SUPPLEMENTAL CONSOLIDATING FINANCIAL INFORMATION

Pursuant to the indenture governing the 10.75% Senior Notes, certain 100% owned subsidiaries of the Company have fully and unconditionally guaranteed the notes on a joint and several basis.

Guarantees of the Senior Notes will be released under certain circumstances, including:

(1)

in the event of a sale or other disposition of all or substantially all of the assets of such Guarantor Subsidiary, by way of merger, consolidation or otherwise, a sale or other disposition of all of the Equity Interests of such Guarantor Subsidiary then held by the Issuers or any Restricted Subsidiary; provided, that the sale or other disposition does not violate the “Asset Sales” provisions of the Indenture;


(2)	if such Guarantor Subsidiary is designated as an Unrestricted Subsidiary in accordance with the provisions of this Indenture, upon effectiveness of such designation;


(3)	upon Legal Defeasance or Covenant Defeasance (as such terms are defined in the indenture) or upon satisfaction and discharge of the Indenture;


(4)	upon the liquidation or dissolution of such Guarantor Subsidiary, provided no event of default has occurred and is continuing; or


(5)	at such time as such Guarantor Subsidiary is no longer required to be a Guarantor Subsidiary of the Senior Notes as described in the Indenture, provided no event of default has occurred and is continuing.

The following tables present unaudited consolidating financial information for (i) the issuer of the notes (Westmoreland Coal Company), (ii) the co-issuer of the notes (Westmoreland Partners), (iii) the guarantors under the notes, and (iv) the entities that are not guarantors under the notes:

CONSOLIDATING BALANCE SHEETS

March 31, 2013

(In thousands)



Assets	Parent/ Issuer			Co-Issuer		Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Consolidating Adjustments			Total
Current assets:
Cash and cash equivalents	$	10,971		$	4,807	$	6,698		$	18,376		$	—		$	40,852
Receivables:
Trade	—			10,133		14,506			35,579			—			60,218
Contractual third-party reclamation receivables	—			—		56			10,484			—			10,540
Intercompany receivable/payable	(5,940		)	—		3,944			(30,992		)	32,988			—
Other	28			—		18,195			1,071			(16,326		)	2,968
	(5,912		)	10,133		36,701			16,142			16,662			73,726
Inventories	—			5,228		17,291			17,902			—			40,421
Other current assets	6,249			298		8,228			5,358			—			20,133
Total current assets	11,308			20,466		68,918			57,778			16,662			175,132
Property, plant and equipment:
Land and mineral rights	—			1,395		94,337			168,757			—			264,489
Plant and equipment	3,443			219,948		216,989			198,523			—			638,903
	3,443			221,343		311,326			367,280			—			903,392
Less accumulated depreciation, depletion and amortization	2,457			64,005		113,261			219,621			—			399,344
Net property, plant and equipment	986			157,338		198,065			147,659			—			504,048
Advanced coal royalties	—			—		500			3,762			—			4,262
Reclamation deposits	—			—		—			73,100			—			73,100
Restricted investments and bond collateral	15,581			5,993		39,233			26,829			—			87,636
Contractual third-party reclamation receivables	—			—		339			83,750			—			84,089
Intangible assets	—			2,513		—			271			—			2,784
Investment in subsidiaries	241,373			—		(792		)	3,770			(244,351		)	—
Other assets	9,878			—		622			3,464			(2,000		)	11,964
Total assets	$	279,126		$	186,310	$	306,885		$	400,383		$	(229,689	)	$	943,015

CONSOLIDATING BALANCE SHEETS

March 31, 2013

(In thousands)



Liabilities and Shareholders’ Deficit	Parent/ Issuer			Co-Issuer			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Consolidating Adjustments			Total
Current liabilities
Current installments of long-term debt	$	(1,594	)	$	—		$	1,578		$	23,310		$	—		$	23,294
Accounts payable and accrued expenses:
Trade	3,369			10,955			12,710			46,577			(16,317		)	57,294
Production taxes	—			407			12,332			25,415			—			38,154
Workers’ compensation	815			—			—			—			—			815
Postretirement medical benefits	12,494			—			87			1,487			—			14,068
SERP	390			—			—			—			—			390
Deferred revenue	—			9,105			4,700			1,580			—			15,385
Asset retirement obligations	—			—			3,524			19,630			—			23,154
Other current liabilities	4,537			—			3			997			(9		)	5,528
Total current liabilities	20,011			20,467			34,934			118,996			(16,326		)	178,082
Long-term debt, less current installments	245,878			—			2,113			87,001			(2,000		)	332,992
Workers’ compensation, less current portion	8,524			—			—			—			—			8,524
Excess of black lung benefit obligation over trust assets	8,439			—			—			—			—			8,439
Postretirement medical benefits, less current portion	223,448			—			57,459			39,852			—			320,759
Pension and SERP obligations, less current portion	29,043			287			19,523			5,398			—			54,251
Deferred revenue, less current portion	—			47,995			—			6,493			—			54,488
Asset retirement obligations, less current portion	—			847			40,918			198,570			—			240,335
Intangible liabilities	—			6,370			—			—			—			6,370
Other liabilities	6,030			—			17,396			1,879			—			25,305
Intercompany receivable/payable	24,281			—			(8,840		)	17,730			(33,171		)	—
Total liabilities	565,654			75,966			163,503			475,919			(51,497		)	1,229,545
Shareholders’ deficit
Preferred stock	160			—			—			—			—			160
Common stock	35,912			5			110			132			(247		)	35,912
Other paid-in capital	132,828			52,813			94,632			63,046			(210,491		)	132,828
Accumulated other comprehensive loss	(146,603		)	(366		)	(4,986		)	(24,087		)	29,439			(146,603		)
Accumulated earnings (deficit)	(292,450		)	57,892			53,626			(114,627		)	3,107			(292,452		)
Total Westmoreland Coal Company shareholders’ deficit	(270,153		)	110,344			143,382			(75,536		)	(178,192		)	(270,155		)
Noncontrolling interest	(16,375		)	—			—			—			—			(16,375		)
Total equity (deficit)	(286,528		)	110,344			143,382			(75,536		)	(178,192		)	(286,530		)
Total liabilities and shareholders’ deficit	$	279,126		$	186,310		$	306,885		$	400,383		$	(229,689	)	$	943,015

CONSOLIDATING BALANCE SHEETS

December 31, 2012

(In thousands)



Assets	Parent/ Issuer			Co-Issuer		Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Consolidating Adjustments			Total
Current assets:
Cash and cash equivalents	$	14,836		$	4,545	$	5,362		$	6,867		$	—		$	31,610
Receivables:
Trade	—			13,018		13,428			33,591			—			60,037
Contractual third-party reclamation receivables	—			—		56			10,151			—			10,207
Intercompany receivable/payable	(8,002		)	—		5,667			(30,641		)	32,976			—
Other	77			—		16,806			1,182			(14,845		)	3,220
	(7,925		)	13,018		35,957			14,283			18,131			73,464
Inventories	—			3,047		16,538			18,149			—			37,734
Other current assets	739			298		5,550			9,917			—			16,504
Total current assets	7,650			20,908		63,407			49,216			18,131			159,312
Property, plant and equipment:
Land and mineral rights	—			1,395		91,741			168,605			—			261,741
Plant and equipment	3,198			219,857		215,751			196,914			—			635,720
	3,198			221,252		307,492			365,519			—			897,461
Less accumulated depreciation, depletion and amortization	2,364			61,474		108,151			212,632			—			384,621
Net property, plant and equipment	834			159,778		199,341			152,887			—			512,840
Advanced coal royalties	—			—		500			3,816			—			4,316
Reclamation deposits	—			—		—			72,718			—			72,718
Restricted investments and bond collateral	15,183			5,990		39,208			26,828			—			87,209
Contractual third-party reclamation receivables	—			—		327			83,831			—			84,158
Intangible assets	—			2,923		—			280			—			3,203
Investment in subsidiaries	248,565			—		(792		)	3,770			(251,543		)	—
Other assets	10,267			—		635			3,457			(2,000		)	12,359
Total assets	$	282,499		$	189,599	$	302,626		$	396,803		$	(235,412	)	$	936,115

CONSOLIDATING BALANCE SHEETS

December 31, 2012

(In thousands)



Liabilities and Shareholders’ Deficit	Parent/ Issuer			Co-Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Adjustments			Total
Current liabilities
Current installments of long-term debt	$	(1,548	)	$	—		$	1,939		$	23,400		$	—		$	23,791
Accounts payable and accrued expenses:
Trade	4,707			4,978			15,163			42,085			(14,840		)	52,093
Production taxes	—			3			10,014			23,211			—			33,228
Workers’ compensation	820			—			—			—			—			820
Postretirement medical benefits	12,494			—			87			1,487			—			14,068
SERP	390			—			—			—			—			390
Deferred revenue	—			8,788			2,997			1,037			—			12,822
Asset retirement obligations	—			—			3,519			18,719			—			22,238
Other current liabilities	11,312			—			10			144			(4		)	11,462
Total current liabilities	28,175			13,769			33,729			110,083			(14,844		)	170,912
Long-term debt, less current installments	245,456			—			2,473			91,269			(2,000		)	337,198
Workers’ compensation, less current portion	8,710			—			—			—			—			8,710
Excess of black lung benefit obligation over trust assets	8,356			—			—			—			—			8,356
Postretirement medical benefits, less current portion	224,336			—			55,981			39,458			—			319,775
Pension and SERP obligations, less current portion	29,265			289			19,346			5,350			—			54,250
Deferred revenue, less current portion	—			50,239			—			6,652			—			56,891
Asset retirement obligations, less current portion	—			829			40,063			200,717			—			241,609
Intangible liabilities	—			6,625			—			—			—			6,625
Other liabilities	701			—			15,677			1,642			—			18,020
Intercompany receivable/payable	23,731			—			(7,972		)	35,787			(51,546		)	—
Total liabilities	568,730			71,751			159,297			490,958			(68,390		)	1,222,346
Shareholders’ deficit
Preferred stock	160			—			—			—			—			160
Common stock	35,502			5			110			132			(247		)	35,502
Other paid-in capital	130,852			52,807			93,456			62,539			(208,802		)	130,852
Accumulated other comprehensive loss	(148,345		)	(372		)	(4,987		)	(24,492		)	29,851			(148,345		)
Accumulated earnings (deficit)	(289,727		)	65,408			54,750			(132,334		)	12,176			(289,727		)
Total Westmoreland Coal Company shareholders’ deficit	(271,558		)	117,848			143,329			(94,155		)	(167,022		)	(271,558		)
Noncontrolling interest	(14,673		)	—			—			—			—			(14,673		)
Total equity (deficit)	(286,231		)	117,848			143,329			(94,155		)	(167,022		)	(286,231		)
Total liabilities and shareholders’ deficit	$	282,499		$	189,599		$	302,626		$	396,803		$	(235,412	)	$	936,115

CONSOLIDATING STATEMENTS OF OPERATIONS

Three Months Ended March 31, 2013

(In thousands)



	Parent/ Issuer			Co-Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Adjustments			Total
Revenues	$	—		$	19,336		$	50,687		$	100,401		$	(8,976	)	$	161,448
Costs and expenses:
Cost of sales	—			16,954			40,421			82,022			(8,976		)	130,421
Depreciation, depletion and amortization	94			2,531			5,189			6,612			—			14,426
Selling and administrative	3,054			855			2,637			5,341			—			11,887
Heritage health benefit expenses	3,689			—			—			262			—			3,951
Gain on sales of assets	—			—			(133		)	(101		)	—			(234		)
Other operating income	—			—			(4,737		)	—			—			(4,737		)
	6,837			20,340			43,377			94,136			(8,976		)	155,714
Operating income (loss)	(6,837		)	(1,004		)	7,310			6,265			—			5,734
Other income (expense):
Interest expense	(7,584		)	(10		)	(74		)	(2,500		)	8			(10,160		)
Interest income	30			10			44			221			(8		)	297
Other income (loss)	—			—			92			(22		)	—			70
	(7,554		)	—			62			(2,301		)	—			(9,793		)
Income (loss) before income taxes and income of consolidated subsidiaries	(14,391		)	(1,004		)	7,372			3,964			—			(4,059		)
Equity in income of subsidiaries	10,304			—			—			—			(10,304		)	—
Loss before income taxes	(4,087		)	(1,004		)	7,372			3,964			(10,304		)	(4,059		)
Income tax expense (benefit)	—			—			496			2,823			(3,291		)	28
Net income (loss)	(4,087		)	(1,004		)	6,876			1,141			(7,013		)	(4,087		)
Less net loss attributable to noncontrolling interest	(1,702		)	—			—			—			—			(1,702		)
Net income (loss) attributable to the Parent company	$	(2,385	)	$	(1,004	)	$	6,876		$	1,141		$	(7,013	)	$	(2,385	)

CONSOLIDATING STATEMENTS OF OPERATIONS

Three Months Ended March 31, 2012

(In thousands)



	Parent/ Issuer			Co-Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Adjustments			Total
Revenues	$	—		$	20,722		$	38,191		$	95,416		$	(7,093	)	$	147,236
Costs and expenses:
Cost of sales	—			14,497			25,856			77,503			(7,093		)	110,763
Depreciation, depletion and amortization	108			2,498			3,779			6,904			—			13,289
Selling and administrative	3,067			937			3,359			7,699			(1,527		)	13,535
Heritage health benefit expenses	3,569			—			—			241			—			3,810
Loss on sales of assets	—			—			—			38			—			38
Other operating loss (income)	—			—			(4,812		)	1			1,527			(3,284		)
	6,744			17,932			28,182			92,386			(7,093		)	138,151
Operating income (loss)	(6,744		)	2,790			10,009			3,030			—			9,085
Other income (expense):
Interest expense	(6,900		)	(10		)	(94		)	(2,899		)	20			(9,883		)
Interest income	50			2			53			321			(20		)	406
Other income	52			—			24			101			—			177
	(6,798		)	(8		)	(17		)	(2,477		)	—			(9,300		)
Income (loss) before income taxes and income of consolidated subsidiaries	(13,542		)	2,782			9,992			553			—			(215		)
Equity in income of subsidiaries	13,292			—			—			—			(13,292		)	—
Income (loss) before income taxes	(250		)	2,782			9,992			553			(13,292		)	(215		)
Income tax expense (benefit)	(28		)	—			538			1,619			(2,122		)	7
Net income (loss)	(222		)	2,782			9,454			(1,066		)	(11,170		)	(222		)
Less net loss attributable to noncontrolling interest	(1,080		)	—			—			—			—			(1,080		)
Net income (loss) attributable to the Parent company	$	858		$	2,782		$	9,454		$	(1,066	)	$	(11,170	)	$	858

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

Three Months Ended March 31, 2013

(In thousands)



	Parent/Issuer			Co-Issuer			Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Consolidating Adjustments			Total

Net income (loss)	$	(4,087	)	$	(1,004	)	$	6,876	$	1,141	$	(7,013	)	$	(4,087	)
Other comprehensive income (loss)
Amortization of accumulated actuarial gains or losses, pension	741			6			—		193		(199		)	741
Amortization of accumulated actuarial gains or losses, transition obligations, and prior service costs, postretirement medical benefit	1,001			—			—		213		(213		)	1,001
Other comprehensive income (loss)	1,742			6			—		406		(412		)	1,742
Comprehensive income (loss) attributable to Westmoreland Coal Company	$	(2,345	)	$	(998	)	$	6,876	$	1,547	$	(7,425	)	$	(2,345	)

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

Three Months Ended March 31, 2012

(In thousands)



	Parent/Issuer			Co-Issuer		Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Consolidating Adjustments			Total

Net income (loss)	$	(222	)	$	2,782	$	9,454	$	(1,066	)	$	(11,170	)	$	(222	)
Other comprehensive income (loss)
Amortization of accumulated actuarial gains or losses, pension	729			5		—		186			(191		)	729
Amortization of accumulated actuarial gains or losses, transition obligations, and prior service costs, postretirement medical benefit	643			—		—		243			(243		)	643
Tax effect of other comprehensive income gains	(504		)	—		—		—			—			(504		)
Unrealized and realized gains and losses on available-for-sale securities	(69		)	—		1		(18		)	17			(69		)
Other comprehensive income (loss)	799			5		1		411			(417		)	799
Comprehensive income (loss) attributable to Westmoreland Coal Company	$	577		$	2,787	$	9,455	$	(655	)	$	(11,587	)	$	577

CONSOLIDATING STATEMENTS OF CASH FLOWS

Three Months Ended March 31, 2013

(In thousands)



Statements of Cash Flows	Parent/ Issuer			Co-Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Adjustments			Total
Cash flows from operating activities:
Net income (loss)	$	(4,087	)	$	(1,004	)	$	6,876		$	1,141		$	(7,013	)	$	(4,087	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Equity in income of subsidiaries	10,304			—			—			—			(10,304		)	—
Depreciation, depletion, and amortization	94			2,531			5,189			6,612			—			14,426
Accretion of asset retirement obligation and receivable	—			16			1,050			2,114			—			3,180
Amortization of intangible assets and liabilities, net	—			156			—			8			—			164
Share-based compensation	682			10			681			1,013			—			2,386
Gain on sale of assets	—			—			(133		)	(101		)	—			(234		)
Amortization of deferred financing costs	771			—			13			149			—			933
Loss on investments	—			—			7			—			—			7
Changes in operating assets and liabilities:
Receivables, net	49			2,885			(2,467		)	(3,355		)	3,008			120
Inventories	—			(2,181		)	(753		)	247			—			(2,687		)
Excess of black lung benefit obligation over trust assets	83			—			—			—			—			83
Accounts payable and accrued expenses	(8,202		)	5,960			(10		)	6,979			(1,482		)	3,245
Deferred revenue	—			(1,927		)	1,703			384			—			160
Income tax payable	—			—			(1,679		)	1,706			—			27
Accrual for workers’ compensation	(191		)	—			—			—			—			(191		)
Asset retirement obligations	—			—			(190		)	(3,017		)	—			(3,207		)
Accrual for postretirement medical benefits	(100		)	—			1,478			607			—			1,985
Pension and SERP obligations	320			4			177			241			—			742
Other assets and liabilities	(187		)	465			(195		)	4,081			—			4,164
Net cash provided by (used in) operating activities	(464		)	6,915			11,747			18,809			(15,791		)	21,216
Cash flows from investing activities:
Distributions received from subsidiaries	19,600			—			—			—			(19,600		)	—
Additions to property, plant and equipment	(157		)	(134		)	(4,224		)	(786		)	—			(5,301		)
Change in restricted investments and bond collateral and reclamation deposits	(398		)	(3		)	(151		)	(5,883		)	—			(6,435		)
Net proceeds from sales of assets	—			—			309			132			—			441



Proceeds from the sale of investments	—			—			120			5,499			—			5,619
Receivable from customer for property and equipment purchases	—			—			—			(49		)	—			(49		)
Net cash provided by (used in) investing activities	19,045			(137		)	(3,946		)	(1,087		)	(19,600		)	(5,725		)
Cash flows from financing activities:
Change in book overdrafts	—			—			(7		)	827			—			820
Repayments of long-term debt	—			—			(713		)	(5,860		)	—			(6,573		)
Borrowings on revolving lines of credit	—			—			—			6,000			—			6,000
Repayments on revolving lines of credit	—			—			—			(6,000		)	—			(6,000		)
Debt issuance costs and other refinancing costs	—			—			—			(156		)	—			(156		)
Dividends/distributions	(340		)	(6,500		)	(8,000		)	(5,100		)	19,600			(340		)
Transactions with Parent/affiliates	(22,106		)	(16		)	2,255			4,076			15,791			—
Net cash provided by (used in) financing activities	(22,446		)	(6,516		)	(6,465		)	(6,213		)	35,391			(6,249		)
Net increase (decrease) in cash and cash equivalents	(3,865		)	262			1,336			11,509			—			9,242
Cash and cash equivalents, beginning of year	14,836			4,545			5,362			6,867			—			31,610
Cash and cash equivalents, end of year	$	10,971		$	4,807		$	6,698		$	18,376		$	—		$	40,852

CONSOLIDATING STATEMENTS OF CASH FLOWS

Three Months Ended March 31, 2012

(In thousands)



Statements of Cash Flows	Parent/ Issuer			Co-Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Adjustments			Total
Cash flows from operating activities:
Net income (loss)	$	(222	)	$	2,782		$	9,454		$	(1,066	)	$	(11,170	)	$	(222	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Equity in income of subsidiaries	13,292			—			—			—			(13,292		)	—
Depreciation, depletion, and amortization	108			2,498			3,779			6,904			—			13,289
Accretion of asset retirement obligation and receivable	—			15			826			2,012			—			2,853
Amortization of intangible assets and liabilities, net	—			155			—			7			—			162
Non-cash tax benefits	(504		)	—			—			—			—			(504		)
Share-based compensation	737			9			121			1,035			—			1,902
Loss on sale of assets	—			—			—			38			—			38
Amortization of deferred financing costs	604			—			91			162			—			857
Gain on investments securities	(52		)	—			—			—			—			(52		)
Changes in operating assets and liabilities:
Receivables, net	(3		)	794			(15,621		)	5,699			1,761			(7,370		)
Inventories	—			(359		)	(156		)	(980		)	—			(1,495		)
Excess of black lung benefit obligation over trust assets	327			—			—			—			—			327
Accounts payable and accrued expenses	(3,724		)	(297		)	7,679			(82		)	(1,606		)	1,970
Deferred revenue	—			(2,173		)	1,371			716			—			(86		)
Accrual for workers’ compensation	(80		)	—			—			—			—			(80		)
Asset retirement obligations	—			—			(19		)	(2,423		)	—			(2,442		)
Accrual for postretirement medical benefits	(35		)	—			873			586			—			1,424
Pension and SERP obligations	271			3			103			220			—			597
Other assets and liabilities	357			(218		)	1,590			91			—			1,820
Net cash provided by (used in) operating activities	11,076			3,209			10,091			12,919			(24,307		)	12,988
Cash flows from investing activities:
Distributions received from subsidiaries	3,500			—			—			—			(3,500		)	—
Additions to property, plant and equipment	27			(511		)	(1,171		)	(2,765		)	—			(4,420		)
Change in restricted investments and bond collateral and reclamation deposits	(809		)	(2		)	(24,736		)	114			—			(25,433		)
Cash payments related to acquisitions and other	4,000			—			(76,522		)	—			—			(72,522		)
Net proceeds from sales of assets	—			—			20			—			—			20
Proceeds from the sale of investments	375			—			—			—			—			375



Receivable from customer for property and equipment purchases	—			—			—			(591		)	—			(591		)
Net cash provided by (used in) investing activities	7,093			(513		)	(102,409		)	(3,242		)	(3,500		)	(102,571		)
Cash flows from financing activities:
Change in book overdrafts	140			(259		)	2			1			—			(116		)
Borrowings from long-term debt	119,364			—			—			—			—			119,364
Repayments of long-term debt	—			—			(593		)	(4,852		)	—			(5,445		)
Debt issuance costs and other refinancing costs	(4,556		)	—			—			—			—			(4,556		)
Dividends/distributions	(340		)	—			—			(3,500		)	3,500			(340		)
Transactions with Parent/affiliates	(126,524		)	44			95,462			6,711			24,307			—
Net cash provided by (used in) financing activities	(11,916		)	(215		)	94,871			(1,640		)	27,807			108,907
Net increase (decrease) in cash and cash equivalents	6,253			2,481			2,553			8,037			—			19,324
Cash and cash equivalents, beginning of year	26,141			6			143			4,493			—			30,783
Cash and cash equivalents, end of year	$	32,394		$	2,487		$	2,696		$	12,530		$	—		$	50,107