UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

__________________________________________

FORM 10-Q

__________________________________________

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~June~~September 30, 2018

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File No. 001-11155

___________________________________________

(Exact name of registrant as specified in its charter)

__________________________________________



Delaware	23-1128670
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
9540 South Maroon Circle, Suite 300 Englewood, CO	80112
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (855) 922-6463

__________________________________________

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer	o	Accelerated filer	x
Non-accelerated filer	o	Smaller reporting company	o
		Emerging growth company	o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of ~~August~~October 230, 2018: 18,788,532 shares of common stock, $0.01 par value.

Table of Contents

TABLE OF CONTENTS

		Page
PART I - FINANCIAL INFORMATION		3
Item 1	Consolidated Financial Statements (Unaudited)	3
	Notes to Consolidated Financial Statements (Unaudited)	7
Item 2	Management's Discussion and Analysis of Financial Condition and Results of Operations	3336
Item 3	Quantitative and Qualitative Disclosures About Market Risk	4850
Item 4	Controls and Procedures	4850
PART II - OTHER INFORMATION		4951
Item 1	Legal Proceedings	4951
Item 1A	Risk Factors	4951
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	4954
Item 4	Mine Safety Disclosures	4954
Item 6	Exhibits	4955
SIGNATURES		5156
SCHEDULE 1		5257

Table of Contents

PART I - FINANCIAL INFORMATION

ITEM 1 - CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

WESTMORELAND COAL COMPANY AND SUBSIDIARIES

Consolidated Balance Sheets (Unaudited)

	June 30, 2018			December 31, 2017
	September 30, 2018			December 31, 2017
Assets	(In thousands)
Current assets:
Cash and cash equivalents	$	6393,~~187~~590		$	103,247
Receivables:
Trade	7888,~~504~~823			89,311
Other	1315,~~741~~114			17,697
Total receivables	92103,~~245~~937			107,008
Inventories	~~137~~109,~~240~~845			106,795
Unbilled revenues	5745,~~560~~345			63,874
Other current assets	2635,~~539~~154			11,517
Total current assets	~~376~~387,~~771~~871			392,441
Land, mineral rights, property, plant and equipment	1,~~239~~252,~~701~~628			1,665,740
Less accumulated depreciation, depletion and amortization	(~~657~~685,~~109~~166		)	(923,905		)
Net land, mineral rights, property, plant and equipment	~~582~~567,~~592~~462			741,835
Advanced coal royalties	12,~~930~~637			21,404
Restricted investments, reclamation deposits and bond collateral	~~205~~207,~~812~~461			200,194
Unbilled revenues, less current portion	~~218~~222,~~892~~447			225,245
Investment in joint venture	2425,~~716~~364			27,763
Other assets	3544,~~882~~615			55,036
Total Assets	$	1,~~457~~467,~~595~~857		$	1,663,918
Liabilities and Shareholders’ Deficit
Current liabilities:
Current installments of long-term debt	$	1,~~071~~085,~~533~~121		$	983,427
Accounts payable and accrued expenses:
Trade and other accrued liabilities	~~106~~119,~~125~~503			121,489
Interest payable	2641,~~042~~478			22,840
Production taxes	4045,~~915~~780			41,688
Postretirement medical benefits	14,734			14,734
Deferred revenue	62,~~120~~648			3,201
Asset retirement obligations	50,~~110~~958			48,429
Other current liabilities	89,~~164~~370			9,401
Total current liabilities	1,~~323~~369,~~743~~592			1,245,209
Long-term debt, less current installments	1512,~~416~~408			64,980
Postretirement medical benefits, less current portion	319,~~583~~626			317,407
Pension and SERP obligations, less current portion	4241,~~827~~395			43,585
Asset retirement obligations, less current portion	412,~~613~~461			426,038
Other liabilities	2935,~~598~~273			31,477
Total liabilities	2,~~143~~190,~~780~~755			2,128,696
Shareholders’ deficit:
Common stock of $0.01 par value: Authorized 30,000,000 shares; Issued and outstanding 18,788,532 shares at June 30, 2018 and 18,771,643 shares at December 31, 2017	188			188
Common stock of $0.01 par value: Authorized 30,000,000 shares; Issued and outstanding 18,788,532 shares at September 30, 2018 and 18,771,643 shares at December 31, 2017	188			188
Other paid-in capital	252,~~354~~338			250,494
Accumulated other comprehensive loss	(~~170~~165,~~289~~493		)	(158,699		)
Accumulated deficit	(~~757~~798,~~949~~491		)	(552,263		)
Total shareholders’ deficit	(~~675~~711,~~696~~458		)	(460,280		)
Noncontrolling interests in consolidated subsidiaries	(1011,~~489~~440		)	(4,498		)
Total deficit	(~~686~~722,~~185~~898		)	(464,778		)
Total Liabilities and Shareholders’ Deficit	$	1,~~457~~467,~~595~~857		$	1,663,918

See accompanying Notes to Consolidated Financial Statements (Unaudited).

Table of Contents

WESTMORELAND COAL COMPANY AND SUBSIDIARIES

Consolidated Statements of Operations (Unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
	(In thousands, except per share data)
Revenues	$	~~276~~328,~~312~~890		$	~~327~~365,~~314~~014		$	~~571~~900,~~989~~880		$	~~674~~1,~~326~~039,341
Cost, expenses and other:
Cost of sales (exclusive of depreciation, depletion and amortization, shown separately)	~~227~~270,~~066~~808			~~272~~280,~~317~~311			~~452~~723,~~226~~033			~~557~~837,~~337~~651
Depreciation, depletion and amortization	26,~~396~~693			3938,~~497~~066			5279,~~431~~124			76114,~~064~~131
Selling and administrative	3839,~~954~~801			2826,~~327~~398			73113,~~293~~095			5683,~~902~~300
Heritage health benefit expenses	~~914~~904			1,~~001~~044			12,~~802~~706			13,~~995~~036
(Gain) loss on sale/disposal of assets	(~~2,401~~969		)	~~133~~236			(23,~~397~~366		)	~~(34~~202		)
Loss on impairment	~~143,324~~—			—			143,324			—
Derivative loss (gain)	—			481			—			(1,904		)
Derivative gain	—			(4,667		)	—			(6,571		)
Loss (income) from equity affiliates	67			(1,400		)	(1,109		)	(2,919		)
Income from equity affiliates	(984		)	(1,355		)	(2,092		)	(4,274		)
Other operating income	(23		)	—			(23		)	—
Other operating loss (income)	5			—			(18		)	—
	434,297			340,356			719,547			687,441
	336,258			340,033			1,055,806			1,027,475
Operating loss	(157,985		)	(13,042		)	(147,558		)	(13,115		)
Operating (loss) income	(7,368		)	24,981			(154,926		)	11,866
Other (expense) income:
Interest expense	(3032,~~816~~769		)	(30,~~109~~017		)	(6093,~~899~~668		)	(5989,~~371~~388		)
Loss on extinguishment of debt	(1,838		)	—			(1,838		)	—
Gain (loss) on extinguishment of debt	17			—			(1,821		)	—
Interest income	1,~~174~~513			1,~~038~~012			23,~~217~~730			12,~~931~~942
Gain (loss) on foreign exchange	264			(1,137		)	1,575			(1,602		)
(Loss) gain on foreign exchange	(1,070		)	(1,733		)	505			(3,337		)
Other expense	(21,~~838~~519		)	(36,~~434~~974		)	(57,~~882~~401		)	(511,~~015~~990		)
	(34,054		)	(33,642		)	(64,827		)	(64,057		)
	(33,828		)	(37,712		)	(98,655		)	(101,773		)
Loss before income taxes	(~~192~~41,~~039~~196		)	(4612,~~684~~731		)	(~~212~~253,~~385~~581		)	(7789,~~172~~907		)
Income tax benefit	(712		)	(402		)	(747		)	(774		)
Income tax expense (benefit)	289			(256		)	(457		)	(1,030		)
Net loss	(~~191~~41,~~327~~485		)	(4612,~~282~~475		)	(~~211~~253,~~638~~124		)	(7688,~~398~~877		)
Less net loss attributable to noncontrolling interest	(~~5,260~~945		)	(~~138~~78		)	(56,~~982~~927		)	(~~637~~715		)
Net loss applicable to common shareholders	$	(~~186~~40,~~067~~540	)	$	(4612,~~144~~397	)	$	(~~205~~246,~~656~~197	)	$	(7588,~~761~~162	)
Net loss per share applicable to common shareholders:
Basic and diluted	$	(92.9116	)	$	(20.4766	)	$	(1113.0016	)	$	(4.0772	)
Weighted average number of common shares outstanding:
Basic and diluted	18,~~772~~776			18,~~700~~742			18,~~700~~704			18,~~636~~672

See accompanying Notes to Consolidated Financial Statements (Unaudited).

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WESTMORELAND COAL COMPANY AND SUBSIDIARIES

Consolidated Statements of Comprehensive Loss (Unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
	(In thousands)
Net loss	$	(~~191~~41,~~327~~485	)	$	(4612,~~282~~475	)	$	(~~211~~253,~~638~~124	)	$	(7688,~~398~~877	)
Other comprehensive income (loss)
Pension and other postretirement plans:
Amortization of accumulated actuarial gains and prior service costs, pension	~~119~~264			~~583~~588			~~239~~503			1,~~177~~765
Adjustments to accumulated actuarial gains and transition obligations, pension	~~148~~(141		)	~~165~~(112		)	(45186		)	~~301~~189
Amortization of accumulated actuarial gains, transition obligations, and prior service costs, postretirement medical benefits	~~969~~171			~~965~~964			12,~~938~~109			12,~~929~~893
Tax effect of other comprehensive income	(857		)	(1,247		)	(902		)	(2,205		)
Tax effect of other comprehensive loss (income)	144			(684		)	(758		)	(2,889		)
Foreign currency translation adjustment (losses) gains	(5,255		)	5,926			(12,544		)	8,029
Foreign currency translation adjustment gain (loss)	4,692			9,426			(7,852		)	17,455
Unrealized and realized (losses) gains on available-for-sale debt securities	(~~246~~334		)	~~386~~278			(~~276~~611		)	1,~~196~~474
Other comprehensive (loss) income, net of income taxes	(5,122		)	6,778			(11,590		)	10,427
Other comprehensive income (loss), net of income taxes	4,796			10,460			(6,795		)	20,887
Comprehensive loss	(~~196~~36,~~449~~689		)	(392,~~504~~015		)	(~~223~~259,~~228~~919		)	(6567,~~971~~990		)
Less: Comprehensive loss attributable to noncontrolling interest	(~~5,260~~945		)	(~~138~~78		)	(56,~~982~~927		)	(~~637~~715		)
Comprehensive loss attributable to common shareholders	$	(~~191~~35,~~189~~744	)	$	(391,~~366~~937	)	$	(~~217~~252,~~246~~992	)	$	(6567,~~334~~275	)

See accompanying Notes to Consolidated Financial Statements (Unaudited).

Table of Contents

WESTMORELAND COAL COMPANY AND SUBSIDIARIES

Consolidated Statements of Cash Flows (Unaudited)

	Six Months Ended June 30,
	Nine Months Ended September 30,
	2018			2017
	(In thousands)
Cash flows from operating activities:
Net loss	$	(~~211~~253,~~638~~124	)	$	(7688,~~398~~877	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation, depletion and amortization	5279,~~431~~124			76114,~~064~~131
Accretion of asset retirement obligation	1726,~~302~~002			2233,~~437~~796
Share-based compensation	1,~~860~~845			23,~~480~~846
Loss on impairment	143,324			—
Non-cash interest expense	413,~~782~~028			46,~~639~~981
Amortization of deferred financing costs	56,~~162~~459			58,~~193~~183
Non-cash loss on extinguishment of debt	1,420			—
Gain on derivative instruments	—			(16,~~904~~571		)
(Gain) loss on foreign exchange	(~~1,575~~505		)	13,~~602~~337
Income from equity affiliates	(12,~~109~~092		)	(24,~~919~~274		)
Distributions from equity affiliates	13,~~262~~642			34,~~403~~970
Deferred income tax benefit	(~~712~~416		)	(~~774~~998		)
Other	~~182~~(3,842		)	(13,~~752~~341		)
Changes in operating assets and liabilities:
Receivables	132,~~826~~193			11(1,~~360~~223		)
Inventories	(335,~~275~~890		)	719,~~706~~713
Accounts payable and accrued expenses	~~(14~~4,~~403~~124		)	(2026,~~919~~965		)
Interest payable	622,~~715~~151			~~532~~(7,165		)
Deferred revenue	~~2,908~~(577		)	(46,~~924~~085		)
Unbilled revenues	1221,~~234~~135			(1219,~~449~~959		)
Other assets and liabilities	(2019,~~602~~776		)	17,~~596~~977
Asset retirement obligations	(2029,~~176~~634		)	(2033,~~819~~004		)
Net cash (used in) provided by operating activities	(40,082		)	10,154
Net cash provided by operating activities	8,591			21,154
Cash flows from investing activities:
Additions to property, plant and equipment	(1125,~~773~~309		)	(1325,~~104~~365		)
Proceeds from sales of restricted investments	2329,~~623~~801			2133,~~605~~686
Purchases of restricted investments	(2329,~~252~~239		)	(2438,~~731~~594		)
Cash payments related to acquisitions and other	—			(3,580		)
Proceeds from sales of assets	23,~~087~~162			~~783~~774
Receipts from loan and lease receivables	—			50,488
Other	(~~399~~581		)	(~~969~~1,384		)
Net cash (used in) provided by investing activities	(922,~~714~~166		)	3016,~~492~~025
Cash flows from financing activities:
Borrowings from long-term debt, net of debt discount	86,700			—
Repayments of long-term debt	(6672,~~996~~766		)	(4464,~~324~~078		)
Borrowings on revolving lines of credit	122,400			~~113~~236,~~200~~100
Repayments on revolving lines of credit	(122,400		)	(~~113~~225,~~200~~560		)
Debt issuance costs and other refinancing costs	(2,664		)	—
Other	—			(~~364~~550		)
Net cash provided by (used in) financing activities	1711,~~040~~270			(4454,~~688~~088		)
Effect of exchange rate changes on cash	1,~~186~~997			~~463~~321
Net (decrease) increase in cash and cash equivalents, including restricted cash	(31,570		)	(3,579		)
Net decrease in cash and cash equivalents, including restricted cash	(308		)	(16,588		)
Cash and cash equivalents, including restricted cash, beginning of period	152,439			129,615
Cash and cash equivalents, including restricted cash, end of period	$	~~120~~152,~~869~~131		$	~~126~~113,~~036~~027
Supplemental disclosures of cash flow information:
Cash paid for interest	$	4153,~~978~~477		$	4881,~~931~~478
Non-cash transactions:
Accrued purchases of property and equipment	$	53,~~495~~223		$	13,~~009~~508
Capital leases and other financing sources	—616			~~480~~503
San Juan longwall financing	8,643			—
Cash and cash equivalents, including restricted cash, end of period
Cash and cash equivalents	$	6393,~~187~~590		$	5744,~~620~~143
Restricted cash in Restricted investments, reclamation deposits and bond collateral	5758,~~682~~541			68,~~416~~884
	$	~~120~~152,~~869~~131		$	~~126~~113,~~036~~027

See accompanying Notes to Consolidated Financial Statements (Unaudited).

Table of Contents

WESTMORELAND COAL COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1. BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements include accounts of Westmoreland Coal Company (the "Company" or "WCC"), and its subsidiaries and controlled entities including those of Westmoreland Resource Partners, LP ("WMLP"). All intercompany transactions and accounts have been eliminated in consolidation. The consolidated financial statements of the Company have been prepared in accordance with United States Generally Accepted Accounting Principles (“GAAP”) and require the use of management’s estimates. The financial information contained in this Quarterly Report on Form 10-Q ("Quarterly Report") is unaudited, but reflects all adjustments which, in the opinion of management, are necessary for a fair presentation of the financial information for the periods shown. Such adjustments are of a normal recurring nature. Certain prior period amounts have been reclassified to conform to current period presentation. The results of operations for the ~~six~~nine months ended ~~June~~September 30, 2018 are not necessarily indicative of results to be expected for the year ending December 31, 2018.

These unaudited quarterly consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017 ("2017 Form 10-K"). There were no changes to our significant accounting policies from those disclosed in the audited consolidated financial statements and notes to the consolidated financial statements thereto contained in our 2017 Form 10-K, except as described below in the section titled "Recently Issued Accounting Pronouncements."

~~Going~~Filing ~~Concern,~~Under ~~Liquidity~~Chapter ~~and~~11 ~~Management’s~~of ~~Plan~~the United States Bankruptcy Code

WeOn ~~have~~October ~~significant~~9, ~~cash~~2018 ~~requirements~~(the to“Petition ~~fund~~Date”), ~~our~~the ~~debt~~Company ~~obligations~~and certain of its subsidiaries, ~~ongoing~~including ~~heritage~~WMLP ~~health~~(collectively, ~~benefit~~the ~~costs~~“Debtors”), ~~pension~~filed ~~contributions~~voluntary ~~and~~petitions ~~corporate~~(the ~~overhead~~“Bankruptcy ~~expenses.~~Petitions”) ~~Our~~for ~~consolidated~~relief ~~cash~~under ~~and~~Chapter ~~cash~~11 ~~equivalents~~of ~~balance~~Title as11 of ~~June 30,~~the ~~2018~~United ~~was~~States ~~$63.2~~Code ~~million.~~(the ~~However,~~“Bankruptcy ~~this~~Code”) ~~balance~~in ~~includes~~the ~~cash~~United ~~and~~States ~~cash~~Bankruptcy ~~equivalents~~Court offor ~~$28.2~~the ~~million~~Southern atDistrict ~~WMLP~~of asTexas of(the ~~June 30,~~“Bankruptcy ~~2018~~Court”). ~~that~~The ~~are~~Company’s ~~restricted~~Canadian entities and ~~unavailable~~Westmoreland toRisk ~~WCC~~Management, Inc. ~~The~~("WRMI") ~~cash~~are ~~and~~excluded ~~cash~~from ~~equivalents~~the atBankruptcy ~~WMLP~~Petitions. isThe ~~governed~~Bankruptcy asCourt ~~described~~has inentered ~~Note~~an 7order ~~- Debt~~granting ~~And~~the ~~Lines~~Debtors Ofmotion ~~Credit.~~seeking ~~Our~~to ~~consolidated~~jointly ~~cash~~administer ~~and~~all ~~cash~~of ~~equivalents~~the ~~balance~~Debtors’ ~~includes~~Chapter ~~proceeds~~11 ofcases (the ~~initial~~“Chapter ~~draw~~11 onCases”) ~~our~~under ~~Bridge~~the ~~Loan,~~caption ~~which~~"In ~~pursuant~~re toWestmoreland ~~such~~Coal ~~transaction~~Company, weet ~~negotiated~~al." ~~Forbearances~~and ofcase ~~certain~~number of18-35672 ~~our~~(DJR). ~~debt~~The ~~covenants~~Debtors ~~and~~will ~~restrictions~~continue ~~from~~to ~~greater~~operate ~~than~~their ~~75%~~businesses ofas ~~our~~“debtors-in-possession” ~~lenders~~under ~~and~~the ~~note~~jurisdiction ~~holders~~of ~~under~~the ~~our~~Bankruptcy ~~Term~~Court ~~Loan~~ and ~~8.75%~~in ~~Notes,~~accordance ~~respectively,~~with asthe ~~described~~applicable ~~below~~provisions ~~and~~of ~~further~~the ~~described~~Bankruptcy inCode ~~Note~~and 7orders ~~- Debt~~of ~~And~~the ~~Lines~~Bankruptcy ~~Of Credit~~Court.

~~The~~For ~~impacts~~the duration of ~~declining~~the ~~industry~~Chapter ~~conditions~~11 ~~and~~Cases, ~~significant debt service requirements on~~ the Company’s ~~financial position, results of~~ operations and ~~cash~~its ~~flows gives rise to substantial doubt about our~~ ability to ~~pay~~develop ~~our~~and ~~obligations~~execute asits ~~they~~business ~~come~~plan ~~due.~~are Insubject ~~consideration~~to ofrisks ~~these~~and ~~challenges,~~uncertainties ~~the~~associated ~~Company has engaged advisers to assist~~ with the evaluation of strategic alternatives, which may include seeking a restructuring, selling certain assets, amendment or refinancing of existing debt through a private restructuring or reorganization under Chapter 11 ~~of the Bankruptcy Code~~Cases. ~~However, there can be no assurances that the Company will be able to successfully restructure its indebtedness, improve its financial position or complete any strategic transactions.~~ As a result of these ~~uncertainties~~risks and ~~the likelihood of a restructuring or reorganization~~uncertainties, ~~management has concluded that there is substantial doubt regarding~~ the Company’s ~~ability~~assets, ~~to continue as a going concern. As such~~liabilities, ~~the~~officers ~~accompanying consolidated financial statements (unaudited) are prepared on a going concern basis~~ and/or dodirectors ~~not~~could ~~include~~be ~~any~~significantly ~~adjustments~~different ~~that~~following ~~might~~the ~~result~~outcome ~~from~~of ~~uncertainty~~the ~~about~~Chapter ~~our~~11 ~~ability~~Cases, toand ~~continue~~the asdescription aof ~~going~~its ~~concern~~operations, ~~other~~properties ~~than~~and ~~the~~capital ~~reclassification~~plans ofincluded ~~certain~~in ~~long-term~~these ~~debt~~financial tostatements ~~current~~may ~~debt~~not ~~and~~accurately ~~the~~reflect ~~related~~its ~~debt~~operations, ~~issuance~~properties ~~costs~~and tocapital ~~current~~plans ~~liabilities~~following ~~and~~the ~~current~~Chapter ~~assets,~~11 ~~respectively~~Cases.

OnThe ~~May~~Debtors ~~21,~~have ~~2018,~~filed wea ~~entered~~series ~~into~~of ~~the~~first ~~Bridge~~day ~~Loan~~motions ~~agreement,~~with asthe ~~described~~Bankruptcy ~~further~~Court inthat ~~Note~~seek 7authorization ~~- Debt~~to ~~And~~continue ~~Lines~~to Ofconduct ~~Credit,~~their ~~which~~business ~~provided~~without aninterruption, ~~additional~~and ~~$110~~the ~~million~~Bankruptcy ~~term~~Court ~~loan,~~has ~~consisting~~entered oforders anapproving ~~initial~~these ~~funding~~motions ofon ~~$90 million and~~ an ~~undrawn~~interim ~~delayed~~basis. ~~draw~~The ~~funding~~Bankruptcy ofCourt uphearing to ~~$20~~consider ~~million.~~approval ~~Approximately $48.5 million~~ of ~~the~~these ~~initial~~motions ~~$90~~on ~~million~~a infinal ~~proceeds~~basis ofis ~~the~~currently ~~Bridge~~scheduled ~~Loan~~for ~~was~~November ~~used~~13, to2018. ~~extinguish~~These inmotions ~~full~~are ~~the~~designed ~~Company’s~~primarily ~~Revolver~~to ~~and~~minimize ~~San~~the ~~Juan~~effect ~~Loan.~~of ~~The~~bankruptcy ~~remaining~~on ~~proceeds~~the ~~will~~Debtors’ beoperations, ~~used~~customers toand ~~fund working capital~~employees. The ~~extinguishment~~Company ofexpects ~~the~~ordinary-course ~~San~~operations ~~Juan~~to ~~Loan~~continue ~~has~~substantially ~~eliminated~~uninterrupted ~~certain~~during ~~previous restrictions~~ and ~~now~~after ~~operating~~the ~~cash~~commencement ~~flows~~of ~~generated at~~ the ~~San~~Chapter ~~Juan~~11 ~~mine~~Cases. ~~are~~Employees ~~available~~should ~~for~~expect ~~use~~no bychange ~~the~~in ~~Company.~~their ~~The~~daily ~~Bridge~~responsibilities ~~Loan~~and ~~has~~to abe ~~maturity~~paid ~~date~~in ofthe ~~May~~ordinary ~~21,~~course ~~2019~~of business.

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

In connection with its Chapter 11 filing, on October 9, 2018, the Company executed a restructuring support agreement (the “RSA”), with members of an ad hoc group of noteholders and lenders (the “Ad Hoc Group”) under (i) the Company’s senior secured 8.75% notes due 2022 (such notes, collectively, the “Prepetition First Lien Notes”) governed by that certain Indenture, dated as of December 16, 2014 (as amended, restated, supplemented or otherwise modified from time to time, the “Prepetition First Lien Notes Indenture”), by and among the Company, the guarantors named therein, and U.S. Bank National Association, as trustee and collateral agent, (ii) the Company’s Credit Agreement, dated as of December 16, 2014 (as amended, restated, supplemented or otherwise modified from time to time, the “Prepetition First Lien Credit Agreement”, and the loan governed thereby, the “Prepetition First Lien Term Loan”), by and among the Company, as borrower, the guarantors and lenders named therein and Wilmington Savings Fund Society, FSB, as agent, and (iii) the Terms of Bridge Loans, attached as Exhibit L to the Prepetition First Lien Credit Agreement, dated as of May 21, 2018, among the Company, Westmoreland San Juan, LLC and

Table of Contents

WESTMORELAND COAL COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONT.)

~~Loan~~Prairie ~~Credit~~Mines ~~Agreement~~& orRoyalty ULC, as borrowers, the ~~related~~guarantors ~~security~~and ~~documents~~lenders ~~until~~named ~~the~~therein, ~~earlier~~and ofWilmington a)Savings ~~September~~Fund 30Society, ~~2018~~FSB, oras b)administrative aagent ~~termination~~and ~~event~~collateral agent (as ~~defined~~amended, inrestated, ~~such~~supplemented ~~agreement)~~or ~~("Term~~otherwise ~~Loan~~modified ~~Forbearance,"~~from ~~and~~time ~~together~~to ~~with~~time, the ~~Note~~“Prepetition ~~Forbearance,~~Bridge ~~the~~Loan ~~"Forbearances"~~Agreement”).

Pursuant to the ~~forbearing~~terms of ~~rights~~the RSA, and ~~remedies~~the ofSale Term ~~Loan~~Sheet ~~lenders~~and Plan Term Sheet attached as exhibits thereto, the Company and ~~8.75%~~the ~~Notes~~Ad ~~holders~~Hoc ~~upon~~Group have agreed on the ~~non-payment~~principal terms of ~~principal~~a ~~and~~Chapter ~~interest~~11 ~~when~~plan ~~due,~~of asreorganization ~~more~~pursuant ~~particularly~~to ~~described~~which inthe holders of the ~~Forbearances~~Prepetition ~~(defined~~First inLien ~~Note~~Notes 7and ~~- Debt~~Prepetition ~~And~~First ~~Lines~~Lien OfTerm ~~Credit),~~Loan onwill ~~June~~credit 29bid for and ~~July~~acquire 2,the ~~2018,~~Company’s ~~respectively~~core assets and, wein ~~elected~~the toevent ~~defer~~that aany ~~scheduled~~of ~~interest~~the ~~and~~Company’s ~~principal~~non-core ~~payment~~assets of(as ~~$8.0~~set ~~million~~forth on a schedule to the Sale Term ~~Loan~~Sheet) ~~and~~are not acquired by a ~~scheduled~~third ~~interest~~party, ~~payment~~to ofcredit ~~$15.3~~bid ~~million~~for onand ~~the~~acquire ~~8.75%~~such ~~Notes~~non-core assets. InOn ~~accordance~~October ~~with~~25, 2018, the ~~Forbearances,~~Debtors filed the ~~Supporting~~proposed ~~Note~~Chapter ~~Holders~~11 ~~and~~plan contemplated by the ~~Supporting~~RSA ~~Lenders~~with ~~may~~the ~~not~~Bankruptcy ~~deliver~~Court. ~~any~~No ~~notice~~date oris ~~instruction~~currently toset for the ~~respective~~Bankruptcy ~~trustee~~Court orto ~~administrative~~consider ~~agent~~confirmation toof ~~exercise~~the ~~any~~Chapter ~~rights~~11 orplan, ~~remedies~~but aspursuant ato ~~result~~the ofRSA, ~~our~~the ~~election~~Bankruptcy toCourt ~~defer~~order ~~these~~confirming ~~interest~~the ~~and~~Chapter ~~principal~~11 ~~payments~~Plan ~~during~~must ~~the~~be ~~forbearance~~entered ~~period~~on or before February 14, 2019.

The ~~WMLP~~RSA ~~Term~~contemplates ~~Loan~~the ~~matures~~approval ~~on December 31, 2018 and WMLP does not currently have liquidity or access to additional capital sufficient to pay off this debt~~ by ~~its maturity date. This condition gives rise to substantial doubt about WMLP’s ability to continue as a going concern for one year after~~ the ~~issuance~~Bankruptcy ofCourt its financial statements. Certain covenants in the WMLP Term Loan provide that an audit opinion on WMLP’s stand-alone consolidated financial statements that includes an explanatory paragraph referencing WMLP's conclusion that substantial doubt exists as to WMLP’s ability to continue as a going concern constitutes an event of ~~default. The audit opinion in WMLP’s Annual Report on Form 10-K for~~ the ~~year~~DIP ~~ended~~Credit ~~December~~Agreement ~~31,~~described ~~2017~~below ~~("WMLP's~~under ~~2017 Form 10-K") contained such an explanatory paragraph. On each of March 1, May 15, June 15, and July 31, 2018,~~ the ~~WMLP~~heading ~~Term Loan lenders temporarily waived the event of default arising as a result of such explanatory paragraph being included~~ “Debtor-in ~~the audit opinion in WMLP’s 2017 Form 10~~-K.Possession ~~The current waiver expires on the earlier occurrence of September 8, 2018 or upon the occurrence of any other event of default under the WMLP Term Loan~~Financing. Unless WMLP obtains further waivers for or otherwise cures this event of default, the lenders could accelerate the maturity date of the WMLP Term Loan after the waiver expires, making it immediately due and payable. Pursuant to the Forbearances, the Supporting Note Holders and Supporting Lenders have agreed to forbear the exercise of rights and remedies during the period of the Forbearances that may result from this event of default under the WMLP Term Loan. All outstanding principal balances and related debt issuance costs for the WMLP Term Loan, the Term Loan, the 8.75% Notes and the Bridge Loan are presented as current debt on our Consolidated Balance Sheets (unaudited). We do not currently have liquidity or access to additional capital sufficient to pay off this debt.”

AsThe ~~disclosed~~RSA inincludes ~~our~~an ~~Current~~agreed ~~Report~~timeline onfor ~~Form~~the ~~8-K~~Chapter ~~filed~~11 ~~April~~Cases 16that, ~~2018~~if met, wewould ~~received~~result ain ~~notification of deficiency from~~ the ~~Listing~~Company ~~Qualifications~~closing ~~Department~~on ofa ~~the~~qualified ~~Nasdaq~~bid ~~Stock~~and/or ~~Market~~confirming ~~(“Nasdaq”)~~a ~~based~~Chapter on11 ~~the~~plan ~~Company’s~~and ~~failure~~emerging tofrom ~~pay~~bankruptcy ~~certain~~on ~~fees~~or ~~required~~before byFebruary ~~Listing~~28, ~~Rule 5250(f)~~2019. ~~Nasdaq~~The ~~has~~proposed ~~informed~~terms ~~the Company that as a result~~ of ~~this deficiency,~~ the ~~Company~~DIP ~~will~~Credit beAgreement ~~delisted~~and ~~unless~~ the ~~Company~~proposed ~~appeals~~terms ~~Nasdaq’s~~of ~~decision.~~the Weplan ~~have~~of ~~not~~reorganization ~~appealed~~set ~~Nasdaq’s~~forth ~~decision, resulting~~ in the ~~suspension~~RSA ofare ~~trading~~to ofbe ~~our~~effectuated ~~common~~through ~~stock~~the ~~effective~~Chapter ~~April~~11 ~~25,~~Cases ~~2018,~~ and ~~formal~~remain ~~delisting~~subject ofto ~~our~~Bankruptcy ~~common~~Court ~~stock on June 6, 2018~~approval. ~~The Company’s common stock currently trades over-the-counter under the ticker symbol "WLBA."~~

~~Recently~~Debtor-in-Possession ~~Adopted Accounting Pronouncements~~Financing

In ~~March~~connection ~~2017,~~with the ~~Financial~~Chapter ~~Accounting~~11 ~~Standards~~Cases, ~~Board~~on ~~("FASB")~~October ~~issued~~9, ~~Accounting Standards Update ("ASU") 2017-07~~2018, ~~Compensation - Retirement Benefits (Topic 715): Improving~~ the ~~Presentation~~Debtors offiled ~~Net~~a ~~Periodic~~motion ~~Pension Cost and Net Periodic Postretirement Cost~~ (the “~~new~~DIP ~~benefit cost standard~~Motion”) seeking, ~~which~~among ~~requires~~other ~~separate~~things, ~~presentation~~interim ~~of service costs~~ and ~~all~~final ~~other~~approval ~~components~~ of ~~net benefit costs~~ debtor-in-possession ~~the~~financing ~~Consolidated~~on ~~Statements~~terms ofand ~~Operations.~~conditions ~~Under~~set ~~this~~forth ~~ASU,~~in ~~service~~a ~~cost~~proposed isDebtor-in-Possession ~~included~~Credit inAgreement (the ~~same~~“DIP ~~line~~Credit ~~item~~Agreement”) asamong ~~other~~the ~~compensation~~Company, ~~costs~~as ~~arising~~borrower, ~~from services rendered by employees during~~ the ~~period,~~financial ~~with~~institutions ~~all~~or other ~~components~~entities offrom ~~net~~time ~~benefit~~to ~~costs~~time inparties ~~the~~thereto, ~~Consolidated~~as ~~Statements~~lenders of(the ~~Operations~~“DIP ~~(unaudited~~Lenders”), ~~outside~~and ofWilmington ~~Operating~~Savings ~~loss.~~Fund ~~The~~Society, ~~amendments~~FSB, inas ~~this~~administrative ~~update~~agent ~~require~~and ~~retrospective~~collateral ~~application.~~agent ~~Prior to~~ (the ~~adoption~~“Agent”). ofThe ~~the~~initial ~~new~~lenders ~~benefit~~under ~~cost standard,~~ the ~~service~~DIP ~~cost~~Credit ~~portion~~Agreement ofare ~~net~~expected ~~periodic~~to ~~benefit~~be ~~cost~~one ~~from~~or ~~pension~~more ~~and postretirement medical benefit were presented in Cost~~ of ~~sales~~the ~~(exclusive~~lenders ofunder ~~depreciation,~~the ~~depletion~~Prepetition ~~and~~Bridge ~~amortization,~~Loan ~~shown~~Agreement ~~separately)~~or ~~and Selling and administrative while~~ the ~~remaining~~affiliates ~~components~~ of ~~net~~such ~~period~~lenders. ~~benefit~~The ~~cost~~DIP ~~were~~Credit ~~included~~Agreement, inif ~~Selling~~approved ~~and~~by ~~administrative~~the ~~and~~Court ~~Heritage~~as ~~health~~proposed, ~~benefit~~would ~~expenses.~~contain the following terms:

~~The~~• ~~Company~~a ~~adopted~~$110 ~~the~~million ~~new~~super-priority ~~benefit~~senior ~~cost standard effective January 1, 2018, at which point all of the service cost portion of net periodic benefit cost from pension and postretirement medical benefit are presented~~ debtor-in-possession ~~Cost~~term ofloan ~~sales~~ (~~exclusive of depreciation, depletion and amortization, shown separately) with the remaining components of net periodic benefit cost are presented in Other expense outside of Operating loss. Refer to~~ "~~Impacts~~DIP ~~to Previously Reported Results~~Loan" ~~below for the impact of adoption of the new benefit cost standard on our consolidated financial statements.~~);

In• ~~November~~following ~~2016~~approval by the Bankruptcy Court, proceeds of the ~~FASB~~DIP ~~issued~~Credit ~~ASU~~Agreement ~~No.~~could ~~2016-18,~~be ~~Statement~~used ofby ~~Cash~~the ~~Flows~~Debtors ~~(Topic~~to ~~230~~(i): ~~Restricted~~refinance ~~Cash~~approximately ~~(“new~~$90 ~~cash~~million ~~flows~~in ~~standard”)~~outstanding principal obligations, ~~which~~as ~~requires~~well ~~all~~as ~~entities~~any ~~that~~accrued ~~have~~but ~~restricted~~unpaid ~~cash~~interest, orfees, ~~restricted~~expenses ~~cash~~and ~~equivalents~~other tocosts, ~~explain~~under the ~~changes~~Prepetition ~~during~~Bridge ~~the~~Loan ~~period~~Agreement, in(ii) pay certain costs, fees and expenses related to the ~~total~~Chapter of11 ~~cash~~Cases, ~~cash~~(iii) ~~equivalents~~make payments in respect of certain “adequate protection” obligations and (iv) fund working capital needs, capital improvements and ~~amounts~~expenditures ~~generally~~of ~~described~~the asCompany ~~restricted~~and ~~cash~~its orsubsidiaries, ~~restricted~~in ~~cash~~all cases subject to the terms of the DIP Credit Agreement and applicable orders of the Bankruptcy Court;

•

the maturity date of the DIP Credit Agreement is expected to be the earlier to occur of: (i) May 21, 2019 (as such date may be extended under the DIP Credit Agreement), (ii) the date of termination in whole of all of the commitments thereunder, (iii) November 8, 2018, if the final order has not been entered into prior to the expiration of such date (or such later date, but no longer than 90 days following the entry of the interim order), (iv) the sale of all or substantially all of the assets of the Debtors pursuant to Section 363 or 1123 of the Bankruptcy Code, and (v) the date of substantial consummation of an acceptable reorganization plan pursuant to an order of the Bankruptcy Court;


•	interest would accrue at a rate per year equal to (i) with respect to Base Rate loans, the Base Rate plus 7.25% and (ii) with respect to LIBOR loans, the LIBOR Rate plus 8.25%;


•	the Company would be required to pay the following fees pursuant to the terms of the DIP Credit Agreement:


–	Agent Fees: Separately agreed upon between the Company and the Administrative Agent.


–	Exit Yield Enhancement Fee: Upon any repayment of any principal amount of the loans, a fee equal to 0.75% of such principal amount repaid.


–	Undrawn Commitment Fee: a fee equal to the undrawn amount under the DIP Credit Agreement multiplied by the LIBOR Rate plus 2.00%.


•	the obligations and liabilities of the Company under the DIP Credit Agreement would be secured by a valid, binding, continuing, enforceable, fully perfected first priority, senior priming lien on, and security interest in, all of the Collateral (as defined in the DIP Credit Agreement), including prepetition Collateral; and


•	the proposed debtor-in-possession financing would be subject to customary covenants, prepayment events, events of default and other provisions.

Table of Contents

WESTMORELAND COAL COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONT.)

~~equivalents~~On inOctober ~~the~~10, ~~Consolidated Statements of Cash Flows. As a result~~2018, ~~amounts~~the ~~generally~~Bankruptcy ~~described~~Court asentered ~~restricted~~an ~~cash~~order ~~and~~approving ~~restricted~~the ~~cash~~Debtors’ ~~equivalents~~entry ~~that~~into ~~are included in other financial statement captions of~~ the ~~Consolidated~~DIP ~~Balance~~Credit ~~Sheets~~Agreement ~~should~~on bean ~~included~~interim ~~with~~basis, ~~cash~~ and ~~cash~~the ~~equivalents~~Debtors ~~when~~promptly ~~reconciling~~closed the ~~beginning~~DIP ofCredit ~~period~~Agreement ~~and~~following ~~end of period total amounts shown on~~ the ~~Consolidated~~entry ~~Statements~~ of ~~Cash~~this ~~Flows~~order. The ~~ASU~~Bankruptcy ~~should~~Court behearing ~~adopted~~to ~~using~~consider aapproval ~~retrospective~~of ~~transition~~the ~~method~~DIP toCredit ~~each~~Agreement ~~period~~on ~~presented.~~a ~~The~~final ~~Company~~basis ~~adopted~~is ~~the~~currently ~~new~~scheduled ~~cash~~for ~~flows~~November ~~standard effective January 1~~13, 2018. ~~and~~The ~~applied~~foregoing ~~the~~description ~~ASU~~of ~~retrospectively to~~ the ~~periods~~DIP ~~presented~~Credit inAgreement ~~the~~does ~~Company's~~not ~~Consolidated~~purport ~~Statements~~to ofbe ~~Cash~~complete ~~Flows~~and ~~(unaudited).~~is ~~Refer~~qualified toin ~~“Impacts~~its toentirety ~~Previously~~by ~~Reported~~reference ~~Results”~~to ~~below for~~ the ~~impact~~final, ofexecuted ~~adoption~~DIP ofCredit ~~the~~Agreement, ~~new~~as ~~cash~~approved ~~flows~~by ~~standard~~the onBankruptcy ~~our consolidated financial statements~~Court.

InFor ~~May~~periods ~~2014,~~subsequent ~~the~~to ~~FASB~~filing ~~issued~~the ~~ASU~~Bankruptcy ~~2014-09~~Petitions, ~~Revenue~~the ~~from~~Company ~~Contracts~~will ~~with~~apply ~~Customers~~the ~~(Topic~~Financial ~~606)~~Accounting Standards Board (~~“new~~"FASB") ~~revenue~~Accounting ~~standard”~~Standards Codification ("ASC") 852, ~~which~~Reorganizations, ~~supersedes~~in ~~all~~preparing ~~previously~~its ~~existing~~consolidated ~~revenue~~financial ~~recognition guidance~~statements. ~~Under~~ASC ~~this~~852 ~~guidance,~~requires anthat ~~entity~~the ~~should~~financial ~~recognize~~statements ~~revenue~~distinguish ~~when~~transactions itand ~~transfers~~events ~~promised~~that ~~goods~~are ordirectly ~~services~~associated towith ~~customers~~the inreorganization anfrom ~~amount~~the ~~that~~ongoing ~~reflects~~operations of the ~~consideration~~business. toAccordingly, ~~which~~certain ~~the~~revenues, ~~entity~~expenses, ~~expects~~realized togains beand ~~entitled~~losses inand ~~exchange~~provisions for ~~those~~losses ~~goods~~that orare ~~services.~~realized ~~The~~or ~~standard~~incurred ~~allows~~in ~~for~~the ~~initial~~bankruptcy ~~application~~proceedings towill be ~~performed~~recorded ~~retrospectively~~in toa ~~each~~reorganization ~~period~~line ~~presented~~item oron asthe aconsolidated ~~cumulative~~statements ~~effect~~of ~~adjustment~~operations. asIn ofaddition, the ~~date~~pre-petition ofobligations ~~adoption.~~that ~~During~~may ~~2016,~~be impacted by the ~~FASB~~bankruptcy ~~clarified~~reorganization ~~the~~process ~~implementation~~will ~~guidance~~be classified on ~~principal~~the ~~versus~~consolidated ~~agent,~~balance ~~identifying~~sheet ~~performance~~as ~~obligations~~liabilities ~~and~~subject ~~licensing,~~to ~~practical~~compromise. ~~expedients~~These liabilities are reported at the amounts expected to be allowed by the Bankruptcy Court, ~~and~~which ~~made~~may ~~technical~~differ ~~corrections~~from onthe ~~various~~ultimate ~~topics~~settlement amounts.

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

AsWe ahave ~~result~~significant ofcash ~~the~~requirements ~~adoption~~to offund ~~the~~our ~~new~~debt ~~revenue~~obligations, ~~standard~~ongoing heritage health benefit costs, ~~the~~pension ~~timing~~contributions ofand ~~the~~corporate ~~recognition~~overhead expenses. Our consolidated cash and cash equivalents balance as of ~~revenue~~September 30, ~~related~~2018 towas ~~certain~~$93.6 ~~long-term~~million. ~~coal~~However, ~~supply~~this ~~agreements~~balance ~~that~~includes ~~contain~~cash ~~provisions~~and ~~for~~cash ~~future~~equivalents ~~payments~~of ~~from~~$25.8 ~~customers~~million at WMLP as of September 30, 2018 that are restricted and unavailable to ~~reimburse~~WCC. ~~our~~The ~~costs~~cash ~~incurred~~and ~~during~~cash ~~final~~equivalents ~~reclamation~~at WMLP is ~~accelerated~~governed as ~~compared~~described toin ~~the~~Note ~~recognition~~7 ~~pattern~~- Debt ~~under~~And ~~the~~Lines ~~previous~~Of ~~revenue standard~~Credit. ~~The~~Our ~~contract~~consolidated ~~asset~~cash ~~created~~and ~~from~~cash ~~the~~equivalents ~~accelerated~~balance ~~recognition~~includes proceeds of ~~revenue~~the ~~related~~initial todraw ~~customer~~on ~~payments~~our ~~related~~Bridge Loan, which pursuant to ~~final~~such ~~reclamation~~transaction iswe ~~classified~~negotiated asForbearances ~~Unbilled~~of ~~revenues~~certain of our debt covenants and ~~Unbilled~~restrictions ~~revenues,~~from ~~less~~greater ~~current~~than ~~portion~~75% inof ~~the~~our ~~Consolidated~~lenders ~~Balance~~and ~~Sheets~~note ~~(unaudited).~~holders ~~See~~under ~~Note~~our 2Term ~~- Revenue~~Loan ~~for~~and a8.75% ~~more~~Notes, ~~detailed~~respectively, ~~description~~as ofdescribed ~~accounting~~below ~~for~~and ~~customer~~further ~~payments~~described ~~related~~in toNote ~~final~~7 ~~reclamation~~- Debt And Lines Of Credit.

~~Additionally,~~The ~~upon~~significant ~~adoption~~risks ofand uncertainties related to the ~~new~~Company’s ~~revenue~~liquidity ~~standard~~and weChapter ~~revised~~11 Cases described above raise substantial doubt about the ~~recognition~~Company’s ~~period~~ability ofto ~~certain~~continue ~~deferred~~as ~~revenues~~a ~~from~~going ~~customer~~concern. ~~up-front~~As ~~payments~~such, the accompanying consolidated financial statements (unaudited) are prepared on a going concern basis and do not include any adjustments that ~~were~~might ~~previously~~result ~~being~~from ~~amortized~~uncertainty about our ability to ~~revenue~~continue ~~over~~as ~~the~~a ~~full~~going ~~term~~concern, other than the reclassification of ~~their~~certain ~~respective~~long-term ~~coal~~debt ~~supply~~to ~~agreements.~~current ~~Under~~debt and the ~~new~~related ~~revenue~~debt ~~standard,~~issuance wecosts ~~concluded~~to ~~that~~current ~~these~~liabilities ~~payments~~and ~~provided~~current assets, respectively. If the ~~customer~~Company ~~with~~cannot continue as a ~~material~~going ~~right~~concern, ~~for~~adjustments ato ~~period~~the ~~shorter~~carrying invalues ~~duration~~and ~~than~~classification of its assets and liabilities and the ~~full~~reported ~~term~~amounts of ~~the~~income ~~coal~~and ~~supply~~expenses ~~agreements~~could be required and could be material.

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

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

As of November 1, 2018, the Company was in default under certain of its debt instruments. The ~~adoption~~Company’s filing of the ~~new~~Chapter ~~benefit~~11 ~~cost~~Cases ~~standard,~~described ~~new~~above ~~cash~~constitutes ~~flows~~an ~~standard~~event of default that accelerated the Company’s obligations under its Term Loan and ~~new~~8.75% ~~revenue~~Notes. ~~standard~~Additionally, ~~resulted~~the infiling of the ~~following~~Chapter ~~adjustments~~11 toCases ~~previously~~constituted ~~reported~~a ~~results~~“termination event” under the Forbearances. Other events of default, ~~with~~including nocross-defaults, ~~change~~are topresent, including the ~~Consolidated~~receipt ~~Statement~~ of ~~Comprehensive~~a ~~Loss~~going ~~for~~concern explanatory paragraph from the ~~three~~Company’s ~~months~~independent ~~ended~~registered ~~June~~public 30accounting firm on the Company’s consolidated financial statements. Under the Bankruptcy Code, ~~2017:~~the creditors under these debt agreements are stayed from taking any action against the

Table of Contents

WESTMORELAND COAL COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONT.)

~~Consolidated~~Company ~~Balance~~as ~~Sheet~~a asresult of ~~December~~an ~~31,~~event ~~2017~~of default. See Note 7 - Debt And Lines Of Credit for additional details about the Company’s debt.

	As Reported			Adjustments for New Revenue Standard			Additional Reclassifications			As Adjusted
	(In thousands)
Assets
Current assets:
Cash and cash equivalents	$	103,247		$	—		$	—		$	103,247
Receivables:
Trade	103,611			—			(14,300		)	89,311
Other	17,697			—			—			17,697
Total receivables	121,308			—			(14,300		)	107,008
Inventories	106,795			—			—			106,795
Unbilled revenues	—			49,574			14,300			63,874
Other current assets	11,517			—			—			11,517
Total current assets	342,867			49,574			—			392,441
Land, mineral rights, property, plant and equipment	1,665,740			—			—			1,665,740
Less accumulated depreciation, depletion and amortization	923,905			—			—			923,905
Net land, mineral rights, property, plant and equipment	741,835			—			—			741,835
Advanced coal royalties	21,404			—			—			21,404
Restricted investments, reclamation deposits and bond collateral	200,194			—			—			200,194
Unbilled revenues, less current portion	—			225,245			—			225,245
Investment in joint venture	27,763			—			—			27,763
Other assets	55,036			—			—			55,036
Total Assets	$	1,389,099		$	274,819		$	—		$	1,663,918
Liabilities and Shareholders’ Deficit
Current liabilities:
Current installments of long-term debt	$	983,427		$	—		$	—		$	983,427
Accounts payable and accrued expenses:
Trade and other accrued liabilities	121,489			—			—			121,489
Interest payable	22,840			—			—			22,840
Production taxes	41,688			—			—			41,688
Postretirement medical benefits	14,734			—			—			14,734
Deferred revenue	5,068			(1,867		)	—			3,201
Asset retirement obligations	48,429			—			—			48,429
Other current liabilities	9,401			—			—			9,401
Total current liabilities	1,247,076			(1,867		)	—			1,245,209
Long-term debt, less current installments	64,980			—			—			64,980
Postretirement medical benefits, less current portion	317,407			—			—			317,407
Pension and SERP obligations, less current portion	43,585			—			—			43,585
Deferred revenue, less current portion	1,984			(1,984		)	—			—
Asset retirement obligations, less current portion	426,038			—			—			426,038
Other liabilities	31,477			—			—			31,477
Total liabilities	2,132,547			(3,851		)	—			2,128,696
Shareholders’ deficit:
Common stock of $0.01 par value: Authorized 30,000,000 shares; Issued and outstanding 18,771,643 shares at December 31, 2017	188			—			—			188
Other paid-in capital	250,494			—			—			250,494
Accumulated other comprehensive loss	(160,525		)	1,826			—			(158,699		)
Accumulated deficit	(829,107		)	276,844			—			(552,263		)
Total shareholders’ deficit	(738,950		)	278,670			—			(460,280		)
Noncontrolling interests in consolidated subsidiaries	(4,498		)	—			—			(4,498		)
Total deficit	(743,448		)	278,670			—			(464,778		)
Total Liabilities and Shareholders' Deficit	$	1,389,099		$	274,819		$	—		$	1,663,918

As disclosed in our Current Report on Form 8-K filed April 16, 2018, we received a notification of deficiency from the Listing Qualifications Department of the Nasdaq Stock Market (“Nasdaq”) based on the Company’s failure to pay certain fees required by Listing Rule 5250(f). Nasdaq has informed the Company that as a result of this deficiency, the Company will be delisted unless the Company appeals Nasdaq’s decision. We have not appealed Nasdaq’s decision, resulting in the suspension of trading of our common stock effective April 25, 2018, and formal delisting of our common stock on June 6, 2018. The Company’s common stock currently trades over-the-counter under the ticker symbol "WLBA."

Recently Adopted Accounting Pronouncements

In March 2017, the FASB issued Accounting Standards Update ("ASU") 2017-07, Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Cost (“new benefit cost standard”), which requires separate presentation of service costs and all other components of net benefit costs in the Consolidated Statements of Operations. Under this ASU, service cost is included in the same line item as other compensation costs arising from services rendered by employees during the period, with all other components of net benefit costs in the Consolidated Statements of Operations (unaudited) outside of Operating (loss) income. The amendments in this update require retrospective application. Prior to the adoption of the new benefit cost standard, the service cost portion of net periodic benefit cost from pension and postretirement medical benefit were presented in Cost of sales (exclusive of depreciation, depletion and amortization, shown separately) and Selling and administrative while the remaining components of net period benefit cost were included in Selling and administrative and Heritage health benefit expenses.

The Company adopted the new benefit cost standard effective January 1, 2018, at which point all of the service cost portion of net periodic benefit cost from pension and postretirement medical benefit are presented in Cost of sales (exclusive of depreciation, depletion and amortization, shown separately) with the remaining components of net periodic benefit cost are presented in Other expense outside of Operating (loss) income. Refer to "Impacts to Previously Reported Results" below for the impact of adoption of the new benefit cost standard on our consolidated financial statements.

In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (“new cash flows standard”), which requires all entities that have restricted cash or restricted cash equivalents to explain the changes during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents in the Consolidated Statements of Cash Flows. As a result, amounts generally described as restricted cash and restricted cash equivalents that are included in other financial statement captions of the Consolidated Balance Sheets should be included with cash and cash equivalents when reconciling the beginning of period and end of period total amounts shown on the Consolidated Statements of Cash Flows. The ASU should be adopted using a retrospective transition method to each period presented. The Company adopted the new cash flows standard effective January 1, 2018 and applied the ASU retrospectively to the periods presented in the Company's Consolidated Statements of Cash Flows (unaudited). Refer to “Impacts to Previously Reported Results” below for the impact of adoption of the new cash flows standard on our consolidated financial statements.

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

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

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

Table of Contents

WESTMORELAND COAL COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONT.)

Unbilled revenues and Unbilled revenues, less current portion in the Consolidated ~~Statement~~Balance ofSheets ~~Operations~~(unaudited). See Note 2 - Revenue for ~~the~~a ~~three~~more ~~months~~detailed ~~ended~~description ~~June~~of ~~30,~~accounting ~~2017~~for customer payments related to final reclamation.

	As Reported			Adjustments for New Revenue Standard		Adjustments for New Net Periodic Benefit Cost Standard			As Adjusted
	(In thousands, except per share data)
Revenues	$	323,025		$	4,289	$	—		$	327,314
Cost, expenses and other:
Cost of sales (exclusive of depreciation, depletion and amortization, shown separately)	271,909			—		408			272,317
Depreciation, depletion and amortization	39,497			—		—			39,497
Selling and administrative	30,166			—		(1,839		)	28,327
Heritage health benefit expenses	3,306			—		(2,305		)	1,001
Loss on sale/disposal of assets	133			—		—			133
Derivative loss	481			—		—			481
Income from equity affiliates	(1,400		)	—		—			(1,400		)
	344,092			—		(3,736		)	340,356
Operating loss	(21,067		)	4,289		3,736			(13,042		)
Other (expense) income:
Interest expense	(30,109		)	—		—			(30,109		)
Interest income	1,038			—		—			1,038
Loss on foreign exchange	(1,185		)	48		—			(1,137		)
Other income (expense)	302			—		(3,736		)	(3,434		)
	(29,954		)	48		(3,736		)	(33,642		)
Loss before income taxes	(51,021		)	4,337		—			(46,684		)
Income tax benefit	(501		)	99		—			(402		)
Net loss	(50,520		)	4,238		—			(46,282		)
Less net loss attributable to noncontrolling interest	(138		)	—		—			(138		)
Net loss applicable to common shareholders	$	(50,382	)	$	4,238	$	—		$	(46,144	)
Net loss per share applicable to common shareholders:
Basic and diluted	$	(2.69	)	$	0.22	$	—		$	(2.47	)
Weighted average number of common shares outstanding:
Basic and diluted	18,700			—		—			18,700

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

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

Impacts to Previously Reported Results

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

Table of Contents

WESTMORELAND COAL COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONT.)

Consolidated ~~Statement~~Balance ofSheet ~~Operations~~as ~~for~~of ~~the~~December ~~six months ended June 30~~31, 2017

	As Reported			Adjustments for New Revenue Standard			~~Adjustments~~Additional ~~for New Net Periodic Benefit Cost Standard~~Reclassifications			As Adjusted
	(In thousands, except per share data)
	(In thousands)
Revenues	$	662,762		$	11,564		$	—		$	674,326
Assets
Cost, expenses and other:
Current assets:
Cost of sales (exclusive of depreciation, depletion and amortization, shown separately)	556,513			—			824			557,337
Cash and cash equivalents	$	103,247		$	—		$	—		$	103,247
Depreciation, depletion and amortization	76,064			—			—			76,064
Receivables:
Selling and administrative	60,592			—			(3,690		)	56,902
Trade	103,611			—			(14,300		)	89,311
Heritage health benefit expenses	6,604			—			(4,609		)	1,995
Other	17,697			—			—			17,697
Gain on sale/disposal of assets	(34		)	—			—			(34		)
Total receivables	121,308			—			(14,300		)	107,008
Derivative gain	(1,904		)	—			—			(1,904		)
Inventories	106,795			—			—			106,795
Income from equity affiliates	(2,919		)	—			—			(2,919		)
Unbilled revenues	—			49,574			14,300			63,874
	694,916			—			(7,475		)	687,441
Other current assets	11,517			—			—			11,517
Operating loss	(32,154		)	11,564			7,475			(13,115		)
Total current assets	342,867			49,574			—			392,441
Other (expense) income:
Land, mineral rights, property, plant and equipment	1,665,740			—			—			1,665,740
Interest expense	(59,371		)	—			—			(59,371		)
Less accumulated depreciation, depletion and amortization	(923,905		)	—			—			(923,905		)
Interest income	1,931			—			—			1,931
Net land, mineral rights, property, plant and equipment	741,835			—			—			741,835
Loss on foreign exchange	(1,652		)	50			—			(1,602		)
Advanced coal royalties	21,404			—			—			21,404
Other income (expense)	2,460			—			(7,475		)	(5,015		)
Restricted investments, reclamation deposits and bond collateral	200,194			—			—			200,194
	(56,632		)	50			(7,475		)	(64,057		)
Unbilled revenues, less current portion	—			225,245			—			225,245
Loss before income taxes	(88,786		)	11,614			—			(77,172		)
Investment in joint venture	27,763			—			—			27,763
Income tax benefit	(965		)	191			—			(774		)
Other assets	55,036			—			—			55,036
Net loss	(87,821		)	11,423			—			(76,398		)
Total Assets	$	1,389,099		$	274,819		$	—		$	1,663,918
Less net loss attributable to noncontrolling interest	(637		)	—			—			(637		)
Liabilities and Shareholders’ Deficit
Net loss applicable to common shareholders	$	(87,184	)	$	11,423		$	—		$	(75,761	)
Current liabilities:
Net loss per share applicable to common shareholders:
Current installments of long-term debt	$	983,427		$	—		$	—		$	983,427
Basic and diluted	$	(4.68	)	$	0.61		$	—		$	(4.07	)
Accounts payable and accrued expenses:
Weighted average number of common shares outstanding:
Trade and other accrued liabilities	121,489			—			—			121,489
Basic and diluted	18,636			—			—			18,636
Interest payable	22,840			—			—			22,840
Production taxes	41,688			—			—			41,688
Postretirement medical benefits	14,734			—			—			14,734
Deferred revenue	5,068			(1,867		)	—			3,201
Asset retirement obligations	48,429			—			—			48,429
Other current liabilities	9,401			—			—			9,401
Total current liabilities	1,247,076			(1,867		)	—			1,245,209
Long-term debt, less current installments	64,980			—			—			64,980
Postretirement medical benefits, less current portion	317,407			—			—			317,407
Pension and SERP obligations, less current portion	43,585			—			—			43,585
Deferred revenue, less current portion	1,984			(1,984		)	—			—
Asset retirement obligations, less current portion	426,038			—			—			426,038
Other liabilities	31,477			—			—			31,477
Total liabilities	2,132,547			(3,851		)	—			2,128,696
Shareholders’ deficit:
Common stock of $0.01 par value: Authorized 30,000,000 shares; Issued and outstanding 18,771,643 shares at December 31, 2017	188			—			—			188
Other paid-in capital	250,494			—			—			250,494
Accumulated other comprehensive loss	(160,525		)	1,826			—			(158,699		)
Accumulated deficit	(829,107		)	276,844			—			(552,263		)
Total shareholders’ deficit	(738,950		)	278,670			—			(460,280		)
Noncontrolling interests in consolidated subsidiaries	(4,498		)	—			—			(4,498		)
Total deficit	(743,448		)	278,670			—			(464,778		)
Total Liabilities and Shareholders' Deficit	$	1,389,099		$	274,819		$	—		$	1,663,918

Table of Contents

WESTMORELAND COAL COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONT.)

Consolidated Statement of ~~Comprehensive~~Operations ~~Loss~~ for the ~~six~~three months ended ~~June~~September 30, 2017

	As Reported			Adjustments for New Revenue Standard			AsAdjustments ~~Adjusted~~for New Net Periodic Benefit Cost Standard			As Adjusted
	(In thousands)
	(In thousands, except per share data)
Net loss	$	(87,821	)	$	11,423		$	(76,398	)
Revenues	$	358,011		$	7,003		$	—		$	365,014
Other comprehensive income (loss)
Cost, expenses and other:
Pension and other postretirement plans:
Cost of sales (exclusive of depreciation, depletion and amortization, shown separately)	280,012			—			299			280,311
Amortization of accumulated actuarial gains and prior service costs, pension	1,177			—			1,177
Depreciation, depletion and amortization	38,066			—			—			38,066
Adjustments to accumulated actuarial gains and transition obligations, pension	301			—			301
Selling and administrative	28,115			—			(1,717		)	26,398
Amortization of accumulated actuarial gains, transition obligations, and prior service costs, postretirement medical benefits	1,929			—			1,929
Heritage health benefit expenses	3,349			—			(2,305		)	1,044
Tax effect of other comprehensive income	(1,819		)	(386		)	(2,205		)
Loss on sale/disposal of assets	236			—			—			236
Foreign currency translation adjustment gains	8,029			—			8,029
Derivative gain	(4,667		)	—			—			(4,667		)
Unrealized and realized gains on available-for-sale debt securities	1,196			—			1,196
Income from equity affiliates	(1,355		)	—			—			(1,355		)
Other comprehensive income, net of income taxes	10,813			(386		)	10,427
	343,756			—			(3,723		)	340,033
Comprehensive loss	(77,008		)	11,037			(65,971		)
Operating income	14,255			7,003			3,723			24,981
Less: Comprehensive loss attributable to noncontrolling interest	(637		)	—			(637		)
Other (expense) income:
Comprehensive loss attributable to common shareholders	$	(76,371	)	$	11,037		$	(65,334	)
Interest expense	(30,017		)	—			—			(30,017		)
Interest income	1,012			—			—			1,012
Loss on foreign exchange	(1,739		)	6			—			(1,733		)
Other expense	(3,251		)	—			(3,723		)	(6,974		)
	(33,995		)	6			(3,723		)	(37,712		)
Loss before income taxes	(19,740		)	7,009			—			(12,731		)
Income tax benefit	(440		)	184			—			(256		)
Net loss	(19,300		)	6,825			—			(12,475		)
Less net loss attributable to noncontrolling interest	(78		)	—			—			(78		)
Net loss applicable to common shareholders	$	(19,222	)	$	6,825		$	—		$	(12,397	)
Net loss per share applicable to common shareholders:
Basic and diluted	$	(1.03	)	$	0.37		$	—		$	(0.66	)
Weighted average number of common shares outstanding:
Basic and diluted	18,742			—			—			18,742

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WESTMORELAND COAL COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONT.)

Consolidated Statement of ~~Cash~~Operations ~~Flows~~ for the ~~six~~nine months ended ~~June~~September 30, 2017

	As Reported			Adjustments for New Revenue Standard			Adjustments for New ~~Cash~~Net ~~Flows~~Periodic Benefit Cost Standard			As Adjusted
	(In thousands)
	(In thousands, except per share data)
Cash flows from operating activities:
Revenues	$	1,020,772		$	18,569		$	—		$	1,039,341
Net loss	$	(87,821	)	$	11,423		$	—		$	(76,398	)
Cost, expenses and other:
Adjustments to reconcile net loss to net cash used in operating activities:
Cost of sales (exclusive of depreciation, depletion and amortization, shown separately)	836,525			—			1,126			837,651
Depreciation, depletion and amortization	76114,~~064~~131			—			—			76114,~~064~~131
Accretion of asset retirement obligation	22,437			—			—			22,437
Selling and administrative	88,706			—			(5,406		)	83,300
Share-based compensation	2,480			—			—			2,480
Heritage health benefit expenses	9,953			—			(6,917		)	3,036
Non-cash interest expense	4,639			—			—			4,639
Loss on sale/disposal of assets	202			—			—			202
Amortization of deferred financing costs	5,193			—			—			5,193
Derivative gain	(6,571		)	—			—			(6,571		)
Gain on derivative instruments	(1,904		)	—			—			(1,904		)
Income from equity affiliates	(4,274		)	—			—			(4,274		)
Loss on foreign exchange	1,652			(50		)	—			1,602
	1,038,672			—			(11,197		)	1,027,475
Income from equity affiliates	(2,919		)	—			—			(2,919		)
Operating (loss) income	(17,900		)	18,569			11,197			11,866
Distributions from equity affiliates	3,403			—			—			3,403
Other (expense) income:
Deferred income tax benefit	(965		)	191			—			(774		)
Interest expense	(89,388		)	—			—			(89,388		)
Other	(1,752		)	—			—			(1,752		)
Interest income	2,942			—			—			2,942
Changes in operating assets and liabilities:
Loss on foreign exchange	(3,391		)	54			—			(3,337		)
Receivables	11,360			—			—			11,360
Other expense	(793		)	—			(11,197		)	(11,990		)
Inventories	7,706			—			—			7,706
	(90,630		)	54			(11,197		)	(101,773		)
Accounts payable and accrued expenses	(20,919		)	—			—			(20,919		)
Loss before income taxes	(108,530		)	18,623			—			(89,907		)
Interest payable	532			—			—			532
Income tax benefit	(1,406		)	376			—			(1,030		)
Deferred revenue	(5,809		)	885			—			(4,924		)
Net loss	(107,124		)	18,247			—			(88,877		)
Unbilled revenues	—			(12,449		)	—			(12,449		)
Less net loss attributable to noncontrolling interest	(715		)	—			—			(715		)
Other assets and liabilities	17,596			—			—			17,596
Net loss applicable to common shareholders	$	(106,409	)	$	18,247		$	—		$	(88,162	)
Asset retirement obligations	(20,819		)	—			—			(20,819		)
Net loss per share applicable to common shareholders:
Net cash used in operating activities	10,154			—			—			10,154
Basic and diluted	$	(5.70	)	$	0.98		$	—		$	(4.72	)
Cash flows from investing activities:
Weighted average number of common shares outstanding:
Additions to property, plant and equipment	(13,104		)	—			—			(13,104		)
Basic and diluted	18,672			—			—			18,672
Proceeds from sales of restricted investments	21,605			—			—			21,605
Purchases of restricted investments	(23,614		)	—			(1,117		)	(24,731		)
Cash payments related to acquisitions and other	(3,580		)	—			—			(3,580		)
Proceeds from sales of assets	783			—			—			783
Receipts from loan and lease receivables	50,488			—			—			50,488
Other	(969		)	—			—			(969		)
Net cash provided by investing activities	31,609			—			(1,117		)	30,492
Cash flows from financing activities:
Repayments of long-term debt	(44,324		)	—			—			(44,324		)
Borrowings on revolving lines of credit	113,200			—			—			113,200
Repayments on revolving lines of credit	(113,200		)	—			—			(113,200		)
Other	(364		)	—			—			(364		)
Net cash used in financing activities	(44,688		)	—			—			(44,688		)
Effect of exchange rate changes on cash	463			—			—			463
Net decrease in cash and cash equivalents, including restricted cash	(2,462		)	—			(1,117		)	(3,579		)
Cash and cash equivalents, including restricted cash, beginning of period	60,082			—			69,533			129,615
Cash and cash equivalents, including restricted cash, end of period	$	57,620		$	—		$	68,416		$	126,036
Supplemental disclosures of cash flow information:
Cash paid for interest	$	48,931		$	—		$	—		$	48,931
Non-cash transactions:
Accrued purchases of property and equipment	$	1,009		$	—		$	—		$	1,009
Capital leases and other financing sources	480			—			—			480

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WESTMORELAND COAL COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONT.)

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



	As Reported			Adjustments for New Revenue Standard			As Adjusted
	(In thousands)
Net loss	$	(107,124	)	$	18,247		$	(88,877	)
Other comprehensive income (loss)
Pension and other postretirement plans:
Amortization of accumulated actuarial gains and prior service costs, pension	1,765			—			1,765
Adjustments to accumulated actuarial gains and transition obligations, pension	189			—			189
Amortization of accumulated actuarial gains, transition obligations, and prior service costs, postretirement medical benefits	2,893			—			2,893
Tax effect of other comprehensive income	(2,503		)	(386		)	(2,889		)
Foreign currency translation adjustment gains	17,455			—			17,455
Unrealized and realized gains on available-for-sale debt securities	1,474			—			1,474
Other comprehensive income, net of income taxes	21,273			(386		)	20,887
Comprehensive loss	(85,851		)	17,861			(67,990		)
Less: Comprehensive loss attributable to noncontrolling interest	(715		)	—			(715		)
Comprehensive loss attributable to common shareholders	$	(85,136	)	$	17,861		$	(67,275	)

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WESTMORELAND COAL COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONT.)

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



	As Reported			Adjustments for New Revenue Standard			Adjustments for New Cash Flows Standard			As Adjusted
	(In thousands)
Cash flows from operating activities:
Net loss	$	(107,124	)	$	18,247		$	—		$	(88,877	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation, depletion and amortization	114,131			—			—			114,131
Accretion of asset retirement obligation	33,796			—			—			33,796
Share-based compensation	3,846			—			—			3,846
Non-cash interest expense	6,981			—			—			6,981
Amortization of deferred financing costs	8,183			—			—			8,183
Gain on derivative instruments	(6,571		)	—			—			(6,571		)
Loss on foreign exchange	3,391			(54		)	—			3,337
Income from equity affiliates	(4,274		)	—			—			(4,274		)
Distributions from equity affiliates	4,970			—			—			4,970
Deferred income tax benefit	(1,374		)	376			—			(998		)
Other	3,341			—			—			3,341
Changes in operating assets and liabilities:
Receivables	(1,223		)	—			—			(1,223		)
Inventories	19,713			—			—			19,713
Accounts payable and accrued expenses	(26,965		)	—			—			(26,965		)
Interest payable	(7,165		)	—			—			(7,165		)
Deferred revenue	(7,475		)	1,390			—			(6,085		)
Unbilled revenues	—			(19,959		)	—			(19,959		)
Other assets and liabilities	17,977			—			—			17,977
Asset retirement obligations	(33,004		)	—			—			(33,004		)
Net cash provided by operating activities	21,154			—			—			21,154
Cash flows from investing activities:
Additions to property, plant and equipment	(25,365		)	—			—			(25,365		)
Proceeds from sales of restricted investments	33,686			—			—			33,686
Purchases of restricted investments	(37,945		)	—			(649		)	(38,594		)
Cash payments related to acquisitions and other	(3,580		)	—			—			(3,580		)
Proceeds from sales of assets	774			—			—			774
Receipts from loan and lease receivables	50,488			—			—			50,488
Other	(1,384		)	—			—			(1,384		)
Net cash provided by investing activities	16,674			—			(649		)	16,025
Cash flows from financing activities:
Repayments of long-term debt	(64,078		)	—			—			(64,078		)
Borrowings on revolving lines of credit	236,100			—			—			236,100
Repayments on revolving lines of credit	(225,560		)	—			—			(225,560		)
Other	(550		)	—			—			(550		)
Net cash used in financing activities	(54,088		)	—			—			(54,088		)
Effect of exchange rate changes on cash	321			—			—			321
Net decrease in cash and cash equivalents, including restricted cash	(15,939		)	—			(649		)	(16,588		)
Cash and cash equivalents, including restricted cash, beginning of period	60,082			—			69,533			129,615
Cash and cash equivalents, including restricted cash, end of period	$	44,143		$	—		$	68,884		$	113,027
Supplemental disclosures of cash flow information:
Cash paid for interest	$	81,478		$	—		$	—		$	81,478
Non-cash transactions:
Accrued purchases of property and equipment	$	3,508		$	—		$	—		$	3,508
Capital leases and other financing sources	503			—			—			503

Recently Issued Accounting Pronouncements

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WESTMORELAND COAL COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONT.)

In February 2018, the FASB issued ASU 2018-02, Income Statement-Reporting Comprehensive Income (Topic 220) Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. ASU 2018-02 provides an option to reclassify stranded tax effects within accumulated other comprehensive loss to retained earnings due to the change in the U.S. federal tax rate in the Tax Cuts and Jobs Act of 2017. The ASU is effective for public companies for fiscal years beginning after December 15, 2018, and interim periods therein with early adoption permitted. The Company is currently in the process of analyzing the standard, but does not expect the adoption to have a material impact to our financial statements.

In August 2016, the FASB issued ASC 2018-14, Compensation - Retirement Benefits - Defined Benefit Plans - General (Topic 715-20): Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans, which eliminates certain disclosure requirements for employers that sponsor defined benefits pension or other postretirement plans, and requires public entities to disclose certain new information. The new guidance is effective for public entities for fiscal years beginning after December 15, 2020. The amendments in this update require retrospective application for all periods presented upon their effective date. We will adopt the new guidance in the fourth quarter of 2018 and the adoption of this guidance will not have a material impact on the consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which requires companies leasing assets to recognize on their balance sheet a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term on contracts longer than one year. The new guidance is effective for fiscal years beginning after December 15, 2018, using a modified retrospective approach, with early adoption permitted.

In July 2018, the FASB issued ASU 2018-11, Leases (Topic 842):Targeted Improvements, which includes two main provisions. The first is an additional optional transition method to adopt the new leasing standard at the adoption date through recognition of a cumulative-effect adjustment to the opening balance of retaining earnings in the period of adoption. The second provides lessors with a practical expedient, by class of underlying asset, to not separate non-lease components from the associated lease component and, instead, to account for those components as a single component, if certain criteria are met.

The Company has established an implementation team to execute a multi-phase plan to adopt the requirements of the new standard. The team is in the process of finalizing ~~its conclusions on how~~ the ~~guidance~~quantitative ~~will~~and bequalitative ~~applied~~analysis toin ~~all~~accordance ~~identified~~with ~~leases~~the plan. The team is also ~~evaluating the expanded disclosures required by the new standard and~~ reviewing ~~our~~ system capabilities, processes and internal controls over financial reporting to ensure the ~~appropriate~~implementation ~~information will be available for these disclosures. We will adopt the new guidance~~ in the first quarter of 2019.

In August 2018, the FASB issued ASC 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement, which eliminates certain disclosure requirements for fair value measurements for all entities, and requires public entities to disclose certain new information while modifying certain disclosure requirements. The new guidance is effective for all entities for fiscal years beginning after December 15, 2019 and for interim periods within those fiscal years, with early adoption permitted. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. We will adopt the new guidance in the first quarter of 2020 and the adoption of this guidance will not have a material impact on the consolidated financial statements.

2. REVENUE

We produce and sell thermal coal primarily to investment grade utility customers, typically under long-term, cost-protected contracts. The majority of our coal is sold domestically within the country it is produced. We own one mine that produces thermal coal which is exported primarily to the Asia-Pacific market via rail and ocean vessel under reserved port capacity. Lesser amounts of revenue (“Other revenues”) are generated from ash hauling services, royalties from oil and gas leases and sales of various mining byproducts.

Under ASC 606, revenue is recognized when a customer obtains control of promised goods or services in an amount that reflects the consideration we expect to receive in exchange for those goods or services. We measure revenue based on the consideration specified in the contract, and revenue is recognized when the performance obligations in the contract are satisfied. A performance obligation is a promise in a contract to transfer a distinct good or service to the customer. The transaction price of a contract is allocated to each distinct performance obligation and recognized as revenue when or as the customer receives the benefit of the performance obligation.

For all of our coal sales contracts, performance obligations consist of the delivery of each ton of coal to the customer as our promise is to sell multiple distinct units of a commodity at a point in time. The transaction price principally consists of fixed consideration in the form of a base price per ton of coal with additional variable consideration comprised of adjustments to the base price based on quality measurements. Certain of our coal sales contracts contain additional variable consideration comprised of various index-based adjustments, adjustments based on changes in underlying production costs and reimbursements of various costs such as royalties and taxes. 17

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WESTMORELAND COAL COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONT.)

For all of our ~~Consolidated~~coal ~~Balance~~sales ~~Sheets~~contracts, ~~(unaudited)~~performance ~~until~~obligations consist of the ~~amount~~delivery isof ~~ultimately~~each ~~billable~~ton of coal to the customer. ~~Although~~as ~~there~~our promise is ato ~~significant~~sell ~~delay~~multiple ~~between~~distinct ~~the~~units ~~customer’s~~of ~~receipt~~a ofcommodity ~~the~~at ~~goods~~a ~~and~~point ~~the~~in ~~customer’s~~time. ~~payment~~The oftransaction ~~final~~price ~~reclamation~~principally ~~costs~~consists ~~that~~of ~~represent~~fixed consideration ~~for~~in the ~~goods,~~form ~~there~~of isa nobase ~~recognition~~price ofper aton ~~significant~~of ~~financing~~coal ~~component~~with asadditional wevariable ~~meet~~consideration acomprised ~~scope-out~~of ~~exception~~adjustments asto the ~~difference~~base ~~between~~price ~~the~~based ~~promised~~on ~~consideration~~quality ~~and~~measurements. ~~the~~Certain ~~cash~~of ~~selling~~our ~~price~~coal sales contracts contain additional variable consideration comprised of ~~the~~various ~~good~~index-based ~~was~~adjustments, ~~for~~adjustments ~~reasons~~based ~~other~~on ~~than~~changes ~~the~~in ~~provision~~underlying production costs and reimbursements of ~~financing~~various tocosts ~~the~~such ~~customer~~as royalties and taxes.

Many of our coal sales contracts contain set minimums for deliveries of tons of coal. However, we are also party to a number of coal sales contracts that contain no tonnage delivery minimums, and thus all deliveries are considered customer options. Further, certain of these contracts contain a commitment from the customer to make payments to us for our performance of final reclamation. As our performance of final reclamation does not transfer a good or service to the customer, we must estimate the amount of consideration we believe we will be entitled to and recognize it on a per ton basis over the period to which the commitment creates a material right to the customer. Prior to the adoption of the new revenue standard, this revenue was generally recognized at the time final reclamation was performed. Under the new revenue standard, this recognition of revenue in advance of when we are contractually permitted to bill our customer results in a contract asset presented as unbilled revenues in our Consolidated Balance Sheets (unaudited) until the amount is ultimately billable to the customer. Although there is a significant delay between the customer’s receipt of the goods and the customer’s payment of final reclamation costs that represent consideration for the goods, there is no recognition of a significant financing component as we meet a scope-out exception as the difference between the promised consideration and the cash selling price of the good was for reasons other than the provision of financing to the customer.

Contract Balances

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

The following table presents the activity in our contract assets and liabilities for the ~~six~~nine months ended ~~June~~September 30, 2018 (in thousands):

Contract Assets(1):
Balance as of December 31, 2017	$	274,699
Additions	1216,~~295~~250
Transfers to Receivables	(3242,~~488~~617		)
Balance as of June 30, 2018	$	254,506
Balance as of September 30, 2018	$	248,332
Contract Liabilities(2):
Balance as of December 31, 2017	$	3,201
Additions	5,949
Transfers to Revenues	(36,~~030~~502		)
Balance as of June 30, 2018	$	6,120
Balance as of September 30, 2018	$	2,648

_________________________

(1) Includes current balances of $3525.69 million and $49.6 million reported within Unbilled revenues in the Consolidated Balance Sheets (unaudited) as of ~~June~~September 30, 2018 and December 31, 2017, respectively, and includes non-current balances of $~~218~~222.94 million and $225.2 million reported within Unbilled revenues, less current portion in the Consolidated Balance Sheets (unaudited) as of ~~June~~September 30, 2018 and December 31, 2017, respectively. The remaining balances of $2219.05 million and $14.3 million included within Unbilled revenues in the Consolidated Balance Sheets (unaudited) as of ~~June~~September 30, 2018 and December 31, 2017, respectively, relate to amounts recognized as revenue but are only billable upon the passage of time and are therefore not contract assets.

(2) Comprised entirely of current balances of $62.16 million and $3.2 million reported within Deferred revenue in the Consolidated Balance Sheets (unaudited) as of ~~June~~September 30, 2018 and December 31, 2017, respectively.

Included in the contract asset balances as of June 30, 2018 and December 31, 2017 are $245.7 million and $251.2 million, respectively, related to revenue recognized at the time performance obligations were satisfied, for which the right to invoice will not occur until final reclamation is performed. 18

Remaining Performance Obligations

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

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WESTMORELAND COAL COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONT.)

~~such~~Included ~~variable~~in ~~consideration~~the iscontract ~~allocated~~asset ~~entirely~~balances toas ~~wholly~~of ~~unsatisfied~~September 30, ~~performance~~2018 ~~obligations;~~ and ~~(ii)~~December ~~remaining~~31, ~~performance~~2017 ~~obligations~~are ~~for~~$245.0 ~~contracts~~million ~~with~~and an$251.2 ~~original~~million, ~~expected~~respectively, ~~duration~~related ofto ~~one~~revenue ~~year~~recognized orat ~~less.~~the ~~These~~time ~~amounts,~~performance asobligations ofwere ~~June 30~~satisfied, ~~2018,~~for ~~represent~~which ~~estimated~~the ~~minimum~~right ~~revenues~~to ~~that~~invoice we will ~~invoice~~not oroccur ~~transfer~~until ~~from~~final ~~contract~~reclamation ~~liabilities~~is ~~and~~performed. ~~recognize in future periods (in thousands):~~

	Estimated Revenues
Six months ended December 31, 2018	$	187,974
2019	214,915
2020	152,159
2021	132,410
2022	58,698
Thereafter	175,606
Total	$	921,762

Remaining Performance Obligations

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



	Estimated Revenues
Three months ended December 31, 2018	$	83,497
2019	231,792
2020	169,150
2021	149,870
2022	76,409
Thereafter	192,905
Total	$	903,623

Significant Judgments

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

3. VARIABLE INTEREST ENTITY

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

The following table presents the carrying amounts, after eliminating the effect of intercompany transactions, included in the Consolidated Balance Sheets (unaudited) that are for the use of or are the obligation of WSJ as a VIE:

	June 30, 2018		December 31, 2017
	September 30, 2018		December 31, 2017
	(In thousands)
Assets	$	—	$	309,025
Liabilities	—		167,529
Net carrying amount	$	—	$	141,496

~~4. INVENTORIES~~19

Inventories consisted of the following:

	June 30, 2018			December 31, 2017
	(In thousands)
Coal stockpiles	$	69,918		$	38,145
Materials and supplies	71,610			73,517
Reserve for obsolete inventory	(4,288		)	(4,867		)
Total	$	137,240		$	106,795

Table of Contents

WESTMORELAND COAL COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONT.)

4. INVENTORIES

Inventories consisted of the following:



	September 30, 2018			December 31, 2017
	(In thousands)
Coal stockpiles	$	44,126		$	38,145
Materials and supplies	70,059			73,517
Reserve for obsolete inventory	(4,340		)	(4,867		)
Total	$	109,845		$	106,795

5. RESTRICTED INVESTMENTS, RECLAMATION DEPOSITS AND BOND COLLATERAL

Coal segments maintain government-required bonds, which require posting of bond collateral, that ~~assures~~assure compliance with applicable federal and state regulations relating to the performance of final reclamation activities. The amounts deposited in the bond collateral account secure the bonds issued by the bonding company. The Corporate segment is required to obtain surety bonds in connection with its self-insured workers’ compensation plan and certain healthcare plans. The Company’s surety bond underwriters require collateral to issue these bonds.

The Company invests certain bond collateral, reclamation deposits and other restricted investments in a limited selection of fixed-income investment options and receives the corresponding investment returns. These investments are not available to meet the Company’s general cash needs. These investments include available-for-sale debt securities, which are reported at fair value with unrealized gains and losses excluded from earnings and reported in Accumulated other comprehensive loss in the Consolidated Balance Sheets (unaudited). On disposal, the resulting gain or loss is reported in Other expense in the Consolidated Statements of Operations (unaudited).

The Company’s carrying value and estimated fair value of Restricted investments, reclamation deposits and bond collateral as of ~~June~~September 30, 2018 were as follows:

	Restricted Investments and Bond Collateral		Reclamation Deposits		Total Restricted Investments, Reclamation Deposits and Bond Collateral
	(In thousands)
Cash and cash equivalents	$	4746,~~900~~049	$	912,~~782~~492	$	5758,~~682~~541
Time deposits	~~2,475~~700		—		~~2,475~~700
Available-for-sale debt securities	7578,~~644~~082		70,~~011~~138		~~145~~148,~~655~~220
	$	~~126~~124,~~019~~831	$	7982,~~793~~630	$	~~205~~207,~~812~~461

The Company’s carrying value and estimated fair value of Restricted investments, reclamation deposits and bond collateral as of December 31, 2017 were as follows:



	Restricted Investments and Bond Collateral		Reclamation Deposits		Total Restricted Investments, Reclamation Deposits and Bond Collateral
	(In thousands)
Cash and cash equivalents	$	42,549	$	6,643	$	49,192
Time deposits	2,467		—		2,467
Available-for-sale debt securities	78,157		70,378		148,535
	$	123,173	$	77,021	$	200,194

~~Available-for-Sale Debt Securities~~20

The cost basis, gross unrealized holding gains and losses, and fair value of available-for-sale debt securities as of June 30, 2018 were as follows:

	Restricted Investments and Bond Collateral			Reclamation Deposits			Total Restricted Investments, Reclamation Deposits and Bond Collateral
	(In thousands)
Cost basis	$	76,281		$	70,255		$	146,536
Gross unrealized holding gains	465			696			1,161
Gross unrealized holding losses	(1,102		)	(940		)	(2,042		)
Fair value	$	75,644		$	70,011		$	145,655

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONT.)

Available-for-Sale Debt Securities

The cost basis, gross unrealized holding gains and losses, and fair value of available-for-sale debt securities as of September 30, 2018 were as follows:



	Restricted Investments and Bond Collateral			Reclamation Deposits			Total Restricted Investments, Reclamation Deposits and Bond Collateral
	(In thousands)
Cost basis	$	78,834		$	70,602		$	149,436
Gross unrealized holding gains	533			533			1,066
Gross unrealized holding losses	(1,285		)	(997		)	(2,282		)
Fair value	$	78,082		$	70,138		$	148,220

The cost basis, gross unrealized holding gains and losses, and fair value of available-for-sale debt securities as of December 31, 2017 were as follows:



	Restricted Investments and Bond Collateral			Reclamation Deposits			Total Restricted Investments, Reclamation Deposits and Bond Collateral
	(In thousands)
Cost basis	$	78,564		$	70,576		$	149,140
Gross unrealized holding gains	521			617			1,138
Gross unrealized holding losses	(928		)	(815		)	(1,743		)
Fair value	$	78,157		$	70,378		$	148,535

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONT.)

6. LOSS ON IMPAIRMENT

~~For~~During the ~~three~~second ~~and~~quarter ~~six~~of ~~months ended June 30,~~ 2018, the Company recorded an asset impairment charge to various assets within our Coal - U.S. and Coal - WMLP segments in the amounts of $65.6 million and $77.7 million, respectively, in Loss on impairment in the Consolidated Statements of Operations (unaudited). The Company determined that indicators of impairment existed with respect to the following:

•

AEP Generation Resources Inc. (“AEP”) declined WMLP’s bid to supply coal to AEP’s Conesville Power Plant Units 5 and 6 for periods subsequent to the expiration of the parties' current contract which expires on December 31, 2018. Coal sales under the Ohio Operations’ current coal supply contract to AEP’s Conesville Power Plant Units 5 and 6 represented a substantial portion of the Coal - WMLP segment revenues generated from the Ohio Operations for the year ended December 31, 2017.


•	a current period operating loss and a projection of continuing losses associated with the use of a long lived asset group based on reassessments of our life of mine models as part of our restructuring efforts.

The Company performed a recoverability analysis as of June 30, 2018 and determined that the net undiscounted cash flows were less than the carrying values for the Ohio mines, Absaloka mine, Beulah mine and Buckingham mine long-lived assets groups within the Coal - WMLP and Coal - U.S. segments. As a result, the Company estimated the fair value of the long-lived asset groups using a discounted cash flow analysis using marketplace participant assumptions which constituted Level 3 fair value inputs. The discounted cash flow analysis is dependent on a number of significant management estimates about future performance including sales volumes and prices, which are based on projected revenues based on expected economic conditions, costs to produce, income taxes, capital spending, working capital changes and the after-tax weighted average cost of capital. The estimates of costs to produce include labor, fuel, explosives, supplies and other major components of mining. The Company estimated the fair value of certain property, plant and equipment and intangible assets using the market approach. To the extent that the carrying values of the long-lived asset groups exceeded the respective fair values, the Company recorded an asset impairment charge, as can be seen by segment and asset type in the table below for the ~~three~~nine ~~and six~~ months ended ~~June~~September 30, 2018.



	Reportable Segment
	Coal - U.S.		Coal - WMLP		Consolidated
	(In thousands)
Asset impairment charges:
Land, mineral rights, property, plant and equipment, net	$	59,262	$	50,717	$	109,979
Advanced coal royalties	4,719		3,145		7,864
Other assets	1,668		23,813		25,481
	$	65,649	$	77,675	$	143,324

1922

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONT.)

7. DEBT AND LINES OF CREDIT

The Company and its subsidiaries are subject to the following debt arrangements:

	Total Debt Outstanding
	June 30, 2018			December 31, 2017
	September 30, 2018			December 31, 2017
	(In thousands)
Bridge Loan	$	90,000		$	—
8.75% Notes	350,000			350,000
Term Loan	319,773			320,595
San Juan Loan	—			56,640
WMLP Term Loan	~~315~~323,~~945~~394			312,734
Capital lease obligations	2422,~~978~~060			33,113
Other debt	1013,~~045~~034			2,826
Total debt	1,~~110~~118,~~741~~261			1,075,908
Less debt discount and issuance costs, net	(2320,~~792~~732		)	(27,501		)
Less current installments, net of debt discount and issuance costs	(1,~~071~~085,~~533~~121		)	(983,427		)
Total non-current debt	$	1512,~~416~~408		$	64,980

The following table presents remaining aggregate contractual debt maturities of all ~~long-term~~ debt as of ~~June~~September 30, 2018 (in thousands):

Maturity Date(1)	Debt Held by WMLP		All Other Debt		Total Debt Outstanding
2018	$	~~318~~324,~~081~~781	$	108,~~686~~357	$	~~328~~333,~~767~~138
2019	4,~~174~~499		~~105~~107,~~079~~604		~~109~~112,~~253~~103
2020	1,766		317,~~276~~560		319,~~042~~326
2021	1,664		1631		1,~~680~~695
2022	1,999		350,000		351,999
Thereafter	—		—		—
Total debt	$	~~327~~334,~~684~~709	$	783,~~057~~552	$	1,~~110~~118,~~741~~261

________________________

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

Covenant Compliance

See Note 1 - Basis Of Presentation "~~Going~~Ability ~~Concern,~~to ~~Liquidity~~Continue ~~and~~as ~~Management’s~~a ~~Plan~~Going Concern" for matters regarding covenant compliance.

Bridge Loan Agreement

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

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

2023

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WESTMORELAND COAL COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONT.)

Loan Agreement. The Base Rate consists of 7.25% plus the highest of (i) the Prime Lending Rate (as defined in the Bridge Loan Agreement), (ii) the overnight Federal Funds Rate (as defined in the Bridge Loan Agreement) plus 0.50%, or (iii) the one-month London Interbank Offered Rate (“LIBOR”) plus 1.00%. The LIBO Rate consists of 8.25% plus the higher of (i) LIBOR offered rate as administered by the ICE Benchmark Administration, or (ii) 1.00%. Interest is payable quarterly. As of ~~June~~September 30, 2018, we have elected the LIBO Rate, resulting in a cash interest rate of 10.5856%. The Bridge Loan has a maturity date of May 21, 2019.

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

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

8.75% Notes

Pursuant to our senior note indenture, dated as of December 16, 2014, by and among the Company, the guarantors named therein, and U.S. Bank National Association, as trustee and notes collateral agent (the “Indenture”), our senior secured 8.75% ~~Notes~~notes (“8.75% Notes”) were issued at a 1.292% discount and bear a fixed interest rate of 8.75% payable semiannually, on January 1 and July 1 of each year, commencing July 1, 2015. The 8.75% Notes are a primary obligation of the Company and are guaranteed by Westmoreland Energy LLC, Westmoreland Mining LLC and Westmoreland Resources, Inc. and their respective subsidiaries (other than Absaloka Coal, LLC, Westmoreland Risk Management, Inc. and certain other immaterial subsidiaries), referred to as the “Guarantors.” The 8.75% Notes are not guaranteed by Westmoreland Canada LLC or any of its subsidiaries, Westmoreland San Juan, LLC or any of its subsidiaries, or Westmoreland Resources GP, LLC or WMLP, referred to as the “Non-guarantors.”

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

Term Loan

Pursuant to our credit agreement, dated as of December 22, 2014, by and among the Company, the lenders from time to time party thereto, and Wilmington Savings Fund Society, FSB, as administrative agent (replaced Bank of Montreal as administrative agent pursuant to the third amendment to the term loan credit agreement dated May 2, 2018) as amended (“Term Loan Credit Agreement”), the $350.0 million term loan was issued at a 2.50% discount and accrues interest on a quarterly basis at a variable interest rate which is set at our election of (i) one-, two-, three- or six-month LIBOR plus 6.50% or (ii) a base rate (determined with reference to the highest of the prime rate, the Federal Funds Rate (as defined in the Term Loan Credit Agreement) plus 0.05%, or one-month LIBOR plus 1.00%) plus 5.50% (the "Term Loan"). As of ~~June~~September 30, 2018, the cash interest rate was 8.8389%. The Term Loan is a primary obligation of WCC and is guaranteed by the Guarantors.

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

Term Loan Add-on

On January 22, 2015, the Company amended the Term Loan to increase the borrowings by $75.0 million, for an aggregate principal amount of $425.0 million as of that date. The amendments to the Term Loan were made in connection with the acquisition of Buckingham Coal Company, LLC. Net proceeds were $71.0 million after a 2.50% discount, 1.50% broker fee, a consent fee of 1.17%, and $0.1 million of additional debt issuance costs. With this addition, the quarterly principal payment due commencing March 31, 2015 is $1.1 million. Under the Term Loan, we are required to offer a portion of our excess cash flows to the Term Loan lenders for each fiscal year, beginning with the fiscal year ended December 31, 2015.

In conjunction with the Kemmerer Drop (as defined and described in Note 2. Acquisitions to the consolidated financial statements in WMLP's 2017 Form 10-K), the Company amended the Term Loan to remove Kemmerer as a guarantor. In addition, $94.1 million of the proceeds received from WMLP related to the Kemmerer Drop were used to pay down the Term Loan.24

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WESTMORELAND COAL COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONT.)

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

San Juan Loan

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

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

WMLP Term Loan

Pursuant to the financing agreement, dated as of December 31, 2014, by and among Oxford Mining Company, LLC ("Oxford"), WMLP and each of its subsidiaries, lenders from time to time party thereto, and U.S. Bank National Association, as administrative agent, WMLP entered into a term loan, as amended (the “WMLP Term Loan”) which consists of a $175.0 million loan, with an option for an additional $120.0 million in term loans for acquisitions, which was exercised on August 1, 2015 to finance the Kemmerer Drop. Proceeds from the credit facility were used to retire WMLP’s previously existing first and second lien credit facilities and to pay fees and expenses related to its existing credit facility, with the remaining proceeds being available as working capital. The WMLP Term Loan was not issued at a discount or a premium and $8.6 million of debt issuance costs were recognized at December 31, 2014. The WMLP Term Loan bears interest on a quarterly basis and bears interest at a variable rate equal to the 3-month LIBOR at each quarter end (2.3339% as of ~~June~~September 30, 2018), subject to a floor of 0.75%, plus 8.50% or the Reference Rate, as defined in the financing agreement. As of ~~June~~September 30, 2018, the WMLP Term Loan had a cash interest rate of 10.8389%. The WMLP Term Loan is a primary obligation of Oxford ~~Mining Company~~, ~~LLC,~~ a wholly owned subsidiary of WMLP, is guaranteed by WMLP and its subsidiaries, and is secured by substantially all of WMLP’s and its subsidiaries’ assets.

The WMLP Term Loan also provides for Paid-In-Kind Interest (“PIK Interest”) at a variable rate between 1.00% and 3.00% based on WMLP's consolidated total net leverage ratio, as defined in the financing agreement. As of ~~June~~September 30, 2018 and December 31, 2017, the WMLP Term Loan had a PIK Interest rate of 3.00%. The rate of PIK Interest is determined on a quarterly basis with the PIK Interest added quarterly to the then-outstanding principal amount of the WMLP Term Loan. PIK Interest under the WMLP Term Loan financing agreement was $412.82 million and $47.60 million for the ~~six~~nine months ended ~~June~~September 30, 2018 and 2017, respectively. The outstanding WMLP Term Loan amount as of ~~June~~September 30, 2018 represents the principal balance of $285.8 million, plus PIK Interest of $3037.26 million.

The WMLP Term Loan limits cash distributions to an aggregate amount not to exceed $15.0 million (“Restricted Distributions”), if WMLP has: (i) a consolidated total net leverage ratio of greater than 3.75, or a fixed charge coverage ratio of less than 1.00 (as such ratios are defined in the WMLP Term Loan financing agreement), or (ii) liquidity of less than $7.5 million, after giving effect to such cash distribution and applying WMLP's availability under the WMLP Revolver. As of ~~June~~September 30, 2018, WMLP’s consolidated total net leverage ratio is in excess of 3.75 and our fixed charge coverage ratio is less than 1.00. Further, as of ~~June~~September 30, 2018, WMLP has utilized the full $15.0 million limit on Restricted Distribution payments and is restricted from making any further distributions under the terms of the WMLP Term Loan financing agreement.

The WMLP Term Loan contains customary affirmative covenants, negative covenants, events of default as well as certain customary cross-default provisions. ~~Our~~The ~~compliance~~filing orof ~~non-compliance~~the ~~with~~Chapter ~~these~~11 ~~provisions~~Cases isconstitutes ~~discussed~~an inevent ~~Note~~of 1default ~~- Basis~~that Ofaccelerated ~~Presentation~~the Company’s obligations under the WMLP Term Loan. However, under the Bankruptcy Code, the creditors under the WMLP Term

~~Revolver~~25

Pursuant to the second amended and restated loan and security agreement, dated as of December 16, 2014, the Company and certain of its subsidiaries, lenders party thereto, and Canadian Imperial Bank of Commerce (formerly known as The PrivateBank and Trust Company), as administrative agent, entered into a revolving credit facility (the “Revolver”).

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONT.)

Loan are stayed from taking any action against the Company as a result of the default. See also Note 1 - Basis Of Presentation included above.

Revolver

On May 21, 2018, we paid $12.0 million of the outstanding draws and executed an agreement to extinguish the Revolver. We recognized a loss on extinguishment of debt of $1.2 million based on remaining balances of debt issuances costs and early termination fees paid to effectuate the extinguishment of the Revolver.

WMLP Revolver

On October 23, 2015, WMLP and its subsidiaries entered into a Loan and Security Agreement (the “WMLP Revolver”) with the lenders party thereto and Canadian Imperial Bank of Commerce (formerly known as The PrivateBank and Trust Company). The WMLP Revolver expired on its December 31, 2017 maturity date and WMLP's management elected not to replace or extend it.

Capital lease obligations

The Company engages in leasing transactions for office equipment and equipment utilized in its mining operations. ~~The~~During ~~Company~~the ~~did~~nine ~~not~~months ~~enter~~ended ~~into~~September ~~any~~30, ~~new~~2018, ~~capital~~the ~~leases~~Company ~~during~~entered ~~the~~into ~~six~~$0.6 ~~months~~million ~~ended~~of ~~June~~new ~~30,~~capital ~~2018~~leases.

8. POSTRETIREMENT MEDICAL BENEFITS AND PENSION

Postretirement Medical Benefits

The Company provides postretirement medical benefits to retired employees and their dependents, as mandated by the Coal Industry Retiree Health Benefit Act of 1992 and pursuant to collective bargaining agreements. The Company also provides these benefits to qualified full-time employees pursuant to collective bargaining agreements. These benefits are provided through self-insured programs.

The components of net periodic postretirement medical benefit cost are as follows:

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

2018

2017

2018

2017

(In thousands)

Components of net periodic postretirement medical benefit cost:

Service cost

~~889~~818

~~794~~793

12,~~779~~597

12,~~587~~380

Interest cost

2,~~893~~921

3,~~196~~197

58,~~786~~707

69,~~393~~590

Amortization of deferred items

~~969~~171

~~965~~964

12,~~938~~109

12,~~929~~893

Total net periodic postretirement medical benefit cost

43,~~751~~910

4,~~955~~954

913,~~503~~413

914,~~909~~863

Service cost is included in Cost of sales (exclusive of depreciation, depletion and amortization, shown separately) in the Consolidated Statements of Operations (unaudited) and interest cost and amortization of deferred items are included in Other expense in the Consolidated Statements of Operations (unaudited).

~~The following table shows the net periodic postretirement medical benefit costs that relate to current and former mining operations:~~ 26

	Three Months Ended June 30,				Six Months Ended June 30,
	2018		2017		2018		2017
	(In thousands)
Former mining operations	$	2,046	$	2,306	$	4,092	$	4,611
Current operations	2,705		2,649		5,411		5,298
Total net periodic postretirement medical benefit cost	$	4,751	$	4,955	$	9,503	$	9,909

Pension

The Company provides defined pension benefits to qualified full-time employees pursuant to collective bargaining agreements. The components of net periodic pension benefit cost are as follows:

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONT.)

	Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017
	(In thousands)
Components of net periodic pension benefit cost:
Service cost	$	410		$	378		$	821		$	785
Interest cost	2,387			2,630			4,777			5,260
Expected return on plan assets	(3,523		)	(3,648		)	(7,055		)	(7,275		)
Settlements	—			269			—			269
Amortization of deferred items	119			583			239			1,177
Total net periodic pension benefit (gain) cost	$	(607	)	$	212		$	(1,218	)	$	216

The following table shows the net periodic postretirement medical benefit costs that relate to current and former mining operations:



	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
	(In thousands)
Former mining operations	$	1,906	$	2,305	$	5,998	$	6,916
Current operations	2,004		2,649		7,415		7,947
Total net periodic postretirement medical benefit cost	$	3,910	$	4,954	$	13,413	$	14,863

Pension

The Company provides defined pension benefits to qualified full-time employees pursuant to collective bargaining agreements. The components of net periodic pension benefit cost are as follows:



	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
	(In thousands)
Components of net periodic pension benefit cost:
Service cost	$	316		$	348		$	1,137		$	1,133
Interest cost	2,395			2,596			7,172			7,855
Expected return on plan assets	(3,514		)	(3,643		)	(10,569		)	(10,918		)
Settlements	—			—			—			269
Amortization of deferred items	264			588			503			1,765
Total net periodic pension benefit (gain) cost	$	(539	)	$	(111	)	$	(1,757	)	$	104

Service cost is included in Cost of sales (exclusive of depreciation, depletion and amortization, shown separately) in the Consolidated Statements of Operations (unaudited) and interest cost, expected return on plan assets and amortization of deferred items are included in Other expense in the Consolidated Statements of Operations (unaudited).

The Company made $01.57 million and $01.21 million of contributions to its pension plans during the ~~six~~nine months ended ~~June~~September 30, 2018 and 2017, respectively. The Company ~~expects~~does not expect to make ~~$2.2~~any ~~million~~further of contributions to its pension plans ~~during~~for the remainder of 2018.

9. DERIVATIVE INSTRUMENTS

Derivative Assets and Liabilities

The Company evaluates all of its financial instruments to determine if such instruments are derivatives, derivatives that qualify for the normal purchase normal sale exception, or contain features that qualify as embedded derivatives. All derivative financial instruments, except for derivatives that qualify for the normal purchase normal sale exception, are recognized on the Consolidated Balance Sheets (unaudited) at fair value. Changes in fair value are recognized in the Consolidated Statements of Operations (unaudited) if they are not eligible for hedge accounting or in the Consolidated Statements of Comprehensive Loss (unaudited) if they qualify for cash flow hedge accounting.

During the ~~six~~nine months ended ~~June~~September 30, 2017, the Company had power purchase contracts at ROVA to manage exposure to power price fluctuations. These contracts covered the period from April 2014 to March 2019 and were not designated as hedging instruments. Accordingly, their fair value was recognized in the Consolidated Balance Sheets (unaudited), with changes in fair value recognized in the Consolidated Statements of Operations (unaudited). Fair value was based on a comparison of contracted prices to projected future market prices which are Level 2 inputs based on the hierarchy defined within Note 10 - Fair Value Measurements. The Company also had in place its power sales contract (the "SEP Agreement") which amended our previous power purchase and operating agreement with our customer. The SEP Agreement covered the period from March 1, 2017 to March 31, 2019 and enabled us to fulfill our obligations under the contract without physically operating the facility. The SEP Agreement met the definition of a derivative and did not qualify for the normal purchases and normal sales scope exception. This contract was not designated as a hedging instrument, therefore, its fair value was recognized in the Consolidated Balance Sheets (unaudited) and changes in fair value recognized in the Consolidated Statements of Operations (unaudited). As the underlying power deliveries option was significantly in the money, the fair value of this derivative was based on comparing expected contracted cash inflows per the SEP Agreement to expected future outflows based on projected market prices.

Effective October 1, 2017, we executed an Assignment and Assumption Agreement with the counterparties to our ROVA power purchase and sale contracts in which we were released from our power purchase and sales contracts and the counterparty to the purchase contracts assumed our position in the power sales contract. As a result of this transaction, we are no longer a party to either of these derivative arrangements as of either balance sheet date presented in the Quarterly Report, and have derecognized the related derivative asset and liability balances.27

The effect of derivative instruments not designated as hedging instruments on the accompanying unaudited Consolidated Statements of Operations was as follows (in thousands):

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WESTMORELAND COAL COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONT.)

		Three Months Ended June 30,					Six Months Ended June 30,
Derivative Instruments	Statements of Operations Location	2018		2017			2018		2017
Contracts to purchase power	Derivative loss (gain)	$	—	$	2,026		$	—	$	3,242
Contract to sell power	Derivative loss (gain)	—		(1,545		)	—		(5,146		)
		$	—	$	481		$	—	$	(1,904	)

Sheets (unaudited) and changes in fair value recognized in the Consolidated Statements of Operations (unaudited). As the underlying power deliveries option was significantly in the money, the fair value of this derivative was based on comparing expected contracted cash inflows per the SEP Agreement to expected future outflows based on projected market prices.

The effect of derivative instruments not designated as hedging instruments on the accompanying unaudited Consolidated Statements of Operations was as follows (in thousands):



		Three Months Ended September 30,					Nine Months Ended September 30,
Derivative Instruments	Statements of Operations Location	2018		2017			2018		2017
Contracts to purchase power	Derivative gain	$	—	$	(6,812	)	$	—	$	(3,570	)
Contract to sell power	Derivative gain	—		2,145			—		(3,001		)
		$	—	$	(4,667	)	$	—	$	(6,571	)

10. FAIR VALUE MEASUREMENTS

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at a given measurement date. Valuation techniques used must maximize the use of observable inputs and minimize the use of unobservable inputs. The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy, as defined below, gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs.


•	Level 1, defined as observable inputs such as quoted prices in active markets for identical assets. Level 1 assets include available-for-sale debt 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.


•	Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.

The book values of cash and cash equivalents, receivables and accounts payable reflected in the Consolidated Balance Sheets (unaudited) approximate the fair value of these instruments due to the short duration to their maturities.

See Note 5 - Restricted Investments, Reclamation Deposits And Bond Collateral and Note 9 - Derivative Instruments for further disclosures related to the Company's fair value estimates.

The table below sets forth, by level, the Company’s financial assets and liabilities that are accounted for at fair value on a recurring basis:

	June 30, 2018
			Quoted Prices in Active Marketsfor Identical Assets or Liabilities		Significant Other Observable Inputs
	Fair Value		Level 1		Level 2
	(In thousands)
Assets:
Available-for-sale debt securities, included in Restricted investments, reclamation deposits and bond collateral	$	145,655	$	145,655	$	—
	$	145,655	$	145,655	$	—

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONT.)



	September 30, 2018
			Quoted Prices in Active Markets for Identical Assets or Liabilities		Significant Other Observable Inputs
	Fair Value		Level 1		Level 2
	(In thousands)
Assets:
Available-for-sale debt securities, included in Restricted investments, reclamation deposits and bond collateral	$	148,220	$	148,220	$	—
	$	148,220	$	148,220	$	—



	December 31, 2017
			Quoted Prices in Active Markets for Identical Assets or Liabilities		Significant Other Observable Inputs
	Fair Value		Level 1		Level 2
	(In thousands)
Assets:
Available-for-sale debt securities, included in Restricted investments, reclamation deposits and bond collateral	$	148,535	$	148,535	$	—
	$	148,535	$	148,535	$	—
Liabilities:
Warrants issued by WMLP, included in Other liabilities	$	296	$	—	$	296
	$	296	$	—	$	296

Long-term debt fair value estimates are based on observed prices for securities with an active trading market when available (Level 2) and otherwise using discount rate estimates based on interest rates (Level 3). As of ~~June~~September 30, 2018, the Company valued the Bridge Loan and WMLP Term Loan with Level 3 fair values. As of December 31, 2017, the Company valued the WMLP Term Loan and the San Juan Loan with Level 3 fair values. The estimated fair values of the Company’s debt with fixed and variable interest rates are as follows:

	Fixed Interest Rate				Variable Interest Rate
	Carrying Value		Fair Value		Carrying Value		Fair Value
	(In thousands)
June 30, 2018	$	375,950	$	108,523	$	710,999	$	232,139
September 30, 2018	$	376,584	$	131,563	$	720,945	$	264,940
December 31, 2017	375,789		195,189		672,618		351,856

11. INCOME TAX

For interim income tax reporting the Company estimates its annual effective tax rate and applies this effective tax rate to its year-to-date pre-tax income (loss). For the ~~six~~nine months ended ~~June~~September 30, 2018 and 2017, the effective tax rate differed from the statutory rate primarily due to the U.S. and Canadian valuation allowances.

The Tax Cuts and Jobs Act

The Tax Cuts and Jobs Act (the "Act") was signed into law on December 22, 2017. The most significant impacts of the Act to the Company include a reduction in the federal corporate income tax rate from 35% to 21%, effective January 1, 2018, and a one-time, mandatory transition tax on deemed repatriation of previously tax-deferred and unremitted foreign earnings.

In accordance with ASU 2018-05 and Staff Accounting Bulletin 118, the Company recognized the provisional tax impacts related to the re-measurement of our deferred income tax assets and liabilities and the one-time, mandatory transition tax on deemed repatriation during the year ended December 31, 2017. As of June 30, 2018, we have not made any additional measurement-period adjustments related to these items. Such adjustments may be necessary in future periods due to, among other things, the significant complexity of the Act and anticipated additional regulatory guidance that may be issued by the Internal Revenue Service (“IRS”), changes in analysis, interpretations and assumptions the Company has made and actions the Company may take as a result of the Act. We are continuing to gather information to assess the application of the Act and expect to complete our analysis with the filing of our 2017 income tax returns during the third quarter of 2018.29

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WESTMORELAND COAL COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONT.)

In accordance with ASU 2018-05 and Staff Accounting Bulletin 118, the Company recognized the provisional tax impacts related to the re-measurement of our deferred income tax assets and liabilities and the one-time, mandatory transition tax on deemed repatriation during the year ended December 31, 2017. As of September 30, 2018, we have not made any additional measurement-period adjustments related to these items. Such adjustments may be necessary in future periods due to, among other things, the significant complexity of the Act and anticipated additional regulatory guidance that may be issued by the Internal Revenue Service (“IRS”), changes in analysis, interpretations and assumptions the Company has made and actions the Company may take as a result of the Act. As of September 30, 2018, we are continuing to gather information to assess the application of the Act and expect to complete our analysis with the filing of our 2017 income tax returns during the fourth quarter of 2018.

Tax Benefits Preservation Plan

As of December 31, 2017, WCC had a U.S. federal net operating loss carryforward of $676.2 million, together with certain other tax attributes. WCC's ability to utilize these deferred tax assets to offset future taxable income may be significantly limited if WCC experiences an "ownership change," as defined in Section 382 of the Internal Revenue Code of 1986, as amended (the "Code"). In general, an ownership change will occur if the percentage of the stock owned cumulatively by one or more “5% shareholders” (as defined in the Code) has increased by more than 50 percentage points over the lowest percentage of stock owned by such shareholders at any time over a rolling three-year period.

On September 2, 2017, the board of directors of WCC adopted a tax benefits preservation plan or stockholder rights plan (the "Plan"). The purpose of the Plan is to minimize the likelihood of an ownership change occurring for Section 382 purposes and thus protect WCC's ability to utilize certain net operating loss carryovers and other tax benefits of the Company and its subsidiaries (the “Tax Benefits”) to offset future income. The Plan is intended to act as a deterrent to any person or group acquiring “beneficial ownership” (within the meaning of applicable SEC rules) of 4.75% or more of the outstanding shares of WCC's common stock without the approval of the board of directors. The description and terms of the Rights (as defined below) applicable to the Plan are set forth in the 382 Rights Agreement, dated as of September 5, 2017 (the “Rights Agreement”), by and between WCC and Broadridge Corporate Issuer Solutions, Inc., as Rights Agent.

As part of the Rights Agreement, the board of directors authorized and declared a dividend distribution of one right (a “Right”) for each outstanding share of common stock to stockholders of record at the close of business on September 18, 2017. Each Right entitles the holder to purchase from WCC a unit consisting of one ten thousandth of a share (a “Unit”) of Series A Participating Preferred Stock, par value $0.01 per share, of WCC at a purchase price of $10.00 per Unit, subject to adjustment. Until a Right is exercised, the holder thereof, as such, will have no separate rights as a stockholder of WCC, including the right to vote or to receive dividends in respect of Rights.

12. STOCKHOLDERS’ DEFICIT AND ACCUMULATED OTHER COMPREHENSIVE LOSS

Changes in Accumulated Other Comprehensive Loss

The following table reflects the changes in Accumulated other comprehensive loss by component:

	Pension			Postretirement Medical Benefits			Available-for-Sale Debt Securities			Foreign Currency Translation Adjustment			Tax Effect of Other Comprehensive Income Gains			Accumulated Other Comprehensive Loss
	(In thousands)
Balance at December 31, 2017	$	(19,921	)	$	(55,123	)	$	(624	)	$	(44,530	)	$	(38,501	)	$	(158,699	)
Other comprehensive income (loss) before reclassifications	(45		)	—			635			(12,544		)	(902		)	(12,856		)
Other comprehensive (loss) income before reclassifications	(186		)	—			140			(7,852		)	(758		)	(8,656		)
Amounts reclassified from accumulated other comprehensive loss	~~239~~503			12,~~938~~109			(~~911~~750		)	—			—			1,~~266~~862
Balance at June 30, 2018	$	(19,727	)	$	(53,185	)	$	(900	)	$	(57,074	)	$	(39,403	)	$	(170,289	)
Balance at September 30, 2018	$	(19,604	)	$	(53,014	)	$	(1,234	)	$	(52,382	)	$	(39,259	)	$	(165,493	)

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONT.)

The following table reflects the reclassifications out of Accumulated other comprehensive loss for the three and ~~six~~nine months ended ~~June~~September 30, 2018 (in thousands):

Details About Accumulated Other Comprehensive Loss Components	Amount Reclassified from Accumulated Other Comprehensive Loss(1)						Affected Line Item in the Statement Where Net Loss is Presented
	Three Months Ended June 30, 2018			Six Months Ended June 30, 2018
	Three Months Ended September 30, 2018			Nine Months Ended September 30, 2018
Available-for-sale debt securities:
Realized losses and (gains) on available-for-sale debt securities	$	351		$	(911	)	Other expense
Realized losses (gains) on available-for-sale debt securities	$	161		$	(750	)	Other expense
Amortization of defined benefit pension items:
Prior service costs(2)	$	~~(116~~2	)	$	46		Other expense
Actuarial losses(2)	~~235~~262			~~235~~497			Other expense
	$	~~119~~264		$	~~239~~503
Amortization of postretirement medical benefit items:
Prior service costs(3)	$	(159	)	$	(~~318~~477	)	Other expense
Actuarial losses(3)	~~1,128~~330			2,~~256~~586			Other expense
	$	~~969~~171		$	12,~~938~~109

_________________

(1) Amounts in parenthesis indicate ~~losses~~gains.

(2) These accumulated other comprehensive loss components are included in the computation of net periodic pension cost. (See Note 8 - Postretirement Medical Benefits And Pension for additional details).

(3) These accumulated other comprehensive loss components are included in the computation of net periodic postretirement medical benefit cost. (See Note 8 - Postretirement Medical Benefits And Pension for additional details).

13. SHARE-BASED COMPENSATION

Historically, we have granted employees and non-employee directors stock options, SARs and/or restricted stock units under our Long-Term Incentive Plan (“LTIP”). However, we do not anticipate granting any share-based compensation during the year ended December 31, 2018. We recognized compensation expense (gain) from share-based arrangements as shown in the following table:

	Three Months Ended June 30,					Six Months Ended June 30,
	Three Months Ended September 30,					Nine Months Ended September 30,
	2018			2017		2018		2017
	(In thousands)
Recognition of fair value of stock options, SARs and restricted stock units over vesting period	$	25(15	)	$	1,~~133~~366	$	1,~~860~~845	$	23,~~480~~846
Total share-based compensation expense	$	25		$	1,133	$	1,860	$	2,480
Total share-based compensation (gain) expense	$	(15	)	$	1,366	$	1,845	$	3,846

Cancellation Option for Restricted Stock Units

Due to the Company’s depressed stock price, the Company offered all holders of unvested restricted stock units an option to cancel their units in order to mitigate potential unfavorable individual tax ramifications. During the ~~six~~nine months ended ~~June~~September 30, 2018, the majority of restricted stock unit holders accepted the cancellation option, resulting in the cancellation of 553,268 restricted stock units. As the cancellation was not accompanied by the concurrent grant of a replacement award or other valuable consideration, the cancellation was accounted for as a repurchase for no consideration, resulting in the recognition of $1.7 million of compensation expense that represented the remaining unamortized compensation expense for these units at the time of cancellation.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONT.)

Restricted Stock Units

~~Unamortized compensation expense is expected to be recognized over the next three years.~~ Changes in our restricted stock for the ~~six~~nine months ended ~~June~~September 30, 2018 were as follows:

	Units		Weighted Average Grant-Date Fair Value			Unamortized Compensation Expense (In thousands)
Non-vested as of December 31, 2017	774,951		$	8.31
Vested and issued	(17,028	)	(6.04		)
Canceled	(553,268	)	(5.52		)
Forfeited	(100,528	)	(23.77		)
Non-vested as of June 30, 2018	104,127		$	8.59		$	20
Non-vested as of September 30, 2018	104,127		$	8.59		$	16

Cash Units

Compensation expense related to the Cash Units was $0.23 million for the ~~six~~nine months ended ~~June~~September 30, 2017. There was no compensation expense related to the Cash Units for the ~~six~~nine months ended ~~June~~September 30, 2018. Because the cash units are settled in cash they are accounted for as a liability award. The accrued liability related to the Cash Units was $0.1 million as of December 31, 2017. There was no accrued liability related to the Cash Units as of ~~June~~September 30, 2018.

14. EARNINGS PER SHARE

Basic earnings (loss) per share is computed by dividing the net income (loss) applicable to common shareholders by the weighted average number of shares of common stock outstanding during each period. Net income (loss) applicable to common shareholders includes the adjustment for net income or loss attributable to noncontrolling interest. Diluted earnings per share is computed by including the dilutive effect of common stock that would be issued assuming conversion or exercise of outstanding stock options, stock appreciation rights ("SARs") and restricted stock units. No such items were included in the computations of diluted loss per share for the three and ~~six~~nine months ended ~~June~~September 30, 2018 and 2017 because the Company incurred a net loss applicable to common stockholders in those periods and the effect of inclusion would have been anti-dilutive.

The table below shows the number of shares that were excluded from the calculation of diluted loss per share because their inclusion would be anti-dilutive to the calculation:

	Three Months Ended June 30,		Six Months Ended June 30,
	Three Months Ended September 30,		Nine Months Ended September 30,
	2018	2017	2018	2017
	(In thousands)
Stock options, SARs and restricted stock units	~~109~~104	1,~~238~~201	~~233~~228	1,~~238~~201

15. SEGMENT INFORMATION

Segment information is based on a management approach, which requires segmentation based upon the Company’s internal organization and reporting. The Company’s operations for the ~~six~~nine months ended ~~June~~September 30, 2018 were classified into five reporting segments: Coal - U.S., Coal - Canada, Coal - WMLP, Heritage and Corporate. The Company's operations for the ~~six~~nine months ended ~~June~~September 30, 2017 included the aforementioned reporting segments as well as our previously existing Power segment, however, during the fourth quarter of 2017 we sold all of the assets that comprised this Power operating segment and terminated all related power agreements. For a detailed description of the Company’s operations segmentation, please see our 2017 Form 10-K. Summarized financial information by segment is as follows:

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Coal -U.S.(1)

Coal - Canada

Coal - WMLP(1)

Power

Heritage

Corporate

Consolidated

Coal - U.S.(1)

Coal - Canada

Coal - WMLP(1)

Power

Heritage

Corporate

Consolidated

(In thousands)

Three Months Ended June 30, 2018

Three Months Ended September 30, 2018

Revenues

~~102~~121,~~492~~320

~~109~~147,~~525~~339

6462,~~295~~785

—

—(2,554

)

~~276~~328,~~312~~890

Depreciation, depletion, and amortization

1012,~~007~~699

7,~~186~~469

96,~~189~~470

—

1455

26,~~396~~693

Operating income (loss)

~~(65~~10,~~529~~684

)

149,~~847~~163

(825,~~471~~699

)

—

(1,~~287~~214

)

(2320,~~545~~302

)

(~~157~~7,~~985~~368

)

Total assets

~~715~~699,~~274~~865

~~461~~467,~~676~~080

~~236~~229,~~770~~608

—

17,~~583~~637

2653,~~292~~667

1,~~457~~467,~~595~~857

Cash paid for capital expenditures

~~892~~1,380

39,~~088~~665

12,~~629~~491

—

513,~~609~~536

Three Months Ended June 30, 2017

Three Months Ended September 30, 2017

Revenues

~~145~~149,~~642~~755

89114,~~033~~977

8185,~~052~~606

1920,~~880~~070

—

(85,~~293~~394

)

~~327~~365,~~314~~014

Depreciation, depletion, and amortization

2219,~~644~~826

68,~~782~~590

109,~~111~~692

—

(4042

)

3938,~~497~~066

Operating income (loss)

(115,~~247~~719

)

~~(12,078~~476

)

79,~~588~~451

~~(383~~5,347

)

(1,~~474~~287

)

(54,~~448~~725

)

~~(13~~24,~~042~~981

)

Total assets

~~770~~764,~~754~~092

~~435~~445,~~820~~366

~~370~~367,~~936~~348

6458,~~269~~788

16,~~699~~726

~~11,741~~538

1,~~670~~652,~~219~~858

Cash paid for capital expenditures

15,~~961~~348

13,~~956~~386

13,~~977~~527

—

512,~~894~~261

Six Months Ended June 30, 2018

Nine Months Ended September 30, 2018

Revenues

~~221~~342,~~090~~412

~~218~~366,~~797~~135

~~132~~194,~~102~~887

—

—(2,554

)

~~571~~900,~~989~~880

Depreciation, depletion, and amortization

2033,~~344~~042

1422,~~704~~172

1723,~~354~~824

—

2986

5279,~~431~~124

Operating income (loss)

(5645,~~394~~709

)

3343,~~947~~110

(8490,~~468~~168

)

—

(23,~~514~~728

)

(3858,~~129~~431

)

(~~147~~154,~~558~~926

)

Total assets

~~715~~699,~~274~~865

~~461~~467,~~676~~080

~~236~~229,~~770~~608

—

17,~~583~~637

2653,~~292~~667

1,~~457~~467,~~595~~857

Cash paid for capital expenditures

13,~~643~~023

616,~~979~~644

35,~~151~~642

—

1125,~~773~~309

Six Months Ended June 30, 2017

Nine Months Ended September 30, 2017

Revenues

~~288~~437,~~100~~855

~~200~~315,~~233~~210

~~155~~241,~~857~~462

4161,~~107~~177

—

(1016,~~971~~363

)

~~674~~1,~~326~~039,341

Depreciation, depletion, and amortization

3858,~~643~~469

1725,~~036~~627

2030,~~461~~153

—

(76118

)

76114,~~064~~131

Operating income (loss)

824,~~991~~710

(1716,~~052~~576

)

818,~~870~~324

(14,~~136~~216

)

(24,~~833~~120

)

(914,~~955~~688

)

~~(13~~11,~~115~~866

)

Total assets

~~770~~764,~~754~~092

~~435~~445,~~820~~366

~~370~~367,~~936~~348

6458,~~269~~788

16,~~699~~726

~~11,741~~538

1,~~670~~652,~~219~~858

Cash paid for capital expenditures

39,~~856~~204

47,~~050~~436

58,~~198~~725

—

1325,~~104~~365

____________________

(1) The Coal - WMLP segment recorded revenues of $8.3 million and $11.0 million for intersegment revenues to the Coal - U.S. segment for the three and six months ended June 30, 2017, respectively. No such revenues occurred during the three and six months ended June 30, 2018. Eliminations for intersegment revenues and cost of sales are presented within the Corporate segment.33

Disaggregated Revenues

The following table presents our revenues for the three and six months ended June 30, 2018 disaggregated by type of revenue for each segment (in thousands):

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WESTMORELAND COAL COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONT.)

	Three Months Ended June 30, 2018
	Coal - U.S.		Coal - Canada		Coal - WMLP
Domestic coal sales	$	101,099	$	68,232	$	60,032
Export coal sales	—		40,684		—
Other revenues	1,393		609		4,263
Total	$	102,492	$	109,525	$	64,295
	Six Months Ended June 30, 2018
	Coal - U.S.		Coal - Canada		Coal - WMLP
Domestic coal sales	$	217,501	$	148,500	$	126,741
Export coal sales	—		69,271		—
Other revenues	3,589		1,026		5,361
Total	$	221,090	$	218,797	$	132,102


(1)	The Coal - WMLP segment recorded revenues of $2.6 million for intersegment revenues to the Coal - U.S. segment for the three and nine months ended September 30, 2018 and $5.4 million and $16.4 million for the three and nine months ended September 30, 2017, respectively. Eliminations for intersegment revenues and cost of sales are presented within the Corporate segment.

~~The~~Disaggregated ~~following table presents our revenues for the three and six months ended June 30, 2017 disaggregated by type of revenue for each segment (in thousands):~~Revenues

	Three Months Ended June 30, 2017
	Coal - U.S.		Coal - Canada		Coal - WMLP		Power
Domestic coal sales	$	134,558	$	67,468	$	79,817	$	—
Export coal sales	—		21,383		—		—
Power revenues	—		—		—		19,880
Other revenues	2,791		182		1,235		—
Total	$	137,349	$	89,033	$	81,052	$	19,880
	Six Months Ended June 30, 2017
	Coal - U.S.		Coal - Canada		Coal - WMLP		Power
Domestic coal sales	$	272,884	$	143,395	$	152,925	$	—
Export coal sales	—		56,163		—		—
Power revenues	—		—		—		41,107
Other revenues	4,245		675		2,932		—
Total	$	277,129	$	200,233	$	155,857	$	41,107

The following table presents our revenues for the three and nine months ended September 30, 2018 disaggregated by type of revenue for each operating segment, exclusive of intercompany eliminations contained within our Corporate segment (in thousands):



	Three Months Ended September 30, 2018
	Coal - U.S.		Coal - Canada		Coal - WMLP
Domestic coal sales	$	119,905	$	74,457	$	62,731
Export coal sales	—		72,511		—
Other revenues	1,415		371		54
Total	$	121,320	$	147,339	$	62,785

	Nine Months Ended September 30, 2018
	Coal - U.S.		Coal - Canada		Coal - WMLP
Domestic coal sales	$	337,407	$	219,427	$	189,472
Export coal sales	—		145,311		—
Other revenues	5,005		1,397		5,415
Total	$	342,412	$	366,135	$	194,887

The following table presents our revenues for the three and nine months ended September 30, 2017 disaggregated by type of revenue for each operating segment, exclusive of intercompany eliminations contained within our Corporate segment (in thousands):



	Three Months Ended September 30, 2017
	Coal - U.S.		Coal - Canada		Coal - WMLP		Power
Domestic coal sales	$	149,212	$	83,649	$	84,888	$	—
Export coal sales	—		30,672		—		—
Power revenues	—		—		—		20,070
Other revenues	543		656		718		—
Total	$	149,755	$	114,977	$	85,606	$	20,070

	Nine Months Ended September 30, 2017
	Coal - U.S.		Coal - Canada		Coal - WMLP		Power
Domestic coal sales	$	433,067	$	225,943	$	237,812	$	—
Export coal sales	—		87,936		—		—
Power revenues	—		—		—		61,177
Other revenues	4,788		1,331		3,650		—
Total	$	437,855	$	315,210	$	241,462	$	61,177

16. CONTINGENCIES

Litigation

There have been no material changes in our litigation since December 31, 2017. For additional information, refer to Note 18. Commitments and Contingencies to the consolidated financial statements of our 2017 Form 10-K.

A loss contingency for the 2013 breach of a water containment pond at our Obed mine in Canada remains probable and reasonably estimable. The previous owner, Sherritt International Corporation, continues to fully indemnify us for the actual cost of the remediation as well as the costs of compliance with any regulatory orders, including any fees, fines, or judgments resulting from the water release. As of June 30, 2018, the Company has recorded $6.7 million in Other current liabilities in the Consolidated Balance Sheets (unaudited) for the estimated costs of remediation work and a corresponding amount in Receivables - Other in the Consolidated Balance Sheets (unaudited) to reflect the indemnification by the prior owner.34

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WESTMORELAND COAL COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONT.)

A loss contingency for the 2013 breach of a water containment pond at our Obed mine in Canada remains probable and reasonably estimable. The previous owner, Sherritt International Corporation, continues to fully indemnify us for the actual cost of the remediation as well as the costs of compliance with any regulatory orders, including any fees, fines, or judgments resulting from the water release. As of September 30, 2018, the Company has recorded $11.9 million within its liabilities in the Consolidated Balance Sheets (unaudited) for the estimated costs of remediation work and a corresponding amount within its receivables in the Consolidated Balance Sheets (unaudited) to reflect the indemnification by the prior owner.

17. SUBSEQUENT EVENTS

~~The~~For ~~Company~~information ~~has~~regarding ~~evaluated~~the ~~subsequent~~Company's ~~events~~filing inunder ~~accordance~~Chapter ~~with~~11 ~~ASC~~of ~~855, Subsequent Events, through~~ the ~~filing~~United ~~date~~States ofBankruptcy ~~this Quarterly Report~~Code, ~~and~~see ~~determined~~Note ~~that~~1 no- Basis ~~events~~Of have occurred that have not been disclosed elsewhere in the notes to the consolidated financial statements (unaudited) that would require adjustments to disclosures in the consolidated financial statements (unaudited)Presentation.

32The Company has evaluated subsequent events in accordance with ASC 855, Subsequent Events, through the filing date of this Quarterly Report, and determined that no other events have occurred that have not been disclosed elsewhere in the notes to the consolidated financial statements (unaudited) that would require adjustments to disclosures in the consolidated financial statements (unaudited).

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WESTMORELAND COAL COMPANY AND SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

ITEM 2— MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report and materials we have filed or will file with the Securities and Exchange Commission (as well as information included in our other written or oral statements) contain or will contain certain statements that are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on our expectations and assumptions at the time they are made and are not guarantees of future performance. Because forward looking statements relate to the future, they involve certain risks, uncertainties and assumptions that are difficult to predict. Actual outcomes and results may differ materially from those expressed in, or implied by, our forward-looking statements. Words such as “expects,” “intends,” “anticipates,” “believes,” “estimates,” “guides,” “provides guidance,” “provides outlook” and other similar expressions or future or conditional verbs such as “may,” “will,” “should,” “would,” “could,” and “might” are intended to identify such forward-looking statements. Readers of this Quarterly Report should not rely solely on the forward-looking statements and should consider all uncertainties and risks discussed in Item 1A - Risk Factors and throughout the Quarterly Report. The statements are only as of the date they are made, and the Company undertakes no obligation to update any forward-looking statement. Possible events or factors that could cause results or performance to differ materially from those expressed in our forward-looking statements include but are not limited to the following:

• ~~Adverse~~Risks ~~impacts~~associated towith our ~~business,~~October ~~financial condition~~9, ~~results~~2018 ofvoluntary ~~operations~~petition ~~and~~for ~~cash~~relief ~~flows~~under ~~resulting~~Chapter ~~from~~11 of the ~~ongoing~~US. ~~capital~~Bankruptcy ~~structure review~~Code, including risks associated with court proceedings, impacts to our ~~possible~~business ~~filing~~from ~~for~~operating under bankruptcy court protection, ~~under~~impacts ~~Chapter~~to 11our ofoutstanding equity, impacts to our financial results, impacts to our ability to retain employees, and our ability to achieve our goals for the ~~United~~reorganization ~~States~~under ~~Bankruptcy~~Chapter ~~Code~~11;

• Our ~~substantial~~ability ~~level~~to ofmaintain ~~indebtedness~~adequate ~~and~~liquidity, ~~our~~including ~~ability~~adhering to ~~adhere~~our to financial ~~covenants~~and ~~contained~~other ~~within~~covenants ~~the~~associated ~~agreements~~with ~~governing~~our ~~indebtedness,~~debtor-in-possession ~~including~~("DIP") ~~indebtedness~~financing ~~under the Bridge Loan entered into on May 21, 2018~~agreement;

• ~~Adverse~~Our ~~impacts~~ability to ~~our~~successfully ~~business~~comply aswith ~~a result of~~ the ~~audit~~terms ~~opinion~~ of our ~~independent auditor containing an explanatory paragraph referencing our conclusion that substantial doubt exists as to our ability to continue as a going concern contained within our 2017 Form 10-K~~RSA;


•	Our ability to confirm and consummate a Chapter 11 plan;


•	Risks associated with third party motions in the Chapter 11 cases;


•	Increased costs related to the bankruptcy filing and other litigation;


•	Our ability to manage contracts that are critical to our operations, to obtain and maintain appropriate terms with our customers, suppliers and service providers;


•	Our exposure to fluctuations in commodity prices;


•	Risks associated with out common stock being traded on the over-the-counter market;


•	The impact of cross-acceleration and cross-default provisions between our debt and debt held by WMLP;

• Our ability to successfully execute a sale of ~~certain~~the assets ~~held~~of by WMLP;


•	Our ability to generate sufficient cash flow;


•	Our ability to secure coal supply agreements to replace revenue from expiring contracts at WMLP;


•	Existing and future environmental legislation and regulation affecting both our coal mining operations and our customers’ coal usage, governmental policies and taxes, including those aimed at reducing emissions of elements such as mercury, sulfur dioxides, nitrogen oxides, particulate matter or greenhouse gases;


•	The concentration of revenues derived from a small number of customers, and the creditworthiness of those customers;


•	Changes in our post-retirement medical benefit and pension obligations resulting from market volatility or changes in assumptions regarding our future expenses;


•	Inaccuracies in our estimates of our coal reserves, reclamation and/or mine closure obligations;


•	Potential limitations in obtaining bonding capacity and/or increases in our mining costs as a result of increased bonding expenses;


•	Business interruptions, including unplanned equipment failures, geological, hydrological or other conditions, and competition and/or conflicts with other resource extraction activities, caused by external factors;


•	Natural disasters and events, including blizzards, earthquakes, drought, floods, fire and storms, not all of which are covered by insurance;


•	Potential title defects or loss of leasehold interests in our properties, which could result in unanticipated costs or an inability to mine the properties;


•	Risks associated with cybersecurity and data leakage;


•	Our ability to continue to acquire and develop coal reserves through acquisition and to raise the associated capital necessary to fund our expansion;


•	Changes in our tax position resulting from ownership changes, our interest in WMLP, and changes in tax law;


•	Risks associated with our interest in WMLP;


•	The availability and costs of key supplies or commodities, such as transportation, key equipment and materials;

~~• Competition within our industry and with producers of competing energy sources;~~36

• Our relationships with, and other conditions affecting, our customers, including how power prices and consumption patterns affect our customers’ decisions to run their plants;

• Changes in the export and import markets for coal products;

• Extensive government regulations both in the US. and Canada, including existing and potential future legislation, treaties and regulatory requirements;

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WESTMORELAND COAL COMPANY AND SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (CONT.)


•	Competition within our industry and with producers of competing energy sources;


•	Our relationships with, and other conditions affecting, our customers, including how power prices and consumption patterns affect our customers’ decisions to run their plants;


•	Changes in the export and import markets for coal products;


•	Extensive government regulations both in the US. and Canada, including existing and potential future legislation, treaties and regulatory requirements;


•	The impacts of climate change concerns;


•	Our ability to obtain and/or renew operating permits;


•	Our ability to raise capital due to our delisting from Nasdaq and the potential impacts to the liquidity of our common stock as a result of being traded on over-the-counter markets;


•	Our ability to effectively manage and integrate acquisitions;


•	Risks associated with our business outside the United States; and


•	Other factors that are described under the heading “Risk Factors” found in our reports filed with the Securities and Exchange Commission, including our Annual Reports on Form 10-K and our Quarterly Reports on Form 10-Q.

Unless otherwise specified, the forward-looking statements in this report speak as of the filing date of this Quarterly Report on Form 10-Q. Factors or events that could cause our actual results to differ may emerge from time to time and it is not possible for us to predict all of them. We undertake no obligation to publicly update any forward-looking statements, whether because oof new information, future developments or otherwise, except as may be required by law.

Overview

Westmoreland Coal Company produces and sells thermal coal primarily to investment grade utility customers under long-term, cost-protected contracts. Our focus is primarily on mine locations which allow us to employ dragline surface mining methods and take advantage of close customer proximity through mine-mouth power plants and strategically located rail transportation. Our coal operations include surface coal mines in the United States and Canada, underground coal mines in Ohio and New Mexico, a char production facility and a 50% interest in an activated carbon plant. We also own the general partner of, and a majority of the equity interests in, WMLP, a publicly-traded coal master limited partnership. We classify our business into three operating segments (Coal - U.S., Coal - Canada and Coal - WMLP) and two non-operating segments (Heritage and Corporate). Our Heritage segment primarily includes the costs of benefits we provide to former mining operation employees and our Corporate segment consists primarily of corporate administrative and business development expenses.

We are a holding company and conduct our operations through subsidiaries. We have significant cash requirements to fund our ongoing debt obligations, pension contributions, heritage health benefit costs and corporate overhead costs. The principal sources of cash flow to us are distributions from our operating subsidiaries.

Recent Trends and Activities

One of the major factors affecting the volume of coal that we sell in any given period is the demand for coal-generated electric power. Numerous factors affect the demand for electric power and the specific demands of customers, including weather patterns, the presence of hydro- or wind-generated energy in our particular energy grids, environmental and legal challenges, political influences, energy policies, international and domestic economic conditions, power plant outages and other factors discussed herein. More specifically, during the ~~six~~nine months ended ~~June~~September 30, 2018, our financial results were impacted by several trends and activities, which are described below.

• ~~Coal~~Restructuring. ~~Valley~~On ~~Coal~~October ~~Pricing.~~9, ~~Operations~~2018, atwe ~~this~~entered ~~mine~~into ~~have~~the ~~historically~~RSA ~~been~~with ~~exposed~~members toof ~~changes~~an inad ~~pricing~~hoc ongroup of lenders (the ~~open~~"Ad ~~market~~Hoc Group") that hold approximately 76.1% ~~However,~~of ~~recently~~the Company's Term Loan, ~~more~~approximately ~~favorable~~57.9% ~~pricing~~of ~~was~~its ~~secured~~8.75% ~~for~~Notes ~~2018,~~and ~~given~~approximately ~~current~~79.1% ~~market~~of ~~conditions,~~its ~~which~~Bridge Loan. To implement the RSA, we ~~believe~~filed ~~will~~voluntary ~~help~~petitions tofor ~~offset~~relief ~~recent~~under ~~downward~~Chapter ~~trends~~11 of the U.S. Bankruptcy Code in ~~demand~~the U.S. ~~Whether~~Bankruptcy Court for the Southern District of Texas, ~~and~~Houston toDivision. ~~what~~On ~~extent~~the same date, ~~favorable~~WMLP ~~pricing~~also ~~and~~filed ~~consistent~~for ~~volumes~~relief ~~persist~~under Chapter 11 in ~~future~~the ~~periods~~U.S. isBankruptcy ~~dependent~~Court ~~upon~~for ~~fluctuations~~the inSouthern ~~market~~District ~~demand~~of ~~within~~Texas, ~~this~~Houston ~~region~~Division. The Company's Canadian entities and Westmoreland Risk Management, Inc. were excluded from the voluntary petitions.

• San Juan Coal Company. The San Juan Coal Company ("SJCC") mine provides 100% of its coal to the San Juan Generating Station ("SJGS") in New Mexico, operated by Westmoreland's customer, Public Service of New Mexico ("PNM"). As anticipated, at the end of 2017, PNM closed and began reclamation on two of SJGS's four coal power generating units. In addition, in March 2018, one of the remaining coal power generating units was damaged, resulting in an unplanned outage. The damage that caused this unplanned outage was remediated and operations at this generating unit resumed during the last week of June 2018. As a result of these factors, during the first half of 2018, coal tons sold from the San Juan mine declined 60% compared to the first half of 2017.37

• Ohio Pricing and Demand. Our operations within this region are exposed to changes in pricing on the open market. In recent quarters, the price of coal has been volatile and has generally been pressured by reduced demand, political pressures and the price of competing products, such as natural gas, that are used in energy production. This has resulted in depressed revenues, net income and Adjusted EBITDA in recent quarters. Whether, and to what extent, pricing and volume softness persist in future periods is dependent upon fluctuations in market demand within this region.

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Prior to the Chapter 11 filing, we and WMLP proactively engaged separate financial advisers to assess the capital structures of our respective companies and to advise on any restructuring. Costs associated with this process were $15.6 million and $35.9 million during the three and nine months ended September 30, 2018, respectively. We intend to continue working constructively with our advisers and with the Ad Hoc Group throughout the Chapter 11 process. WMLP will continue to pursue a value-maximizing sale and marketing process of its assets, including its Kemmerer mine in Wyoming and Oxford assets in Ohio and Kentucky, a process which began in August 2018. There can be no guarantee that we or WMLP will be successful in these efforts.

Please see Note 1 - Basis Of Presentation as well as "Liquidity and Capital Resources" for further information.

•

Coal Valley Coal Pricing. Operations at this mine are exposed to changes in pricing on the open market. However, during the first half of 2018, more favorable pricing was secured for the remainder of the year given current market conditions, which we believe will help to offset recent downward trends in demand in the Canadian segment. Whether, and to what extent, favorable pricing and consistent volumes persist in future periods is dependent upon fluctuations in market demand within this region.

•

San Juan Coal Company. The San Juan Coal Company ("SJCC") mine provides 100% of its coal to the San Juan Generating Station ("SJGS") in New Mexico, operated by the Company's customer, Public Service of New Mexico ("PNM"). As anticipated, at the end of 2017, PNM closed and began reclamation on two of SJGS's four coal power generating units. In addition, in March 2018, one of the remaining coal power generating units was damaged, resulting in an unplanned outage. The damage that caused this unplanned outage was remediated and operations at this generating unit resumed during the last week of June 2018. As a result of these factors, during the nine months ended September 30, 2018, coal tons sold from the San Juan mine declined 58% compared to the nine months ended September 30, 2017.

•

Ohio Pricing and Demand. Our operations within this region are exposed to changes in pricing on the open market. In recent quarters, the price of coal has been volatile and has generally been pressured by reduced demand, political pressures and the price of competing products, such as natural gas, that are used in energy production. This has resulted in depressed revenues, net income and Adjusted EBITDA in recent quarters. Whether, and to what extent, pricing and volume softness persist in future periods is dependent upon fluctuations in market demand within this region.

On June 14, 2018, we were notified by a significant customer in Ohio that such customer would not renew its coal supply contract related to the Conesville Power Plant Units 5 and 6 after the current contract ends on December 31, 2018. Coal sales under Oxford’s current coal supply contract to AEP’s Conesville Power Plant Units 5 and 6 represented a substantial portion of the Coal - WMLP segment revenues generated from the Ohio Operations for the year ended December 31, 2017. While we endeavor to secure additional coal supply contracts to replace volumes lost at the end of this contract, there can be no guarantee these efforts will be successful.

• ~~Capital~~Impairment ~~Structure Review~~Charges. InDuring ~~order~~the tonine ~~address~~months ~~our~~ended ~~substantial~~September ~~indebtedness~~30, as2018, ~~well~~we asrecognized ~~upcoming~~impairment ~~debt~~charges ~~maturities,~~of ~~covenant~~$143.3 ~~violations~~million, ~~and~~of ~~other~~which ~~issues,~~$65.6 asmillion ~~described~~related into ~~Note~~the 1Coal - ~~Basis~~U.S. Ofsegment ~~Presentation,~~and we$77.7 ~~have~~million ~~engaged~~related ~~advisers~~ to ~~assist~~the ~~with~~Coal ~~the~~- ~~evaluation~~WMLP ofsegment ~~strategic~~(see ~~alternatives,~~Note ~~which~~6 ~~may~~- ~~include,~~Loss ~~but~~On ~~not~~Impairment). beThese ~~limited~~impairment ~~to,~~charges adjusted downwards the ~~sale~~carrying value of certain assets, aat ~~restructuring~~the Absaloka, ~~amendment~~Beulah orand ~~refinancing~~Buckingham ofmines ~~existing~~in ~~debt~~the ~~through~~Coal a- ~~private~~U.S. ~~restructuring~~segment orand ~~reorganization~~the ~~under~~Ohio ~~Chapter~~mines 11within of the ~~Bankruptcy~~Coal ~~Code~~- WMLP segment. ~~Costs~~As ~~associated~~a ~~with~~result ~~this~~of ~~process~~these ~~were~~charges, ~~$14.8~~the ~~million~~remaining ~~and~~depreciable ~~$20.2~~value ~~million~~of ~~during~~our ~~the~~assets ~~three~~at these mines is lower, which has and ~~six~~will ~~months~~continue ~~ended~~to ~~June~~result ~~30,~~in ~~2018~~lower depreciation, ~~respectively~~depletion and amortization expense in future periods.

~~Pursuant~~• ~~to the Waiver and Amendment No~~Financing. 5On toMay ~~the WMLP’s loan agreement (“Amendment No. 5”) entered dated as of June 15~~21, 2018, we ~~were~~entered ~~required,~~into ~~amongst~~the ~~other~~Bridge ~~things,~~Loan toAgreement ~~develop~~with aan ~~business~~ad ~~plan~~hoc togroup ~~utilize~~of inour aexisting ~~possible~~first ~~sale~~lien oflenders ~~the~~and ~~WMLP~~creditors ~~assets,~~under ~~including~~the ~~both~~8.75% ~~Kemmerer~~Notes and ~~Ohio~~Term ~~operations~~Loan, ~~and~~pursuant ~~a sale protocol with respect~~ to ~~such~~which ~~possible~~we ~~sale. This~~accessed ~~business~~an ~~plan~~additional ~~was~~$110 ~~provided~~million toterm ~~WMLP~~loan, ~~lenders’~~consisting ~~professional~~of ~~advisers~~$90 onmillion ~~July~~in ~~31,~~initial ~~2018,~~funding and, ~~consistent~~an ~~with~~undrawn ~~the~~delayed ~~agreed~~draw ~~upon~~funding ~~sales~~of ~~protocol,~~up ~~the process~~ to ~~market~~$20 ~~WMLP’s assets contemplated by Amendment No~~million. 5These isfunds ~~expected~~were toused ~~be initiated~~ in ~~August~~part ~~2018. There~~to ~~can~~pay beoff noand ~~guarantee~~fully ~~that~~extinguish wethe ~~will~~Revolver beand ~~successful~~San inJuan ~~these~~Loan. ~~efforts~~As ~~nor~~a ~~that~~result, ~~such~~during ~~asset sales will generate sufficient cash to repay existing debt at~~ the ~~WMLP~~nine ~~before~~months itended ~~matures. On~~September ~~July 31~~30, 2018, ~~WMLP~~we ~~entered~~recognized ~~into~~ a ~~new~~$1.8 ~~waiver~~million ~~and~~loss ~~amendment~~related to ~~WMLP’s~~the ~~loan~~early ~~agreement,~~extinguishment ~~which~~of ~~waiver~~debt, and ~~amendment~~we ~~extends~~paid ~~the~~an ~~waiver~~additional ~~through~~$2.7 ~~and~~million ~~including~~in ~~September~~debt 8,issuance ~~2018~~costs.

~~The~~On ~~evaluation~~October of9, 2018, pursuant to the RSA we entered into with the Ad Hoc Group, the $90 million outstanding under our ~~capital~~Bridge ~~structure~~Loan iswas ~~ongoing~~refinanced with a new $110 million DIP Loan subject to final approval of the Bankruptcy Court, of which $90 million has been drawn. ~~There~~The ~~can~~super-priority benon-amortizing noDIP ~~assurances~~Loan ~~that~~bears ~~our~~interest ~~efforts~~at ~~will~~the besame ~~successful~~rate inas ~~addressing~~the ~~these~~Bridge ~~issues~~Loan. ~~Please~~The ~~see~~DIP Loan financing and cash flow from operations are expected to provide adequate liquidity to support our U.S. and Canadian business throughout the restructuring process. See Note 17 - ~~Basis~~Debt OfAnd ~~Presentation~~Lines asOf ~~well~~Credit asand "Liquidity and Capital Resources" for further ~~information~~discussion.

• Impairment Charges. During the second quarter of 2018, we recognized impairment charges of $143.3 million, of which $65.6 million related to the Coal - U.S. segment and $77.7 million related to the Coal - WMLP segment (see Note 6 - Loss On Impairment). These impairment charges adjusted downwards the carrying value of certain assets at the Absaloka, Beulah and Buckingham mines in the Coal - U.S. segment and the Ohio mines within the WMLP segment. As a result of these charges, the remaining depreciable value of our assets at these mines is lower, which will result in lower depreciation, depletion and amortization expense in future periods.38

• Bridge Loan. On May 21, 2018, we entered into a credit agreement with an ad hoc group of our existing first lien lenders and creditors under the 8.75% Notes and Term Loan, pursuant to which we accessed an additional $110 million term loan, consisting of $90 million in initial funding and an undrawn delayed draw funding of up to $20 million. These funds were used in part to pay off and fully extinguish the Revolver and San Juan Loan. As a result, during the second quarter of 2018, we recognized a $1.8 million loss related to the early extinguishment of debt, and we paid an additional $2.7 million in debt issuance costs. See Note 7 - Debt And Lines Of Credit for further discussion.

• Early Repayment of Loan and Lease Receivables. During the first quarter of 2017, we received $52.5 million from our customer at the Genesee mine, representing an accelerated repayment of all then-outstanding loan and lease receivables. These loan and lease receivables represented the financed portion of amounts owed to Westmoreland for capital expenditures we had made on behalf of our customer. This payment, which will not recur in 2018 or beyond, fully satisfied amounts owed to Westmoreland for loan and lease receivables and Westmoreland is no longer entitled to further payments from these agreements, which historically generally averaged approximately $3 million to $4 million per quarter. We have no further obligation to make capital expenditures at the mine, though we anticipate continuing to provide contract mining services at the Genesee mine through 2030.

• ROVA Sale. During the fourth quarter of 2017, we sold all of the power assets associated with the Roanoke Valley Power Facility ("ROVA") and exited the related power purchase and supply agreements. As a result, the power segment had no revenue, operating income or Adjusted EBITDA in the first half of 2018, but generated revenue of $41.1 million, an operating loss of $1.1 million and negative Adjusted EBITDA of $3.5 million in the first half of 2017.

• 2017 Operating Challenges. Certain of our Canadian mines experienced unexpected operating challenges, including a dragline outage, that impacted financial results for the first and second quarters of 2017. In addition, during the first and second quarters of 2017, we were mining in a more challenging area at the Coal Valley mine. This was in part because we had been operating Coal Valley in anticipation of either a sale or shutdown of the mine during 2017, which drove us to minimize the number of mining pits and delay maintenance on our equipment. This resulted in lower yields and increased costs during the first half of 2017.

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• Early Repayment of Loan and Lease Receivables. During the first quarter of 2017, we received $52.5 million from our ~~Kemmerer~~customer at the Genesee mine, ~~experienced~~representing ~~unusually~~an ~~high~~accelerated ~~amounts~~repayment of ~~precipitation,~~all ~~which~~then-outstanding ~~increased~~loan ~~our~~and ~~mining~~lease ~~costs~~receivables. These loan and ~~restricted~~lease ~~our~~receivables ~~ability~~represented tothe ~~supply~~financed ~~coal.~~portion ~~These~~of ~~factors~~amounts ~~lowered~~owed ~~our~~to ~~coal~~the ~~tons~~Company ~~sold~~for ~~and~~capital ~~our~~expenditures ~~revenues~~we ~~during~~had ~~the~~made ~~first~~on ~~quarter~~behalf of ~~2017~~our customer. This payment, ~~resulting~~which will not recur in a2018 ~~favorable~~or ~~year-over-year~~beyond, ~~comparison~~fully satisfied amounts owed to the Company for loan and lease receivables and the ~~year-~~Company is no longer entitled to~~-date~~ ~~periods~~further inpayments ~~2018~~from ~~and~~these ~~2017~~agreements, which historically generally averaged approximately $3 million to $4 million per quarter. ~~These~~ ~~unfavorable~~We ~~weather~~have ~~patterns~~no ~~did~~further ~~not~~obligation ~~recur~~to inmake capital expenditures at the ~~2018~~mine, ~~period~~though we anticipate continuing to provide contract mining services at the Genesee mine through 2030.

•

ROVA Sale. During the fourth quarter of 2017, we sold all of the power assets associated with the Roanoke Valley Power Facility ("ROVA") and exited the related power purchase and supply agreements. As a result, the power segment had no revenue, operating income or Adjusted EBITDA during the three and nine months ended September 30, 2018, but generated revenue of $20.1 million, operating income of $5.3 million and Adjusted EBITDA of $0.4 million during the three months ended September 30, 2017. The power segment generated revenue of $61.2 million, operating income of $4.2 million and negative Adjusted EBITDA of $3.1 million during the nine months ended September 30, 2017.

•

2017 Operating Challenges. Certain of our Canadian mines experienced unexpected operating challenges, including a dragline outage, that impacted financial results for the nine months ended September 30, 2017. In addition, during the nine months ended September 30, 2017, we were mining in a more challenging area at the Coal Valley mine. This was in part because we had been operating Coal Valley in anticipation of either a sale or shutdown of the mine during 2017, which drove us to minimize the number of mining pits and delay maintenance on our equipment. This resulted in lower yields and increased costs during the nine months ended September 30, 2017.

During the first quarter of 2017, our Kemmerer mine experienced unusually high amounts of precipitation, which increased our mining costs and restricted our ability to supply coal. These factors lowered our coal tons sold and our revenues during the first quarter of 2017, resulting in a favorable period-over-period comparison for the year-to-date periods in 2018 and 2017. These unfavorable weather patterns did not recur in the 2018 period.

•

Seasonality. Our financial results are impacted by seasonality caused by weather and customer buying patterns. Customer buying patterns are influenced by many factors, including annual maintenance outages at our customers’ plants, which often occur in the spring, when the demand for power is low. Combined, these factors have historically led to lower Adjusted EBITDA for our mine operations in the second quarter and first half of the year.

Results of Operations

Three Months Ended ~~June~~September 30, 2018 Compared to Three Months Ended ~~June~~September 30, 2017

Consolidated Results of Operations

The following table shows the comparative consolidated results and changes between periods:

	Three Months Ended June 30,						Increase / (Decrease)
	Three Months Ended September 30,						Increase / (Decrease)
	2018			2017			$			%
	(In thousands, except tons data)
Revenues	$	~~276~~328,~~312~~890		$	~~327~~365,~~314~~014		$	(5136,~~002~~124	)	(159.69	)%
Operating loss	$	(157,985	)	$	(13,042	)	$	(144,943	)	(1,111.4	)%
Operating (loss) income	$	(7,368	)	$	24,981		$	(32,349	)	*
Net loss applicable to common shareholders	$	(~~186~~40,~~067~~540	)	$	(4612,~~144~~397	)	$	(~~139~~28,~~923~~143	)	(~~303~~227.20	)%
Adjusted EBITDA(1)	$	3040,~~208~~811		$	3669,~~855~~587		$	(628,~~647~~776	)	(1841.04	)%
Tons sold—millions of equivalent tons	911.72			1113.06			(12.34		)	(1117.86	)%

____________________


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

Revenues decreased 15.6% due in large part to the sale of ROVA assets and underlying revenue streams which occurred in the fourth quarter of 2017. This sale resulted in a period-over-period revenue decline of $19.9 million. Further contributing to the decrease were volume declines driven by the planned closure of two units at San Juan and ongoing demand pressure in our Ohio region. Partially offsetting these declines was a $19.3 million increase in revenues quarter-over-quarter at our Coal Valley mine due to favorable pricing (as discussed above in "Recent Trends and Activities") and increased demand in the current quarter.

Operating loss increased by $144.9 million driven primarily by an impairment charge of $143.3 million (as discussed in Note 6 - Loss On Impairment) coupled with increases in selling, general and administrative expense related to advisory fees relative to the ongoing capital structure review. This was partially offset by production efficiencies and reduced depreciation, depletion and amortization expense ("DD&A").

Adjusted EBITDA decreased by $6.6 million, or 18.0%. This decrease was driven by declines in revenues as discussed previously, offset by decreases in cost of sales (excluding DD&A) on lower volumes. Adjusted EBITDA excludes the impact of loss on impairment, DD&A expense and the advisory fees discussed above.

Coal - U.S. Segment Operating Results

	Three Months Ended June 30,						Increase / (Decrease)
	2018			2017			$			%
	(In thousands, except tons data)
Revenues	$	102,492		$	145,642		$	(43,150	)	(29.6	)%
Operating loss	$	(65,529	)	$	(1,247	)	$	(64,282	)	(5,154.9	)%
Adjusted EBITDA(1)	$	14,806		$	28,260		$	(13,454	)	(47.6	)%
Tons sold—millions of equivalent tons	3.1			4.0			(0.9		)	(22.5	)%

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

* Not meaningful.

36Revenues decreased 9.9% on 17.6% fewer tons sold in the third quarter of 2018 compared to the third quarter of 2017. The decline in revenue was due in large part to the sale of ROVA assets and underlying revenue streams which occurred in the fourth quarter of 2017. This sale resulted in a period-over-period revenue decline of $20.1 million. Further contributing to the decrease were volume declines driven by the planned closure of two units at San Juan and ongoing demand pressure in our Ohio region. Partially offsetting these declines was a $32.4 million period-over-period increase in revenues from our Coal - Canada segment, which benefited from more favorable pricing at our Coal Valley mine, as discussed above in "Recent Trends and Activities."

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WESTMORELAND COAL COMPANY AND SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (CONT.)

~~Revenues~~Operating ~~decreased~~loss 29of $7.6%4 ~~primarily~~million ~~due~~represented to a ~~decline~~period-over-period indecrease ~~volume~~of at$32.3 ~~the~~million, ~~San~~which ~~Juan~~was ~~mine~~driven ~~resulting~~primarily ~~from~~by ~~the~~lower ~~planned~~revenues, ~~closure~~as ofdiscussed ~~two~~above, ofand ~~the~~increased ~~four~~selling, ~~coal~~general ~~power~~and ~~generating~~administrative ~~units~~expense atrelated ~~the~~to ~~San~~advisory ~~Juan Generating Station coupled with the unplanned outage~~fees, ~~described~~as ~~previously~~discussed in "Recent Trends and Activities." ~~Revenue~~This was ~~also~~partially ~~negatively~~offset ~~impacted~~ by ~~amended~~improved ~~contract~~operating ~~terms~~income ~~with~~from ~~one of~~ our ~~merchant~~Coal ~~customers,~~- ~~which~~Canada ~~resulted~~segment inand lower ~~pricing.~~operating ~~These~~income ~~declines~~from ~~were~~our ~~partially~~power ~~offset~~segment, byas ~~increased~~discussed ~~demand~~in at"Recent ~~certain~~Trends ~~other~~and ~~mines, particularly our mines in Montana~~Activities."

~~Operating~~Net loss ~~increased~~applicable byto common shareholders declined $6428.31 million ~~driven~~during ~~primarily~~the byquarter anended ~~impairment~~September ~~charge~~30, of2018 ~~$65.6~~compared ~~million~~with ~~(as~~the ~~discussed~~same period in ~~Note~~2017, 6largely ~~- Loss~~as Ona ~~Impairment)~~result ~~partially~~of ~~offset~~the bysame afactors ~~reduction~~that inimpacted ~~depletion~~operating ~~costs~~(loss) atincome. In ~~our~~addition, ~~San~~interest ~~Juan~~expense ~~mine~~was higher due to the bridge loan financing, as adescribed ~~result~~in of"Recent ~~temporary~~Trends ~~production~~and ~~curtailment.~~Activities," offset by improvements in other expense.

Adjusted EBITDA decreased by $1328.58 million, or 4741.64%. This decrease was driven by declines in revenues as discussed previously, offset by decreases in cost of sales (excluding DD&A) on lower ~~volume~~volumes. Adjusted EBITDA excludes the impact of ~~loss on impairment,~~ DD&A expense and the advisory fees discussed above.

Coal - U.S. Segment Operating Results



	Three Months Ended September 30,				Increase / (Decrease)
	2018		2017		$			%
	(In thousands, except tons data)
Revenues	$	121,320	$	149,755	$	(28,435	)	(19.0	)%
Operating income	$	10,684	$	15,719	$	(5,035	)	(32.0	)%
Adjusted EBITDA⁽¹⁾	$	28,886	$	42,004	$	(13,118	)	(31.2	)%
Tons sold—millions of equivalent tons	4.1		5.6		(1.5		)	(26.8	)%

____________________


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

Revenues decreased 19.0% on 26.8% fewer tons sold during the third quarter of 2018 compared with the third quarter of 2017. Revenue and volume declines were primarily due to a decline in volume at the San Juan mine resulting from the planned closure of two of the four coal power generating units at the San Juan Generating Station coupled with the unplanned outage, described previously in "Recent Trends and Activities." Revenue was also negatively impacted by lower volumes from our Colstrip mine. These declines were offset by increased per-ton pricing at our Absoloka mine.

Operating income decreased by $5.0 million, or 32.0%, driven by lower revenues, as discussed above, and increased expenses related to a longwall move at our San Juan mine. These operating income declines were partially offset by lower cost of sales resulting from fewer tons sold and lower DD&A expense, also resulting from lower tons sold as well as the second quarter 2018 impairment, as described previously in "Recent Trends and Activities."

Adjusted EBITDA decreased by $13.1 million, or 31.2%, primarily as a result of the aforementioned operating income pressure. Adjusted EBITDA excludes the impact of lower DD&A expense in the 2018 period.

Coal - Canada Segment Operating Results

	Three Months Ended June 30,					Increase / (Decrease)
	Three Months Ended September 30,					Increase / (Decrease)
	2018		2017			$			%
	(In thousands, except tons data)
Revenues	$	~~109~~147,~~525~~339	$	89114,~~033~~977		$	2032,~~492~~362		2328.01	%
Operating income (loss)	$	14,847	$	(12,078	)	$	26,925		*
Operating income	$	9,163	$	476		$	8,687		1,825.0	%
Adjusted EBITDA(1)	$	2319,~~289~~538	$	(112,~~913~~790	)	$	256,~~202~~748		*52.8	%
Tons sold—millions of equivalent tons	5.27		56.21			—(0.4		)	—(6.6	)%

____________________


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

During * Notthe ~~meaningful~~third quarter of 2018, revenues increased 28.1% despite a 6.6% decline in tons sold compared with the third quarter of 2017. Pricing increases, particularly at the Coal Valley mine as discussed in "Recent Trends and Activities" above, as well as higher volumes at the Coal Valley mine were partially offset by lower volume period-over-period across the segment.

~~Revenues~~Operating ~~increased~~income ~~23.0%~~improved ~~due~~by ~~primarily~~$8.7 tomillion, ~~volume~~driven ~~and~~by ~~pricing~~increased ~~increases~~revenues atdescribed ~~our Coal Valley mine~~previously, asoffset ~~discussed~~by inincreased ~~"Recent~~cost ~~Trends~~of ~~and~~sales ~~Activities"~~due ~~above.~~to ~~This~~the ~~increase~~timing ~~was~~of ~~partially~~stockpile ~~offset~~builds byand ~~volume declines at our Estevan mine~~releases.

Operating income (loss) improved by $26.9 million due to the increase in revenues mentioned above, coupled with production efficiencies at our Coal Valley mine as compared to the second quarter of 2017 when costs were higher due to operational challenges, as discussed in "Recent Trends and Activities."40

Adjusted EBITDA improved by $25.2 million, driven by the same factors as discussed above for operating income (loss). Adjusted EBITDA excludes the impact of DD&A expense.

Coal - WMLP Segment Operating Results

	Three Months Ended June 30,					Increase / (Decrease)
	2018			2017		$			%
	(In thousands, except tons data)
Revenues	$	64,295		$	81,052	$	(16,757	)	(20.7	)%
Operating (loss) income	$	(82,471	)	$	7,588	$	(90,059	)	*
Adjusted EBITDA(1)	$	7,649		$	18,815	$	(11,166	)	(59.3	)%
Tons sold—millions of equivalent tons	1.4			1.9		(0.5		)	(26.3	)%

____________________

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

* Not meaningful.

Revenues decreased 20.7% on 26.3% fewer coal tons sold during the second quarter of 2018 compared with the second quarter of 2017 driven primarily by pressured volumes in our Ohio market. These declines were partially offset by stronger pricing at the Kemmerer mine in Wyoming and revenue related to an advanced bonus payment from an oil and gas lease.

During the second quarter of 2018, we generated an operating loss of $82.5 million. This compares to operating income of $7.6 million in the second quarter of 2017. This $90.1 million decline quarter-over-quarter was driven primarily by an impairment charge of $77.7 million related to our Ohio Operations (see Note 6 - Loss On Impairment), as well as a decrease in revenues described above and an increase in selling, general and administrative expense related to advisory fees relative to the ongoing capital structure review.

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WESTMORELAND COAL COMPANY AND SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (CONT.)

Adjusted EBITDA ~~decreased~~improved toby $7.6 ~~million compared to $18~~.87 million ~~in the three months ended June 30~~, ~~2018 and 2017, respectively. This decrease was~~ driven by ~~declines~~the insame ~~revenues,~~factors ~~partially~~as ~~offset~~discussed byabove ~~decreases~~for inoperating ~~cost of sales (excluding DD&A), as discussed previously~~income. Adjusted EBITDA excludes the impact of ~~loss on impairment,~~ DD&A expense, interest and ~~the~~foreign ~~advisory~~currency ~~fees~~translation ~~discussed~~gains ~~above~~or losses.

~~Six~~Coal ~~Months~~- ~~Ended~~WMLP ~~June~~Segment ~~30,~~Operating ~~2018 Compared to Six Months Ended June 30, 2017~~ Results



	Three Months Ended September 30,					Increase / (Decrease)
	2018			2017		$			%
	(In thousands, except tons data)
Revenues	$	62,785		$	85,606	$	(22,821	)	(26.7	)%
Operating (loss) income	$	(5,699	)	$	9,451	$	(15,150	)	*
Adjusted EBITDA⁽¹⁾	$	4,287		$	21,173	$	(16,886	)	(79.8	)%
Tons sold—millions of equivalent tons	1.5			2.0		(0.5		)	(25.0	)%

____________________


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

* Not meaningful.

Revenues decreased 26.7% on 25.0% fewer coal tons sold during the third quarter of 2018 compared with the third quarter of 2017 driven primarily by pressured volumes and pricing in our Ohio market, particularly ahead of the December 2018 contract expiration at the Oxford mine, as discussed in "Recent Trends and Activities." This was partially offset by stronger pricing at the Kemmerer mine in Wyoming.

During the third quarter of 2018, we generated an operating loss of $5.7 million. This compares to operating income of $9.5 million in the third quarter of 2017. This $15.2 million decline was driven by a decline in revenues and volumes, an increase in selling, general and administrative expense related to advisory fees as discussed previously in "Recent Trends and Activities," and higher per-ton direct costs at our mines. The higher per-ton direct costs were the result of mining in a more difficult area at Kemmerer, an increase in wages and benefits, and increase in fuel costs.

Adjusted EBITDA decreased to $4.3 million compared to $21.2 million in the three months ended September 30, 2018 and 2017, respectively. This decrease was driven by declines in revenues and increased per-ton direct costs, as discussed previously, partially offset by decreases in cost of sales (excluding DD&A) resulting from lower sales volumes. Adjusted EBITDA excludes the impact of DD&A expense and the advisory fees discussed above.

Nine Months Ended September 30, 2018 Compared to Nine Months Ended September 30, 2017

Consolidated Results of Operations

The following table shows the comparative consolidated results and changes between periods:

	Six Months Ended June 30,						Increase / (Decrease)
	Nine Months Ended September 30,						Increase / (Decrease)
	2018			2017			$			%
	(In thousands, except tons data)
Revenues	$	~~571~~900,~~989~~880		$	~~674~~1,~~326~~039,341		$	(~~102~~138,~~337~~461	)	(1513.23	)%
Operating loss	$	(147,558	)	$	(13,115	)	$	(134,443	)	(1,025.1	)%
Operating (loss) income	$	(154,926	)	$	11,866		$	(166,792	)	*
Net loss applicable to common shareholders	$	(~~205~~246,~~656~~197	)	$	(7588,~~761~~162	)	$	(~~129~~158,~~895~~035	)	(~~171~~179.53	)%
Adjusted EBITDA(1)	$	80120,~~026~~840		$	~~132~~201,~~348~~936		$	(5281,~~322~~096	)	(3940.52	)%
Tons sold—millions of equivalent tons	2132.24			2336.39			(24.15		)	(912.02	)%

___________________


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

~~Revenues~~ ~~decreased~~* Not 15meaningful.2% due in large part to the sale of ROVA assets and underlying revenue streams which occurred in the fourth quarter of 2017. This sale resulted in a period-over-period revenue decline of $41.1 million. Further contributing to the decrease were volume declines driven by the planned closure of two units at San Juan and ongoing demand pressure in our Ohio region. Partially offsetting these declines was an 19% increase in revenues period-over-period at our Coal Valley mine due to favorable pricing (as discussed above in "Recent Trends and Activities") and increased demand in the current period.

~~Operating~~Revenues ~~loss~~decreased ~~increased~~13.3% bydue in large part to the 2017 sale of ROVA assets and underlying revenue streams, which drove a period-over-period revenue decline of $~~134~~61.42 million. The ~~driven~~remaining decline in revenues was primarily due to lower revenues from the Coal - U.S. segment, which was impacted by anthe ~~impairment~~planned ~~charge~~closure of ~~$143.3~~two ~~million~~units (at the San Juan mine, and from the power segment, as ~~discussed~~a inresult ~~Note~~of 6the ~~- Loss~~sale Onof ~~Impairment)~~ROVA ~~coupled~~(each ~~with~~is ~~increases~~discussed in ~~selling,~~"Recent ~~general~~Trends and ~~administrative~~Activities"). ~~expense~~Further ~~related~~contributing to ~~advisory~~the ~~fees~~decrease ~~relative~~was tolower revenue from the Coal - WMLP segment resulting from ongoing ~~capital~~demand ~~structure~~pressure ~~review~~in our Ohio region. ~~This~~Partially offsetting these declines was ~~partially~~a ~~offset~~16.2% byincrease ~~production~~in ~~efficiencies~~revenues ~~and~~period-over-period ~~reduced~~from ~~depreciation~~the Coal - Canada segment, ~~depletion~~which ~~and~~benefited ~~amortization~~from ~~expense~~favorable (pricing at our Coal Valley mine, as discussed above in "~~DD&A")~~Recent Trends and Activities."

Adjusted EBITDA decreased by $2.0 million, or 2.4% after excluding the $52.5 million in loan and lease receivable collection in the first quarter of 2017, as described in "Recent Trends and Activities" above. 41

Coal - U.S. Segment Operating Results

	Six Months Ended June 30,					Increase / (Decrease)
	2018			2017		$			%
	(In thousands, except tons data)
Revenues	$	221,090		$	288,100	$	(67,010	)	(23.3	)%
Operating (loss) income	$	(56,394	)	$	8,991	$	(65,385	)	(727.2	)%
Adjusted EBITDA(1)	$	39,020		$	60,820	$	(21,800	)	(35.8	)%
Tons sold—millions of equivalent tons	7.6			8.8		(1.2		)	(13.6	)%

____________________

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

Revenues decreased 23.3% primarily due to a decline in volume at the San Juan mine resulting from the planned closure of two of the four coal power generating units at the San Juan Generating Station coupled with the unplanned outage, described previously in "Recent Trends and Activities." Revenue was also negatively impacted by amended contract terms with one of our merchant customers, which resulted in lower pricing. These declines were partially offset by increased demand at certain other mines, particularly our mines in Montana.

Operating (loss) income decreased by $65.4 million driven primarily by an impairment charge of $65.6 million (as discussed in Note 6 - Loss On Impairment) partially offset by a reduction in depletion costs at our San Juan mine as a result of temporary production curtailment.

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WESTMORELAND COAL COMPANY AND SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (CONT.)

~~Adjusted~~Operating ~~EBITDA~~loss ~~decreased~~of by $21154.89 million in the nine months ended September 30, or2018 35represented a decline of $166.8%. ~~This~~million ~~decrease~~compared ~~was~~with ~~driven~~the bysame ~~declines~~period in ~~revenues~~2017. This asdecline ~~discussed~~was ~~previously,~~driven ~~offset~~primarily by ~~decreases~~an inimpairment ~~cost~~charge of ~~sales~~$143.3 million (~~excluding~~as ~~DD&A)~~discussed onin ~~lower~~Note ~~volume,~~6 as- Loss ~~well~~On asImpairment) coupled with increases in selling, general and administrative expense related to advisory fees, each as discussed in "Recent Trends and Activities." ~~Adjusted~~This ~~EBITDA~~was ~~excludes~~partially ~~the~~offset ~~impact~~by ofincreased ~~loss~~operating onincome ~~impairment,~~from ~~DD&A~~our ~~expense~~Coal ~~and~~- ~~the~~Canada ~~advisory~~segment ~~fees~~due to higher revenue, as discussed above.

Net loss applicable to common shareholders declined $158.0 million during the nine months ended September 30, 2018 compared with the same period in 2017, largely as a result of the same factors that impacted operating (loss) income. In addition, interest expense was higher due to the bridge loan financing, as described in "Recent Trends and Activities," offset by improvements in other expense.

Adjusted EBITDA decreased $81.1 million, primarily as a result of the $52.5 million in loan and lease receivable collection in the first quarter of 2017 which did not recur in 2018, as described in "Recent Trends and Activities" above.

Coal - U.S. Segment Operating Results



	Nine Months Ended September 30,					Increase / (Decrease)
	2018			2017		$			%
	(In thousands, except tons data)
Revenues	$	342,412		$	437,855	$	(95,443	)	(21.8	)%
Operating (loss) income	$	(45,709	)	$	24,710	$	(70,419	)	*
Adjusted EBITDA⁽¹⁾	$	67,907		$	102,829	$	(34,922	)	(34.0	)%
Tons sold—millions of equivalent tons	11.7			14.4		(2.7		)	(18.8	)%

____________________


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

* Not meaningful.

Revenues decreased 21.8% on 18.8% fewer tons sold primarily due to a decline in volume at the San Juan mine resulting from the planned closure of two of the four coal power generating units at the San Juan Generating Station coupled with the unplanned outage, described previously in "Recent Trends and Activities." Revenue was also negatively impacted by amended contract terms with one of our merchant customers, which resulted in lower pricing. These declines were partially offset by increased demand at certain other mines, particularly our Absoloka mine in Montana.

Operating loss of $45.7 million in the nine months ended September 30, 2018 was a $70.4 million decrease compared with the same period in 2017 driven primarily by an impairment charge of $65.6 million (as discussed in Note 6 - Loss On Impairment) and the decline in revenues discussed above. These declines were partially offset by a reduction in depletion costs at our San Juan mine as a result of temporary production curtailment and lower cost of sales due to lower volume.

Adjusted EBITDA decreased by $34.9 million, or 34.0%. This decrease was driven by declines in revenues as discussed previously, offset by decreases in cost of sales (excluding DD&A) on lower volume, as well as selling, general and administrative expense. Adjusted EBITDA excludes the impact of loss on impairment, DD&A expense and the advisory fees discussed above.

Coal - Canada Segment Operating Results

	Six Months Ended June 30,					Increase / (Decrease)
	Nine Months Ended September 30,					Increase / (Decrease)
	2018		2017			$			%
	(In thousands, except tons data)
Revenues	$	~~218~~366,~~797~~135	$	~~200~~315,~~233~~210		$	1850,~~564~~925		916.32	%
Operating income (loss)	$	3343,~~947~~110	$	(1716,~~052~~576	)	$	5059,~~999~~686		*
Adjusted EBITDA(1)	$	5271,~~293~~839	$	5972,~~502~~293		$	(~~7,209~~454	)	(120.16	)%
Tons sold—millions of equivalent tons	1016.64		1117.12			(0.58		)	(4.57	)%

____________________


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

* Not meaningful.

Revenues increased 916.32% ~~due~~despite ~~primarily~~a 4.7% decline in tons sold during the nine months ended September 30, 2018 compared to ~~volume~~the ~~and~~same ~~pricing~~period in 2017. Pricing increases, particularly at ~~our~~the Coal Valley mine, as discussed in "Recent Trends and Activities" above., ~~This~~as ~~increase~~well ~~was~~as higher volumes at the Coal Valley mine were partially offset by lower volume ~~declines~~period-over-period atacross ~~our~~the ~~Estevan mine~~segment.

~~Operating income (loss) improved by $51.0 million due to the increase in revenues mentioned above, coupled with production efficiencies at our Coal Valley mine as compared to the first half of 2017.~~42

~~Adjusted~~Table ~~EBITDA increased by $43.3 million after excluding the $52.5 million in loan and lease receivable collection in the first quarter~~ of ~~2017, as described in "Recent Trends and Activities" above.~~Contents

WESTMORELAND COAL COMPANY AND SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (CONT.)

Operating income (loss) improved by $59.7 million primarily due to the increase in revenues described previously as well as lower DD&A expense resulting from fully depreciated equipment.

Adjusted EBITDA for the nine months ended September 30, 2018 was relatively flat compared to the same period in 2017 due to the inclusion of the $52.5 million in loan and lease receivable collection in the first quarter of 2017, which increased 2017 Adjusted EBITDA at nearly the same rate as the period-over-period increase in revenues. See "Recent Trends and Activities" for further information on the loan and lease receivable collection.

Coal - WMLP Segment Operating Results

	Six Months Ended June 30,					Increase / (Decrease)
	Nine Months Ended September 30,					Increase / (Decrease)
	2018			2017		$			%
	(In thousands, except tons data)
Revenues	$	~~132~~194,~~102~~887		$	~~155~~241,~~857~~462	$	(2346,~~755~~575	)	(1519.23	)%
Operating (loss) income	$	(8490,~~468~~168	)	$	818,~~870~~324	$	(93108,~~338~~492	)	*
Adjusted EBITDA(1)	$	1722,~~746~~033		$	3152,~~643~~896	$	(1330,~~897~~863	)	(4358.93	)%
Tons sold—millions of equivalent tons	34.04			35.6		(01.62		)	(1621.74	)%

____________________


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

* Not meaningful.

Revenues decreased 1519.23% on 1621.74% fewer coal tons sold during the ~~six~~nine months ended ~~June~~September 30, 2018 compared with the ~~six~~nine months ended ~~June~~September 30, 2017. This decline was primarily driven by pressured volumes in our Ohio market and, to a lesser extent, by volume declines from the Kemmerer mine. These declines were partially offset by stronger pricing at the Kemmerer mine in Wyoming and revenue related to an advanced bonus payment from an oil and gas lease received in the second quarter of 2018.

During the ~~six~~nine months ended ~~June~~September 30, 2018, we generated an operating loss of $8490.52 million. This compares to operating income of $818.93 million in the ~~six~~nine months ended ~~June~~September 30, 2017. This $93108.35 million decline period-over-period was driven primarily by an impairment charge of $77.7 million related to our Ohio Operations (see Note 6 - Loss On Impairment),. The asperiod-over-period ~~well~~decline aswas also impacted by a decrease in revenues described above, ~~and~~ an increase in selling, general and administrative expense related to advisory fees ~~relative~~discussed above in "Recent Trends and Activities," and increased per-ton costs related to mining in a more difficult area at the ~~ongoing~~Kemmerer ~~capital~~mine, ~~structure~~increased ~~review~~wages and higher fuel costs.

Adjusted EBITDA decreased to $1722.70 million compared to $3152.69 million for the ~~six~~nine months ended ~~June~~September 30, 2018 and 2017, respectively. This decrease was driven by declines in revenues and increased per-ton costs, as discussed previously, partially offset by decreases in cost of sales (excluding DD&A), asresulting ~~discussed~~from ~~previously~~lower sales volume. Adjusted EBITDA excludes the impact of loss on impairment, DD&A expense and the advisory fees discussed above.

Non-GAAP Financial Measures

Adjusted EBITDA

EBITDA is defined as earnings before interest expense, interest income, income taxes, depreciation, depletion, amortization and accretion expense. Adjusted EBITDA is defined as EBITDA before certain charges to income such as advisory fees, loss on impairment, gains and/or losses on extinguishment of debt, foreign exchange, derivatives and the sale or disposal of assets, as well as customer payments received under loan and lease receivables, share based compensation, and other items which are not considered part of earnings from operations for comparison purposes to other companies’ normalized income. Adjusted EBITDA is a supplemental measure of financial performance that is not required by, or presented in accordance with, GAAP. Adjusted EBITDA is a key metric used by us to assess our operating performance and as a basis for strategic planning and forecasting and we believe that Adjusted EBITDA is useful to an investor in evaluating our operating performance because this measure:

39• is used widely by investors to measure a company’s operating performance without regard to items excluded from the calculation of such term, 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;

• is used by rating agencies, lenders and other parties to evaluate our creditworthiness; and

• helps 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.

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WESTMORELAND COAL COMPANY AND SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (CONT.)

fees, loss on impairment, gains and/or losses on debt extinguishment, foreign exchange, derivative losses and/or gains, as well as other items which are not considered part of earnings from operations for comparison purposes to other companies’ normalized income. Adjusted EBITDA is a supplemental measure of financial performance that is not required by, or presented in accordance with, GAAP. Adjusted EBITDA is a key metric used by us to assess our operating performance and as a basis for strategic planning and forecasting and we believe that Adjusted EBITDA is useful to an investor in evaluating our operating performance because this measure:

• is used widely by investors to measure a company’s operating performance without regard to items excluded from the calculation of such term, 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;

• is used by rating agencies, lenders and other parties to evaluate our creditworthiness; and

Adjusted EBITDA is not a measure calculated in accordance with GAAP. The items excluded from Adjusted EBITDA are significant in assessing our operating results. Adjusted EBITDA has limitations as an analytical tool, and should not be considered in isolation from, or as a substitute for, analysis of our results as reported under GAAP. For example, Adjusted EBITDA:

• does not reflect our cash expenditures or future requirements for capital and major maintenance expenditures or contractual commitments;

• does not reflect income tax expenses or the cash requirements necessary to pay income taxes;

• does not reflect changes in, or cash requirements for, our working capital needs; and

• does not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments, on certain of our debt obligations.

In addition, although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and Adjusted EBITDA does not reflect any cash requirements for such replacements. Other companies in our industry and in other industries may calculate Adjusted EBITDA differently from the way that we do, limiting its usefulness as a comparative measure. Because of these limitations, Adjusted EBITDA should not be considered as a measure of discretionary cash available to us to invest in the growth of our business. We compensate for these limitations by relying primarily on our GAAP results and using Adjusted EBITDA only as supplemental data.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (CONT.)

The tables below show how we calculated Adjusted EBITDA, including a breakdown by segment, and reconcile Adjusted EBITDA to net income (loss), the most directly comparable GAAP financial measure.

Reconciliation of Adjusted EBITDA to Net Income (Loss) - Consolidated	Three Months Ended ~~June~~September 30,						~~Six~~Nine Months Ended ~~June~~September 30,
	2018			2017			2018			2017
	(In thousands)
Net loss	$	(~~191~~41,~~327~~485	)	$	(4612,~~282~~475	)	$	(~~211~~253,~~638~~124	)	$	(7688,~~398~~877	)
Income tax benefit	(712		)	(402		)	(747		)	(774		)
Income tax expense (benefit)	289			(256		)	(457		)	(1,030		)
Interest income	(1,~~174~~513		)	(1,~~038~~012		)	(23,~~217~~730		)	(12,~~931~~942		)
Interest expense	3032,~~816~~769			30,~~109~~017			6093,~~899~~668			5989,~~371~~388
Depreciation, depletion and amortization	26,~~396~~693			3938,~~497~~066			5279,~~431~~124			76114,~~064~~131
Accretion of asset retirement obligation	8,652			11,142			17,302			22,437
Accretion of asset retirement obligations	8,700			11,358			26,002			33,796
Amortization of intangible assets and liabilities	—			(267		)	—			(~~534~~801		)
EBITDA	~~(127~~25,~~349~~453		)	3265,~~759~~431			(8358,~~970~~517		)	78143,~~235~~665
Advisory fees(1)	1415,~~827~~633			~~925~~1,849			2035,~~224~~858			~~925~~2,774
Loss on impairment	~~143,324~~—			—			143,324			—
Loss on extinguishment of debt	1,838			—			1,838			—
(Gain) loss on extinguishment of debt	(17		)	—			1,821			—
(Gain) loss on foreign exchange	(264		)	1,137			(1,575		)	1,602
Loss (gain) on foreign exchange	1,070			1,733			(505		)	3,337
Customer payments received under loan and lease receivables(2)	—			—			—			50,489
Derivative loss (gain)	—			481			—			(1,904		)
Derivative gain	—			(4,667		)	—			(6,571		)
(Gain) loss on sale/disposal of assets and other adjustments	(21,~~193~~313		)	~~420~~3,875			(12,~~675~~986		)	~~521~~4,396
Share-based compensation	25(15		)	1,~~133~~366			1,~~860~~845			23,~~480~~846
Adjusted EBITDA	$	3040,~~208~~811		$	3669,~~855~~587		$	80120,~~026~~840		$	~~132~~201,~~348~~936

____________________

(1) Amount represents fees paid to financial and legal advisors related to the assessment of ~~Westmoreland~~the Company’s capital structure. These advisors, together with ~~Westmoreland~~the Company's management and board of directors, are developing and evaluating options to optimize ~~Westmoreland~~the Company’s overall capital structure.

(2) Represents a return of and on capital. These amounts are not included in operating income or operating cash flows as the capital outlays are treated as loan and lease receivables, but are included within Adjusted EBITDA so that the cash received by the Company is treated consistently with all other contracts within the Company that do not result in loan and lease receivable accounting. During the first quarter of 2017, the Company received $52.5 million from its customer at the Genesee mine, representing an accelerated repayment of all outstanding loan and lease receivables. We will continue to provide contract mining services at the Genesee mine. We have no further obligation to make any capital expenditures. All future capital expenditures at the Genesee mine will be funded by the customer pursuant to the Company’s contractual arrangement with the customer. Accordingly, there will be no additional payments from the customer at the ~~Genesee mine in the form of loan and lease repayments, however, the Company will continue to manage the Genesee mine and earn a management fee pursuant the contract mining arrangement.~~

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Reconciliation of Adjusted EBITDA to Net Income (Loss) by Segment	Three Months Ended June 30, 2018
	Coal - U.S.			Coal - Canada			Coal - WMLP			Power		Heritage			Corporate			Consolidated
	(In thousands)
Net income (loss)	$	(66,772	)	$	11,502		$	(93,758	)	$	—	$	(3,211	)	$	(39,088	)	$	(191,327	)
Income tax benefit	61			27			—			—		—			(800		)	(712		)
Interest income	(559		)	(247		)	(239		)	—		(119		)	(10		)	(1,174		)
Interest expense	825			3,520			11,609			—		—			14,862			30,816
Depreciation, depletion and amortization	10,007			7,186			9,189			—		—			14			26,396
Accretion of asset retirement obligation	5,126			1,778			1,748			—		—			—			8,652
EBITDA	(51,312		)	23,766			(71,451		)	—		(3,330		)	(25,022		)	(127,349		)
Advisory fees(1)	—			293			2,679			—		—			11,855			14,827
Loss on impairment	65,649			—			77,675			—		—			—			143,324
Loss on extinguishment of debt	560			385			—			—		—			893			1,838
Gain on foreign exchange	—			(264		)	—			—		—			—			(264		)
(Gain) loss on sale/disposal of assets and other adjustments	(91		)	(894		)	(1,254		)	—		—			46			(2,193		)
Share-based compensation	—			3			—			—		—			22			25
Adjusted EBITDA	$	14,806		$	23,289		$	7,649		$	—	$	(3,330	)	$	(12,206	)	$	30,208

Genesee mine in the form of loan and lease repayments, however, the Company will continue to manage the Genesee mine and earn a management fee pursuant the contract mining arrangement.



Reconciliation of Adjusted EBITDA to Net Income (Loss) by Segment	Three Months Ended September 30, 2018
	Coal - U.S.			Coal - Canada			Coal - WMLP			Power		Heritage			Corporate			Consolidated
	(In thousands)
Net income (loss)	$	11,904		$	5,771		$	(17,308	)	$	—	$	(2,944	)	$	(38,908	)	$	(41,485	)
Income tax expense	11			6			—			—		—			272			289
Interest income	(801		)	(297		)	(245		)	—		(146		)	(24		)	(1,513		)
Interest expense	124			2,932			12,140			—		—			17,573			32,769
Depreciation, depletion and amortization	12,699			7,469			6,470			—		—			55			26,693
Accretion of asset retirement obligation	5,128			1,756			1,816			—		—			—			8,700
Amortization of intangible assets and liabilities	—			—			—			—		—			—			—
EBITDA	29,065			17,637			2,873			—		(3,090		)	(21,032		)	25,453
Advisory fees⁽¹⁾	—			757			2,658			—		—			12,218			15,633
Gain on extinguishment of debt	—			(17		)	—			—		—			—			(17		)
Loss (gain) on foreign exchange	—			1,093			—			—		—			(23		)	1,070
(Gain) loss on sale/disposal of assets and other adjustments	(179		)	65			(1,244		)	—		(26		)	71			(1,313		)
Share-based compensation	—			3			—			—		—			(18		)	(15		)
Adjusted EBITDA	$	28,886		$	19,538		$	4,287		$	—	$	(3,116	)	$	(8,784	)	$	40,811

____________________

Reconciliation of Adjusted EBITDA to Net Income (Loss) by Segment	Three Months Ended ~~June~~September 30, 2017
	Coal - U.S.			Coal - Canada			Coal - WMLP			Power			Heritage			Corporate			Consolidated
	(In thousands)
Net loss	$	(5,565	)	$	(16,409	)	$	(2,351	)	$	(405	)	$	(3,730	)	$	(17,822	)	$	(46,282	)
Net income (loss)	$	12,622		$	(4,957	)	$	(1,360	)	$	1,999		$	(3,501	)	$	(17,278	)	$	(12,475	)
Income tax expense (benefit)	—			~~203~~32			—			—			—			(~~605~~288		)	(~~402~~256		)
Interest income	(~~439~~523		)	(~~187~~109		)	(~~233~~222		)	(6865		)	(9993		)	~~(12~~—		)	(1,~~038~~012		)
Interest expense	32,~~898~~874			3,~~329~~795			10,~~652~~990			9190			—			12,~~139~~268			30,~~109~~017
Depreciation, depletion and amortization	2219,~~644~~826			68,~~782~~590			109,~~111~~691			—			—			(4041		)	3938,~~497~~066
Accretion of asset retirement obligation	6,862			23,~~922~~138			1,336			22			—			—			11,~~142~~358
Amortization of intangible assets and liabilities	—			—			—			(267		)	—			—			(267		)
EBITDA	2741,~~400~~661			(310,~~360~~489		)	1920,~~515~~435			~~(627~~1,779		)	(3,~~829~~594		)	(65,~~340~~339		)	3265,~~759~~431
Advisory fees(1)	—			—			—589			—			—			~~925~~1,260			~~925~~1,849
Loss on foreign exchange	—			1,~~137~~733			—			—			—			—			1,~~137~~733
Derivative loss	—			—			—			481			—			—			481
Derivative gain	—			—			—			(4,667		)	—			—			(4,667		)
Loss (gain) on sale/disposal of assets and other adjustments	~~680~~144			~~188~~367			~~(700~~66		)	—3,319			42(6		)	~~210~~(15		)	~~420~~3,875
Share-based compensation	~~180~~199			~~122~~201			—83			6			—			~~825~~877			1,~~133~~366
Adjusted EBITDA	$	2842,~~260~~004		$	(112,~~913~~790	)	$	1821,~~815~~173		$	~~(140~~437	)	$	(3,~~787~~600	)	$	(43,~~380~~217	)	$	3669,~~855~~587

____________________

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Reconciliation of Adjusted EBITDA to Net Income (Loss) by Segment	~~Six~~Nine Months Ended ~~June~~September 30, 2018
	Coal - U.S.			Coal - Canada			Coal - WMLP			Power		Heritage			Corporate			Consolidated
	(In thousands)
Net income (loss)	$	(60,555	)	$	28,849		$	(106,636	)	$	—	$	(6,390	)	$	(66,906	)	$	(211,638	)
Net (loss) income	$	(48,650	)	$	34,620		$	(123,945	)	$	—	$	(9,334	)	$	(105,815	)	$	(253,124	)
Income tax benefit	77			35			—			—		—			(859		)	(747		)
Income tax expense (benefit)	88			41			—			—		—			(586		)	(457		)
Interest income	(1,~~067~~867		)	(~~426~~723		)	(~~498~~743		)	—		(~~215~~360		)	(1137		)	(23,~~217~~730		)
Interest expense	3,~~602~~726			69,~~854~~786			2235,~~959~~099			—		—			2745,~~484~~057			6093,~~899~~668
Depreciation, depletion and amortization	2033,~~343~~042			1422,~~704~~172			1723,~~354~~824			—		—			3086			5279,~~431~~124
Accretion of asset retirement obligation	1015,~~254~~380			35,~~499~~255			35,~~549~~367			—		—			—			1726,~~302~~002
EBITDA	~~(27~~1,~~346~~719		)	5371,~~515~~151			(6360,~~272~~398		)	—		(69,~~605~~694		)	(4061,~~262~~295		)	(8358,~~970~~517		)
Advisory fees(1)	—			~~293~~1,051			47,~~651~~309			—		—			1527,~~280~~498			2035,~~224~~858
Loss on impairment	65,649			—			77,675			—		—			—			143,324
Loss on extinguishment of debt	560			~~385~~368			—			—		—			893			1,~~838~~821
(Gain) loss on foreign exchange	—			(1,575		)	—			—		—			—			(1,575		)
Gain on foreign exchange	—			(474		)	—			—		—			(31		)	(505		)
Loss on sale/disposal of assets and other adjustments	37			(533		)	(1,360		)	—		8			173			(1,675		)
(Gain) loss on sale/disposal of assets and other adjustments	(141		)	(468		)	(2,605		)	—		(18		)	246			(2,986		)
Share-based compensation	120			~~208~~211			52			—		—			1,~~480~~462			1,~~860~~845
Adjusted EBITDA	$	3967,~~020~~907		$	5271,~~293~~839		$	1722,~~746~~033		$	—	$	(69,~~597~~712	)	$	(2231,~~436~~227	)	$	80120,~~026~~840

____________________

Reconciliation of Adjusted EBITDA to Net Income (Loss) by Segment	~~Six~~Nine Months Ended ~~June~~September 30, 2017
	Coal - U.S.			Coal - Canada			Coal - WMLP			Power			Heritage			Corporate			Consolidated
	(In thousands)
Net income (loss)	$	113,~~107~~730		$	(2328,~~425~~382	)	$	(1112,~~167~~529	)	$	~~(1,225~~774	)	$	(710,~~338~~839	)	$	(3451,~~350~~631	)	$	(7688,~~398~~877	)
Income tax expense (benefit)	—			~~158~~189			—			—			—			(~~932~~1,219		)	(~~774~~1,030		)
Interest income	(~~885~~1,407		)	(~~289~~397		)	(~~438~~660		)	(92157		)	(~~212~~304		)	(1517		)	(12,~~931~~942		)
Interest expense	710,~~135~~009			710,~~204~~999			2132,~~130~~120			~~181~~272			—			2335,~~721~~988			5989,~~371~~388
Depreciation, depletion and amortization	3858,~~643~~469			1725,~~036~~627			2030,~~461~~152			—			—			(76117		)	76114,~~064~~131
Accretion of asset retirement obligation	1320,~~830~~694			59,~~892~~029			24,~~672~~008			4365			—			—			2233,~~437~~796
Amortization of intangible assets and liabilities	—			—			—			(~~534~~801		)	—			—			(~~534~~801		)
EBITDA	59101,~~830~~495			617,~~576~~065			3253,~~658~~091			~~(1,627~~153		)	(711,~~550~~143		)	(1116,~~652~~996		)	78143,~~235~~665
Advisory fees(1)	—			—			—589			—			—			~~925~~2,185			~~925~~2,774
Loss on foreign exchange	—			13,~~602~~337			—			—			—			—			13,~~602~~337
Customer payments received under loan and lease receivables(2)	—			50,489			—			—			—			—			50,489
Derivative gain	—			—			—			(16,~~904~~571		)	—			—			(16,~~904~~571		)
Loss (gain) on sale/disposal of assets and other adjustments	~~607~~752			~~522~~889			(~~1,015~~948		)	—3,319			9589			~~312~~295			~~521~~4,396
Share-based compensation	~~383~~582			~~313~~513			—164			1622			—			12,~~768~~565			23,~~480~~846
Adjusted EBITDA	$	60102,~~820~~829		$	5972,~~502~~293		$	3152,~~643~~896		$	(3,~~515~~077	)	$	(711,~~455~~054	)	$	(811,~~647~~951	)	$	~~132~~201,~~348~~936

____________________

(2)

Represents a return of and on capital. These amounts are not included in operating income or operating cash flows as the capital outlays are treated as loan and lease receivables, but are included within Adjusted EBITDA so that the cash received by the Company is treated consistently with all other contracts within the Company that do not result in loan and lease receivable accounting. During the first quarter of 2017, the Company received $52.5 million from its customer at the Genesee mine, representing an accelerated repayment of all

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AND RESULTS OF OPERATIONS (CONT.)

outstanding loan and lease receivables. We will continue to provide contract mining services at the Genesee mine. We have no further obligation to make any capital expenditures. All future capital expenditures at the Genesee mine will be funded by the customer pursuant to the Company’s contractual arrangement with the customer. Accordingly, there will be no additional payments from the customer at the Genesee mine in the form of loan and lease repayments, however, the Company will continue to manage the Genesee mine and earn a management fee pursuant the contract mining arrangement.

Liquidity and Capital Resources

Liquidity

We had the following liquidity as of ~~June~~September 30, 2018 and December 31, 2017:

	June 30, 2018		December 31, 2017
	September 30, 2018		December 31, 2017
	(In millions)
Cash and cash equivalents	$	6393.26	$	103.2
Revolver availability	—		28.7
Undrawn Bridge Loan capacity	20.0		—
Total	$	83113.26	$	131.9

We conduct our operations through subsidiaries. We have significant cash requirements to fund our debt obligations, ongoing heritage health benefit costs, pension contributions and corporate overhead expenses. Our business is also capital intensive and requires substantial capital expenditures for, among other things, purchasing, maintaining and upgrading equipment used in developing and mining our coal, and acquiring reserves. Historically, our principal sources of cash are distributions from our operating subsidiaries. The cash at all of our subsidiaries is immediately available, except for cash at WMLP ($2825.28 million and $36.7 million as of ~~June~~September 30, 2018 and December 31, 2017, respectively). The cash at WMLP is governed as described in Note 7 - Debt And Lines Of Credit.

As discussed further in Note 7 - Debt And Lines Of Credit, the Company's Revolver was extinguished on May 21, 2018. As such, there was no Revolver availability as of ~~June~~September 30, 2018.

On October 9, 2018, we entered into the RSA with members of an ad hoc group of lenders (the "Ad Hoc Group"), as descried previously in "Recent Trends and Activities." To implement the RSA, we filed voluntary petitions under Chapter 11 of the U.S. Bankruptcy Code. We have filed a series of first day motions with the Bankruptcy Court that seek authorization to continue to conduct our business without interruption. These motions are designed primarily to minimize the effect of bankruptcy on our operations, customers and employees. We expect ordinary course operations to continue substantially uninterrupted during and after the consummation of the Chapter 11 reorganization process.

In connection with the Chapter 11 petitions, we filed a motion (the "DIP Motion") seeking, among other things, interim and final approval of debtor-in-possession ("DIP") financing, as described further in Note 1 - Basis Of Presentation. The DIP financing, which remains subject to final approval by the Bankruptcy Court, provides us with a $110 million superpriority senior DIP term loan agreement to be used to (i) refinance approximately $90 million in outstanding principal obligations related to the Bridge Loan, (ii) pay certain costs, fees and expenses related to the Chapter 11 filing, (iii) make payments in respect of certain "adequate protection" obligations and (iv) fund working capital needs, capital improvements and expenditures of ours and our subsidiaries. See Note 1 - Basis Of Presentation for a further explanation of the DIP facility and its terms.

Debt Obligations

See Note 7 - Debt And Lines Of Credit for a description of our different debt facilities as of September 30, 2018. See Note 1 - Basis Of Presentation for a further explanation of the DIP facility, as briefly described above, and its terms.

Covenant Compliance

~~Under~~As ~~impacts~~ of ~~declining industry conditions and significant debt service requirements on the Company’s financial position~~November 1, ~~results of operations and cash flows gives rise to substantial doubt about our ability to pay our obligations as they come due. In consideration of these challenges~~2018, the Company ~~has~~was ~~engaged~~in ~~advisers~~default tounder ~~assist~~certain ~~with the evaluation~~ of ~~strategic~~its ~~alternatives,~~debt ~~which~~instruments. ~~may~~The ~~include~~October ~~seeking~~9, a2018 ~~restructuring,~~petitions ~~selling~~under ~~certain~~Chapter ~~assets,~~11 ~~amendment~~constitute oran ~~refinancing~~event of ~~existing~~default ~~debt~~that ~~through~~accelerated aour ~~private~~obligations ~~restructuring or reorganization~~ under ~~Chapter~~the 11Term ofLoan ~~the~~and ~~Bankruptcy~~8.75% ~~Code~~Notes. ~~However~~Additionally, ~~there can be no assurances that~~ the ~~Company~~petitions ~~will~~constituted bea ~~able~~“termination toevent” ~~successfully~~under ~~restructure~~certain ~~its indebtedness~~forbearances, ~~improve~~as ~~its~~described ~~financial~~more ~~position~~fully orin ~~complete~~Note ~~any~~1 ~~strategic~~- Basis ~~transactions~~Of Presentation. AsOther aevents ~~result~~ of ~~these~~default, ~~uncertainties~~including ~~and~~cross-defaults, ~~the~~are ~~likelihood of a restructuring or reorganization~~present, ~~management~~including ~~has concluded that there is substantial doubt regarding~~ the ~~Company’s~~receipt ~~ability~~of ~~to continue as~~ a going concern. Asexplanatory ~~such,~~paragraph ~~the~~from ~~accompanying~~our ~~consolidated~~independent ~~financial~~registered ~~statements~~public ~~(unaudited)~~accounting ~~are~~firm ~~prepared~~ on ~~a going concern basis and do not include any adjustments that might result from uncertainty about~~ our ~~ability~~consolidated tofinancial ~~continue~~statements. asUnder athe ~~going~~Bankruptcy ~~concern~~Code, ~~other than~~ the ~~reclassification~~creditors ofunder ~~certain~~these ~~long-term~~ debt toagreements ~~current~~are ~~debt~~stayed ~~and~~from ~~the~~taking ~~related~~any ~~debt~~action ~~issuance~~against ~~costs~~us toas ~~current~~a ~~liabilities~~result ~~and~~of ~~current~~an ~~assets, respectively.~~

On May 21, 2018, we entered into the Bridge Loan agreement, as described further in Note 7 - Debt And Lines Of Credit, which provided an additional $110 million term loan, consisting of an initial funding of $90 million and an undrawn delayed draw funding of up to $20 million. Approximately $48.5 million of the initial $90 million in proceeds of the Bridge Loan was used to extinguish in full the Company’s Revolver and San Juan Loan. The remaining proceeds will be used to fund working capital. The extinguishment of the San Juan Loan has eliminated certain previous restrictions and now operating cash flows generated at the San Juan mine are available for use by the Company. The Bridge Loan has a maturity date of May 21, 2019.47

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

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (CONT.)

~~Loan~~event ~~Credit~~of ~~Agreement~~default. orSee ~~the~~Note ~~related~~1 ~~security~~- Basis ~~documents~~Of ~~until~~Presentation ~~the~~"Ability ~~earlier~~to ofContinue a)as ~~September 30, 2018, or b)~~ a ~~termination~~Going ~~event (as defined in such agreement) (~~Concern"~~Term~~ ~~Loan~~for ~~Forbearance,"~~further ~~and together with the Note Forbearance, the "Forbearances")~~discussion.

Pursuant to the forbearing of rights and remedies of Term Loan lenders and 8.75% Notes holders upon the non-payment of principal and interest when due, as more particularly described in the Forbearances (defined in Note 7 - Debt And Lines Of Credit), on June 29 and July 2, 2018, respectively, we elected to defer a scheduled interest and principal payment of $8.0 million on the Term Loan and a scheduled interest payment of $15.3 million on the 8.75% Notes. In accordance with the Forbearances, the Supporting Note Holders and the Supporting Lenders may not deliver any notice or instruction to the respective trustee or administrative agent to exercise any rights or remedies as a result of our election to defer these interest and principal payments during the forbearance period.

The WMLP Term Loan matures on December 31, 2018 and WMLP does not currently have liquidity or access to additional capital sufficient to pay off this debt by its maturity date. This condition gives rise to substantial doubt about WMLP’s ability to continue as a going concern for one year after the issuance of its financial statements. Certain covenants in the WMLP Term Loan provide that an audit opinion on WMLP’s stand-alone consolidated financial statements that includes an explanatory paragraph referencing WMLP's conclusion that substantial doubt exists as to WMLP’s ability to continue as a going concern constitutes an event of default. The audit opinion in WMLP’s Annual Report on Form 10-K for the year ended December 31, 2017 ("WMLP's 2017 Form 10-K") contained such an explanatory paragraph. On each of March 1, May 15, June 15, and July 31, 2018, the WMLP Term Loan lenders temporarily waived the event of default arising as a result of such explanatory paragraph being included in the audit opinion in WMLP’s 2017 Form 10-K. The current waiver expires on the earlier occurrence of September 8, 2018 or upon the occurrence of any other event of default under the WMLP Term Loan. Unless WMLP obtains further waivers for or otherwise cures this event of default, the lenders could accelerate the maturity date of the WMLP Term Loan after the waiver expires, making it immediately due and payable. Pursuant to the Forbearances, the Supporting Note Holders and Supporting Lenders have agreed to forbear the exercise of rights and remedies during the period of the Forbearances that may result from this event of default under the WMLP Term Loan. All outstanding principal balances and related debt issuance costs for the WMLP Term Loan, the Term Loan, the 8.75% Notes and the Bridge Loan are presented as current debt on our Consolidated Balance Sheets (unaudited). We do not currently have liquidity or access to additional capital sufficient to pay off this debt.

Restricted Group and Unrestricted Group Results

Under the indenture governing the 8.75% Notes and the Term Loan, and as of ~~June~~September 30, 2018, Westmoreland Resources GP, LLC, WMLP and all of WMLP’s subsidiaries are designated as "unrestricted subsidiaries" (the "Unrestricted Group"). All of our other subsidiaries are "restricted subsidiaries" (the "Restricted Group"). Only the Restricted Group provides credit support for our obligations under the 8.75% Notes and the Term Loan. The Unrestricted Group is not subject to any of the restrictive covenants in the 8.75% Notes or the Term Loan. Conversely, the Restricted Group are not obligors of the WMLP Term Loan and such indebtedness is non-recourse to the Restricted Group and its assets.

Table of Contents

WESTMORELAND COAL COMPANY AND SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (CONT.)

The 8.75% Notes require summary information for the Restricted Group and Unrestricted Group provided as follows:

	Restricted Group			Unrestricted Group			Total
	(In thousands)
Balance sheet as of June 30, 2018:
Balance sheet as of September 30, 2018:
Cash and cash equivalents	$	3467,~~954~~785		$	2825,~~233~~805		$	6393,~~187~~590
Total current assets	~~307~~320,~~186~~399			6967,~~585~~472			~~376~~387,~~771~~871
Total assets	1,~~220~~238,~~825~~249			~~236~~229,~~770~~608			1,~~457~~467,~~595~~857
Total current liabilities	~~958~~992,~~455~~913			~~365~~376,~~288~~679			1,~~323~~369,~~743~~592
Total debt	~~760~~763,~~654~~515			~~326~~334,~~295~~014			1,~~086~~097,~~949~~529
Total liabilities	1,~~738~~775,~~627~~341			~~405~~415,~~153~~414			2,~~143~~190,~~780~~755
Statement of operations for the six months ended June 30, 2018:
Statement of operations for the nine months ended September 30, 2018:
Revenues	$	~~439~~705,~~887~~993		$	~~132~~194,~~102~~887		$	~~571~~900,~~989~~880
Operating costs and expenses	~~502~~770,~~977~~751			~~216~~285,~~570~~055			~~719~~1,~~547~~055,806
Operating income	(63,090		)	(84,468		)	(147,558		)
Operating loss	(64,758		)	(90,168		)	(154,926		)
Other expense	(4264,~~659~~878		)	(2233,~~168~~777		)	(6498,~~827~~655		)
Loss before income taxes	(~~105~~129,~~749~~636		)	(~~106~~123,~~636~~945		)	(~~212~~253,~~385~~581		)
Income tax benefit	(~~747~~457		)	—			(~~747~~457		)
Net loss	(~~105~~129,~~002~~179		)	(~~106~~123,~~636~~945		)	(~~211~~253,~~638~~124		)
Less net loss attributable to noncontrolling interest	(56,~~982~~927		)	—			(56,~~982~~927		)
Net loss attributable to the Parent company	$	(99122,~~020~~252	)	$	(~~106~~123,~~636~~945	)	$	(~~205~~246,~~656~~197	)
Adjusted EBITDA	$	6298,~~279~~807		$	1722,~~746~~033		$	80120,~~025~~840

Non-Guarantor Restricted Subsidiaries' Results

The 8.75% Notes require summary information for WRMI (the “Non-Guarantor Restricted Subsidiary”) as follows:

	June 30, 2018			Percent of Consolidated Total
	September 30, 2018			Percent of Consolidated Total
	(In thousands)
Total assets	$	4,~~427~~476		0.3	%
Total debt	$	—		—	%
Total liabilities	$	~~950~~2,774		—0.1	%
	Six Months Ended June 30, 2018			Percent of Consolidated Total
	Nine Months Ended September 30, 2018			Percent of Consolidated Total
	(In thousands)
Revenues	$	—		—	%
Adjusted EBITDA	$	~~522~~(1,255	)	0(1.70	)%

4648

Table of Contents

WESTMORELAND COAL COMPANY AND SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (CONT.)

Historical Sources and Uses of Cash

The following table summarizes net cash provided by (used in) operating, investing and financing activities for the ~~six~~nine months ended ~~June~~September 30, 2018 and 2017:

	Six Months Ended June 30,
	Nine Months Ended September 30,
	2018			2017
	(In thousands)
Cash provided by (used in):
Operating activities	$	~~(40~~8,~~082~~591	)	$	1021,154
Investing activities	(922,~~714~~166		)	3016,~~492~~025
Financing activities

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