ACQUISITIONS

Acquisition of Buckingham Coal Company, LLC

On January 1, 2015, Westmoreland completed the acquisition of Buckingham Coal Company, LLC, an Ohio-based coal supplier (“Buckingham”), pursuant to an agreement dated January 1, 2015 among WCC Land Holding Company, Inc., an affiliate of the Company, for an initial cash purchase price of $34.0 million, reduced by a working capital adjustment of $1.6 million (the “Buckingham Acquisition”). The Buckingham operations are included in the Company’s Coal - U.S. segment.

The Buckingham Acquisition has been accounted for under the acquisition method of accounting that requires the total purchase consideration to be allocated to the assets acquired and liabilities assumed based on estimates of fair value.

The allocation of the purchase price is preliminary pending the completion of various analyses and the finalization of estimates. During the measurement period (which is not to exceed one year from the acquisition date), additional assets or liabilities may be recognized if new information is obtained about facts and circumstances that existed as of the acquisition date that, if known, would have resulted in the recognition of those assets or liabilities as of that date. The preliminary allocation may be adjusted after obtaining additional information regarding, among other things, asset valuations, liabilities assumed and revisions of previous estimates, and these adjustments may be significant.

A summary of the purchase consideration and a preliminary allocation of the purchase consideration follows (in millions):



	Provisional as of September 30, 2015
Purchase Price:
Cash paid - Initial payment	$	34.0
Cash received - Working capital adjustment	(1.6		)
Net cash consideration	$	32.4

Preliminary allocation of purchase price:
Assets:
Cash and cash equivalents	$	2.8
Inventories - materials and supplies	2.5
Other current assets	0.1
Total current assets	5.4
Land and mineral rights	13.2
Plant and equipment	24.6
Total Assets	43.2
Liabilities:
Trade payables and other accrued liabilities	(5.2		)
Asset retirement obligations	(1.0		)
Total current liabilities	(6.2		)
Asset retirement obligations, less current portion	(2.8		)
Other liabilities	(1.8		)
Total Liabilities	(10.8		)
Net fair value	$	32.4

Acquisition of General Partner of Westmoreland Resource Partners, LP

On December 31, 2014, the Company completed the acquisition of Westmoreland Resources GP, LLC (the “GP”), the general partner of Westmoreland Resource Partners, LP (“WMLP”), referred to as the “GP Acquisition.” Concurrent with the GP Acquisition, Westmoreland contributed certain royalty-bearing coal reserves to WMLP in return for WMLP common units (the “Contribution” and together with the GP Acquisition, the “WMLP Transactions”).

Westmoreland paid $30.0 million in December 2014 and $3.5 million in January 2015 to acquire the GP; and received 4,512,500 common units of WMLP (on a post-split basis following a 12-to-1 reverse split of WMLP’s common and general partner units) as consideration for the Contribution.

In connection with the closing, WMLP’s name was changed to Westmoreland Resource Partners, LP from Oxford Resource Partners, LP and the name of the GP was changed to Westmoreland Resources GP, LLC from Oxford Resources GP, LLC. The common units of WMLP trade on the NYSE under the symbol “WMLP”.

The GP Acquisition has been accounted for under the acquisition method of accounting that requires the total purchase consideration to be allocated to the assets acquired and liabilities assumed based on estimates of fair value.

A summary of the purchase consideration and a preliminary allocation of the purchase consideration follows (in millions):



	Provisional as of September 30, 2015
Purchase Price:
Cash paid at closing	$	30.0
Contingent consideration	3.5
Fair value of outstanding WMLP units ⁽¹⁾	10.8
Total purchase consideration	$	44.3

Preliminary allocation of purchase price:
Assets:
Trade receivables and other	$	22.5
Inventories - materials and supplies	7.4
Inventories - coal	6.6
Other current assets	1.3
Total current assets	37.8
Land and mineral rights	39.5
Plant and equipment	134.0
Advanced coal royalties	9.2
Restricted investments and bond collateral	10.6
Intangible assets	31.0
Other assets	0.2
Total Assets	262.3
Liabilities:
Trade payables and other accrued liabilities	(19.1		)
Asset retirement obligations	(7.8		)
Other current liabilities	(4.0		)
Total current liabilities	(30.9		)
Long-term debt, less current installments	(160.1		)
Asset retirement obligations, less current portion	(23.9		)
Warrants	(2.0		)
Other liabilities	(1.1		)
Total Liabilities	(218.0		)
Net Assets	44.3
Non-controlling Interest	(10.8		)
Invested Equity	$	33.5

(1) Represents the market price of WMLP units outstanding using the December 31, 2014 closing price.

No goodwill was recorded in the GP Acquisition and $31.0 million of intangible assets to be amortized over a fifteen-year period were identified. The intangible asset identified in the GP Acquisition is a terminal lease at a dock in Ohio which was fair valued based on contract prices which were favorable to market prices.

Canadian Acquisition

On April 28, 2014, Westmoreland Coal Company acquired Prairie Mines & Royalty ULC (“PMRU”) and Coal Valley Resources Inc. (“CVRI”), collectively referred to as the “Canadian Subsidiaries.” The operations of the Canadian Subsidiaries (the “Canadian Operations”) include six producing thermal coal mines in the Canadian provinces of Alberta and Saskatchewan, a char production facility, and a 50% interest in an activated carbon plant. The purchase consideration included a $282.8 million initial cash payment made on April 28, 2014, a cash payment for a working capital adjustment of $39.8 million made on June 25, 2014, and assumed liabilities of $421.3 million.

Acquisition related costs of $33.1 million were expensed for the nine months ended September 30, 2014; which included a $14.2 million charge to Cost of sales related to the sale of inventory written up to fair value in the acquisition, $7.8 million of expenses included in Selling and administrative costs, $6.2 million of loss on foreign exchange as described in Note 11, and $4.9 million included in Interest expense related to a bridge facility commitment fee.

The Canadian Acquisition has been accounted for under the acquisition method of accounting that requires the total purchase consideration to be allocated to the assets acquired and liabilities assumed based on estimates of fair value.

The Company finalized the purchase price allocation for the Canadian Acquisition as of December 31, 2014. No goodwill was recorded in the acquisition and $37.0 million of intangible assets were identified in the acquisition.

A summary of the purchase consideration and allocation of the purchase consideration follows (in millions):



	Final as of December 31, 2014
Purchase Price:
Cash paid - Initial payment	$	282.8
Cash paid - Working capital adjustment	39.8
Total cash consideration	$	322.6

Allocation of purchase price:
Assets:
Cash and cash equivalents	$	26.2
Receivables	78.1
Inventories - materials and supplies	52.0
Inventories - coal	79.8
Loan and lease receivables	11.2
Deferred tax assets	8.2
Other current assets	3.4
Total current assets	258.9
Land and mineral rights	202.6
Plant and equipment	114.8
Loan and lease receivables	79.1
Contractual third-party reclamation receivables, less current portion	6.8
Investment in joint venture	36.0
Intangible assets	37.0
Other assets	8.7
Total Assets	743.9
Liabilities:
Current installments of long-term debt	(36.3		)
Trade payables and other accrued liabilities	(136.1		)
Asset retirement obligations	(7.8		)
Total current liabilities	(180.2		)
Long-term debt, less current installments	(86.3		)
Asset retirement obligations, less current portion	(122.9		)
Deferred tax liabilities	(31.9		)
Total Liabilities	(421.3		)
Net fair value	$	322.6

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

Unaudited Pro Forma Information

The following unaudited pro forma information has been prepared for illustrative purposes only and assumes the acquisitions occurred on January 1, 2013, in the case of the Canadian Acquisition and the WMLP Transactions, and on January 1, 2014, in the case of the Buckingham Acquisition. The unaudited pro forma results have been prepared based on estimates and assumptions, which the Company believes are reasonable, however, they are not necessarily indicative of the consolidated results of operations had the acquisitions occurred on the dates indicated above, or of future results of operations.



(In thousands, except per share data)	Three Months Ended September 30,			Nine Months Ended September 30,
	2014			2014
Total Revenues
As reported	$	337,830		$	805,989
Pro forma (unaudited)	$	465,094		$	1,366,820

Operating Income
As reported	$	(29,432	)	$	(51,021	)
Pro forma (unaudited)	$	(7,339	)	$	(14,678	)

Net loss applicable to common shareholders
As reported	$	(49,329	)	$	(131,982	)
Pro forma (unaudited)	$	(31,034	)	$	(95,373	)

Net loss per share applicable to common shareholders
As reported	$	(2.95	)	$	(8.49	)
Pro forma (unaudited)	$	(1.86	)	$	(6.13	)