxes and Deferred Income Taxes
       65




---



##### 



Recent Accounting Pronouncements
    Off-Balance Sheet Arrangements
   PostWorkers
    
    
    RetirementReclamation
    
    
    Compensation
    
    
    Medical BenefitObligations
    
    
    Obligations
    
    
    Obligations
    
    
    Other
    
    
    Total(In thousands)Surety bonds
    
    $
    230,367
    
    
    $
    10,303
    
    
    $
    9,432
    
    
    $
    4,245
    
    
    $
    254,347Letters of credit
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,556
    
    
    
    8,556$
    230,367
    
    
    $
    10,303
    
    
    $
    9,432
    
    
    $
    12,801
    
    
    $
    262,903
  66




---



##### 



CHANGE IN AUDITORS
 Change in Independent Public Accounting Firm
     Engagement of Ernst & Young LLP
  
 DESCRIPTION OF THE EXCHANGE NOTES
   67




---



##### 



Principal, Maturity and Interest
   provided
 Methods of Receiving Payments on the Notes
  Note Guarantees
  68




---



##### 



provided
   Non-Guarantor Subsidiaries
 provided
   69




---



##### 



Restricted and Unrestricted Subsidiaries
  
    
    an Unrestricted Subsidiary will not be subject to many of the restrictive
covenants in the Indenture;
    
    a Subsidiary that has previously been a Guarantor and that is designated an
Unrestricted Subsidiary will be released from its Note Guarantee, the Indenture and
the Security Documents, and any of its assets that constitute Collateral will be
released from the Liens of the Security Documents; and
    
    the assets, income, cash flow and other financial results of an Unrestricted
Subsidiary will not be consolidated with those of the Issuer and Co-Issuer for
purposes of calculating compliance with the restrictive covenants contained in the
Indenture.
 Ranking
 Senior Notes
  70




---



##### 



Ranking of Note Guarantees
   Optional Redemption
  OptionalYear
    
    Redemption Price2015
    
    
    103.583
    %2016
    
    
    101.792
    %2017 and thereafter
    
    
    100.000
    %
 Redemption with Proceeds from Qualified Equity Offerings
 provided
  Selection and Notice of Redemption
 pro rata provided however pro rata pro rata
  71




---



##### 



Security
 General
      provided provided, further,
   72




---



##### 



Intercreditor Agreement to be Entered into in Connection with a Future Revolving Credit Facility
      73




---



##### 



provided
  provided
  74




---



##### 



pari passu
    Sufficiency of collateral in the event of foreclosure
  75




---



##### 



Certain Covenants with Respect to the Note Collateral
  Maintenance of collateral
  Permitted ordinary course activities with respect to collateral
  After-acquired property
  76




---



##### 



Further assurances
  Real estate mortgages and filings
     Foreclosure
  77




---



##### 



Certain bankruptcy limitations
    Release
       78




---



##### 



Change of Control
            79




---



##### 



80




---



##### 



Certain Covenants
  Limitations on Additional Indebtedness and Preferred Stock
 provided provided further
      provided however
 81




---



##### 



provided however
  provided
 provided, further
   82




---



##### 



provided
   provided
 provided however provided, further
  Limitations on Restricted Payments
   pro
forma
 83




---



##### 



84




---



##### 



provided
 provided plus plus less provided,
further
  provided however pro forma
  provided
 85




---



##### 



provided
  Limitations on Dividend and Other Restrictions Affecting Restricted Subsidiaries
             86




---



##### 



provided
 provided
 Limitations on Transactions with Affiliates
        87




---



##### 



provided, however,
    provided
 Limitations on Liens
  88




---



##### 



Limitations on Asset Sales
         provided
 provided
 89




---



##### 



provided however pro rata
      pro rata pro rata pro rata
     90




---



##### 



Excess Cash Flow
       Rights Offering
 pro rata provided provided further
  91




---



##### 



Limitations on Designation of Unrestricted Subsidiaries
        provided further
      92




---



##### 



Limitations on Sale and Leaseback Transactions
 provided
    Limitations on the Issuance or Sale of Equity Interests of Restricted Subsidiaries
 pro rata
 Limitations on Mergers, Consolidations, Etc.
  (1)
    
    either:
   93




---



##### 



pro forma
 pro forma
         94




---



##### 



provided
 Additional Note Guarantees
     95




---



##### 



Conduct of Business
  Limitation on Activities of Certain Subsidiaries
  Payments for Consent
  Reports and Other Information
     96




---



##### 



Events of Loss
      pro rata pro rata
  97




---



##### 



Events of Default
                 98




---



##### 



provided however
       99




---



##### 



Legal Defeasance and Covenant Defeasance
               100




---



##### 



Satisfaction and Discharge
        Transfer and Exchange
   101




---



##### 



Amendment, Supplement and Waiver and Entry into Intercreditor Agreement
 provided
             102




---



##### 



No Personal Liability of Directors, Officers, Employees, Stockholders and Members
  Concerning the Trustee and the Note Collateral Agent
  103




---



##### 



Governing Law
  Certain Definitions
  Absaloka
 Absaloka Collateral
 Acquired Indebtedness
 Additional Interest
 Additional Notes
 Administrative Agent
 Affiliate control
 Affiliate Transaction
 Agents
 104




---



##### 



Alternate Offer
 amend amendment
 Amended and Restated WMLCredit Agreement
 asset
 Asset Acquisition
   Asset Sale transfer provided
          105




---



##### 



Attributable Indebtedness
 Bankruptcy Code
 bankruptcy law
 Board of Directors
 Business Day
 Capital Lease
 Capital Lease Obligations
 Cash Equivalents
 provided
   provided
  106




---



##### 



Cash Management Obligations means
 Change of Control
       Change of Control Offer
 Change of Control Payment Date
 Change of Control Purchase Price
 Collateral
 Consolidated Adjusted Working Capital
 Amortization Expense
 107




---



##### 



Consolidated Asset Reclamation Accretion Expense
 Consolidated Capital Expenditures
 Consolidated Current Assets
 Consolidated Current Liabilities
 Consolidated Depreciation and Depletion Expense
 Consolidated EBITDA
 plus
        108




---



##### 



minus
  Consolidated Income Tax Expense
 Consolidated Interest Expense
       multiplied by minus
  provided
 Consolidated Net Income provided
   109




---



##### 



provided
         nonrecurring provided
  110




---



##### 



Consolidated Total Indebtedness
 Covenant Defeasance
 Coverage Ratio Exception
 Co-Issuer
 Custodian
 Default
 Designated Preferred Stock
 Designation
 Designation Amount
 DIP Financing
 Disqualified Equity Interests provided however provided further
 111




---



##### 



Equity Interests
 Event of Default
 Event of Loss
 Excess Cash Flow
  plus
 plus
 over
           112




---



##### 



provided,
 provided
 Excess Cash Flow Amount
 Excess Cash Flow Offer meaning
 Excess Cash Flow Offer Deficiency
 Excess Cash Flow Offered Price
 Excess Cash Flow Payment Amount
 Excess Loss Proceeds
 Excess Proceeds
 Exchange Act
 Exchange Notes
 Excluded Property provided
 113




---



##### 



Fair Market Value
 First Lien Collateral
 First Lien Security Documents
 Fixed Charge Coverage Ratio Transaction Date pro forma
  provided
     114




---



##### 



Foreign Subsidiary
 Four-Quarter Period
 GAAP
 guarantee guarantee guaranteed
 Guarantors
 Hedging Obligations
 Holder
 Holder Buy-out Right
 incur provided
 115




---



##### 



Indebtedness
        provided
      maximum fixed redemption or repurchase price
 Indenture
 Independent Financial Advisor
 116




---



##### 



Initial Purchaser
 Intercreditor Agreement
 interest
 Investments
      Issue Date
 Issuer
 Legal Defeasance
 Lien
 Loss Proceeds Offer
 117




---



##### 



Moodys
 Mortgage
 Mortgaged Property
 Net Available Proceeds
    provided however
 Net Loss Proceeds
      Net Proceeds Deficiency
 118




---



##### 



Net Proceeds Offer
 Non-Recourse Debt
    Note Collateral
 Note Collateral Agent
 Note First-Priority Liens
 Note Guarantees
 Note Liens
 Note Second-Priority Liens
 Notes
 Obligations
 Offered Price
 Officer
 Officers Certificate
 Opinion of Counsel
 119




---



##### 



Pari Passu Indebtedness pari passu
 Pari Passu Indebtedness Price
 Paying Agent
 Payment Amount
 Permitted Business
 Permitted Collateral Liens
 Permitted Indebtedness
 Permitted Investment
     provided, however,
   120




---



##### 



provided
  provided
    provided
    121




---



##### 



Permitted Liens
         provided
 122




---



##### 



provided
 provided
   123




---



##### 



provided
  provided
          provided however
 Person
 Plan of Liquidation
 124




---



##### 



Preferred Stock
 principal
 Purchase Money Indebtedness provided, however
 Qualified Equity Interests provided
 Qualified Equity Offering provided however
 Real Property
 redeem redemption provided
 Redesignation
 refinance
 Refinancing Indebtedness Refinanced Indebtedness provided
 125




---



##### 



pari passu pari passu pari passu
    Registrar
 Registration Rights Agreement
 Required Filing Date
 Restricted Payment
 pro rata provided pro rata
   126




---



##### 



Restricted Payments Basket
 Restricted Subsidiary
 Revolving Buy-out Price
 Revolving Collateral Agent
 Revolving Credit Facility
 Revolving Credit Facility Obligations
 Revolving Facility First-Priority Collateral
 Revolving Facility First-Priority Liens
 Revolving Lenders
 Rights Plan S&P
 Sale and Leaseback Transactions
 SEC
 Second Lien Collateral
 127




---



##### 



Second Lien Security Document
 Secretarys Certificate
 Securities Act
 Security Documents
 Senior Indebtedness
       Series A Preferred Stock
 Significant Subsidiary
 Standstill Period
 Subordinated Indebtedness
 128




---



##### 



Subsidiary
   provided
 Subsidiary Guarantors
 Successor
 Total Assets
 Total Leverage Ratio
 Transactions
 Trust Indenture Act
 Trustee
 UCC
 Unrestricted Subsidiary
 129




---



##### 



U.S. Government Obligations
 Voting Stock
 Weighted Average Life to Maturity
 WELLC
 Wholly Owned
 WML
 WML Collateral
 WML Credit Agreements
 WML Lien
 WML Notes
 WML Payments Collateral
 WML Repayment Date
 WML Security Agreements
 WRI
 WRM
 WRM Collateral
 130




---



##### 



CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
  
    
    tax consequences to holders that may be subject to special tax treatment, such as
tax-exempt entities, dealers in securities or foreign currencies, brokers, certain financial
institutions or financial services entities, insurance companies, regulated investment
companies, traders in securities that elect to use a mark-to-market method of accounting for
their securities holdings, retirement plans, real estate investment trusts, controlled foreign
corporations and shareholders of such corporations, passive foreign investment companies and
shareholders of such companies, former citizens or long-term residents of the United States,
certain U.S. expatriates or corporations that accumulate earnings to avoid U.S. federal income
tax;
 
    
    tax consequences to persons holding notes as part of a hedging, integrated, constructive
sale or conversion transaction or a straddle or other risk reduction transaction;
 
    
    tax consequences to holders whose functional currency is not the U.S. Dollar;
 
    
    tax consequences to persons who hold notes through a partnership or similar pass-through
entity;
 
    
    alternative minimum tax, gift tax or estate tax consequences, if any; or
 
    
    any state, local or foreign tax consequences.
  Consequences of Tendering Notes
  The preceding discussion of certain material U.S. federal income tax consequences is for
general information only and is not tax advice. Accordingly, each investor is urged to consult its
own tax advisor as to the particular tax consequences to it of exchanging Restricted Notes for
Exchange Notes, including the applicability and effect of any U.S. federal, state, local or foreign
tax laws, and of any proposed changes in applicable laws.
 
 PLAN OF DISTRIBUTION
  131




---



##### 



LEGAL MATTERS
  
 EXPERTS
      132




---



##### 



WHERE YOU CAN FIND MORE INFORMATION
  www.sec.gov
   133




---



##### 



INDEX TO FINANCIAL STATEMENTS
 PageWestmoreland Coal Company and SubsidiariesConsolidated Balance Sheets (Unaudited) as of March 31, 2011 and December 31, 2010
    
    
    136Consolidated Statements of Operations (Unaudited) for the Three Months Ended March 31, 2011 and 2010
    
    
    138Consolidated Statement of Shareholders Deficit (Unaudited) for the Three Months Ended March 31, 2011
    
    
    139Consolidated Statements of Cash Flows (Unaudited) for the Three Months Ended March 31, 2011 and 2010
    
    
    140Notes to Consolidated Financial Statements (Unaudited) for the Three Months Ended March 31, 2011 and 2010
    
    
    141Reports of Independent Registered Public Accounting Firms
    
    
    162Consolidated Balance Sheets as of December 31, 2010 and 2009
    
    
    164Consolidated Statements of Operations for the Years Ended December 31, 2010, 2009 and 2008
    
    
    166Consolidated Statements of Shareholders Deficit and Comprehensive Loss for the Years Ended
December 31, 2010, 2009 and 2008
    
    
    167Consolidated Statements of Cash Flows for the Years Ended December 31, 2010, 2009 and 2008
    
    
    168Notes to Consolidated Financial Statements for the Years Ended December 31, 2010, 2009 and 2008
    
    
    169Other Financial Statements of Certain Westmoreland Coal Company SubsidiariesThe following financial statements for certain of Westmoreland Coal Companys wholly owned
subsidiaries are included pursuant to Regulation S-X, Rule 3-16, Financial Statements of
Affiliates Whose Securities Collateralize an Issue Registered of Being Registered.Westmoreland Resources, Inc. and subsidiaryReports of Independent Registered Public Accounting Firms
    
    
    216Consolidated Balance Sheets as of December 31, 2010 and 2009
    
    
    218Consolidated Statements of Operations for the Years Ended December 31, 2010, 2009 and 2008
    
    
    219Consolidated Statements of Shareholders Equity and Comprehensive Income (Loss) for the Years Ended
December 31, 2010, 2009 and 2008
    
    
    220Consolidated Statements of Cash Flows for the Years Ended December 31, 2010, 2009 and 2008
    
    
    221Notes to Consolidated Financial Statements for the Years Ended December 31, 2010, 2009 and 2008
    
    
    222
 134




---



##### 



PageWestmoreland Energy LLCReports of Independent Registered Public Accounting Firms
    
    
    236Consolidated Balance Sheets as of December 31, 2010 and 2009
    
    
    238Consolidated Statements of Operations for the Years Ended December 31, 2010, 2009 and 2008
    
    
    239Consolidated Statements of Members Equity and Comprehensive Income (Loss) for the Years Ended
December 31, 2010, 2009 and 2008
    
    
    240Consolidated Statements of Cash Flows for the Years Ended December 31, 2010, 2009 and 2008
    
    
    241Notes to Consolidated Financial Statements for the Years Ended December 31, 2010, 2009 and 2008
    
    
    242
 135




---



##### 



WESTMORELAND COAL COMPANY AND SUBSIDIARIES
 Westmoreland Coal Company and Subsidiaries
Consolidated Balance Sheets
 March 31,
    
    
    December 31,2011
    
    
    2010(Unaudited)
    
    
    (Audited)(In thousands)AssetsCurrent assets:Cash and cash equivalents
    
    $
    44,984
    
    
    $
    5,775Receivables:Trade
    
    
    49,776
    
    
    
    50,578Contractual third-party reclamation receivables
    
    
    7,638
    
    
    
    7,743Other
    
    
    3,620
    
    
    
    4,54561,034
    
    
    
    62,866Inventories
    
    
    26,180
    
    
    
    23,571Other current assets
    
    
    5,461
    
    
    
    5,335Total current assets
    
    
    137,659
    
    
    
    97,547Property, plant and equipment:Land and mineral rights
    
    
    83,893
    
    
    
    83,824Capitalized asset retirement cost
    
    
    114,856
    
    
    
    114,856Plant and equipment
    
    
    509,013
    
    
    
    506,661707,762
    
    
    
    705,341Less accumulated depreciation, depletion and amortization
    
    
    (299,381
    )
    
    
    (288,386
    )Net property, plant and equipment
    
    
    408,381
    
    
    
    416,955Advanced coal royalties
    
    
    3,532
    
    
    
    3,695Reclamation deposits
    
    
    73,007
    
    
    
    72,274Restricted investments and bond collateral
    
    
    55,701
    
    
    
    55,384Contractual third-party reclamation receivables, less current portion
    
    
    88,514
    
    
    
    87,739Deferred income taxes
    
    
    2,900
    
    
    
    2,458Intangible assets, net of accumulated amortization of $9.5 million
and $9.1 million at March 31, 2011, and December 31, 2010,
respectively
    
    
    6,137
    
    
    
    6,555Other assets
    
    
    12,156
    
    
    
    7,699Total Assets
    
    $
    787,987
    
    
    $
    750,306
  136




---



##### 



Westmoreland Coal Company and Subsidiaries

Consolidated Balance Sheets
 March 31,
    
    
    December 31,2011
    
    
    2010(Unaudited)
    
    
    (Audited)(In thousands)Liabilities and Shareholders DeficitCurrent liabilities:Current installments of long-term debt
    
    $
    17,673
    
    
    $
    14,973Accounts payable and accrued expenses:Trade
    
    
    44,354
    
    
    
    46,247Production taxes
    
    
    28,467
    
    
    
    26,317Workers compensation
    
    
    951
    
    
    
    954Postretirement medical benefits
    
    
    13,581
    
    
    
    13,581SERP
    
    
    304
    
    
    
    304Deferred revenue
    
    
    10,594
    
    
    
    10,209Asset retirement obligations
    
    
    15,235
    
    
    
    14,514Other current liabilities
    
    
    7,524
    
    
    
    6,241Total current liabilities
    
    
    138,683
    
    
    
    133,340Long-term debt, less current installments
    
    
    276,689
    
    
    
    208,731Revolving lines of credit
    
    
    
    
    
    
    18,400Workers compensation, less current portion
    
    
    9,360
    
    
    
    9,424Excess of pneumoconiosis benefit obligation over trust assets
    
    
    2,726
    
    
    
    2,246Postretirement medical benefits, less current portion
    
    
    196,726
    
    
    
    197,279Pension and SERP obligations, less current portion
    
    
    19,683
    
    
    
    20,462Deferred revenue, less current portion
    
    
    73,025
    
    
    
    75,395Asset retirement obligations, less current portion
    
    
    227,117
    
    
    
    227,129Intangible liabilities, net of accumulated amortization $9.6
million at March 31, 2011, and $9.4 million at December 31,
2010, respectively
    
    
    8,409
    
    
    
    8,663Other liabilities
    
    
    9,496
    
    
    
    11,592Total liabilities
    
    
    961,914
    
    
    
    912,661Shareholders deficit:Preferred stock of $1.00 par value
Authorized 5,000,000 shares;
Issued and outstanding 160,129 shares at
March 31, 2011, and December 31, 2010
    
    
    160
    
    
    
    160Common stock of $2.50 par value Authorized 30,000,000 shares;
Issued and outstanding 13,155,263 shares at
March 31, 2011, and 11,160,798 shares at
December 31, 2010
    
    
    32,887
    
    
    
    27,901Other paid-in capital
    
    
    120,748
    
    
    
    98,466Accumulated other comprehensive loss
    
    
    (57,507
    )
    
    
    (57,680
    )Accumulated deficit
    
    
    (264,632
    )
    
    
    (226,740
    )Total Westmoreland Coal Company shareholders deficit
    
    
    (168,344
    )
    
    
    (157,893
    )Noncontrolling interest
    
    
    (5,583
    )
    
    
    (4,462
    )Total deficit
    
    
    (173,927
    )
    
    
    (162,355
    )Total Liabilities and Shareholders Deficit
    
    $
    787,987
    
    
    $
    750,306
  137




---



##### 



Westmoreland Coal Company and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
 Three Months EndedMarch 31,2011
    
    
    2010(In thousands, exceptper share data)Revenues
    
    $
    127,764
    
    
    $
    126,439Cost, expenses and other:Cost of sales
    
    
    97,510
    
    
    
    97,677Depreciation, depletion and amortization
    
    
    11,245
    
    
    
    11,392Selling and administrative
    
    
    9,305
    
    
    
    9,976Heritage health benefit expenses
    
    
    3,778
    
    
    
    3,915Loss on sales of assets
    
    
    83
    
    
    
    71Other operating income
    
    
    (1,597
    )
    
    
    (1,906
    )120,324
    
    
    
    121,125Operating income
    
    
    7,440
    
    
    
    5,314Other income (expense):Interest expense
    
    
    (6,967
    )
    
    
    (5,723
    )Loss on extinguishment of debt
    
    
    (17,030
    )
    
    
    Interest income
    
    
    382
    
    
    
    410Other loss
    
    
    (3,017
    )
    
    
    (3,836
    )(26,632
    )
    
    
    (9,149
    )Loss before income taxes
    
    
    (19,192
    )
    
    
    (3,835
    )Income tax benefit from operations
    
    
    (460
    )
    
    
    (90
    )Net loss
    
    
    (18,732
    )
    
    
    (3,745
    )Less net loss attributable to noncontrolling interest
    
    
    (1,121
    )
    
    
    (890
    )Net loss attributable to the Parent company
    
    
    (17,611
    )
    
    
    (2,855
    )Less preferred stock dividend requirements
    
    
    340
    
    
    
    340Net loss applicable to common shareholders
    
    $
    (17,951
    )
    
    $
    (3,195
    )Net loss per share applicable to common shareholders:Basic and diluted
    
    $
    (1.45
    )
    
    $
    (0.30
    )Weighted average number of common shares outstanding:Basic and diluted
    
    
    12,369
    
    
    
    10,521Net loss (from above)
    
    $
    (18,732
    )
    
    $
    (3,745
    )Other comprehensive loss:Tax effect of other comprehensive income gains
    
    
    (110
    )
    
    
    Amortization of accumulated actuarial gains or
losses and transition obligations, pension
    
    
    385
    
    
    
    228Amortization of accumulated actuarial gains or
losses transition obligations and prior service
costs, postretirement medical benefits
    
    
    (72
    )
    
    
    (68
    )Unrealized and realized gain on available-for-sale
securities
    
    
    (30
    )
    
    
    (499
    )Comprehensive loss
    
    $
    (18,559
    )
    
    $
    (4,084
    )
  138




---



##### 



Westmoreland Coal Company and Subsidiaries
Consolidated Statement of Shareholders Deficit
Three Months Ended March 31, 2011
(Unaudited)
 Class AConvertibleExchangeable
    
    
    
    
    
    
    Other Paid-In
    
    
    Accumulated Other
    
    
    
    
    
    
    Non-
    
    
    Total
ShareholdersPreferred Stock
    
    
    Common Stock
    
    
    Capital
    
    
    Compre-hensive Loss
    
    
    Accumulated Deficit
    
    
    controlling Interest
    
    
    Equity (Deficit)(In thousands)Balance at December 31, 2010 (160,129 preferred
shares and 11,160,798 common shares outstanding)
    
    $
    160
    
    
    $
    27,901
    
    
    $
    98,466
    
    
    $
    (57,680
    )
    
    $
    (226,740
    )
    
    $
    (4,462
    )
    
    $
    (162,355
    )Preferred dividends paid
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (20,281
    )
    
    
    
    
    
    
    (20,281
    )Common stock issued as compensation (104,019
shares)
    
    
    
    
    
    
    260
    
    
    
    1,393
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,653Common stock options exercised (12,500 shares)
    
    
    
    
    
    
    31
    
    
    
    100
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    131Conversion of convertible notes (1,877,946 shares)
    
    
    
    
    
    
    4,695
    
    
    
    20,789
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    25,484Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (17,611
    )
    
    
    (1,121
    )
    
    
    (18,732
    )Tax effect of other comprehensive income gains
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (110
    )
    
    
    
    
    
    
    
    
    
    
    (110
    )Amortization of accumulated actuarial gains or
losses and transition obligations, pension
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    385
    
    
    
    
    
    
    
    
    
    
    
    385Amortization of accumulated actuarial gains or
losses, transition obligations and prior service
costs, postretirement medical benefits
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (72
    )
    
    
    
    
    
    
    
    
    
    
    (72
    )Unrealized losses on available-for-sale securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (30
    )
    
    
    
    
    
    
    
    
    
    
    (30
    )Balance at March 31, 2011 (160,129 preferred shares
and 13,155,263 common shares outstanding)
    
    $
    160
    
    
    $
    32,887
    
    
    $
    120,748
    
    
    $
    (57,507
    )
    
    $
    (264,632
    )
    
    $
    (5,583
    )
    
    $
    (173,927
    )
  139




---



##### 



Westmoreland Coal Company and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
 Three Months Ended March 31,2011
    
    
    2010(In thousands)Cash flows from operating activities:Net loss
    
    $
    (18,732
    )
    
    $
    (3,745
    )Adjustments to reconcile net loss to net cash provided by operating activities:Depreciation, depletion and amortization
    
    
    11,245
    
    
    
    11,392Accretion of asset retirement obligation and receivable
    
    
    2,700
    
    
    
    3,003Amortization of intangible assets and liabilities, net
    
    
    163
    
    
    
    85Non-cash tax benefits
    
    
    (110
    )
    
    
    Share-based compensation
    
    
    1,653
    
    
    
    1,363Loss on sales of assets
    
    
    83
    
    
    
    71Non-cash interest expense
    
    
    
    
    
    
    388Amortization of deferred financing costs
    
    
    635
    
    
    
    523Loss on extinguishment of debt
    
    
    17,030
    
    
    
    Gain on impairment and sales of investment securities
    
    
    
    
    
    
    (659
    )Loss on derivative instruments
    
    
    3,079
    
    
    
    4,515Changes in operating assets and liabilities:Receivables, net
    
    
    3,630
    
    
    
    (3,866
    )Inventories
    
    
    (2,609
    )
    
    
    (1,502
    )Excess of pneumoconiosis benefit obligation over trust assets
    
    
    480
    
    
    
    347Accounts payable and accrued expenses
    
    
    2,009
    
    
    
    3,770Deferred revenue
    
    
    (1,985
    )
    
    
    617Accrual for workers compensation
    
    
    (67
    )
    
    
    (51
    )Asset retirement obligation
    
    
    (2,661
    )
    
    
    (1,875
    )Accrual for postretirement medical benefits
    
    
    (625
    )
    
    
    (361
    )Pension and SERP obligations
    
    
    (394
    )
    
    
    (39
    )Other assets and liabilities
    
    
    658
    
    
    
    (680
    )Net cash provided by (used) in operating activities
    
    
    16,182
    
    
    
    13,296Cash flows from investing activities:Additions to property, plant and equipment
    
    
    (2,923
    )
    
    
    (4,337
    )Change in restricted investments and bond collateral and reclamation deposits
    
    
    (1,080
    )
    
    
    (592
    )Net proceeds from sales of assets
    
    
    22
    
    
    
    379Proceeds from the sale of investments
    
    
    
    
    
    
    1,119Receivable from customer for property and equipment purchases
    
    
    (1,903
    )
    
    
    (510
    )Net cash used in investing activities
    
    
    (5,884
    )
    
    
    (3,941
    )Cash flows from financing activities:Change in book overdrafts
    
    
    108
    
    
    
    890Borrowings from long-term debt, net of debt discount
    
    
    142,500
    
    
    
    Repayments of long-term debt
    
    
    (60,391
    )
    
    
    (8,112
    )Borrowings on revolving lines of credit
    
    
    50,700
    
    
    
    28,400Repayments of revolving lines of credit
    
    
    (69,100
    )
    
    
    (23,300
    )Debt issuance and other refinancing costs
    
    
    (14,756
    )
    
    
    Preferred dividends paid
    
    
    (20,281
    )
    
    
    Exercise of stock options
    
    
    131
    
    
    
    8Net cash provided by (used in) financing activities
    
    
    28,911
    
    
    
    (2,114
    )Net increase in cash and cash equivalents
    
    
    39,209
    
    
    
    7,241Cash and cash equivalents, beginning of period
    
    
    5,775
    
    
    
    10,519Cash and cash equivalents, end of period
    
    $
    44,984
    
    
    $
    17,760Non-cash transactions:Capital leases
    
    $
    
    
    
    $
    866
  140




---



##### 



Westmoreland Coal Company and Subsidiaries
 Notes to Consolidated Financial Statements  (Unaudited)
 1. BASIS OF PRESENTATION
      2. ACCOUNTING POLICIES
 Newly Adopted Accounting Pronouncements
  141




---



##### 



3. INVENTORIES
  March 31,
    
    
    December 31,2011
    
    
    2010(In thousands)Coal stockpiles
    
    $
    694
    
    
    $
    678Coal fuel inventories
    
    
    3,808
    
    
    
    1,936Materials and supplies
    
    
    22,258
    
    
    
    21,538Reserve for obsolete inventory
    
    
    (580
    )
    
    
    (581
    )Total
    
    $
    26,180
    
    
    $
    23,571
 4. RESTRICTED INVESTMENTS AND BOND COLLATERAL
  March 31,
    
    
    December 31,2011
    
    
    2010(In thousands)Coal Segment:Westmoreland Mining  debt reserve account
    
    $
    9,964
    
    
    $
    7,514Reclamation bond collateral:Rosebud Mine
    
    
    12,264
    
    
    
    12,263Absaloka Mine
    
    
    10,974
    
    
    
    10,956Jewett Mine
    
    
    3,001
    
    
    
    3,001Beulah Mine
    
    
    1,270
    
    
    
    1,270Power Segment:Letter of credit account
    
    
    5,976
    
    
    
    5,990Debt protection account
    
    
    
    
    
    
    905Repairs and maintenance account
    
    
    
    
    
    
    1,067Ash reserve account
    
    
    
    
    
    
    602Corporate Segment:Workers compensation bonds
    
    
    6,390
    
    
    
    6,350Postretirement medical benefit bonds
    
    
    5,862
    
    
    
    5,466Total restricted investments and bond
collateral
    
    $
    55,701
    
    
    $
    55,384
  Accumulated other
comprehensive loss
 142




---



##### 



Carrying Value
    
    
    Fair Value(In thousands)Cash and cash equivalents
    
    $
    42,606
    
    
    $
    42,606Time deposits
    
    
    7,679
    
    
    
    7,679Held-to-maturity securities
    
    
    2,544
    
    
    
    2,853Available-for-sale securities
    
    
    2,872
    
    
    
    2,872$
    55,701
    
    
    $
    56,010
  Held-to-Maturity and Available-for-Sale Restricted Investments and Bond Collateral
  Amortized cost
    
    $
    2,544Gross unrealized holding gains
    
    
    309Fair value
    
    $
    2,853
  Amortized Cost
    
    
    Fair Value(In thousands)Due in five years or less
    
    $
    659
    
    
    $
    730Due after five years to ten years
    
    
    772
    
    
    
    857Due in more than ten years
    
    
    1,113
    
    
    
    1,266$
    2,544
    
    
    $
    2,853
  Cost basis
    
    $
    2,566Gross unrealized holding gains
    
    
    306Fair value
    
    $
    2,872
 143




---



##### 



5. LINES OF CREDIT AND LONG-TERM DEBT
  Total Debt OutstandingMarch 31,
    
    
    December 31,2011
    
    
    2010(In thousands)Corporate:Senior secured notes
    
    $
    150,000
    
    
    $
    Convertible notes
    
    
    
    
    
    
    18,495Debt discount
    
    
    (7,383
    )
    
    
    (4,823
    )Westmoreland Mining, LLC:Revolving line of credit
    
    
    
    
    
    
    1,500Term debt
    
    
    125,000
    
    
    
    125,000Capital lease obligations
    
    
    17,184
    
    
    
    18,407Other term debt
    
    
    2,368
    
    
    
    2,556Westmoreland Resources, Inc.:Revolving line of credit
    
    
    
    
    
    
    16,900Term debt
    
    
    
    
    
    
    9,600Capital lease obligations
    
    
    7,193
    
    
    
    7,821ROVA:Term debt
    
    
    
    
    
    
    46,220Debt premiums
    
    
    
    
    
    
    428Total debt outstanding
    
    
    294,362
    
    
    
    242,104Less current portion
    
    
    (17,673
    )
    
    
    (14,973
    )Total debt outstanding, less current portion
    
    $
    276,689
    
    
    $
    227,131
  Remainder of 2011
    
    $
    12,9342012
    
    
    21,5122013
    
    
    24,8152014
    
    
    22,5652015
    
    
    21,910Thereafter
    
    
    198,009Total
    
    
    301,745Less: debt discount
    
    
    (7,383
    )Total debt
    
    $
    294,362
 Corporate
   144




---



##### 



Westmoreland Mining LLC
    Westmoreland Resources, Inc.
   ROVA
  Convertible Debt
  6. PENSION AND POSTRETIREMENT MEDICAL BENEFITS
 Pension
  145




---



##### 



Three Months EndedMarch 31,2011
    
    
    2010(In thousands)Components of net periodic benefit cost:Service cost
    
    $
    153
    
    
    $
    196Interest cost
    
    
    1,120
    
    
    
    1,606Expected return on plan assets
    
    
    (1,106
    )
    
    
    (1,299
    )Amortization of deferred items
    
    
    385
    
    
    
    228Total net periodic benefit cost
    
    $
    552
    
    
    $
    731
   Postretirement Medical Benefits
   Three Months EndedMarch 31,2011
    
    
    2010(In thousands)Components of net periodic benefit cost:Service cost
    
    $
    123
    
    
    $
    141Interest cost
    
    
    2,627
    
    
    
    2,752Amortization of deferred items
    
    
    (72
    )
    
    
    (68
    )Total net periodic benefit cost
    
    $
    2,678
    
    
    $
    2,825
  Three Months EndedMarch 31,2011
    
    
    2010(In thousands)Former mining operations
    
    $
    2,314
    
    
    $
    2,518Current operations
    
    
    364
    
    
    
    307Total net periodic benefit cost
    
    $
    2,678
    
    
    $
    2,825
 Heritage health benefit
expenses
 146




---



##### 



7. HERITAGE HEALTH BENEFIT EXPENSES
 Heritage health benefit expenses
 Three Months EndedMarch 31,2011
    
    
    2010(In thousands)Health care benefits
    
    $
    2,454
    
    
    $
    2,676Combined benefit fund payments
    
    
    686
    
    
    
    756Workers compensation benefits
    
    
    158
    
    
    
    136Black lung benefits
    
    
    480
    
    
    
    347Total
    
    $
    3,778
    
    
    $
    3,915
 8. ASSET RETIREMENT OBLIGATIONS, CONTRACTUAL THIRD-PARTY RECLAMATION RECEIVABLES, AND
RECLAMATION DEPOSITS
  ContractualAsset
    
    
    Third-PartyRetirement
    
    
    Reclamation
    
    
    ReclamationObligations
    
    
    Receivables
    
    
    Deposits(In thousands)Rosebud
    
    $
    107,247
    
    
    $
    14,797
    
    
    $
    73,007Jewett
    
    
    80,816
    
    
    
    80,816
    
    
    
    Absaloka
    
    
    32,437
    
    
    
    539
    
    
    
    Beulah
    
    
    18,390
    
    
    
    
    
    
    
    Savage
    
    
    2,733
    
    
    
    
    
    
    
    ROVA
    
    
    729
    
    
    
    
    
    
    
    Total
    
    $
    242,352
    
    
    $
    96,152
    
    
    $
    73,007
 Asset Retirement Obligations
  Three Months EndedMarch 31,2011
    
    
    2010(In thousands)Asset retirement obligations, beginning of period
    
    $
    241,643
    
    
    $
    244,615Accretion
    
    
    5,019
    
    
    
    4,792Liabilities settled
    
    
    (4,310
    )
    
    
    (3,906
    )Asset retirement obligations, end of period
    
    
    242,352
    
    
    
    245,501Less current portion
    
    
    (15,235
    )
    
    
    (16,675
    )Asset retirement obligations, less current portion
    
    $
    227,117
    
    
    $
    228,826
 147




---



##### 



Contractual Third-Party Reclamation Receivables
  Reclamation Deposits
  Carrying Value
    
    
    Fair Value(In thousands)Cash and cash equivalents
    
    $
    36,146
    
    
    $
    36,146Held-to-maturity securities
    
    
    18,767
    
    
    
    20,036Time deposits
    
    
    15,903
    
    
    
    15,903Available-for-sale securities
    
    
    2,191
    
    
    
    2,191$
    73,007
    
    
    $
    74,276
 Held-to-maturity and Available-for-sale Reclamation Deposits
  Amortized cost
    
    $
    18,767Gross unrealized holding gains
    
    
    1,341Gross unrealized holding losses
    
    
    (72
    )Fair value
    
    $
    20,036
  Amortized Cost
    
    
    Fair Value(In thousands)Due in five years or less
    
    $
    7,529
    
    
    $
    7,854Due after five years to ten years
    
    
    4,067
    
    
    
    4,177Due in more than ten years
    
    
    7,171
    
    
    
    8,005$
    18,767
    
    
    $
    20,036
  Cost basis
    
    $
    2,000Gross unrealized holding gains
    
    
    191Fair value
    
    $
    2,191
 148




---



##### 



9. DERIVATIVE INSTRUMENTS
 Derivative Liabilities
   Stock Price
    
    Bond Yield$13.57
    
    4.55%
  Balance Sheet
    
    
    March 31,
    
    
    December 31,Derivative Instruments
    
    Location
    
    
    2011
    
    
    2010(In thousands)Convertible debt  conversion feature
    
    Other liabilities
    
    $
    
    
    
    $
    3,588
  Three Months EndedStatement of
    
    
    March 31,Derivative Instruments
    
    Operations Location
    
    
    2011
    
    
    2010(In thousands)Convertible debt 
conversion feature
    
    Other income (loss)
    
    $
    (3,079
    )
    
    $
    (4,521
    )Warrant
    
    Other income (loss)
    
    
    
    
    
    
    6
 10. FAIR VALUE MEASUREMENTS
   
    
    Level 1, defined as observable inputs such as quoted prices in active markets for
identical assets.
    
    Level 2, defined as observable inputs other than Level 1 prices. These include
quoted prices for similar assets or liabilities in an active market, quoted prices for
identical assets and liabilities in markets that are not active, or other inputs that
are observable or can be corroborated by observable market data for substantially the
full term of the assets or liabilities.
    
    Level 3, defined as unobservable inputs in which little or no market data exists,
therefore requiring an entity to develop its own assumptions.
 149




---



##### 



Fair Value atMarch 31, 2011Level 1(In thousands)Assets:Available-for-sale investments
included in Restricted
investments and bond collateral
    
    $
    2,872Available-for-sale investments
included in Reclamation deposits
    
    
    2,191Total assets
    
    $
    5,063
  Three Months EndedMarch 31, 2011(In thousands)Beginning balance
    
    $
    3,588Change in fair value
    
    
    3,079Settlements
    
    
    (6,667
    )Ending balance
    
    $
    
  Carrying Value
    
    
    Fair Value(In thousands)December 31, 2010
    
    $
    185,320
    
    
    $
    196,483March 31, 2011
    
    $
    267,617
    
    
    $
    278,465
 11. SHAREHOLDERS EQUITY
 Preferred Stock
  12. RESTRICTED STOCK UNITS, STOCK OPTIONS, AND STOCK APPRECIATION RIGHTS (SARs)
  Three Months EndedMarch 31,2011
    
    
    2010(In thousands)Recognition of fair value of restricted stock
units, stock options, and stock appreciation
rights over vesting period; and issuance of common
stock
    
    $
    569
    
    
    $
    225Contributions of stock to the Companys 401(k) plan
    
    
    1,084
    
    
    
    1,138Total share-based compensation expense
    
    $
    1,653
    
    
    $
    1,363
 150




---



##### 



Restricted Stock Units
  Weighted Average
    
    
    UnamortizedGrant-Date Fair
    
    
    Compensation ExpenseUnits
    
    
    Value
    
    
    (In thousands)Non-vested at December 31, 2010
    
    
    192,697
    
    
    $
    8.13Non-vested at March 31, 2011
    
    
    192,697
    
    
    $
    8.13
    
    
    $
    1,118
    (1)
 
 1
    
    Expected to be recognized over the next two years.  Stock Options
  Weighted
    
    
    
    
    
    
    UnamortizedAverage Remaining
    
    
    Aggregate Intrinsic
    
    
    CompensationWeighted Average
    
    
    Contractual Life
    
    
    Value
    
    
    ExpenseStock Options
    
    
    Exercise Price
    
    
    (in years)
    
    
    (In thousands)
    
    
    (In thousands)Outstanding at December 31, 2010
    
    
    318,590
    
    
    $
    18.99Exercised
    
    
    (12,500
    )
    
    $
    10.48
    
    
    
    
    
    
    $
    49Expired or forfeited
    
    
    (20,000
    )
    
    $
    12.04Outstanding at March 31, 2011
    
    
    286,090
    
    
    $
    19.86
    
    
    
    4.5
    
    
    $
    17Options exercisable at March 31, 2011
    
    
    241,334
    
    
    $
    19.57
    
    
    
    4.0
    
    
    $
    17
    
    
    $
    131
    (1)
 
 1
    
    Expected to be recognized over the next three months. Stock Appreciation Rights
  Weighted Average
    
    
    
    
    
    
    UnamortizedRemaining Contractual
    
    
    Aggregate Intrinsic
    
    
    CompensationWeighted Average
    
    
    Life
    
    
    Value
    
    
    ExpenseSARs
    
    
    Base Price
    
    
    (in years)
    
    
    (In thousands)
    
    
    (In thousands)Outstanding at December 31, 2010
    
    
    118,934
    
    
    $
    22.13Outstanding and exercisable at March 31, 2011
    
    
    118,934
    
    
    $
    22.13
    
    
    
    4.2
    
    
    $
    
    
    
    $
    
 13. EARNINGS PER SHARE
  151




---



##### 



Three Months EndedMarch 31,2011
    
    
    2010(In thousands)Convertible notes and securities
    
    
    1,094
    
    
    
    2,859Restricted stock units, stock
options, SARs, and warrant
shares
    
    
    598
    
    
    
    776Total shares excluded from
diluted shares calculation
    
    
    1,692
    
    
    
    3,635
 14. BUSINESS SEGMENT INFORMATION
    Coal
    
    
    Power
    
    
    Heritage
    
    
    Corporate
    
    
    Consolidated(In thousands)Three Months Ended March 31, 2011Revenues
    
    $
    104,136
    
    
    $
    23,628
    
    
    $
    
    
    
    $
    
    
    
    $
    127,764Depreciation, depletion, and
amortization
    
    
    8,613
    
    
    
    2,553
    
    
    
    
    
    
    
    79
    
    
    
    11,245Operating income (loss)
    
    
    8,819
    
    
    
    4,619
    
    
    
    (4,170
    )
    
    
    (1,828
    )
    
    
    7,440Total assets
    
    
    516,725
    
    
    
    206,894
    
    
    
    12,541
    
    
    
    51,827
    
    
    
    787,987Capital expenditures
    
    
    2,688
    
    
    
    227
    
    
    
    
    
    
    
    8
    
    
    
    2,923Three Months Ended March 31, 2010Revenues
    
    $
    103,550
    
    
    $
    22,889
    
    
    $
    
    
    
    $
    
    
    
    $
    126,439Depreciation, depletion, and
amortization
    
    
    8,757
    
    
    
    2,536
    
    
    
    
    
    
    
    99
    
    
    
    11,392Operating income (loss)
    
    
    7,352
    
    
    
    4,172
    
    
    
    (4,255
    )
    
    
    (1,955
    )
    
    
    5,314Total assets
    
    
    538,886
    
    
    
    220,127
    
    
    
    11,247
    
    
    
    8,258
    
    
    
    778,518Capital expenditures
    
    
    3,829
    
    
    
    68
    
    
    
    
    
    
    
    440
    
    
    
    4,337
  Three Months EndedMarch 31,2011
    
    
    2010(In thousands)Operating income
    
    $
    7,440
    
    
    $
    5,314Interest expense
    
    
    (6,967
    )
    
    
    (5,723
    )Loss on extinguishment of debt
    
    
    (17,030
    )
    
    
    Interest income
    
    
    382
    
    
    
    410Other loss
    
    
    (3,017
    )
    
    
    (3,836
    )Loss before income taxes
    
    $
    (19,192
    )
    
    $
    (3,835
    )
 152




---



##### 



15. CONTINGENCIES
  16. SUPPLEMENTAL CONSOLIDATING FINANCIAL INFORMATION
  153




---



##### 



CONSOLIDATING BALANCE SHEETS
March 31, 2011
(In thousands)
 Parent/
    
    
    
    
    
    
    Guarantor
    
    
    Non-Guarantor
    
    
    ConsolidatingAssets
    
    Issuer
    
    
    Co-Issuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Adjustments
    
    
    TotalCurrent assets:Cash and cash equivalents
    
    $
    36,770
    
    
    $
    3,715
    
    
    $
    161
    
    
    $
    4,338
    
    
    $
    
    
    
    $
    44,984Receivables:Trade
    
    
    
    
    
    
    13,880
    
    
    
    9
    
    
    
    35,887
    
    
    
    
    
    
    
    49,776Contractual third-party reclamation
receivables
    
    
    
    
    
    
    
    
    
    
    127
    
    
    
    7,511
    
    
    
    
    
    
    
    7,638Intercompany receivable/payable
    
    
    (20,135
    )
    
    
    
    
    
    
    10,050
    
    
    
    (23,504
    )
    
    
    33,589
    
    
    
    Other
    
    
    161
    
    
    
    221
    
    
    
    8,973
    
    
    
    109
    
    
    
    (5,844
    )
    
    
    3,620(19,974
    )
    
    
    14,101
    
    
    
    19,159
    
    
    
    20,003
    
    
    
    27,745
    
    
    
    61,034Inventories
    
    
    
    
    
    
    3,808
    
    
    
    4,209
    
    
    
    18,163
    
    
    
    
    
    
    
    26,180Other current assets
    
    
    745
    
    
    
    423
    
    
    
    554
    
    
    
    3,739
    
    
    
    
    
    
    
    5,461Total current assets
    
    
    17,541
    
    
    
    22,047
    
    
    
    24,083
    
    
    
    46,243
    
    
    
    27,745
    
    
    
    137,659Property, plant and equipment:Land and mineral rights
    
    
    
    
    
    
    1,156
    
    
    
    17,806
    
    
    
    64,931
    
    
    
    
    
    
    
    83,893Capitalized asset retirement cost
    
    
    
    
    
    
    239
    
    
    
    20,463
    
    
    
    94,154
    
    
    
    
    
    
    
    114,856Plant and equipment
    
    
    2,619
    
    
    
    216,391
    
    
    
    117,447
    
    
    
    172,556
    
    
    
    
    
    
    
    509,0132,619
    
    
    
    217,786
    
    
    
    155,716
    
    
    
    331,641
    
    
    
    
    
    
    
    707,762Less accumulated depreciation,
depletion and amortization
    
    
    (2,066
    )
    
    
    (44,709
    )
    
    
    (84,290
    )
    
    
    (168,316
    )
    
    
    
    
    
    
    (299,381
    )Net property, plant and equipment
    
    
    553
    
    
    
    173,077
    
    
    
    71,426
    
    
    
    163,325
    
    
    
    
    
    
    
    408,381Advanced coal royalties
    
    
    
    
    
    
    
    
    
    
    848
    
    
    
    2,684
    
    
    
    
    
    
    
    3,532Reclamation deposits
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    73,007
    
    
    
    
    
    
    
    73,007Restricted investments and bond collateral
    
    
    12,251
    
    
    
    5,976
    
    
    
    10,975
    
    
    
    26,499
    
    
    
    
    
    
    
    55,701Contractual third-party reclamation
receivables, less current portion
    
    
    
    
    
    
    
    
    
    
    412
    
    
    
    88,102
    
    
    
    
    
    
    
    88,514Deferred income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,900
    
    
    
    2,900Intangible assets
    
    
    
    
    
    
    5,793
    
    
    
    
    
    
    
    344
    
    
    
    
    
    
    
    6,137Investment in subsidiaries
    
    
    157,792
    
    
    
    
    
    
    
    (717
    )
    
    
    3,770
    
    
    
    (160,845
    )
    
    
    Other assets
    
    
    7,385
    
    
    
    
    
    
    
    1,387
    
    
    
    3,384
    
    
    
    
    
    
    
    12,156Total assets
    
    $
    195,522
    
    
    $
    206,893
    
    
    $
    108,414
    
    
    $
    407,358
    
    
    $
    (130,200
    )
    
    $
    787,987
 154




---



##### 



CONSOLIDATING BALANCE SHEETS
March 31, 2011
(In thousands)
 Parent/
    
    
    
    
    
    
    Guarantor
    
    
    Non-Guarantor
    
    
    ConsolidatingLiabilities and Stockholders Deficit
    
    Issuer
    
    
    Co-Issuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Adjustments
    
    
    TotalCurrent liabilitiesCurrent installments of long-term debt
    
    $
    (735
    )
    
    $
    
    
    
    $
    2,296
    
    
    $
    16,112
    
    
    $
    
    
    
    $
    17,673Accounts payable and accrued expenses:Trade
    
    
    2,688
    
    
    
    9,733
    
    
    
    3,067
    
    
    
    35,015
    
    
    
    (6,149
    )
    
    
    44,354Production taxes
    
    
    
    
    
    
    334
    
    
    
    1,354
    
    
    
    26,779
    
    
    
    
    
    
    
    28,467Workers compensation
    
    
    951
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    951Postretirement medical benefits
    
    
    12,198
    
    
    
    
    
    
    
    
    
    
    
    1,383
    
    
    
    
    
    
    
    13,581SERP
    
    
    304
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    304Deferred revenue
    
    
    
    
    
    
    8,689
    
    
    
    37
    
    
    
    1,868
    
    
    
    
    
    
    
    10,594Asset retirement obligations
    
    
    
    
    
    
    
    
    
    
    3,184
    
    
    
    12,051
    
    
    
    
    
    
    
    15,235Other current liabilities
    
    
    2,571
    
    
    
    
    
    
    
    2,000
    
    
    
    2,925
    
    
    
    28
    
    
    
    7,524Total current liabilities
    
    
    17,977
    
    
    
    18,756
    
    
    
    11,938
    
    
    
    96,133
    
    
    
    (6,121
    )
    
    
    138,683Long-term debt, less current installments
    
    
    143,352
    
    
    
    
    
    
    
    4,897
    
    
    
    128,440
    
    
    
    
    
    
    
    276,689Workers compensation, less current portion
    
    
    9,360
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,360Excess of pneumoconiosis benefit obligation over
trust assets
    
    
    2,726
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,726Postretirement medical benefits, less current
portion
    
    
    168,953
    
    
    
    
    
    
    
    
    
    
    
    27,773
    
    
    
    
    
    
    
    196,726Pension and SERP obligations, less current portion
    
    
    15,709
    
    
    
    150
    
    
    
    
    
    
    
    3,824
    
    
    
    
    
    
    
    19,683Deferred revenue, less current portion
    
    
    
    
    
    
    65,050
    
    
    
    
    
    
    
    7,975
    
    
    
    
    
    
    
    73,025Asset retirement obligations, less current portion
    
    
    
    
    
    
    728
    
    
    
    29,253
    
    
    
    197,136
    
    
    
    
    
    
    
    227,117Intangible liabilities
    
    
    
    
    
    
    8,409
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,409Other liabilities
    
    
    473
    
    
    
    
    
    
    
    4,518
    
    
    
    1,435
    
    
    
    3,070
    
    
    
    9,496Intercompany receivable/payable
    
    
    10,899
    
    
    
    
    
    
    
    6,878
    
    
    
    28,507
    
    
    
    (46,284
    )
    
    
    Total liabilities
    
    
    369,449
    
    
    
    93,093
    
    
    
    57,484
    
    
    
    491,223
    
    
    
    (49,335
    )
    
    
    961,914Shareholders DeficitPreferred stock
    
    
    160
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    160Common stock
    
    
    32,887
    
    
    
    5
    
    
    
    110
    
    
    
    132
    
    
    
    (247
    )
    
    
    32,887Other paid-in capital
    
    
    120,748
    
    
    
    52,699
    
    
    
    16,583
    
    
    
    52,717
    
    
    
    (121,999
    )
    
    
    120,748Accumulated other comprehensive loss
    
    
    (57,507
    )
    
    
    (200
    )
    
    
    94
    
    
    
    (14,113
    )
    
    
    14,219
    
    
    
    (57,507
    )Accumulated deficit
    
    
    (264,632
    )
    
    
    61,296
    
    
    
    34,143
    
    
    
    (122,601
    )
    
    
    27,162
    
    
    
    (264,632
    )Total Westmoreland Coal Company shareholders
deficit
    
    
    (168,344
    )
    
    
    113,800
    
    
    
    50,930
    
    
    
    (83,865
    )
    
    
    (80,865
    )
    
    
    (168,344
    )Noncontrolling interest
    
    
    (5,583
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,583
    )Total deficit
    
    
    (173,927
    )
    
    
    113,800
    
    
    
    50,930
    
    
    
    (83,865
    )
    
    
    (80,865
    )
    
    
    (173,927
    )Total liabilities and stockholders deficit
    
    $
    195,522
    
    
    $
    206,893
    
    
    $
    108,414
    
    
    $
    407,358
    
    
    $
    (130,200
    )
    
    $
    787,987
 155




---



##### 



CONSOLIDATING BALANCE SHEETS
December 31, 2010
(In thousands)
 Parent/
    
    
    
    
    
    
    Guarantor
    
    
    Non-Guarantor
    
    
    ConsolidatingAssets
    
    Issuer
    
    
    Co-Issuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Adjustments
    
    
    TotalCurrent assets:Cash and cash equivalents
    
    $
    271
    
    
    $
    880
    
    
    $
    
    
    
    $
    4,624
    
    
    $
    
    
    
    $
    5,775Receivables:Trade
    
    
    
    
    
    
    14,148
    
    
    
    65
    
    
    
    36,365
    
    
    
    
    
    
    
    50,578Contractual third-party reclamation
receivables
    
    
    
    
    
    
    
    
    
    
    135
    
    
    
    7,608
    
    
    
    
    
    
    
    7,743Intercompany receivable/payable
    
    
    
    
    
    
    
    
    
    
    10,193
    
    
    
    (21,544
    )
    
    
    11,351
    
    
    
    Other
    
    
    66
    
    
    
    198
    
    
    
    4,917
    
    
    
    1,530
    
    
    
    (2,166
    )
    
    
    4,54566
    
    
    
    14,346
    
    
    
    15,310
    
    
    
    23,959
    
    
    
    9,185
    
    
    
    62,866Inventories
    
    
    
    
    
    
    1,935
    
    
    
    4,624
    
    
    
    17,012
    
    
    
    
    
    
    
    23,571Other current assets
    
    
    796
    
    
    
    224
    
    
    
    469
    
    
    
    3,944
    
    
    
    (98
    )
    
    
    5,335Total current assets
    
    
    1,133
    
    
    
    17,385
    
    
    
    20,403
    
    
    
    49,539
    
    
    
    9,087
    
    
    
    97,547Property, plant and equipment:Land and mineral rights
    
    
    
    
    
    
    1,156
    
    
    
    17,806
    
    
    
    64,862
    
    
    
    
    
    
    
    83,824Capitalized asset retirement cost
    
    
    
    
    
    
    239
    
    
    
    20,463
    
    
    
    94,154
    
    
    
    
    
    
    
    114,856Plant and equipment
    
    
    2,611
    
    
    
    215,851
    
    
    
    117,360
    
    
    
    170,839
    
    
    
    
    
    
    
    506,6612,611
    
    
    
    217,246
    
    
    
    155,629
    
    
    
    329,855
    
    
    
    
    
    
    
    705,341Less accumulated depreciation, depletion and
amortization
    
    
    (1,987
    )
    
    
    (42,156
    )
    
    
    (82,239
    )
    
    
    (162,004
    )
    
    
    
    
    
    
    (288,386
    )Net property, plant and equipment
    
    
    624
    
    
    
    175,090
    
    
    
    73,390
    
    
    
    167,851
    
    
    
    
    
    
    
    416,955Advanced coal royalties
    
    
    
    
    
    
    
    
    
    
    998
    
    
    
    2,697
    
    
    
    
    
    
    
    3,695Reclamation deposits
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    72,274
    
    
    
    
    
    
    
    72,274Restricted investments and bond collateral
    
    
    11,816
    
    
    
    8,563
    
    
    
    10,956
    
    
    
    24,049
    
    
    
    
    
    
    
    55,384Contractual third-party reclamation receivables
    
    
    
    
    
    
    
    
    
    
    390
    
    
    
    87,349
    
    
    
    
    
    
    
    87,739Deferred income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,458
    
    
    
    2,458Intangible assets
    
    
    
    
    
    
    6,203
    
    
    
    
    
    
    
    352
    
    
    
    
    
    
    
    6,555Investment in subsidiaries
    
    
    115,612
    
    
    
    
    
    
    
    (717
    )
    
    
    3,770
    
    
    
    (118,665
    )
    
    
    Other assets
    
    
    2,060
    
    
    
    401
    
    
    
    1,683
    
    
    
    3,555
    
    
    
    
    
    
    
    7,699Total assets
    
    $
    131,245
    
    
    $
    207,642
    
    
    $
    107,103
    
    
    $
    411,436
    
    
    $
    (107,120
    )
    
    $
    750,306
 156




---



##### 



CONSOLIDATING BALANCE SHEETS
December 31, 2010
(In thousands)
 Parent/
    
    
    
    
    
    
    Guarantor
    
    
    Non-Guarantor
    
    
    ConsolidatingLiabilities and Stockholders Deficit
    
    Issuer
    
    
    Co-Issuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Adjustments
    
    
    TotalCurrent liabilitiesCurrent installments of long-term debt
    
    $
    
    
    
    $
    
    
    
    $
    2,255
    
    
    $
    12,718
    
    
    $
    
    
    
    $
    14,973Accounts payable and accrued expenses:Trade
    
    
    5,187
    
    
    
    8,549
    
    
    
    3,283
    
    
    
    31,709
    
    
    
    (2,481
    )
    
    
    46,247Production taxes
    
    
    
    
    
    
    2
    
    
    
    1,084
    
    
    
    25,231
    
    
    
    
    
    
    
    26,317Workers compensation
    
    
    954
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    954Postretirement medical benefits
    
    
    12,198
    
    
    
    
    
    
    
    
    
    
    
    1,383
    
    
    
    
    
    
    
    13,581SERP
    
    
    304
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    304Deferred revenue
    
    
    
    
    
    
    8,805
    
    
    
    349
    
    
    
    1,055
    
    
    
    
    
    
    
    10,209Asset retirement obligations
    
    
    
    
    
    
    
    
    
    
    3,371
    
    
    
    11,143
    
    
    
    
    
    
    
    14,514Other current liabilities
    
    
    249
    
    
    
    782
    
    
    
    3,138
    
    
    
    2,164
    
    
    
    (92
    )
    
    
    6,241Total current liabilities
    
    
    18,892
    
    
    
    18,138
    
    
    
    13,480
    
    
    
    85,403
    
    
    
    (2,573
    )
    
    
    133,340Long-term debt, less current installments
    
    
    13,671
    
    
    
    46,648
    
    
    
    15,166
    
    
    
    133,246
    
    
    
    
    
    
    
    208,731Revolving lines of credit, less current portion
    
    
    
    
    
    
    
    
    
    
    16,900
    
    
    
    1,500
    
    
    
    
    
    
    
    18,400Workers compensation, less current portion
    
    
    9,424
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,424Excess of pneumoconiosis benefit obligation over
trust assets
    
    
    2,246
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,246Postretirement medical benefits, less current
portion
    
    
    169,677
    
    
    
    
    
    
    
    
    
    
    
    27,602
    
    
    
    
    
    
    
    197,279Pension and SERP obligations, less current portion
    
    
    16,105
    
    
    
    154
    
    
    
    
    
    
    
    4,203
    
    
    
    
    
    
    
    20,462Deferred revenue, less current portion
    
    
    
    
    
    
    67,308
    
    
    
    
    
    
    
    8,087
    
    
    
    
    
    
    
    75,395Asset retirement obligations, less current portion
    
    
    
    
    
    
    715
    
    
    
    28,967
    
    
    
    197,447
    
    
    
    
    
    
    
    227,129Intangible liabilities
    
    
    
    
    
    
    8,663
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,663Other liabilities
    
    
    4,153
    
    
    
    
    
    
    
    3,149
    
    
    
    1,409
    
    
    
    2,881
    
    
    
    11,592Intercompany receivable/payable
    
    
    59,432
    
    
    
    
    
    
    
    (19,590
    )
    
    
    26,424
    
    
    
    (66,266
    )
    
    
    Total liabilities
    
    
    293,600
    
    
    
    141,626
    
    
    
    58,072
    
    
    
    485,321
    
    
    
    (65,958
    )
    
    
    912,661Shareholders DeficitPreferred stock
    
    
    160
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    160Common stock
    
    
    27,901
    
    
    
    5
    
    
    
    110
    
    
    
    132
    
    
    
    (247
    )
    
    
    27,901Other paid-in capital
    
    
    98,466
    
    
    
    30
    
    
    
    16,036
    
    
    
    53,264
    
    
    
    (69,330
    )
    
    
    98,466Accumulated other comprehensive income
    
    
    (57,680
    )
    
    
    (203
    )
    
    
    120
    
    
    
    (14,353
    )
    
    
    14,436
    
    
    
    (57,680
    )Accumulated earnings (deficit)
    
    
    (226,740
    )
    
    
    66,184
    
    
    
    32,765
    
    
    
    (112,928
    )
    
    
    13,979
    
    
    
    (226,740
    )Total Westmoreland Coal Company shareholders
deficit
    
    
    (157,893
    )
    
    
    66,016
    
    
    
    49,031
    
    
    
    (73,885
    )
    
    
    (41,162
    )
    
    
    (157,893
    )Noncontrolling interest
    
    
    (4,462
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,462
    )Total equity (deficit)
    
    
    (162,355
    )
    
    
    66,016
    
    
    
    49,031
    
    
    
    (73,885
    )
    
    
    (41,162
    )
    
    
    (162,355
    )Total liabilities and stockholders deficit
    
    $
    131,245
    
    
    $
    207,642
    
    
    $
    107,103
    
    
    $
    411,436
    
    
    $
    (107,120
    )
    
    $
    750,306
 157




---



##### 



CONSOLIDATING STATEMENTS OF OPERATIONS
Three Months Ended March 31, 2011
(In thousands)
 Parent/
    
    
    
    
    
    
    Guarantor
    
    
    Non-Guarantor
    
    
    ConsolidatingIssuer
    
    
    Co-Issuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Adjustments
    
    
    TotalRevenues
    
    $
    
    
    
    $
    23,628
    
    
    $
    14,824
    
    
    $
    103,197
    
    
    $
    (13,885
    )
    
    $
    127,764Costs, expenses:Cost of sales
    
    
    
    
    
    
    15,559
    
    
    
    11,152
    
    
    
    84,684
    
    
    
    (13,885
    )
    
    
    97,510Depreciation, depletion and amortization
    
    
    79
    
    
    
    2,553
    
    
    
    2,051
    
    
    
    6,562
    
    
    
    
    
    
    
    11,245Selling and administrative
    
    
    2,379
    
    
    
    897
    
    
    
    1,008
    
    
    
    5,021
    
    
    
    
    
    
    
    9,305Heritage health benefit expenses
    
    
    3,576
    
    
    
    
    
    
    
    
    
    
    
    202
    
    
    
    
    
    
    
    3,778Loss on sales of assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    83
    
    
    
    
    
    
    
    83Other operating income
    
    
    
    
    
    
    
    
    
    
    (1,597
    )
    
    
    
    
    
    
    
    
    
    
    (1,597
    )6,034
    
    
    
    19,009
    
    
    
    12,614
    
    
    
    96,552
    
    
    
    (13,885
    )
    
    
    120,324Operating income (loss)
    
    
    (6,034
    )
    
    
    4,619
    
    
    
    2,210
    
    
    
    6,645
    
    
    
    
    
    
    
    7,440Other income (expense):Interest expense
    
    
    (3,073
    )
    
    
    (428
    )
    
    
    (301
    )
    
    
    (3,184
    )
    
    
    19
    
    
    
    (6,967
    )Loss on extinguishment of debt
    
    
    (7,873
    )
    
    
    (9,073
    )
    
    
    (84
    )
    
    
    
    
    
    
    
    
    
    
    (17,030
    )Interest income
    
    
    60
    
    
    
    6
    
    
    
    68
    
    
    
    267
    
    
    
    (19
    )
    
    
    382Other income (loss)
    
    
    (3,079
    )
    
    
    
    
    
    
    33
    
    
    
    29
    
    
    
    
    
    
    
    (3,017
    )(13,965
    )
    
    
    (9,495
    )
    
    
    (284
    )
    
    
    (2,888
    )
    
    
    
    
    
    
    (26,632
    )Income (loss) from operations before income
taxes
    
    
    (19,999
    )
    
    
    (4,876
    )
    
    
    1,926
    
    
    
    3,757
    
    
    
    
    
    
    
    (19,192
    )Equity in income of subsidiaries
    
    
    (1,104
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,104
    
    
    
    (18,895
    )
    
    
    (4,876
    )
    
    
    1,926
    
    
    
    3,757
    
    
    
    (1,104
    )
    
    
    (19,192
    )Income tax (benefit) expense from operations
    
    
    (163
    )
    
    
    
    
    
    
    547
    
    
    
    1,566
    
    
    
    (2,410
    )
    
    
    (460
    )Net income (loss)
    
    
    (18,732
    )
    
    
    (4,876
    )
    
    
    1,379
    
    
    
    2,191
    
    
    
    1,306
    
    
    
    (18,732
    )Less net income attributable to
noncontrolling interest
    
    
    (1,121
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,121
    )Net income (loss) attributable to the Parent
company
    
    $
    (17,611
    )
    
    $
    (4,876
    )
    
    $
    1,379
    
    
    $
    2,191
    
    
    $
    1,306
    
    
    $
    (17,611
    )
 158




---



##### 



CONSOLIDATING STATEMENTS OF OPERATIONS
Three Months Ended March 31, 2010
(In thousands)
 Non-Parent/
    
    
    
    
    
    
    Guarantor
    
    
    Guarantor
    
    
    ConsolidatingIssuer
    
    
    Co-Issuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Adjustments
    
    
    TotalRevenues
    
    $
    (33
    )
    
    $
    22,889
    
    
    $
    12,721
    
    
    $
    103,253
    
    
    $
    (12,391
    )
    
    $
    126,439Costs, expenses:Cost of sales
    
    
    
    
    
    
    15,045
    
    
    
    11,637
    
    
    
    83,419
    
    
    
    (12,424
    )
    
    
    97,677Depreciation, depletion and amortization
    
    
    99
    
    
    
    2,537
    
    
    
    1,921
    
    
    
    6,835
    
    
    
    
    
    
    
    11,392Selling and administrative
    
    
    2,356
    
    
    
    1,136
    
    
    
    1,115
    
    
    
    5,369
    
    
    
    
    
    
    
    9,976Heritage health benefit expenses
    
    
    3,681
    
    
    
    
    
    
    
    
    
    
    
    234
    
    
    
    
    
    
    
    3,915Loss on sales of assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    71
    
    
    
    
    
    
    
    71Other operating income
    
    
    
    
    
    
    
    
    
    
    (1,906
    )
    
    
    
    
    
    
    
    
    
    
    (1,906
    )6,136
    
    
    
    18,718
    
    
    
    12,767
    
    
    
    95,928
    
    
    
    (12,424
    )
    
    
    121,125Operating income (loss)
    
    
    (6,169
    )
    
    
    4,171
    
    
    
    (46
    )
    
    
    7,325
    
    
    
    33
    
    
    
    5,314Other income (expense):Interest expense
    
    
    (724
    )
    
    
    (1,218
    )
    
    
    (641
    )
    
    
    (3,140
    )
    
    
    
    
    
    
    (5,723
    )Interest income
    
    
    53
    
    
    
    18
    
    
    
    (133
    )
    
    
    477
    
    
    
    (5
    )
    
    
    410Other income (loss)
    
    
    (4,424
    )
    
    
    5
    
    
    
    
    
    
    
    583
    
    
    
    
    
    
    
    (3,836
    )(5,095
    )
    
    
    (1,195
    )
    
    
    (774
    )
    
    
    (2,080
    )
    
    
    (5
    )
    
    
    (9,149
    )Income (loss) from operations before
income taxes
    
    
    (11,264
    )
    
    
    2,976
    
    
    
    (820
    )
    
    
    5,245
    
    
    
    28
    
    
    
    (3,835
    )Equity in income of subsidiaries
    
    
    (8,408
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,408
    
    
    
    (2,856
    )
    
    
    2,976
    
    
    
    (820
    )
    
    
    5,245
    
    
    
    (8,380
    )
    
    
    (3,835
    )Income tax (benefit) expense from
operations
    
    
    
    
    
    
    32
    
    
    
    (246
    )
    
    
    2,737
    
    
    
    (2,613
    )
    
    
    (90
    )Net income (loss)
    
    
    (2,856
    )
    
    
    2,944
    
    
    
    (574
    )
    
    
    2,508
    
    
    
    (5,767
    )
    
    
    (3,745
    )Less net income attributable to
noncontrolling interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (890
    )
    
    
    (890
    )Net income (loss) attributable to the
Parent company
    
    $
    (2,856
    )
    
    $
    2,944
    
    
    $
    (574
    )
    
    $
    2,508
    
    
    $
    (4,877
    )
    
    $
    (2,855
    )
 159




---



##### 



CONSOLIDATING STATEMENTS OF CASH FLOWS
Three Months Ended March 31, 2011
(In thousands)
 Non-Parent/
    
    
    
    
    
    
    Guarantor
    
    
    Guarantor
    
    
    ConsolidatingStatements of Cash Flows
    
    Issuer
    
    
    Co-Issuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Adjustments
    
    
    TotalCash flows from operating activities:Net income (loss)
    
    $
    (18,732
    )
    
    $
    (4,875
    )
    
    $
    1,378
    
    
    $
    2,192
    
    
    $
    1,305
    
    
    $
    (18,732
    )Adjustments to reconcile net loss to net cash provided
by operation activities:Equity in income of subsidiaries
    
    
    (1,104
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,104
    
    
    
    Depreciation, depletion, and amortization
    
    
    79
    
    
    
    2,553
    
    
    
    2,051
    
    
    
    6,562
    
    
    
    
    
    
    
    11,245Accretion of asset retirement obligation and
receivable
    
    
    
    
    
    
    14
    
    
    
    758
    
    
    
    1,928
    
    
    
    
    
    
    
    2,700Amortization of intangible assets and liabilities, net
    
    
    
    
    
    
    155
    
    
    
    
    
    
    
    8
    
    
    
    
    
    
    
    163Non-cash tax benefits
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (110
    )
    
    
    (110
    )Share-based compensation
    
    
    1,653
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,653Loss on sale of assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    83
    
    
    
    
    
    
    
    83Amortization of deferred financing costs
    
    
    377
    
    
    
    (21
    )
    
    
    109
    
    
    
    170
    
    
    
    
    
    
    
    635Loss on extinguishment of debt
    
    
    7,873
    
    
    
    9,073
    
    
    
    84
    
    
    
    
    
    
    
    
    
    
    
    17,030Gain (loss) on derivative
    
    
    3,079
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,079Changes in operating assets and liabilities:Receivables, net
    
    
    (95
    )
    
    
    245
    
    
    
    (4,001
    )
    
    
    3,803
    
    
    
    3,678
    
    
    
    3,630Inventories
    
    
    
    
    
    
    (1,873
    )
    
    
    415
    
    
    
    (1,151
    )
    
    
    
    
    
    
    (2,609
    )Excess of pneumoconiosis benefit obligation over
trust assets
    
    
    480
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    480Accounts payable and accrued expenses
    
    
    (2,499
    )
    
    
    533
    
    
    
    (147
    )
    
    
    7,791
    
    
    
    (3,669
    )
    
    
    2,009Deferred revenue
    
    
    
    
    
    
    (2,374
    )
    
    
    (312
    )
    
    
    701
    
    
    
    
    
    
    
    (1,985
    )Accrual for workers compensation
    
    
    (67
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (67
    )Asset retirement obligations
    
    
    
    
    
    
    
    
    
    
    (673
    )
    
    
    (1,988
    )
    
    
    
    
    
    
    (2,661
    )Accrual for postretirement medical benefits
    
    
    (870
    )
    
    
    
    
    
    
    
    
    
    
    245
    
    
    
    
    
    
    
    (625
    )Pension and SERP obligations
    
    
    (193
    )
    
    
    
    
    
    
    
    
    
    
    (201
    )
    
    
    
    
    
    
    (394
    )Other assets and liabilities
    
    
    2,425
    
    
    
    (314
    )
    
    
    1,202
    
    
    
    (2,425
    )
    
    
    (230
    )
    
    
    658Net cash provided by (used in) operating activities
    
    
    (7,594
    )
    
    
    3,116
    
    
    
    864
    
    
    
    17,718
    
    
    
    2,078
    
    
    
    16,182Cash flows from investing activities:Distributions received by subsidiaries
    
    
    11,700
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11,700
    )
    
    
    Additions to property, plant and equipment
    
    
    (8
    )
    
    
    (227
    )
    
    
    (112
    )
    
    
    (2,576
    )
    
    
    
    
    
    
    (2,923
    )Change in restricted investments and bond collateral
and reclamation deposits
    
    
    (440
    )
    
    
    2,587
    
    
    
    (45
    )
    
    
    (3,182
    )
    
    
    
    
    
    
    (1,080
    )Net proceeds from sales of assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    22
    
    
    
    
    
    
    
    22Receivable from customer for property and equipment
purchases
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,903
    )
    
    
    
    
    
    
    (1,903
    )Net cash provided by (used in) investing activities
    
    
    11,252
    
    
    
    2,360
    
    
    
    (157
    )
    
    
    (7,639
    )
    
    
    (11,700
    )
    
    
    (5,884
    )Cash flows from financing activities:Bank overdrafts
    
    
    (146
    )
    
    
    
    
    
    
    (674
    )
    
    
    928
    
    
    
    
    
    
    
    108Borrowings of long-term debt, net of debt discount
    
    
    142,500
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    142,500Repayments of long-term debt
    
    
    (2,532
    )
    
    
    (46,220
    )
    
    
    (10,230
    )
    
    
    (1,409
    )
    
    
    
    
    
    
    (60,391
    )Borrowings on revolving lines of credit
    
    
    
    
    
    
    1,500
    
    
    
    12,200
    
    
    
    37,000
    
    
    
    
    
    
    
    50,700Repayments on revolving lines of credit
    
    
    
    
    
    
    (1,500
    )
    
    
    (29,100
    )
    
    
    (38,500
    )
    
    
    
    
    
    
    (69,100
    )Debt issuance and other refinancing costs
    
    
    (5,779
    )
    
    
    (9,077
    )
    
    
    100
    
    
    
    
    
    
    
    
    
    
    
    (14,756
    )Dividends/distributions
    
    
    (20,281
    )
    
    
    
    
    
    
    
    
    
    
    (11,700
    )
    
    
    11,700
    
    
    
    (20,281
    )Exercise of stock options
    
    
    131
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    131Transactions with Parent/affiliates
    
    
    (81,051
    )
    
    
    52,656
    
    
    
    27,158
    
    
    
    3,315
    
    
    
    (2,078
    )
    
    
    Net cash provided by (used in) financing activities
    
    
    32,842
    
    
    
    (2,641
    )
    
    
    (546
    )
    
    
    (10,366
    )
    
    
    9,622
    
    
    
    28,911Net increase (decrease) in cash and cash equivalents
    
    
    36,500
    
    
    
    2,835
    
    
    
    161
    
    
    
    (287
    )
    
    
    
    
    
    
    39,209Cash and cash equivalents, beginning of year
    
    
    271
    
    
    
    880
    
    
    
    
    
    
    
    4,624
    
    
    
    
    
    
    
    5,775Cash and cash equivalents, end of year
    
    $
    36,771
    
    
    $
    3,715
    
    
    $
    161
    
    
    $
    4,337
    
    
    $
    
    
    
    
    44,984
 160




---



##### 



CONSOLIDATING STATEMENTS OF CASH FLOWS
Three Months Ended March 31, 2010
(In thousands)
 Parent/
    
    
    
    
    
    
    Guarantor
    
    
    Non-Guarantor
    
    
    ConsolidatingStatements of Cash Flows
    
    Issuer
    
    
    Co-Issuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Adjustments
    
    
    TotalCash flows from operating activities:Net income (loss)
    
    $
    (11,264
    )
    
    $
    2,943
    
    
    $
    (573
    )
    
    $
    2,507
    
    
    $
    2,642
    
    
    $
    (3,745
    )Adjustments to reconcile net income (loss) to net cash
provided by operation activities:Equity in income of subsidiaries
    
    
    (8,408
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,408
    
    
    
    Depreciation, depletion, and amortization
    
    
    99
    
    
    
    2,537
    
    
    
    1,921
    
    
    
    6,835
    
    
    
    
    
    
    
    11,392Accretion of asset retirement obligation and receivable
    
    
    
    
    
    
    13
    
    
    
    752
    
    
    
    2,238
    
    
    
    
    
    
    
    3,003Amortization of intangible assets and liabilities, net
    
    
    
    
    
    
    155
    
    
    
    
    
    
    
    (70
    )
    
    
    
    
    
    
    85Share-based compensation
    
    
    1,363
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,363Loss on sale of assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    71
    
    
    
    
    
    
    
    71Non-cash interest expense
    
    
    388
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    388Amortization of deferred financing costs
    
    
    335
    
    
    
    (86
    )
    
    
    125
    
    
    
    149
    
    
    
    
    
    
    
    523Gain on impairments and sales of investment securities
    
    
    (97
    )
    
    
    
    
    
    
    
    
    
    
    (562
    )
    
    
    
    
    
    
    (659
    )Gain (loss) on derivative
    
    
    4,521
    
    
    
    (6
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,515Changes in operating assets and liabilities:Receivables, net
    
    
    359
    
    
    
    (432
    )
    
    
    (2,540
    )
    
    
    (2,609
    )
    
    
    1,356
    
    
    
    (3,866
    )Inventories
    
    
    
    
    
    
    (1,363
    )
    
    
    116
    
    
    
    (255
    )
    
    
    
    
    
    
    (1,502
    )Excess of pneumoconiosis benefit obligation over trust
assets
    
    
    347
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    347Accounts payable and accrued expenses
    
    
    (322
    )
    
    
    3,069
    
    
    
    134
    
    
    
    2,597
    
    
    
    (1,708
    )
    
    
    3,770Deferred revenue
    
    
    
    
    
    
    (572
    )
    
    
    
    
    
    
    1,189
    
    
    
    
    
    
    
    617Accrual for workers compensation
    
    
    (51
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (51
    )Asset retirement obligations
    
    
    
    
    
    
    
    
    
    
    (188
    )
    
    
    (1,687
    )
    
    
    
    
    
    
    (1,875
    )Accrual for postretirement medical benefits
    
    
    (522
    )
    
    
    
    
    
    
    
    
    
    
    161
    
    
    
    
    
    
    
    (361
    )Pension and SERP obligations
    
    
    280
    
    
    
    1
    
    
    
    
    
    
    
    (320
    )
    
    
    
    
    
    
    (39
    )Other assets and liabilities
    
    
    (634
    )
    
    
    (187
    )
    
    
    680
    
    
    
    (417
    )
    
    
    (122
    )
    
    
    (680
    )Net cash provided by (used in) operating activities
    
    
    (13,606
    )
    
    
    6,072
    
    
    
    427
    
    
    
    9,827
    
    
    
    10,576
    
    
    
    13,296Cash flows from investing activities:Distributions received by subsidiaries
    
    
    8,100
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,100
    )
    
    
    Additions to property, plant and equipment
    
    
    (440
    )
    
    
    (68
    )
    
    
    (635
    )
    
    
    (3,194
    )
    
    
    
    
    
    
    (4,337
    )Change in restricted investments and bond collateral
and reclamation deposits
    
    
    (579
    )
    
    
    1,691
    
    
    
    131
    
    
    
    (1,835
    )
    
    
    
    
    
    
    (592
    )Net proceeds from sales of assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    379
    
    
    
    
    
    
    
    379Proceeds from the sale of investments
    
    
    156
    
    
    
    
    
    
    
    
    
    
    
    963
    
    
    
    
    
    
    
    1,119Receivable from customer for property and equipment
purchases
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (510
    )
    
    
    
    
    
    
    (510
    )Net cash provided by (used in) investing activities
    
    
    7,237
    
    
    
    1,623
    
    
    
    (504
    )
    
    
    (4,197
    )
    
    
    (8,100
    )
    
    
    (3,941
    )Cash flows from financing activities:Bank overdrafts
    
    
    (76
    )
    
    
    
    
    
    
    (14
    )
    
    
    980
    
    
    
    
    
    
    
    890Borrowings of long-term debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Repayments of long-term debt
    
    
    
    
    
    
    (5,405
    )
    
    
    (1,118
    )
    
    
    (1,589
    )
    
    
    
    
    
    
    (8,112
    )Borrowings on revolving lines of credit
    
    
    
    
    
    
    3,800
    
    
    
    20,100
    
    
    
    4,500
    
    
    
    
    
    
    
    28,400Repayments on revolving lines of credit
    
    
    
    
    
    
    
    
    
    
    (18,800
    )
    
    
    (4,500
    )
    
    
    
    
    
    
    (23,300
    )Debt issuance costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Exercise of stock options
    
    
    8
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8Dividends/distributions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,100
    )
    
    
    8,100
    
    
    
    Transactions with Parent/affiliates
    
    
    6,186
    
    
    
    (163
    )
    
    
    (75
    )
    
    
    4,628
    
    
    
    (10,576
    )
    
    
    Net cash provided by (used in) financing activities
    
    
    6,118
    
    
    
    (1,768
    )
    
    
    93
    
    
    
    (4,081
    )
    
    
    (2,476
    )
    
    
    (2,114
    )Net increase (decrease) in cash and cash equivalents
    
    
    (251
    )
    
    
    5,927
    
    
    
    16
    
    
    
    1,549
    
    
    
    
    
    
    
    7,241Cash and cash equivalents, beginning of year
    
    
    755
    
    
    
    138
    
    
    
    
    
    
    
    9,626
    
    
    
    
    
    
    
    10,519Cash and cash equivalents, end of year
    
    $
    504
    
    
    $
    6,065
    
    
    $
    16
    
    
    $
    11,175
    
    
    $
    
    
    
    
    17,760
 161




---



##### 



Report of Independent Registered Public Accounting Firm:
     Determining Whether an Instrument (or Embedded Feature) is Indexed to an
Entitys Own Stock
 Internal ControlIntegrated Framework
  
 162




---



##### 



Report of Independent Registered Public Accounting Firm:
 
      
 163




---



##### 



Westmoreland Coal Company and Subsidiaries
Consolidated Balance Sheets
 December 31,
    
    
    December 31,2010
    
    
    2009(In thousands)AssetsCurrent assets:Cash and cash equivalents
    
    $
    5,775
    
    
    $
    10,519Receivables:Trade
    
    
    50,578
    
    
    
    46,393Contractual third-party reclamation receivables
    
    
    7,743
    
    
    
    7,257Other
    
    
    4,545
    
    
    
    3,16262,866
    
    
    
    56,812Inventories
    
    
    23,571
    
    
    
    25,871Other current assets
    
    
    5,335
    
    
    
    6,047Total current assets
    
    
    97,547
    
    
    
    99,249Property, plant and equipment:Land and mineral rights
    
    
    83,824
    
    
    
    83,694Capitalized asset retirement cost
    
    
    114,856
    
    
    
    134,821Plant and equipment
    
    
    506,661
    
    
    
    486,238705,341
    
    
    
    704,753Less accumulated depreciation, depletion and amortization
    
    
    (288,386
    )
    
    
    (248,569
    )Net property, plant and equipment
    
    
    416,955
    
    
    
    456,184Advanced coal royalties
    
    
    3,695
    
    
    
    3,056Reclamation deposits
    
    
    72,274
    
    
    
    73,067Restricted investments and bond collateral
    
    
    55,384
    
    
    
    48,188Contractual third-party reclamation receivables, less current portion
    
    
    87,739
    
    
    
    74,989Deferred income taxes
    
    
    2,458
    
    
    
    2,341Intangible assets, net of accumulated amortization of $9.1 million
and $6.8 million at December 31, 2010 and December 31, 2009,
respectively
    
    
    6,555
    
    
    
    8,781Other assets
    
    
    7,699
    
    
    
    6,873Total Assets
    
    $
    750,306
    
    
    $
    772,728
  164




---



##### 



Westmoreland Coal Company and Subsidiaries
Consolidated Balance Sheets
 December 31,
    
    
    December 31,2010
    
    
    2009(In thousands)Liabilities and Shareholders DeficitCurrent liabilities:Current installments of long-term debt
    
    $
    14,973
    
    
    $
    41,089Revolving lines of credit
    
    
    
    
    
    
    16,400Accounts payable and accrued expenses:Trade
    
    
    46,247
    
    
    
    39,264Production taxes
    
    
    26,317
    
    
    
    24,510Workers compensation
    
    
    954
    
    
    
    1,031Postretirement medical benefits
    
    
    13,581
    
    
    
    14,501SERP
    
    
    304
    
    
    
    306Deferred revenue
    
    
    10,209
    
    
    
    8,760Asset retirement obligations
    
    
    14,514
    
    
    
    15,513Other current liabilities
    
    
    6,241
    
    
    
    12,851Total current liabilities
    
    
    133,340
    
    
    
    174,225Long-term debt, less current installments
    
    
    208,731
    
    
    
    197,206Revolving lines of credit, less current portion
    
    
    18,400
    
    
    
    Workers compensation, less current portion
    
    
    9,424
    
    
    
    10,188Excess of pneumoconiosis benefit obligation over trust assets
    
    
    2,246
    
    
    
    786Postretirement medical benefits, less current portion
    
    
    197,279
    
    
    
    175,722Pension and SERP obligations, less current portion
    
    
    20,462
    
    
    
    26,827Deferred revenue, less current portion
    
    
    75,395
    
    
    
    84,243Asset retirement obligations, less current portion
    
    
    227,129
    
    
    
    229,102Intangible liabilities, net of accumulated amortization $9.4
million at December 31, 2010 and $7.7 million at December
31, 2009, respectively
    
    
    8,663
    
    
    
    10,300Other liabilities
    
    
    11,592
    
    
    
    5,928Total liabilities
    
    
    912,661
    
    
    
    914,527Shareholders deficit:Preferred stock of $1.00 par value
Authorized 5,000,000 shares;
Issued and
outstanding 160,129 shares at December 31, 2010, and December 31, 2009
    
    
    160
    
    
    
    160Common stock of $2.50 par value
Authorized 30,000,000 shares;
Issued and
outstanding 11,160,798 shares at December 31, 2010 and
10,345,927 shares at December 31, 2009
    
    
    27,901
    
    
    
    25,864Other paid-in capital
    
    
    98,466
    
    
    
    91,432Accumulated other comprehensive loss
    
    
    (57,680
    )
    
    
    (31,223
    )Accumulated deficit
    
    
    (226,740
    )
    
    
    (226,215
    )Total Westmoreland Coal Company shareholders deficit
    
    
    (157,893
    )
    
    
    (139,982
    )Noncontrolling interest
    
    
    (4,462
    )
    
    
    (1,817
    )Total deficit
    
    
    (162,355
    )
    
    
    (141,799
    )Total Liabilities and Shareholders Deficit
    
    $
    750,306
    
    
    $
    772,728
  165




---



##### 



Westmoreland Coal Company and Subsidiaries
Consolidated Statements of Operations
 Years Ended December 31,2010
    
    
    2009
    
    
    2008(In thousands, except per share data)Revenues
    
    $
    506,057
    
    
    $
    443,368
    
    
    $
    509,696Cost and expenses:Cost of sales
    
    
    394,827
    
    
    
    373,070
    
    
    
    409,795Depreciation, depletion and amortization
    
    
    44,690
    
    
    
    44,254
    
    
    
    41,387Selling and administrative
    
    
    39,481
    
    
    
    40,612
    
    
    
    40,513Heritage health benefit expenses
    
    
    14,421
    
    
    
    28,074
    
    
    
    33,452Restructuring charges
    
    
    
    
    
    
    
    
    
    
    2,009Loss (gain) on sales of assets
    
    
    226
    
    
    
    191
    
    
    
    (1,425
    )Other operating income
    
    
    (8,109
    )
    
    
    (11,059
    )
    
    
    485,536
    
    
    
    475,142
    
    
    
    525,731Operating income (loss)
    
    
    20,521
    
    
    
    (31,774
    )
    
    
    (16,035
    )Other income (expense):Interest expense
    
    
    (22,992
    )
    
    
    (23,733
    )
    
    
    (23,130
    )Interest expense attributable to beneficial conversion feature
    
    
    
    
    
    
    
    
    
    
    (8,146
    )Loss on extinguishment of debt
    
    
    
    
    
    
    
    
    
    
    (5,178
    )Interest income
    
    
    1,747
    
    
    
    3,218
    
    
    
    5,125Other income (loss)
    
    
    (2,587
    )
    
    
    5,991
    
    
    
    (284
    )(23,832
    )
    
    
    (14,524
    )
    
    
    (31,613
    )Loss before income taxes
    
    
    (3,311
    )
    
    
    (46,298
    )
    
    
    (47,648
    )Income tax (benefit) expense
    
    
    (141
    )
    
    
    (17,136
    )
    
    
    919Net loss
    
    
    (3,170
    )
    
    
    (29,162
    )
    
    
    (48,567
    )Less net loss attributable to noncontrolling interest
    
    
    (2,645
    )
    
    
    (1,817
    )
    
    
    Net loss attributable to the Parent company
    
    
    (525
    )
    
    
    (27,345
    )
    
    
    (48,567
    )Less preferred stock dividend requirements
    
    
    1,360
    
    
    
    1,360
    
    
    
    1,360Net loss applicable to common shareholders
    
    $
    (1,885
    )
    
    $
    (28,705
    )
    
    $
    (49,927
    )Net loss per share applicable to common shareholders:Basic and diluted
    
    $
    (0.17
    )
    
    $
    (2.88
    )
    
    $
    (5.25
    )Weighted average number of common shares outstandingBasic and diluted
    
    
    10,791
    
    
    
    9,967
    
    
    
    9,512
  166




---



##### 



Westmoreland Coal Company and Subsidiaries
Consolidated Statements of Shareholders Deficit and Comprehensive Loss
Years Ended December 31, 2010, 2009 and 2008
 Class AConvertible
    
    
    
    
    
    
    
    
    
    
    Accumulated
    
    
    
    
    
    
    
    
    
    
    TotalExchangeable
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    
    
    
    
    Non-
    
    
    Shareholders'Preferred
    
    
    Common
    
    
    Other Paid-In
    
    
    Comprehensive
    
    
    Accumulated
    
    
    controlling
    
    
    EquityStock
    
    
    Stock
    
    
    Capital
    
    
    Loss
    
    
    
    Deficit
    
    
    Interest
    
    
    (Deficit)(In thousands)Balance at December 31, 2007 (160,129 preferred shares and
9,427,203 common shares outstanding)
    
    $
    160
    
    
    $
    23,567
    
    
    $
    85,352
    
    
    $
    (125,187
    )
    
    $
    (161,149
    )
    
    $
    
    
    
    $
    (177,257
    )Common stock issued as compensation (221,933 shares)
    
    
    
    
    
    
    554
    
    
    
    2,242
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,796Common stock options exercised (40,882 shares)
    
    
    
    
    
    
    102
    
    
    
    101
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    203Warrant repriced in lieu of registration requirement
    
    
    
    
    
    
    
    
    
    
    355
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    355Beneficial conversion feature on convertible debt
    
    
    
    
    
    
    
    
    
    
    8,146
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,146Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (48,567
    )
    
    
    
    
    
    
    (48,567
    )Adjustments to accumulated actuarial losses of pension plans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (17,589
    )
    
    
    
    
    
    
    
    
    
    
    (17,589
    )Amortization of accumulated actuarial losses of pension plans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    351
    
    
    
    
    
    
    
    
    
    
    
    351Adjustments to accumulated actuarial losses, prior service
costs and transition obligations of postretirement medical
benefit plans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,533
    
    
    
    
    
    
    
    
    
    
    
    5,533Amortization of accumulated actuarial losses, prior service
costs and transition obligations of postretirement medical
benefit plans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,319
    
    
    
    
    
    
    
    
    
    
    
    8,319Unrealized loss on available-for-sale securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (788
    )
    
    
    
    
    
    
    
    
    
    
    (788
    )Other than temporary impairment of available-for-sale
securities recognized in earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    900
    
    
    
    
    
    
    
    
    
    
    
    900Comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (51,841
    )Balance at December 31, 2008 (160,129 preferred shares and
9,690,018 common shares outstanding)
    
    
    160
    
    
    
    24,223
    
    
    
    96,196
    
    
    
    (128,461
    )
    
    
    (209,716
    )
    
    
    
    
    
    
    (217,598
    )Cumulative effect of adoption of ASC 815-40
    
    
    
    
    
    
    
    
    
    
    (9,847
    )
    
    
    
    
    
    
    10,846
    
    
    
    
    
    
    
    999Common stock issued as compensation (255,909 shares, less
100,000 shares forfeited)
    
    
    
    
    
    
    391
    
    
    
    2,180
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,571Contributions of Company stock to pension plans assets
(500,000 shares)
    
    
    
    
    
    
    1,250
    
    
    
    2,903
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,153Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (27,345
    )
    
    
    (1,817
    )
    
    
    (29,162
    )Tax effect of other comprehensive income gains
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (17,062
    )
    
    
    
    
    
    
    
    
    
    
    (17,062
    )Adjustments to accumulated actuarial losses and transition
obligations, pension
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,459
    )
    
    
    
    
    
    
    
    
    
    
    (1,459
    )Amortization of accumulated actuarial losses and transition
obligations, pension
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,845
    
    
    
    
    
    
    
    
    
    
    
    1,845Amortization of accumulated actuarial losses and transition
obligations, postretirement medical benefit
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,079
    
    
    
    
    
    
    
    
    
    
    
    7,079Effect of pension plan freeze
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,670
    
    
    
    
    
    
    
    
    
    
    
    10,670Effect of postretirement medical benefit plan amendments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    95,313
    
    
    
    
    
    
    
    
    
    
    
    95,313Unrealized gain on available-for-sale securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    852
    
    
    
    
    
    
    
    
    
    
    
    852Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    68,076Balance at December 31, 2009 (160,129 preferred shares and
10,345,927 common shares outstanding)
    
    
    160
    
    
    
    25,864
    
    
    
    91,432
    
    
    
    (31,223
    )
    
    
    (226,215
    )
    
    
    (1,817
    )
    
    
    (141,799
    )Common stock issued as compensation (337,371 shares)
    
    
    
    
    
    
    843
    
    
    
    3,206
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,049Common stock options exercised (2,500 shares)
    
    
    
    
    
    
    6
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8Contributions of Company stock to pension plan assets
(475,000 shares)
    
    
    
    
    
    
    1,188
    
    
    
    3,826
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,014Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (525
    )
    
    
    (2,645
    )
    
    
    (3,170
    )Amortization of accumulated actuarial losses and transition
obligations, pension
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,312
    
    
    
    
    
    
    
    
    
    
    
    1,312Adjustments to accumulated actuarial losses and transition
obligations, pension
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,860
    )
    
    
    
    
    
    
    
    
    
    
    (3,860
    )Amortization of accumulated actuarial gains and transition
obligations, postretirement medical benefits
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (275
    )
    
    
    
    
    
    
    
    
    
    
    (275
    )Adjustments to accumulated actuarial gains and transition
obligations, postretirement medical benefits
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (23,195
    )
    
    
    
    
    
    
    
    
    
    
    (23,195
    )Unrealized and realized gains on available-for-sale securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (439
    )
    
    
    
    
    
    
    
    
    
    
    (439
    )Comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (29,627
    )Balance at December 31, 2010 (160,129 preferred shares and
11,160,798 common shares outstanding)
    
    $
    160
    
    
    $
    27,901
    
    
    $
    98,466
    
    
    $
    (57,680
    )
    
    $
    (226,740
    )
    
    $
    (4,462
    )
    
    $
    (162,355
    )
  167




---



##### 



Westmoreland Coal Company and Subsidiaries
Consolidated Statements of Cash Flows
 Years Ended December 31,2010
    
    
    2009
    
    
    2008(In thousands)Cash flows from operating activities:Net loss
    
    $
    (3,170
    )
    
    $
    (29,162
    )
    
    $
    (48,567
    )Adjustments to reconcile net loss to net cash provided by operating activities:Depreciation, depletion and amortization
    
    
    44,690
    
    
    
    44,254
    
    
    
    41,387Accretion of asset retirement obligation and receivable
    
    
    11,540
    
    
    
    9,974
    
    
    
    9,528Non-cash tax benefits
    
    
    
    
    
    
    (17,062
    )
    
    
    Amortization of intangible assets and liabilities, net
    
    
    590
    
    
    
    279
    
    
    
    598Restructuring charges
    
    
    
    
    
    
    
    
    
    
    2,009Share-based compensation
    
    
    4,049
    
    
    
    2,552
    
    
    
    2,733Loss (gain) on sales of assets
    
    
    226
    
    
    
    191
    
    
    
    (1,425
    )Non-cash interest expense
    
    
    1,236
    
    
    
    1,470
    
    
    
    8,934Amortization of deferred financing costs
    
    
    2,304
    
    
    
    1,975
    
    
    
    839Loss on extinguishment of debt
    
    
    
    
    
    
    
    
    
    
    2,292Loss (gain) on impairment and sales of investment securities
    
    
    (604
    )
    
    
    412
    
    
    
    900Loss (gain) on derivative instruments
    
    
    3,456
    
    
    
    (6,122
    )
    
    
    Changes in operating assets and liabilities:Receivables, net
    
    
    (4,728
    )
    
    
    15,503
    
    
    
    (6,240
    )Inventories
    
    
    2,300
    
    
    
    (1,217
    )
    
    
    4,144Excess of pneumoconiosis benefit obligation over trust assets
    
    
    1,460
    
    
    
    3,025
    
    
    
    (23
    )Accounts payable and accrued expenses
    
    
    9,041
    
    
    
    (13,802
    )
    
    
    2,001Deferred revenue
    
    
    (7,399
    )
    
    
    10,486
    
    
    
    29,177Accrual for workers compensation
    
    
    (841
    )
    
    
    (1,619
    )
    
    
    3,316Asset retirement obligations
    
    
    (7,783
    )
    
    
    (2,219
    )
    
    
    (889
    )Accrual for postretirement medical benefits
    
    
    (2,832
    )
    
    
    7,762
    
    
    
    10,021Pension and SERP obligations
    
    
    (3,902
    )
    
    
    3,173
    
    
    
    (2,116
    )Other assets and liabilities
    
    
    (4,280
    )
    
    
    (405
    )
    
    
    (3,374
    )Net cash provided by operating activities
    
    
    45,353
    
    
    
    29,448
    
    
    
    55,245Cash flows from investing activities:Additions to property, plant and equipment
    
    
    (22,814
    )
    
    
    (34,546
    )
    
    
    (31,320
    )Change in restricted investments and bond collateral and reclamation
deposits
    
    
    (8,545
    )
    
    
    (4,601
    )
    
    
    24,319Net proceeds from sales of assets
    
    
    712
    
    
    
    937
    
    
    
    2,641Proceeds from the sale of investments
    
    
    2,307
    
    
    
    796
    
    
    
    Receivable from customer for property and equipment purchases
    
    
    (840
    )
    
    
    (1,183
    )
    
    
    (2,228
    )Net cash used in investing activities
    
    
    (29,180
    )
    
    
    (38,597
    )
    
    
    (6,588
    )Cash flows from financing activities:Change in book overdrafts
    
    
    (595
    )
    
    
    596
    
    
    
    (5,043
    )Borrowings from long-term debt
    
    
    
    
    
    
    8,562
    
    
    
    205,377Repayments of long-term debt
    
    
    (20,405
    )
    
    
    (35,275
    )
    
    
    (219,785
    )Borrowings on revolving lines of credit
    
    
    170,900
    
    
    
    94,116
    
    
    
    169,600Repayments on revolving lines of credit
    
    
    (168,900
    )
    
    
    (88,016
    )
    
    
    (173,500
    )Debt issuance costs
    
    
    (1,925
    )
    
    
    (256
    )
    
    
    (5,304
    )Exercise of stock options
    
    
    8
    
    
    
    
    
    
    
    203Net cash used in financing activities
    
    
    (20,917
    )
    
    
    (20,273
    )
    
    
    (28,452
    )Net increase (decrease) in cash and cash equivalents
    
    
    (4,744
    )
    
    
    (29,422
    )
    
    
    20,205Cash and cash equivalents, beginning of year
    
    
    10,519
    
    
    
    39,941
    
    
    
    19,736Cash and cash equivalents, end of year
    
    $
    5,775
    
    
    $
    10,519
    
    
    $
    39,941Supplemental disclosures of cash flow information:Cash paid during the year for:Interest
    
    $
    19,744
    
    
    $
    20,418
    
    
    $
    22,226Income taxes (refunds)
    
    
    (236
    )
    
    
    2,263
    
    
    
    2,227Non-cash transactions:Accrued purchases of property and equipment
    
    
    628
    
    
    
    949
    
    
    
    2,715Capital leases and other financing sources
    
    
    3,748
    
    
    
    11,286
    
    
    
    14,859
  168




---



##### 



Westmoreland Coal Company and Subsidiaries
Notes to Consolidated Financial Statements
 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Nature of Operations
   Liquidity
      169




---



##### 



Westmoreland Coal Company and Subsidiaries
Notes to Consolidated Financial Statements (Cont.)
 Consolidation Policy
    Use of Estimates
  Cash and Cash Equivalents
  Trade Receivables
  Inventories
  Restricted Investments and Bond Collateral
 Restricted Investments and Bond Collateral
 Mine Development
  170




---



##### 



Westmoreland Coal Company and Subsidiaries
Notes to Consolidated Financial Statements (Cont.)
  Property, Plant and Equipment
   YearsBuildings and improvements
    
    
    15 to 30Machinery and equipment
    
    
    3 to 36
   Reclamation Deposits and Contractual Third-Party Reclamation Receivables
  Financial Instruments
 Accumulated other comprehensive income (loss)
  Accumulated
other comprehensive loss
 171




---



##### 



Westmoreland Coal Company and Subsidiaries
Notes to Consolidated Financial Statements (Cont.)
 Other income (expense)
 Intangible Assets and Liabilities
  Cost of sales Revenues
  AmortizationExpense (Revenue)(In thousands)2011
    
    $
    6572012
    
    
    6572013
    
    
    6572014
    
    
    102015
    
    
    (798
    )
 Workers Compensation Benefits
   Black Lung Benefits
 Excess of pneumoconiosis benefit obligation over trust assets
  172




---



##### 



Westmoreland Coal Company and Subsidiaries
Notes to Consolidated Financial Statements (Cont.)
 Postretirement Health Care Benefits
  Pension and SERP Plans
  Deferred Revenue
  Asset Retirement Obligations
   Income Taxes
   Income tax
expense
  173




---



##### 



Westmoreland Coal Company and Subsidiaries
Notes to Consolidated Financial Statements (Cont.)
 Deferred Financing Costs
 Other assets
 Coal Revenues
  Power Revenues
   Other Operating Income (Loss)
 Other operating income
 Exploration and Drilling Costs
 Cost of sales
 Share-Based Compensation
  Earnings (Loss) per Share
  174




---



##### 



Westmoreland Coal Company and Subsidiaries
Notes to Consolidated Financial Statements (Cont.)
  Years Ended December 31,2010
    
    
    2009
    
    
    2008(In thousands)Convertible notes and securities
    
    
    2,943
    
    
    
    2,820
    
    
    
    2,673Restricted stock units, stock options, SARs, and warrant shares
    
    
    630
    
    
    
    779
    
    
    
    870Total shares excluded from diluted shares calculation
    
    
    3,573
    
    
    
    3,599
    
    
    
    3,543
 Accounting Pronouncements Adopted
    2. INVENTORIES
  December 31,2010
    
    
    2009(In thousands)Coal
    
    $
    678
    
    
    $
    1,158Materials and supplies
    
    
    23,474
    
    
    
    25,713Reserve for obsolete inventory
    
    
    (581
    )
    
    
    (1,000
    )Total
    
    $
    23,571
    
    
    $
    25,871
 175




---



##### 



Westmoreland Coal Company and Subsidiaries
Notes to Consolidated Financial Statements (Cont.)
 3. RESTRICTED INVESTMENTS AND BOND COLLATERAL
  December 31,2010
    
    
    2009(In thousands)Coal Segment:Westmoreland Mining  debt reserve account
    
    $
    7,514
    
    
    $
    5,064Reclamation bond collateral:Rosebud Mine
    
    
    12,263
    
    
    
    12,462Absaloka Mine
    
    
    10,956
    
    
    
    9,228Jewett Mine
    
    
    3,001
    
    
    
    1,502Beulah Mine
    
    
    1,270
    
    
    
    1,270Power Segment:Letter of credit account
    
    
    5,990
    
    
    
    6,037Debt protection account
    
    
    905
    
    
    
    2,067Repairs and maintenance account
    
    
    1,067
    
    
    
    Ash reserve account
    
    
    602
    
    
    
    600Corporate Segment:Workers compensation bonds
    
    
    6,350
    
    
    
    6,118Postretirement medical benefit bonds
    
    
    5,466
    
    
    
    3,840Total restricted investments and bond collateral
    
    $
    55,384
    
    
    $
    48,188
   Carrying Value
    
    
    Fair Value(In thousands)Cash and cash equivalents
    
    $
    39,557
    
    
    $
    39,557Time deposits
    
    
    10,266
    
    
    
    10,266Held-to-maturity securities
    
    
    2,672
    
    
    
    3,012Available-for-sale securities
    
    
    2,889
    
    
    
    2,889$
    55,384
    
    
    $
    55,724
  Coal Segment
   176




---



##### 



Westmoreland Coal Company and Subsidiaries
Notes to Consolidated Financial Statements (Cont.)
 Power Segment
     Corporate Segment
  Held-to-Maturity and Available-for-Sale Restricted Investments and Bond Collateral
  December 31,2010
    
    
    2009(In thousands)Amortized cost
    
    $
    2,672
    
    
    $
    3,479Gross unrealized holding gains
    
    
    340
    
    
    
    113Gross unrealized holding losses
    
    
    
    
    
    
    (2
    )Fair value
    
    $
    3,012
    
    
    $
    3,590
  Amortized Cost
    
    
    Fair Value(In thousands)Due in five years or less
    
    $
    652
    
    
    $
    730Due after five years to ten years
    
    
    762
    
    
    
    859Due in more than ten years
    
    
    1,258
    
    
    
    1,423$
    2,672
    
    
    $
    3,012
  December 31,2010
    
    
    2009(In thousands)Cost basis
    
    $
    2,566
    
    
    $
    2,625Gross unrealized holding gains
    
    
    323
    
    
    
    281Gross unrealized holding losses
    
    
    
    
    
    
    (27
    )Fair value
    
    $
    2,889
    
    
    $
    2,879
 177




---



##### 



Westmoreland Coal Company and Subsidiaries
Notes to Consolidated Financial Statements (Cont.)
 4. LINES OF CREDIT AND LONG-TERM DEBT
  Total Debt OutstandingDecember 31,2010
    
    
    2009(In thousands)Westmoreland Mining, LLC:Revolving line of credit
    
    $
    1,500
    
    
    $
    Term debt
    
    
    125,000
    
    
    
    125,000Capital lease obligations
    
    
    18,407
    
    
    
    22,360Other term debt
    
    
    2,556
    
    
    
    1,463Westmoreland Resources, Inc.:Revolving line of credit
    
    
    16,900
    
    
    
    16,400Term debt
    
    
    9,600
    
    
    
    12,000Capital lease obligations
    
    
    7,821
    
    
    
    9,864ROVA:Term debt
    
    
    46,220
    
    
    
    55,575Debt premiums
    
    
    428
    
    
    
    880Corporate:Convertible notes
    
    
    18,495
    
    
    
    17,258Debt discount
    
    
    (4,823
    )
    
    
    (6,105
    )Total debt outstanding
    
    
    242,104
    
    
    
    254,695Less current portion
    
    
    (14,973
    )
    
    
    (57,489
    )Total debt outstanding, less current portion
    
    $
    227,131
    
    
    $
    197,206
  SubsequentAs of
    
    
    to ParentDecember 31,
    
    
    Notes2010
    
    
    Offering(In thousands)2011
    
    $
    42,298
    
    
    $
    14,9732012
    
    
    32,732
    
    
    
    21,5122013
    
    
    56,855
    
    
    
    26,3152014
    
    
    34,435
    
    
    
    22,5652015
    
    
    32,170
    
    
    
    21,910Thereafter
    
    
    48,009
    
    
    
    198,009Total
    
    
    246,499
    
    
    
    305,284Less: debt discount
    
    
    (4,395
    )
    
    
    (7,500
    )Total debt
    
    $
    242,104
    
    
    $
    297,784
 Westmoreland Mining LLC
   178




---



##### 



Westmoreland Coal Company and Subsidiaries
Notes to Consolidated Financial Statements (Cont.)
     Westmoreland Resources, Inc.
      ROVA
    179




---



##### 



Westmoreland Coal Company and Subsidiaries
Notes to Consolidated Financial Statements (Cont.)
 Convertible Debt
    5. POSTRETIREMENT MEDICAL BENEFITS
  Accumulated other comprehensive loss
 Accumulated other comprehensive loss
 Accumulated other comprehensive loss
 180




---



##### 



Westmoreland Coal Company and Subsidiaries
Notes to Consolidated Financial Statements (Cont.)
  December 31,2010
    
    
    2009(In thousands)Change in benefit obligations:Net benefit obligation at beginning of year
    
    $
    190,223
    
    
    $
    284,851Service cost
    
    
    539
    
    
    
    735Interest cost
    
    
    10,498
    
    
    
    16,233Plan participant contributions
    
    
    153
    
    
    
    140Actuarial (gain) loss
    
    
    23,195
    
    
    
    (60,155
    )Gross benefits paid
    
    
    (14,797
    )
    
    
    (17,816
    )Federal subsidy on benefits paid
    
    
    1,049
    
    
    
    1,315Plan amendments
    
    
    
    
    
    
    (35,080
    )Net benefit obligation at end of year
    
    
    210,860
    
    
    
    190,223Change in plan assets:Employer contributions
    
    
    14,644
    
    
    
    17,676Plan participant contributions
    
    
    153
    
    
    
    140Gross benefits paid
    
    
    (14,797
    )
    
    
    (17,816
    )Fair value of plan assets at end of year
    
    
    
    
    
    
    Unfunded status at end of year
    
    $
    (210,860
    )
    
    $
    (190,223
    )Amounts recognized in the balance sheet consist of:Current liabilities
    
    $
    (13,581
    )
    
    $
    (14,501
    )Noncurrent liabilities
    
    
    (197,279
    )
    
    
    (175,722
    )Accumulated other comprehensive loss (gain)
    
    
    8,336
    
    
    
    (15,134
    )Net amount recognized
    
    $
    (202,524
    )
    
    $
    (205,357
    )Amounts recognized in accumulated other
comprehensive loss consists of:Net actuarial loss (gain)
    
    $
    15,777
    
    
    $
    (7,151
    )Prior service credit
    
    
    (7,627
    )
    
    
    (8,262
    )Transition obligation
    
    
    186
    
    
    
    279$
    8,336
    
    
    $
    (15,134
    )
  181




---



##### 



Westmoreland Coal Company and Subsidiaries
Notes to Consolidated Financial Statements (Cont.)
  Years Ended December 31,2010
    
    
    2009
    
    
    2008(In thousands)Components of net periodic benefit
cost:Service cost
    
    $
    539
    
    
    $
    735
    
    
    $
    677Interest cost
    
    
    10,498
    
    
    
    16,233
    
    
    
    17,107Amortization of:Transition obligation
    
    
    93
    
    
    
    3,381
    
    
    
    3,613Prior service cost (credit)
    
    
    (636
    )
    
    
    924
    
    
    
    1,325Actuarial loss
    
    
    268
    
    
    
    2,774
    
    
    
    3,381Total net periodic benefit cost
    
    $
    10,762
    
    
    $
    24,047
    
    
    $
    26,103
  Years Ended December 31,2010
    
    
    2009
    
    
    2008(In thousands)Former mining operations
    
    $
    9,225
    
    
    $
    22,186
    
    
    $
    24,553Current operations
    
    
    1,537
    
    
    
    1,861
    
    
    
    1,550Total net periodic benefit cost
    
    $
    10,762
    
    
    $
    24,047
    
    
    $
    26,103
 Heritage health benefit expenses
 Assumptions
  December 31,2010
    
    2009Discount rate
    
    
    5.15
    %
    
    
    5.71
    %Measurement date
    
    December 31, 2010
    
    December 31, 2009
   December 31,2010
    
    2009
    
    2008Discount rate
    
    
    5.71
    %
    
    
    5.45% - 6.05
    %
    
    
    6.10
    %Measurement date
    
    December 31, 2009
    
    December 31, 2008
    
    December 31, 2007
 182




---



##### 



Westmoreland Coal Company and Subsidiaries
Notes to Consolidated Financial Statements (Cont.)
  Year Ended December 31,2010
    
    
    2009Health care cost trend rate assumed for next year
    
    
    7.50
    %
    
    
    8.00
    %Rate to which the cost trend is assumed to decline
(ultimate trend rate)
    
    
    5.00
    %
    
    
    5.00
    %Year that the trend rate reaches the ultimate trend rate
    
    
    2016
    
    
    
    2016
  Postretirement Medical Benefits1 % Increase
    
    
    1 % Decrease(In thousands)Effect on service and interest cost components
    
    $
    1,282
    
    
    $
    (1,079
    )Effect on postretirement medical benefit
obligation
    
    $
    22,565
    
    
    $
    (19,116
    )
 Cash Flows
  Postretirement
    
    Medicare D
    
    Net PostretirementMedical Benefits
    
    Subsidy
    
    Medical Benefits(In thousands)2011
    
    $
    14,734
    
    
    $
    (1,153
    )
    
    $
    13,5812012
    
    
    15,088
    
    
    
    (1,215
    )
    
    
    13,8732013
    
    
    15,428
    
    
    
    (1,270
    )
    
    
    14,1582014
    
    
    15,617
    
    
    
    (1,318
    )
    
    
    14,2992015
    
    
    15,903
    
    
    
    (1,350
    )
    
    
    14,553Years 2016  2020
    
    
    78,962
    
    
    
    (7,201
    )
    
    
    71,761
 Combined Benefit Fund
  Workers Compensation Benefits
  183




---



##### 



Westmoreland Coal Company and Subsidiaries
Notes to Consolidated Financial Statements (Cont.)
  December 31,2010
    
    
    2009(In thousands)Workers compensation , beginning of year
(including current portion)
    
    $
    11,219
    
    
    $
    12,838Accretion
    
    
    429
    
    
    
    300Claims paid
    
    
    (633
    )
    
    
    (806
    )Actuarial changes
    
    
    (637
    )
    
    
    (1,113
    )Workers compensation, end of year
    
    
    10,378
    
    
    
    11,219Less current portion
    
    
    (954
    )
    
    
    (1,031
    )Workers compensation, less current portion
    
    $
    9,424
    
    
    $
    10,188
  Pneumoconiosis (Black Lung) Benefits
    December 31,2010
    
    
    2009(In thousands)Actuarial present value of benefit obligation:Expected claims from terminated employees
    
    $
    949
    
    
    $
    937Amounts owed to existing claimants
    
    
    13,108
    
    
    
    13,723Total present value of benefit obligation
    
    
    14,057
    
    
    
    14,660Plan assets at fair value, primarily government-backed securities
    
    
    11,811
    
    
    
    13,874Excess of the pneumoconiosis benefit obligation over trust assets
    
    $
    (2,246
    )
    
    $
    (786
    )
   184




---



##### 



Westmoreland Coal Company and Subsidiaries
Notes to Consolidated Financial Statements (Cont.)
 Plan Assets
  Year Ended December 31, 2010Quoted Prices
    
    
    Significantin Active
    
    
    OtherMarkets for
    
    
    ObservableIdentical Assets
    
    
    InputsFair Value
    
    
    Level 1
    
    
    Level 2(In thousands)U.S. treasury securities
    
    $
    10,416
    
    
    $
    
    
    
    $
    10,416Mortgage-backed securities
    
    
    682
    
    
    
    
    
    
    
    682Cash and cash equivalents
    
    
    713
    
    
    
    713
    
    
    
    $
    11,811
    
    
    $
    713
    
    
    $
    11,098
 Year Ended December 31, 2009Quoted Prices
    
    
    Significantin Active
    
    
    OtherMarkets for
    
    
    ObservableIdentical Assets
    
    
    InputsFair Value
    
    
    Level 1
    
    
    Level 2(In thousands)U.S. treasury securities
    
    $
    12,860
    
    
    $
    
    
    
    $
    12,860Mortgage-backed securities
    
    
    839
    
    
    
    
    
    
    
    839Cash and cash equivalents
    
    
    175
    
    
    
    175
    
    
    
    $
    13,874
    
    
    $
    175
    
    
    $
    13,699
   6. PENSION AND OTHER SAVING PLANS
 Defined Benefit Pension Plans
   185




---



##### 



Westmoreland Coal Company and Subsidiaries
Notes to Consolidated Financial Statements (Cont.)
 Supplemental Executive Retirement Plan
   Defined Benefit Pension
    
    
    SERPDecember 31,
    
    
    December 31,2010
    
    
    2009
    
    
    2010
    
    
    2009(In thousands)Change in benefit obligation:Net benefit obligation at beginning of year
    
    $
    76,084
    
    
    $
    76,672
    
    
    $
    3,200
    
    
    $
    3,279Service cost
    
    
    610
    
    
    
    1,577
    
    
    
    
    
    
    
    Interest cost
    
    
    4,490
    
    
    
    4,650
    
    
    
    183
    
    
    
    191Actuarial loss
    
    
    7,025
    
    
    
    3,171
    
    
    
    175
    
    
    
    36Benefits paid
    
    
    (2,762
    )
    
    
    (1,610
    )
    
    
    (306
    )
    
    
    (306
    )Plan amendments
    
    
    
    
    
    
    204
    
    
    
    
    
    
    
    Curtailments
    
    
    
    
    
    
    (8,580
    )
    
    
    
    
    
    
    Net benefit obligation at end of year
    
    
    85,447
    
    
    
    76,084
    
    
    
    3,252
    
    
    
    3,200Change in plan assets:Fair value of plan assets at the beginning
of year
    
    
    52,152
    
    
    
    40,783
    
    
    
    
    
    
    
    Actual return on plan assets
    
    
    7,732
    
    
    
    7,196
    
    
    
    
    
    
    
    Employer contributions
    
    
    10,811
    
    
    
    5,782
    
    
    
    306
    
    
    
    306Benefits paid
    
    
    (2,762
    )
    
    
    (1,610
    )
    
    
    (306
    )
    
    
    (306
    )Fair value of plan assets at end of year
    
    
    67,933
    
    
    
    52,151
    
    
    
    
    
    
    
    Funded status at end of year
    
    $
    (17,514
    )
    
    $
    (23,933
    )
    
    $
    (3,252
    )
    
    $
    (3,200
    )Amounts recognized in the accompanying
balance sheet consist of:Current liability
    
    $
    
    
    
    $
    
    
    
    $
    (304
    )
    
    $
    (306
    )Noncurrent liability
    
    
    (17,514
    )
    
    
    (23,933
    )
    
    
    (2,948
    )
    
    
    (2,894
    )Accumulated other comprehensive loss
    
    
    22,946
    
    
    
    20,542
    
    
    
    770
    
    
    
    625Net amount recognized at end of year
    
    $
    5,432
    
    
    $
    (3,391
    )
    
    $
    (2,482
    )
    
    $
    (2,575
    )Amounts recognized in accumulated other
comprehensive loss consist of:Net actuarial loss
    
    $
    22,946
    
    
    $
    20,542
    
    
    $
    765
    
    
    $
    610Prior service costs
    
    
    
    
    
    
    
    
    
    
    5
    
    
    
    15$
    22,946
    
    
    $
    20,542
    
    
    $
    770
    
    
    $
    625
  186




---



##### 



Westmoreland Coal Company and Subsidiaries
Notes to Consolidated Financial Statements (Cont.)
   Defined Benefit Pension
    
    
    
    
    
    
    SERPYears Ended December 31,
    
    
    Years Ended December 31,2010
    
    
    2009
    
    
    2008
    
    
    2010
    
    
    2009
    
    
    2008(In thousands)Components of net periodic benefit cost:Service cost
    
    $
    610
    
    
    $
    1,577
    
    
    $
    2,597
    
    
    $
    
    
    
    $
    
    
    
    $
    Interest cost
    
    
    4,490
    
    
    
    4,650
    
    
    
    4,390
    
    
    
    183
    
    
    
    191
    
    
    
    198Expected return on plan assets
    
    
    (4,393
    )
    
    
    (3,359
    )
    
    
    (4,416
    )
    
    
    
    
    
    
    
    
    
    
    Curtailment loss
    
    
    
    
    
    
    204
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Amortization of:Prior service cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10
    
    
    
    10
    
    
    
    10Actuarial loss
    
    
    1,282
    
    
    
    1,817
    
    
    
    340
    
    
    
    20
    
    
    
    18
    
    
    
    11Total net periodic pension cost
    
    $
    1,989
    
    
    $
    4,889
    
    
    $
    2,911
    
    
    $
    213
    
    
    $
    219
    
    
    $
    219
 Cost of sales Selling and administrative expenses
 Assumptions
  Defined Benefit Pension
    
    SERPDecember 31,
    
    December 31,2010
    
    2009
    
    2010
    
    2009Discount rate
    
    
    5.15% - 5.40
    %
    
    
    5.96
    %
    
    
    5.40
    %
    
    
    6.00
    %Rate of
compensation
increase
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/AMeasurement date
    
    December 31, 2010
    
    December 31, 2009
    
    December 31, 2010
    
    December 31, 2009
   Defined Benefit Pension
    
    SERPYears Ended December 31,
    
    Years Ended December 31,2010
    
    2009
    
    2008
    
    2010
    
    2009
    
    2008Discount rate
    
    
    5.75%-6.00
    %
    
    
    6.10
    %
    
    
    6.20%-6.30
    %
    
    
    6.00
    %
    
    
    6.10
    %
    
    
    6.30
    %Expected return on
plan assets
    
    
    7.80
    %
    
    
    7.96
    %
    
    
    8.50
    %
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/ARate of
compensation
increase
    
    
    N/A
    
    
    
    4.00%-7.50
    %
    
    
    4.00%-7.50
    %
    
    
    N/A
    
    
    
    4.00%-7.50
    %
    
    
    4.00%-7.50
    %Measurement date
    
    December 31, 2009
    
    December 31, 2008
    
    December 31, 2007
    
    December 31, 2009
    
    December 31, 2008
    
    December 31, 2007
 187




---



##### 



Westmoreland Coal Company and Subsidiaries
Notes to Consolidated Financial Statements (Cont.)
 Plan Assets
   TargetAllocationAsset categoryCash and equivalents
    
    
    0% - 10
    %Equity securities funds
    
    
    40% - 70
    %Debt securities funds
    
    
    30% - 60
    %Other
    
    
    0% - 10
    %Total
  Year Ended December 31, 2010QuotedPrices inActive
    
    
    SignificantMarkets for
    
    
    Other
    
    
    SignificantIdentical
    
    
    Observable
    
    
    UnobservableAssets
    
    
    Inputs
    
    
    InputsFair Value
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3(In thousands)Equity securities funds:U.S.
    
    $
    29,233
    
    
    $
    29,233
    
    
    $
    
    
    
    $
    International
    
    
    6,659
    
    
    
    6,659
    
    
    
    
    
    
    
    Debt securities funds:U.S. bonds
    
    
    22,736
    
    
    
    
    
    
    
    22,736
    
    
    
    Short-term securities
    
    
    1,313
    
    
    
    1,313
    
    
    
    
    
    
    
    Limited partnerships and
limited liability companies
    
    
    1,359
    
    
    
    
    
    
    
    
    
    
    
    1,359Westmoreland Coal common stock
    
    
    6,045
    
    
    
    6,045
    
    
    
    
    
    
    
    Cash and cash equivalents
    
    
    588
    
    
    
    588
    
    
    
    
    
    
    
    $
    67,933
    
    
    $
    43,838
    
    
    $
    22,736
    
    
    $
    1,359
 188




---



##### 



Westmoreland Coal Company and Subsidiaries
Notes to Consolidated Financial Statements (Cont.)
 Year Ended December 31, 2009QuotedPrices inActive
    
    
    SignificantMarkets for
    
    
    Other
    
    
    SignificantIdentical
    
    
    Observable
    
    
    UnobservableAssets
    
    
    Inputs
    
    
    InputsFair Value
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3(In thousands)Equity securities funds:U.S.
    
    $
    24,850
    
    
    $
    24,850
    
    
    $
    
    
    
    $
    International
    
    
    2,467
    
    
    
    2,467
    
    
    
    
    
    
    
    Debt securities funds:U.S. bonds
    
    
    15,065
    
    
    
    
    
    
    
    15,065
    
    
    
    Short-term securities
    
    
    967
    
    
    
    967
    
    
    
    
    
    
    
    Limited partnerships and
limited liability companies
    
    
    1,697
    
    
    
    
    
    
    
    
    
    
    
    1,697Westmoreland Coal common stock
    
    
    3,240
    
    
    
    3,240
    
    
    
    
    
    
    
    Cash and cash equivalents
    
    
    3,865
    
    
    
    3,865
    
    
    
    
    
    
    
    $
    52,151
    
    
    $
    35,389
    
    
    $
    15,065
    
    
    $
    1,697
     Limited partnerships and limitedliability companiesYear Ended December 31,2010
    
    
    2009(In thousands)Beginning balance
    
    $
    1,697
    
    
    $
    5,866Realized loss
    
    
    
    
    
    
    (283
    )Unrealized (loss) gain
    
    
    197
    
    
    
    (234
    )Settlements
    
    
    (535
    )
    
    
    (3,652
    )Ending balance
    
    $
    1,359
    
    
    $
    1,697
 189




---



##### 



Westmoreland Coal Company and Subsidiaries
Notes to Consolidated Financial Statements (Cont.)
 Contributions
   Cash Flows
  Pension Benefits(In thousands)2011
    
    $
    2,6742012
    
    
    3,0492013
    
    
    3,4762014
    
    
    3,8992015
    
    
    4,277Years 2016 - 2020
    
    
    27,412
  Multi-Employer Pension
  Other Plans
  7. HERITAGE HEALTH BENEFIT EXPENSES
 Heritage health benefit expenses
 Years Ended December 31,2010
    
    
    2009
    
    
    2008(In thousands)Health care benefits
    
    $
    9,927
    
    
    $
    22,490
    
    
    $
    25,588Combined benefit fund payments
    
    
    2,953
    
    
    
    3,132
    
    
    
    3,470Workers compensation benefits
(credit)
    
    
    81
    
    
    
    (485
    )
    
    
    4,417Black lung benefits (credit)
    
    
    1,460
    
    
    
    2,937
    
    
    
    (23
    )Total
    
    $
    14,421
    
    
    $
    28,074
    
    
    $
    33,452
  190




---



##### 



Westmoreland Coal Company and Subsidiaries
Notes to Consolidated Financial Statements (Cont.)
 8.
    
    ASSET RETIREMENT OBLIGATIONS, CONTRACTUAL THIRD-PARTY RECLAMATION RECEIVABLE, AND
RECLAMATION DEPOSITS
  ContractualAsset
    
    
    Third-PartyRetirement
    
    
    Reclamation
    
    
    ReclamationObligation
    
    
    Receivable
    
    
    Deposits(In thousands)Rosebud
    
    $
    106,990
    
    
    $
    14,622
    
    
    $
    72,274Jewett
    
    
    80,335
    
    
    
    80,335
    
    
    
    Absaloka
    
    
    32,338
    
    
    
    525
    
    
    
    Beulah
    
    
    18,588
    
    
    
    
    
    
    
    Savage
    
    
    2,676
    
    
    
    
    
    
    
    ROVA
    
    
    716
    
    
    
    
    
    
    
    Total
    
    $
    241,643
    
    
    $
    95,482
    
    
    $
    72,274
 Asset Retirement Obligations
  Years Ended December 31,2010
    
    
    2009(In thousands)Asset retirement obligations, beginning of year
(including current portion)
    
    $
    244,615
    
    
    $
    222,708Accretion
    
    
    19,773
    
    
    
    17,436Liabilities settled
    
    
    (15,351
    )
    
    
    (9,434
    )Changes due to amount and timing of reclamation
    
    
    (7,394
    )
    
    
    13,905Asset retirement obligations, end of year
    
    
    241,643
    
    
    
    244,615Less current portion
    
    
    (14,514
    )
    
    
    (15,513
    )Asset retirement obligations, less current portion
    
    $
    227,129
    
    
    $
    229,102
   Contractual Third-Party Reclamation Receivables
  Contractual third-party reclamation receivables Capitalized asset retirement cost
 191




---



##### 



Westmoreland Coal Company and Subsidiaries
Notes to Consolidated Financial Statements (Cont.)
 Reclamation Deposits
  Carrying Value
    
    
    Fair Value(In thousands)Cash and cash equivalents
    
    $
    38,534
    
    
    $
    38,534Held-to-maturity securities
    
    
    15,633
    
    
    
    17,044Time deposits
    
    
    15,903
    
    
    
    15,903Available-for-sale securities
    
    
    2,204
    
    
    
    2,204$
    72,274
    
    
    $
    73,685
  Held-to-Maturity and Available-for-Sale Reclamation Deposits
  Years Ended December 31,2010
    
    
    2009(In thousands)Amortized cost
    
    $
    15,633
    
    
    $
    21,099Gross unrealized holding gains
    
    
    1,453
    
    
    
    1,418Gross unrealized holding losses
    
    
    (42
    )
    
    
    (9
    )Fair value
    
    $
    17,044
    
    
    $
    22,508
  Amortized Cost
    
    
    Fair Value(In thousands)Due in five years or less
    
    $
    3,350
    
    
    $
    3,732Due after five years to ten years
    
    
    4,207
    
    
    
    4,335Due in more than ten years
    
    
    8,076
    
    
    
    8,977$
    15,633
    
    
    $
    17,044
  December 31,2010
    
    
    2009(In thousands)Cost basis
    
    $
    2,000
    
    
    $
    2,402Gross unrealized holding gains
    
    
    204
    
    
    
    712Fair value
    
    $
    2,204
    
    
    $
    3,114
 192




---



##### 



Westmoreland Coal Company and Subsidiaries
Notes to Consolidated Financial Statements (Cont.)
 9.
    
    DERIVATIVE INSTRUMENTS
 Adoption of ASC 815-40
 Determining Whether an Instrument (or
Embedded Feature) is Indexed to an Entitys Own Stock Accounting for
Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion
Ratios
  OtherDebt Discount
    
    
    Derivative Liability
    
    
    Paid-In-Capital
    
    
    Accumulated Deficit(In thousands)Record January 1,
2009, debt discount
and derivative
instrument
liability related
to convertible debt
    
    $
    7,734
    
    
    $
    5,605
    
    
    $
    
    
    
    $
    (2,129
    )Record January 1,
2009, derivative
instrument
liability related
to warrant
    
    
    
    
    
    
    477
    
    
    
    
    
    
    
    477Record amortization
of debt discount
from March 4, 2008,
through December
31, 2008
    
    
    (653
    )
    
    
    
    
    
    
    
    
    
    
    653Record the reversal
of the beneficial
conversion feature
expensed in 2008
under ASC 470-20
    
    
    
    
    
    
    
    
    
    
    (8,147
    )
    
    
    (8,147
    )Record the reversal
of prior accounting
related to the
warrant
    
    
    
    
    
    
    
    
    
    
    (1,700
    )
    
    
    (1,700
    )$
    7,081
    
    
    $
    6,082
    
    
    $
    (9,847
    )
    
    $
    (10,846
    )
 Convertible Debt
  Stock Price
    
    Bond Yield$11.94
    
    
    5.16
    %
 Warrant
  Number ofShares Included in
    
    
    
    
    
    
    
    
    
    
    
    
    
    Expected LifeWarrant
    
    Dividend Yield
    
    Volatility
    
    Risk Free Rate
    
    (in years)173,228
    
    None
    
    
    65
    %
    
    
    0.20
    %
    
    
    1.0
 193




---



##### 



Westmoreland Coal Company and Subsidiaries
Notes to Consolidated Financial Statements (Cont.)
  December 31,Derivative Instruments
    
    Balance Sheet Location
    
    
    2010
    
    
    2009Convertible debt
-conversion feature
    
    Other liabilities
    
    $
    3,588
    
    
    $
    Warrant
    
    Other liabilities
    
    
    
    
    
    
    30
  Income (Expense)Recognized in Earnings onDerivativesStatement of
    
    
    Year Ended December 31,Derivative Instruments
    
    Operations Location
    
    
    2010
    
    
    2009Convertible debt
-conversion feature
    
    Other income (loss)
    
    $
    (3,486
    )
    
    $
    5,674Warrant
    
    Other income (loss)
    
    
    30
    
    
    
    448
 10. FAIR VALUE MEASUREMENTS
   Carrying Value
    
    
    Fair Value(In thousands)December 31, 2009
    
    $
    192,608
    
    
    $
    201,352December 31, 2010
    
    $
    185,320
    
    
    $
    196,483
  
    
    Level 1, defined as observable inputs such as quoted prices in active markets for
identical assets. Level 1 assets include available-for-sale equity securities
generally valued based on independent third-party market prices.
    
    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. The Company had no Level 2 inputs at December
31, 2010.
    
    Level 3, defined as unobservable inputs in which little or no market data exists,
therefore requiring an entity to develop its own assumptions. The Companys
convertible notes conversion feature and warrant were classified as Level 3. These
items were valued using the Binomial Lattice model and the Black-Scholes model,
respectively.
 194




---



##### 



Westmoreland Coal Company and Subsidiaries
Notes to Consolidated Financial Statements (Cont.)
  Year Ended December 31, 2010Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    Total(In thousands)Assets:Available-for-sale investments
included in Restricted investments
and bond collateral
    
    $
    2,889
    
    
    $
    
    
    
    $
    
    
    
    $
    2,889Available-for-sale investments
included in Reclamation deposits
    
    
    2,204
    
    
    
    
    
    
    
    
    
    
    
    2,204Total assets
    
    $
    5,093
    
    
    $
    
    
    
    $
    
    
    
    $
    5,093Liabilities:Convertible debt  conversion feature
    
    $
    
    
    
    $
    
    
    
    $
    3,588
    
    
    $
    3,588Total liabilities
    
    $
    
    
    
    $
    
    
    
    $
    3,588
    
    
    $
    3,588
 Year Ended December 31, 2009Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    Total(In thousands)Assets:Available-for-sale
investments included in
Restricted investments
and bond collateral
    
    $
    2,879
    
    
    $
    
    
    
    $
    
    
    
    $
    2,879Available-for-sale
investments included in
Reclamation deposits
    
    
    3,114
    
    
    
    
    
    
    
    
    
    
    
    3,114Total assets
    
    $
    5,993
    
    
    $
    
    
    
    $
    
    
    
    $
    5,993Liabilities:Warrant
    
    $
    
    
    
    $
    
    
    
    $
    30
    
    
    $
    30Total liabilities
    
    $
    
    
    
    $
    
    
    
    $
    30
    
    
    $
    30
  Year Ended December 31,2010
    
    
    2009(In thousands)Beginning balance
    
    $
    30
    
    
    $
    January 1, 2010, beginning balance
adjustment pursuant to adoption of ASC
815-40
    
    
    
    
    
    
    6,082Additional debt discount
    
    
    102
    
    
    
    70Change in fair value
    
    
    3,456
    
    
    
    (6,122
    )Ending balance
    
    $
    3,588
    
    
    $
    30
 11. STOCKHOLDERS EQUITY
 Preferred and Common Stock
  195




---



##### 



Westmoreland Coal Company and Subsidiaries
Notes to Consolidated Financial Statements (Cont.)
  Extended TotalShares
    
    
    Per Share
    
    
    (in thousands)Dividends accumulated(1)
    
    
    160,129
    
    
    $
    124.53
    
    
    $
    19,940Redemption value
    
    
    160,129
    
    
    $
    100.00
    
    
    
    16,013Total
    
    
    
    
    
    
    
    
    
    $
    35,953
 
 (1)
    
    In February 2011, the Company paid the $19.9 million of accumulated
dividends as of January 1, 2011.  Restricted Net Assets
   12.
    
    RESTRICTED STOCK, STOCK OPTIONS, AND STOCK APPRECIATION RIGHTS
    Years Ended December 31,2010
    
    
    2009
    
    
    2008(In thousands)Recognition of fair value of restricted stock, stock options
and SARs over vesting period
    
    $
    1,058
    
    
    $
    702
    
    
    $
    1,227Contributions of stock to the Companys 401(k) plan
    
    
    2,991
    
    
    
    1,869
    
    
    
    1,569Compensation credit for performance units plan (1)
    
    
    
    
    
    
    (19
    )
    
    
    (63
    )Total share-based compensation expense (2)
    
    $
    4,049
    
    
    $
    2,552
    
    
    $
    2,733
 
 (1)
    
    The Companys only active performance unit plan expired June 30, 2009.(2)
    
    These costs are recorded in Cost of salesand Selling and administrative expenses
in the accompanying statement of operations. 196




---



##### 



Westmoreland Coal Company and Subsidiaries
Notes to Consolidated Financial Statements (Cont.)
  December 31, 2008Assumptions (weighted average):Risk-free interest rate
    
    
    3.62
    %Expected dividend yield
    
    NoneExpected volatility
    
    
    50
    %Expected life (in years)
    
    
    7.0
 Restricted Stock
   UnamortizedWeighted Average
    
    
    CompensationCommon
    
    
    Grant-Date Fair
    
    
    ExpenseShares
    
    
    Value
    
    
    (In thousands)Non-vested at December 31, 2009
    
    
    96,558
    
    
    $
    8.36Granted
    
    
    157,833
    
    
    $
    8.31Vested
    
    
    (47,656
    )
    
    $
    9.21Forfeited
    
    
    (14,038
    )
    
    $
    8.14Non-vested at December 31, 2010
    
    
    192,697
    
    
    $
    8.13
    
    
    $
    1,265
    (1)
 
 (1)
    
    Expected to be recognized over the next three years.   197




---



##### 



Westmoreland Coal Company and Subsidiaries
Notes to Consolidated Financial Statements (Cont.)
 Stock Options
   Weighted AverageRemaining
    
    
    
    
    
    
    UnamortizedWeighted
    
    
    Contractual
    
    
    Aggregate
    
    
    CompensationAverage
    
    
    Life
    
    
    Intrinsic
    
    
    ExpenseStock Options
    
    
    Exercise Price
    
    
    (in years)
    
    
    Value
    
    
    (In thousands)Outstanding at December 31, 2009
    
    
    354,224
    
    
    $
    18.73Exercised
    
    
    (2,500
    )
    
    $
    3.38
    
    
    
    
    
    
    $
    16,588Expired
    
    
    (28,466
    )
    
    $
    17.40Forfeited
    
    
    (4,668
    )
    
    $
    21.40Outstanding at December 31, 2010
    
    
    318,590
    
    
    $
    18.99
    
    
    
    4.4
    
    
    $
    16,938Exercisable at December 31, 2010
    
    
    273,834
    
    
    $
    18.60
    
    
    
    3.9
    
    
    $
    16,938
    
    
    $
    259
    (1)
 
 (1)
    
    Expected to be recognized over the next year.    SARs
   WeightedAverage
    
    
    
    
    
    
    UnamortizedWeighted
    
    
    Remaining
    
    
    
    
    
    
    CompensationAverage
    
    
    Contractual Life
    
    
    Aggregate Intrinsic
    
    
    ExpenseSARs
    
    
    Base Price
    
    
    (in years)
    
    
    Value
    
    
    (In thousands)Outstanding at December 31, 2009
    
    
    155,334
    
    
    $
    21.91Expired
    
    
    (36,400
    )
    
    $
    21.18Outstanding at December 31, 2010
    
    
    118,934
    
    
    $
    22.13
    
    
    
    4.6
    
    
    $
    Exercisable at December 31, 2010
    
    
    118,934
    
    
    $
    22.13
    
    
    
    4.6
    
    
    $
    
    
    
    $
    
   198




---



##### 



Westmoreland Coal Company and Subsidiaries
Notes to Consolidated Financial Statements (Cont.)
  13.
    
    ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
  Pension and
    
    
    
    
    
    
    Tax Effect of OtherPostretirement
    
    
    Available for Sale
    
    
    Comprehensive
    
    
    Accumulated OtherMedical Benefits
    
    
    Securities
    
    
    Income Gains
    
    
    Comprehensive Loss(In thousands)Balance at January 1, 2008
    
    $
    (116,093
    )
    
    $
    
    
    
    $
    (9,094
    )
    
    $
    (125,187
    )2008 activity
    
    
    (3,386
    )
    
    
    112
    
    
    
    
    
    
    
    (3,274
    )Balance at December 31, 2008
    
    
    (119,479
    )
    
    
    112
    
    
    
    (9,094
    )
    
    
    (128,461
    )Postretirement medical
benefit plan amendments and
pension plan freeze
adjustments
    
    
    105,983
    
    
    
    
    
    
    
    
    
    
    
    105,9832009 activity
    
    
    7,465
    
    
    
    852
    
    
    
    (17,062
    )
    
    
    (8,745
    )Balance at December 31, 2009
    
    
    (6,031
    )
    
    
    964
    
    
    
    (26,156
    )
    
    
    (31,223
    )2010 activity
    
    
    (26,018
    )
    
    
    (439
    )
    
    
    
    
    
    
    (26,457
    )Balance at December 31, 2010
    
    $
    (32,049
    )
    
    $
    525
    
    
    $
    (26,156
    )
    
    $
    (57,680
    )
 Accumulated other comprehensive loss
 14.
    
    INCOME TAX
  Year Ended December 31,2010
    
    
    2009
    
    
    2008(In thousands)Current:Federal
    
    $
    (10
    )
    
    $
    (323
    )
    
    $
    State
    
    
    (14
    )
    
    
    1,168
    
    
    
    919(24
    )
    
    
    845
    
    
    
    919Deferred:Federal
    
    
    
    
    
    
    (15,977
    )
    
    
    State
    
    
    (117
    )
    
    
    (2,004
    )
    
    
    (117
    )
    
    
    (17,981
    )
    
    
    Income tax expense (benefit)
    
    $
    (141
    )
    
    $
    (17,136
    )
    
    $
    919
 199




---



##### 



Westmoreland Coal Company and Subsidiaries
Notes to Consolidated Financial Statements (Cont.)
  Year Ended December 31,2010
    
    
    2009
    
    
    2008(In thousands)Computed tax benefit at statutory rate
    
    $
    (1,126
    )
    
    $
    (15,619
    )
    
    $
    (16,200
    )Increase (decrease) in tax expense resulting from:Tax depletion in excess of basis
    
    
    (4,019
    )
    
    
    (713
    )
    
    
    (2,643
    )Non-deductible interest expense and convertible debt valuation
    
    
    2,076
    
    
    
    (1,074
    )
    
    
    3,156Noncontrolling interest
    
    
    899
    
    
    
    618
    
    
    
    State income taxes, net
    
    
    (1,090
    )
    
    
    (2,467
    )
    
    
    (3,214
    )Change in valuation allowance for net deferred
tax assets
    
    
    (3,312
    )
    
    
    2,902
    
    
    
    24,628Medicare Part D subsidy law change
    
    
    7,159
    
    
    
    
    
    
    
    Indian Coal Tax Credits
    
    
    (120
    )
    
    
    (96
    )
    
    
    (5,893
    )Other, net
    
    
    (608
    )
    
    
    (687
    )
    
    
    1,085Income tax expense (benefit)
    
    $
    (141
    )
    
    $
    (17,136
    )
    
    $
    919
   Loss FromContinuing
    
    
    Other
    
    
    TotalOperations
    
    
    Comprehensive Income
    
    
    Comprehensive Income(In thousands)Pre-allocation
    
    $
    (46,224
    )
    
    $
    114,300
    
    
    $
    68,076Tax allocation
    
    
    17,062
    
    
    $
    (17,062
    )
    
    
    As presented
    
    $
    (29,162
    )
    
    $
    97,238
    
    
    $
    68,076
  200




---



##### 



Westmoreland Coal Company and Subsidiaries
Notes to Consolidated Financial Statements (Cont.)
  December 31,2010
    
    
    2009(In thousands)Deferred tax assets:Federal net operating loss carryforwards
    
    $
    74,061
    
    
    $
    67,133State net operating loss carryforwards
    
    
    24,627
    
    
    
    14,983Alternative minimum tax credit carryforwards
    
    
    7,009
    
    
    
    5,683Charitable contribution carryforwards
    
    
    169
    
    
    
    179Indian Coal Tax Credit carryforwards
    
    
    25,552
    
    
    
    26,654Accruals for the following:Workers compensation
    
    
    4,013
    
    
    
    4,338Postretirement medical benefit and pension
obligations
    
    
    80,116
    
    
    
    81,764Incentive plans
    
    
    1,843
    
    
    
    900Asset retirement obligations
    
    
    68,561
    
    
    
    66,839Deferred revenues
    
    
    29,430
    
    
    
    31,757Gain on sale of partnership interest
    
    
    6,402
    
    
    
    8,061Other accruals
    
    
    5,618
    
    
    
    7,147Total gross deferred assets
    
    
    327,401
    
    
    
    315,438Less valuation allowance
    
    
    (247,086
    )
    
    
    (232,575
    )Net deferred tax assets
    
    
    80,315
    
    
    
    82,863Deferred tax liabilities:Property, plant and equipment, differences due
to depreciation and amortization
    
    
    (76,656
    )
    
    
    (77,562
    )Change in accounting method
    
    
    (354
    )
    
    
    (2,137
    )Other
    
    
    (847
    )
    
    
    (823
    )Total gross deferred tax liabilities
    
    
    (77,857
    )
    
    
    (80,522
    )Net deferred tax asset
    
    $
    2,458
    
    
    $
    2,341
      201




---



##### 



Westmoreland Coal Company and Subsidiaries
Notes to Consolidated Financial Statements (Cont.)
  Expiration Date
    
    Regular Tax(In thousands)2011
    
    $
    32,6982012
    
    
    4492018
    
    
    282019
    
    
    88,4292020
    
    
    32after 2020
    
    
    96,165Total
    
    $
    217,801
   Year Ended December 31,2010
    
    
    2009(In thousands)Balance of unrecognized tax benefits at beginning of year
    
    $
    2,861
    
    
    $
    1,748Additions for tax positions related to current year
    
    
    18
    
    
    
    1,113Balance of unrecognized tax benefits at end of year
    
    $
    2,879
    
    
    $
    2,861
   15. COMMITMENTS
 Supply Agreements
  202




---



##### 



Westmoreland Coal Company and Subsidiaries
Notes to Consolidated Financial Statements (Cont.)
 Leases
   Year Ended December 31, 2010Capital Leases
    
    
    Operating Leases(In thousands)2011
    
    $
    8,714
    
    
    $
    6,6652012
    
    
    8,319
    
    
    
    4,2432013
    
    
    7,077
    
    
    
    2,8272014
    
    
    4,461
    
    
    
    2,2332015
    
    
    1,617
    
    
    
    1,625Thereafter
    
    
    105
    
    
    
    718Total minimum lease payments
    
    $
    30,293
    
    
    $
    18,311Less imputed interest
    
    
    (4,064
    )Present value of minimum capital
lease payments
    
    $
    26,229
   16. CONTINGENCIES
  17. BUSINESS SEGMENT INFORMATION
   203




---



##### 



Westmoreland Coal Company and Subsidiaries
Notes to Consolidated Financial Statements (Cont.)
  Coal
    
    
    Power
    
    
    Heritage
    
    
    Corporate
    
    
    Consolidated(In thousands)December 31, 2010Revenues
    
    $
    418,058
    
    
    $
    87,999
    
    
    $
    
    
    
    $
    
    
    
    $
    506,057Operating income (loss)
    
    
    32,922
    
    
    
    11,721
    
    
    
    (15,968
    )
    
    
    (8,154
    )
    
    
    20,521Total assets
    
    
    520,722
    
    
    
    207,643
    
    
    
    12,283
    
    
    
    9,658
    
    
    
    750,306Capital expenditures
    
    
    20,056
    
    
    
    2,207
    
    
    
    
    
    
    
    551
    
    
    
    22,814December 31, 2009Revenues
    
    $
    361,206
    
    
    $
    82,162
    
    
    $
    
    
    
    $
    
    
    
    $
    443,368Operating income (loss)
    
    
    476
    
    
    
    7,672
    
    
    
    (31,770
    )
    
    
    (8,152
    )
    
    
    (31,774
    )Total assets
    
    
    537,924
    
    
    
    216,685
    
    
    
    4,634
    
    
    
    13,485
    
    
    
    772,728Capital expenditures
    
    
    30,078
    
    
    
    4,251
    
    
    
    
    
    
    
    217
    
    
    
    34,546December 31, 2008Revenues
    
    $
    419,806
    
    
    $
    89,890
    
    
    $
    
    
    
    $
    
    
    
    $
    509,696Restructuring charges
    
    
    155
    
    
    
    
    
    
    
    
    
    
    
    1,854
    
    
    
    2,009Operating income (loss)
    
    
    15,211
    
    
    
    16,920
    
    
    
    (35,472
    )
    
    
    (12,694
    )
    
    
    (16,035
    )Total assets
    
    
    557,245
    
    
    
    239,083
    
    
    
    5,301
    
    
    
    11,338
    
    
    
    812,967Capital expenditures
    
    
    29,534
    
    
    
    1,711
    
    
    
    
    
    
    
    75
    
    
    
    31,320
  Year Ended2010
    
    
    2009
    
    
    2008(In thousands)Income (loss) from operations
    
    $
    20,521
    
    
    $
    (31,774
    )
    
    $
    (16,035
    )Interest expense attributable to beneficial conversion feature
    
    
    
    
    
    
    
    
    
    
    (8,146
    )Loss on extinguishment of debt
    
    
    
    
    
    
    
    
    
    
    (5,178
    )Interest expense
    
    
    (22,992
    )
    
    
    (23,733
    )
    
    
    (23,130
    )Interest income
    
    
    1,747
    
    
    
    3,218
    
    
    
    5,125Other income (loss)
    
    
    (2,587
    )
    
    
    5,991
    
    
    
    (284
    )Loss before income taxes
    
    $
    (3,311
    )
    
    $
    (46,298
    )
    
    $
    (47,648
    )
  2010
    
    
    2009
    
    
    2008(In thousands)Customer A  coal
    
    $
    119,633
    
    
    $
    79,502
    
    
    $
    131,859Customer B  coal
    
    
    80,493
    
    
    
    85,334
    
    
    
    80,581Customer C  power
    
    
    86,926
    
    
    
    81,037
    
    
    
    88,651Customer D  coal(1)
    
    
    64,968
    
    
    
    51,187
    
    
    
    Customer E  coal(2)
    
    
    
    
    
    
    49,670
    
    
    
    Percentage of total revenue
    
    
    70
    %
    
    
    78
    %
    
    
    60
    %
 
 (1)
    
    The revenue from Customer D did not exceed 10% in 2008.(2)
    
    The revenue from Customer E did not exceed 10% in 2010 and
2008. 204




---



##### 



Westmoreland Coal Company and Subsidiaries
Notes to Consolidated Financial Statements (Cont.)
 18. QUARTERLY FINANCIAL DATA (UNAUDITED)
  Three Months EndedMarch 31
    
    
    June 30
    
    
    September 30
    
    
    December 31(In thousands; except per share data)2010:Revenues
    
    $
    126,439
    
    
    $
    127,632
    
    
    $
    124,080
    
    
    $
    127,906Operating income (loss)
    
    
    5,314
    
    
    
    1,333
    
    
    
    7,839
    
    
    
    6,035Net income (loss) applicable to common
shareholders
    
    
    (3,195
    )
    
    
    919
    
    
    
    2,513
    
    
    
    (2,122
    )Basic income (loss) per common share
    
    $
    (0.30
    )
    
    $
    0.09
    
    
    $
    0.23
    
    
    $
    (0.19
    )2009:Revenues
    
    $
    121,798
    
    
    $
    104,780
    
    
    $
    112,404
    
    
    $
    104,386Operating loss
    
    
    (4,402
    )
    
    
    (6,249
    )
    
    
    (9,751
    )
    
    
    (11,372
    )Net loss applicable to common shareholders
    
    
    (5,629
    )
    
    
    (7,232
    )
    
    
    (7,837
    )
    
    
    (8,007
    )Basic and diluted loss per common share
    
    $
    (0.59
    )
    
    $
    (0.75
    )
    
    $
    (0.77
    )
    
    $
    (0.78
    )
 205




---



##### 



Westmoreland Coal Company and Subsidiaries
Notes to Consolidated Financial Statements (Cont.)
 19. SUPPLEMENTAL CONSOLIDATING FINANCIAL INFORMATION
  CONSOLIDATING BALANCE SHEETS
December 31, 2009
(In thousands)
 Parent/
    
    
    
    
    
    
    Guarantor
    
    
    Non-Guarantor
    
    
    ConsolidatingAssets
    
    Issuer
    
    
    Co-Issuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Adjustments
    
    
    TotalCurrent assets:Cash and cash equivalents
    
    $
    755
    
    
    $
    138
    
    
    $
    
    
    
    $
    9,626
    
    
    $
    
    
    
    $
    10,519Receivables:Trade
    
    
    
    
    
    
    13,737
    
    
    
    29
    
    
    
    32,824
    
    
    
    (197
    )
    
    
    46,393Contractual third-party reclamation
receivables
    
    
    
    
    
    
    
    
    
    
    180
    
    
    
    7,077
    
    
    
    
    
    
    
    7,257Intercompany receivable/payable
    
    
    
    
    
    
    
    
    
    
    11,429
    
    
    
    (16,592
    )
    
    
    5,163
    
    
    
    Other
    
    
    424
    
    
    
    
    
    
    
    2,686
    
    
    
    672
    
    
    
    (620
    )
    
    
    3,162424
    
    
    
    13,737
    
    
    
    14,324
    
    
    
    23,981
    
    
    
    4,346
    
    
    
    56,812Inventories
    
    
    
    
    
    
    2,571
    
    
    
    4,415
    
    
    
    18,885
    
    
    
    
    
    
    
    25,871Other current assets
    
    
    454
    
    
    
    176
    
    
    
    540
    
    
    
    4,877
    
    
    
    
    
    
    
    6,047Total current assets
    
    
    1,633
    
    
    
    16,622
    
    
    
    19,279
    
    
    
    57,369
    
    
    
    4,346
    
    
    
    99,249Property, plant and equipment:Land and mineral rights
    
    
    
    
    
    
    1,156
    
    
    
    17,764
    
    
    
    64,774
    
    
    
    
    
    
    
    83,694Capitalized asset retirement cost
    
    
    
    
    
    
    239
    
    
    
    22,016
    
    
    
    112,566
    
    
    
    
    
    
    
    134,821Plant and equipment
    
    
    2,295
    
    
    
    214,531
    
    
    
    113,388
    
    
    
    156,024
    
    
    
    
    
    
    
    486,2382,295
    
    
    
    215,926
    
    
    
    153,168
    
    
    
    333,364
    
    
    
    
    
    
    
    704,753Less accumulated depreciation,
depletion and amortization
    
    
    (1,830
    )
    
    
    (32,953
    )
    
    
    (74,566
    )
    
    
    (139,220
    )
    
    
    
    
    
    
    (248,569
    )Net property, plant and equipment
    
    
    465
    
    
    
    182,973
    
    
    
    78,602
    
    
    
    194,144
    
    
    
    
    
    
    
    456,184Advanced coal royalties
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,056
    
    
    
    
    
    
    
    3,056Reclamation deposits
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    73,067
    
    
    
    
    
    
    
    73,067Restricted investments and bond collateral
    
    
    9,958
    
    
    
    8,705
    
    
    
    9,226
    
    
    
    20,299
    
    
    
    
    
    
    
    48,188Contractual third-party reclamation
receivables, less current portion
    
    
    
    
    
    
    
    
    
    
    120
    
    
    
    74,869
    
    
    
    
    
    
    
    74,989Deferred income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,341
    
    
    
    2,341Intangible assets
    
    
    
    
    
    
    7,842
    
    
    
    
    
    
    
    939
    
    
    
    
    
    
    
    8,781Investment in subsidiaries
    
    
    110,341
    
    
    
    
    
    
    
    (664
    )
    
    
    3,770
    
    
    
    (113,447
    )
    
    
    Other assets
    
    
    451
    
    
    
    543
    
    
    
    1,926
    
    
    
    3,953
    
    
    
    
    
    
    
    6,873Total assets
    
    $
    122,848
    
    
    $
    216,685
    
    
    $
    108,489
    
    
    $
    431,466
    
    
    $
    (106,760
    )
    
    $
    772,728
 206




---



##### 



Westmoreland Coal Company and Subsidiaries
Notes to Consolidated Financial Statements (Cont.)
 CONSOLIDATING BALANCE SHEETS
December 31, 2009
(In thousands)
 Non-Parent/
    
    
    
    
    
    
    Guarantor
    
    
    Guarantor
    
    
    ConsolidatingLiabilities and Stockholders Deficit
    
    Issuer
    
    
    Co-Issuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Adjustments
    
    
    TotalCurrent liabilitiesCurrent installments of long-term debt
    
    $
    11,154
    
    
    $
    9,806
    
    
    $
    14,469
    
    
    $
    5,660
    
    
    $
    
    
    
    $
    41,089Revolving lines of credit
    
    
    
    
    
    
    
    
    
    
    16,400
    
    
    
    
    
    
    
    
    
    
    
    16,400Accounts payable and accrued expenses:Trade
    
    
    2,854
    
    
    
    7,469
    
    
    
    2,887
    
    
    
    27,033
    
    
    
    (979
    )
    
    
    39,264Production taxes
    
    
    
    
    
    
    2
    
    
    
    2,406
    
    
    
    22,102
    
    
    
    
    
    
    
    24,510Workers compensation
    
    
    1,031
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,031Postretirement medical benefits
    
    
    13,198
    
    
    
    
    
    
    
    
    
    
    
    1,303
    
    
    
    
    
    
    
    14,501SERP
    
    
    306
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    306Deferred revenue
    
    
    
    
    
    
    6,840
    
    
    
    724
    
    
    
    1,196
    
    
    
    
    
    
    
    8,760Asset retirement obligations
    
    
    
    
    
    
    
    
    
    
    4,512
    
    
    
    11,001
    
    
    
    
    
    
    
    15,513Other current liabilities
    
    
    853
    
    
    
    942
    
    
    
    3,777
    
    
    
    7,279
    
    
    
    
    
    
    
    12,851Total current liabilities
    
    
    29,396
    
    
    
    25,059
    
    
    
    45,175
    
    
    
    75,574
    
    
    
    (979
    )
    
    
    174,225Long-term debt, less current installments
    
    
    
    
    
    
    46,648
    
    
    
    7,745
    
    
    
    142,813
    
    
    
    
    
    
    
    197,206Workers compensation, less current portion
    
    
    10,188
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,188Excess of pneumoconiosis benefit obligation over
trust assets
    
    
    786
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    786Postretirement medical benefits, less current
portion
    
    
    151,057
    
    
    
    
    
    
    
    
    
    
    
    24,665
    
    
    
    
    
    
    
    175,722Pension and SERP obligations, less current portion
    
    
    20,626
    
    
    
    178
    
    
    
    
    
    
    
    6,023
    
    
    
    
    
    
    
    26,827Deferred revenue, less current portion
    
    
    
    
    
    
    75,283
    
    
    
    
    
    
    
    8,960
    
    
    
    
    
    
    
    84,243Asset retirement obligations, less current portion
    
    
    
    
    
    
    664
    
    
    
    27,916
    
    
    
    200,522
    
    
    
    
    
    
    
    229,102Intangible liabilities
    
    
    
    
    
    
    9,682
    
    
    
    
    
    
    
    618
    
    
    
    
    
    
    
    10,300Other liabilities
    
    
    656
    
    
    
    30
    
    
    
    538
    
    
    
    1,684
    
    
    
    3,020
    
    
    
    5,928Intercompany receivable/payable
    
    
    51,938
    
    
    
    
    
    
    
    (20,896
    )
    
    
    28,891
    
    
    
    (59,933
    )
    
    
    Total liabilities
    
    
    264,647
    
    
    
    157,544
    
    
    
    60,478
    
    
    
    489,750
    
    
    
    (57,892
    )
    
    
    914,527Shareholders deficit:Preferred stock
    
    
    160
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    160Common stock
    
    
    25,864
    
    
    
    5
    
    
    
    110
    
    
    
    132
    
    
    
    (247
    )
    
    
    25,864Other paid-in capital
    
    
    91,432
    
    
    
    1
    
    
    
    15,921
    
    
    
    48,646
    
    
    
    (64,568
    )
    
    
    91,432Accumulated other comprehensive income (loss)
    
    
    (31,223
    )
    
    
    (164
    )
    
    
    106
    
    
    
    (11,199
    )
    
    
    11,257
    
    
    
    (31,223
    )Accumulated earnings (deficit)
    
    
    (226,215
    )
    
    
    59,299
    
    
    
    31,874
    
    
    
    (95,863
    )
    
    
    4,690
    
    
    
    (226,215
    )Total Westmoreland Coal Company shareholders
deficit
    
    
    (139,982
    )
    
    
    59,141
    
    
    
    48,011
    
    
    
    (58,284
    )
    
    
    (48,868
    )
    
    
    (139,982
    )Noncontrolling interest
    
    
    (1,817
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,817
    )Total equity (deficit)
    
    
    (141,799
    )
    
    
    59,141
    
    
    
    48,011
    
    
    
    (58,284
    )
    
    
    (48,868
    )
    
    
    (141,799
    )Total liabilities and shareholders deficit
    
    $
    122,848
    
    
    $
    216,685
    
    
    $
    108,489
    
    
    $
    431,466
    
    
    $
    (106,760
    )
    
    $
    772,728
 207




---



##### 



Westmoreland Coal Company and Subsidiaries
Notes to Consolidated Financial Statements (Cont.)
 CONSOLIDATING BALANCE SHEETS
December 31, 2010
(In thousands)
 Non-Parent/
    
    
    
    
    
    
    Guarantor
    
    
    Guarantor
    
    
    ConsolidatingAssets
    
    Issuer
    
    
    Co-Issuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Adjustments
    
    
    TotalCurrent assets:Cash and cash equivalents
    
    $
    271
    
    
    $
    880
    
    
    $
    
    
    
    $
    4,624
    
    
    $
    
    
    
    $
    5,775Receivables:Trade
    
    
    
    
    
    
    14,148
    
    
    
    65
    
    
    
    36,365
    
    
    
    
    
    
    
    50,578Contractual third-party reclamation
receivables
    
    
    
    
    
    
    
    
    
    
    135
    
    
    
    7,608
    
    
    
    
    
    
    
    7,743Intercompany receivable/payable
    
    
    
    
    
    
    
    
    
    
    10,193
    
    
    
    (21,544
    )
    
    
    11,351
    
    
    
    Other
    
    
    66
    
    
    
    198
    
    
    
    4,917
    
    
    
    1,530
    
    
    
    (2,166
    )
    
    
    4,54566
    
    
    
    14,346
    
    
    
    15,310
    
    
    
    23,959
    
    
    
    9,185
    
    
    
    62,866Inventories
    
    
    
    
    
    
    1,935
    
    
    
    4,624
    
    
    
    17,012
    
    
    
    
    
    
    
    23,571Other current assets
    
    
    796
    
    
    
    224
    
    
    
    469
    
    
    
    3,944
    
    
    
    (98
    )
    
    
    5,335Total current assets
    
    
    1,133
    
    
    
    17,385
    
    
    
    20,403
    
    
    
    49,539
    
    
    
    9,087
    
    
    
    97,547Property, plant and equipment:Land and mineral rights
    
    
    
    
    
    
    1,156
    
    
    
    17,806
    
    
    
    64,862
    
    
    
    
    
    
    
    83,824Capitalized asset retirement cost
    
    
    
    
    
    
    239
    
    
    
    20,463
    
    
    
    94,154
    
    
    
    
    
    
    
    114,856Plant and equipment
    
    
    2,611
    
    
    
    215,851
    
    
    
    117,360
    
    
    
    170,839
    
    
    
    
    
    
    
    506,6612,611
    
    
    
    217,246
    
    
    
    155,629
    
    
    
    329,855
    
    
    
    
    
    
    
    705,341Less accumulated depreciation,
depletion and amortization
    
    
    (1,987
    )
    
    
    (42,156
    )
    
    
    (82,239
    )
    
    
    (162,004
    )
    
    
    
    
    
    
    (288,386
    )Net property, plant and equipment
    
    
    624
    
    
    
    175,090
    
    
    
    73,390
    
    
    
    167,851
    
    
    
    
    
    
    
    416,955Advanced coal royalties
    
    
    
    
    
    
    
    
    
    
    998
    
    
    
    2,697
    
    
    
    
    
    
    
    3,695Reclamation deposits
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    72,274
    
    
    
    
    
    
    
    72,274Restricted investments and bond collateral
    
    
    11,816
    
    
    
    8,563
    
    
    
    10,956
    
    
    
    24,049
    
    
    
    
    
    
    
    55,384Contractual third-party reclamation
receivables, less current portion
    
    
    
    
    
    
    
    
    
    
    390
    
    
    
    87,349
    
    
    
    
    
    
    
    87,739Deferred income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,458
    
    
    
    2,458Intangible assets
    
    
    
    
    
    
    6,203
    
    
    
    
    
    
    
    352
    
    
    
    
    
    
    
    6,555Investment in subsidiaries
    
    
    115,612
    
    
    
    
    
    
    
    (717
    )
    
    
    3,770
    
    
    
    (118,665
    )
    
    
    Other assets
    
    
    2,060
    
    
    
    401
    
    
    
    1,683
    
    
    
    3,555
    
    
    
    
    
    
    
    7,699Total assets
    
    $
    131,245
    
    
    $
    207,642
    
    
    $
    107,103
    
    
    $
    411,436
    
    
    $
    (107,120
    )
    
    $
    750,306
 208




---



##### 



Westmoreland Coal Company and Subsidiaries
Notes to Consolidated Financial Statements (Cont.)
 CONSOLIDATING BALANCE SHEETS  December 31, 2010
(In thousands)
 Non-Parent/
    
    
    
    
    
    
    Guarantor
    
    
    Guarantor
    
    
    ConsolidatingLiabilities and Stockholders Deficit
    
    Issuer
    
    
    Co-Issuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Adjustments
    
    
    TotalCurrent liabilitiesCurrent installments of long-term debt
    
    $
    
    
    
    $
    
    
    
    $
    2,255
    
    
    $
    12,718
    
    
    $
    
    
    
    $
    14,973Accounts payable and accrued expenses:Trade
    
    
    5,187
    
    
    
    8,549
    
    
    
    3,283
    
    
    
    31,709
    
    
    
    (2,481
    )
    
    
    46,247Production taxes
    
    
    
    
    
    
    2
    
    
    
    1,084
    
    
    
    25,231
    
    
    
    
    
    
    
    26,317Workers compensation
    
    
    954
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    954Postretirement medical benefits
    
    
    12,198
    
    
    
    
    
    
    
    
    
    
    
    1,383
    
    
    
    
    
    
    
    13,581SERP
    
    
    304
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    304Deferred revenue
    
    
    
    
    
    
    8,805
    
    
    
    349
    
    
    
    1,055
    
    
    
    
    
    
    
    10,209Asset retirement obligations
    
    
    
    
    
    
    
    
    
    
    3,371
    
    
    
    11,143
    
    
    
    
    
    
    
    14,514Other current liabilities
    
    
    249
    
    
    
    782
    
    
    
    3,138
    
    
    
    2,164
    
    
    
    (92
    )
    
    
    6,241Total current liabilities
    
    
    18,892
    
    
    
    18,138
    
    
    
    13,480
    
    
    
    85,403
    
    
    
    (2,573
    )
    
    
    133,340Long-term debt, less current installments
    
    
    13,671
    
    
    
    46,648
    
    
    
    15,166
    
    
    
    133,246
    
    
    
    
    
    
    
    208,731Revolving lines of credit, less current portion
    
    
    
    
    
    
    
    
    
    
    16,900
    
    
    
    1,500
    
    
    
    
    
    
    
    18,400Workers compensation, less current portion
    
    
    9,424
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,424Excess of pneumoconiosis benefit obligation over
trust assets
    
    
    2,246
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,246Postretirement medical benefits, less current
portion
    
    
    169,677
    
    
    
    
    
    
    
    
    
    
    
    27,602
    
    
    
    
    
    
    
    197,279Pension and SERP obligations, less current portion
    
    
    16,105
    
    
    
    154
    
    
    
    
    
    
    
    4,203
    
    
    
    
    
    
    
    20,462Deferred revenue, less current portion
    
    
    
    
    
    
    67,308
    
    
    
    
    
    
    
    8,087
    
    
    
    
    
    
    
    75,395Asset retirement obligations, less current portion
    
    
    
    
    
    
    715
    
    
    
    28,967
    
    
    
    197,447
    
    
    
    
    
    
    
    227,129Intangible liabilities
    
    
    
    
    
    
    8,663
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,663Other liabilities
    
    
    4,153
    
    
    
    
    
    
    
    3,149
    
    
    
    1,409
    
    
    
    2,881
    
    
    
    11,592Intercompany receivable/payable
    
    
    59,432
    
    
    
    
    
    
    
    (19,590
    )
    
    
    26,424
    
    
    
    (66,266
    )
    
    
    Total liabilities
    
    
    293,600
    
    
    
    141,626
    
    
    
    58,072
    
    
    
    485,321
    
    
    
    (65,958
    )
    
    
    912,661Shareholders deficit:Preferred stock
    
    
    160
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    160Common stock
    
    
    27,901
    
    
    
    5
    
    
    
    110
    
    
    
    132
    
    
    
    (247
    )
    
    
    27,901Other paid-in capital
    
    
    98,466
    
    
    
    30
    
    
    
    16,036
    
    
    
    53,264
    
    
    
    (69,330
    )
    
    
    98,466Accumulated other comprehensive income (loss)
    
    
    (57,680
    )
    
    
    (203
    )
    
    
    120
    
    
    
    (14,353
    )
    
    
    14,436
    
    
    
    (57,680
    )Accumulated earnings (deficit)
    
    
    (226,740
    )
    
    
    66,184
    
    
    
    32,765
    
    
    
    (112,928
    )
    
    
    13,979
    
    
    
    (226,740
    )Total Westmoreland Coal Company shareholders
deficit
    
    
    (157,893
    )
    
    
    66,016
    
    
    
    49,031
    
    
    
    (73,885
    )
    
    
    (41,162
    )
    
    
    (157,893
    )Noncontrolling interest
    
    
    (4,462
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,462
    )Total equity (deficit)
    
    
    (162,355
    )
    
    
    66,016
    
    
    
    49,031
    
    
    
    (73,885
    )
    
    
    (41,162
    )
    
    
    (162,355
    )Total liabilities and stockholders deficit
    
    $
    131,245
    
    
    $
    207,642
    
    
    $
    107,103
    
    
    $
    411,436
    
    
    $
    (107,120
    )
    
    $
    750,306
 209




---



##### 



Westmoreland Coal Company and Subsidiaries
Notes to Consolidated Financial Statements (Cont.)
 CONSOLIDATING STATEMENTS OF OPERATIONS
Year Ended December 31, 2008
(In thousands)
 Non-Parent/
    
    
    
    
    
    
    Guarantor
    
    
    Guarantor
    
    
    ConsolidatingIssuer
    
    
    Co-Issuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Adjustments
    
    
    TotalRevenues
    
    $
    
    
    
    $
    90,006
    
    
    $
    76,367
    
    
    $
    354,939
    
    
    $
    (11,616
    )
    
    $
    509,696Costs and expenses:Cost of sales
    
    
    
    
    
    
    59,761
    
    
    
    62,922
    
    
    
    298,728
    
    
    
    (11,616
    )
    
    
    409,795Depreciation, depletion and amortization
    
    
    381
    
    
    
    9,780
    
    
    
    6,898
    
    
    
    24,328
    
    
    
    
    
    
    
    41,387Selling and administrative
    
    
    12,585
    
    
    
    3,867
    
    
    
    4,872
    
    
    
    19,189
    
    
    
    
    
    
    
    40,513Heritage health benefit expenses
    
    
    32,104
    
    
    
    
    
    
    
    
    
    
    
    1,348
    
    
    
    
    
    
    
    33,452Restructuring charges
    
    
    1,854
    
    
    
    
    
    
    
    120
    
    
    
    35
    
    
    
    
    
    
    
    2,009Gain (loss) on sales of assets
    
    
    1
    
    
    
    (876
    )
    
    
    (6
    )
    
    
    (544
    )
    
    
    
    
    
    
    (1,425
    )46,925
    
    
    
    72,532
    
    
    
    74,806
    
    
    
    343,084
    
    
    
    (11,616
    )
    
    
    525,731Operating income (loss)
    
    
    (46,925
    )
    
    
    17,474
    
    
    
    1,561
    
    
    
    11,855
    
    
    
    
    
    
    
    (16,035
    )Other income (expense):
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Interest expense
    
    
    (9,385
    )
    
    
    (1,351
    )
    
    
    (1,542
    )
    
    
    (10,852
    )
    
    
    
    
    
    
    (23,130
    )Interest expense attributable to
beneficial conversion feature
    
    
    
    
    
    
    (8,146
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,146
    )Loss on extinguishment of debt
    
    
    
    
    
    
    (1,345
    )
    
    
    
    
    
    
    (3,833
    )
    
    
    
    
    
    
    (5,178
    )Interest income
    
    
    532
    
    
    
    511
    
    
    
    265
    
    
    
    4,017
    
    
    
    (200
    )
    
    
    5,125Other income (loss)
    
    
    66
    
    
    
    
    
    
    
    
    
    
    
    (350
    )
    
    
    
    
    
    
    (284
    )(8,787
    )
    
    
    (10,331
    )
    
    
    (1,277
    )
    
    
    (11,018
    )
    
    
    (200
    )
    
    
    (31,613
    )Loss before income taxes and income of
consolidated subsidiaries
    
    
    (55,712
    )
    
    
    7,143
    
    
    
    284
    
    
    
    837
    
    
    
    (200
    )
    
    
    (47,648
    )Equity in income of subsidiaries
    
    
    (7,172
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,172
    
    
    
    Loss before income taxes
    
    
    (48,540
    )
    
    
    7,143
    
    
    
    284
    
    
    
    837
    
    
    
    (7,372
    )
    
    
    (47,648
    )Income tax expense (benefit)
    
    
    27
    
    
    
    11,883
    
    
    
    138
    
    
    
    4,510
    
    
    
    (15,639
    )
    
    
    919Net income (loss)
    
    $
    (48,567
    )
    
    $
    (4,740
    )
    
    $
    146
    
    
    $
    (3,673
    )
    
    $
    8,267
    
    
    $
    (48,567
    )
 210




---



##### 



Westmoreland Coal Company and Subsidiaries
Notes to Consolidated Financial Statements (Cont.)
 CONSOLIDATING STATEMENTS OF OPERATIONS
Year Ended December 31, 2009
(In thousands)
 Non-Parent/
    
    
    
    
    
    
    Guarantor
    
    
    Guarantor
    
    
    ConsolidatingIssuer
    
    
    Co-Issuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Adjustments
    
    
    TotalRevenues
    
    $
    
    
    
    $
    82,162
    
    
    $
    52,643
    
    
    $
    360,117
    
    
    $
    (51,554
    )
    
    $
    443,368Costs and expenses:Cost of sales
    
    
    
    
    
    
    60,504
    
    
    
    46,966
    
    
    
    317,154
    
    
    
    (51,554
    )
    
    
    373,070Depreciation, depletion and amortization
    
    
    418
    
    
    
    9,764
    
    
    
    8,265
    
    
    
    25,807
    
    
    
    
    
    
    
    44,254Selling and administrative
    
    
    11,585
    
    
    
    4,231
    
    
    
    4,682
    
    
    
    20,114
    
    
    
    
    
    
    
    40,612Heritage health benefit expenses
    
    
    26,813
    
    
    
    
    
    
    
    
    
    
    
    1,261
    
    
    
    
    
    
    
    28,074Gain (loss) on sales of assets
    
    
    
    
    
    
    12
    
    
    
    78
    
    
    
    101
    
    
    
    
    
    
    
    191Other operating income
    
    
    
    
    
    
    
    
    
    
    (11,059
    )
    
    
    
    
    
    
    
    
    
    
    (11,059
    )38,816
    
    
    
    74,511
    
    
    
    48,932
    
    
    
    364,437
    
    
    
    (51,554
    )
    
    
    475,142Operating income (loss)
    
    
    (38,816
    )
    
    
    7,651
    
    
    
    3,711
    
    
    
    (4,320
    )
    
    
    
    
    
    
    (31,774
    )Other income (expense):Interest expense
    
    
    (2,618
    )
    
    
    (5,946
    )
    
    
    (2,195
    )
    
    
    (12,977
    )
    
    
    3
    
    
    
    (23,733
    )Interest income
    
    
    376
    
    
    
    120
    
    
    
    446
    
    
    
    2,344
    
    
    
    (68
    )
    
    
    3,218Other income (loss)
    
    
    5,691
    
    
    
    448
    
    
    
    28
    
    
    
    (176
    )
    
    
    
    
    
    
    5,9913,449
    
    
    
    (5,378
    )
    
    
    (1,721
    )
    
    
    (10,809
    )
    
    
    (65
    )
    
    
    (14,524
    )Loss before income taxes and income of
consolidated subsidiaries
    
    
    (35,367
    )
    
    
    2,273
    
    
    
    1,990
    
    
    
    (15,129
    )
    
    
    (65
    )
    
    
    (46,298
    )Equity in income of subsidiaries
    
    
    10,869
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (10,869
    )
    
    
    Loss before income taxes
    
    
    (46,236
    )
    
    
    2,273
    
    
    
    1,990
    
    
    
    (15,129
    )
    
    
    10,804
    
    
    
    (46,298
    )Income tax expense (benefit)
    
    
    (17,074
    )
    
    
    3,812
    
    
    
    106
    
    
    
    (4,224
    )
    
    
    244
    
    
    
    (17,136
    )Net income (loss)
    
    
    (29,162
    )
    
    
    (1,539
    )
    
    
    1,884
    
    
    
    (10,905
    )
    
    
    10,560
    
    
    
    (29,162
    )Less net loss attributable to
noncontrolling interest
    
    
    (1,817
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,817
    )Net loss attributable to the Parent company
    
    $
    (27,345
    )
    
    $
    (1,539
    )
    
    $
    1,884
    
    
    $
    (10,905
    )
    
    $
    10,560
    
    
    $
    (27,345
    )
 211




---



##### 



Westmoreland Coal Company and Subsidiaries
Notes to Consolidated Financial Statements (Cont.)
 CONSOLIDATING STATEMENTS OF OPERATIONS
Year Ended December 31, 2010
(In thousands)
 Non-Parent/
    
    
    
    
    
    
    Guarantor
    
    
    Guarantor
    
    
    ConsolidatingIssuer
    
    
    Co-Issuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Adjustments
    
    
    TotalRevenues
    
    $
    
    
    
    $
    87,999
    
    
    $
    52,201
    
    
    $
    416,410
    
    
    $
    (50,553
    )
    
    $
    506,057Costs and expenses:Cost of sales
    
    
    
    
    
    
    61,739
    
    
    
    44,943
    
    
    
    338,698
    
    
    
    (50,553
    )
    
    
    394,827Depreciation, depletion and amortization
    
    
    391
    
    
    
    10,131
    
    
    
    7,897
    
    
    
    26,271
    
    
    
    
    
    
    
    44,690Selling and administrative
    
    
    9,292
    
    
    
    4,287
    
    
    
    4,140
    
    
    
    21,905
    
    
    
    (143
    )
    
    
    39,481Heritage health benefit expenses
    
    
    13,732
    
    
    
    
    
    
    
    
    
    
    
    689
    
    
    
    
    
    
    
    14,421Gain (loss) on sales of assets
    
    
    
    
    
    
    122
    
    
    
    (5
    )
    
    
    109
    
    
    
    
    
    
    
    226Other operating income
    
    
    
    
    
    
    
    
    
    
    (8,109
    )
    
    
    
    
    
    
    
    
    
    
    (8,109
    )23,415
    
    
    
    76,279
    
    
    
    48,866
    
    
    
    387,672
    
    
    
    (50,696
    )
    
    
    485,536Operating income (loss)
    
    
    (23,415
    )
    
    
    11,720
    
    
    
    3,335
    
    
    
    28,738
    
    
    
    143
    
    
    
    20,521Other income (expense):Interest expense
    
    
    (3,195
    )
    
    
    (4,659
    )
    
    
    (2,534
    )
    
    
    (12,723
    )
    
    
    119
    
    
    
    (22,992
    )Interest income
    
    
    246
    
    
    
    36
    
    
    
    141
    
    
    
    1,448
    
    
    
    (124
    )
    
    
    1,747Other income (loss)
    
    
    (3,389
    )
    
    
    30
    
    
    
    48
    
    
    
    724
    
    
    
    
    
    
    
    (2,587
    )(6,338
    )
    
    
    (4,593
    )
    
    
    (2,345
    )
    
    
    (10,551
    )
    
    
    (5
    )
    
    
    (23,832
    )Loss before income taxes and income of
consolidated subsidiaries
    
    
    (29,753
    )
    
    
    7,127
    
    
    
    990
    
    
    
    18,187
    
    
    
    138
    
    
    
    (3,311
    )Equity in income of subsidiaries
    
    
    (26,268
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    26,268
    
    
    
    Loss before income taxes
    
    
    (3,485
    )
    
    
    7,127
    
    
    
    990
    
    
    
    18,187
    
    
    
    (26,130
    )
    
    
    (3,311
    )Income tax expense (benefit)
    
    
    (315
    )
    
    
    368
    
    
    
    21
    
    
    
    3,945
    
    
    
    (4,160
    )
    
    
    (141
    )Net income (loss)
    
    
    (3,170
    )
    
    
    6,759
    
    
    
    969
    
    
    
    14,242
    
    
    
    (21,970
    )
    
    
    (3,170
    )Less net loss attributable to
noncontrolling interest
    
    
    (2,645
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,645
    )Net loss attributable to the Parent company
    
    $
    (525
    )
    
    $
    6,759
    
    
    $
    969
    
    
    $
    14,242
    
    
    $
    (21,970
    )
    
    $
    (525
    )
 212




---



##### 



Westmoreland Coal Company and Subsidiaries
Notes to Consolidated Financial Statements (Cont.)
 CONSOLIDATING STATEMENTS OF CASH FLOWS
Year Ended December 31, 2008
(In thousands)
 Non-Parent/
    
    
    
    
    
    
    Guarantor
    
    
    Guarantor
    
    
    ConsolidatingStatements of Cash Flows
    
    Issuer
    
    
    Co-Issuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Adjustments
    
    
    TotalCash flows from operating activities:Net loss
    
    $
    (48,567
    )
    
    $
    (4,740
    )
    
    $
    146
    
    
    $
    (3,673
    )
    
    $
    8,267
    
    
    $
    (48,567
    )Adjustments to reconcile net loss to net cash provided by
operating activities:Equity in income of subsidiaries
    
    
    (7,172
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,172
    
    
    
    Depreciation, depletion, and amortization
    
    
    381
    
    
    
    9,780
    
    
    
    6,898
    
    
    
    24,328
    
    
    
    
    
    
    
    41,387Accretion of asset retirement obligation and receivable
    
    
    
    
    
    
    32
    
    
    
    950
    
    
    
    8,546
    
    
    
    
    
    
    
    9,528Amortization of intangible assets and liabilities, net
    
    
    
    
    
    
    620
    
    
    
    24
    
    
    
    (46
    )
    
    
    
    
    
    
    598Share-based compensation
    
    
    2,733
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,733Restructuring charges
    
    
    1,854
    
    
    
    
    
    
    
    120
    
    
    
    35
    
    
    
    
    
    
    
    2,009Loss (gain) on sale of assets
    
    
    1
    
    
    
    (876
    )
    
    
    (6
    )
    
    
    (544
    )
    
    
    
    
    
    
    (1,425
    )Loss on extinguishment of debt
    
    
    
    
    
    
    1,102
    
    
    
    
    
    
    
    1,190
    
    
    
    
    
    
    
    2,292Amortization of deferred financing costs
    
    
    78
    
    
    
    (105
    )
    
    
    132
    
    
    
    734
    
    
    
    
    
    
    
    839Non-cash interest expense
    
    
    8,934
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,934Loss on investments securities
    
    
    271
    
    
    
    
    
    
    
    
    
    
    
    629
    
    
    
    
    
    
    
    900Changes in operating assets and liabilities:Receivables, net
    
    
    (526
    )
    
    
    (3,546
    )
    
    
    4,510
    
    
    
    (8,579
    )
    
    
    1,901
    
    
    
    (6,240
    )Inventories
    
    
    
    
    
    
    959
    
    
    
    (787
    )
    
    
    3,972
    
    
    
    
    
    
    
    4,144Excess of pneumoconiosis benefit obligation over trust assets
    
    
    (23
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (23
    )Accounts payable and accrued expenses
    
    
    (1,010
    )
    
    
    (406
    )
    
    
    (6,105
    )
    
    
    10,446
    
    
    
    (924
    )
    
    
    2,001Deferred revenue
    
    
    
    
    
    
    28,774
    
    
    
    133
    
    
    
    270
    
    
    
    
    
    
    
    29,177Accrual for workers compensation
    
    
    3,316
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,316Asset retirement obligations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (889
    )
    
    
    
    
    
    
    (889
    )Accrual for postretirement medical benefits
    
    
    3,175
    
    
    
    
    
    
    
    
    
    
    
    6,846
    
    
    
    
    
    
    
    10,021Pension and SERP obligations
    
    
    (6,701
    )
    
    
    
    
    
    
    
    
    
    
    4,822
    
    
    
    (237
    )
    
    
    (2,116
    )Other assets and liabilities
    
    
    (750
    )
    
    
    (2,302
    )
    
    
    2,892
    
    
    
    (2,611
    )
    
    
    (603
    )
    
    
    (3,374
    )Net cash provided by (used in) operating activities
    
    
    (44,006
    )
    
    
    29,292
    
    
    
    8,907
    
    
    
    45,476
    
    
    
    15,576
    
    
    
    55,245Cash flows from investing activities:Distributions received from subsidiaries
    
    
    35,525
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (35,525
    )
    
    
    Additions to property, plant and equipment
    
    
    (75
    )
    
    
    (1,711
    )
    
    
    (2,364
    )
    
    
    (27,170
    )
    
    
    
    
    
    
    (31,320
    )Change in restricted investments and bond collateral and
reclamation deposits
    
    
    (1,274
    )
    
    
    19,868
    
    
    
    (2,252
    )
    
    
    8,024
    
    
    
    (47
    )
    
    
    24,319Net proceeds from sales of assets
    
    
    
    
    
    
    876
    
    
    
    672
    
    
    
    1,093
    
    
    
    
    
    
    
    2,641Receivable from customer for property and equipment purchases
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,228
    )
    
    
    
    
    
    
    (2,228
    )Net cash provided by (used in) investing activities
    
    
    34,176
    
    
    
    19,033
    
    
    
    (3,944
    )
    
    
    (20,281
    )
    
    
    (35,572
    )
    
    
    (6,588
    )Cash flows from financing activities:Change in book overdrafts
    
    
    59
    
    
    
    
    
    
    
    344
    
    
    
    (5,446
    )
    
    
    
    
    
    
    (5,043
    )Borrowings from long-term debt
    
    
    15,000
    
    
    
    64,880
    
    
    
    
    
    
    
    125,497
    
    
    
    
    
    
    
    205,377Repayments of long-term debt
    
    
    
    
    
    
    (132,070
    )
    
    
    (2,680
    )
    
    
    (85,035
    )
    
    
    
    
    
    
    (219,785
    )Borrowings on revolving lines of credit
    
    
    
    
    
    
    
    
    
    
    70,100
    
    
    
    99,500
    
    
    
    
    
    
    
    169,600Repayments on revolving lines of credit
    
    
    
    
    
    
    
    
    
    
    (71,500
    )
    
    
    (102,000
    )
    
    
    
    
    
    
    (173,500
    )Debt issuance costs
    
    
    (623
    )
    
    
    (296
    )
    
    
    (225
    )
    
    
    (4,160
    )
    
    
    
    
    
    
    (5,304
    )Exercise of stock options
    
    
    203
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    203Dividends/distributions
    
    
    
    
    
    
    (21,000
    )
    
    
    
    
    
    
    (14,525
    )
    
    
    35,525
    
    
    
    Transactions with Parent/affiliates
    
    
    (4,159
    )
    
    
    30,151
    
    
    
    (1,599
    )
    
    
    (8,864
    )
    
    
    (15,529
    )
    
    
    Net cash provided by (used in) financing activities
    
    
    10,480
    
    
    
    (58,335
    )
    
    
    (5,560
    )
    
    
    4,967
    
    
    
    19,996
    
    
    
    (28,452
    )Net increase (decrease) in cash and cash equivalents
    
    
    650
    
    
    
    (10,010
    )
    
    
    (597
    )
    
    
    30,162
    
    
    
    
    
    
    
    20,205Cash and cash equivalents, beginning of year
    
    
    306
    
    
    
    15,674
    
    
    
    597
    
    
    
    3,159
    
    
    
    
    
    
    
    19,736Cash and cash equivalents, end of year
    
    $
    956
    
    
    $
    5,664
    
    
    $
    
    
    
    $
    33,321
    
    
    $
    
    
    
    $
    39,941
 213




---



##### 



Westmoreland Coal Company and Subsidiaries
Notes to Consolidated Financial Statements (Cont.)
 CONSOLIDATING STATEMENTS OF CASH FLOWS
Year Ended December 31, 2009
(In thousands)
 Non-Parent/
    
    
    
    
    
    
    Guarantor
    
    
    Guarantor
    
    
    ConsolidatingStatements of Cash Flows
    
    Issuer
    
    
    Co-Issuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Adjustments
    
    
    TotalCash flows from operating activities:Net loss
    
    $
    (29,162
    )
    
    $
    (1,539
    )
    
    $
    1,884
    
    
    $
    (10,905
    )
    
    $
    10,560
    
    
    $
    (29,162
    )Adjustments to reconcile net loss to net cash provided by
operating activities:Equity in income of subsidiaries
    
    
    10,869
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (10,869
    )
    
    
    Gain on derivative instruments
    
    
    (5,674
    )
    
    
    (448
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,122
    )Depreciation, depletion, and amortization
    
    
    418
    
    
    
    9,764
    
    
    
    8,265
    
    
    
    25,807
    
    
    
    
    
    
    
    44,254Accretion of asset retirement obligation and receivable
    
    
    
    
    
    
    34
    
    
    
    1,291
    
    
    
    8,649
    
    
    
    
    
    
    
    9,974Amortization of intangible assets and liabilities, net
    
    
    
    
    
    
    621
    
    
    
    
    
    
    
    (342
    )
    
    
    
    
    
    
    279Non-cash tax benefits
    
    
    (17,062
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (17,062
    )Share-based compensation
    
    
    2,552
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,552Loss (gain) on sale of assets
    
    
    
    
    
    
    12
    
    
    
    78
    
    
    
    101
    
    
    
    
    
    
    
    191Amortization of deferred financing costs
    
    
    1,143
    
    
    
    (313
    )
    
    
    572
    
    
    
    573
    
    
    
    
    
    
    
    1,975Non-cash interest expense
    
    
    1,470
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,470Gain (loss) on investments securities
    
    
    (11
    )
    
    
    
    
    
    
    
    
    
    
    423
    
    
    
    
    
    
    
    412Changes in operating assets and liabilities:Receivables, net
    
    
    102
    
    
    
    8,341
    
    
    
    661
    
    
    
    7,910
    
    
    
    (1,511
    )
    
    
    15,503Inventories
    
    
    
    
    
    
    (730
    )
    
    
    (617
    )
    
    
    130
    
    
    
    
    
    
    
    (1,217
    )Excess of pneumoconiosis benefit obligation over trust assets
    
    
    3,025
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,025Accounts payable and accrued expenses
    
    
    (123
    )
    
    
    (61
    )
    
    
    (3,990
    )
    
    
    (9,577
    )
    
    
    (51
    )
    
    
    (13,802
    )Deferred revenue
    
    
    
    
    
    
    11,216
    
    
    
    (139
    )
    
    
    (591
    )
    
    
    
    
    
    
    10,486Accrual for workers compensation
    
    
    (1,619
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,619
    )Asset retirement obligations
    
    
    
    
    
    
    
    
    
    
    (307
    )
    
    
    (1,912
    )
    
    
    
    
    
    
    (2,219
    )Accrual for postretirement medical benefits
    
    
    (3,362
    )
    
    
    
    
    
    
    
    
    
    
    11,124
    
    
    
    
    
    
    
    7,762Pension and SERP obligations
    
    
    2,682
    
    
    
    
    
    
    
    
    
    
    
    491
    
    
    
    
    
    
    
    3,173Other assets and liabilities
    
    
    (1,220
    )
    
    
    (2,427
    )
    
    
    (2,307
    )
    
    
    5,879
    
    
    
    (330
    )
    
    
    (405
    )Net cash provided by (used in) operating activities
    
    
    (35,972
    )
    
    
    24,470
    
    
    
    5,391
    
    
    
    37,760
    
    
    
    (2,201
    )
    
    
    29,448Cash flows from investing activities:Distributions received from subsidiaries
    
    
    26,399
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (26,399
    )
    
    
    Additions to property, plant and equipment
    
    
    (218
    )
    
    
    (4,251
    )
    
    
    (3,919
    )
    
    
    (26,158
    )
    
    
    
    
    
    
    (34,546
    )Change in restricted investments and bond collateral and
reclamation deposits
    
    
    (2,239
    )
    
    
    2,266
    
    
    
    (1,399
    )
    
    
    (3,229
    )
    
    
    
    
    
    
    (4,601
    )Net proceeds from sales of assets
    
    
    
    
    
    
    
    
    
    
    105
    
    
    
    832
    
    
    
    
    
    
    
    937Proceeds from the sale of investments
    
    
    415
    
    
    
    
    
    
    
    
    
    
    
    381
    
    
    
    
    
    
    
    796Receivable from customer for property and equipment purchases
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,183
    )
    
    
    
    
    
    
    (1,183
    )Net cash provided by (used in) investing activities
    
    
    24,357
    
    
    
    (1,985
    )
    
    
    (5,213
    )
    
    
    (29,357
    )
    
    
    (26,399
    )
    
    
    (38,597
    )Cash flows from financing activities:Change in book overdrafts
    
    
    (291
    )
    
    
    
    
    
    
    244
    
    
    
    643
    
    
    
    
    
    
    
    596Borrowings from long-term debt
    
    
    
    
    
    
    
    
    
    
    7,764
    
    
    
    798
    
    
    
    
    
    
    
    8,562Repayments of long-term debt
    
    
    
    
    
    
    (25,845
    )
    
    
    (3,719
    )
    
    
    (5,711
    )
    
    
    
    
    
    
    (35,275
    )Borrowings on revolving lines of credit
    
    
    
    
    
    
    
    
    
    
    79,116
    
    
    
    15,000
    
    
    
    
    
    
    
    94,116Repayments on revolving lines of credit
    
    
    
    
    
    
    
    
    
    
    (73,016
    )
    
    
    (15,000
    )
    
    
    
    
    
    
    (88,016
    )Debt issuance costs
    
    
    
    
    
    
    
    
    
    
    (256
    )
    
    
    
    
    
    
    
    
    
    
    (256
    )Dividends/distributions
    
    
    
    
    
    
    (7,706
    )
    
    
    
    
    
    
    (18,693
    )
    
    
    26,399
    
    
    
    Transactions with Parent/affiliates
    
    
    11,705
    
    
    
    5,540
    
    
    
    (10,311
    )
    
    
    (9,135
    )
    
    
    2,201
    
    
    
    Net cash provided by (used in) financing activities
    
    
    11,414
    
    
    
    (28,011
    )
    
    
    (178
    )
    
    
    (32,098
    )
    
    
    28,600
    
    
    
    (20,273
    )Net increase (decrease) in cash and cash equivalents
    
    
    (201
    )
    
    
    (5,526
    )
    
    
    
    
    
    
    (23,695
    )
    
    
    
    
    
    
    (29,422
    )Cash and cash equivalents, beginning of year
    
    
    956
    
    
    
    5,664
    
    
    
    
    
    
    
    33,321
    
    
    
    
    
    
    
    39,941Cash and cash equivalents, end of year
    
    $
    755
    
    
    $
    138
    
    
    $
    
    
    
    $
    9,626
    
    
    $
    
    
    
    $
    10,519
 214




---



##### 



Westmoreland Coal Company and Subsidiaries
Notes to Consolidated Financial Statements (Cont.)
 CONSOLIDATING STATEMENTS OF CASH FLOWS
Year Ended December 31, 2010
(In thousands)
 Non-Parent/
    
    
    
    
    
    
    Guarantor
    
    
    Guarantor
    
    
    ConsolidatingStatements of Cash Flows
    
    Issuer
    
    
    Co-Issuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Adjustments
    
    
    TotalCash flows from operating activities:Net loss
    
    $
    (3,170
    )
    
    $
    6,759
    
    
    $
    969
    
    
    $
    14,242
    
    
    $
    (21,970
    )
    
    $
    (3,170
    )Adjustments to reconcile net loss to net cash provided by
operating activities:Equity in income of subsidiaries
    
    
    (26,268
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    26,268
    
    
    
    Gain on derivative instruments
    
    
    3,486
    
    
    
    (30
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,456Depreciation, depletion, and amortization
    
    
    391
    
    
    
    10,131
    
    
    
    7,897
    
    
    
    26,271
    
    
    
    
    
    
    
    44,690Accretion of asset retirement obligation and receivable
    
    
    
    
    
    
    51
    
    
    
    3,007
    
    
    
    8,482
    
    
    
    
    
    
    
    11,540Amortization of intangible assets and liabilities, net
    
    
    
    
    
    
    621
    
    
    
    
    
    
    
    (31
    )
    
    
    
    
    
    
    590Share-based compensation
    
    
    4,049
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,049Loss (gain) on sale of assets
    
    
    
    
    
    
    122
    
    
    
    (5
    )
    
    
    109
    
    
    
    
    
    
    
    226Amortization of deferred financing costs
    
    
    1,489
    
    
    
    (308
    )
    
    
    450
    
    
    
    673
    
    
    
    
    
    
    
    2,304Non-cash interest expense
    
    
    1,236
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,236Gain on investments securities
    
    
    (97
    )
    
    
    
    
    
    
    
    
    
    
    (507
    )
    
    
    
    
    
    
    (604
    )Changes in operating assets and liabilities:Receivables, net
    
    
    358
    
    
    
    (609
    )
    
    
    (2,266
    )
    
    
    (3,367
    )
    
    
    1,156
    
    
    
    (4,728
    )Inventories
    
    
    
    
    
    
    635
    
    
    
    (208
    )
    
    
    1,873
    
    
    
    
    
    
    
    2,300Excess of pneumoconiosis benefit obligation over trust assets
    
    
    1,460
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,460Accounts payable and accrued expenses
    
    
    2,333
    
    
    
    884
    
    
    
    (863
    )
    
    
    8,189
    
    
    
    (1,502
    )
    
    
    9,041Deferred revenue
    
    
    
    
    
    
    (6,010
    )
    
    
    (375
    )
    
    
    (1,014
    )
    
    
    
    
    
    
    (7,399
    )Accrual for workers compensation
    
    
    (841
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (841
    )Asset retirement obligations
    
    
    
    
    
    
    
    
    
    
    (1,769
    )
    
    
    (6,014
    )
    
    
    
    
    
    
    (7,783
    )Accrual for postretirement medical benefits
    
    
    (2,813
    )
    
    
    
    
    
    
    
    
    
    
    (19
    )
    
    
    
    
    
    
    (2,832
    )Pension and SERP obligations
    
    
    (6,828
    )
    
    
    
    
    
    
    93
    
    
    
    2,833
    
    
    
    
    
    
    
    (3,902
    )Other assets and liabilities
    
    
    (923
    )
    
    
    (211
    )
    
    
    898
    
    
    
    (3,986
    )
    
    
    (58
    )
    
    
    (4,280
    )Net cash provided by (used in) operating activities
    
    
    (26,138
    )
    
    
    12,035
    
    
    
    7,828
    
    
    
    47,734
    
    
    
    3,894
    
    
    
    45,353Cash flows from investing activities:Distributions received from subsidiaries
    
    
    31,300
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (31,300
    )
    
    
    Additions to property, plant and equipment
    
    
    (550
    )
    
    
    (2,207
    )
    
    
    (4,275
    )
    
    
    (15,782
    )
    
    
    
    
    
    
    (22,814
    )Change in restricted investments and bond collateral and
reclamation deposits
    
    
    (1,714
    )
    
    
    142
    
    
    
    (1,716
    )
    
    
    (5,257
    )
    
    
    
    
    
    
    (8,545
    )Net proceeds from sales of assets
    
    
    
    
    
    
    1
    
    
    
    66
    
    
    
    645
    
    
    
    
    
    
    
    712Proceeds from the sale of investments
    
    
    156
    
    
    
    
    
    
    
    
    
    
    
    2,151
    
    
    
    
    
    
    
    2,307Receivable from customer for property and equipment purchases
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (840
    )
    
    
    
    
    
    
    (840
    )Net cash provided by (used in) investing activities
    
    
    29,192
    
    
    
    (2,064
    )
    
    
    (5,925
    )
    
    
    (19,083
    )
    
    
    (31,300
    )
    
    
    (29,180
    )Cash flows from financing activities:Change in book overdrafts
    
    
    (111
    )
    
    
    
    
    
    
    57
    
    
    
    (541
    )
    
    
    
    
    
    
    (595
    )Repayments of long-term debt
    
    
    
    
    
    
    (9,355
    )
    
    
    (4,440
    )
    
    
    (6,610
    )
    
    
    
    
    
    
    (20,405
    )Borrowings on revolving lines of credit
    
    
    
    
    
    
    7,300
    
    
    
    91,500
    
    
    
    72,100
    
    
    
    
    
    
    
    170,900Repayments on revolving lines of credit
    
    
    
    
    
    
    (7,300
    )
    
    
    (91,000
    )
    
    
    (70,600
    )
    
    
    
    
    
    
    (168,900
    )Debt issuance costs
    
    
    (1,718
    )
    
    
    
    
    
    
    (207
    )
    
    
    
    
    
    
    
    
    
    
    (1,925
    )Exercise of stock options
    
    
    8
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8Dividends/distributions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (31,300
    )
    
    
    31,300
    
    
    
    Transactions with Parent/affiliates
    
    
    (1,717
    )
    
    
    126
    
    
    
    2,187
    
    
    
    3,298
    
    
    
    (3,894
    )
    
    
    Net cash provided by (used in) financing activities
    
    
    (3,538
    )
    
    
    (9,229
    )
    
    
    (1,903
    )
    
    
    (33,653
    )
    
    
    27,406
    
    
    
    (20,917
    )Net increase (decrease) in cash and cash equivalents
    
    
    (484
    )
    
    
    742
    
    
    
    
    
    
    
    (5,002
    )
    
    
    
    
    
    
    (4,744
    )Cash and cash equivalents, beginning of year
    
    
    755
    
    
    
    138
    
    
    
    
    
    
    
    9,626
    
    
    
    
    
    
    
    10,519Cash and cash equivalents, end of year
    
    $
    271
    
    
    $
    880
    
    
    $
    
    
    
    $
    4,624
    
    
    $
    
    
    
    $
    5,775
 215




---



##### 



WESTMORELAND RESOURCES, INC. AND SUBSIDIARY
 Report of Independent Registered Public Accounting Firm
 
     
 216




---



##### 



WESTMORELAND RESOURCES, INC. AND SUBSIDIARY
 Independent Auditors Report
 
      
 217




---



##### 



Westmoreland Resources, Inc. and Subsidiary
 2010
    
    
    2009AssetsCurrent assets:Cash and cash equivalents
    
    $
    583
    
    
    $
    923Accounts receivableTrade
    
    
    3,712
    
    
    
    3,427Other
    
    
    2,435
    
    
    
    1,7136,147
    
    
    
    5,140Inventories
    
    
    4,320
    
    
    
    3,786Other current assets
    
    
    603
    
    
    
    719Total current assets
    
    
    11,653
    
    
    
    10,568Property, plant and equipment, at cost:Land and mineral rights
    
    
    17,806
    
    
    
    17,764Plant and equipment
    
    
    117,321
    
    
    
    113,347Asset retirement costs
    
    
    20,463
    
    
    
    22,016155,590
    
    
    
    153,127Less accumulated depreciation, depletion and amortization
    
    
    (82,233
    )
    
    
    (74,534
    )Net property, plant and equipment
    
    
    73,357
    
    
    
    78,593Restricted investments and bond collateral
    
    
    10,956
    
    
    
    9,226Contractual third-party reclamation receivables
    
    
    390
    
    
    
    120Advanced coal royalties
    
    
    998
    
    
    
    Intangible assets, net of accumulated amortization of $1.5
million at December 31, 2010 and $1.0 million at 2009
    
    
    
    
    
    
    550Other assets
    
    
    1,683
    
    
    
    1,927Total assets
    
    $
    99,037
    
    
    $
    100,984Liabilities and Shareholders EquityCurrent liabilities:Current installments of long-term debt
    
    $
    2,255
    
    
    $
    14,117Revolving line of credit
    
    
    
    
    
    
    16,400Accounts payable
    
    
    4,682
    
    
    
    3,949Book overdrafts
    
    
    695
    
    
    
    618Payable to related parties
    
    
    465
    
    
    
    953Accrued expenses
    
    
    7,461
    
    
    
    7,482Asset retirement obligations
    
    
    3,371
    
    
    
    4,512Other current liabilities
    
    
    2,214
    
    
    
    3,001Total current liabilities
    
    
    21,143
    
    
    
    51,032Long-term debt, less current installments
    
    
    15,166
    
    
    
    7,744Revolving line of credit, less current installments
    
    
    16,900
    
    
    
    Asset retirement obligations, less current portion
    
    
    28,967
    
    
    
    27,916Other liabilities
    
    
    3,149
    
    
    
    1,156Total liabilities
    
    
    85,325
    
    
    
    87,848Shareholders equity:Common stock of $1 par value. Authorized 40,000 shares;
issued and outstanding 10,000 shares at December 31, 2010
and December 31, 2009
    
    
    10
    
    
    
    10Additional paid-in capital
    
    
    15,526
    
    
    
    15,412Advances to Parent
    
    
    (13,387
    )
    
    
    (16,171
    )Accumulated other comprehensive income
    
    
    120
    
    
    
    106Retained earnings
    
    
    15,905
    
    
    
    15,596Total Westmoreland Resources Inc. shareholders equity
    
    
    18,174
    
    
    
    14,953Noncontrolling interest
    
    
    (4,462
    )
    
    
    (1,817
    )Total shareholders equity
    
    
    13,712
    
    
    
    13,136Total liabilities and shareholders equity
    
    $
    99,037
    
    
    $
    100,984
  218




---



##### 



Westmoreland Resources, Inc. and Subsidiary
 2010
    
    
    2009
    
    
    2008Revenues
    
    $
    74,997
    
    
    $
    78,360
    
    
    $
    80,148Costs and expenses:Cost of coal and operating expenses
    
    
    71,614
    
    
    
    74,931
    
    
    
    67,859Depreciation, depletion, and amortization
    
    
    7,886
    
    
    
    8,252
    
    
    
    6,885Selling and administrative
    
    
    3,437
    
    
    
    3,797
    
    
    
    4,074Restructuring charge
    
    
    
    
    
    
    
    
    
    
    120Loss (gain) on sale of assets
    
    
    19
    
    
    
    78
    
    
    
    (6
    )Other operating income
    
    
    (8,109
    )
    
    
    (11,059
    )
    
    
    74,847
    
    
    
    75,999
    
    
    
    78,932Operating income
    
    
    150
    
    
    
    2,361
    
    
    
    1,216Other income (expense):Interest expense
    
    
    (2,534
    )
    
    
    (2,195
    )
    
    
    (1,543
    )Interest income
    
    
    21
    
    
    
    443
    
    
    
    266Other
    
    
    48
    
    
    
    28
    
    
    
    (2,465
    )
    
    
    (1,724
    )
    
    
    (1,277
    )Income (loss) before income taxes
    
    
    (2,315
    )
    
    
    637
    
    
    
    (61
    )Income tax expense
    
    
    21
    
    
    
    106
    
    
    
    138Net income (loss)
    
    
    (2,336
    )
    
    
    531
    
    
    
    (199
    )Less: net loss attributable to noncontrolling interests
    
    
    (2,645
    )
    
    
    (1,817
    )
    
    
    Net income (loss) attributable to Parent company
    
    $
    309
    
    
    $
    2,348
    
    
    $
    (199
    )Net income (loss) per share applicable to Parent company
    
    $
    30.90
    
    
    $
    234.80
    
    
    $
    (19.90
    )Weighted average number of common shares outstanding
    
    
    10
    
    
    
    10
    
    
    
    10
  219




---



##### 



Westmoreland Resources, Inc. and Subsidiary
  Accumulated OtherAdditional
    
    
    Advances from (to)
    
    
    Comprehensive
    
    
    
    
    
    
    Noncontrolling
    
    
    Total ShareholdersCommon stock
    
    
    paid-in capital
    
    
    Parent
    
    
    Income (Loss)
    
    
    Retained Earnings
    
    
    Interest
    
    

    EquityBalance, December 31, 2007
    
    $
    10
    
    
    $
    15,167
    
    
    $
    (3,164
    )
    
    $
    
    
    
    $
    13,447
    
    
    $
    
    
    
    $
    25,460Adjustment for
utilization of tax
losses of Westmoreland
Coal Company
    
    
    
    
    
    
    138
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    138Advances to Parent
    
    
    
    
    
    
    
    
    
    
    (1,691
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,691
    )Unrealized gain on
available-for-sale
securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    61
    
    
    
    
    
    
    
    
    
    
    
    61Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (199
    )
    
    
    
    
    
    
    (199
    )Comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (138
    )Balance, December 31, 2008
    
    $
    10
    
    
    $
    15,305
    
    
    $
    (4,855
    )
    
    $
    61
    
    
    $
    13,248
    
    
    $
    
    
    
    $
    23,769Adjustment for
utilization of tax
losses of Westmoreland
Coal Company
    
    
    
    
    
    
    107
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    107Advances to Parent
    
    
    
    
    
    
    
    
    
    
    (11,316
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11,316
    )Unrealized gain on
available-for-sale
securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    45
    
    
    
    
    
    
    
    
    
    
    
    45Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,348
    
    
    
    (1,817
    )
    
    
    531Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    576Balance, December 31, 2009
    
    $
    10
    
    
    $
    15,412
    
    
    $
    (16,171
    )
    
    $
    106
    
    
    $
    15,596
    
    
    $
    (1,817
    )
    
    $
    13,136Contribution of
Westmoreland Coal
Company common stock
to pension plan on the
Companys behalf
    
    
    
    
    
    
    93
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    93Adjustment for
utilization of tax
losses of Westmoreland
Coal Company
    
    
    
    
    
    
    21
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21Advances from Parent
    
    
    
    
    
    
    
    
    
    
    2,784
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,784Unrealized gain on
available-for-sale
securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14
    
    
    
    
    
    
    
    
    
    
    
    14Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    309
    
    
    
    (2,645
    )
    
    
    (2,336
    )Comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,322
    )Balance, December 31, 2010
    
    $
    10
    
    
    $
    15,526
    
    
    $
    (13,387
    )
    
    $
    120
    
    
    $
    15,905
    
    
    $
    (4,462
    )
    
    $
    13,712
  220




---



##### 



Westmoreland Resources, Inc. and Subsidiary
 2010
    
    
    2009
    
    
    2008Cash flows from operating activities:Net income (loss)
    
    $
    (2,336
    )
    
    $
    531
    
    
    $
    (199
    )Adjustments to reconcile net income to net cash from
operating activities:Depreciation, depletion and amortization
    
    
    7,886
    
    
    
    8,252
    
    
    
    6,885Restructuring charge
    
    
    
    
    
    
    
    
    
    
    120Accretion of asset retirement obligation and receivable
    
    
    3,007
    
    
    
    1,346
    
    
    
    980Postretirement medical benefit costs allocated by
Parent, net of payments
    
    
    1
    
    
    
    81
    
    
    
    75Pension contributions, net of pension costs allocated
by Parent
    
    
    (175
    )
    
    
    (30
    )
    
    
    28Loss (gain) on sale of assets
    
    
    19
    
    
    
    78
    
    
    
    (6
    )Amortization of deferred financing costs
    
    
    450
    
    
    
    575
    
    
    
    133Amortization of intangible assets and liabilities, net
    
    
    (67
    )
    
    
    (385
    )
    
    
    (79
    )Utilization of tax losses of Westmoreland Coal Company
    
    
    21
    
    
    
    107
    
    
    
    138Change in:Accounts receivable
    
    
    (1,007
    )
    
    
    1,105
    
    
    
    1,002Inventories
    
    
    (534
    )
    
    
    (507
    )
    
    
    (854
    )Accounts payable
    
    
    687
    
    
    
    (1,946
    )
    
    
    (1,398
    )Payable to related parties
    
    
    (1,219
    )
    
    
    802
    
    
    
    (361
    )Deferred revenues
    
    
    
    
    
    
    (285
    )
    
    
    (445
    )Asset retirement obligation
    
    
    (1,814
    )
    
    
    (199
    )
    
    
    (14
    )Other assets and liabilities
    
    
    1,941
    
    
    
    (2,521
    )
    
    
    3,445Net cash provided by operating activities
    
    
    6,860
    
    
    
    7,004
    
    
    
    9,450Cash flows from investing activities:Additions to property, plant and equipment
    
    
    (4,240
    )
    
    
    (3,920
    )
    
    
    (2,377
    )Increase in restricted investments and bond collateral
    
    
    (1,716
    )
    
    
    (1,399
    )
    
    
    (2,252
    )Proceeds from sales of assets
    
    
    41
    
    
    
    103
    
    
    
    672Net cash used in investing activities
    
    
    (5,915
    )
    
    
    (5,216
    )
    
    
    (3,957
    )Cash flows from financing activities:Increase in book overdrafts
    
    
    77
    
    
    
    227
    
    
    
    391Borrowings from long-term debt
    
    
    
    
    
    
    7,764
    
    
    
    Repayments of long-term debt
    
    
    (4,440
    )
    
    
    (3,725
    )
    
    
    (2,679
    )Borrowings on revolving line of credit
    
    
    91,500
    
    
    
    79,116
    
    
    
    70,100Repayments on revolving line of credit
    
    
    (91,000
    )
    
    
    (73,016
    )
    
    
    (71,500
    )Deferred financing costs
    
    
    (206
    )
    
    
    (256
    )
    
    
    (225
    )Advances from (to) Parent
    
    
    2,784
    
    
    
    (11,316
    )
    
    
    (1,794
    )Net cash used in financing activities
    
    
    (1,285
    )
    
    
    (1,206
    )
    
    
    (5,707
    )Net increase (decrease) in cash and cash equivalents
    
    
    (340
    )
    
    
    582
    
    
    
    (214
    )Cash and cash equivalents, beginning of year
    
    
    923
    
    
    
    341
    
    
    
    555Cash and cash equivalents, end of year
    
    $
    583
    
    
    $
    923
    
    
    $
    341Supplemental disclosures of cash flow information:Cash paid for interest
    
    $
    2,238
    
    
    $
    1,801
    
    
    $
    1,330Noncash transactions:Accrued purchases of property and equipment
    
    $
    51
    
    
    $
    26
    
    
    $
    866Capital leases
    
    
    
    
    
    
    5,604
    
    
    
    914
  221




---



##### 



Westmoreland Resources, Inc. and Subsidiary
 (1)
    
    Summary of Significant Accounting Policies
 (a)
    
    Nature of OperationsWestmoreland Resources, Inc., or WRI, or the Company, a wholly owned subsidiary of
Westmoreland Coal Company, or WCC, or the Parent, owns a surface coal mining
operation located in eastern Montana. Coal produced from the Absaloka Mine is sold
to electric utilities based in the north central region of the United States.
Westmoreland Coal Company owns and operates the Company. All coal reserves are owned
by the Crow Tribe of Indians and the mineral rights to the coal reserves are leased
by the Company on a long-term basis.In various transactions in October 2008, the Company formed a limited liability
company, Absaloka Coal LLC, which it owns jointly with a newly formed subsidiary, WRI
Partners, Inc., to mine and sell coal from the Absaloka Mine. Absaloka Coal LLC
subleases the mineral rights from the Company entitling Absaloka Coal LLC to mine up
to 40.0 million tons of coal at the Absaloka Mine through 2012. WRI also assigned to
Absaloka Coal LLC all of its contracts to sell coal to third parties. The Company
sold a 99% interest in Absaloka Coal LLC to a third-party but continues to
consolidate Absaloka Coal LLC as the Company has effective control over its
operations.The Companys financial statements reflect substantially all of its costs of doing
business. Common expenses incurred by the Parent on behalf of the Company are
charged to the Company based on proportional cost allocations. The Company believes
the allocations used are reasonable. However, these financial statements may not
necessarily be representative of a stand-alone company.(b)
    
    WCC LiquidityOn February 4, 2011 through a private placement offering, WCC issued $150.0 million
of Senior Secured Notes due in 2018 together with Westmoreland Partners as co-issuer
(hereafter, the Parent Notes). Substantially all of the assets of the Company
constitute collateral for the Parent Notes as to which the holders of these notes
have a first priority lien. WCC received approximately $135.2 million in proceeds
from the Parent Notes offering. WCC used the proceeds to pay the outstanding balance
on the Companys term debt. Also, the Companys credit facility was terminated in
February 2011, as result of the Parent Notes offering.Following the February 4, 2011 Parent Notes offering, WCC has cash on hand in excess
of $45 million. WCC also expects increases in coal operating profits and its
heritage health benefit expenditures to continue at their reduced 2010 rates. As a
result, WCC anticipates that its cash flows from operations, cash on hand and
available borrowing capacity will be sufficient to meet its investing, financing, and
working capital requirements for the next several years.As a result of the Parent Notes offering, the Company recorded the current portion of
its term debt as non-current liabilities in its consolidated balance sheet at
December 31, 2010.WCCs liquidity continues to be affected by its heritage health, pension, capital
expenditures and bond collateral obligations. Following the February 4, 2011 Parent
Notes offering, WCC expects that distributions from the Company and other
subsidiaries will comprise a significant source of liquidity. In addition, the cash
at WCCs subsidiary Westmoreland Mining, LLC, or WML, is available to it through
quarterly distributions, although it is subject to certain restrictions.(c)
    
    Consolidation PolicyThe Company consolidates any variable interest entity, or VIE, for which the Company
is considered the primary beneficiary. The Company provides for noncontrolling
interests in consolidated subsidiaries, which the Companys ownership is less than
100 percent. All intercompany accounts and transactions have been eliminated.
 222




---



##### 



Westmoreland Resources, Inc. and Subsidiary
 A VIE is an entity that is unable to make significant decisions about its activities
or does not have the obligation to absorb losses or the right to receive returns
generated by its operations. If the entity meets one of these characteristics, then
the Company must determine if it is the primary beneficiary of the VIE. The party
exposed to the majority of the risks and rewards with the VIE is the primary
beneficiary and must consolidate the entity.
 The Company has determined that at December 31, 2010, 2009 and 2008 it was the
primary beneficiary in Absaloka Coal LLC, a VIE, in which it holds less than a 50%
ownership. As a result, the Company has consolidated this entity within its
operations.(d)
    
    Use of Estimates
 The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosures of contingent
assets and liabilities at the date of the financial statements and reported amounts
of revenues and expenses during the reporting period. Actual results could differ
from those estimates.(e)
    
    Cash and Cash Equivalents
 Cash and cash equivalents are stated at cost, which approximate fair value. Cash
equivalents consist of highly liquid investments with original maturities of three
months or less.(f)
    
    Accounts Receivable
 Accounts receivable are recorded at the invoiced amount and do not bear interest. The
Company evaluates the need for an allowance for doubtful accounts based on a review
of collectability. The Company has determined that no allowance is necessary for
accounts receivable as of December 31, 2010 and 2009.(g)
    
    Inventories
 Inventories, which include materials and supplies as well as raw coal, are stated at
the lower of cost or market. Cost is determined using the average cost method. Coal
inventory costs include labor, supplies, equipment, operating overhead and other
related costs.(h)
    
    Mine Development
 At the existing mine, additional pits may be added to increase production capacity in
order to meet customer requirements. These expansions may require significant capital
to purchase additional equipment, relocate equipment, expand the workforce, build or
improve existing haul roads and create the initial pre-production box cut to remove
overburden for new pits at the existing operation. If these pits operate in a
separate and distinct area of the mine, the costs associated with initially
uncovering coal for production are capitalized and amortized over the life of the
developed pit consistent with coal industry practices. Once production has begun,
mining costs are then expensed as incurred.
 Where new pits are routinely developed as part of a contiguous mining sequence, the
Company expenses such costs as incurred. The development of a contiguous pit
typically reflects the planned progression of an existing pit, thus maintaining
production levels from the same mining area utilizing the same employee group and
equipment.(i)
    
    Property, Plant, and Equipment
 Property, plant and equipment are recorded at cost. Expenditures that extend the
useful lives of existing plant and equipment or increase productivity of the assets
are capitalized. Maintenance and repair costs that do not extend the useful life or
increase productivity of the asset are expensed as incurred. Coal reserves are
recorded at cost, or at fair value in the case of acquired businesses.
 223




---



##### 



Westmoreland Resources, Inc. and Subsidiary
 Coal reserves, mineral rights and mine development costs are depleted based upon
estimated recoverable proven and probable reserves. Plant and equipment are
depreciated on a straight-line basis over the assets estimated useful lives as
follows:
 YearsBuildings and improvements
    
    15 to 30Machinery and equipment
    
    3 to 30
 The Company assesses the carrying value of its property, plant and equipment for
impairment whenever events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable. Recoverability is measured by comparing
estimated undiscounted cash flows expected to be generated from such assets to their
net book value. If net book value exceeds estimated cash flows, the asset is written
down to fair value. When an asset is retired or sold, its cost and related
accumulated depreciation and depletion are removed from the accounts. The difference
between the net book value of the asset and proceeds on disposition is recorded as a
gain or loss. Fully depreciated plant and equipment still in use is not eliminated
from the accounts.(j)
    
    Restricted Investments and Bond Collateral
 The Company has requirements to maintain restricted cash and investments for bonding
requirements. Amounts held are recorded as Restricted investments and bond
collateral. Funds in the restricted investment and bond collateral accounts are not
available to meet the Companys operating cash needs.(k)
    
    Contractual Third-Party Reclamation Receivables
 Certain of the Companys customers have agreed to reimburse the Company for
reclamation expenditures as they are incurred. Amounts that are reimbursable by
customers are recorded as Contractual third-party reclamation receivableswhen the
related reclamation obligation is recorded.(l)
    
    Fair Value Measurements
 The Company is required to disclose the fair value of financial instruments where
practicable. The carrying amounts of cash equivalents, accounts receivable and
accounts payable reflected on the balance sheet approximates the fair value of these
instruments due to the short duration to maturities. The fair value of the Companys
Level 1 available-for-sale equity securities is generally based on independent
third-party market prices.(m)
    
    Financial 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 instruments, which contain features that qualify them as embedded
derivatives. Except for derivatives that qualify for the normal purchase normal sale
exception, all financial instruments are recognized in the balance sheet at fair
value. Changes in fair value are recognized in earnings if they are not eligible for
hedge accounting or Accumulated other comprehensive income (loss)if they qualify for
cash flow hedge accounting.
 Held-to-maturity financial instruments consist of non-derivative financial assets
with fixed or determinable payments and a fixed term, which the Company has the
ability and intent to hold until maturity, and, therefore, accounts for them as
held-to-maturity securities. Held-to-maturity securities are recorded at amortized
cost, adjusted for the amortization or accretion of premiums or discounts calculated
on the effective interest method. Interest income is recognized when earned.
 The Company has securities classified as available-for-sale, which are recorded at
fair value. The changes in fair values are recorded as unrealized gains (losses) as
a component of Accumulated other comprehensive lossin stockholders deficit.
 224




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##### 



Westmoreland Resources, Inc. and Subsidiary
 The Company reviews its securities routinely for other-than-temporary impairment.
The primary factors used to determine if an impairment charge must be recorded
because a decline in value of the security is other than temporary include (i)
whether the fair value of the investment is significantly below its cost basis, (ii)
the financial condition of the issuer of the security, (iii) the length of time that
the cost of the security has exceeded its fair value and (iv) the Companys intent
and ability to retain the investment for a period of time sufficient to allow for any
anticipated recovery in market value.Other-than-temporary impairments are recorded
as a component of Other income (expense).(n)
    
    Intangible Assets and Liabilities
 Identifiable intangible assets or liabilities acquired in a business combination must
be recognized and reported separately from goodwill. The Company has determined that
its most significant acquired identifiable intangible assets and liabilities are
related to sales and purchase agreements. Intangible assets result from more
favorable market prices than contracted prices in sales and purchase agreements as
measured during a business combination. Intangible liabilities result from less
favorable market prices than contracted prices in sales and purchase agreements as
measured during a business combination. The majority of these intangible assets and
liabilities are amortized on a straight-line basis over the respective period of the
sales and purchase agreements, while the remainder are amortized on a
unit-of-production basis. The intangible liabilities are recorded as Other
liabilitiesin the accompanying consolidated balance sheet.
 Amortization of intangible assets and liabilities recognized as an increase in
Revenueswas $0.1 million, $0.4 million and $0.1 million in 2010, 2009 and 2008,
respectively.(o)
    
    Postretirement Medical Benefits and Pension Plans
 The Company, through a plan sponsored by WCC, provides certain medical benefits for
retired employees and their dependents. Effective September 1, 2009, WCC eliminated
these benefits for non-represented employees and retirees. These benefits are
provided through an unfunded self-insured program.
 WCC requires the costs of postretirement medical benefits other than pensions to be
accrued over the employees period of active service. These costs are determined on
an actuarial basis and are allocated by the Parent to the Company based on its share
of the plan participants. These costs are recorded in Cost of saleswith a
corresponding decrease in Advances to Parent. The Parents consolidated balance
sheet reflects the unfunded status of these postretirement medical benefit
obligations.
 The Company also participates in the Parents noncontributory defined benefit pension
plan, which was frozen effective July 1, 2009. The costs to provide the benefits are
accrued over the employees period of active service and are determined on an
actuarial basis. The Company records an allocation of net periodic retirement
benefit costs from the Parent in Cost of saleswith a corresponding decrease in
Advances to Parent. The Parents consolidated balance sheet reflects the unfunded
status of these defined benefit pension plan obligations.(p)
    
    Income Taxes
 The Company files consolidated federal and state tax returns with its Parent. As the
Company itself is not a taxable entity, the Parents tax expense for its income tax
return group included on the Parents consolidated income tax return is allocated
among the members of that group. This allocation is calculated as if each member
were a separate taxpayer. This allocation is reflected by the Company in Income tax
expensewith the offset in Additional paid-in capital. There is no formal tax
sharing agreement with the Parent.
 The Company accounts for deferred income taxes using the asset and liability method.
Deferred tax liabilities and assets are recognized for the expected future tax
consequences of events that have been reflected in the Companys financial statements
based on the difference between the financial statement carrying amounts and tax
bases of assets and liabilities, as well as net operating loss and tax credit
carryforwards, using enacted tax rates in effect in the years in which the
differences are expected to reverse. The Company establishes a valuation allowance against its net deferred tax assets to
the extent the
 225




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##### 



Westmoreland Resources, Inc. and Subsidiary
 Company believes that it is more likely than not that it will not realize the net
deferred tax assets.
 Accounting guidance prescribes a recognition threshold and measurement attribute for
the financial statement recognition and measurement of a tax position taken or
expected to be taken in a tax return. Under this guidance, a company can recognize
the benefit of an income tax position only if it is more likely than not (greater
than 50%) that the tax position will be sustained upon tax examination, based solely
on the technical merits of the tax position. This standard also provides guidance on
derecognition, classification, interest and penalties, accounting in interim periods,
disclosure and transition.(q)
    
    Deferred Financing Costs
 The Company capitalizes costs incurred in connection with borrowings or establishment
of credit facilities and issuance of debt securities. These costs are amortized as an
adjustment to interest expense over the life of the borrowing or term of the credit
facility using the effective interest method. These amounts are recorded in Other
assetsin the accompanying Consolidated Balance Sheet.(r)
    
    Asset Retirement Obligations
 The Companys asset retirement obligation, or ARO, liabilities primarily consist of
estimated costs related to reclaiming surface land and support facilities at its
mines in accordance with federal and state reclamation laws as established by each
mining permit.
 The Company estimates its ARO liabilities for final reclamation and mine closure
based upon detailed engineering calculations of the amount and timing of the
estimated future costs for a third party to perform the required work. Cost
estimates are escalated for inflation, and then discounted at the credit-adjusted
risk-free rate. The Company records an ARO asset associated with the initial
recorded liability. The ARO asset is amortized based on the units-of-production
method over the estimated recoverable, proven and probable reserves at the related
mine, and the ARO liability is accreted to the projected settlement date. Changes in
estimates could occur due to revisions of mine plans, changes in estimated costs, and
changes in the timing of the performance of reclamation activities.(s)
    
    Coal Revenues
 The Company recognizes coal sales revenue at the time title passes to the customer in
accordance with the terms of the underlying sales agreements and after any contingent
performance obligations have been satisfied. Coal sales revenue is recognized based
on the pricing contained in the coal contracts in place at the time that title passes
and any retroactive pricing adjustments to those contracts are recognized as revised
agreements are reached with the customers and any performance obligations included in
the agreements are satisfied.
 (t)
    
    Other Operating Income (Loss)
 Other operating income in the accompanying Consolidated Results of Operations
reflects income from sources other than coal revenues. Income from the Companys
Indian Coal Tax Credit monetization transaction is recorded as Other operating
income.(u)
    
    Exploration and Drilling Costs
 Exploration expenditures are charged to Cost of salesas incurred, including costs
related to drilling and study costs incurred to convert or upgrade mineral resources
to reserves.(v)
    
    Earnings (Loss) per Share
 Basic earnings (loss) per share have 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.
 226




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##### 



Westmoreland Resources, Inc. and Subsidiary
 (w) Accounting Pronouncements Adopted
 In January 2010, the FASB issued authoritative guidance, which requires additional
disclosures and clarifies certain existing disclosure requirements regarding fair
value measurements. This guidance is effective for interim and annual reporting
periods beginning after December 15, 2009. The Company adopted this guidance
effective January 1, 2010. However, none of the specific additional disclosures were
applicable at December 31, 2010.
 On January 1, 2009, the Company adopted accounting guidance that establishes
accounting and reporting standards for (1) noncontrolling interests in partially
owned consolidated subsidiaries and (2) the loss of control of subsidiaries. This
guidance requires noncontrolling interests (minority interests) to be reported as a
separate component of equity. The amount of net income or loss attributable to the
noncontrolling interests will be included in consolidated net income or loss on the
face of the income statement. In addition, this guidance requires that a parent
recognize a gain or loss in net income or loss when a subsidiary is deconsolidated.
Such gain or loss will be measured using the fair value of the noncontrolling equity
investment on the deconsolidation date. This guidance also includes expanded
disclosure requirements regarding the interests of the parent and its noncontrolling
interest. The Company recorded $2.6 million and $1.8 million, respectively, of net
loss attributable to noncontrolling interest for the years ended December 31, 2010
and December 31, 2009, which is reflected in the Companys consolidated financial
statements.
 (2)
    
    Indian Coal Production Tax Credits (ICTCs)In August 2005, the Energy Policy Act of 2005 was enacted. Among other provisions, it
contains a tax credit for the production of coal owned by Indian tribes. The tax credit is
equal to $2.20 per ton in 2010 and increases annually based on an inflationadjustment
factor. The credit may be used against regular corporate income tax for all years and
against alternative minimum taxes for the initial four-year period after the placed in
service date of the facility. The Absaloka Mine produces coal that qualifies for this
credit.In July 2008, the Company finalized an agreement with the Crow Tribe covering the treatment
of the tax credit in determining royalties payable to the Tribe under its lease agreement
with the Tribe.On October 16, 2008, the Company entered into a series of transactions with a financial
institution, or Investor, designed to enable the Company to take advantage of ICTCs
generated by its mining operations.In these transactions, the Company formed a limited liability company, Absaloka Coal LLC,
which it owned jointly with a newly formed subsidiary, WRI Partners, Inc., to mine and sell
coal from the Absaloka Mine. Absaloka Coal LLC then entered into a sublease from the
Company for the coal leases with the Crow Tribe, entitling Absaloka Coal LLC to mine up to
40.0 million tons of coal at the Absaloka Mine through 2012. WRI also assigned to Absaloka
Coal LLC all of its contracts to sell coal to third parties.On October 16, 2008, the Company sold its interest in Absaloka Coal LLC to the Investor for
consideration consisting of an initial payment of $4.0 million, $34.0 million of fixed
principal and interest payments, and contingent payments based on 90% of the credits
allocated to the Investor in excess of the fixed payments. Based on current forecasts of
the Absaloka Mines coal sales, the total consideration to be paid by the Investor to the
Company is projected to be approximately $55.8 million through December 31, 2012. The
Company expects to share approximately $17.1 million of this consideration with the Crow
Tribe as royalties.The Investor will be entitled to 99% of Absaloka Coal LLCs earnings and related
distributions until it has received a 10% return on its initial $4.0 million cash
investment, after which it will be entitled to 5% of earnings and distributions.On October 3, 2008, the Company requested a private letter ruling, or PLR, request with the
IRS concerning various issues relating to the validity of the ICTCs. In March 2009, the
Company received a PLR confirming the availability of the ICTCs under the specific scenario
described whereby WRI subleased the right to mine a fixed amount of coal from the Companys
Absaloka Mine to the LLC. The Company recognizes the fixed and contingent payments from the
Investor as they are received as income in its consolidated financial statements.
 227




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##### 



Westmoreland Resources, Inc. and Subsidiary
 As part of the purchase agreement, the Company has an option to purchase the Investors
entire membership interest after October 16, 2013, and Investor is entitled to withdraw at
any time from Absaloka Coal LLC. In these events, or on dissolution of the LLC, the Company
would be required to pay the Investor the appraised value of its capital account balance.The Company is the sole manager of Absaloka Coal LLC has entered into a contract mining
agreement with Absaloka Coal LLC under which it receives an amount equal to all of its
mining costs plus a fee per ton of coal mined. Westmoreland Coal Sales Company acts as the
exclusive sales agent on behalf of Absaloka Coal LLC under a sales agency agreement and
receives a fee for its services based on the tons of coal sold.(3)
    
    InventoriesInventory consisted of the following at December 31, 2010 and 2009 (in thousands):
 2010
    
    
    2009Coal
    
    $
    210
    
    
    $
    194Materials and supplies
    
    
    4,155
    
    
    
    3,712Reserve for obsolete inventory
    
    
    (45
    )
    
    
    (120
    )Total
    
    $
    4,320
    
    
    $
    3,786
 (4)
    
    Restricted Investments and Bond CollateralThe Companys restricted investments and bond collateral consisted of the following (in
thousands):
 December 31,2010
    
    
    2009Reclamation bond collateral
    
    $
    10,956
    
    
    $
    9,226
 The Companys carrying value and estimated fair value of its restricted investments and
bond collateral at December 31, 2010, are as follows (in thousands):
 Carrying Value
    
    
    Fair ValueCash and cash equivalents
    
    $
    8,402
    
    
    $
    8,402Held-to-maturity securities
    
    
    1,259
    
    
    
    1,423Available-for-sale securities
    
    
    1,295
    
    
    
    1,295$
    10,956
    
    
    $
    11,120
 Funds in the restricted investment and bond collateral accounts are not available to
meet the Companys operating cash needs. For all of its restricted investments and bond
collateral accounts, the Company can select from several investment options for the funds
and receives the investment returns on these investments.As of December 31, 2010, the Company had reclamation bond collateral in place for its active
Absaloka Mine. These government-required bonds assure that coal-mining operations comply
with applicable federal and state regulations relating to the performance and completion of
final reclamation activities. The amounts deposited in the bond collateral account secure
the bonds issued by the bonding company.
 228




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##### 



Westmoreland Resources, Inc. and Subsidiary
 a)
    
    Held-to-Maturity and Available-for-Sale Restricted Investments and Bond
Collateral
 The amortized cost, gross unrealized holding gains and losses and fair value of
held-to-maturity securities at December 31, 2010 and 2009, are as follows (in thousands):
 2010
    
    
    2009Amortized cost
    
    $
    1,259
    
    
    $
    2,139Gross unrealized holding gains (losses)
    
    
    164
    
    
    
    (2
    )Fair value
    
    $
    1,423
    
    
    $
    2,137
 Maturities of held-to-maturity securities are as follows at December 31, 2010 (in
thousands):
 Amortized Cost
    
    
    Fair ValueDue in more than ten years
    
    $
    1,259
    
    
    $
    1,423
 The cost basis, gross unrealized holding gains and fair value of available-for-sale
securities at December 31, 2010 and 2009, are as follows (in thousands):
 2010
    
    
    2009Cost basis
    
    $
    1,175
    
    
    $
    1,175Gross unrealized holding gains
    
    
    120
    
    
    
    106Fair value
    
    $
    1,295
    
    
    $
    1,281
 (5)
    
    Line of Credit, Long-Term Debt and Capital LeasesThe amount outstanding at December 31, 2010 and 2009, under the Companys line of credit,
long-term debt and capital leases consisted of the following (in thousands):
 Total Debt Outstanding2010
    
    
    2009Revolving line of credit
    
    $
    16,900
    
    
    $
    16,400Term debt
    
    
    9,600
    
    
    
    12,000Capital lease obligations
    
    
    7,821
    
    
    
    9,861Total debt outstanding
    
    
    34,321
    
    
    
    38,261Less current portion
    
    
    (2,255
    )
    
    
    (30,517
    )Total debt outstanding, less current portion
    
    $
    32,066
    
    
    $
    7,744
 The following table presents aggregate contractual debt maturities of all long-term
debt and the revolving credit facilities at December 31, 2010 (in thousands):
 Subsequent to Parent NoteAs of December 31, 2010
    
    
    Offering2011
    
    $
    21,555
    
    
    $
    2,2552012
    
    
    4,781
    
    
    
    2,3812013
    
    
    3,993
    
    
    
    1,5932014
    
    
    3,330
    
    
    
    9302015
    
    
    662
    
    
    
    662Thereafter
    
    
    
    
    
    
    $
    34,321
    
    
    $
    7,821
 In December 2010, WRIs Business Loan Agreement was amended and the $20.0 million
revolving line of credit was extended through December 18, 2011. The interest rate for the
term debt and the revolver were payable at the prime rate. The term debt and the revolver
were both subject to a per annum 8.0% and 7.0% floor, respectively. As described in Note 1,
the outstanding balance of the term debt and the revolving line of credit were repaid and
the revolving line of credit was terminated in February 2011.
 229




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##### 



Westmoreland Resources, Inc. and Subsidiary
 At December 31, 2010, the Company had $3.1 million of unused borrowings under the revolver.
The revolver did not have commitment fees for the unused portion of the available revolving
loan.The two debt instruments were collateralized by a first lien in WRIs inventory, chattel
paper, accounts and notes receivable, and equipment. WCC was the guarantor of the debt
under the Agreement and its guaranty was secured by a pledge of WCCs interest in WRI.WRIs Business Loan Agreement required it to comply with numerous covenants and minimum
financial ratio requirements primarily related to debt coverage, tangible net worth, capital
expenditures, and its operations. Primarily as a result of unfavorable market conditions
driving decreases in tonnages sold, WRI was not in compliance with a net worth requirement
contained in its Business Loan Agreement at April 30, 2010. As a result of this
non-compliance, the interest rates on WRIs term debt and revolving line of credit were
increased 1% (to 8% and 7%, respectively at December 31, 2010). As of December 31, 2010,
WRI was in compliance with all covenants, with the exception of the net worth requirement.WRI leases equipment utilized in its operations at the Absaloka Mine. The weighted average
interest rate for these capital leases outstanding at December 31, 2010 and 2009 was 6.65%
and 7.60%, respectively.(6)
    
    Postretirement Medical BenefitsThe Company participates in a postretirement medical benefit plan sponsored by the Parent.
The plan provided medical benefits for retired employees and their dependents. Effective
September 1, 2009, WCC eliminated these benefits for non-represented employees and retirees.The Company records an allocation of the net periodic postretirement medical benefit cost
from the Parent as a component of Cost of saleswith a corresponding decrease in Advances to
Parent. In 2010 and 2009, the Company did not make medical benefit payments for its
retirees who participate in the Parents postretirement medical benefit plan. The Company
recorded postretirement medical benefit costs of less than $0.1 million in both 2010 and
2009. The benefit obligation attributable to the plan participants that are employees or
retirees of the Company was less than $0.1 million at December 31, 2010 and 2009.(7)
    
    Pension PlanThe Company participates in a noncontributory defined benefit pension plan sponsored by the
Parent, which was frozen effective July 1, 2009. This plan covered nearly all of the
Companys full-time employees. Benefits are generally based on years of service, the
employees average annual compensation for the highest five continuous years of employment
as specified in the plan agreement and social security integration levels.The Company records an allocation of the net periodic pension benefit cost from the Parent
as Cost of saleswith a corresponding decrease in Advances to Parent. The Company recorded
$0.1 million in 2009 and less than $0.1 million was allocated in net periodic pension
benefit cost in 2010 and 2008. In 2010 and 2009, the Company contributed $0.2 million and
$0.1 million, respectively, for its allocated share of contributions to the pension plan
sponsored by the Parent. The accumulated pension benefit obligation attributable to the
plan participants that are employees or retirees of the Company was $1.8 million and $1.4
million at December 31, 2010 and December 31, 2009, respectively. This obligation is funded
with $1.4 million and $0.9 million of plan assets held by the Parent at December 31, 2010
and 2009, respectively, resulting in a $0.4 million and $0.5 million unfunded liability
recorded on the Parents consolidated balance sheet at December 31, 2010 and 2009,
respectively.The Company expects to contribute $0.2 million to WCCs pension plan during 2011.
 a) Multi-Employer Pension
  230




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##### 



Westmoreland Resources, Inc. and Subsidiary
 (8) Asset Retirement Obligations and Contractual Third Party Reclamation Receivables
  a) Asset Retirement Obligations
  2010
    
    
    2009Asset retirement obligations  beginning of year
    
    $
    32,428
    
    
    $
    15,487Accretion
    
    
    3,035
    
    
    
    1,346Liabilities settled
    
    
    (1,842
    )
    
    
    (318
    )Changes due to amount and timing of reclamation
    
    
    (1,283
    )
    
    
    15,913Asset retirement obligations  end of year
    
    
    32,338
    
    
    
    32,428Less current portion
    
    
    (3,371
    )
    
    
    (4,512
    )Asset retirement obligations  less current portion
    
    $
    28,967
    
    
    $
    27,916
 As permittee, the Company is responsible for the total amount. The financial
responsibility for a portion of final reclamation of the mine when it is closed has been
transferred by contract to one of the Companys customers.
  b) Contractual Third-Party Reclamation Receivables
 The Company has recognized an asset of $0.5 million at December 31, 2010, as a
contractual third-party reclamation receivable, representing the present value of the
obligation of one of its customers to reimburse the Company for a portion of the asset
retirement costs.
 (9)
    
    Fair Value MeasurementsFair value is the price that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants at the measurement date.
The Company is required to disclose the fair value of financial instruments where
practicable. The carrying amounts of cash equivalents, accounts receivable and accounts
payable reflected on the Consolidated Balance Sheet approximate the fair value of these
instruments due to the short duration to their maturities. See Note 4 for additional
disclosures related to fair value measurements.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. Level 1 assets include available-for-sale equity securities
generally valued based on independent third-party market prices.
 
    
    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. The Company had no Level 2 inputs at December
31, 2010 and 2009.
 
    
    Level 3, defined as unobservable inputs in which little or no market data exists,
therefore requiring an entity to develop its own assumptions. The Company had no Level
3 inputs at December 31, 2010 and 2009.
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##### 



Westmoreland Resources, Inc. and Subsidiary
 The table below sets forth, by level, the Companys financial assets that are accounted for
at fair value (in thousands):
 Fair Value at December 31, 2010Level 1
    
    
    Level 2

    
    
    Level 3Assets:Available-for-sale
investments included in
Reclamation investments
and bond collateral
    
    $
    1,295
    
    
    $
    
    
    
    $
    
 Fair Value at December 31, 2009Level 1

    
    
    Level 2
    
    
    Level 3Assets:Available-for-sale
investments included in
Reclamation investments and
bond collateral
    
    $
    1,281
    
    
    $
    
    
    
    $
    
 (10)
    
    Income TaxesIncome tax expense attributable to net income before income taxes consists of (in thousands):
 2010
    
    
    2009
    
    
    2008Current:Federal
    
    $
    
    
    
    $
    
    
    
    $
    State
    
    
    21
    
    
    
    106
    
    
    
    138Income tax expense
    
    $
    21
    
    
    $
    106
    
    
    $
    138
 Income tax expense attributable to net income before income taxes differed from the
amounts computed by applying the statutory federal income tax rate of 34% to pre-tax income
as a result of the following (in thousands):
 2010
    
    
    2009
    
    
    2008Computed tax expense (benefit) at statutory rate
    
    $
    (787
    )
    
    $
    216
    
    
    $
    (21
    )Increase in income tax expense resulting from:Noncontrolling interest
    
    
    899
    
    
    
    618
    
    
    
    State income taxes, net of federal tax benefit
    
    
    10
    
    
    
    70
    
    
    
    25State income taxes, return to provision adjustment
    
    
    5
    
    
    
    
    
    
    
    Minority interest
    
    
    
    
    
    
    
    
    
    
    288Prior year permanent items tax adjustments
    
    
    41
    
    
    
    
    
    
    
    Change in valuation allowance for net deferred tax assets
    
    
    (167
    )
    
    
    (803
    )
    
    
    8,000Domestic production activities deduction
    
    
    
    
    
    
    
    
    
    
    (57
    )Indian Coal Tax credit
    
    
    
    
    
    
    
    
    
    
    (8,104
    )Other, net
    
    
    20
    
    
    
    5
    
    
    
    7Actual income tax expense
    
    $
    21
    
    
    $
    106
    
    
    $
    138
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##### 



Westmoreland Resources, Inc. and Subsidiary
 The tax effects of temporary differences that give rise to significant portions of the
deferred tax assets and deferred tax liabilities are presented below (in thousands):
 2010
    
    
    2009Deferred tax assets:Indian coal tax credit carryforward
    
    $
    15,848
    
    
    $
    15,727Accruals for following:Asset retirement obligations
    
    
    5,548
    
    
    
    5,114NOL carryforward
    
    
    2,414
    
    
    
    1,981Other accruals
    
    
    264
    
    
    
    245Pension and postretirement medical obligation
    
    
    89
    
    
    
    Gain on sale of partnership interest
    
    
    5,819
    
    
    
    7,331Total gross deferred tax assets
    
    
    29,982
    
    
    
    30,398Less valuation allowance
    
    
    (17,923
    )
    
    
    (17,365
    )Net deferred tax asset
    
    
    12,059
    
    
    
    13,033Deferred tax liabilities:Pension and postretirement medical benefit obligations
    
    
    
    
    
    
    (174
    )Property, plant and equipment, due to differences in
basis and depreciation, depletion and amortization
    
    
    (12,046
    )
    
    
    (12,840
    )Change in accounting method
    
    
    (13
    )
    
    
    (19
    )Total gross deferred tax liabilities
    
    
    (12,059
    )
    
    
    (13,033
    )Net deferred taxes
    
    $
    
    
    
    $
    
 As of December 31, 2010, the Company has available Federal net operating loss
carryforwards to reduce future regular taxable income, which expires as follows:
 Expiration Date
    
    Regular Tax(In thousands)2029
    
    $
    3,1962030
    
    
    3,394Total
    
    $
    6,590
 As of December 31, 2010, the Company also has an estimated $6.5 million in State net
operating loss carryforwards to reduce future taxable income.
 (11)
    
    Commitments
  a) Leases
 The gross value of property, plant, equipment and mine development assets under capital
leases was $4.6 million and $13.1 million as of December 31, 2010 and December 31, 2009,
respectively, related primarily to the leasing of mining equipment. The accumulated
amortization for these items was $1.1 million and $2.2 million at December 31, 2010 and
December 31, 2009, respectively.
 233




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##### 



Westmoreland Resources, Inc. and Subsidiary
 Future minimum capital and operating lease payments as of December 31, 2010, are as follows
(in thousands):
 Year Ended December 31, 2010Capital Leases
    
    
    Operating Leases2011
    
    $
    2,705
    
    
    $
    5882012
    
    
    2,678
    
    
    
    2452013
    
    
    1,751
    
    
    
    1232014
    
    
    1,008
    
    
    
    2015
    
    
    681
    
    
    
    Thereafter
    
    
    
    
    
    
    Total minimum lease payments
    
    $
    8,824
    
    
    $
    956Less imputed interest
    
    
    (1,003
    )Present value of minimum capital
lease payments
    
    $
    7,821
 Rental expense under operating leases during the year ending December 31, 2010, 2009
and 2008 totaled $1.0 million, $1.3 million and less than $0.1 million, respectively.
 The Company leases certain of its coal reserves from third parties and pays royalties based
on either a per ton rate or as a percentage of revenues received. Royalties charged to
expense under all such lease agreements amounted to $9.2 million, $9.6 million and $8.2
million in 2010, 2009 and 2008, respectively.
 (12) Coal Sales and Major Customers
 Coal sales to major customers during the year ended December 31, 2010, 2009 and 2008 was as
follows (in thousands):
 2010
    
    
    2009
    
    
    2008Customer A
    
    $
    45,211
    
    
    $
    49,670
    
    
    $
    49,482Customer B
    
    
    15,171
    
    
    
    15,889
    
    
    
    18,753Customer C
    
    
    7,491
    
    
    
    6,156
    
    
    
    5,895$
    67,873
    
    
    $
    71,715
    
    
    $
    74,130
 (13) Related Party Transactions
 The Company engages in certain transactions with its Parent and other subsidiaries of the
Parent.During 2010, 2009 and 2008, Western Energy Company, or WECO, a wholly owned subsidiary of
WML, sold 0.2 million, 0.3 million and less than 0.1 million tons of coal, respectively, to
the Company for approximately $2.1 million, $3.8 million and $0.4 million, respectively.The Company was allocated audit and tax fees and information technology costs incurred by
its Parent. In 2010, 2009 and 2008, these fees were $0.4 million, $0.5 million and $0.4
million, respectively, and are included in Selling and administrative expenses.Advances to Parentprimarily represent the Companys obligations for long-term loans from
the Parent and accruals for postretirement medical benefit costs and pension costs allocated
by the Parent, net of payments.
 234




---



##### 



Westmoreland Resources, Inc. and Subsidiary
 (14)
    
    Quarterly Financial Data (unaudited)Summarized quarterly financial data is as follows:
 Three Months EndedMarch 31
    
    
    June 30
    
    
    September 30
    
    
    December 31(In thousands; except per share data)2010:Revenues
    
    $
    18,801
    
    
    $
    20,958
    
    
    $
    18,936
    
    
    $
    16,302Operating income (loss)
    
    
    (936
    )
    
    
    1,655
    
    
    
    770
    
    
    
    (1,339
    )Net income (loss) applicable to
Parent company
    
    
    (574
    )
    
    
    1,635
    
    
    
    (165
    )
    
    
    (587
    )Basic income (loss) per common share
    
    $
    (57.40
    )
    
    $
    163.50
    
    
    $
    (16.50
    )
    
    $
    (58.70
    )2009:Revenues
    
    $
    19,657
    
    
    $
    20,210
    
    
    $
    20,287
    
    
    $
    18,206Operating income (loss)
    
    
    (591
    )
    
    
    5,334
    
    
    
    (595
    )
    
    
    (1,787
    )Net income (loss) applicable to
Parent company
    
    
    (925
    )
    
    
    5,551
    
    
    
    257
    
    
    
    (2,535
    )Basic income (loss) per common share
    
    $
    (92.50
    )
    
    $
    555.10
    
    
    $
    25.70
    
    
    $
    (253.50
    )
 235




---



##### 



WESTMORELAND ENERGY LLC
 
 Report of Independent Registered Public Accounting Firm
 
     
 236




---



##### 



WESTMORELAND ENERGY LLC
 Independent Auditors Report
 
      
 237




---



##### 



Westmoreland Energy LLC
 
   2010
    
    
    2009(In thousands)AssetsCurrent assets:Cash and cash equivalents
    
    $
    880
    
    
    $
    138Accounts receivable
    
    
    14,346
    
    
    
    13,737Inventories
    
    
    1,936
    
    
    
    2,571Other current assets
    
    
    224
    
    
    
    176Total current assets
    
    
    17,386
    
    
    
    16,622Property, plant, and equipment:Land
    
    
    1,156
    
    
    
    1,156Capitalized asset retirement costs
    
    
    239
    
    
    
    239Plant, equipment, and other
    
    
    215,851
    
    
    
    214,531217,246
    
    
    
    215,926Less accumulated depreciation and amortization
    
    
    (42,156
    )
    
    
    (32,953
    )175,090
    
    
    
    182,973Restricted investments
    
    
    8,563
    
    
    
    8,705Intangible assets, net of accumulated
amortization $7.4 million at December 31, 2010
and $5.7 million at December 31, 2009
    
    
    6,203
    
    
    
    7,842Other assets
    
    
    400
    
    
    
    543Total assets
    
    $
    207,642
    
    
    $
    216,685Liabilities and Members EquityCurrent liabilities:Current portion of long-term debt
    
    
    
    
    
    
    9,806Accounts payable
    
    
    8,549
    
    
    
    7,469Accrued expenses
    
    
    783
    
    
    
    944Deferred revenue
    
    
    8,805
    
    
    
    6,840Total current liabilities
    
    
    18,137
    
    
    
    25,059Long-term debt, less current installments
    
    
    46,648
    
    
    
    46,648Deferred revenue, less current portion
    
    
    67,308
    
    
    
    75,283Pension
    
    
    154
    
    
    
    178Asset retirement obligation
    
    
    715
    
    
    
    664Intangible liabilities, net of accumulated
amortization of $4.6 million at December 31,
2010 and $3.6 million at December 31, 2009
    
    
    8,664
    
    
    
    9,682Other liabilities
    
    
    
    
    
    
    30Total liabilities
    
    
    141,626
    
    
    
    157,544Members equity:Contributed capital
    
    
    35
    
    
    
    6Accumulated other comprehensive income
    
    
    (203
    )
    
    
    (164
    )Retained earnings
    
    
    66,184
    
    
    
    59,299Total members equity
    
    
    66,016
    
    
    
    59,141Total liabilities and members equity
    
    $
    207,642
    
    
    $
    216,685
  238




---



##### 



Westmoreland Energy LLC
 
   2010
    
    
    2009
    
    
    2008(In thousands)Revenues
    
    $
    87,999
    
    
    $
    82,162
    
    
    $
    90,006Costs and expenses:Cost of sales
    
    
    61,739
    
    
    
    60,504
    
    
    
    59,761Depreciation
    
    
    10,131
    
    
    
    9,764
    
    
    
    9,780Selling and administrative
    
    
    4,287
    
    
    
    4,231
    
    
    
    3,867Loss (gain) on sale of assets
    
    
    122
    
    
    
    12
    
    
    
    (876
    )76,279
    
    
    
    74,511
    
    
    
    72,532Operating income
    
    
    11,720
    
    
    
    7,651
    
    
    
    17,474Other income (expense):Interest expense
    
    
    (4,659
    )
    
    
    (5,946
    )
    
    
    (9,497
    )Loss on extinguishment of debt
    
    
    
    
    
    
    
    
    
    
    (1,345
    )Interest income
    
    
    36
    
    
    
    120
    
    
    
    511Other income
    
    
    30
    
    
    
    448
    
    
    
    (4,593
    )
    
    
    (5,378
    )
    
    
    (10,331
    )Income before income taxes
    
    
    7,127
    
    
    
    2,273
    
    
    
    7,143Income tax expense
    
    
    368
    
    
    
    3,812
    
    
    
    11,883Net income (loss)
    
    $
    6,759
    
    
    $
    (1,539
    )
    
    $
    (4,740
    )
  239




---



##### 



Westmoreland Energy LLC
   Accumulated Other
    
    
    
    
    
    
    Total MembersContributed Capital
    
    
    Comprehensive Loss
    
    
    Retained Earnings
    
    
    Equity(In thousands)Balance at December 31, 2007
    
    $
    1,351
    
    
    $
    (295
    )
    
    $
    57,371
    
    
    $
    58,427Distributions
    
    
    
    
    
    
    
    
    
    
    (21,000
    )
    
    
    (21,000
    )Warrant repriced in lieu of registration
requirement
    
    
    355
    
    
    
    
    
    
    
    
    
    
    
    355Sale of Ft. Lupton interest
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    (1
    )Transactions with Parent/affiliates
    
    
    
    
    
    
    
    
    
    
    30,151
    
    
    
    30,151Amortization and adjustment of accumulated
actuarial loss of pension plans
    
    
    
    
    
    
    189
    
    
    
    
    
    
    
    189Net loss
    
    
    
    
    
    
    
    
    
    
    (4,740
    )
    
    
    (4,740
    )Comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,551
    )Balance at December 31, 2008
    
    $
    1,705
    
    
    $
    (106
    )
    
    $
    61,782
    
    
    $
    63,381Distributions
    
    
    
    
    
    
    
    
    
    
    (7,706
    )
    
    
    (7,706
    )Cumulative effect of adoption of ASC 815-40
    
    
    (1,699
    )
    
    
    
    
    
    
    1,222
    
    
    
    (477
    )Transactions with Parent/affiliates
    
    
    
    
    
    
    
    
    
    
    5,540
    
    
    
    5,540Amortization and adjustment of accumulated
actuarial loss of pension plans
    
    
    
    
    
    
    (58
    )
    
    
    
    
    
    
    (58
    )Net loss
    
    
    
    
    
    
    
    
    
    
    (1,539
    )
    
    
    (1,539
    )Comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,597
    )Balance at December 31, 2009
    
    $
    6
    
    
    $
    (164
    )
    
    $
    59,299
    
    
    $
    59,141Transactions with Parent/affiliates
    
    
    
    
    
    
    
    
    
    
    126
    
    
    
    126Contributions of Westmoreland Coal Company
common stock to pension plan on the
Companys behalf
    
    
    29
    
    
    
    
    
    
    
    
    
    
    
    29Amortization and adjustment of accumulated
actuarial loss of pension plans
    
    
    
    
    
    
    (39
    )
    
    
    
    
    
    
    (39
    )Net income
    
    
    
    
    
    
    
    
    
    
    6,759
    
    
    
    6,759Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,720Balance at December 31, 2010
    
    $
    35
    
    
    $
    (203
    )
    
    $
    66,184
    
    
    $
    66,016
  240




---



##### 



Westmoreland Energy LLC
   2010
    
    
    2009
    
    
    2008(In thousands)Cash flows from operating activities:Net income (loss)
    
    $
    6,759
    
    
    $
    (1,539
    )
    
    $
    (4,740
    )Adjustments to reconcile net income (loss) to net cash
from operating activities:Depreciation
    
    
    10,131
    
    
    
    9,764
    
    
    
    9,780Accretion of asset retirement obligation
    
    
    51
    
    
    
    34
    
    
    
    32Loss (gain) on the sale of assets
    
    
    122
    
    
    
    12
    
    
    
    (876
    )Amortization of deferred financing costs
    
    
    (308
    )
    
    
    (313
    )
    
    
    (105
    )Amortization of intangible assets and liabilities, net
    
    
    621
    
    
    
    621
    
    
    
    620Loss on extinguishment of debt
    
    
    
    
    
    
    
    
    
    
    1,102Gain on derivative
    
    
    (30
    )
    
    
    (448
    )
    
    
    Income tax
allocation
    
    
    
    
    
    
    
    
    
    
    11,883Change in:Accounts receivable
    
    
    (609
    )
    
    
    8,341
    
    
    
    (3,546
    )Inventories
    
    
    635
    
    
    
    (730
    )
    
    
    959Accounts payable and accrued expenses
    
    
    884
    
    
    
    (61
    )
    
    
    (406
    )Deferred revenues
    
    
    (6,010
    )
    
    
    11,216
    
    
    
    28,774Other assets and liabilities
    
    
    (211
    )
    
    
    (2,427
    )
    
    
    (2,302
    )Net cash provided by operating activities
    
    
    12,035
    
    
    
    24,470
    
    
    
    41,175Cash flows from investing activities:Purchases of property, plant and equipment
    
    
    (2,207
    )
    
    
    (4,251
    )
    
    
    (1,711
    )Change in restricted investments
    
    
    142
    
    
    
    2,266
    
    
    
    19,868Proceeds from sale of assets
    
    
    1
    
    
    
    
    
    
    
    876Net cash provided by (used in) investing activities
    
    
    (2,064
    )
    
    
    (1,985
    )
    
    
    19,033Cash flows from financing activities:Borrowings of long-term debt
    
    
    
    
    
    
    
    
    
    
    64,880Repayments of long-term debt
    
    
    (9,355
    )
    
    
    (25,845
    )
    
    
    (132,070
    )Borrowings on revolving lines of credit
    
    
    7,300
    
    
    
    
    
    
    
    Repayments on revolving lines of credit
    
    
    (7,300
    )
    
    
    
    
    
    
    Deferred financing costs
    
    
    
    
    
    
    
    
    
    
    (296
    )Transactions with Parent/affiliates
    
    
    126
    
    
    
    5,540
    
    
    
    18,268Distributions
    
    
    
    
    
    
    (7,706
    )
    
    
    (21,000
    )Net cash used in financing activities
    
    
    (9,229
    )
    
    
    (28,011
    )
    
    
    (70,218
    )Net increase (decrease) in cash and cash equivalents
    
    
    742
    
    
    
    (5,526
    )
    
    
    (10,010
    )Cash and cash equivalents, beginning of year
    
    
    138
    
    
    
    5,664
    
    
    
    15,674Cash and cash equivalents, end of year
    
    $
    880
    
    
    $
    138
    
    
    $
    5,664Supplemental disclosure of cash flow information:Cash paid during the year for:Interest
    
    $
    5,159
    
    
    $
    6,531
    
    
    $
    9,364Income taxes
    
    $
    10
    
    
    $
    1,910
    
    
    $
    2,714Noncash transactions:Accrued purchases of property and equipment
    
    $
    86
    
    
    $
    51
    
    
    $
    408
  241




---



##### 



Westmoreland Energy LLC
  1.
    
    Summary of Significant Accounting Policies
 (a)
    
    Nature of OperationsWestmoreland Energy LLC, or WELLC, or the Company, a wholly owned subsidiary of
Westmoreland Coal Company, or WCC, or the Parent, is a special purpose Delaware
Limited Liability Company formed on December 4, 2000. Through its subsidiaries, the
Company owns and operates two cogeneration facilities also known as Roanoke Valley
Power Plant, or ROVA, located in Weldon, North Carolina. The first facility, ROVA I,
is a 180 MW facility and the second facility, ROVA II, is a 50 MW facility adjacent
to ROVA I. ROVA I and ROVA II operate as exempt wholesale generators as determined
by the Federal Energy Regulatory Commission, or FERC. ROVA I commenced commercial
operation on May 29, 1994. ROVA II commenced commercial operation on June 1, 1995.
The Parent provides management and administrative support to WELLC and its
subsidiaries, including legal, environmental, sales, and accounting services.The Companys financial statements reflect substantially all of its costs of doing
business. Common expenses incurred by the Parent on behalf of the Company are
charged to the Company based on proportional cost allocations. The Company believes
the allocations used are reasonable. However, these financial statements may not
necessarily be representative of a stand-alone company.(b)
    
    WCCs LiquidityOn February 4, 2011 through a private placement offering, WCC issued $150.0 million
of Senior Secured Notes due in 2018 together with Westmoreland Partners, an indirect
wholly owned subsidiary of WELLC, as co-issuer (hereafter, the Parent Notes). WCC
received approximately $135.2 million in proceeds from the Parent Notes offering. WCC
used the proceeds to pay the outstanding balance on the Companys term debt, which
the Company recorded as contributed capital.Following the February 4, 2011 Parent Notes offering, WCC has cash on hand in excess
of $45 million. WCC also expects increases in coal operating profits and heritage
health benefit expenditures to continue at their reduced 2010 rates. As a result,
WCC anticipates that its cash flows from operations, cash on hand and available
borrowing capacity will be sufficient to meet its investing, financing, and working
capital requirements for the next several years.Also, the Companys credit facility was terminated in February 2011 as a result of
the Parent Notes offering. As a result of the Parent Notes offering, the Company
recorded the current portion of its term debt as non-current liabilities in its
consolidated balance sheet at December 31, 2010.
 242




---



##### 



Westmoreland Energy LLC
 (c)
    
    Consolidation PolicyThe consolidated financial statements of WELLC includes the accounts of the Company
and its wholly owned subsidiaries, after elimination of intercompany balances and
transactions.(d)
    
    Use of EstimatesThe preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosures of contingent
assets and liabilities at the date of the financial statements and reported amounts
of revenues and expenses during the reporting period. Actual results could differ
from those estimates.(e)
    
    Cash and Cash EquivalentsCash and cash equivalents are stated at cost, which approximate fair value. Cash
equivalents consist of highly liquid investments with original maturities of three
months or less.(f)
    
    Accounts ReceivableAccounts receivable are recorded at the invoiced amount and do not bear interest.
The Company evaluates the need for an allowance for doubtful accounts based on a
review of collectability. The Company has determined that no allowance is necessary
for accounts receivable as of December 31, 2010 and 2009.(g)
    
    InventoriesInventories, which consist primarily of coal, are stated at the lower of cost or
market. Cost is determined using the average cost method.(h)
    
    Restricted InvestmentsThe Company has requirements to maintain restricted cash and investments for letter
of credit requirements. Funds in the restricted investment accounts are not
available to meet the Companys operating cash needs. For all of its restricted
investments, the Company can select from several investment options for the funds
and receives the investment returns on these investments.(i)
    
    Property, Plant, and EquipmentProperty, plant and equipment are carried at cost and include expenditures for new
facilities, those expenditures that substantially increase the productive lives of
existing plant and equipment and long-term spare parts inventory. Maintenance and
repair costs that do not extend the useful life or increase the productivity of the
asset are expensed as incurred. Plant and equipment are depreciated on a
straight-line basis over the assets estimated useful lives as follows:
 YearsBuildings and improvements
    
    
    15 to 30Machinery and equipment
    
    
    3 to 36
 Ash monofills are amortized on a cost per ton basis multiplied by tons sent to
each monofill. The ash monofills were built as disposal sites for the ash
generated during operations. Long-term spare parts inventory begins depreciation
when placed in service.
 243




---



##### 



Westmoreland Energy LLC
 The Company assesses the carrying value of its property, plant and equipment for
impairment whenever events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable. Recoverability is measured by comparing
estimated undiscounted cash flows expected to be generated from such assets to
their net book value. If net book value exceeds estimated cash flows, the asset is
written down to fair value.When an asset is retired or sold, its cost and related accumulated depreciation and
depletion are removed from the accounts. The difference between the net book value
of the asset and proceeds on disposition is recorded as a gain or loss. Fully
depreciated plant and equipment still in use is not eliminated from the accounts.(j)
    
    Intangible Assets & LiabilitiesIdentifiable intangible assets or liabilities acquired in a business combination
must be recognized and reported separately from goodwill. The Company has
determined that its acquired identifiable intangible assets and liabilities are
related to sales and purchase agreements. Intangible assets result from more
favorable market prices than contracted prices in sales and purchase agreements as
measured during a business combination. Intangible liabilities result from less
favorable market prices than contracted prices in sales and purchase agreements as
measured during a business combination. These intangible assets and liabilities are
amortized on a straight-line basis over the respective period of the sales and
purchase agreements.Amortization of intangible assets recognized in Cost of saleswas $1.6 million in
2010, 2009 and 2008. Amortization of intangible assets and liabilities recognized
in Revenueswas $1.0 million in 2010, 2009 and 2008.The estimated aggregate amortization amounts from intangibles assets and
liabilities for each of the next five years as of December 31, 2010 are as follows:
 Amortization Expense (Revenue)(In thousands)2011
    
    $
    6212012
    
    
    6212013
    
    
    6212014
    
    
    (26
    )2015
    
    
    (834
    )
 (k)
    
    Fair Value MeasurementsThe Company is required to disclose the fair value of financial instruments where
practicable. The carrying amounts of cash equivalents, accounts receivable and
accounts payable reflected on the balance sheet approximates the fair value of
these instruments due to the short duration to maturities. The fair value of
long-term debt is based on the interest rates available to the Company for debt
with similar terms and maturities.(l)
    
    Financial InstrumentsThe 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 instruments, which contain features that qualify them as
embedded derivatives. Except for derivatives that qualify for the normal purchase
normal sale exception, all financial instruments are recognized in the balance
sheet at fair value. Changes in fair value are recognized in earnings if they are
not eligible for hedge accounting or Accumulated other comprehensive income (loss)
if they qualify for cash flow hedge accounting.
 244




---



##### 



Westmoreland Energy LLC
 (m)
    
    Pension PlanThe Company participates in the Parents noncontributory defined benefit pension
plan, which was frozen effective July 1, 2009. The costs to provide the benefits
are accrued over the employees period of active service and are determined on an
actuarial basis. The liability recorded for this obligation was $0.2 million at
year ended December 31, 2010 and 2009.(n)
    
    Deferred Financing CostsThe Company capitalizes costs incurred in connection with borrowings or
establishment of credit facilities and issuance of debt securities. These costs are
amortized as an adjustment to interest expense over the life of the borrowing or
term of the credit facility using the effective interest method. Accumulated
amortization as of December 31, 2010 and 2009 was $1.7 million and $1.6 million,
respectively.(o)
    
    Deferred RevenueDeferred revenues represent funding received upon the negotiation of long-term
contracts. The deferred power revenues are recognized as power is delivered on a
pro rata basis, based on the payments estimated to be received and recognized over
the remaining term of the power sales agreements.(p)
    
    Asset Retirement ObligationThe Companys asset retirement obligation, or ARO, liabilities primarily consist of
estimated costs related to reclaiming land at its facilities in accordance with
federal and state reclamation laws.The Company estimates its ARO liabilities based upon detailed engineering
calculations of the amount and timing of the future costs for a third party to
perform the required work. Cost estimates are escalated for inflation, and then
discounted at the credit-adjusted risk-free rate. The Company records an ARO asset
associated with the initial recorded liability. The ARO asset is amortized on a
straight-line basis and the ARO liability is accreted to the projected settlement
date. Changes in estimates could occur due to revisions of plant operating plans,
changes in estimated costs, and changes in timing of the performance of reclamation
activities.As of December 31, 2010 and 2009, the Companys obligation recorded in Asset
retirement obligationwas $0.7 million. Changes in the Companys asset retirement
obligations for the years ended December 31, 2010 and 2009 were as follows:
 2010
    
    
    2009(In thousands)Asset retirement obligation  beginning of period
    
    $
    664
    
    
    $
    490Accretion
    
    
    51
    
    
    
    34Changes due to amount and timing of reclamation
    
    
    
    
    
    
    140Asset retirement obligation  end of period
    
    $
    715
    
    
    $
    664
 (q)
    
    Income TaxesThe Company is an LLC which is treated as a disregarded entity for U.S. Federal and
State income tax purposes and as a result is included in the determination of
taxable income or loss of WCC. In preparing these separate financial statements,
income taxes have been provided like any other tax-paying enterprise based upon the
requirement that single-member LLCs are subsidiaries of the member for financial
reporting purposes, and income taxes generally are allocated under ASC paragraphs
740-10-30-27 and 30-28.The Company files consolidated federal and state tax returns with its Parent. As
the Company itself is not a taxable entity, the Parents tax expense for its income
tax return group included on the Parents consolidated income tax return is
allocated among the members of that group. This allocation is calculated
 245




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##### 



Westmoreland Energy LLC
 as if
each member were a separate taxpayer. This allocation is reflected by the Company
in Income tax expense with a corresponding amount in Members Equity. There is no
formal tax sharing agreement with the Parent.The Company accounts for deferred income taxes using the asset and liability
method. Deferred tax liabilities and assets are recognized for the expected future
tax consequences of events that have been reflected in the Companys consolidated
financial statements based on the difference between the financial statement
carrying amounts and tax bases of assets and liabilities, as well as net operating
loss and tax credit carryforwards, using enacted tax rates in effect in the years
in which the differences are expected to reverse. The Company establishes a
valuation allowance against its net deferred tax assets to the extent the Company
believes that it is more likely than not that it will not realize the net deferred
tax assets.Accounting guidance prescribes a recognition threshold and measurement attribute
for the financial statement recognition and measurement of a tax position taken or
expected to be taken in a tax return. Under this guidance, a company can recognize
the benefit of an income tax position only if it is more likely than not (greater
than 50%) that the tax position will be sustained upon tax examination, based
solely on the technical merits of the tax position. This accounting standard also
provides guidance on derecognition, classification, interest and penalties,
accounting in interim periods, disclosure and transition.(r)
    
    Power RevenuesROVA supplies power under long-term power sales agreements. Under these
agreements, ROVA invoices and collects capacity payments based on kilowatt-hours
produced if the units are dispatched or for the kilowatt-hours of available
capacity if the units are not fully dispatched.A portion of the capacity payments under the agreements is considered to be an
operating lease. The Company is recognizing amounts invoiced under the power sales
agreements as revenue on a pro rata basis, based on the weighted average per
kilowatt hour capacity payments estimated to be received over the remaining term of
the power sales agreements. Under this method of recognizing revenue, $6.0 million
of prior deferred revenue was recognized during 2010 while $11.2 million and $28.8
million of amounts invoiced during 2009 and 2008, respectively, were deferred from
recognition. The Company began to recognize prior deferred revenue during 2010 at
ROVA II and during 2009 at ROVA I.(s)
    
    Accounting Pronouncements AdoptedIn January 2010, the FASB issued authoritative guidance, which requires additional
disclosures and clarifies certain existing disclosure requirements regarding fair
value measurements. This guidance is effective for interim and annual reporting
periods beginning after December 15, 2009. The Company adopted this guidance
effective January 1, 2010. However, none of the specific additional disclosures
were applicable at December 31, 2010.On January 1, 2009, the Company adopted accounting guidance that clarifies how to
determine whether certain instruments or features are indexed to an entitys own
stock. This guidance was effective for financial statements issued for fiscal
years beginning after December 15, 2008 and interim periods within those fiscal
years. The Company recorded a cumulative effect of change in accounting principles
upon adoption of this guidance. See Note 4 for additional information.
 246




---



##### 



Westmoreland Energy LLC
 2. Restricted Investments
 The Companys restricted investments consist of the following at December 31, 2010 and
2009:
 2010
    
    
    2009(In thousands)Letter of credit
    
    $
    5,989
    
    
    $
    6,038Repairs and maintenance account
    
    
    1,067
    
    
    
    Debt protection account
    
    
    905
    
    
    
    2,067Ash reserve account
    
    
    602
    
    
    
    600Total restricted investments
    
    $
    8,563
    
    
    $
    8,705
 All restricted investments at December 31, 2010, consisted of cash and cash
equivalents.All underlying financial instruments included in the restricted investment accounts have
Level I inputs available regarding fair value measurements. Level I inputs are quoted
prices in active markets for identical financial instruments that the Company has the
ability to access at the fair value measurement date.Pursuant to the terms of its loan agreement, ROVA was required to maintain either three or
six months debt service reserves in its debt protection accounts, which was based on the
calculation of its current debt service coverage ratio.The loan agreement required ROVA to fund an ash reserve account to $0.6 million. The ash
reserve account was fully funded at December 31, 2010.The loan agreement also required ROVA to fund a repairs and maintenance account up to a
maximum amount of $2.6 million. The funds for the repairs and maintenance account were
required to be deposited every three months based on a formula contained in the agreement.Following the Parent Notes offering in February 2011, the debt protection, ash reserve, and
repairs and maintenance accounts are no longer required and will be available for current
operating needs.
 3.
    
    Lines of Credit and Long-Term Debt
  2010
    
    
    2009(In thousands)Term debt
    
    $
    46,220
    
    
    $
    55,575Debt premiums
    
    
    428
    
    
    
    879Total debt outstanding
    
    
    46,648
    
    
    
    56,454Less current portion
    
    
    
    
    
    
    (9,806
    )Total long-term debt
    
    $
    46,648
    
    
    $
    46,648
 247




---



##### 



Westmoreland Energy LLC
 Future principal payments on long-term debt at December 31, 2010 are as follows:
 As ofDecember 31, 2010(In thousands)2011
    
    $
    8,0252012
    
    
    8,8202013
    
    
    9,6452014
    
    
    9,4702015
    
    
    10,260Thereafter
    
    
    Total
    
    
    46,220Plus: debt premium
    
    
    428Total debt
    
    $
    46,648
      Carrying Value
    
    
    Fair Value(In thousands)December 31, 2010
    
    $
    46,648
    
    
    $
    50,583December 31, 2009
    
    $
    56,455
    
    
    $
    60,330
 4.
    
    Derivative Instruments
 Adoption of ASC 815-40On January 1, 2009, the Company adopted ASC 815-40, Determining Whether an Instrument (or
Embedded Feature) is Indexed to an Entitys Own Stock. As part of the adoption of ASC
815-40, the value of the Companys warrant was recorded as a liability.
 248




---



##### 



Westmoreland Energy LLC
  Derivative
    
    
    OtherLiability
    
    
    Paid-In-Capital
    
    
    Accumulated Deficit(In thousands)Record January 1,
2009, derivative
instrument
liability related
to warrant
    
    
    477
    
    
    
    
    
    
    
    477Record the reversal
of prior accounting
related to the
warrant
    
    
    
    
    
    
    (1,699
    )
    
    
    (1,699
    )$
    477
    
    
    $
    (1,699
    )
    
    $
    (1,222
    )
 Warrant
  Number ofShares Included in
    
    
    
    
    
    
    
    
    
    
    
    
    
    Expected LifeWarrant
    
    Dividend Yield
    
    
    Volatility
    
    
    Risk Free Rate
    
    
    (in years)173,228
    
    None
    
    
    65
    %
    
    
    0.20
    %
    
    
    1.0
  December 31,Derivative Instruments
    
    Balance Sheet Location
    
    
    2010
    
    
    2009Warrant
    
    Other liabilities
    
    
    
    
    
    
    30
  Income Recognized inEarnings on DerivativesYear Ended December 31,Derivative
    
    Statement ofInstruments
    
    Operations Location
    
    
    2010
    
    
    2009Warrant
    
    Other income
    
    
    30
    
    
    
    448
 5.
    
    Income TaxesIncome tax expense consists of:
 Year Ended December 31,2010
    
    
    2009
    
    
    2008(In thousands)Current:Federal
    
    $
    296
    
    
    $
    3,128
    
    
    $
    9,891State
    
    
    72
    
    
    
    684
    
    
    
    1,992Income tax expense
    
    $
    368
    
    
    $
    3,812
    
    
    $
    11,883
 249




---



##### 



Westmoreland Energy LLC
  Year Ended December 31,2010
    
    
    2009
    
    
    2008(In thousands)Computed tax expense at statutory rate
    
    $
    2,495
    
    
    $
    829
    
    
    $
    2,500Increase (decrease) in income tax expense
resulting from:State tax, net of federal benefit
    
    
    47
    
    
    
    445
    
    
    
    1,295Prior year permanent items tax return true-up
    
    
    (34
    )
    
    
    
    
    
    
    Adjustments to deferred tax assets
attributable to prior years
    
    
    38
    
    
    
    
    
    
    
    27Change in valuation allowance for net
deferred tax assets
    
    
    (2,170
    )
    
    
    2,693
    
    
    
    8,690Domestic production and activities deduction
    
    
    
    
    
    
    
    
    
    
    (631
    )Other, net
    
    
    (8
    )
    
    
    (155
    )
    
    
    2Income tax expense
    
    $
    368
    
    
    $
    3,812
    
    
    $
    11,883
  December 31,2010
    
    
    2009(In thousands)Deferred tax assets:Accruals for the following:Pension and postretirement medical benefit obligation
    
    $
    61
    
    
    $
    71Deferred revenue
    
    
    30,157
    
    
    
    32,538Reclamation
    
    
    228
    
    
    
    208MBO bonus
    
    
    284
    
    
    
    191Other accruals
    
    
    59
    
    
    
    9Total gross deferred tax assets:
    
    
    30,789
    
    
    
    33,017Less valuation allowance
    
    
    (11,816
    )
    
    
    (14,176
    )Net deferred tax assets
    
    
    18,973
    
    
    
    18,841Deferred tax liabilities:Debt issuance costs
    
    
    (200
    )
    
    
    (252
    )Other
    
    
    (868
    )
    
    
    (774
    )Property, plant, and equipment, principally due to
differences in depreciation, depletion, and
amortization
    
    
    (17,905
    )
    
    
    (17,815
    )Total gross deferred tax liabilities:
    
    
    (18,973
    )
    
    
    (18,841
    )Net deferred tax asset
    
    $
    
    
    
    $
    
 6.
    
    Commitments
 Coal Supply Agreement
  7.
    
    Power Sales and Major Customers
  250




---



##### 



Westmoreland Energy LLC
 8.
    
    Related-Party Transactions
 Selling and administrative expenses
 Selling and administrative expenses
 9.
    
    Quarterly Financial Data (unaudited)
  Three Months EndedMarch 31
    
    
    June 30
    
    
    September 30
    
    
    December 31(In thousands)2010:Revenues
    
    $
    22,889
    
    
    $
    21,174
    
    
    $
    23,598
    
    
    $
    20,338Operating income
    
    
    4,170
    
    
    
    1,307
    
    
    
    5,058
    
    
    
    1,185Net income
    
    
    2,943
    
    
    
    117
    
    
    
    3,890
    
    
    
    2662009:Revenues
    
    $
    21,845
    
    
    $
    23,551
    
    
    $
    20,696
    
    
    $
    16,070Operating income
(loss)
    
    
    2,961
    
    
    
    5,189
    
    
    
    680
    
    
    
    (1,179
    )Net income (loss)
    
    
    1,557
    
    
    
    3,434
    
    
    
    (448
    )
    
    
    (2,332
    )
 251




---



##### 



WESTMORELAND COAL COMPANY
WESTMORELAND PARTNERS
Offer to Exchange
 $150,000,000 10.75% Senior Secured Notes due 2018
for $150,000,000 10.75% Senior Secured Notes due 2018
that have been registered under the Securities Act of 1933
 
 
  
 
 252




---



##### 



PART II
 INFORMATION NOT REQUIRED IN PROSPECTUS
 Item 20. Indemnification of Officers and Directors
 Registrants under the laws of Delaware
       Registrants under the laws of Virginia
  II-1




---



##### 



Item 21. Exhibits and Financial Statement Schedules.
 Exhibits
  
 ExhibitNumber
    
    Exhibit Description3.1*
    
    Restated Certificate of Incorporation of Westmoreland Coal Company3.2*
    
    Certificate of Correction to the Restated Certificate of Incorporation of Westmoreland Coal Company3.3*
    
    Certificate of Amendment to the Restated Certificate of Incorporation of Westmoreland Coal Company3.4*
    
    Certificate of Amendment to the Restated Certificate of Incorporation of Westmoreland Coal Company3.5*
    
    Amended and Restated Bylaws of Westmoreland Coal Company3.6*
    
    Amended and Restated Partnership Agreement of Westmoreland Partners3.7*
    
    Amendment No. 1 to Amended and Restated Partnership Agreement of Westmoreland Partners3.8*
    
    Amendment No. 2 to Amended and Restated Partnership Agreement of Westmoreland Partners3.9*
    
    Certificate of Formation of Westmoreland Energy LLC3.10*
    
    Operating Agreement of Westmoreland Energy LLC3.11*
    
    Certificate of Formation of Westmoreland  North Carolina Power LLC3.12*
    
    Operating Agreement of Westmoreland  North Carolina Power LLC3.13*
    
    Certificate of Incorporation of WEI  Roanoke Valley, Inc.3.14*
    
    Certificate of Amendment to Certificate of Incorporation of WEI  Roanoke Valley, Inc.3.15*
    
    Bylaws of WEI  Roanoke Valley, Inc.3.16*
    
    Certificate of Limited Partnership of Westmoreland Roanoke Valley LP3.17*
    
    Amendment to Certificate of Limited Partnership of Westmoreland Roanoke Valley LP3.18*
    
    Agreement of Limited Partnership of Westmoreland Roanoke Valley LP3.19*
    
    Certificate of Incorporation of Westmoreland Resources, Inc.3.20*
    
    Certificate of Amendment of Certificate of Incorporation of Westmoreland Resources, Inc.3.21*
    
    Certificate of Amendment of Certificate of Incorporation of Westmoreland Resources, Inc.3.22*
    
    Bylaws of Westmoreland Resources, Inc.3.23*
    
    Certificate of Incorporation of WRI Partners, Inc.3.24*
    
    Bylaws of WRI Partners, Inc.3.25*
    
    Certificate of Incorporation of Westmoreland Mining Services, Inc.3.26*
    
    Bylaws of Westmoreland Mining Services, Inc.3.27*
    
    Certificate of Incorporation of Westmoreland Coal Sales Company, Inc.3.28*
    
    Certificate of Amendment of Certificate of Incorporation of Westmoreland Coal Sales Company, Inc.3.29*
    
    Bylaws of Westmoreland Coal Sales Company, Inc.3.30*
    
    Certificate of Incorporation of WCC Land Holding Company, Inc.3.31*
    
    Bylaws of WCC Land Holding Company, Inc.3.32*
    
    Certificate of Incorporation of Westmoreland Power, Inc.3.33*
    
    Certificate of Amendment of Certificate of Incorporation of Westmoreland Power, Inc.3.34*
    
    Certificate of Amendment of Certificate of Incorporation of Westmoreland Power, Inc.3.35*
    
    Bylaws of Westmoreland Power, Inc.
 
 II-2




---



##### 



ExhibitNumber
    
    Exhibit Description4.1*
    
    Indenture, dated as of 2/04/2011, by and between Westmoreland Coal Company, Westmoreland Partners
and Wells Fargo Bank, NA, as trustee and note collateral agent.4.2*
    
    Form of 10.75% Senior Notes due 2018 (included as Exhibit A in Exhibit 4.11).4.3*
    
    Registration Rights Agreement, dated 2/04/2011, among Westmoreland Coal Company and Westmoreland
Partners and Gleacher & Company Securities, Inc., as initial purchaser4.4*
    
    Pledge and Security Agreement dated as of 2/04/ 2011, by Westmoreland Coal Company and
Westmoreland Partners in favor of Wells Fargo Bank, NA, as note collateral agent5.1*
    
    Opinion of Davis Graham & Stubbs LLP as to the validity of the new notes.12.1
    
    Statement Regarding Computation of Ratios.21.1
    
    Subsidiaries of the Registrant.23.1
    
    Consent of Ernst & Young LLP23.2
    
    Consent of KPMG LLP23.3
    
    Consent of KPMG LLP23.4*
    
    Consent of Norwest Corporation23.5
    
    Consent of Davis Graham & Stubbs LLP (included in Exhibit 5.1)24.1
    
    Power of Attorney (included on signature page)25.1*
    
    Statement of Eligibility on Form T-1 of Wells Fargo Bank, National Association99.1
    
    Letter of Transmittal
 
 
 
 *
    
    Incorporated by reference to the Companys Form S-4 registration statement initially filed with the SEC on June 3, 2011. 
 Item 22. Undertakings
   (i)
    
    To include any prospectus required by
Section 10(a)(3) of the Securities Act of 1933;
 (ii)
    
    To reflect in the prospectus any fact or
events arising after the effective date of the registration statement
(or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental change in
the information set forth in this registration statement.
Notwithstanding the foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of securities offered
would not exceed that which was registered) and any deviation from
the low or high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the Securities and
Exchange Commission pursuant to Rule 424(b) if, in the aggregate,
the changes in volume and price represent no more than 20% change
in the maximum aggregate offering price set forth in the
Calculation of Registration Fee table in the effective
registration statement; and
 (iii)
    
    To include any material information with
respect to the plan of distribution not previously disclosed in the
registration statement or any material change to such information in
the registration statement.
 bona fide
  provided however
 II-3




---



##### 



(i)
    
    any preliminary prospectus or prospectus of
the undersigned registrants relating to the offering required to be
filed pursuant to Rule 424;
 (ii)
    
    any free writing prospectus relating to the
offering prepared by or on behalf of the undersigned registrants or
used or referred to by the undersigned registrants;
 (iii)
    
    the portion of any other free writing
prospectus relating to the offering containing material information
about the undersigned registrants or their securities provided by or
on behalf of the undersigned registrants; and
 (iv)
    
    any other communication that is an offer in
the offering made by the undersigned registrants to the purchaser.
 bona fide
    II-4




---



##### 



SIGNATURES
 
  
 WESTMORELAND COAL COMPANYBy:
    /s/ KEITH E. ALESSIName:
    Keith E. AlessiTitle:
    Chief Executive Officer and President 
 
 
  
 
 Signature
    
    Title
    
    Date/s/ Keith E. Alessi

Keith E. Alessi
    
    President and
Chief Executive Officer
(Principal Executive Officer)
    
    July  7, 2011/s/ Kevin A. Paprzycki

Kevin A. Paprzycki
    
    Chief Financial Officer and Treasurer
(Principal Financial Officer)
    
    July  7, 2011/s/ Russell H. Werner

Russell H. Werner
    
    Corporate Controller
(Principal Accounting Officer)
    
    July  7, 2011*

Thomas J. Coffey
    
    Director
    
    July  7, 2011*

Michael R. DAppolonia
    
    Director
    
    July  7, 2011*

Gail E. Hamilton
    
    Director
    
    July  7, 2011*

Richard M. Klingaman
    
    Director
    
    July  7, 2011*

Jan B. Packwood
    
    Director
    
    July  7, 2011*

Robert C. Scharp
    
    Director
    
    July  7, 2011
 
 
 *By:
    
    /s/ Keith E. Alessi

Keith E. Alessi as attorney-in-factpursuant to authority granted by powers of attorney, copies of which have been previously filed.
 
 II-5




---



##### 



WESTMORELAND PARTNERSBy:
    WESTMORELAND-NORTH CAROLINA POWER, LLC, General Partner*By:
    /s/ Donald KeislingName:
    Donald KeislingTitle:
    Chief Executive Officer

(Principal Executive Officer)By:
    WESTMORELAND ENERGY LLC, General PartnerBy:
    /s/ Donald KeislingName:
    Donald KeislingTitle:
    Chief Executive Officer

(Principal Executive Officer) 
 
  
 
 Signature
    
    Title
    
    DateWestmoreland-North Carolina Power, LLCBy:                 /s/ Douglas P. Kathol

                           Douglas P. Kathol
    
    Director
    
    July 7, 2011/s/ Kevin A. Paprzycki

Kevin A. Paprzycki
    
    Director
    
    July 7, 2011/s/ Jennifer S. Grafton

Jennifer S. Grafton
    
    Director
    
    July 7, 2011
 
 
 
 *
    
    Westmoreland Partners has no officers or directors. 
 II-6




---



##### 



WESTMORELAND ENERGY LLCBy:
    /s/ Donald KeislingName: Donald KeislingTitle: Chief Executive Officer
(Principal Executive Officer) 
 
 
  
 
 Signature
    
    Title
    
    Date/s/ Donald Keisling

Donald Keisling
    
    Chief Executive Officer
(Principal Executive Officer)
    
    July 7, 2011/s/ Russell Werner

Russell Werner
    
    Treasurer and Controller
(Principal Financial Officer and Principal Accounting Officer)
    
    July 7, 2011*

Jennifer Grafton
    
    Director
    
    July 7, 2011*

Douglas Kathol
    
    Director
    
    July 7, 2011*

Kevin Paprzycki
    
    Director
    
    July 7, 2011
 
 
 *By:
    
    /s/ Russell Werner

Russell Werner as attorney-in-factpursuant to authority granted by powers of attorney, copies of which have been previously filed.
 
 II-7




---



##### 



WESTMORELAND ROANOKE VALLEY, L.P.By:
    WEI-Roanoke Valley, Inc., General Partner*By:
    /s/ Donald KeislingName:
    Donald KeislingTitle:
    Chief Executive Officer
(Principal Executive Officer)By:
    Westmoreland Energy LLC, Limited PartnerBy:
    /s/ Donald KeislingName:
    Donald KeislingTitle:
    Chief Executive Officer
(Principal Executive Officer) 
 
  
 
 Signature
    
    Title
    
    DateWEI-Roanoke Valley Inc.By:                /s/ Douglas P. Kathol

                           Douglas P. Kathol
    
    Director
    
    July 7, 2011/s/ Kevin A. Paprzycki

Kevin A. Paprzycki
    
    Director
    
    July 7, 2011/s/ Jennifer S. Grafton

Jennifer S. Grafton
    
    Director
    
    July 7, 2011
 
 
 
 *
    
    Westmoreland Roanoke Valley, L. P.  has no officers or directors. 
 II-8




---



##### 



WEI  ROANOKE VALLEY, INC.By:
    /s/ Donald KeislingName:
    Donald KeislingTitle:
    Chief Executive Officer
(Principal Executive Officer) 
 
 
  
 
 Signature
    
    Title
    
    Date/s/ Donald Keisling

Donald Keisling
    
    Chief Executive Officer
(Principal Executive Officer)
    
    July 7, 2011/s/ Russell Werner

Russell Werner
    
    Treasurer and Controller
(Principal Financial Officer and Principal Accounting Officer)
    
    July 7, 2011*

Jennifer Grafton
    
    Director
    
    July 7, 2011*

Douglas Kathol
    
    Director
    
    July 7, 2011*

Kevin Paprzycki
    
    Director
    
    July 7, 2011
 
 
 *By:
    
    /s/ Russell Werner

Russell Werner as attorney-in-factpursuant to authority granted by powers of authority, copies of which have been previously filed.
 
 II-9




---



##### 



WESTMORELAND NORTH CAROLINA POWER LLCBy:
    /s/ Donald KeislingName:
    Donald KeislingTitle:
    Chief Executive Officer
(Principal Executive Officer) 
 
 
  
 
 Signature
    
    Title
    
    Date/s/ Donald Keisling

Donald Keisling
    
    Chief Executive Officer
(Principal Executive Officer)
    
    July 7, 2011/s/ Russell Werner

Russell Werner
    
    Treasurer and Controller
(Principal Financial Officer and Principal Accounting Officer)
    
    July 7, 2011*

Jennifer Grafton
    
    Director
    
    July 7, 2011*

Douglas Kathol
    
    Director
    
    July 7, 2011*

Kevin Paprzycki
    
    Director
    
    July 7, 2011
 
 
 *By:
    
    /s/ Russell Werner

Russell Werner as attorney-in-factpursuant to authority granted by powers of attorney, copies of which have been previously filed.
 
 II-10




---



##### 



WESTMORELAND RESOURCES, INC.By:
    /s/ Jerome GillespieName:
    Jerome GillespieTitle:
    President
(Principal Executive Officer) 
 
 
  
 
 Signature
    
    Title
    
    Date/s/ Jerome Gillespie

Jerome Gillespie
    
    President
(Principal Executive Officer)
    
    July 7, 2011/s/ Susan Mateel

Susan Mateel
    
    Controller and Treasurer
(Principal Financial Officer and Principal Accounting Officer)
    
    July 7, 2011*

Jennifer Grafton
    
    Director
    
    July 7, 2011*

Douglas Kathol
    
    Director
    
    July 7, 2011*

Kevin Paprzycki
    
    Director
    
    July 7, 2011
 
 
 *By:
    
    /s/ Jerome Gillespie

Jerome Gillespie as attorney-in-factpursuant to authority granted by powers of attorney, copies of which have been previously filed.
 
 II-11




---



##### 



WRI PARTNERS, INC.By:
    /s/ Kevin PaprzyckiName:
    Kevin PaprzyckiTitle:
    Chief Executive Officer
(Principal Executive Officer) 
 
 
  
 
 Signature
    
    Title
    
    Date/s/ Kevin Paprzycki

Kevin Paprzycki
    
    Chief Executive Officer
(Principal Executive Officer)
    
    July 7, 2011/s/ Susan Mateel

Susan Mateel
    
    Controller and Treasurer
(Principal Financial Officer and Principal Accounting Officer)
    
    July 7, 2011*

Jennifer Grafton
    
    Director
    
    July 7, 2011*

Douglas Kathol
    
    Director
    
    July 7, 2011*

Kevin Paprzycki
    
    Director
    
    July 7, 2011
 
 
 *By:
    
    /s/ Kevin Paprzycki

Kevin Paprzycki as attorney-in-factpursuant to authority granted by powers of attorney, copies of which have been previously filed.
 
 II-12




---



##### 



WESTMORELAND MINING SERVICES, INC.By:
    /s/ John OLaughlinName:
    John OLaughlinTitle:
    President
(Principal Executive Officer) 
 
 
  
 
 Signature
    
    Title
    
    Date/s/ John OLaughlin

John OLaughlin
    
    President
(Principal Executive Officer)
    
    July 7, 2011/s/ Russell Werner

Russell Werner
    
    Treasurer
(Principle Financial Officer and Principle Accounting Officer)
    
    July 7, 2011*

Jennifer Grafton
    
    Director
    
    July 7, 2011*

Douglas Kathol
    
    Director
    
    July 7, 2011*

Kevin Paprzycki
    
    Director
    
    July 7, 2011
 
 
 *By:
    
    /s/ Russell Werner

Russell Werner as attorney-in-factpursuant to authority granted by powers of attorney, copies of which have been previously filed.
 
 II-13




---



##### 



WESTMORELAND COAL SALES COMPANY, INC.By:
    /s/ Jonathan BarrName:
    Jonathan BarrTitle:
    President
(Principal Executive Officer) 
 
 
  
 
 Signature
    
    Title
    
    Date/s/ Jonathan Barr

Jonathan Barr
    
    President
(Principal Executive Officer)
    
    July 7, 2011/s/ Russell Werner

Russell Werner
    
    Controller
(Principle Financial Officer and Principle Accounting Officer)
    
    July 7, 2011*
    
    Director
    
    July 7, 2011Jennifer Grafton*
    
    Director
    
    July 7, 2011Douglas Kathol*
    
    Director
    
    July 7, 2011Kevin Paprzycki
 
 
 *By:
    
    /s/ Russell Werner

Russell Werner  as attorney-in-factpursuant to authority granted by powers of attorney, copies of which have been previously filed.
 
 II-14




---



##### 



WESTMORELAND POWER, INC.By:
    /s/ Douglas KatholName:
    Douglas KatholTitle:
    Chief Executive Officer
(Principal Executive Officer) 
 
 
  
 
 Signature
    
    Title
    
    Date/s/ Douglas Kathol

Douglas Kathol
    
    Chief Executive Officer
(Principal Executive Officer)
    
    July 7, 2011/s/ Russell Werner

Russell Werner
    
    Controller and Treasurer
(Principal Financial Officer and Principal Accounting Officer)
    
    July 7, 2011*

Jennifer Grafton
    
    Director
    
    July 7, 2011*

Douglas Kathol
    
    Director
    
    July 7, 2011*

Kevin Paprzycki
    
    Director
    
    July 7, 2011
 
 
 *By:
    
    /s/ Russell Werner

Russell Werner  as attorney-in-factpursuant to authority granted by powers of attorney, copies of which have been previously filed.
 
 II-15




---



##### 



WCC LAND HOLDING COMPANY, INC.By:
    /s/ Thomas DurhamName:
    Thomas DurhamTitle:
    President
(Principal Executive Officer) 
 
 
  
 
 Signature
    
    Title
    
    Date/s/ Thomas Durham

Thomas Durham
    
    President
(Principal Executive Officer)
    
    July 7, 2011/s/ Russell Werner

Russell Werner
    
    Treasurer
(Principle Financial Officer and Principle Accounting Officer)
    
    July 7, 2011*

Jennifer Grafton
    
    Director
    
    July 7, 2011*

Douglas Kathol
    
    Director
    
    July 7, 2011*

Kevin Paprzycki
    
    Director
    
    July 7, 2011
 
 
 *By:
    
    /s/ Russell Werner

Russell Werner  as attorney-in-factpursuant to authority granted by powers of attorney, copies of which have been previously filed.
 
 II-16




---



##### 



INDEX TO EXHIBITS
 
 ExhibitNumber
    
    Exhibit Description3.1*
    
    Restated Certificate of Incorporation of Westmoreland Coal Company3.2*
    
    Certificate of Correction to the Restated Certificate of Incorporation of Westmoreland Coal Company3.3*
    
    Certificate of Amendment to the Restated Certificate of Incorporation of Westmoreland Coal Company3.4*
    
    Certificate of Amendment to the Restated Certificate of Incorporation of Westmoreland Coal Company3.5*
    
    Amended and Restated Bylaws of Westmoreland Coal Company3.6*
    
    Amended and Restated Partnership Agreement of Westmoreland Partners3.7*
    
    Amendment No. 1 to Amended and Restated Partnership Agreement of Westmoreland Partners3.8*
    
    Amendment No. 2 to Amended and Restated Partnership Agreement of Westmoreland Partners3.9*
    
    Certificate of Formation of Westmoreland Energy LLC3.10*
    
    Operating Agreement of Westmoreland Energy LLC3.11*
    
    Certificate of Formation of Westmoreland  North Carolina Power LLC3.12*
    
    Operating Agreement of Westmoreland  North Carolina Power LLC3.13*
    
    Certificate of Incorporation of WEI  Roanoke Valley, Inc.3.14*
    
    Certificate of Amendment to Certificate of Incorporation of WEI  Roanoke Valley, Inc.3.15*
    
    Bylaws of WEI  Roanoke Valley, Inc.3.16*
    
    Certificate of Limited Partnership of Westmoreland Roanoke Valley LP3.17*
    
    Amendment to Certificate of Limited Partnership of Westmoreland Roanoke Valley LP3.18*
    
    Agreement of Limited Partnership of Westmoreland Roanoke Valley LP3.19*
    
    Certificate of Incorporation of Westmoreland Resources, Inc.3.20*
    
    Certificate of Amendment of Certificate of Incorporation of Westmoreland Resources, Inc.3.21*
    
    Certificate of Amendment of Certificate of Incorporation of Westmoreland Resources, Inc.3.22*
    
    Bylaws of Westmoreland Resources, Inc.3.23*
    
    Certificate of Incorporation of WRI Partners, Inc.3.24*
    
    Bylaws of WRI Partners, Inc.3.25*
    
    Certificate of Incorporation of Westmoreland Mining Services, Inc.3.26*
    
    Bylaws of Westmoreland Mining Services, Inc.3.27*
    
    Certificate of Incorporation of Westmoreland Coal Sales Company, Inc.3.28*
    
    Certificate of Amendment of Certificate of Incorporation of Westmoreland Coal Sales Company, Inc.3.29*
    
    Bylaws of Westmoreland Coal Sales Company, Inc.3.30*
    
    Certificate of Incorporation of WCC Land Holding Company, Inc.3.31*
    
    Bylaws of WCC Land Holding Company, Inc.3.32*
    
    Certificate of Incorporation of Westmoreland Power, Inc.3.33*
    
    Certificate of Amendment of Certificate of Incorporation of Westmoreland Power, Inc.3.34*
    
    Certificate of Amendment of Certificate of Incorporation of Westmoreland Power, Inc.3.35*
    
    Bylaws of Westmoreland Power, Inc.4.1*
    
    Indenture, dated as of 2/04/2011, by and between Westmoreland Coal Company, Westmoreland Partners
and Wells Fargo Bank, NA, as trustee and note collateral agent.4.2*
    
    Form of 10.75% Senior Notes due 2018 (included as Exhibit A in Exhibit 4.1).4.3*
    
    Registration Rights Agreement, dated 2/04/2011, among Westmoreland Coal Company and Westmoreland
Partners and Gleacher & Company Securities, Inc., as initial purchaser4.4*
    
    Pledge and Security Agreement dated as of 2/04/ 2011, by Westmoreland Coal Company and
Westmoreland Partners in favor of Wells Fargo Bank, NA, as note collateral agent5.1*
    
    Opinion of Davis Graham & Stubbs LLP as to the validity of the new notes.12.1
    
    Statement Regarding Computation of Ratios.21.1
    
    Subsidiaries of the Registrant.23.1
    
    Consent of Ernst & Young LLP23.2
    
    Consent of KPMG LLP23.3
    
    Consent of KPMG LLP23.4*
    
    Consent of Norwest Corporation23.5
    
    Consent of Davis Graham & Stubbs LLP (included in Exhibit 5.1)24.1
    
    Power of Attorney (included on signature page)25.1*
    
    Statement of Eligibility on Form T-1 of Wells Fargo Bank, National Association99.1
    
    Letter of Transmittal
 
 
 
 *
    
    Incorporated by reference to the Companys Form S-4 registration statement initially filed with the SEC on June 3, 2011. 
 II-17