2. 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 a total cash purchase price of $32.5 million (the “Buckingham Acquisition”). 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. Of the total purchase price, $26.8 million was allocated to property plant and equipment, $12.1 million to land and mineral reserves and $6.4 million to net liabilities assumed. The Buckingham operations are included in the Company’s Coal - U.S. segment. Purchase price accounting was considered final as of December 31, 2015.

Acquisition of General Partner of Westmoreland Resource Partners, LP

On December 31, 2014, the Company completed the acquisition of Oxford Resources GP, LLC, the general partner of Oxford Resource Partners, LP, for $33.5 million in cash consideration (the “GP Acquisition”). Also on December 31, 2014 the Company completed a contribution of certain royalty-bearing coal reserves in return for 4,512,500 common units of Oxford Resource Partners, LP (the “Contribution”). In connection with these transactions, Oxford Resources GP, LLC was renamed to Westmoreland Resources GP, LLC, and Oxford Resource Partners, LP was renamed to Westmoreland Resource Partners, LP (“WMLP”). WMLP will continue to operate as a standalone, publicly traded master limited partnership, with common units trading on the NYSE under the symbol WMLP.

The completion of the GP Acquisition and the Contribution provide Westmoreland with a platform to implement a value-creating drop-down strategy, pursuant to which it intends to periodically contribute certain U.S. and Canadian coal assets to WMLP in exchange for a combination of cash and additional limited partner interests. After completion of the GP Acquisition and the Contribution, the Company owned approximately 79% of the fully diluted limited partner interests as of December 31, 2014 which increased by December 31, 2015 to 93.8% as a result of the Kemmerer Drop, described below. WMLP resumed quarterly distributions of $0.20 per unit beginning in April 2015. In addition to receiving our proportionate share of these distributions, as WMLP's general partner, the Company is entitled to incentive distribution rights.

Acquisition related costs of $0.3 million and $4.5 million have been expensed for the years ended December 31, 2015 and 2014 which are included in Selling and administrative costs.

The acquisition of the GP 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 has finalized the purchase price allocation for the GP acquisition, summarized as follows (in millions):



Purchase Price:	Final as of December 31, 2015
Cash paid at closing	$	30.0
Contingent consideration	3.5
Fair value of outstanding WMLP units	10.8
Total purchase consideration	$	44.3

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	40.2
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	263.0
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	(1.8		)
Total Liabilities	(218.7		)
Net Assets	44.3
Non-controlling Interest	(10.8		)
Invested Equity	$	33.5

No goodwill was recorded in the acquisition and a $31.0 million intangible asset related to a favorable terminal lease at a dock in Ohio will be amortized over a fifteen-year period. The favorable lease was valued based on the difference between contracted prices and market prices.

Kemmerer Drop

On August 1, 2015, we contributed 100% of the outstanding equity interests in Westmoreland Kemmerer, LLC (“Kemmerer”) to WMLP in exchange for $230 million in aggregate consideration, comprised of $115 million in cash and $115 million in newly issued WMLP Series A Convertible Units (the “Series A Units” and such transaction, the “Kemmerer Drop”). In connection with the Kemmerer Drop, all employees of Kemmerer and related employee liabilities, including but not limited to post-retirement pension obligations and post-retirement health benefits, were transferred to us. The Series A Units are convertible into common units representing limited partner interests of WMLP (“Common Units”), on a one-for-one basis, upon the earlier of (i) the date on which WMLP first makes a regular quarterly cash distribution to holders of Common Units in an amount equal to at least $0.22 per Common Unit, or (ii) a change of control of WMLP. Following the Kemmerer Drop, we hold an approximately 93.8% controlling interest in WMLP (on a fully diluted basis). The Kemmerer Drop represents a reorganization of entities under common control. Accordingly, the net assets transferred are deemed to have transferred at the $102.6 million carrying value as of the date of transfer. No gain or loss was recognized.

Canadian Acquisition

On April 28, 2014, the Company acquired Sherritt International Corporation’s coal mining operations (the “Canadian Acquisition”) which 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 $33.6 million have been expensed for the year ended December 31, 2014 which included a $14.2 million charge to Cost of sales related to the post-close sale of inventory written up to fair value in the acquisition, $8.3 million of expenses included in Selling and administrative costs, $6.2 million of loss on foreign exchange 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 has finalized the purchase price allocation for the Canadian Acquisition, summarized as follows (in millions):



Purchase Price:	Final as of December 31, 2014
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 $26.2 million of cash and cash equivalents noted above includes $18.1 million which was used for immediate payment of an assumed liability on the acquisition date, leaving $8.1 million of net cash received upon the acquisition.

During the third quarter of 2014, the Company transferred to an unrelated third party the contract related to the $37.0 million intangible asset noted above. Proceeds of $37.0 million were received from the unrelated third party, with no gain or loss recognized on the transaction.

As part of the Canadian Acquisition 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. Sherritt 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.

The results of the acquired operations subsequent to April 28, 2014 have been included in the Company’s consolidated results of operations.

Unaudited Pro Forma Information

The following unaudited pro forma information has been prepared for illustrative purposes only and assumes the acquisition of the GP and the Canadian Acquisition occurred on January 1, 2013. 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 January 1, 2013, or of future results of operations. Unaudited pro forma information for 2015 is not presented as a result of all acquired entities being consolidated for the entire year.



	Year Ended December 31,
	2014			2013
	(In thousands)
Total Revenues
As reported	$	1,115,992		$	674,686
Pro forma (unaudited)	$	1,644,474		$	1,673,538

Operating Income (Loss)
As reported	$	(42,975	)	$	25,362
Pro forma (unaudited)	$	(38,827	)	$	36,097

Net loss applicable to common shareholders
As reported	$	(173,118	)	$	(6,057	)
Pro forma (unaudited)	$	(135,647	)	$	(62,595	)

Net loss per share applicable to common shareholders
As reported	$	(10.86	)	$	(0.42	)
Pro forma (unaudited)	$	(8.51	)	$	(4.32	)