<HTML>
<HEAD>
<TITLE>FORM S-1</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>As filed with the Securities and Exchange Commission on
April&nbsp;28, 2005</B>
</DIV>

<DIV align="right" style="font-size: 10pt;">
<B>Registration
No.&nbsp;333-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B>
</DIV>

<DIV align="left" style="font-size: 10pt;">
<HR size="4" noshade color="#000000" style="margin-top: -5px">
</DIV>

<DIV align="left" style="font-size: 10pt;">
<HR size="1" noshade color="#000000" style="margin-top: -10px">
</DIV>

<DIV align="center" style="font-size: 14pt; margin-top: 4pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>SECURITIES AND EXCHANGE COMMISSION</B>
</DIV>

<DIV align="center" style="font-size: 12pt;">
<B>Washington, D.C. 20549</B>
</DIV>

<DIV align="center" style="font-size: 3pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 26%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 18pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Form S-1</B>
</DIV>

<DIV align="center" style="font-size: 12pt;">
<B>REGISTRATION STATEMENT</B>
</DIV>

<DIV align="center" style="font-size: 12pt;">
<B>UNDER</B>
</DIV>

<DIV align="center" style="font-size: 12pt;">
<B>THE SECURITIES ACT OF 1933</B>
</DIV>

<DIV align="center" style="font-size: 3pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 26%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 22pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>INTERNATIONAL COAL GROUP, INC.</B>
</DIV>

<DIV align="center" style="font-size: 8pt;">
<I>(Exact name of registrant as specified in its charter)</I>
</DIV>

<DIV align="center" style="font-size: 3pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 26%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="34%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="33%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="27%">&nbsp;</TD>
</TR>

<TR>
    <TD align="center" valign="top">
    <B>Delaware</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    <B>1222</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    <B>20-2641185</B></TD>
</TR>

<TR>
    <TD align="center" valign="top">
    <I>(State of incorporation)</I></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    <I>(Primary Standard Industrial<BR>
    Classification Code Number)</I></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    <I>(I.R.S. Employer<BR>
    Identification No.)</I></TD>
</TR>

</TABLE>
</CENTER>

<DIV align="center" style="font-size: 3pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 26%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 9pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>2000 Ashland Drive</B>
</DIV>

<DIV align="center" style="font-size: 9pt;">
<B>Ashland, Kentucky 41101</B>
</DIV>

<DIV align="center" style="font-size: 9pt;">
<B>(606)&nbsp;920-7400</B>
</DIV>

<DIV align="center" style="font-size: 8pt;">
<I>(Address, including zip code, and telephone number, including
area code, of registrant&#146;s principal executive offices)</I>
</DIV>

<DIV align="center" style="font-size: 9pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>William D. Campbell</B>
</DIV>

<DIV align="center" style="font-size: 9pt;">
<B>Vice President, Treasurer and Secretary</B>
</DIV>

<DIV align="center" style="font-size: 9pt;">
<B>International Coal Group, Inc.</B>
</DIV>

<DIV align="center" style="font-size: 9pt;">
<B>2000 Ashland Drive</B>
</DIV>

<DIV align="center" style="font-size: 9pt;">
<B>Ashland, Kentucky 41101</B>
</DIV>

<DIV align="center" style="font-size: 9pt;">
<B>(606)&nbsp;920-7400</B>
</DIV>

<DIV align="center" style="font-size: 8pt;">
<I>(Name, address, including zip code, and telephone number,
including area code, of agent for service)</I>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>With Copies to:</I></B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 9pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="55%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="42%">&nbsp;</TD>
</TR>

<TR>
    <TD align="center" valign="top">
    <B>Randi L. Strudler,&nbsp;Esq.<BR>
    Jones Day<BR>
    222 East 41st&nbsp;Street<BR>
    New York, New York 10017<BR>
    (212)&nbsp;326-3939</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    <B>Kirk A. Davenport&nbsp;II,&nbsp;Esq.<BR>
    Latham&nbsp;&#38; Watkins LLP<BR>
    885 Third Avenue<BR>
    New York, New York 10022<BR>
    (212) 906-1200</B></TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Approximate date of commencement of proposed sale to the
public:</B> As soon as practicable after this Registration
Statement becomes effective.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
If any of the securities being registered on this form are being
offered on a delayed or continuous basis pursuant to
Rule&nbsp;415 under the Securities Act of 1933, check the
following
box.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">&#111;
</FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
If this form is filed to register additional securities for an
offering pursuant to Rule&nbsp;462(b) under the Securities Act,
check the following box and list the Securities Act registration
statement number of the earlier effective registration statement
for the same
offering.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">&#111;
</FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
If this form is a post-effective amendment filed pursuant to
Rule&nbsp;462(c) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">&#111;
</FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
If this form is a post-effective amendment filed pursuant to
Rule&nbsp;462(d) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">&#111;
</FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
If delivery of the prospectus is expected to be made pursuant to
Rule&nbsp;434 under the Securities Act of 1933, check the
following
box.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">&#111;
</FONT>
</DIV>

<DIV align="center" style="font-size: 3pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 26%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 15pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>CALCULATION OF REGISTRATION FEE</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 9pt; margin-top: 3pt; ">

<TR style="font-size: 1pt;">
    <TD width="44%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD><!-- Right VRule -->
    <TD width="2%">&nbsp;</TD>
    <TD width="22%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD><!-- Right VRule -->
    <TD width="2%">&nbsp;</TD>
    <TD width="26%">&nbsp;</TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Proposed Maximum</B></TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="center" nowrap><B>Title of Each Class of</B></TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Aggregate Offering</B></TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Amount of</B></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="center" nowrap><B>Securities to be Registered</B></TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Offering Price(1)(2)</B></TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Registration Fee(2)</B></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Common stock, par value $0.01&nbsp;per share</DIV>
    </TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">
    $250,000,000</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">
    $29,425</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>

</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><I>(1)</I></TD>
    <TD align="left">
    <I>Estimated solely for determining the registration fee
    pursuant to Rule&nbsp;457(o) promulgated under Securities Act of
    1933.</I></TD>
</TR>

<TR valign="top">
    <TD><I>(2)</I></TD>
    <TD align="left">
    <I>Includes common stock issuable upon the exercise of the
    underwriters&#146; over-allotment option.</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>The Registrant hereby amends this Registration Statement on
such date or dates as may be necessary to delay its effective
date until the Registrant shall file a further amendment which
specifically states that this Registration Statement shall
thereafter become effective in accordance with Section&nbsp;8(a)
of the Securities Act of 1933 or until this Registration
Statement shall become effective on such date as the Commission,
acting pursuant to said Section&nbsp;8(a), may determine.</B>
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<TABLE width="100%" cellpadding="5" style="border: 3pt double #000000; margin-bottom: 6pt; font-size: 10pt"><TR><TD>
<FONT color="#E8112D"> <BR>
 The information in this prospectus is not complete and may be
changed. We may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is
effective. This prospectus is not an offer to sell these
securities and we are not soliciting offers to buy these
securities in any state where the offer or sale is not
permitted.
</FONT> <BR>
</TD></TR></TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 1pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<HR size="1" noshade color="#000000" style="margin-top: -2px">
</DIV>

<DIV align="left" style="font-size: 10pt;">
<HR size="4" noshade color="#000000" style="margin-top: -10px">
</DIV>

<DIV align="left" style="font-size: 9pt;">
<FONT style="font-size: 10pt">
</FONT><FONT color="#E8112D">PRELIMINARY PROSPECTUS
</FONT>
</DIV>

<DIV align="center" style="font-size: 9pt;">
<FONT color="#E8112D">Subject to completion
</FONT>
</DIV>

<DIV align="right" style="font-size: 9pt;">
<FONT color="#E8112D">April 28, 2005
</FONT>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 14pt; margin-top: 10pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Shares</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<IMG src="y07947y0794700.gif" alt="ICG">
</DIV>

<DIV align="left" style="font-size: 14pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Common Stock</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We are
offering &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock. Prior to this offering, there has been no
public market for our shares of common stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Shares of our common stock are currently quoted on the Pink
Sheets Electronic Quotation Service. The last sale price of our
common stock
on &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2005, as reported on the Pink Sheets Electronic Quotation
Service, was
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share. We will apply to list our shares of common stock on The
New York Stock Exchange under the symbol &#147;ICO.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Investing in our common stock involves a high degree of risk.
Before buying any shares of our common stock, you should
carefully read the discussion of material risks of investing in
our common stock under &#147;Risk factors&#148; beginning on
page&nbsp;13 of this prospectus.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or determined if this prospectus is truthful or
complete. Any representation to the contrary is a criminal
offense.</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 9pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="72%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Per Share</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Total</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="8" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Public offering price</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Underwriting discounts and commissions</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Proceeds, before expenses to us&nbsp;</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The underwriters may also purchase up to an
additional &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of our common stock at the public offering price, less the
underwriting discounts and commissions, to cover
over-allotments, if any, within 30&nbsp;days of the date of this
prospectus. If the underwriters exercise this option in full,
the total underwriting discounts and commissions will be
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
and our total proceeds, before expenses, will be
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The underwriters are offering our common stock as set forth
under &#147;Underwriting.&#148; Delivery of the shares of common
stock will be made on or
about &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2005.
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 16pt;">

<TR>
    <TD width="50%"></TD>
    <TD width="50%"></TD>
</TR>

<TR valign="top">
    <TD align="left"><B>UBS Investment Bank</B></TD>
    <TD align="right"><B>Lehman Brothers</B></TD>
</TR>

</TABLE>

<DIV align="center" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The date of this prospectus
is &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2005.
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>[Inside cover graphics to be filed by amendment]</B>
</DIV>

<DIV style="margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>

<DIV align="left" style="font-size: 10pt;">

</DIV>

<DIV align="left" style="font-size: 10pt;">
<!-- TOC -->
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name="tocpage"></A>
</DIV>

<DIV align="left" style="font-size: 10pt;">
________________________________________________________________________________
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
You should rely only on the information contained in this
prospectus. We have not, and the underwriters have not,
authorized anyone to provide you with additional information or
information different from that contained in this prospectus. We
are offering to sell, and seeking offers to buy, shares of our
common stock only in jurisdictions where those offers and sales
are permitted. The information contained in this prospectus is
accurate only as of the date of this prospectus, regardless of
the time of delivery of this prospectus or any sale of our
common stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>TABLE OF CONTENTS</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="87%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#101'>Prospectus summary</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>1</B></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#102'>Risk factors</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>13</B></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#103'>Special note regarding forward-looking
    statements</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>35</B></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#104'>Industry data</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>36</B></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#130'>Price range of common stock</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>36</B></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#105'>Use of proceeds</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>37</B></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#106'>Dividend policy</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>37</B></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#107'>Capitalization</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>38</B></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#108'>Dilution</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>39</B></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#109'>Unaudited consolidated pro forma financial
    data</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>41</B></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#110'>Selected historical consolidated financial
    data of ICG</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>47</B></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#111'>Selected historical consolidated financial
    data of Anker and CoalQuest</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>49</B></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#112'>Management&#146;s discussion and analysis
    of financial condition and results of operations</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>50</B></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#113'>The coal industry</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>65</B></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#114'>Business</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>71</B></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#115'>Environmental and other regulatory
    matters</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>93</B></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#116'>Management</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>101</B></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#117'>Principal stockholders</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>109</B></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#118'>Certain relationships and related party
    transactions</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>111</B></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#119'>Description of indebtedness</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>112</B></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#120'>Description of capital stock</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>114</B></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#121'>Shares eligible for future sale</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>120</B></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#122'>Certain U.S.&nbsp;federal income and estate
    tax consequences to non-U.S.&nbsp;holders</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>122</B></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#123'>Underwriting</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>125</B></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#124'>Validity of the shares</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>129</B></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#125'>Experts</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>130</B></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#126'>Experts&#151; coal reserves</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>130</B></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#127'>Where you can find additional
    information</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>131</B></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#128'>Glossary of selected terms</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>132</B></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#129'>Index to financial statements</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>F-1</B></TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y07947exv3w1.txt">EX-3.1: AMENDED AND RESTATED CERTIFICATE OF INCORPORATION</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y07947exv3w2.txt">EX-3.2: AMENDED AND RESTATED BY-LAWS</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y07947exv10w1.txt">EX-10.1: AMENDED AND RESTATED CREDIT AGREEMENT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y07947exv10w2.txt">EX-10.2: FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y07947exv10w3.txt">EX-10.3: SECURITY AGREEMENT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y07947exv10w4.txt">EX-10.4: ADVISORY SERVICES AGREEMENT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y07947exv10w5.txt">EX-10.5: EMPLOYMENT AGREEMENT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y07947exv11w1.txt">EX-11.1: STATEMENT RE COMPUTATION OF PER SHARE EARNINGS</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y07947exv21w1.txt">EX-21.1: LIST OF SUBSIDIARIES</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y07947exv23w2.htm">EX-23.2: CONSENT OF DELOITTE & TOUCHE, LLP</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y07947exv23w3.txt">EX-23.3: CONSENT OF MARSHALL MILLER & ASSOCIATES, INC.</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y07947exv24w1.txt">EX-24.1: POWERS OF ATTORNEY</A></FONT></TD></TR>
</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt;">
<!-- /TOC -->
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
ADDCAR<SUP style="font-size: 85%; vertical-align: text-top"><FONT style="font-variant:SMALL-CAPS">tm</FONT></SUP>
is the registered trademark of ICG, Inc.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Through and
including &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2005 (the 25th&nbsp;day after the date of this prospectus),
federal securities law may require all dealers that effect
transactions in our common stock, whether or not participating
in this offering, to deliver a prospectus. This requirement is
in addition to the dealers&#146; obligation to deliver a
prospectus when acting as underwriters and with respect to their
unsold allotments or subscriptions.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> i</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<A name='101'></A>
</DIV>

<!-- link1 "Prospectus summary" -->

<DIV align="left" style="font-size: 16pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Prospectus summary
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>The following summarizes information contained elsewhere in
this prospectus and does not contain all of the information you
should consider in making your investment decision. You should
read this summary together with the more detailed information,
including our financial statements and the related notes,
elsewhere in this prospectus. You should carefully consider,
among other things, the matters discussed in &#147;Risk
factors&#148; and &#147;Management&#146;s discussion and
analysis of financial condition and results of
operations.&#148;</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Unless the context otherwise requires, the term
&#147;Horizon&#148; refers to Horizon Natural Resources Company
and its consolidated subsidiaries, the term &#147;Anker&#148;
refers to Anker Coal Group, Inc. and its consolidated
subsidiaries, and the term &#147;CoalQuest&#148; refers to
CoalQuest Development, LLC. References to the &#147;Anker
acquisition&#148; refer to ICG&#146;s acquisition of both Anker
and CoalQuest, which is expected to occur in the second quarter
of 2005. Immediately prior to this offering, ICG and its
subsidiaries will be reorganized so that ICG will be the parent
holding company and ICG, Inc., the current parent holding
company, will become a subsidiary of ICG. Unless the context
otherwise indicates, as used in this prospectus, the terms
&#147;ICG,&#148; &#147;we,&#148; &#147;our,&#148; &#147;us&#148;
and similar terms refer to International Coal Group, Inc. and
its consolidated subsidiaries, after giving effect to the
reorganization and the Anker acquisition. For purposes of the
discussion in this prospectus, references to ICG include all the
assets and coal reserves resulting from the Anker acquisition.
For purposes of all financial disclosure contained in this
prospectus, ICG, Inc. and Horizon (together with its predecessor
AEI Resources Holding, Inc. and its consolidated subsidiaries)
are the predecessors to ICG. All information in this prospectus
relating to the beneficial ownership of our common stock is
presented assuming that all existing shares of ICG, Inc. common
stock are exchanged at a 1-for-1 exchange ratio in the
reorganization and that we issue 30,950,129&nbsp;shares of
common stock in the Anker acquisition. The term &#147;coal
reserves&#148; as used in this prospectus means proven and
probable reserves and the term &#147;coal resources&#148; in
this prospectus means inferred and indicated reserves.</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>THE COMPANY</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We are a leading producer of coal in Northern and Central
Appalachia with a broad range of mid to high Btu, low sulfur
steam and metallurgical coal. Our Appalachian mining operations,
which include 11 of our mining complexes, are located in West
Virginia, Kentucky and Maryland. We also have a complementary
mining complex of mid to high sulfur steam coal strategically
located in the Illinois Basin. We market our coal to a diverse
customer base of largely investment grade electric utilities, as
well as domestic and international industrial customers. The
high quality of our coal and the availability of multiple
transportation options, including rail, truck and barge,
throughout the Appalachian region enable us to participate in
both the domestic and international coal markets. Due to the
decline in Appalachian coal production in recent years, these
markets are currently characterized by strong demand with
limited supply response and elevated spot and contract prices.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The company was formed by WL Ross&nbsp;&#38; Co. LLC, or WLR,
and other investors in May 2004 to acquire and operate
competitive coal mining facilities. Through the acquisition of
certain key assets from the bankruptcy estate of Horizon, the
WLR investor group was able to acquire high quality reserves
strategically located in Appalachia and the Illinois Basin that
are union free, have limited reclamation liabilities and are
substantially free of other legacy liabilities. Due to our
initial capitalization, we were able to complete the acquisition
without incurring a significant level of indebtedness. Following
this offering, we expect to retire substantially all of our
long-term debt and, thus, will be strategically well-positioned.
Consistent with the WLR investor group&#146;s strategy to
consolidate profitable coal assets, the Anker acquisition
further diversifies our reserves.
</DIV>

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As of January&nbsp;1, 2005, we owned or controlled approximately
315&nbsp;million tons of metallurgical quality coal reserves and
approximately 572&nbsp;million tons of steam coal reserves. Coal
reserves are the part of a mineral deposit that can be
economically and legally extracted or produced at the time of the
</DIV>

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<B> 1</B>
</DIV>

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reserve determination. Based on expected 2005 production rates,
our Northern and Central Appalachian reserves could support
existing production levels for approximately 35&nbsp;years and
all of our reserves could support existing production levels for
approximately 49&nbsp;years. Further, we own or control
approximately 707&nbsp;million tons of coal resources. Coal
resources are coal bearing bodies that have been sufficiently
sampled and analyzed, but do not qualify as a commercially
viable coal reserve as prescribed by SEC rules until a final
comprehensive SEC prescribed evaluation is performed.
</DIV>

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Steam coal is primarily consumed by large electric utilities and
industrial customers as fuel for electricity generation. Demand
for low sulfur steam coal has grown significantly since the
introduction of certain controls associated with the Clean Air
Act and the decline in coal production in the eastern half of
the United States.
</DIV>

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Metallurgical coal is primarily used to produce coke, a key raw
material used in the steel making process. Generally,
metallurgical coal sells at a premium to steam coal because of
its higher quality and its importance and value in the steel
making process. During 2004 and the first quarter of 2005, the
demand for metallurgical coal increased substantially as the
global demand for steel increased.
</DIV>

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For the year ended December&nbsp;31, 2004, we sold
18.4&nbsp;million tons of coal, of which 18.2&nbsp;million tons
were steam coal and 0.2&nbsp;million tons were metallurgical
coal. Our steam coal sales volume in 2004 consisted of mid to
high quality, high Btu (greater than 12,000 Btu/lb.), low sulfur
(1.5% or less) coal, which typically sells at a premium to lower
quality, lower Btu, higher sulfur steam coal. We generated total
pro forma revenues of $673.8&nbsp;million and $84.2&nbsp;million
of pro forma earnings before interest, taxes, depreciation and
amortization, as adjusted, or EBITDA, for the year ended
December&nbsp;31, 2004. For a reconciliation of EBITDA, as
adjusted, to the most comparable financial measure calculated in
accordance with GAAP and of EBITDA, as adjusted, to pro forma
EBITDA, an explanation of why we present EBITDA, as adjusted,
and pro forma EBITDA, and how management uses these financial
measures, see &#147;&#151;Summary historical consolidated and
pro forma financial data of ICG.&#148;
</DIV>

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<B>OUR STRENGTHS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Ability to provide variety of high-quality steam and
metallurgical coal.</I></B> Our customers, which include largely
investment grade electric utilities, as well as domestic and
international industrial customers, demand a variety of coal
products. Our variety of coal qualities also allows us to blend
coal in order to meet the specifications of our customers. Our
access to a comprehensive range of high Btu steam and
metallurgical quality coal allows us to market differentiated
coal products to a variety of customers with different coal
quality demands, which allows us to benefit from particularly
strong pricing dynamics in the current market.
</DIV>

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<B><I>Concentration in highly valued Central Appalachian
region.</I></B> Our operations are primarily located in Central
Appalachia, a region known for its high quality coal
characterized by low sulfur and high Btu content. Production
from Central Appalachian mines accounted for approximately 73.2%
of our 2004 coal sales volume. We believe that generally
favorable market dynamics and trends in Central Appalachian coal
supply and demand, the high quality of Central Appalachian coal
and the low transportation costs that result from the relative
proximity of Central Appalachian producers and customers have
created favorable pricing dynamics that will continue to provide
us with an advantage over producers from other regions.
</DIV>

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<B><I>Significant reserve base providing internal expansion
opportunities.</I></B> We own approximately 613&nbsp;million
tons of reserves and control an additional 274&nbsp;million tons
of reserves through long-term leases. We own or control an
additional 707&nbsp;million tons of coal resources. We have not
yet developed approximately 73% of these owned and controlled
reserves. We believe these owned and controlled but as yet
undeveloped reserves and resources would allow us to as much as
double our existing production levels over the next several
years. Our ownership and control of such a substantial portion
of undeveloped reserves in both Northern and Central Appalachia
and the Illinois Basin provides us with significant internal
growth opportunities, which is in contrast to other
U.S.&nbsp;coal producers who
</DIV>

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<B> 2</B>
</DIV>
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must acquire or lease new reserves to enable their growth. We
also have coalbed methane reserves in our owned reserves in West
Virginia, which provides us with additional growth opportunities
in this complementary energy market.
</DIV>

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<B><I>Ability to capitalize on strong coal market
dynamics.</I></B> A significant portion of our coal supply
contracts were renegotiated during the second half of 2004 in
connection with Horizon&#146;s bankruptcy and were re-priced at
that time to then-current (and more favorable) market prices and
terms. Our marketing effort is focused on maintaining a balance
of longer-term contracts and spot sales. We typically have 50%
of our production contracted by the early part of the previous
year with another 35% contracted by the second half of the year
with the remainder of our production used to take advantage of
market dynamics and maximize value in the spot market.
</DIV>

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<B><I>Diversity of reserves, resources and production.</I></B>
Our production, reserves and resources are located in three of
the four major coal regions in the United States. Our
production, reserves and resources in Northern and Central
Appalachia and the Illinois Basin provide important geographical
diversity in terms of markets, transportation and labor. The
diversity of our operations and reserves provides us with a
significant competitive advantage, allowing us to source coal
from multiple operations to meet the needs of our customers and
reduce transportation costs.
</DIV>

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<B><I>Minimal level of long-term liabilities.</I></B> We believe
that compared to other publicly traded U.S.&nbsp;coal producers
we have among the lowest legacy reclamation liabilities and
post-retirement employee obligations. As of December&nbsp;31,
2004, we had total accrued reclamation liabilities of only
$68.7&nbsp;million, post-retirement employee obligations of only
$8.0&nbsp;million, &#147;black lung&#148; liabilities of
approximately $10.0&nbsp;million and Coal Act liabilities of
only $4.8&nbsp;million. In addition, our entire workforce is
union free, which minimizes employee-related liabilities
commonly associated with union-represented mines. As of
December&nbsp;31, 2004, our pro forma total long-term debt was
$180.4&nbsp;million and after this offering we expect to retire
substantially all of this long-term debt. We believe this low
leverage will afford significant financial and operational
flexibility.
</DIV>

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<B><I>Highly skilled management team.</I></B> The members of our
senior management team have, on average, 23&nbsp;years of
industry work experience across a variety of mining methods,
including longwall mining. We have substantial Appalachian
mining experience in increasing productivity, reducing costs,
enhancing work safety practices, and maintaining strong customer
relationships. In addition, the majority of our senior
management team has extensive mine development and expansion
experience.
</DIV>

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<B><I>Recognized leadership in safety and environmental
stewardship.</I></B> The injury incident rates at our mines
throughout 2004, according to the Mine Safety and Health
Administration, or MSHA, were below industry averages. We have
been recognized by safety and environmental agencies with
several prestigious awards for our safety and environmental
record, such as the &#147;Sentinels of Safety Award&#148; from
MSHA, The Department of Interior &#147;Excellence in Surface
Coal Mining and Reclamation Award&#148; and a reclamation award
for innovative methods from the West Virginia Coal Association.
Our focus on safety and environmental performance results in the
reduced likelihood of disruption of production at our mines,
which leads to higher productivity and improved financial
performance.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>OUR BUSINESS STRATEGY</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Maximize profitability through highly efficient and
productive mining operations.</I></B> We are continuing to
evaluate and assess our current operations in order to maximize
operating efficiency and returns on invested capital. We are
focused on maintaining low-cost, highly productive operations by
continuing to invest substantial capital in state-of-the-art
equipment and advanced technologies. We expect to internally
fund approximately $264&nbsp;million of capital expenditures in
the next two years. As we take advantage of planned expansion
opportunities from 2007 through 2009, we expect to spend
approximately $572&nbsp;million on capital expenditures, which
may require external financing.
</DIV>

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<B><I>Leverage owned and controlled reserve base to generate
substantial internal growth.</I></B> We own a large undeveloped
reserve in Northern Appalachia containing approximately
194&nbsp;million tons of high Btu,
</DIV>

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<DIV align="right" style="font-size: 8pt;">
<B> 3</B>
</DIV>
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low sulfur steam and metallurgical quality coal. We currently
expect underground longwall mining operations at this reserve to
commence within the next four years, which will increase our
production level by providing highly valued premium quality coal
in an increasingly tight supply market. In addition, we have two
substantial undeveloped reserves in Central Appalachia, which
contain 56.5&nbsp;million tons of premium metallurgical coal and
are expected to be developed in the next three to six years.
Further, the substantial reserve position that we own in the
Illinois Basin is expected to allow us to benefit from the
expected increase in demand for high sulfur coal to generate
electricity. We are in the process of developing and exploiting
our coalbed methane reserves. Finally, we intend to
opportunistically acquire new coal reserves and/or coal
companies to expand our coal market opportunities and increase
shareholder value.
</DIV>

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<B><I>Capitalize on favorable industry fundamentals by
opportunistically marketing coal.</I></B> U.S.&nbsp;coal market
fundamentals are among the strongest in the last 20&nbsp;years.
We believe this generally favorable pricing environment will
persist given systemic changes in market dynamics such as
long-term supply constraints and increasing demand, particularly
in Central Appalachia and for our metallurgical coal.
Furthermore, because of the high quality of our coal, our access
to a variety of alternative transportation methods, including
truck, rail and barge, and our mix of long-term contract and
spot market sales, we will be able to capitalize on the
favorable industry dynamics to maximize our revenues and
profits. We plan to extend the life of our longer-term contract
arrangements and limit price reopeners in order to lock in
margins and enhance our financial stability, while at the same
time, we plan to maintain an uncommitted portion of planned
production to allow for additional future pricing upside
exposure. As of April&nbsp;25, 2005, we had entered into
contracts to sell approximately 88% of 2005 planned production,
approximately 66% of 2006 planned production and approximately
49% of 2007 planned production.
</DIV>

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<B><I>Continue to focus on improving workplace safety and
environmental compliance.</I></B> We have maintained and plan to
continue to maintain an excellent safety and environmental
performance record. We continue to implement safety measures and
environmental initiatives that are designed to promote safe
operating practices and improved environmental stewardship among
our employees. Our ability to maintain a good safety and
environmental record improves our productivity and lowers our
overall cost structure as well as bolsters employee morale.
</DIV>

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<B>COAL MARKET OUTLOOK</B>
</DIV>

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According to traded coal indices and reference prices, U.S. and
international coal demand is currently strong, and coal pricing
has increased year-over-year in each of our coal production
markets. We believe that the current strong fundamentals in the
U.S.&nbsp;coal industry result primarily from:
</DIV>

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    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    stronger industrial demand following a recovery in the
    U.S.&nbsp;manufacturing sector, evidenced by the final estimate
    of 3.8% real gross domestic product growth in the fourth quarter
    of 2004, as reported by the Bureau of Economic Analysis;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    relatively low customer stockpiles, estimated by the
    U.S.&nbsp;Energy Information Administration, or EIA, to be
    approximately 99&nbsp;million tons at the end of February 2005,
    down 8% from the same period in the prior year;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    declining coal production in Central Appalachia, including a
    decline of 11% in Central Appalachian coal production volume
    from 2000 to 2004, primarily a result of the depletion of
    economically attractive reserves, permitting issues that delay
    mine development and increasing costs of production;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    capacity constraints of U.S.&nbsp;nuclear-powered electricity
    generators, which operated at an average utilization rate of
    88.4% in 2003, up from 70.5% in 1993, as estimated by the EIA;</TD>
</TR>

</TABLE>

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<DIV align="left" style="font-size: 8pt;">
<B> 4</B>
</DIV>

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    <TD width="3%"></TD>
    <TD width="97%"></TD>
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    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    high current and forward prices for natural gas and oil, the
    primary fuels for electricity generation, with spot prices as of
    April&nbsp;22, 2005 for natural gas and heating oil at
    $7.06&nbsp;per million Btu and $1.55&nbsp;per gallon,
    respectively, as reported by Bloomberg L.P.;&nbsp;and</TD>
</TR>

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    <TD style="font-size: 6pt">&nbsp;</TD>
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    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    increased international demand for U.S.&nbsp;coal for
    steelmaking, driven by global economic growth, high ocean
    freight rates and the weak U.S.&nbsp;dollar.</TD>
</TR>

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U.S.&nbsp;spot steam coal prices have steadily increased since
mid-2003, particularly for coals sourced in the eastern United
States. As reported by Bloomberg L.P., the average price of high
Btu, low sulfur Central Appalachia coal was $61.00/ton, during
the week of April&nbsp;22, 2005. This price level represents a
dramatic 64.9% increase in the price of coal since January 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>CENTRAL APPALACHIA COAL REFERENCE
PRICE<SUP style="font-size: 85%; vertical-align: text-top">1</SUP></B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<IMG src="y07947y0794701.gif" alt="(COAL PRICES CHART)">
</DIV>

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<DIV style="width: 15%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<I>Source: Bloomberg L.P.</I>
</DIV>

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    <TD width="92%"></TD>
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    <TD><I>Note:&nbsp; (1)&nbsp;</I></TD>
    <TD align="left">
    <I>Represents coal which meets the specifications (minimum
    12,000 Btu/lb, maximum 1.00% sulfur) for Central Appalachian
    steam coal traded on the New York Mercantile Exchange.</I></TD>
</TR>

</TABLE>

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We expect near-term volume growth in U.S.&nbsp;coal consumption
to be driven by greater utilization at existing coal-fired
electricity generating plants. Nationally, capacity utilization
for coal plants (excluding combined heat and power) is expected
to rise from 72% in 2003 to 83% in 2025, according to the EIA.
If existing U.S.&nbsp;coal-fired plants operate at estimated
potential utilization rates of 85%, we believe they would
consume approximately 180&nbsp;million additional tons of coal
per year, which represents an increase of approximately 18% over
current coal consumption.
</DIV>

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We expect longer-term volume growth in U.S.&nbsp;coal
consumption to be driven by the construction of new coal-fired
plants. The National Energy Technology Laboratory, or NETL, an
arm of the U.S.&nbsp;Department of Energy, or DOE, projects that
112,000 megawatts of new coal-fired electric generation capacity
will be constructed in the United States by 2025. The NETL has
identified 106 coal-fired plants, representing 65,000 megawatts
of electric generation capacity, that have been proposed and are
currently in various stages of development.
</DIV>

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The current pricing environment for U.S.&nbsp;metallurgical coal
is also strong in both the domestic and seaborne export markets.
Demand for metallurgical coal in the United States has recently
increased due to a recovery in the U.S.&nbsp;steel industry. In
addition, the supply for metallurgical coal in the United States
has been temporarily restricted as Consol Energy was forced to
seal its Buchanan mine on February&nbsp;14, 2005 due to an
underground fire. The Buchanan mine produced 4.4&nbsp;million
tons of metallurgical coal in 2004 and has yet to return into
service. In addition to increased demand for metallurgical coal
in the United States, demand for metallurgical coal has
increased in international markets. According to the
International Iron and Steel Institute, Chinese steel
consumption increased 25% in 2003 as compared to 2002, and
Asia-Pacific Rim consumption of metallurgical coal continues
</DIV>

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<B> 5</B>
</DIV>

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to strain supply. For example, BHP Billiton, a major Australian
coal producer, reported average&nbsp;2005 price settlement
increases of 120% for approximately three quarters of its
annually priced metallurgical coal contracts from the prior
year. Fording Canadian Coal Trust, a major Canadian
metallurgical coal producer, announced substantially all
metallurgical coal contracts for the 2005 coal year are priced
at an average of $125&nbsp;per ton, an increase of 140% over the
average sales price during 2004. The dramatic rise in
metallurgical coal prices in global markets is due in part to
concerns over the availability of sufficient supply and the
significant increase in steel production in China. In addition,
weakness of the U.S.&nbsp;dollar has made
U.S.&nbsp;metallurgical coal more competitive in international
markets.
</DIV>

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<B>RISKS RELATED TO OUR BUSINESS AND STRATEGY</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our ability to execute our strategy is subject to the risks that
are generally associated with the coal industry. For example,
our profitability could decline due to changes in coal prices or
coal consumption patterns, as well as unanticipated mine
operating conditions, loss of customers, changes in our ability
to access our coal reserves and other factors that are not
within our control. Furthermore, the heavily regulated nature of
the coal industry imposes significant actual and potential costs
on us, and future regulations could increase those costs or
limit our ability to produce coal.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We are also subject to a number of risks related to our
competitive position and business strategies. For example, our
business strategy exposes us to the risks involving our
long-term coal supply contracts, the demand for coal,
electricity and steel, our projected plans and objectives for
future operations and expansion or consolidation, the
integration of Anker and CoalQuest into our business, and future
economic or capital market conditions. In addition, our focus on
the Central Appalachian region exposes us to the risks of
operating in this region, including higher costs of production
as compared to other coal-producing regions and more costly and
restrictive permitting, licensing and other environmental and
regulatory requirements.
</DIV>

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For additional risks relating to our business, the coal industry
and this offering, see &#147;Risk factors&#148; beginning on
page&nbsp;13 of this prospectus.
</DIV>

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<B>RECENT DEVELOPMENTS</B>
</DIV>

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<B>The Anker acquisition</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
On March&nbsp;31, 2005, ICG, Inc. entered into business
combination agreements with each of Anker and CoalQuest pursuant
to which each of Anker and CoalQuest are to become indirect
wholly owned subsidiaries of ICG. Holders of all of the
outstanding stock of Anker and the membership interests in
CoalQuest will be issued shares of ICG common stock equal to up
to 22.5% of the common stock of ICG outstanding on the date of
the agreement. The aggregate amount of common stock to be issued
will be based upon the price of the shares of common stock sold
in this offering. The acquisitions are subject to certain
closing conditions. See &#147;Business&#151; Our history&#151;
The Anker acquisition&#148; for additional information regarding
the acquisitions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>The reorganization</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In connection with the acquisitions of Anker and CoalQuest, the
current parent holding company, ICG, Inc., will merge with and
into a merger subsidiary and become a subsidiary of ICG. Upon
consummation of the merger, ICG will become the new parent
holding company. All stockholders of ICG, Inc. prior to the
reorganization, all Anker stockholders and all CoalQuest members
prior to the Anker acquisition will be stockholders of ICG after
the reorganization and the Anker acquisition. The
</DIV>

<DIV style="margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 6</B>
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
following chart reflects our corporate organizational structure
following the consummation of the Anker acquisition, the
reorganization and this offering:
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<IMG src="y07947y0794702.gif" alt="(FLOW CHART)">
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>OUR SPONSOR</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
WL Ross&nbsp;&#38; Co. LLC was organized on April&nbsp;1, 2000
by Wilbur L. Ross,&nbsp;Jr. and other members of the
Restructuring Group of Rothschild Inc. This team had
restructured more than $200&nbsp;billion of liabilities in North
America and other parts of the world. The firm maintains offices
in New York City and has become the sponsor of more than
$2.0&nbsp;billion of alternative investment partnerships on
behalf of major U.S., European and Japanese institutional
investors. Selected current and recent portfolio companies
include International Steel Group, the largest integrated steel
producer in North America, and International Textile Group, a
combination of Burlington Industries and Cone Mills.
</DIV>

<DIV align="center" style="font-size: 3pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 26%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our principal executive office is located at 2000 Ashland Drive,
Ashland, Kentucky 41101 and our telephone number is
(606)&nbsp;920-7400.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
You should carefully consider the information contained in the
&#147;Risk factors&#148; section of this prospectus before you
decide to purchase shares of our common stock.
</DIV>

<DIV style="margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 7</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 16pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The offering
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt;">

<TR>
    <TD width="28%"></TD>
    <TD width="1%"></TD>
    <TD width="71%"></TD>
</TR>

<TR>
    <TD valign="top">
    Shares of common stock offered by us</TD>
    <TD></TD>
    <TD valign="top">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    Shares of common stock to be outstanding after this offering</TD>
    <TD></TD>
    <TD valign="top">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    Use of proceeds</TD>
    <TD></TD>
    <TD valign="top">
    We estimate that the net proceeds from this offering, after
    expenses, will be approximately
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
    or approximately
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;if
    the underwriters exercise their over-allotment option in full,
    assuming a public offering price of
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
    share. As of March&nbsp;31, 2005, $174.6&nbsp;million was
    outstanding under our term loan facility. We will use
    $174.6&nbsp;million to repay our term loan facility and the
    remaining proceeds to further reduce debt or for general
    corporate purposes. See &#147;Use of proceeds.&#148;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    Over-allotment option</TD>
    <TD></TD>
    <TD valign="top">
    We have granted the underwriters an option to purchase up to
    additional shares of our common stock to cover over-allotments.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    Proposed New York Stock Exchange symbol</TD>
    <TD></TD>
    <TD valign="top">
    ICO</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The number of shares of our common stock outstanding after this
offering is based on
approximately &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
outstanding as
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2005. Unless otherwise indicated, all information in this
prospectus assumes that we
issue &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of our common stock in the Anker acquisition and all outstanding
shares of common stock of ICG, Inc. are exchanged for shares of
our common stock at a 1-for-1 exchange ratio in the
reorganization.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The number of shares of our common stock to be outstanding
immediately after this offering excludes:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    the shares of our common stock issuable upon exercise of options
    we plan to grant prior to the effectiveness of the registration
    statement of which this prospectus is a part;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    the shares of our common stock expected to be available for
    future grant under the equity incentive plan we plan to adopt
    prior to the effectiveness of the registration statement of
    which this prospectus is a part.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Unless we specifically state otherwise, all information in this
prospectus assumes no exercise by the underwriters of their
option to purchase additional shares. See
&#147;Underwriting.&#148;
</DIV>

<DIV style="margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 8</B>
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 16pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Summary historical consolidated and pro forma financial data of
ICG
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
ICG is a recently formed holding company which does not have any
independent external operations, assets or liabilities, other
than through its operating subsidiaries. Prior to the
acquisition of certain assets of Horizon as of
September&nbsp;30, 2004, our predecessor, ICG, Inc., did not
have any material assets, liabilities or results of operations.
The summary historical consolidated financial data as of and for
the period from October&nbsp;1, 2004 to December&nbsp;31, 2004
have been derived from the audited consolidated financial
statements of ICG, Inc. The following summary historical
consolidated financial data as of and for the period
January&nbsp;1, 2004 to September&nbsp;30, 2004, the year ended
December&nbsp;31, 2003 and the period May&nbsp;10, 2002 to
December&nbsp;31, 2002 has been derived from the audited
consolidated financial statements of Horizon (the predecessor to
ICG for accounting purposes). The summary historical
consolidated financial data for the period January&nbsp;1, 2002
to May&nbsp;9, 2002 has been derived from the audited
consolidated financial statements of AEI Resources (the
predecessor to Horizon for accounting purposes). The financial
statements for the predecessor periods have been prepared on a
&#147;carve-out&#148; basis to include the assets, liabilities
and results of operations of ICG that were previously included
in the consolidated financial statements of Horizon. The
financial statements for the predecessor periods include
allocations of certain expenses, taxation charges, interest and
cash balances relating to the predecessor based on
management&#146;s estimates. The predecessor financial
information is not necessarily indicative of the consolidated
financial position, results of operations and cash flows of ICG
if it had operated during the predecessor periods presented. In
the opinion of management, such financial data reflect all
adjustments, consisting only of normal and recurring
adjustments, necessary for a fair presentation of the results
for those periods. The results of operations for the interim
periods are not necessarily indicative of the results to be
expected for the full year or any future period.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The following summary unaudited pro forma consolidated financial
data of ICG, Inc. and its subsidiaries as of and for the year
ended December&nbsp;31, 2004 have been prepared to give pro
forma effect to our reorganization and our acquisitions of
Horizon, Anker and CoalQuest, as if each had occurred on
January&nbsp;1, 2004, in the case of unaudited pro forma
statement of operations data, and on December&nbsp;31, 2004, in
the case of unaudited pro forma balance sheet data. The
successor balance sheet data and pro forma adjustments used in
preparing the pro forma financial data reflect our preliminary
estimates of the purchase price allocation to certain assets and
liabilities. The pro forma financial data are for informational
purposes only and should not be considered indicative of actual
results that would have been achieved had the transactions
actually been consummated on the dates indicated and do not
purport to indicate balance sheet data or results of operations
as of any future date or for any future period. You should read
the following data in conjunction with &#147;Unaudited
consolidated pro forma financial information,&#148;
&#147;Management&#146;s discussion and analysis of financial
condition and results of operations&#148; and the audited
consolidated financial statements and related notes of each of
ICG, Inc., Horizon (and its predecessors), Anker and CoalQuest,
each included elsewhere in this prospectus.
</DIV>

<DIV style="margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 9</B>
</DIV>
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<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="22%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD><!-- Right VRule -->
    <TD width="2%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD><!-- Right VRule -->
    <TD width="2%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD><!-- Right VRule -->
    <TD width="2%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>AEI RESOURCES</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Predecessor to</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>HORIZON</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="8">&nbsp;</TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Horizon</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Predecessor to ICG, Inc.</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap><B>ICG, Inc.</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="25" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Period from</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Period January&nbsp;1,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Pro forma year</B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Period from</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>May&nbsp;10, 2002 to</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Year ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2004 to</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Period October&nbsp;1,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>ended</B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>January&nbsp;1, 2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>September&nbsp;30,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2004 to</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>to May&nbsp;9, 2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>December&nbsp;31, 2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2004<SUP style="font-size: 85%; vertical-align: text-top">(3)</SUP></B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="7">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>(in thousands, except share data)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Statement of operations data:</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Revenues:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Coal sales revenues</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>136,040</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>264,235</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>441,291</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>346,981</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>130,463</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>624,120</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Freight and handling revenues</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,947</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,032</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,008</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,700</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>880</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15,996</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other revenues</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>21,183</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>27,397</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>31,771</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>22,702</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,766</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>33,696</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total revenues</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>160,170</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>297,664</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>481,070</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>373,383</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>136,109</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>673,812</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cost and expenses:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Freight and handling costs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,947</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,032</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,008</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,700</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>880</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15,996</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cost of coal sales and other revenues (exclusive of
    depreciation, depletion and amortization shown separately below)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>114,767</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>251,361</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>400,652</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>306,429</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>113,707</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>564,723</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Depreciation, depletion and amortization</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>32,316</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>40,033</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>52,254</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>27,547</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,943</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>45,323</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Selling, general and administrative (exclusive of depreciation,
    depletion and amortization shown separately above)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,677</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16,695</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>23,350</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,477</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,194</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17,257</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    (Gain)/loss on sale of assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(93</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(39</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(4,320</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(226</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(10</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(236</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Writedowns and other items</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,323</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>729,953</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,100</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,018</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(140</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total costs and expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>167,937</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,044,035</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>489,044</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>355,945</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>126,714</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>642,923</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income (loss) from operations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(7,767</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(746,371</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(7,974</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17,438</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,395</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>30,889</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other income (expense):</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(36,666</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(80,405</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(145,892</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(114,211</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,453</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(14,348</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Reorganization items</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,567,689</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(143,663</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(52,784</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>727</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>499</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,256</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>187</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,581</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>898</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,329</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total interest and other income (expense)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,531,522</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(222,812</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(198,489</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(111,903</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,555</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(6,019</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income (loss) before income taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,523,755</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(969,183</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(206,463</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(94,465</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,840</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>24,870</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income tax expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,591</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(9,421</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income (loss)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,523,755</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(969,183</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(206,463</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(94,465</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,249</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>15,449</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Earnings (loss) per
    share<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP>:</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Basic</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.04</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.11</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Diluted</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.04</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.11</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Average common shares
    outstanding<SUP style="font-size: 85%; vertical-align: text-top">(1)
    </SUP>:</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Basic</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>106,605,999</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>137,556,128</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Diluted</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>106,605,999</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>137,556,128</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Balance sheet data (at period end):</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash and cash equivalents</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>87,278</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>114</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>859</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>23,967</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>18,359</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,521,318</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>484,212</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>407,064</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>370,298</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>459,975</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>826,724</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Long term debt and capital leases</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>933,106</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,157</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>315</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>29</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>173,446</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>180,388</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,286,318</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,222,218</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,351,393</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,409,092</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>305,575</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>381,076</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total stockholders&#146; equity (members deficit)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>235,000</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(738,006</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(944,329</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1,038,794</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>154,400</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>445,648</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total liabilities and stockholders&#146; equity (members deficit)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,521,318</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>484,212</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>407,064</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>370,298</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>459,975</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>826,724</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Other financial data (unaudited):</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    EBITDA, as
    adjusted<SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>33,278</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>24,832</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>49,247</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>56,358</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>18,226</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>84,165</TD>
    <TD align="left" valign="bottom" nowrap><SUP style="font-size: 85%; vertical-align: text-top">(4)</SUP></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net cash provided by (used in)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(298,196</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>76,372</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>17,753</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>34,057</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>30,209</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Investing activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(10,841</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(12,799</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1,549</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(2,535</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(329,166</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Financing activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>259,011</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(78,025</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(15,459</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(32,381</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>322,924</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Capital expenditures</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>10,963</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>13,435</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>16,937</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>6,624</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,583</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Operating data (unaudited):</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Tons sold</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,416</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,124</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16,655</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,421</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,582</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>18,400</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Tons produced</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,231</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,139</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,041</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,812</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,959</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,591</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Average coal sales realization (per ton)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>25.12</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>23.75</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>26.50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>33.30</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>36.42</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>33.92</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 10</B>
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 15%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 9pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp; <I>(1)</I></TD>
    <TD align="left">
    <I>Earnings per share data and average shares outstanding are
    not presented for the period from January&nbsp;1, 2002 to
    May&nbsp;9, 2002, period from May&nbsp;10, 2002 to
    December&nbsp;31, 2002, year ended December&nbsp;31, 2003 and
    the period from January&nbsp;1, 2004 to September&nbsp;30, 2004
    because they were prepared on a &#147;carve-out&#148; basis.</I></TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp; <I>(2)</I></TD>
    <TD align="left">
    <I>EBITDA, as adjusted, represents net income (but excluding
    gain on the sale of assets, reorganization items and writedowns
    and other items) before deducting net interest expense, income
    taxes and depreciation, depletion and amortization. We present
    EBITDA and pro forma EBITDA because we consider them important
    supplemental measures of our performance and believe they are
    frequently used by securities analysts, investors and other
    interested parties in the evaluation of companies in our
    industry, substantially all of which present EBITDA when
    reporting their results.</I></TD>
</TR>

</TABLE>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 9pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <I>We also use EBITDA for the following purposes: Our executive
    compensation plan bases incentive compensation payments on our
    EBITDA performance measured against budgets and a peer group.
    Our credit agreement uses EBITDA (with additional adjustments)
    to measure our compliance with covenants, such as interest
    coverage and debt incurrence. EBITDA is also widely used by us
    and others in our industry to evaluate and price potential
    acquisition candidates.</I></TD>
</TR>

</TABLE>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 9pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <I>EBITDA and pro forma EBITDA have limitations as analytical
    tools, and you should not consider them in isolation, or as a
    substitute for analysis of our results as reported under GAAP.
    Some of these limitations are:</I></TD>
</TR>

</TABLE>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="3%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <I><FONT style="font-size: 9pt">EBITDA and pro forma EBITDA do
    not reflect our cash expenditures, or future requirements, for
    capital expenditures or contractual commitments;</FONT></I></TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <I><FONT style="font-size: 9pt">EBITDA and pro forma EBITDA do
    not reflect changes in, or cash requirements for, our working
    capital needs;</FONT></I></TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <I><FONT style="font-size: 9pt">EBITDA and pro forma EBITDA do
    not reflect the significant interest expense, or the cash
    requirements necessary to service interest or principal
    payments, on our debts;</FONT></I></TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <I><FONT style="font-size: 9pt">Although depreciation and
    amortization are non-cash charges, the assets being depreciated
    and amortized will often have to be replaced in the future, and
    EBITDA and pro forma EBITDA do not reflect any cash requirements
    for such replacements;&nbsp;and</FONT></I></TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <I><FONT style="font-size: 9pt">Other companies in our industry
    may calculate EBITDA and pro forma EBITDA differently than we
    do, limiting their usefulness as comparative measures</FONT></I></TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <I><FONT style="font-size: 9pt">EBITDA and pro forma EBITDA are
    a measure of our performance that are not required by, or
    presented in accordance with, GAAP and we also believe each is a
    useful indicator of our ability to meet debt service and capital
    expenditure requirements. EBITDA and pro forma EBITDA are not
    measurements of our financial performance under GAAP and should
    not be considered as alternatives to net income, operating
    income or any other performance measures derived in accordance
    with GAAP or as an alternative to cash flow from operating
    activities as a measure of our liquidity.</FONT></I></TD>
</TR>

</TABLE>

<DIV style="margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 11</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 9pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <I>The following table reconciles (i)&nbsp;net income, which we
    believe to be the closest GAAP performance measure, to EBITDA
    and (ii)&nbsp;EBITDA to EBITDA, as adjusted.</I></TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 9pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="32%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD><!-- Right VRule -->
    <TD width="2%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD><!-- Right VRule -->
    <TD width="2%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>

<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>AEI Resources</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(Predecessor</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Horizon</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>to Horizon)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>(Predecessor to ICG, Inc.)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>ICG, Inc.</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="20" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Period from</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Period from</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Period from</B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Period from</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>May&nbsp;10,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>January&nbsp;1,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>October&nbsp;1,</B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>January&nbsp;1,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2002 to</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Year ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2004 to</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2004 to</B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2002 to</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>September&nbsp;30,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>May&nbsp;9, 2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2004</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="22" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>


<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="20" align="center" nowrap><B>(in thousands)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income (loss)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,523,755</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(969,183</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(206,463</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(94,465</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,249</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>36,666</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>80,405</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>145,892</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>114,211</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,453</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income tax expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,591</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Depreciation, depletion and amortization expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>32,316</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>40,033</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>52,254</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>27,547</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,943</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>EBITDA</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,592,737</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(848,745</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(8,317</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>47,293</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>18,236</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    (Gain)/loss on sale of assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(93</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(39</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(4,320</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(226</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(10</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Reorganization items</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,567,689</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>143,663</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>52,784</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(727</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Writedowns and other items</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,323</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>729,953</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,100</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,018</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Total EBITDA adjustments</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,559,459</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>873,577</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>57,564</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,065</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(10</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>EBITDA, as adjusted</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>33,278</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>24,832</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>49,247</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>56,358</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>18,226</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 9pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp; <I>(3)</I></TD>
    <TD align="left">
    <I>The summary unaudited pro forma data of ICG, Inc. and its
    subsidiaries as of and for the year ended December&nbsp;31, 2004
    have been prepared to give pro forma effect to our
    reorganization, the acquisition of Horizon, Anker and CoalQuest,
    as if each had occurred on January&nbsp;1, 2004, in the case of
    unaudited statements of operations data, and on
    December&nbsp;31, 2004, in the case of unaudited pro forma
    balance sheet data.</I></TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp; <I>(4)</I></TD>
    <TD align="left">
    <I>The following table reconciles (i)&nbsp;pro forma net income,
    which we believe to be the closest GAAP performance measure, to
    pro forma EBITDA and (ii)&nbsp;pro forma EBITDA to pro forma
    EBITDA, as adjusted.</I></TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 9pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="71%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="13%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="12%">&nbsp;</TD>
</TR>

<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Pro forma year ended</B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>December&nbsp;31, 2004</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>(in thousands)</B></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>15,449</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,348</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income tax expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,421</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Depreciation, depletion and amortization expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>45,323</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Pro forma EBITDA</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>84,541</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    (Gain)/loss on sale of assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(236</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Reorganization items</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other items</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(140</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Total pro forma EBITDA adjustments</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(376</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Pro forma EBITDA, as adjusted</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>84,165</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 12</B>
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">

</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<A name='102'></A>
</DIV>

<!-- link1 "Risk factors" -->

<DIV align="left" style="font-size: 16pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Risk factors
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>An investment in our common stock involves a high degree of
risk. You should carefully consider the following risk factors,
together with the other information contained in this
prospectus, before investing in our common stock. If any of the
following risks develop into actual events, our business,
financial condition or results of operations could be materially
adversely affected, the trading price of your shares of our
common stock could decline and you may lose all or part of your
investment.</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>RISKS RELATING TO OUR BUSINESS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Because of our limited operating history, we believe that
historical information regarding our company prior to
October&nbsp;1, 2004 and for Horizon, our predecessor for
accounting purposes, is of little relevance in understanding our
business as currently conducted.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We are subject to the risks, uncertainties, expenses and
problems encountered by companies in the early stages of
operations. ICG was incorporated in March&nbsp;2005 as a holding
company and our predecessor, ICG, Inc., was incorporated in
May&nbsp;2004 for the sole purpose of acquiring certain assets
of Horizon. Until we completed that acquisition we had
substantially no operations. As a result, we believe the
historical financial information presented in this prospectus,
other than for the three month period ended December&nbsp;31,
2004, which does not include the historical financial
information for Anker and CoalQuest, is of limited relevance in
understanding our business as currently conducted. The financial
statements for the predecessor periods have been prepared from
the books and records of Horizon as if ICG had existed as a
separate legal entity under common management for all periods
presented (that is, on a &#147;carve-out&#148; basis). The
financial statements for the predecessor periods include
allocations of certain expenses, taxation charges, interest and
cash balances relating to the predecessor based on
management&#146;s estimates. In light of these allocations and
estimates, the predecessor financial information is not
necessarily indicative of the consolidated financial position,
results of operations and cash flows of ICG if it had operated
during the predecessor period presented. See &#147;Unaudited
consolidated pro forma financial data,&#148; &#147;Selected
historical consolidated financial data of ICG&#148; and
&#147;Management&#146;s discussion and analysis of financial
condition and results of operations.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>A substantial or extended decline in coal prices could reduce
our revenues and the value of our coal reserves.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our results of operations are substantially dependent upon the
prices we receive for our coal. The prices we receive for coal
depend upon factors beyond our control, including:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    the supply of and demand for domestic and foreign coal;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    the demand for electricity;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    domestic and foreign demand for steel and the continued
    financial viability of the domestic and/or foreign steel
    industry;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    the proximity to, capacity of and cost of transportation
    facilities;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    domestic and foreign governmental regulations and taxes;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    air emission standards for coal-fired power plants;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    regulatory, administrative and judicial decisions;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    the price and availability of alternative fuels, including the
    effects of technological developments;&nbsp;and</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 13</B>
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<B>Risk factors</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

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    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

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    <TD><FONT face="webdings">4</FONT></TD>
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    the effect of worldwide energy conservation measures.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our results of operations are dependent upon the prices we
charge for our coal as well as our ability to improve
productivity and control costs. Any decreased demand would cause
spot prices to decline and require us to increase productivity
and decrease costs in order to maintain our margins. Declines in
the prices we receive for our coal could adversely affect our
operating results and our ability to generate the cash flows we
require to improve our productivity and invest in our operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Our coal mining production is subject to operating risks that
could result in higher operating expenses and/or decreased
production.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our revenues depend on our level of coal mining production. The
level of our production is subject to operating conditions and
events beyond our control that could disrupt operations and
affect production at particular mines for varying lengths of
time. These conditions and events include:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    the unavailability of qualified labor;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    our inability to acquire, maintain or renew necessary permits or
    mining or surface rights in a timely manner, if at all;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    unfavorable geologic conditions, such as the thickness of the
    coal deposits and the amount of rock embedded in or overlying
    the coal deposit;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    failure of reserve estimates to prove correct;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    changes in governmental regulation of the coal industry,
    including the imposition of additional taxes, fees or actions to
    suspend or revoke our permits or changes in the manner of
    enforcement of existing regulations;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    mining and processing equipment failures and unexpected
    maintenance problems;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    adverse weather and natural disasters, such as heavy rains and
    flooding;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    increased water entering mining areas and increased or
    accidental mine water discharges;</TD>
</TR>

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    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    increased or unexpected reclamation costs;</TD>
</TR>

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    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

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    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    interruptions due to transportation delays;</TD>
</TR>

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    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    the unavailability of required equipment of the type and size
    needed to meet production expectations;&nbsp;and</TD>
</TR>

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    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    unexpected mine safety accidents, including fires and explosions
    from methane.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
These conditions and events may increase our cost of mining and
delay or halt production at particular mines either permanently
or for varying lengths of time. In addition, we may experience
disruptions in our supply of coal from third parties who produce
coal for us due to the foregoing conditions and events. Any
interruptions in the production of coal by us or third parties
who supply us with coal could adversely affect our business and
revenues.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Any change in coal consumption patterns by North American
electric power generators resulting in a decrease in the use of
coal by those consumers could result in lower prices for our
coal, which would reduce our revenues and adversely impact our
earnings and the value of our coal reserves.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Steam coal accounted for nearly all of our coal sales volume in
2004. The majority of our sales of steam coal in 2004 were to
electric power generators. Domestic electric power generation
accounted for approximately&nbsp;92% of all U.S.&nbsp;coal
consumption in 2003, according to the EIA. The amount of
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 14</B>
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<B>Risk factors</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
coal consumed for U.S.&nbsp;electric power generation is
affected primarily by the overall demand for electricity, the
location, availability, quality and price of competing fuels for
power such as natural gas, nuclear, fuel oil and alternative
energy sources such as hydroelectric power, technological
developments, and environmental and other governmental
regulations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We expect that many new power plants will be built to produce
electricity during peak periods of demand, when the demand for
electricity rises above the &#147;base load demand,&#148; or
minimum amount of electricity required if consumption occurred
at a steady rate. However, we also expect that many of these new
power plants will be fired by natural gas because gas-fired
plants are cheaper to construct than coal-fired plants and
because natural gas is a cleaner burning fuel. Gas-fired
generation from existing and newly constructed gas-fired
facilities has the potential to displace coal-fired generation,
particularly from older, less efficient coal-powered generators.
In addition, the increasingly stringent requirements of the
Clean Air Act may result in more electric power generators
shifting from coal to natural gas-fired plants. Any reduction in
the amount of coal consumed by North American electric power
generators could reduce the price of steam coal that we mine and
sell, thereby reducing our revenues and adversely impacting our
earnings and the value of our coal reserves.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Weather patterns also can greatly affect electricity generation.
Extreme temperatures, both hot and cold, cause increased power
usage and, therefore, increased generating requirements from all
sources. Mild temperatures, on the other hand, result in lower
electrical demand, which allows generators to choose the
lowest-cost sources of power generation when deciding which
generation sources to dispatch. Accordingly, significant changes
in weather patterns could reduce the demand for our coal.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Overall economic activity and the associated demands for power
by industrial users can have significant effects on overall
electricity demand. Robust economic activity can cause much
heavier demands for power, particularly if such activity results
in increased utilization of industrial assets during evening and
nighttime periods. The economic slowdown experienced during the
last several years significantly slowed the growth of electrical
demand and, in some locations, resulted in contraction of
demand. Any downward pressure on coal prices, whether due to
increased use of alternative energy sources, changes in weather
patterns, decreases in overall demand or otherwise, would likely
cause our profitability to decline.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Our profitability may be adversely affected by the status of
our long-term coal supply agreements and changes in purchasing
patterns in the coal industry may make it difficult for us to
extend existing agreements or enter into long-term supply
agreements, which could adversely affect the capability and
profitability of our operations.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We sell a significant portion of our coal under long-term coal
supply agreements, which we define as contracts with a term
greater than 12&nbsp;months. As of December&nbsp;31, 2004
approximately 66% of our pro forma revenues were derived from
coal sales that were made under long-term coal supply
agreements. As of that date, we had 28 long-term sales
agreements with a volume-weighted average term of approximately
4.6&nbsp;years. The prices for coal shipped under these
agreements are fixed for the initial year of the contract,
subject to certain adjustments in later years, and thus may be
below the current market price for similar type coal at any
given time, depending on the timeframe of contract execution or
initiation. As a consequence of the substantial volume of our
sales that are subject to these long-term agreements, we have
less coal available with which to capitalize on higher coal
prices, if and when they arise. In addition, in some cases, our
ability to realize the higher prices that may be available in
the spot market may be restricted when customers elect to
purchase higher volumes allowable under some contracts.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 15</B>
</DIV>
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<DIV align="left" style="font-size: 10pt;">
<B>Risk factors</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
When our current contracts with customers expire or are
otherwise renegotiated, our customers may decide not to extend
or enter into new long-term contracts or, in the absence of
long-term contracts, our customers may decide to purchase fewer
tons of coal than in the past or on different terms, including
under different pricing terms. For additional information
relating to these contracts, see &#147;Business&#151; Customers
and coal contracts&#151; Long-term coal supply agreements.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Furthermore, as electric utilities seek to adjust to
requirements of the Clean Air Act, particularly the Acid Rain
regulations, the Clean Air Mercury Rule and the Clean Air
Interstate Rule, and the possible deregulation of their
industry, they could become increasingly less willing to enter
into long-term coal supply agreements and instead may purchase
higher percentages of coal under short-term supply agreements.
To the extent the electric utility industry shifts away from
long-term supply agreements, it could adversely affect us and
the level of our revenues. For example, fewer electric utilities
will have a contractual obligation to purchase coal from us,
thereby increasing the risk that we will not have a market for
our production. Furthermore, spot market prices tend to be more
volatile than contractual prices, which could result in
decreased revenues.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Certain provisions in our long-term supply agreements may
provide limited protection during adverse economic conditions or
may result in economic penalties upon the failure to meet
specifications.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Price adjustment, &#147;price reopener&#148; and other similar
provisions in long-term supply agreements may reduce the
protection from short-term coal price volatility traditionally
provided by such contracts. Most of our coal supply agreements
contain provisions that allow for the purchase price to be
renegotiated at periodic intervals. These price reopener
provisions may automatically set a new price based on the
prevailing market price or, in some instances, require the
parties to agree on a new price, sometimes between a specified
range of prices. In some circumstances, failure of the parties
to agree on a price under a price reopener provision can lead to
termination of the contract. Any adjustment or renegotiations
leading to a significantly lower contract price would result in
decreased revenues. Accordingly, supply contracts with terms of
one year or more may provide only limited protection during
adverse market conditions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Coal supply agreements also typically contain force majeure
provisions allowing temporary suspension of performance by us or
our customers during the duration of specified events beyond the
control of the affected party. Most of our coal supply
agreements contain provisions requiring us to deliver coal
meeting quality thresholds for certain characteristics such as
Btu, sulfur content, ash content, hardness and ash fusion
temperature. Failure to meet these specifications could result
in economic penalties, including price adjustments, the
rejection of deliveries or, in the extreme, termination of the
contracts.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Consequently, due to the risks mentioned above with respect to
long-term supply agreements, we may not achieve the revenue or
profit we expect to achieve from these sales commitments. In
addition, we may not be able to successfully convert these sales
commitments into long-term supply agreements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>A decline in demand for metallurgical coal would limit our
ability to sell our high quality steam coal as higher-priced
metallurgical coal.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Portions of our coal reserves possess quality characteristics
that enable us to mine, process and market them as either
metallurgical coal or high quality steam coal, depending on the
prevailing conditions in the metallurgical and steam coal
markets. We will decide whether to mine, process and market
these coals as metallurgical or steam coal based on
management&#146;s assessment as to which market is likely to
provide us with a higher margin. We will consider a number of
factors when making this assessment, including the difference
between the current and anticipated future market prices of
steam coal and metallurgical coal, the lower volume of saleable
tons that results from producing a given quantity of
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 16</B>
</DIV>
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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Risk factors</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
reserves for sale in the metallurgical market instead of the
steam market, the increased costs incurred in producing coal for
sale in the metallurgical market instead of the steam market,
the likelihood of being able to secure a longer-term sales
commitment by selling coal into the steam market and our
contractual commitments to deliver different types of coals to
our customers. A decline in the metallurgical market relative to
the steam market could cause us to shift coal from the
metallurgical market to the steam market, thereby reducing our
revenues and profitability.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Most of our metallurgical coal reserves possess quality
characteristics that enable us to mine, process and market them
as high quality steam coal. However, some of our mines operate
profitably only if all or a portion of their production is sold
as metallurgical coal to the steel market. If demand for
metallurgical coal declined to the point where we could earn a
more attractive return marketing the coal as steam coal, these
mines may not be economically viable and may be subject to
closure. Such closures would lead to accelerated reclamation
costs, as well as reduced revenue and profitability.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>We face numerous uncertainties in estimating our economically
recoverable coal reserves, and inaccuracies in our estimates
could result in lower than expected revenues, higher than
expected costs or decreased profitability.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We base our reserve information on engineering, economic and
geological data assembled and analyzed by our staff, which
includes various engineers and geologists, and which is
periodically reviewed by outside firms. The reserves estimates
as to both quantity and quality are annually updated to reflect
production of coal from the reserves and new drilling or other
data received. There are numerous uncertainties inherent in
estimating quantities and qualities of and costs to mine
recoverable reserves, including many factors beyond our control.
Estimates of economically recoverable coal reserves and net cash
flows necessarily depend upon a number of variable factors and
assumptions, all of which may vary considerably from actual
results such as:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    geological and mining conditions which may not be fully
    identified by available exploration data or which may differ
    from experience in current operations;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    historical production from the area compared with production
    from other similar producing areas;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    the assumed effects of regulation and taxes by governmental
    agencies and assumptions concerning coal prices, operating
    costs, mining technology improvements, severance and excise tax,
    development costs and reclamation costs.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
For these reasons, estimates of the economically recoverable
quantities and qualities attributable to any particular group of
properties, classifications of reserves based on risk of
recovery and estimates of net cash flows expected from
particular reserves prepared by different engineers or by the
same engineers at different times may vary substantially. Actual
coal tonnage recovered from identified reserve areas or
properties and revenues and expenditures with respect to our
reserves may vary materially from estimates. These estimates
thus may not accurately reflect our actual reserves. Any
inaccuracy in our estimates related to our reserves could result
in lower than expected revenues, higher than expected costs or
decreased profitability.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>We depend heavily on a small number of large customers, the
loss of any of which would adversely affect our operating
results.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our three largest customers for the year ended December&nbsp;31,
2004 were Georgia Power, Carolina Power&nbsp;&#38; Light and
Duke Power and we derived approximately&nbsp;51% of our pro
forma coal revenues from sales to our five largest customers. At
December&nbsp;31, 2004, we had 16&nbsp;coal supply agreements
with these customers that expire at various times from 2005 to
2020. We are currently discussing the
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 17</B>
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<B>Risk factors</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
extension of existing agreements or entering into new long-term
agreements with some of these customers, but we cannot assure
you that these negotiations will be successful or that those
customers will continue to purchase coal from us without
long-term coal supply agreements. If a number of these customers
were to significantly reduce their purchases of coal from us, or
if we were unable to sell coal to them on terms as favorable to
us as the terms under our current agreements, our financial
condition and results of operations could suffer materially.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Disruptions in transportation services could limit our
ability to deliver coal to our customers.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We depend primarily upon railroads, trucks and barges to deliver
coal to our customers. Disruption of railroad service due to
weather-related problems, strikes, lockouts, and other events
could temporarily impair our ability to supply coal to our
customers, resulting in decreased shipments. Decreased
performance levels over longer periods of time could cause our
customers to look elsewhere for their fuel needs, negatively
affecting our revenues and profitability.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
During 2004, the major eastern railroads (CSX and Norfolk
Southern) experienced significant service problems. These
problems were caused by an increase in overall rail traffic from
the expanding economy and shortages of both equipment and
personnel. The service problems had an adverse effect on our
shipments during several months in 2004. If these service
problems persist, they could have an adverse impact on our
financial results in 2005 and beyond.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The states of West Virginia and Kentucky have recently increased
enforcement of weight limits on coal trucks on its public roads.
Additionally, West Virginia legislation, which raised coal truck
weight limits in West Virginia, includes provisions supporting
enhanced enforcement. The legislation went into effect on
October&nbsp;1, 2003 and implementation began on January&nbsp;1,
2004. It is possible that other states in which our coal is
transported by truck could conduct similar campaigns to increase
enforcement of weight limits. Such stricter enforcement actions
could result in shipment delays and increased costs. An increase
in transportation costs could have an adverse effect on our
ability to increase or to maintain production and could
adversely affect revenues.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Some of our mines depend on a single transportation carrier or a
single mode of transportation. Disruption of any of these
transportation services due to weather-related problems,
mechanical difficulties, strikes, lockouts, bottlenecks, and
other events could temporarily impair our ability to supply coal
to our customers. Our transportation providers may face
difficulties in the future that may impair our ability to supply
coal to our customers, resulting in decreased revenues.
Currently, there is a shortage of available train cars to
service our coal operations in eastern Kentucky.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
If there are disruptions of the transportation services provided
by our primary rail carriers that transport our produced coal
and we are unable to find alternative transportation providers
to ship our coal, our business could be adversely affected.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Fluctuations in transportation costs could reduce revenues by
causing us to reduce our production or impairing our ability to
supply coal to our customers.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Transportation costs represent a significant portion of the
total cost of coal for our customers and, as a result, the cost
of transportation is a critical factor in a customer&#146;s
purchasing decision. Increases in transportation costs could
make coal a less competitive source of energy or could make our
coal production less competitive than coal produced from other
sources.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
On the other hand, significant decreases in transportation costs
could result in increased competition from coal producers in
other parts of the country. For instance, coordination of the
many eastern loading facilities, the large number of small
shipments, the steeper average grades of the terrain and a
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 18</B>
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<B>Risk factors</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
more unionized workforce are all issues that combine to make
shipments originating in the eastern United States inherently
more expensive on a per-mile basis than shipments originating in
the western United States. The increased competition could have
a material adverse effect on the business, financial condition
and results of operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Disruption in supplies of coal produced by third parties
could temporarily impair our ability to fill our customers&#146;
orders or increase our costs.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In addition to marketing coal that is produced from our
controlled reserves, we purchase and resell coal produced by
third parties from their controlled reserves to meet customer
specifications. Disruption in our supply of third-party coal
could temporarily impair our ability to fill our customers&#146;
orders or require us to pay higher prices in order to obtain the
required coal from other sources. Any increase in the prices we
pay for third-party coal could increase our costs and therefore
lower our earnings.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Because our profitability is substantially dependent on the
availability of an adequate supply of coal reserves that can be
mined at competitive costs, the unavailability of these types of
reserves would cause our profitability to decline.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We have not yet applied for or obtained all of the permits
required, or developed the mines necessary, to use all of our
reserves. Furthermore, we may not be able to mine all of our
reserves as profitably as we do at our current operations. Our
planned development projects and acquisition activities may not
result in significant additional reserves and we may not have
continuing success developing new mines or expanding existing
mines beyond our existing reserve base. Most of our mining
operations are conducted on properties owned or leased by us.
Because title to most of our leased properties and mineral
rights is not thoroughly verified until a permit to mine the
property is obtained, our right to mine some of our reserves may
be materially adversely affected if defects in title or
boundaries exist. In addition, in order to develop our reserves,
we must receive various governmental permits. We may be unable
to obtain the permits necessary for us to operate profitably in
the future. Some of these permits are becoming increasingly more
difficult and expensive to obtain and the review process
continues to lengthen.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our profitability depends substantially on our ability to mine
coal reserves that have the geological characteristics that
enable them to be mined at competitive costs and to meet the
quality needed by our customers. Because our reserves decline as
we mine our coal, our future success and growth depend, in part,
upon our ability to acquire additional coal reserves that are
economically recoverable. Replacement reserves may not be
available when required or, if available, may not be capable of
being mined at costs comparable to those characteristic of the
depleting mines. We may not be able to accurately assess the
geological characteristics of any reserves that we acquire,
which may adversely affect our profitability and financial
condition. Exhaustion of reserves at particular mines also may
have an adverse effect on our operating results that is
disproportionate to the percentage of overall production
represented by such mines. Our ability to obtain other reserves
in the future could be limited by restrictions under our
existing or future debt agreements, competition from other coal
companies for attractive properties, the lack of suitable
acquisition candidates or the inability to acquire coal
properties on commercially reasonable terms.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Unexpected increases in raw material costs could
significantly impair our operating results.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our coal mining operations use significant amounts of steel,
petroleum products and other raw materials in various pieces of
mining equipment, supplies and materials, including the roof
bolts required by the room and pillar method of mining described
below. Scrap steel prices have risen
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 19</B>
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<B>Risk factors</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
significantly in recent months, and historically, the prices of
scrap steel and petroleum have fluctuated. If the price of steel
or other of these materials increase, our operational expenses
will increase, which could have a significant negative impact on
our operating results.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>A shortage of skilled labor in the mining industry could pose
a risk to achieving optimal labor productivity and competitive
costs, which could adversely affect our profitability.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Efficient coal mining using modern techniques and equipment
requires skilled laborers, preferably with at least a year of
experience and proficiency in multiple mining tasks. In order to
support our planned expansion opportunities, we intend to
sponsor both in-house and vocational coal mining programs at the
local level in order to train additional skilled laborers. In
the event the shortage of experienced labor continues or worsens
or we are unable to train the necessary amount of skilled
laborers, there could be an adverse impact on our labor
productivity and costs and our ability to expand production and
therefore have a material adverse effect on our results of
operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>We have a new management team, and if they are unable to work
effectively together, our business may be harmed.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Most of our and ICG, Inc.&#146;s management team was hired in
2005, and the group has only been working together for a short
period of time. Moreover, several other key employees were hired
in 2005. Because many of our executive officers and key
employees are new and we also expect to add additional key
personnel in the near future, there is a risk that our
management team will not be able to work together effectively.
If our management team is unable to work together, our
operations could be disrupted and our business harmed.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Our ability to operate our company effectively could be
impaired if we fail to attract and retain key personnel.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our senior management team averages&nbsp;23&nbsp;years of
experience in the coal industry, which includes developing
innovative, low-cost mining operations, maintaining strong
customer relationships and making strategic, opportunistic
acquisitions. The loss of any of our senior executives could
have a material adverse effect on our business. There may be a
limited number of persons with the requisite experience and
skills to serve in our senior management positions. We cannot
assure you that we would be able to locate or employ qualified
executives on acceptable terms. In addition, as our business
develops and expands, we believe that our future success will
depend greatly on our continued ability to attract and retain
highly skilled personnel with coal industry experience.
Competition for these persons in the coal industry is intense
and we may not be able to successfully recruit, train or retain
qualified personnel. We cannot assure you that we will continue
to employ key personnel or that we will be able to attract and
retain qualified personnel in the future. Our failure to retain
or attract key personnel could have a material adverse effect on
our operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Acquisitions that we may undertake involve a number of
inherent risks, any of which could cause us not to realize the
anticipated benefits.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We continually seek to expand our operations and coal reserves
through acquisitions. If we are unable to successfully integrate
the companies, businesses or properties we are able to acquire,
our
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 20</B>
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<B>Risk factors</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
profitability may decline and we could experience a material
adverse effect on our business, financial condition, or results
of operations. Acquisition transactions involve various inherent
risks, including:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
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    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    uncertainties in assessing the value, strengths, and potential
    profitability of, and identifying the extent of all weaknesses,
    risks, contingent and other liabilities (including environmental
    or mine safety liabilities) of, acquisition candidates;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

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    <TD><FONT face="webdings">4</FONT></TD>
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    the potential loss of key customers, management and employees of
    an acquired business;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

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    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    the ability to achieve identified operating and financial
    synergies anticipated to result from an acquisition;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
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    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    problems that could arise from the integration of the acquired
    business;&nbsp;and</TD>
</TR>

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    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

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    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    unanticipated changes in business, industry or general economic
    conditions that affect the assumptions underlying our rationale
    for pursuing the acquisition.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Any one or more of these factors could cause us not to realize
the benefits anticipated to result from an acquisition. Any
acquisition opportunities we pursue could materially affect our
liquidity and capital resources and may require us to incur
indebtedness, seek equity capital or both. In addition, future
acquisitions could result in our assuming more long-term
liabilities relative to the value of the acquired assets than we
have assumed in our previous acquisitions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>We may not be able to effectively integrate Anker and
CoalQuest into our operations.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our future success will depend largely on our ability to
consolidate and effectively integrate Anker&#146;s and
CoalQuest&#146;s operations into our operations. We may not be
able to do so successfully without substantial costs, delays or
other difficulties. We may face significant challenges in
consolidating functions and integrating procedures, information
technology systems, personnel and operating philosophies in a
timely and efficient manner. The integration process is complex
and time consuming and may pose a number of obstacles, such as:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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    <TD width="3%"></TD>
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    the loss of key employees or customers;</TD>
</TR>

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    <TD style="font-size: 6pt">&nbsp;</TD>
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    <TD><FONT face="webdings">4</FONT></TD>
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    the challenge of maintaining the quality of customer service;</TD>
</TR>

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    <TD style="font-size: 6pt">&nbsp;</TD>
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    <TD><FONT face="webdings">4</FONT></TD>
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    the need to coordinate geographically diverse operations;</TD>
</TR>

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    <TD style="font-size: 6pt">&nbsp;</TD>
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    <TD><FONT face="webdings">4</FONT></TD>
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    retooling and reprogramming of equipment and information
    technology systems;&nbsp;and</TD>
</TR>

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    <TD style="font-size: 6pt">&nbsp;</TD>
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    <TD><FONT face="webdings">4</FONT></TD>
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    the resulting diversion of management&#146;s attention from our
    day-to-day business and the need to hire and integrate
    additional management personnel to manage our expanded
    operations.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
If we are not successful in completing the integration of Anker
and CoalQuest into our operations, if the integration takes
longer or is more complex or expensive than anticipated, if we
cannot operate the Anker and CoalQuest businesses as effectively
as we anticipate, whether as a result of deficiency of the
acquired business or otherwise, or if the integrated businesses
fail to achieve market acceptance, our operating performance,
margins, sales and reputation could be materially adversely
affected.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Failure to obtain or renew surety bonds in a timely manner
and on acceptable terms could affect our ability to secure
reclamation and coal lease obligations, which could adversely
affect our ability to mine or lease coal.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Federal and state laws require us to obtain surety bonds to
secure payment of certain long-term obligations, such as mine
closure or reclamation costs, federal and state workers&#146;
compensation costs, coal leases and other obligations. These
bonds are typically renewable annually. Surety bond issuers and
holders may not continue to renew the bonds or may demand
additional collateral or other less
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 21</B>
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<B>Risk factors</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
favorable terms upon those renewals. The ability of surety bond
issuers and holders to demand additional collateral or other
less favorable terms has increased as the number of companies
willing to issue these bonds has decreased over time. Our
failure to maintain, or our inability to acquire, surety bonds
that are required by state and federal law would affect our
ability to secure reclamation and coal lease obligations, which
could adversely affect our ability to mine or lease coal. That
failure could result from a variety of factors including,
without limitation:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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    lack of availability, higher expense or unfavorable market terms
    of new bonds;</TD>
</TR>

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    <TD style="font-size: 6pt">&nbsp;</TD>
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    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    restrictions on availability of collateral for current and
    future third-party surety bond issuers under the terms of our
    credit facility; and</TD>
</TR>

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    <TD style="font-size: 6pt">&nbsp;</TD>
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    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    the exercise by third-party surety bond issuers of their right
    to refuse to renew the surety.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Failure to maintain capacity for required letters of credit
could limit our ability to obtain or renew surety bonds.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
At December&nbsp;31, 2004, on a combined basis, we had
$54.4&nbsp;million of letters of credit in place, of which
$45.0&nbsp;million serve as collateral for reclamation surety
bonds and $9.4&nbsp;million secure miscellaneous obligations.
Included in the $45.0&nbsp;million letters of credit securing
collateral for reclamation surety bonds is a $10.0&nbsp;million
letter of credit related to Lexington Coal Company. Our credit
facility provides for a $110.0&nbsp;million revolving credit
facility, of which up to $60.0&nbsp;million may be used for
letters of credit. If we do not maintain sufficient borrowing
capacity under our revolving credit facility for additional
letters of credit, we may be unable to obtain or renew surety
bonds required for our mining operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Our business requires substantial capital investment and
maintenance expenditures, which we may be unable to provide.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our business strategy will require additional substantial
capital investment. We require capital for, among other
purposes, managing acquired assets, acquiring new equipment,
maintaining the condition of our existing equipment and
maintaining compliance with environmental laws and regulations.
To the extent that cash generated internally and cash available
under our credit facilities are not sufficient to fund capital
requirements, we will require additional debt and/or equity
financing. However, this type of financing may not be available
or, if available, may not be on satisfactory terms. Future debt
financings, if available, may result in increased interest and
amortization expense, increased leverage and decreased income
available to fund further acquisitions and expansion. In
addition, future debt financings may limit our ability to
withstand competitive pressures and render us more vulnerable to
economic downturns. If we fail to generate or obtain sufficient
additional capital in the future, we could be forced to reduce
or delay capital expenditures, sell assets or restructure or
refinance our indebtedness.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Our level of indebtedness and other demands on our cash
resources could materially adversely affect our ability to
execute our business strategy and make us more vulnerable to
economic downturns.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
As of December&nbsp;31, 2004, on a pro forma basis, we had cash
of approximately $18.4&nbsp;million and total consolidated
indebtedness, including current maturities and capital lease
obligations, of approximately $195.4&nbsp;million. During 2005,
our anticipated principal repayments will be approximately
$1.8&nbsp;million on the term loan. Subject to the limits
contained in our credit facilities, we may also incur additional
debt in the future. In addition to the principal repayments on
our outstanding debt, we have other demands on our cash
resources, including, among others, capital expenditures and
operating expenses.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 22</B>
</DIV>
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<DIV align="left" style="font-size: 10pt;">
<B>Risk factors</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our credit facilities are secured by substantially all our
assets. If we default under these facilities, the lenders could
choose to declare all outstanding amounts immediately due and
payable, and seek foreclosure of the assets we granted to them
as collateral. If the amounts outstanding under the credit
facilities were accelerated, we may not have sufficient
resources to repay all outstanding amounts, and our assets may
not be sufficient to repay all of our outstanding debt in full.
Foreclosures on any of our material assets could disrupt our
operations, and have a material adverse effect on our
reputation, production volume, sales and earnings.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Our variable rate indebtedness subjects us to interest rate
risk, which could cause our annual debt service obligations to
increase significantly.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our borrowings under our credit facilities are at variable rates
of interest and expose us to interest rate risk. If interest
rates increase, our debt service obligations on our variable
rate indebtedness would increase even if the amount borrowed
remained the same, resulting in a decrease in our net income. We
have developed a hedging program to actively manage the risks
associated with interest rate fluctuations but our program may
not effectively eliminate all of the financial exposure
associated with interest rate fluctuations. We currently have
instruments in place that have the effect of fixing the interest
rate on a portion of our outstanding debt for various time
periods up to two years.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Increased consolidation and competition in the U.S.&nbsp;coal
industry may adversely affect our ability to sell coal.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
During the last several years, the U.S.&nbsp;coal industry has
experienced increased consolidation, which has contributed to
the industry becoming more competitive. According to the EIA, in
1995, the top ten coal producers accounted for approximately 50%
of total domestic coal production. By 2003, however, the top ten
coal producers&#146; share had increased to approximately 63% of
total domestic coal production. Consequently, many of our
competitors in the domestic coal industry are major coal
producers who have significantly greater financial resources
than us. The intense competition among coal producers may impact
our ability to retain or attract customers and may therefore
adversely affect our future revenues and profitability.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The demand for U.S.&nbsp;coal exports is dependent upon a number
of factors outside of our control, including the overall demand
for electricity in foreign markets, currency exchange rates,
ocean freight rates, the demand for foreign-produced steel both
in foreign markets and in the U.S.&nbsp;market (which is
dependent in part on tariff rates on steel), general economic
conditions in foreign countries, technological developments and
environmental and other governmental regulations. If foreign
demand for U.S.&nbsp;coal were to decline, this decline could
cause competition among coal producers in the United States to
intensify, potentially resulting in additional downward pressure
on domestic coal prices.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Our ability to collect payments from our customers could be
impaired if their creditworthiness deteriorates.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our ability to receive payment for coal sold and delivered
depends on the continued creditworthiness of our customers. Our
customer base is changing with deregulation as utilities sell
their power plants to their non-regulated affiliates or third
parties that may be less creditworthy, thereby increasing the
risk we bear on payment default. These new power plant owners
may have credit ratings that are below investment grade. In
addition, competition with other coal suppliers could force us
to extend credit to customers and on terms that could increase
the risk we bear on payment default.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We have contracts to supply coal to energy trading and brokering
companies under which those companies sell coal to end users.
During 2004, the creditworthiness of the energy trading and
brokering companies with which we do business declined,
increasing the risk that we may not be able
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 23</B>
</DIV>
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<DIV align="left" style="font-size: 10pt;">
<B>Risk factors</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
to collect payment for all coal sold and delivered to or on
behalf of these energy trading and brokering companies.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Defects in title or loss of any leasehold interests in our
properties could limit our ability to mine these properties or
result in significant unanticipated costs.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We conduct a significant part of our mining operations on
properties that we lease. A title defect or the loss of any
lease could adversely affect our ability to mine the associated
reserves. Title to most of our leased properties and mineral
rights is not usually verified until we make a commitment to
develop a property, which may not occur until after we have
obtained necessary permits and completed exploration of the
property. Our right to mine some of our reserves has in the past
been, and may again in the future be, adversely affected if
defects in title or boundaries exist. In order to obtain leases
or mining contracts to conduct our mining operations on property
where these defects exist, we may in the future have to incur
unanticipated costs. In addition, we may not be able to
successfully negotiate new leases or mining contracts for
properties containing additional reserves, or maintain our
leasehold interests in properties where we have not commenced
mining operations during the term of the lease. Some leases have
minimum production requirements. Failure to meet those
requirements could result in losses of prepaid royalties and, in
some rare cases, could result in a loss of the lease itself.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Our work force could become unionized in the future, which
could adversely affect the stability of our production and
reduce our profitability.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
All of our coal production is from mines operated by union-free
employees. However, our subsidiaries&#146; employees have the
right at any time under the National Labor Relations Act to form
or affiliate with a union. If the terms of a union collective
bargaining agreement are significantly different from our
current compensation arrangements with our employees, any
unionization of our subsidiaries&#146; employees could adversely
affect the stability of our production and reduce our
profitability.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Our ability and the ability of some of our subsidiaries to
engage in some business transactions may be limited by the terms
of our debt.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our credit facilities contain a number of financial covenants
requiring us to meet financial ratios and financial condition
tests, as well as covenants restricting our ability to:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    incur additional debt;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    pay dividends on, redeem or repurchase capital stock;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    allow our subsidiaries to issue new stock to any person other
    than us or any of our other subsidiaries;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    make investments;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    make acquisitions;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    incur or permit to exist liens;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    enter into transactions with affiliates;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    guarantee the debt of other entities, including joint ventures;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    merge or consolidate or otherwise combine with another
    company;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    transfer or sell a material amount of our assets outside the
    ordinary course of business.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 24</B>
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<B>Risk factors</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
These covenants could adversely affect our ability to finance
our future operations or capital needs or to execute preferred
business strategies.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Additionally, our ability to borrow under our credit facilities
will depend upon our ability to comply with these covenants and
our borrowing base requirements. Our ability to meet these
covenants and requirements may be affected by events beyond our
control and we may not meet these obligations. Our failure to
comply with these covenants and requirements could result in an
event of default under our credit facilities that, if not cured
or waived, could terminate our ability to borrow further, permit
acceleration of the relevant debt and permit foreclosure on any
collateral granted as security under our credit facilities. If
our indebtedness is accelerated, we may not be able repay our
debt or borrow sufficient funds to refinance it. Even if we were
able to obtain new financing, it may not be on commercially
reasonable terms, on terms that are acceptable to us, or at all.
If our debt is in default for any reason, our business,
financial condition and results of operations could be
materially and adversely affected.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
See &#147;Management&#146;s discussion and analysis of financial
condition and results of operations&#151; Liquidity and capital
resources&#148; and Note&nbsp;6 to our audited consolidated
financial statements appearing elsewhere in this prospectus.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>If our business does not generate sufficient cash for
operations, we may not be able to repay our indebtedness.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our ability to pay principal and interest on and to refinance
our debt depends upon the operating performance of our
subsidiaries, which will be affected by, among other things,
general economic, financial, competitive, legislative,
regulatory and other factors, some of which are beyond our
control. In particular, economic conditions could cause the
price of coal to fall, our revenue to decline, and hamper our
ability to repay our indebtedness.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our business may not generate sufficient cash flow from
operations and future borrowings may not be available to us
under our new credit facility or otherwise in an amount
sufficient to enable us to pay our indebtedness or to fund our
other liquidity needs. We may need to refinance all or a portion
of our indebtedness on or before maturity. We may not be able to
refinance any of our indebtedness on commercially reasonable
terms, on terms acceptable to us or at all.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>RISKS RELATING TO GOVERNMENT REGULATION</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>The government extensively regulates our mining operations,
which imposes significant costs on us, and future regulations
could increase those costs or limit our ability to produce and
sell coal.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The coal mining industry is subject to increasingly strict
regulation by federal, state and local authorities with respect
to matters such as:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    limitations on land use;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    employee health and safety;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    mandated benefits for retired coal miners;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    mine permitting and licensing requirements;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    reclamation and restoration of mining properties after mining is
    completed;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    air quality standards;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    water pollution;</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 25</B>
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<B>Risk factors</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    protection of human health, plantlife and wildlife;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    the discharge of materials into the environment;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    surface subsidence from underground mining;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    the effects of mining on groundwater quality and availability.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In particular, federal and state statutes require us to restore
mine property in accordance with specific standards and an
approved reclamation plan, and require that we obtain and
periodically renew permits for mining operations. If we do not
make adequate provisions for all expected reclamation and other
costs associated with mine closures, it could harm our future
operating results. In addition, state and federal regulations
impose strict standards for particulate matter emissions which
may restrict our ability to develop new mines or could require
us to modify our existing operations and increase our costs of
doing business.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Federal and state safety and health regulation in the coal
mining industry may be the most comprehensive and pervasive
system for protection of employee safety and health affecting
any segment of the U.S.&nbsp;industry. It is costly and
time-consuming to comply with these requirements and new
regulations or orders may materially adversely affect our mining
operations or cost structure, any of which could harm our future
results.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Under federal law, each coal mine operator must secure payment
of federal black lung benefits to claimants who are current and
former employees and contribute to a trust fund for the payment
of benefits and medical expenses to claimants who last worked in
the coal industry before July 1973. The trust fund is funded by
an excise tax on coal production. If this tax increases, or if
we could no longer pass it on to the purchaser of our coal under
many of our long-term sales contracts, it could increase our
operating costs and harm our results. New regulations that took
effect in 2001 could significantly increase our costs with
contesting and paying black lung claims. If new laws or
regulations increase the number and award size of claims, it
could substantially harm our business.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The costs, liabilities and requirements associated with these
and other regulations may be costly and time-consuming and may
delay commencement or continuation of exploration or production
operations. Failure to comply with these regulations may result
in the assessment of administrative, civil and criminal
penalties, the imposition of cleanup and site restoration costs
and liens, the issuance of injunctions to limit or cease
operations, the suspension or revocation of permits and other
enforcement measures that could have the effect of limiting
production from our operations. We may also incur costs and
liabilities resulting from claims for damages to property or
injury to persons arising from our operations. We must
compensate employees for work-related injuries. If we do not
make adequate provisions for our workers&#146; compensation
liabilities, it could harm our future operating results. If we
are pursued for these sanctions, costs and liabilities, our
mining operations and, as a result, our profitability could be
adversely affected. See &#147;Environmental and other regulatory
matters.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The possibility exists that new legislation and/or regulations
and orders may be adopted that may materially adversely affect
our mining operations, our cost structure and/or our
customers&#146; ability to use coal. New legislation or
administrative regulations (or new judicial interpretations or
administrative enforcement of existing laws and regulations),
including proposals related to the protection of the environment
that would further regulate and tax the coal industry, may also
require us or our customers to change operations significantly
or incur increased costs. These regulations, if proposed and
enacted in the future, could have a material adverse effect on
our financial condition and results of operations.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 26</B>
</DIV>
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<DIV align="left" style="font-size: 10pt;">
<B>Risk factors</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Mining in Northern and Central Appalachia is more complex and
involves more regulatory constraints than mining in the other
areas, which could affect the mining operations and cost
structures of these areas.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The geological characteristics of Northern and Central
Appalachian coal reserves, such as depth of overburden and coal
seam thickness, make them complex and costly to mine. As mines
become depleted, replacement reserves may not be available when
required or, if available, may not be capable of being mined at
costs comparable to those characteristic of the depleting mines.
In addition, as compared to mines in the Powder River Basin,
permitting, licensing and other environmental and regulatory
requirements are more costly and time-consuming to satisfy.
These factors could materially adversely affect the mining
operations and cost structures of, and customers&#146; ability
to use coal produced by, our mines in Northern and Central
Appalachia.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Judicial rulings that restrict how we may dispose of mining
wastes could significantly increase our operating costs,
discourage customers from purchasing our coal, and materially
harm our financial condition and operating results.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In our surface mining operations, we use mountaintop removal
mining wherever feasible because it allows us to recover more
tons of coal per acre and facilitates the permitting of larger
projects, which allows mining to continue over a longer period
of time than would be the case using other mining methods. To
dispose of mining waste generated by mountaintop removal
operations, as well as other mining operations, we obtain
permits to construct and operate valley fills and surface
impoundments. Some of these permits are &#147;nationwide&#148;
permits (as opposed to individual permits) issued by the Army
Corps of Engineers, or ACOE, for dredging and filling in streams
and wetlands. Lawsuits challenging ACOE&#146;s authority to
issue Nationwide Permit&nbsp;21 have been instituted by
environmental groups. In 2004, a federal court issued an order
enjoining ACOE from issuing further Nationwide 21&nbsp;permits
in the South District of West Virginia. This decision is being
appealed. A similar lawsuit has been filed in federal court in
Kentucky, which seeks invalidate the ACOE issuance of Nationwide
Permit&nbsp;21 and enjoin ACOE from allowing pursuant to this
permit further discharges into valley fills or surface
impoundments from 54 mines in Kentucky, including some of our
mines. We cannot predict the final outcomes of these lawsuits.
If mining methods at issue are limited or prohibited, it could
significantly increase our operational costs, make it more
difficult to economically recover a significant portion of our
reserves and lead to a material adverse effect on our financial
condition and results of operation. We may not be able to
increase the price we charge for coal to cover higher production
costs without reducing customer demand for our coal.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>We may be unable to obtain and renew permits necessary for
our operations, which would reduce our production, cash flow and
profitability.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Mining companies must obtain numerous permits that impose strict
regulations on various environmental and safety matters in
connection with coal mining. These include permits issued by
various federal and state agencies and regulatory bodies. The
permitting rules are complex and may change over time, making
our ability to comply with the applicable requirements more
difficult or even impossible, thereby precluding continuing or
future mining operations. Private individuals and the public
have certain rights to comment upon and otherwise engage in the
permitting process, including through court intervention.
Accordingly, the permits we need may not be issued, maintained
or renewed, or may not be issued or renewed in a timely fashion,
or may involve requirements that restrict our ability to conduct
our mining operations. An inability to conduct our mining
operations pursuant to applicable permits would reduce our
production, cash flow, and profitability.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 27</B>
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<B>Risk factors</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>We have significant reclamation and mine closure obligations.
If the assumption underlying our accruals are materially
inaccurate, we could be required to expend greater amounts than
anticipated.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The Surface Mining Control and Reclamation Act of 1977, or
SMCRA, establishes operational, reclamation and closure
standards for all aspects of surface mining as well as most
aspects of deep mining. Estimates of our total reclamation and
mine-closing liabilities are based upon permit requirements and
our engineering expertise related to these requirements. The
estimate of ultimate reclamation liability is reviewed
periodically by our management and engineers. The estimated
liability can change significantly if actual costs vary from
assumptions or if governmental regulations change significantly.
We adopted Statement of Financial Accounting Standard
No.&nbsp;143, &#147;Accounting for Asset Retirement
Obligations&#148; (&#147;Statement No.&nbsp;143&#148;) effective
January&nbsp;1, 2003. Statement No.&nbsp;143 requires that
retirement obligations be recorded as a liability based on fair
value, which is calculated as the present value of the estimated
future cash flows. In estimating future cash flows, we
considered the estimated current cost of reclamation and applied
inflation rates and a third-party profit, as necessary. The
third-party profit is an estimate of the approximate markup that
would be charged by contractors for work performed on behalf of
us. The resulting estimated liability could change significantly
if actual amounts change significantly from our assumptions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Our operations may substantially impact the environment or
cause exposure to hazardous substances, and our properties may
have significant environmental contamination, any of which could
result in material liabilities to us.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We use, and in the past have used, hazardous materials and
generate, and in the past have generated, hazardous wastes. In
addition, many of the locations that we own or operate were used
for coal mining and/or involved hazardous materials usage either
before or after we were involved with those locations. We may be
subject to claims under federal and state statutes, and/or
common law doctrines, for toxic torts, natural resource damages,
and other damages as well as the investigation and clean up of
soil, surface water, groundwater, and other media. Such claims
may arise, for example, out of current or former activities at
sites that we own or operate currently, as well as at sites that
we or predecessor entities owned or operated in the past, and at
contaminated sites that have always been owned or operated by
third parties. Our liability for such claims may be joint and
several, so that we may be held responsible for more than our
share of the remediation costs or other damages, or even for the
entire share. We have from time to time been subject to claims
arising out of contamination at our own and other facilities and
may incur such liabilities in the future.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Mining operations can also impact flows and water quality in
surface water bodies and remedial measures may be required, such
as lining of stream beds, to prevent or minimize such impacts.
We are currently involved with state environmental authorities
concerning impacts or alleged impacts of our mining operations
on water flows in several surface streams. We are studying, or
addressing, those impacts and we have not finally resolved those
matters. Many of our mining operations take place in the
vicinity of streams, and similar impacts could be asserted or
identified at other streams in the future. The costs of our
efforts at the streams we are currently addressing, and at any
other streams that may be identified in the future, could be
significant.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We maintain extensive coal slurry impoundments at a number of
our mines. Such impoundments are subject to regulation. Slurry
impoundments maintained by other coal mining operations have
been known to fail, releasing large volumes of coal slurry.
Structural failure of an impoundment can result in extensive
damage to the environment and natural resources, such as bodies
of water that the coal slurry reaches, as well as liability for
related personal injuries and property damages, and injuries to
wildlife. Some of our impoundments overlie mined out areas,
which can pose a heightened risk of failure and of damages
arising out of failure. We have commenced measures to modify our
method of
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 28</B>
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<B>Risk factors</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
operation at one surface impoundment containing slurry wastes in
order to reduce the risk of releases to the environment from it,
a process that will take several years to complete. If one of
our impoundments were to fail, we could be subject to
substantial claims for the resulting environmental contamination
and associated liability, as well as for fines and penalties.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
These and other impacts that our operations may have on the
environment, as well as exposures to hazardous substances or
wastes associated with our operations and environmental
conditions at our properties, could result in costs and
liabilities that would materially and adversely affect us.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Extensive environmental regulations affect our customers and
could reduce the demand for coal as a fuel source and cause our
sales to decline.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The Clean Air Act and similar state and local laws extensively
regulate the amount of sulfur dioxide, particulate matter,
nitrogen oxides, and other compounds emitted into the air from
coke ovens and electric power plants, which are the largest
end-users of our coal. Such regulations will require significant
emissions control expenditures for many coal-fired power plants
to comply with applicable ambient air quality standards. As a
result, these generators may switch to other fuels that generate
less of these emissions, possibly reducing future demand for
coal and the construction of coal-fired power plants.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The Federal Clean Air Act, including the Clean Air Act
Amendments of 1990 and corresponding state laws that regulate
emissions of materials into the air affect coal mining
operations both directly and indirectly. Measures intended to
improve air quality that reduce coal&#146;s share of the
capacity for power generation could diminish our revenues and
harm our business, financial condition and results of
operations. The price of higher sulfur coal may decrease as more
coal-fired utility power plants install additional pollution
control equipment to comply with stricter sulfur dioxide
emission limits, which may reduce our revenues and harm our
results. In addition, regulatory initiatives including the
nitrogen oxide rules, new ozone and particulate matter
standards, regional haze regulations, new source review,
regulation of mercury emissions, and legislation or regulations
that establish restrictions on greenhouse gas emissions or
provide for other multiple pollutant reductions could make coal
a less attractive fuel to our utility customers and
substantially reduce our sales.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Various new and proposed laws and regulations may require
further reductions in emissions from coal-fired utilities. For
example, under the Clean Air Interstate Rule issued in March
2005, the U.S.&nbsp;Environmental Protection Agency, or EPA, has
further regulated sulfur dioxide and nitrogen oxides from
coal-fired power plants. Among other things, in affected states,
the rule mandates reductions in sulfur dioxide emissions by
approximately 45% below 2003 levels by 2010, and by
approximately 57% below 2003 levels by 2015. The stringency of
this cap may require many coal-fired sources to install
additional pollution control equipment, such as wet scrubbers.
Installation of additional pollution control equipment required
by this proposed rule could result in a decrease in the demand
for low sulfur coal (because sulfur would be removed by the new
equipment), potentially driving down prices for low sulfur coal.
In March 2005, the EPA also adopted the Clean Air Mercury Rule
to control mercury emissions from power plants, which could
require coal-fired power plants to install new pollution
controls or comply with a mandatory, declining cap on the total
mercury emissions allowed from coal-fired power plants
nationwide. These and other future standards could have the
effect of making the operation of coal-fired plants less
profitable, thereby decreasing demand for coal. The majority of
our coal supply agreements contain provisions that allow a
purchaser to terminate its contract if legislation is passed
that either restricts the use or type of coal permissible at the
purchaser&#146;s plant or results in specified increases in the
cost of coal or its use.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
There have been several recent proposals in Congress, including
the Clear Skies Initiative, that are designed to further reduce
emissions of sulfur dioxide, nitrogen oxides and mercury from
power
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 29</B>
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<B>Risk factors</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
plants, and certain ones could regulate additional air
pollutants. If such initiatives are enacted into law, power
plant operators could choose fuel sources other than coal to
meet their requirements, thereby reducing the demand for coal.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
A regional haze program initiated by the EPA to protect and to
improve visibility at and around national parks, national
wilderness areas and international parks restricts the
construction of new coal-fired power plants whose operation may
impair visibility at and around federally protected areas, and
may require some existing coal-fired power plants to install
additional control measures designed to limit haze-causing
emissions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
One major by-product of burning coal is carbon dioxide, which is
considered a greenhouse gas and is a major source of concern
with respect to global warming. The Kyoto Protocol to the 1992
Framework Convention on Global Climate Change, which establishes
a binding set of emission targets for greenhouse gases, became
binding on ratifying countries on February&nbsp;16, 2005. Four
industrialized nations have refused to ratify the Kyoto
Protocol&#151; Australia, Liechtenstein, Monaco and the United
States. Although the targets vary from country to country, if
the United States were to ratify the Kyoto Protocol, our nation
would be required to reduce greenhouse gas emissions to 93% of
1990 levels in a series of phased reductions from 2008 to 2012.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Future regulation of greenhouse gases in the United States could
occur pursuant to future U.S.&nbsp;treaty obligations, statutory
or regulatory changes under the Clean Air Act, or otherwise. The
Bush Administration has proposed a package of voluntary emission
reductions for greenhouse gases which provide for certain
incentives if targets are met. Some states, such as
Massachusetts, have already issued regulations regulating
greenhouse gas emissions from large power plants. Further, in
2002, the Conference of New England Governors and Eastern
Canadian Premiers adopted a Climate Change Action Plan, calling
for reduction in regional greenhouse emissions to 1990 levels by
2010, and a further reduction of at least 10% below 1990 levels
by 2020. Increased efforts to control greenhouse gas emissions,
including the future ratification of the Kyoto Protocol by the
United States, could result in reduced demand for our coal. See
&#147;Environmental and other regulatory matters&#148; for a
discussion of these and other regulations affecting our business.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>RISKS RELATING TO OUR COMMON STOCK AND THIS OFFERING</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Implementation of required public company corporate
governance and financial reporting practices and policies will
increase our costs, and we may be unable to provide the required
financial information in a timely and reliable manner.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our current operations consist primarily of the assets of our
predecessor, Horizon, and the Anker and CoalQuest businesses
that we have acquired, each of which had different historical
operating, financial, accounting and other systems. Due to our
rapid growth and limited history operating our acquired
operations as an integrated business, and our internal controls
and procedures do not currently meet all the standards
applicable to public companies, including those contemplated by
Section&nbsp;404 of the Sarbanes-Oxley Act of 2002, as well as
rules and regulations enacted by the Securities and Exchange
Commission and The New York Stock Exchange. Areas of deficiency
in our internal controls requiring improvement include
documentation of controls and procedures, insufficient
experience in public company accounting and periodic reporting
matters among our financial and accounting staff.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our management may not be able to effectively and timely
implement controls and procedures that adequately respond to the
increased regulatory compliance and reporting requirements that
will be applicable to us as a public company. If we are not able
to implement the requirements of Section&nbsp;404 in a timely
manner or with adequate compliance, our independent auditors may
not be able to attest to the adequacy of our internal controls
over financial reporting. This result may subject us to adverse
regulatory consequences, and there could also be a negative
reaction in the financial markets
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 30</B>
</DIV>
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<DIV align="left" style="font-size: 10pt;">
<B>Risk factors</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
due to a loss of confidence in the reliability of our financial
statements. We could also suffer a loss of confidence in the
reliability of our financial statements if our auditors report a
material weakness in our internal controls. In addition, if we
fail to develop and maintain effective controls and procedures,
we may be unable to provide the required financial information
in a timely and reliable manner or otherwise comply with the
standards applicable to us as a public company. Any failure by
us to timely provide the required financial information could
materially and adversely impact our financial condition and the
market value of our securities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We will incur incremental costs not reflected in our historical
financial statements as a result of these increased regulatory
compliance and reporting requirements, including increased
auditing and legal fees. We also will need to hire additional
accounting and administrative staff with experience managing
public companies. Moreover, the standards that will be
applicable to us as a public company after this offering could
make it more difficult and expensive for us to attract and
retain qualified members of our board of directors and qualified
executive officers. We also anticipate that the regulations
related to the Sarbanes-Oxley Act will make it more difficult
and more expensive for us to obtain director and officer
liability insurance, and we may be required to accept reduced
coverage or incur substantially higher costs to obtain coverage.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Our stock price may be extremely volatile, and you may not be
able to resell your shares at or above the public offering
price.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
There has been significant volatility in the market price and
trading volume of equity securities, which is unrelated to the
financial performance of the companies issuing the securities.
These broad market fluctuations may negatively affect the market
price of our common stock. The public offering price for the
shares of common stock being sold in this offering will be
determined by negotiations between the representative of the
underwriters and us and may not be indicative of prices that
will prevail in the open market following this offering. You may
not be able to resell your shares at or above the public
offering price due to fluctuations in the market price of our
common stock caused by changes in our operating performance or
prospects and other factors.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Some specific factors that may have a significant effect on our
common stock market price include:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    actual or anticipated fluctuations in our operating results or
    future prospects;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    the public&#146;s reaction to our press releases, our other
    public announcements and our filings with the SEC;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    strategic actions by us or our competitors, such as acquisitions
    or restructurings;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    new laws or regulations or new interpretations of existing laws
    or regulations applicable to our business;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    changes in accounting standards, policies, guidance,
    interpretations or principles;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    conditions of the coal industry as a result of changes in
    financial markets or general economic conditions, including
    those resulting from war, incidents of terrorism and responses
    to such events;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    sales of common stock by us or members of our management
    team;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    changes in stock market analyst recommendations or earnings
    estimates regarding our common stock, other comparable companies
    or the coal industry generally.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Prior to this offering, there has not been a public market for
our common stock. We cannot predict the extent to which investor
interest in our company will lead to the development of an
active trading market on The New York Stock Exchange or
otherwise or how liquid that market might become. If an active
trading market does not develop, you may have difficulty selling
any of our common stock that
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 31</B>
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<B>Risk factors</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
you buy. Consequently, you may not be able to sell our common
stock at prices equal to or greater than the price you paid in
this offering.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Anti-takeover provisions in our charter documents and
Delaware corporate law may make it difficult for our
stockholders to replace or remove our current board of directors
and could deter or delay third-parties from acquiring us, which
may adversely affect the marketability and market price of our
common stock.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Provisions in our amended and restated certificate of
incorporation and bylaws and in Delaware corporate law may make
it difficult for stockholders to change the composition of our
board of directors in any one year, and thus prevent them from
changing the composition of management. In addition, the same
provisions may make it difficult and expensive for a third-party
to pursue a tender offer, change in control or takeover attempt
that is opposed by our management and board of directors. Public
stockholders who might desire to participate in this type of
transaction may not have an opportunity to do so. These
anti-takeover provisions could substantially impede the ability
of public stockholders to benefit from a change in control or
change our management and board of directors and, as a result,
may adversely affect the marketability and market price of our
common stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We are also subject to the anti-takeover provisions of
Section&nbsp;203 of the Delaware General Corporation Law. Under
these provisions, if anyone becomes an &#147;interested
stockholder,&#148; we may not enter into a &#147;business
combination&#148; with that person for three years without
special approval, which could discourage a third party from
making a takeover offer and could delay or prevent a change of
control. For purposes of Section&nbsp;203, &#147;interested
stockholder&#148; means, generally, someone owning more than 15%
or more of our outstanding voting stock or an affiliate of ours
that owned 15% or more of our outstanding voting stock during
the past three years, subject to certain exceptions as described
in Section&nbsp;203.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Under any change of control, the lenders under our credit
facilities would have the right to require us to repay all of
our outstanding obligations under the facility.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>You will incur immediate and substantial dilution as a result
of this offering.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Investors purchasing shares of our common stock in this offering
will incur immediate and substantial dilution in net tangible
book value per share because the price that new investors pay
will be substantially greater than the net tangible book value
per share of the shares acquired. This dilution is due in large
part to the fact that our existing investors paid substantially
less than the public offering price of the shares of common
stock being sold in this offering when they purchased their
shares. To the extent that we raise additional capital by
issuing equity security or shares of our common stock are issued
upon the exercise of stock options or under the restricted stock
plan we intend to adopt prior to the consummation of this
offering, investors may experience additional substantial
dilution.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>There may be circumstances in which the interests of our
major stockholders could be in conflict with your interests as a
stockholder.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Funds sponsored by WLR will own
approximately &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;%
of our common stock on a fully consolidated basis following the
completion of the offering and after giving effect to the Anker
acquisition, assuming no exercise of the underwriters&#146;
over-allotment option. Circumstances may occur in which WLR or
other major investors may have an interest in pursuing
acquisitions, divestitures or other transactions, including
among other things, taking advantage of certain corporate
opportunities that, in their judgment, could enhance their
investment in us or another company in which they invest. These
transactions might invoke risks to our other holders of common
stock or adversely affect us or other investors, including
investors who purchase common stock in this offering.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 32</B>
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<B>Risk factors</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We may from time to time engage in transactions with related
parties and affiliates that include, among other things,
business arrangements, lease arrangements for certain coal
reserves and the payment of fees or commissions for the transfer
of coal reserves by one operating company to another. These
transactions, if any, may adversely affect our sales volumes,
margins and earnings.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>If our stockholders sell substantial amounts of our common
stock following this offering, the market price of our common
stock may decline.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Sales of shares of our common stock in the public market
following this offering, or the perception that these sales may
occur, could cause the market price of our common stock to
decline. After this offering, our reorganization and after
giving effect to the Anker acquisition, we will have
approximately &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock outstanding. The number of shares of common
stock available for sale in the public market is limited by
restrictions under federal securities law and under lock-up
agreements that our directors, executive officers and certain
holders of our common stock have entered into with the
underwriters and with us. Those lock-up agreements restrict
these persons from selling, pledging or otherwise disposing of
their shares for a period of 180&nbsp;days after the date of
this prospectus without the prior written consent of UBS
Securities LLC. However, UBS Securities LLC, may release all or
any portion of the common stock from the restrictions of the
lock-up agreements. These sales might make it difficult or
impossible for us to sell additional securities if we need to
raise capital. All of the shares sold in this offering, as well
as &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;of
the shares to be issued by us in the reorganization to the
holders of ICG, Inc. common stock, will be freely tradable
without restrictions or further registration under the
Securities Act, except for any shares held by our affiliates, as
defined in Rule&nbsp;144 of the Securities Act. The remaining
shares of common stock outstanding after this offering,
including those issued to former Anker stockholders and
CoalQuest members, will be available for sale into the public
market at various times in the future. Additional shares of
common stock underlying options to be granted will become
available for sale in the public market. We expect to file
registration statements on Form&nbsp;S-8 that will register up
to &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock covering the shares of common stock to be issued
pursuant to the exercise of options expected to be granted under
our employee stock option plan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In addition, under a registration rights agreement that we
expect to enter into with certain of our existing stockholders,
certain of our stockholders will have &#147;demand&#148; and
&#147;piggyback&#148; registration rights in connection with
future offerings of our common stock. &#147;Demand&#148; rights
enable the holders to demand that their shares of common stock
be registered and may require us to file a registration
statement under the Securities Act at our expense.
&#147;Piggyback&#148; rights require us to provide notice to the
relevant holders of our stock if we propose to register any of
our securities under the Securities Act and grant such holders
the right to include their shares in our registration statement.
We will also grant &#147;piggyback&#148; registration rights to
the former Anker and CoalQuest holders who will receive shares
of our common stock at the closing of the Anker acquisition. As
restrictions on resale end, our stock price could drop
significantly if the holders of these restricted shares sell
them or the market perceives they intend to sell them. These
sales may also make it more difficult for us to sell securities
in the future at a time and at a price we deem appropriate.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>The requirements of being a public company may strain our
resources and distract management.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
As a public company, we will be subject to the reporting
requirements of the Securities Exchange Act of 1934 and the
Sarbanes-Oxley Act. These requirements may place a strain on our
people, systems and resources. The Exchange Act requires that we
file annual, quarterly and current reports with respect to our
business and financial condition. The Sarbanes-Oxley Act
requires that we maintain effective disclosure controls and
procedures and internal controls over financial reporting. In
order to
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 33</B>
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<B>Risk factors</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
maintain and improve the effectiveness of our disclosure
controls and procedures and internal controls over financial
reporting, significant resources and management oversight will
be required. This may divert management&#146;s attention from
other business concerns. Upon consummation of this offering, our
costs will increase as a result of having to comply with the
Exchange Act, the Sarbanes-Oxley Act and The New York Stock
Exchange listing requirements, which will require us, among
other things, to establish an internal audit function. We may
not be able to do so in a timely fashion or without incurring
material costs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>We may not pay dividends for the foreseeable future.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We may retain any future earnings to support the development and
expansion of our business or make additional payments under our
credit facilities and, as a result, we may not pay cash
dividends in the foreseeable future. Our payment of any future
dividends will be at the discretion of our board of directors
after taking into account various factors, including our
financial condition, operating results, cash needs, growth plans
and the terms of any credit agreements that we may be a party to
at the time. Our credit facilities limit us from paying cash
dividends or other payments or distributions with respect to our
capital stock in excess of certain limitations. In addition, the
terms of any future credit agreement may contain similar
restrictions on our ability to pay any dividends or make any
distributions or payments with respect to our capital stock.
Accordingly, investors must rely on sales of their common stock
after price appreciation, which may never occur, as the only way
to realize their investment.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 34</B>
</DIV>

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<DIV align="left" style="font-size: 10pt;">

</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<A name='103'></A>
</DIV>

<!-- link1 "Special note regarding forward-looking statements" -->

<DIV align="left" style="font-size: 16pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Special note regarding forward-looking statements
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
This prospectus contains forward-looking statements that are not
statements of historical fact and may involve a number of risks
and uncertainties. We have used the words
&#147;anticipate,&#148; &#147;believe,&#148; &#147;could,&#148;
&#147;estimate,&#148; &#147;expect,&#148; &#147;intend,&#148;
&#147;may,&#148; &#147;plan,&#148; &#147;predict,&#148;
&#147;project&#148; and similar terms and phrases, including
references to assumptions, in this prospectus to identify
forward-looking statements. These forward-looking statements are
made based on expectations and beliefs concerning future events
affecting us and are subject to uncertainties and factors
relating to our operations and business environment, all of
which are difficult to predict and many of which are beyond our
control, that could cause our actual results to differ
materially from those matters expressed in or implied by these
forward-looking statements. The following factors are among
those that may cause actual results to differ materially from
our forward-looking statements:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    market demand for coal, electricity and steel;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    availability of qualified workers;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    future economic or capital market conditions;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    weather conditions or catastrophic weather-related damage;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    our production capabilities;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    our consummation of the reorganization and the Anker acquisition
    and the integration of these businesses;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    the consummation of financing, acquisition or disposition
    transactions and the effect thereof on our business;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    our plans and objectives for future operations and expansion or
    consolidation;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    our relationships with, and other conditions affecting, our
    customers;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    timing of reductions or increases in customer coal inventories;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    long-term coal supply arrangements;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    risks in coal mining;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    unexpected maintenance and equipment failure;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    environmental laws and regulations, including those directly
    affecting our coal mining and production, and those affecting
    our customers&#146; coal usage;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    competition;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    railroad, barge, trucking and other transportation performance
    and costs;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    employee benefits costs and labor relations issues;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    our assumptions concerning economically recoverable coal reserve
    estimates;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    regulatory and court decisions;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    future legislation and changes in regulations or governmental
    policies or changes in interpretations thereof;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    our liquidity, results of operations and financial condition.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 35</B>
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<B>Special note regarding forward-looking statements</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
You should keep in mind that any forward-looking statement made
by us in this prospectus speaks only as of the date on which we
make it. New risks and uncertainties arise from time to time,
and it is impossible for us to predict these events or how they
may affect us. We have no duty to, and do not intend to, update
or revise the forward-looking statements in this prospectus
after the date of this prospectus, except as may be required by
law. In light of these risks and uncertainties, you should keep
in mind that any forward-looking statement made in this
prospectus or elsewhere might not occur.
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='104'></A>
</DIV>

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Industry data
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In this prospectus, we rely on and refer to information
regarding the coal industry in the United States from the
U.S.&nbsp;Department of Energy, or DOE, the U.S.&nbsp;Energy
Information Administration, or EIA, the National Mining
Association, or NMA, the National Energy Technology Laboratory,
or NETL, the Bureau of Economic Analysis and Bloomberg L.P.
These organizations are not affiliated with us. They are not
aware of and have not consented to being named in this
prospectus. We believe that this information is reliable. In
addition, in many cases we have made statements in this
prospectus regarding our industry and our position in the
industry based on our experience in the industry and our own
investigation of market conditions. We have made determinations
based on publicly available information of production by
competitors and our internal estimates of competitors&#146;
production based on discussions with industry participants.
Statements relating to our leadership in safety and
environmental performance are based on our receipt of numerous
awards from state and federal agencies, including awards from
the Mine Safety and Health Administration, or MSHA, the
principal federal agency regulating health and safety in the
coal mining industry, and the Office of Surface Mining, the
principal federal agency regulating environmental performance in
the coal mining industry.
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='130'></A>
</DIV>

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<DIV align="left" style="font-size: 16pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Price range of common stock
</DIV>

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The following table shows, for the quarterly periods indicated,
the high and low quotes for the shares of our common stock as
reported on the Pink Sheets Electronic Quotation Service. Prior
to this offering, there has not been a public market for our
common stock. These quotes are provided solely for informational
purposes and are not necessarily representative of trading
prices in a public trading market nor of any price at which the
shares of common stock purchased in this offering may trade in
the future. See &#147;Risk Factors&#151;Risks relating to our
common stock and this offering&#151;Our stock price may be
extremely volatile and you may not be able to resell your shares
at or above the public offering price.&#148;
</DIV>

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    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Stock Price Average</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Average</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Daily</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>High</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Low</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Volume(1)</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    November&nbsp;15, 2004 through December 31,
    2004<SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">$</TD>
    <TD align="right" valign="top" nowrap>14.50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">$</TD>
    <TD align="right" valign="top" nowrap>7.63</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>673,493</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Three months ended March&nbsp;31, 2005</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">$</TD>
    <TD align="right" valign="top" nowrap>15.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">$</TD>
    <TD align="right" valign="top" nowrap>12.13</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>224,952</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 15%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 9pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><I>(1)</I></TD>
    <TD align="left">
    <I>Does not include days on which there were no quotes for the
    shares of the common stock.</I></TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><I>(2)</I></TD>
    <TD align="left">
    <I>Quotes for the shares of our common stock were not reported
    prior to November&nbsp;15, 2004.</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 36</B>
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 9pt;">

</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<A name='105'></A>
</DIV>

<!-- link1 "Use of proceeds" -->

<DIV align="left" style="font-size: 16pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Use of proceeds
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The net proceeds to us from the sale
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock in this offering are estimated to be
approximately
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million,
or
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million
if the underwriters exercise their over-allotment option in
full, based on the public offering price of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;and
after deducting estimated underwriting discounts and commissions
and the estimated offering expenses, which are payable by us.
Under the terms of our credit facilities, we are required to use
50% of our net proceeds from this offering to repay amounts
outstanding under our term loan facility, which otherwise
matures on October&nbsp;1, 2010. As of March&nbsp;31, 2005,
$174.6&nbsp;million was outstanding under our term loan
facility. As of March&nbsp;31, 2005, amounts outstanding under
our term loan facility bore interest at a weighted average rate
of approximately 5.36%. For additional information, see
&#147;Description of indebtedness.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We will use $174.6&nbsp;million to repay all of our term loan
facility and our remaining net proceeds for general corporate
purposes. We may also use a portion of the remaining proceeds to
pursue possible acquisitions of businesses, technologies,
products or assets complementary to our business. Although we
currently have no commitments or agreements to make any
additional material acquisitions for cash, we may make
acquisitions in the future. Pending our use of any excess net
proceeds, we intend to invest the excess net proceeds of this
offering in short-term, interest-bearing investment-grade or
government securities.
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='106'></A>
</DIV>

<!-- link1 "Dividend policy" -->

<DIV align="left" style="font-size: 16pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Dividend policy
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We have never declared or paid a dividend on our common stock.
We may retain any future earnings to support the development and
expansion of our business or make additional payments under our
credit facilities and, as a result, we may not pay cash
dividends in the foreseeable future. Our payment of any future
dividends will be at the discretion of our board of directors
after taking into account various factors, including our
financial condition, operating results, cash needs, growth plans
and the terms of any credit agreements that we may be a party to
at the time. Our credit facilities limit us from paying cash
dividends or other payments or distributions with respect to our
capital stock in excess of certain limitations. In addition, the
terms of any future credit agreement may contain similar
restrictions on our ability to pay dividends or make payments or
distributions with respect to our capital stock.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 37</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">

</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<A name='107'></A>
</DIV>

<!-- link1 "Capitalization" -->

<DIV align="left" style="font-size: 16pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Capitalization
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The following table sets forth cash and cash equivalents and
capitalization as of December&nbsp;31, 2004:
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    for ICG, Inc. on an actual basis;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    for ICG on a pro forma basis to give effect to the Anker
    acquisition; and</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    for ICG on a pro forma, as adjusted basis, to give effect to the
    Anker acquisition and the sale by us of
    approximately &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    of our common stock in this offering at an assumed public
    offering price of
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
    the last sale price of our common stock
    on &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
    2005, as quoted on the Pink Sheets Electronic Quotation Service,
    after deducting underwriting discounts and estimated offering
    expenses and the application of the estimated net proceeds as
    described under &#147;Use of proceeds.&#148;</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The following table assumes no exercise of the
underwriter&#146;s over-allotment option in connection with this
offering. You should read the information in this table in
conjunction with &#147;Unaudited consolidated pro forma
financial information,&#148; &#147;Management&#146;s discussion
and analysis of financial condition and results of
operations,&#148; &#147;Description of indebtedness&#148; and
the consolidated financial statements included elsewhere in this
prospectus.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 3pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="52%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>As of December&nbsp;31, 2004</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Pro forma, as</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>adjusted for</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Actual</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Pro forma</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>the offering</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>(unaudited)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>(unaudited)</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>(dollars in thousands)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash and cash equivalents</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>23,967</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>18,359</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Long-term debt, including current portion:</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Revolving credit
    facility<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15,957</TD>
    <TD align="left" valign="bottom" nowrap><SUP style="font-size: 85%; vertical-align: text-top">(3)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Term loan facility</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>175,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>175,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other long-term debt, including capital leases</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,468</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,468</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total debt</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>179,468</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>195,425</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Stockholders&#146; equity:</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Common stock, par value $0.0001&nbsp;per share,
    1,800,000,000&nbsp;shares authorized, 106,605,999&nbsp;shares
    issued and outstanding, actual
    and &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    issued and outstanding, as adjusted for the offering and the
    Anker
    acquisition<SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,376</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Preferred stock, par value $0.0001&nbsp;per share,
    200,000,000&nbsp;shares authorized, no shares issued and
    outstanding<SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Paid-in-capital</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>150,140</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>440,023</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Retained earnings</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,249</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,249</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total stockholders&#146; equity</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>154,400</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>445,648</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Total capitalization</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>333,868</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>641,073</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 15%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 9pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><I>(1)</I></TD>
    <TD align="left">
    <I>Our credit facility provides for a $110.0&nbsp;million
    revolving credit facility, of which up to $60.0&nbsp;million may
    be used for letters of credit. As of December&nbsp;31, 2004,
    $54.4&nbsp;million of letters of credit were outstanding.</I></TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><I>(2)</I></TD>
    <TD align="left">
    <I>Represents stock of our predecessor, ICG, Inc. The par value
    of our common stock is $0.01&nbsp;per share and the par value of
    our preferred stock is $0.01&nbsp;per share.</I></TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><I>(3)</I></TD>
    <TD align="left">
    <I>Represents debt to be assumed in the Anker acquisition.</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 38</B>
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">

</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<A name='108'></A>
</DIV>

<!-- link1 "Dilution" -->

<DIV align="left" style="font-size: 16pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Dilution
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
If you invest in our common stock, you will experience dilution
to the extent of the difference between the public offering
price per share you pay in this offering and the pro forma net
tangible book value per share of our common stock immediately
after this offering.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our pro forma net tangible book value as of December&nbsp;31,
2004 equaled approximately
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million,
or
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share of common stock. Pro forma net tangible book value per
share of common stock is equal to the amount of our total
tangible assets (total assets less intangible assets) less total
liabilities, divided by the total number of shares of common
stock outstanding.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
On a pro forma basis, after giving effect to the sale
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock offered by us in this offering at an assumed
public offering price of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share (the last sale price of our common stock
on &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2005, as quoted on the Pink Sheets Electronic Quotation Service)
and after deducting the estimated underwriting discounts and
commissions and offering expenses payable by us and the
application of the estimated net proceeds of this offering as
described under &#147;Use of proceeds,&#148; and after giving
effect to the issuance
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock upon completion of the Anker acquisition at an
implied value of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share, our pro forma as adjusted net tangible book value, as of
December&nbsp;31, 2004 would have equaled approximately
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
or
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share of common stock. This represents an immediate increase in
net tangible book value of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share to our existing stockholders and an immediate dilution in
net tangible book value of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share to new investors of common stock in this offering. If the
public offering price in this offering is higher or lower, the
dilution to new investors will be greater or less, respectively.
The following table illustrates this per share dilution to new
investors purchasing our common stock in this offering.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 9pt; ">

<TR style="font-size: 1pt;">
    <TD width="79%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Assumed public offering price per share</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Pro forma net tangible book value per share as of
    December&nbsp;31, 2004</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Increase in pro forma net tangible book value per share
    attributable to this offering</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net tangible book value per share after this offering</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Dilution per share to new investors</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The following table as of December&nbsp;31, 2004 summarizes, on
a pro forma basis, to give effect to the shares issued in
connection with the Anker acquisition and the reorganization,
the number of shares of common stock purchased from us, the
total consideration paid to us and the average price per share
paid by the existing stockholders and by new investors. The
calculations with respect to existing stockholders include
shares that would be issued by us on the exercise of currently
outstanding options or other rights to acquire shares of our
common stock by directors, officers and affiliated parties, and
the proceeds that would be received by us in connection with
this exercise. The calculations with respect to shares purchased
by new investors in this offering reflect an assumed public
offering price of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share (the last sale price of our common stock
on &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2005, as quoted on the Pink Sheets Electronic Quotation Service).
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 39</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Dilution</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 21pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Shares purchased or</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>issuable upon the</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>exercise of currently</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>outstanding options</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Total consideration</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Average</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>price per</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Number</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Percent</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Amount</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Percent</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>share</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="21" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Existing stockholders, directors, officers and affiliated parties</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Former Anker stockholders and CoalQuest members</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    New investors</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The table and calculations above assume no exercise of
outstanding options. As
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2005,
shares of common stock were subject to outstanding options at a
weighted average exercise price of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share. To the extent outstanding options are exercised, there
will be further dilution to new investors.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 40</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">

</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<A name='109'></A>
</DIV>

<!-- link1 "Unaudited consolidated pro forma financial data" -->

<DIV align="left" style="font-size: 16pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Unaudited consolidated pro forma financial data
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The following unaudited pro forma financial data is based on the
information derived from audited consolidated financial
statements of ICG, Inc. and its subsidiaries (and its
predecessors), Anker and CoalQuest, each appearing elsewhere in
this prospectus, as adjusted to illustrate the estimated pro
forma effects of:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    our reorganization;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    our acquisition of the Horizon assets;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    borrowings under our credit facilities, in part, to finance the
    Horizon asset acquisition (including the preliminary application
    of purchase accounting);&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    the Anker acquisition.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The unaudited pro forma consolidated statements of operations
and unaudited pro forma balance sheet do not include any
adjustments for this offering or for future cost savings or
operating improvements as a result of the Anker acquisition. The
unaudited pro forma consolidated financial data should be read
in conjunction with the consolidated financial statements of
ICG, Inc. (and its predecessors), Anker and CoalQuest, and other
financial information appearing elsewhere in this prospectus,
including &#147;Management&#146;s discussion and analysis of
financial condition and results of operations.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The unaudited pro forma balance sheet gives effect to our
reorganization, the acquisition of the Horizon assets, the
related financing and the Anker acquisition as if they had
occurred on December&nbsp;31, 2004. The unaudited pro forma
statements of operations give effect to these transactions as if
they had occurred on January&nbsp;1, 2004. The unaudited pro
forma consolidated statements of operations do not include any
adjustments for future cost savings or other operating
improvements. See &#147;Risk factors,&#148; &#147;Special note
regarding forward-looking statements,&#148; and
&#147;Business&#148; for a discussion of factors that may impact
consolidated future operating results.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The pro forma adjustments reflect our preliminary estimates of
the purchase price allocation of certain assets and liabilities
in the Anker acquisition. An allocation to inventory would
impact cost of coal sales subsequent to the acquisition date. An
allocation to coal reserves, property, plant and equipment, coal
supply agreements or other intangible assets would result in
additional depreciation, depletion and amortization expense
which may be significant.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The unaudited pro forma financial data is for informational
purposes only and is not intended to represent or be indicative
of the consolidated results of operations or financial position
that would have been reported had the transactions been
completed as of the dates presented, and should not be taken as
representative of future consolidated results of operations or
financial position.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 41</B>
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Unaudited consolidated pro forma financial data</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Unaudited pro forma balance sheet data</B>
</DIV>

<DIV align="left" style="font-size: 10pt;">
<B>as of December&nbsp;31, 2004</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="20%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>ICG, Inc. Historical</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Predecessor</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>(period</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>October&nbsp;1,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2004 to</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>ICG, Inc.</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Anker</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>CoalQuest</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Anker</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>CoalQuest</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>acquisition</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>acquisition</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>acquisition</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2004)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>historical</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>historical</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>adjustments</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>adjustments</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>adjustments</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Pro forma</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="30" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 7pt;">
    <TD colspan="30" align="center" nowrap><B>(in thousands)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>ASSETS</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current assets:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash and cash equivalents</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>23,967</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,166</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,819</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(8,593</TD>
    <TD align="left" valign="bottom" nowrap>) <SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>18,359</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Trade accounts receivable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>40,417</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,361</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,238</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>53,016</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Inventories</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,943</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,027</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17,970</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred income taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,188</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,188</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Prepaid insurance</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,142</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,157</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Prepaid expenses and other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,899</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,457</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,356</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total current assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>93,556</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>18,011</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,072</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(8,593</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>106,046</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Property, plant and equipment, at cost including mineral
    interests, mine development and contract costs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>165,079</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>134,046</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>19,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>23,183</TD>
    <TD align="left" valign="bottom" nowrap><SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>55,091</TD>
    <TD align="left" valign="bottom" nowrap><SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>396,399</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Less accumulated depreciation, depletion and amortization</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(7,943</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(79,923</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(79</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(87,945</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net property, plant and equipment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>157,136</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>54,123</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>18,921</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>23,183</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>55,091</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>308,454</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Debt issuance costs, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,865</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,865</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Advance royalties</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,424</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,439</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,863</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Goodwill</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>183,946</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>148,668</TD>
    <TD align="left" valign="bottom" nowrap><SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>43,036</TD>
    <TD align="left" valign="bottom" nowrap><SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>375,650</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred tax asset non-current</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,741</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,741</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other non-current assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,307</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,798</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,105</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>459,975</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>83,371</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>21,993</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>163,258</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>98,127</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>826,724</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="31">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>LIABILITIES AND STOCKHOLDERS&#146; EQUITY/(DEFICIT)</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Trade accounts payable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>21,250</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>10,281</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>546</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>32,077</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current portion of long-term debt and capital leases</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,022</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,370</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,356</TD>
    <TD align="left" valign="bottom" nowrap>)<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15,036</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current portion of reclamation and mine closure costs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,682</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>105</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,787</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued income tax</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,232</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,232</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued expenses and other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>33,854</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,253</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>535</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>42,642</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total current liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>66,040</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>29,009</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,081</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1,356</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>94,774</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Non-current liabilities, less current portion</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Long-term debt and capital leases</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>173,446</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>14,179</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>16,250</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(7,237</TD>
    <TD align="left" valign="bottom" nowrap>) <SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(16,250</TD>
    <TD align="left" valign="bottom" nowrap>) <SUP style="font-size: 85%; vertical-align: text-top">(3)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>180,388</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Reclamation and mine closure costs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>40,616</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25,169</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>65,785</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Long-term employee benefits</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>18,007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>18,007</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other non-current liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,466</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,617</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,039</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>22,122</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total non-current liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>239,535</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>52,965</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17,289</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(7,237</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(16,250</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>286,302</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>305,575</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>81,974</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>18,370</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(8,593</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(16,250</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>381,076</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    STOCKHOLDERS&#146; EQUITY (DEFICIT):</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Preferred stock-par value $0.0001, 200,000,000&nbsp;shares
    authorized, none issued</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 42</B>
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Unaudited consolidated pro forma financial data</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="23%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>ICG, Inc. Historical</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Predecessor</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>(period</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>October&nbsp;1,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2004 to</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>ICG, Inc.</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Anker</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>CoalQuest</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Anker</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>CoalQuest</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>acquisition</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>acquisition</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>acquisition</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2004)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>historical</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>historical</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>adjustments</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>adjustments</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>adjustments</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Pro forma</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="29" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 7pt;">
    <TD colspan="29" align="center" nowrap><B>(in thousands)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Common stock-par value $0.0001, 1,800,000,000&nbsp;shares
    authorized, 106,605,999 issued and outstanding (137,556,128
    issued and outstanding at a par value of $0.01 on a pro forma
    basis)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,055</TD>
    <TD align="left" valign="bottom" nowrap><SUP style="font-size: 85%; vertical-align: text-top">(4)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>195</TD>
    <TD align="left" valign="bottom" nowrap><SUP style="font-size: 85%; vertical-align: text-top">(4)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>115</TD>
    <TD align="left" valign="bottom" nowrap><SUP style="font-size: 85%; vertical-align: text-top">(4)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,376</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Paid-in Capital</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>150,140</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>145,588</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,250</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,055</TD>
    <TD align="left" valign="bottom" nowrap>) <SUP style="font-size: 85%; vertical-align: text-top">(4)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>27,465</TD>
    <TD align="left" valign="bottom" nowrap><SUP style="font-size: 85%; vertical-align: text-top">(2,4)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>114,635</TD>
    <TD align="left" valign="bottom" nowrap><SUP style="font-size: 85%; vertical-align: text-top">(2,3,4)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>440,023</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Comprehensive Income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Retained earnings (deficit)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,249</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(144,191</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>373</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>144,191</TD>
    <TD align="left" valign="bottom" nowrap><SUP style="font-size: 85%; vertical-align: text-top">(3)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(373</TD>
    <TD align="left" valign="bottom" nowrap>)<SUP style="font-size: 85%; vertical-align: text-top">(3)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,249</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total stockholders&#146; equity (members&#146; deficit)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>154,400</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,397</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,623</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>171,851</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>114,377</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>445,648</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total liabilities and stockholders&#146; equity (members&#146;
    deficit)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>459,975</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>83,371</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>21,993</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>163,258</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>98,127</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>826,724</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><I>(1)</I></TD>
    <TD align="left">
    <I>Reflects the repayment of Anker&#146;s senior notes
    ($7.0&nbsp;million) and the payment of the worker&#146;s
    compensation premium to the state of West Virginia
    ($1.5&nbsp;million).</I></TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><I>(2)</I></TD>
    <TD align="left">
    <I>Reflects the assumed issuance of 30,950,129 additional shares
    of common stock at an assumed $8.885 per share for the
    acquisitions of Anker ($173.25&nbsp;million) and CoalQuest
    ($101.75&nbsp;million) for a total of $275.0&nbsp;million.</I></TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><I>(3)</I></TD>
    <TD align="left">
    <I>Reflects the conversion of CoalQuest&#146;s note payable
    ($16.3&nbsp;million) to equity upon consummation of the Anker
    acquisition.</I></TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><I>(4)</I></TD>
    <TD align="left">
    <I>Reflects the change in par value from $0.0001 per share to
    $0.01 per share upon the effective date of this offering.</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 43</B>
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Unaudited consolidated pro forma financial data</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Unaudited pro forma statement of operations data</B>
</DIV>

<DIV align="left" style="font-size: 10pt;">
<B>for the year ended December&nbsp;31, 2004</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 7pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="17%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>


<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Historical</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Horizon</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>ICG, Inc.</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Predecessor</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Predecessor</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>(period</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>(period</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>January&nbsp;1,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>October&nbsp;1,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2004 to</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2004 to</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Horizon</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Anker</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>CoalQuest</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>September&nbsp;30,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Anker</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>CoalQuest</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>acquisition</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>acquisition</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>acquisition</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2004)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2004)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>historical</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>historical</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>adjustments</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>adjustments</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>adjustments</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Pro forma</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="34" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="30" align="center" nowrap><B>(dollars in thousands)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Revenues</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Coal sales revenues</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>346,981</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>130,463</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>146,676</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>624,120</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Freight and handling revenues</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,700</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>880</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,416</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15,996</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other revenues</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>22,702</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,766</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,228</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>33,696</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total revenues</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>373,383</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>136,109</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>164,320</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>673,812</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Costs and expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Freight and handling costs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,700</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>880</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,416</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15,996</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cost of coal sales and other revenues (exclusive of
    depreciation, depletion and amortization shown separately below)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>306,429</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>113,707</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>145,985</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>371</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,769</TD>
    <TD align="left" valign="bottom" nowrap>)<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>564,723</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Depreciation, depletion and amortization</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>27,547</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,943</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,754</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>79</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>45,323</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Selling, general and administrative (exclusive of depreciation,
    depletion and amortization shown separately above)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,477</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,194</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,654</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17,257</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gain on sale of assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(226</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(10</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(236</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Writedowns and other items</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,018</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(10,158</TD>
    <TD align="left" valign="bottom" nowrap>) <SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(140</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total costs and expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>355,945</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>126,714</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>170,809</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>450</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(10,158</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,769</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>642,923</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income (loss) from operations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17,438</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,395</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(6,489</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(450</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,158</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,769</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>30,889</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest and other income (expense):</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(114,211</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,453</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,485</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(535</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>105,336</TD>
    <TD align="left" valign="bottom" nowrap><SUP style="font-size: 85%; vertical-align: text-top">(3)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(14,348</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Reorganization items</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>727</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(727</TD>
    <TD align="left" valign="bottom" nowrap>)<SUP style="font-size: 85%; vertical-align: text-top">(4)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,581</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>898</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,709</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,910</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,769</TD>
    <TD align="left" valign="bottom" nowrap>)<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,329</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total interest and other income (expense)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(111,903</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,555</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,224</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,375</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>104,609</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,769</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(6,019</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income (loss) before income taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(94,465</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,840</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,265</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>925</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>114,767</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,769</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,769</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>24,870</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income tax (expense) benefit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,591</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(7,690</TD>
    <TD align="left" valign="bottom" nowrap>)<SUP style="font-size: 85%; vertical-align: text-top">(5)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>188</TD>
    <TD align="left" valign="bottom" nowrap><SUP style="font-size: 85%; vertical-align: text-top">(5)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>320</TD>
    <TD align="left" valign="bottom" nowrap><SUP style="font-size: 85%; vertical-align: text-top">(5)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(9,421</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income (loss)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(94,465</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,249</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(2,265</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>925</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>107,077</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,957</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1,449</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>15,449</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 8pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>(footnotes on next page)</I>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 44</B>
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Unaudited consolidated pro forma financial data</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 3pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>(1)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To eliminate intercompany
royalty revenue and expense ($1.8&nbsp;million) between
CoalQuest and Anker.</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>(2)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Reflects the removal of
writedowns and other items related to the bankruptcy
reorganization during the predecessor period January&nbsp;1,
2004 to September&nbsp;30, 2004.</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>(3)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Represents pro forma
interest expense to reflect the acquisition of Horizon&#146;s
assets and the related debt required to finance the purchase as
shown in the tables below.</I>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="28%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap><B>Historical interest expense</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Horizon</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>ICG, Inc.</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="11">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>(Period Jan.&nbsp;1,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>(Period</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="11">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2004 to</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Oct.&nbsp;1, 2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="11">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Sep.&nbsp;30,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>to Dec.&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="11">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2" align="left" nowrap><B>Description</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2004)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2004)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Anker</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>CoalQuest</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Total</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="21" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Amortization of financing fee</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,437,278</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,437,278</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    DIP facility</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,114,618</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,114,618</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Term loan</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>42,757,312</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>42,757,312</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Wells Fargo loan</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>57,199,570</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>57,199,570</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Funded letter of credit fees</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>130,278</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>130,278</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Revolver letter of credit fees</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>248,351</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>248,351</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Revolver unutilized portion</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>63,666</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>63,666</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Term note</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,462,985</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,462,985</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Amortization of finance cost</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>265,878</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>265,878</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Annual administration fee</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest rate cap</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>20,427</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>20,427</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Revolver base rate interest</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>24,863</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>24,863</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Anker related party term loan</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>294,215</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>294,215</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Anker related party revolving line of credit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>110,311</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>110,311</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Anker senior notes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>751,469</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>751,469</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Miscellaneous other (capital lease, black lung, etc)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,701,814</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>211,375</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>329,486</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>535,200</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,777,875</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Total historical interest expense</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>114,210,592</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,452,822</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,485,481</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>535,200</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>119,684,095</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 45</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Unaudited consolidated pro forma financial data</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 18pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="28%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap><B>Pro forma interest expense</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Horizon</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>ICG, Inc.</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Anker</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>CoalQuest</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Total</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2" align="center" nowrap><B>Description</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="21" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Revolver letter of credit fees(a)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,469,475</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,469,475</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Revolver(b)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>756,353</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>756,353</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Revolver unutilized portion(c)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>198,091</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>198,091</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Term note(d)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,732,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,732,500</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Amortization of finance costs(e)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,096,553</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,096,553</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Annual administration fee(f)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest rate cap(g)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>82,187</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>82,187</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Miscellaneous other (capital leases, black lung, etc.)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,701,814</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>211,375</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,913,189</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Total pro forma interest expense</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,701,814</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,646,534</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,348,348</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Less: historical interest expense</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>114,210,592</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,452,822</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,485,481</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>535,200</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>119,684,095</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Pro forma interest expense adjustment</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>112,508,778</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(9,193,712</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,485,481</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>535,200</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>105,335,747</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 15%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 9pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR>
    <TD valign="top">
    <I>(a)</I></TD>
    <TD></TD>
    <TD valign="top">
    <I>Reflects pro forma interest expense at the fixed rate of 2.7%
    on $54.4&nbsp;million estimated letters of credit outstanding
    under the revolving letter of credit facility.</I></TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <I>(b)</I></TD>
    <TD></TD>
    <TD valign="top">
    <I>Reflects pro forma interest expense on the revolver at an
    estimated rate of 4.74% on an estimated average balance of
    $16.0&nbsp;million.</I></TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <I>(c)</I></TD>
    <TD></TD>
    <TD valign="top">
    <I>Reflects pro forma interest expense at the fixed rate of 0.5%
    on an estimated unutilized balance of $39.6&nbsp;million on the
    revolving facility.</I></TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <I>(d)</I></TD>
    <TD></TD>
    <TD valign="top">
    <I>Reflects pro forma interest expense at the actual
    December&nbsp;31, 2004 rate of 4.99% on the $175&nbsp;million
    term note. The term note utilizes LIBOR rate and is adjusted
    quarterly.</I></TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <I>(e)</I></TD>
    <TD></TD>
    <TD valign="top">
    <I>Reflects amortization of finance costs of $8.1&nbsp;million
    at a nominal rate of 8.118% for 72&nbsp;months.</I></TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <I>(f)</I></TD>
    <TD></TD>
    <TD valign="top">
    <I>Reflects the quarterly administration fee of $25,000&nbsp;per
    quarter to UBS AG, Stamford Branch.</I></TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <I>(g)</I></TD>
    <TD></TD>
    <TD valign="top">
    <I>Reflects the estimated expense incurred on the two year
    interest rate cap agreement of $88&nbsp;million at 4.5%&nbsp;per
    year.</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>A hypothetical 1/8% change in interest rates on our variable
rate debt would cause pro forma interest expense to increase
$239,031 for the year ended December&nbsp;31, 2004.</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>(4)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Reflects the removal of
reorganization expenses incurred in the predecessor period
January&nbsp;1, 2004 to September&nbsp;30, 2004 that were
related to the Horizon bankruptcy filing.</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>(5)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Reflects the federal and
state tax effects on the combined historical net income and pro
forma adjustments assuming an estimated average tax rate at
December&nbsp;31, 2004 of 37.88%.</I>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 46</B>
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">

</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<A name='110'></A>
</DIV>

<!-- link1 "Selected historical consolidated financial data of ICG" -->

<DIV align="left" style="font-size: 16pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Selected historical consolidated financial data of ICG
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
ICG is a recently formed holding company which does not have any
independent external operations, assets or liabilities, other
than through its operating subsidiaries. Prior to the
acquisition of certain assets of Horizon as of
September&nbsp;30, 2004, ICG, Inc. did not have any material
assets, liabilities or results of operations. The selected
historical consolidated financial data as of and for the year
ended December&nbsp;31, 2004 are derived from ICG, Inc.&#146;s
audited consolidated statement of operations for the period
October&nbsp;1, 2004 to December&nbsp;31, 2004 and the
predecessor audited consolidated financial data as of and for
the nine months ended September&nbsp;30, 2004, which have been
audited by Deloitte&nbsp;&#38; Touche LLP, an independent
registered public accounting firm and are included elsewhere in
the prospectus. The selected historical consolidated financial
data as of and for the year ended December&nbsp;31, 2003 and the
period from May&nbsp;10, 2002 to December&nbsp;31, 2002 have
been derived from the audited consolidated statement of
operations of Horizon, the predecessor to ICG, which have been
audited by Deloitte&nbsp;&#38; Touche LLP and which are included
elsewhere in the prospectus and from the audited consolidated
balance sheet of Horizon as of December&nbsp;31, 2002, which has
been audited by Deloitte&nbsp;&#38; Touche LLP and which is not
included in this prospectus. The selected historical
consolidated data for the period as of and for the years ended
December&nbsp;31, 2001 and 2000 were derived from the audited
consolidated financial statements of AEI Resources, the
predecessor to Horizon, which were audited by Arthur Andersen
LLP, in the case of the financial data for the years ended
December&nbsp;31, 2000 and 2001 and which are not included in
this prospectus. The statement of operations of AEI Resources,
the predecessor of Horizon, for the period January&nbsp;1, 2002
to May&nbsp;9, 2002, included elsewhere in this prospectus, has
been audited by Deloitte&nbsp;&#38; Touche&nbsp;LLP. In the
opinion of management, the financial data reflect all
adjustments, consisting of all normal and recurring adjustments,
necessary for a fair presentation of the results for those
periods. The results of operations for interim periods are not
necessarily indicative of the results to be expected for the
full year or for any future period. The financial statements for
the predecessor periods have been prepared on a
&#147;carve-out&#148; basis to include the assets, liabilities
and results of operations of ICG, Inc. that were previously
included on the consolidated financial statements of Horizon.
The financial statements for the predecessor periods include
allocations of certain expenses, taxation charges, interest and
cash balances relating to the predecessor based on
management&#146;s estimates. The predecessor financial
information is not necessarily indicative of the consolidated
financial position, results of operations and cash flows of ICG
if it had operated during the predecessor periods presented.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
You should read the following data in conjunction with
&#147;Management&#146;s discussion and analysis of financial
condition and results of operations&#148; and with the financial
information included elsewhere in this prospectus, including the
consolidated financial statements of ICG and Horizon (and its
predecessor) and the related notes thereto.
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 47</B>
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Selected historical consolidated financial data of ICG</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="18%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>


<TR style="font-size: 7pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="center" nowrap><B>AEI RESOURCES</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="center" nowrap><B>HORIZON</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="center" nowrap><B>Predecessor to Horizon</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="center" nowrap><B>Predecessor to ICG, Inc.</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>ICG, Inc.</B></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="27" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Period from</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Period from</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Period</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Period</B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Year ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Year ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>January&nbsp;1, 2002 to</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>May&nbsp;10, 2002 to</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Year ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>January&nbsp;1, 2004 to</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>October&nbsp;1, 2004 to</B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>December&nbsp;31, 2000*</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>December&nbsp;31, 2001*</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>May&nbsp;9, 2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>December&nbsp;31, 2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>December&nbsp;31, 2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>September&nbsp;30, 2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>December&nbsp;31, 2004</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="31" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>


<TR style="font-size: 7pt;">
    <TD colspan="15">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="center" nowrap><B>(in thousands, except share data)</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Statement of Operations Data:</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Revenues:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Coal sales revenues</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>486,848</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>500,829</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>136,040</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>264,235</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>441,291</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>346,981</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>130,463</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Freight and handling revenues</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,050</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,728</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,947</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,032</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,008</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,700</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>880</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other revenues</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>23,491</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>34,835</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>21,183</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>27,397</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>31,771</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>22,702</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,766</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total revenues</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>521,389</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>550,392</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>160,170</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>297,664</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>481,070</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>373,383</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>136,109</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cost and expenses:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Freight and handling costs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,050</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,728</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,947</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,032</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,008</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,700</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>880</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cost of coal sales and other revenues (exclusive of
    depreciation, depletion and amortization shown separately below)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>409,536</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>379,333</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>114,767</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>251,361</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>400,652</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>306,429</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>113,707</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Depreciation, depletion and amortization</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>94,183</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>92,602</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>32,316</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>40,033</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>52,254</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>27,547</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,943</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Selling, general and administrative (exclusive of depreciation,
    depletion and amortization shown separately above)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>20,364</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>19,324</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,677</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16,695</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>23,350</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,477</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,194</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    (Gain)/loss on sale of assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(594</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>189</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(93</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(39</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(4,320</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(226</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(10</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Writedowns and special items</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,306</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>20,218</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,323</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>729,953</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,100</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,018</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total costs and expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>546,845</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>526,394</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>167,937</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,044,035</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>489,044</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>355,945</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>126,714</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income (loss) from operations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(25,456</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>23,998</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(7,767</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(746,371</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(7,974</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17,438</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,395</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other income (expense)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(116,319</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(138,655</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(36,666</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(80,405</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(145,892</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(114,211</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,453</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Reorganization items</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(429,751</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(22,839</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,567,689</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(143,663</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(52,784</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>727</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,523</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,941</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>499</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,256</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>187</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,581</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>898</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total interest and other income (expense)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(547,593</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(164,435</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,531,522</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(222,812</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(198,489</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(111,903</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,555</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income&nbsp;(loss)&nbsp;before&nbsp;income&nbsp;taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(573,049</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(140,437</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,523,755</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(969,183</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(206,463</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(94,465</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,840</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income tax expense (benefit)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>48,290</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(4,155</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,591</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income (loss)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(524,759</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(144,592</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,523,755</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(969,183</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(206,463</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(94,465</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,249</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Earnings (loss) per
    share<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP>:</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Basic</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.04</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Diluted</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.04</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Average&nbsp;common&nbsp;shares&nbsp;outstanding<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP>:</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Basic</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>106,605,999</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Diluted</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>106,605,999</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Balance&nbsp;sheet&nbsp;data&nbsp;(at&nbsp;period&nbsp;end):</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash and cash equivalents</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>55,513</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>64,592</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>87,278</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>114</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>859</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>23,967</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>881,847</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>859,084</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,521,318</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>484,212</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>407,064</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>370,298</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>459,975</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Long term debt and capital leases</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>933,106</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,157</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>315</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>29</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>173,446</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,451,796</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,581,346</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,286,318</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,222,218</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,351,393</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,409,092</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>305,575</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total stockholders&#146; equity (members deficit)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(569,949</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(722,262</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>235,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(738,006</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(944,329</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1,038,794</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>154,400</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total liabilities and stockholders&#146; equity (members deficit)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>881,847</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>859,084</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,521,318</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>484,212</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>407,064</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>370,298</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>459,975</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Statement of cash flows data:</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net cash provided by (used in):</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>106,060</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(298,196</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>76,372</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>17,753</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>34,057</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>30,209</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Investing activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(88,434</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(10,841</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(12,799</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1,549</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(2,535</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(329,166</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Financing activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(8,547</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>259,011</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(78,025</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(15,459</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(32,381</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>322,924</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Capital expenditures</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>24,143</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>34,254</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>10,963</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>13,435</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>16,937</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>6,624</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,583</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 15%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 2pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><I>&nbsp; &nbsp;*</I></TD>
    <TD align="left">
    <I>The selected historical financial data of AEI Resources for
    the year ended December&nbsp;31, 2000 and the year ended
    December&nbsp;31, 2001 is not derived from audited financial
    statements.</I></TD>
</TR>

</TABLE>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><I>(1)</I></TD>
    <TD align="left">
    <I>Earnings per share data and average shares outstanding are
    not presented for the period from January&nbsp;1, 2002 to
    May&nbsp;9, 2002, the period from May&nbsp;10, 2002 to
    December&nbsp;31, 2002, the year ended December&nbsp;31, 2003
    and the period from January&nbsp;1, 2004 to September&nbsp;30,
    2004 because they were prepared on a carve-out basis.</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 48</B>
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">

</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<A name='111'></A>
</DIV>

<!-- link1 "Selected historical consolidated financial data of Anker and CoalQuest" -->

<DIV align="left" style="font-size: 16pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Selected historical consolidated financial data of Anker and
CoalQuest
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The following table presents the selected historical
consolidated financial data for Anker and CoalQuest. The
selected historical consolidated financial data for the year
ended December&nbsp;31, 2004 have been derived from the audited
consolidated financial statements of Anker and CoalQuest,
respectively, each of which have been audited by
Deloitte&nbsp;&#38; Touche LLP, an independent registered public
accounting firm.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
You should read the following data in conjunction with
&#147;Management&#146;s discussion and analysis of financial
condition and results of operations&#148; and with the financial
information included elsewhere in this prospectus, including the
audited consolidated financial statements of Anker and CoalQuest
and related notes thereto.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="62%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Year ended December&nbsp;31, 2004</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Anker</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>CoalQuest</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="9" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Statement of operations data:</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income (loss)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(3,196,973</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>925,553</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Balance sheet data (at period end):</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash and cash equivalents</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,165,559</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,818,833</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>83,370,701</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>21,993,658</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>81,973,367</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>18,370,242</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total stockholders&#146; equity (members&#146; deficit)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,397,334</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,623,416</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total liabilities and stockholders&#146; equity/members&#146;
    deficit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>83,370,701</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>21,993,658</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Statement of cash flows data:</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net cash provided by (used in)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>10,149,401</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,318,103</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Investing activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(27,086,561</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Financing activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>14,925,969</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Capital expenditures</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>27,238,311</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 49</B>
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">

</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<A name='112'></A>
</DIV>

<!-- link1 "Management&#146;s discussion and analysis of financial condition and results of operations" -->

<DIV align="left" style="font-size: 16pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Management&#146;s discussion and analysis of financial condition
and results of operations
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>The following discussion contains forward-looking statements
that include numerous risks and uncertainties. Actual results
could differ materially from those discussed in the
forward-looking statements as a result of these risks and
uncertainties, including those set forth in this prospectus
under &#147;Special note regarding forward-looking
statements&#148; and under &#147;Risk factors.&#148; You should
read the following discussion in conjunction with &#147;Selected
historical consolidated financial data of ICG,&#148; and audited
consolidated financial statements and notes of ICG, Inc. and the
audited consolidated financial statements and notes of Horizon
and its predecessors, each appearing elsewhere in this
prospectus.</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Unless otherwise indicated, for purposes of the following
management&#146;s discussion and analysis of ICG, Inc.&#146;s
financial condition and results of operations, all references to
&#147;ICG,&#148; &#147;we,&#148; &#147;our&#148; and
&#147;us&#148; refer only to ICG, Inc. and its consolidated
subsidiaries, without Anker and CoalQuest, but assuming the
reorganization.</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>OVERVIEW</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The company was formed by WLR and other investors in May 2004 to
acquire and operate competitive coal mining facilities. Through
the acquisition of key assets from the Horizon bankruptcy
estate, the WLR investor group was able to target properties
strategically located in Appalachia and the Illinois Basin with
high quality reserves that are union free, have limited
reclamation liabilities and are substantially free of legacy
liabilities. Due to our initial capitalization, we were able to
complete the acquisition without significantly increasing our
level of indebtedness. Following this offering, we expect to
retire substantially all of our long term debt and, thus, will
be strategically well-positioned. Consistent with the WLR
investor group&#146;s strategy to acquire profitable coal
assets, the Anker acquisition further diversifies our reserves.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We produce, process and sell steam coal from five regional
business units, which, as of December&nbsp;31, 2004 were
supported by five active underground mines, seven active surface
mines and three preparation plants located throughout West
Virginia, Kentucky and Illinois. We also broker coal produced by
others; the majority of which is shipped directly from the third
party producer to the ultimate customer. Our sales of steam coal
were made to large utilities and industrial customers in the
Eastern region of the United States.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In addition, we generate other revenues from the manufacture and
operation of highwall mining systems, parts sales and shop
services relating to those systems and coal handling and
processing fees. We also generate revenue when we are reimbursed
by our customers for freight and handling charges. However,
these freight and handling revenues are offset by equivalent
freight and handling costs and do not contribute to our
profitability.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Revenues are recognized on coal sales in accordance with the
terms of the sales agreement, which is when the coal is shipped
to the customer and title has passed. Freight and handling costs
paid directly to third-party carriers and invoiced to coal
customers are recorded as freight and handling costs and freight
and handling revenues, respectively. Other revenues are
recognized in the period earned or when the service is
completed. Advance payments received are deferred and recognized
in revenue as coal is shipped or rentals are earned.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our primary expenses are wages and benefits, repair and
maintenance expenditures, diesel fuel purchases, blasting
supplies, coal transportation costs, cost of purchased coal,
royalties, freight and handling costs and taxes incurred in
selling our coal.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We have one reportable segment, coal mining operations, which
includes all of our revenues and costs from coal production and
sales, operations parts and shop services related to highwall
mining systems,
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 50</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Management&#146;s discussion and analysis of financial
condition and results of operations</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
freight and handling, rentals, royalties and coal handling and
processing services. We report the revenues from the operation
of highwall mining systems and coal handling and processing in
our other revenues category.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>CERTAIN TRENDS AND ECONOMIC FACTORS AFFECTING THE COAL
INDUSTRY</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our revenues depend on the price at which we are able to sell
our coal. The current pricing environment for U.S.&nbsp;coal is
strong. Any decrease in coal prices due to, among other reasons,
the supply of domestic and foreign coal, the demand for
electricity and the price and availability of alternative fuels
for electricity generation could adversely affect our revenues
and our ability to generate cash flows. In addition, our results
of operations depend on the cost of coal production. We are
experiencing increased operating costs for fuel and explosives,
steel products, health care and contract labor. We expect to
experience higher costs for surety bonds and letters of credit.
In addition, historically low interest rates have had a negative
impact on expenses related to our actuarially determined
employee-related liabilities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
For additional information regarding some of the risks and
uncertainties that affect our business and the industry in which
we operate, and that apply to an investment in our common stock,
see &#147;Risk factors.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>CRITICAL ACCOUNTING ESTIMATES</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our financial statements are prepared in accordance with
accounting principles that are generally accepted in the United
States. The preparation of these financial statements requires
management to make estimates and judgments that affect the
reported amount of assets, liabilities, revenues and expenses as
well as the disclosure of contingent assets and liabilities.
Management evaluates its estimates on an on-going basis.
Management bases its estimates and judgments on historical
experience and other factors that are believed to be reasonable
under the circumstances. Actual results may differ from the
estimates used. Note&nbsp;2 to our audited consolidated
financial statements provides a description of all significant
accounting policies. We believe that of these significant
accounting policies, the following may involve a higher degree
of judgment or complexity.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Reclamation</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our asset retirement obligations arise from the federal Surface
Mining Control and Reclamation Act of 1977 and similar state
statutes, which require that mine property be restored in
accordance with specified standards and an approved reclamation
plan. Significant reclamation activities include reclaiming
refuse and slurry ponds, reclaiming the pit and support acreage
at surface mines, and sealing portals at deep mines. We account
for the costs of our reclamation activities in accordance with
the provisions of SFAS&nbsp;No.&nbsp;143, &#147;Accounting for
Asset Retirement Obligations.&#148; We determine the future cash
flows necessary to satisfy our reclamation obligations on a
mine-by-mine basis based upon current permit requirements and
various estimates and assumptions, including estimates of
disturbed acreage, cost estimates, and assumptions regarding
productivity. Estimates of disturbed acreage are determined
based on approved mining plans and related engineering data.
Cost estimates are based upon third-party costs. Productivity
assumptions are based on historical experience with the
equipment that is expected to be utilized in the reclamation
activities. In accordance with the provisions of
SFAS&nbsp;No.&nbsp;143, we determine the fair value of our asset
retirement obligations. In order to determine fair value, we
must also estimate a discount rate and third-party margin. Each
is discussed further below:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <I>Discount rate.</I> SFAS&nbsp;No.&nbsp;143 requires that asset
    retirement obligations be recorded at fair value. In accordance
    with the provisions of SFAS&nbsp;No.&nbsp;143, we utilize
    discounted cash flow techniques to estimate the fair value of
    our obligations. We base our discount rate on the rates of
    treasury bonds with maturities similar to expected mine lives,
    adjusted for our credit standing.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 51</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Management&#146;s discussion and analysis of financial
condition and results of operations</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <I>Third-party margin.</I> SFAS&nbsp;No.&nbsp;143 requires the
    measurement of an obligation to be based upon the amount a
    third-party would demand to assume the obligation. Because we
    plan to perform a significant amount of the reclamation
    activities with internal resources, a third-party margin was
    added to the estimated costs of these activities. This margin
    was estimated based upon our historical experience with
    contractors performing certain types of reclamation activities.
    The inclusion of this margin will result in a recorded
    obligation that is greater than our estimates of our cost to
    perform the reclamation activities. If our cost estimates are
    accurate, the excess of the recorded obligation over the cost
    incurred to perform the work will be recorded as a gain at the
    time that reclamation work is completed.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
On at least an annual basis, we review our entire reclamation
liability and make necessary adjustments for permit changes as
granted by state authorities, additional costs resulting from
accelerated mine closures and revisions to cost estimates and
productivity assumptions to reflect current experience. At
December&nbsp;31, 2004, we had recorded asset retirement
obligation liabilities of $43.3&nbsp;million, including amounts
reported as current liabilities. While the precise amount of
these future costs cannot be determined with certainty, as of
December&nbsp;31, 2004, we estimate that the aggregate
undiscounted cost of final mine closure is approximately
$59.0&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Coal reserves</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
There are numerous uncertainties inherent in estimating
quantities of economically recoverable coal reserves. Many of
these uncertainties are beyond our control. As a result,
estimates of economically recoverable coal reserves are by their
nature uncertain. Information about our reserves consists of
estimates based on engineering, economic and geological data
assembled by our internal engineers and geologists and reviewed
by a third-party consultant. We believe that the most important
factors and assumptions that impact economically recoverable
reserve estimates are:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    geological conditions;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    historical production from the area compared with production
    from other producing areas;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    the assumed effects of regulations and taxes by governmental
    agencies;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    assumptions governing future demand and prices;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    assumptions regarding future operating costs.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Each of these factors may in fact vary considerably from the
assumptions used in estimating reserves. For these reasons,
estimates of the economically recoverable quantities of coal
attributable to a particular group of properties, and
classifications of these reserves based on risk of recovery and
estimates of future net cash flows, may vary substantially.
Actual production, revenues and expenditures with respect to
reserves will likely vary from estimates, and these variances
may be material.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Post-retirement medical benefits</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
All of our subsidiaries have long and short-term liabilities for
post-retirement benefit cost obligations. Detailed information
related to these liabilities is included in the notes to our
consolidated financial statements included elsewhere in this
prospectus. Liabilities for post-retirement benefits are not
funded. The liability is actuarially determined, and we use
various actuarial assumptions, including the discount rate and
future cost trends, to estimate the costs and obligations for
post-retirement benefits. The discount rate assumption reflects
the rates available on high quality fixed income debt
instruments. The discount rate used to determine the net
periodic benefit cost for post-retirement medical benefits was
5.75% for the year ended December&nbsp;31, 2004. We make
assumptions related to future trends for medical care costs in
the estimates of retiree health care and work-related injury and
illness obligations. If our assumptions do not materialize as
expected, actual cash expenditures and costs that
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 52</B>
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Management&#146;s discussion and analysis of financial
condition and results of operations</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
we incur could differ materially from our current estimates.
Moreover, regulatory changes could increase our requirement to
satisfy these or additional obligations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Workers&#146; compensation</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Workers&#146; compensation is a system by which individuals who
sustain personal injuries due to job-related accidents are
compensated for their disabilities, medical costs and on some
occasions, for the costs of their rehabilitation, and by which
the survivors of workers who suffer fatal injuries receive
compensation for lost financial support. The workers&#146;
compensation laws are administered by state agencies with each
state having its own set of rules and regulations regarding
compensation that is owed to an employee who is injured in the
course of employment. Our operations are covered through a
combination of participation in a state run program and
insurance policies. Our estimates of these costs are adjusted
based upon actuarial studies. Actual losses may differ from
these estimates, which could increase or decrease our costs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Coal workers&#146; pneumoconiosis</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We are responsible under various federal statutes, and various
states&#146; statutes, for the payment of medical and disability
benefits to eligible employees resulting from occurrences of
coal workers&#146; pneumoconiosis disease (black lung). Our
operations are covered through a combination of a self-insurance
program, in which we are a participant in a state run program,
and an insurance policy. We accrue for any self-insured
liability by recognizing costs when it is probable that a
covered liability has been incurred and the cost can be
reasonably estimated. Our estimates of these costs are adjusted
based upon actuarial studies. Actual losses may differ from
these estimates, which could increase or decrease our costs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Income taxes</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We account for income taxes in accordance with
SFAS&nbsp;No.&nbsp;109, &#147;Accounting for Income Taxes,&#148;
which requires the recognition of deferred tax assets and
liabilities using enacted tax rates for the effect of temporary
differences between the book and tax bases of recorded assets
and liabilities. SFAS&nbsp;No.&nbsp;109 also requires that
deferred tax assets be reduced by a valuation allowance if it is
more likely than not that some portion or all of the deferred
tax asset will not be realized. In evaluating the need for a
valuation allowance, we take into account various factors
including the expected level of future taxable income and
available tax planning strategies. If future taxable income is
lower than expected or if expected tax planning strategies are
not available as anticipated, we may record a change to the
valuation allowance through income tax expense in the period the
determination is made.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>RESULTS OF CONTINUING OPERATIONS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Basis of presentation</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Certain assets of Horizon and its subsidiaries were acquired by
ICG, Inc. as of September&nbsp;30, 2004. The remaining Horizon
assets and all of its liabilities were transferred to A.T.
Massey Coal Company, Inc. and Lexington Coal Company. Due to the
change in ownership, and the resultant application of purchase
accounting, the historical financial statements of Horizon and
ICG, Inc. included in this prospectus have been prepared on
different bases for the periods presented and are not
comparable. In May 2002, Horizon, formerly operating as AEI
Resources, was reorganized.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The following provides a description of the basis of
presentation during all periods presented:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Successor</B>&#151; ICG was formed on March&nbsp;31, 2005 as
a holding company in order to effect the reorganization and the
Anker acquisition.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Predecessors</B>&#151; Represents the consolidated financial
position of ICG, Inc. as of December&nbsp;31, 2004 and its
consolidated results of operations and cash flows for the period
from October&nbsp;1 through
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 53</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Management&#146;s discussion and analysis of financial
condition and results of operations</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
December&nbsp;31, 2004 and the consolidated financial position
(at the end of the period), results of operations and cash flows
for AEI Resources for the period January&nbsp;1, 2002 to
May&nbsp;9, 2002 and for Horizon for the period May&nbsp;10,
2002 to December&nbsp;31, 2002, the year ended December&nbsp;31,
2003 and for the period January&nbsp;1 through
September&nbsp;30, 2004. ICG, Inc. had no material assets,
liabilities or results of operations until the acquisition of
certain assets from Horizon as of September&nbsp;30, 2004. ICG,
Inc.&#146;s consolidated financial position at December&nbsp;31,
2004 and its consolidated results of operations for the period
ending December&nbsp;31, 2004 reflect the purchase price
allocation partially based on appraisals prepared by independent
valuation specialists and employee benefit valuations prepared
by independent actuaries. The application of purchase accounting
to the acquired assets of Horizon resulted in increases to coal
inventories and the asset arising from recognition of asset
retirement obligations. It also resulted in increases to plant
and equipment, coal supply agreements and goodwill and a
decrease in deferred taxes. With regard to consolidated results
of operations for the three month operating period ended
December&nbsp;31, 2004, the principal effects of the application
of purchase accounting, in comparison to reporting for
historical periods, were to increase the net cost of coal sold
by $1.4&nbsp;million due to the revaluation of coal inventories
to market price as required by purchase accounting.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The financial statements for the predecessor periods of Horizon
and AEI have been prepared on a &#147;carve-out&#148; basis to
include the assets, liabilities and results of operations of
ICG, Inc. that were previously included in the consolidated
financial statements of Horizon. The financial statements for
the Horizon predecessor periods include allocations of certain
expenses, taxation charges, interest and cash balances relating
to Horizon based on management&#146;s estimates. The Horizon
predecessor financial information is not necessarily indicative
of the consolidated financial position, results of operations
and cash flows of ICG, Inc. if it had operated during the
predecessor period presented.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Three months ended December&nbsp;31, 2003 of Horizon compared
to three months ended December&nbsp;31, 2004 of ICG, Inc.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Revenues</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 9pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="50%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Horizon</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>ICG, Inc.</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Three months ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Increase</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>(decrease)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>($ or tons)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>% change</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="17" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap><B>(in thousands, except percentages and per ton data)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Coal revenues</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>111,428</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>130,463</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>19,305</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17%</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Freight and handling revenues</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,221</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>880</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(341</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(28%</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other revenues</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,398</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,766</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,632</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(26%</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total revenues</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>119,047</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>136,109</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>17,062</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14%</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Tons sold</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,855</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,582</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(273</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(7%</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Coal sales realization per ton sold</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>28.90</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>36.42</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>7.52</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>26%</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Coal revenues.</I> ICG, Inc.&#146;s coal revenues increased
in the last three months of 2004 by $19.3&nbsp;million, or 17%,
to $130.5&nbsp;million, as compared to the last three months of
2003 for Horizon. This increase was due to a $7.52&nbsp;per ton
increase in the average sales price of our coal, partially
offset by a sales tons decrease of 0.3&nbsp;million tons, or 7%,
over the comparable period last year. The increase in the
average sales price of our coal was due to the general increase
in coal prices during the period as well as the favorable
renegotiations of coal sales contracts as a result of
Horizon&#146;s Chapter&nbsp;11 bankruptcy.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Freight and handling revenues.</I> Freight and handling
revenues decreased to $0.9&nbsp;million for the period ended
December&nbsp;31, 2004 for ICG, Inc. a decrease of
$0.3&nbsp;million compared to the period ended December&nbsp;31,
2003 for Horizon, due to a decrease in shipments where we pay
the freight and handling costs and are then reimbursed by the
customer.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 54</B>
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Management&#146;s discussion and analysis of financial
condition and results of operations</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Other revenues.</I> Other revenues of ICG, Inc. decreased for
the last three months of 2004 by $1.6&nbsp;million, or 26%, to
$4.8&nbsp;million, as compared to the last three months of 2003
for Horizon, primarily due to a $1.4&nbsp;million decrease in
highwall miner lease revenue.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Costs and expenses</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 9pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="50%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Horizon</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>ICG, Inc.</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Three months ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Increase</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>(decrease)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>($ or tons)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>% change</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="17" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap><B>(in thousands, except percentages and per ton data)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cost of coal sales and other revenues (exclusive of
    depreciation, depletion and amortization)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>100,267</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>113,707</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>13,440</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13%</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <I>Cost of coal sales and other revenues as % of revenues</I></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>84</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>84</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Freight and handling costs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,221</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>880</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(341</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(28%</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <I>Freight and handling costs as % of revenues</I></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Depreciation, depletion and amortization</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>13,230</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>7,943</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(5,287</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(40%</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <I>Depreciation, depletion and amortization as % of revenues</I></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Selling, general and administrative expenses (exclusive of
    depreciation, depletion and amortization)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,873</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,194</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(679</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(14%</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <I>Selling, general and administrative expenses as % of
    revenues</I></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gain on sale of assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(2,260</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(10</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,250</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(100%</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Writedowns and other items</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>203</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(203</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(100%</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total costs and expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>117,534</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>126,714</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>9,180</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8%</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <I>Total costs and expenses as % of revenues</I></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>99</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>93</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cost of coal sales per ton sold</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>30.49</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>35.38</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4.89</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16%</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Cost of coal sales and other revenues.</I> In the last three
months of 2004, ICG, Inc.&#146;s cost of coal sales, which
excludes charges for depreciation, depletion and amortization,
increased $13.4&nbsp;million, or 13%, to $113.7&nbsp;million
compared to the last three months of 2003 for Horizon. ICG,
Inc.&#146;s cost of coal sales increased primarily as a result
of increased prices for steel-related mine supplies, escalating
diesel fuel costs ($1.9&nbsp;million), increasing costs for
repair and maintenance of an aging equipment fleet
($2.8&nbsp;million), increased coal trucking costs
($2.7&nbsp;million) and increased variable sales-related costs
($2.2&nbsp;million), such as royalties and severance taxes
related to increased sale realizations. The average cost per ton
sold increased 16% from $30.49&nbsp;per ton in the last three
months of 2003 to $35.38&nbsp;per ton in the last three months
of 2004. ICG, Inc.&#146;s cost of coal sales as a percentage of
coal revenues remained constant at 84% for the last three months
of both 2003 and 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Freight and handling costs.</I> Freight and handling costs
decreased $0.3&nbsp;million to $0.9&nbsp;million during the last
three months of 2004 as compared to the last three months of
2003, mainly due to the decrease in shipments where we initially
pay the freight and handling costs and are then reimbursed by
the customer.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Depreciation, depletion and amortization.</I> Depreciation,
depletion, and amortization decreased $5.3&nbsp;million, or 40%,
to $7.9&nbsp;million for the last three months of 2004 as
compared to the last three months of 2003. Depreciation,
depletion and amortization per ton decreased from $3.43&nbsp;per
ton in the last three months of 2003 to $2.22&nbsp;per ton in
the last three months of 2004. The principal components of the
decrease were a $3.1&nbsp;million decrease in amortization
related to an above market contract that expired at the end of
2003, as well as a $1.5&nbsp;million decrease in connection with
a change in accounting practice related to the capitalization
and amortization of major repair costs in excess of
$25,000&nbsp;per occurrence.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 55</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Management&#146;s discussion and analysis of financial
condition and results of operations</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Selling, general and administrative expenses.</I> Selling,
general and administrative expenses decreased $0.7&nbsp;million,
or 14%, to $4.2&nbsp;million in the last three months of 2004
compared to the same period in 2003 for Horizon. This reduction
was due in large part to a significant reduction in salary
expense for senior management for the period. ICG, Inc.&#146;s
selling, general and administrative expenses as a percentage of
total revenues decreased from 4.0% in the last three months of
2003 to 3.0% in the last three months of 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Gain on sale of assets.</I> Gain on sale of assets decreased
$2.3&nbsp;million from a gain of $2.3&nbsp;million in last three
months of 2003 to a gain of $0.01 million in the last three
months of 2004. The gain on sale of assets in 2003 occurred in
relation to the sale of the Hannah Land property, also known as
the Republic Reserve, which was acquired by A. T. Massey.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Writedowns and other items.</I> Writedowns and other items
decreased $0.2&nbsp;million in the last three months of 2004 as
compared to the same period in 2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Interest Expense.</I> Interest expense decreased
$32.4&nbsp;million to $3.5&nbsp;million during the last three
months of 2004 compared to the same period in 2003 for Horizon.
The decrease was mainly due to the elimination of approximately
$915&nbsp;million of debt through our Horizon&#146;s
Chapter&nbsp;11 bankruptcy. This debt was replaced with a
$175&nbsp;million term loan that ICG, Inc. entered into at the
closing of the Horizon acquisition.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Nine Months Ended September&nbsp;30, 2003 of Horizon Compared
to Nine Months Ended September&nbsp;30, 2004 of Horizon.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Revenues</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 9pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="49%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Nine months ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>September&nbsp;30,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Increase</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>(decrease)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>($ or tons)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>% change</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap><B>(in thousands, except percentages and per ton data)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Coal revenues</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>329,863</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>346,981</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>17,118</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5%</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Freight and handling revenues</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,786</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,700</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,086</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(45%</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other revenues</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25,373</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>22,702</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,671</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(11%</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total revenues</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>362,022</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>373,383</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>11,361</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3%</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Tons sold</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,801</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,421</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,380</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(19%</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Coal sales realization per ton sold</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>25.77</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>33.30</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>7.53</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>29%</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Coal revenues.</I> Coal revenues increased in the first nine
months of 2004 by $17.1&nbsp;million, or 5%, to
$347.0&nbsp;million, as compared to the first nine months of
2003. This increase was due to a $7.53&nbsp;per ton increase in
the average sales price of Horizon&#146;s coal, partially offset
by a sales tons decrease of 2.4&nbsp;million tons, or 19%, over
the comparable period last year. The principal reason for the
reduction in sales tons in the first nine months of 2004 over
2003 is due to the elimination of 1.3&nbsp;million tons of
synfuel sales in 2004. The increase in the average sales price
of our coal was due to the general increase in coal prices
during 2004, as well as the favorable renegotiations of coal
sales contracts related to Horizon&#146;s Chapter&nbsp;11
bankruptcy.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Freight and handling revenues.</I> Freight and handling
revenues decreased to $3.7&nbsp;million for the nine months
ended September&nbsp;30, 2004, a decrease of $3.1&nbsp;million
compared to the period ended September&nbsp;30, 2003 due to a
decrease in shipments where we pay the freight and handling
costs and are then reimbursed by the customer.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Other revenues.</I> Other revenues decreased for the first
nine months of 2004 by $2.7&nbsp;million, or 11%, to
$22.7&nbsp;million, as compared to the first nine months of 2003
primarily due to a $2.4&nbsp;million decrease in highwall miner
lease revenue.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 56</B>
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Management&#146;s discussion and analysis of financial
condition and results of operations</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Costs and expenses</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 9pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="50%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Nine months ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>September&nbsp;30,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Increase</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>(decrease)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>% change</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap><B>(in thousands, except percentages and per ton data)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cost of coal sales and other revenues (exclusive of
    depreciation, depletion and amortization)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>300,386</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>306,429</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>6,043</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2%</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <I>Cost of coal sales and other revenues as % of revenues</I></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>83</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>82</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Freight and handling costs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>6,786</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,700</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(3,086</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(45%</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <I>Freight and handling costs as % of revenues</I></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Depreciation, depletion and amortization</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>39,023</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>27,547</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(11,476</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(29%</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <I>Depreciation, depletion and amortization as % of revenues</I></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Selling, general and administrative expenses (exclusive of
    depreciation, depletion and amortization)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>18,478</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>8,477</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(10,001</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(54%</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <I>Selling, general and administrative expenses as % of
    revenues</I></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gain on sale of assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(2,060</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(226</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,834</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(89%</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Writedowns and other items</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>8,897</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>10,018</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,121</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13%</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total costs and expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>371,510</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>355,945</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(15,565</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(4%</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <I>Total costs and expenses as % of revenues</I></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>103</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>95</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cost of coal sales per ton sold</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>29.02</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>34.16</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5.14</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>18%</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Cost of coal sales and other revenues.</I> In the first nine
months of 2004, Horizon&#146;s cost of coal sales, which
excludes charges for depreciation, depletion and amortization,
increased $6.0&nbsp;million, or 2%, to $306.4&nbsp;million
compared to the first nine months of 2003. Horizon&#146;s cost
of coal sales increased by approximately $6.0&nbsp;million
primarily as a result of increased prices for steel-related mine
supplies, escalating diesel fuel costs ($5.2&nbsp;million),
increasing costs for repair and maintenance of an aging
equipment fleet ($10.7&nbsp;million), increased coal trucking
costs ($2.9&nbsp;million) and increased variable sales-related
costs, such as royalties and severance taxes
($4.2&nbsp;million). These increased costs were offset by volume
related decreases in purchased coal cost ($22.3&nbsp;million).
The average cost per ton sold increased 18% from $29.02&nbsp;per
ton in the first nine months of 2003 to $34.16&nbsp;per ton in
the first nine months of 2004. Horizon&#146;s cost of coal sales
as a percentage of coal revenues decreased from 83% in the first
nine months of 2003 to 82% in the first nine months of 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Freight and handling costs.</I> Freight and handling costs
decreased $3.1&nbsp;million to $3.7&nbsp;million during the
first nine months of 2004 as compared to the first nine months
of 2003, mainly due to the decrease in shipments where we pay
the freight and handling costs and are then reimbursed by the
customer.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Depreciation, depletion and amortization.</I> Depreciation,
depletion and amortization decreased $11.5&nbsp;million, or 29%,
to $27.5&nbsp;million for the first nine months of 2004 as
compared to the first nine months of 2003. Depreciation,
depletion and amortization per ton decreased from $3.05&nbsp;per
ton in the first nine months of 2003 to $2.64&nbsp;per ton in
the first nine months of 2004. The principal components of the
decrease were a $6.3&nbsp;million decrease in amortization
related to an above market contract that expired at the end of
2003, as well as a $1.6&nbsp;million decrease in connection with
a change in accounting practice related to the capitalization
and amortization of major repair costs in excess of
$25,000&nbsp;per occurrence.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Selling, general and administrative expenses.</I> Selling,
general and administrative expenses decreased
$10.0&nbsp;million, or 54%, to $8.5&nbsp;million in the first
nine months of 2004 compared to the same period in 2003. The
decrease is primarily attributed to decreased general and
supervisory salaries ($1.7&nbsp;million), reduction in building
rent ($0.7&nbsp;million) as operations were consolidated to two
floors reducing total square footage utilized, reduced taxes and
licenses ($0.8&nbsp;million), reduced sales
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 57</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Management&#146;s discussion and analysis of financial
condition and results of operations</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
commissions ($1.1&nbsp;million), reduced bad debt expense
($3.6&nbsp;million), decreased consulting fees, attorney fees
and professional services ($0.9&nbsp;million).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Gain on sale of assets.</I> Gain on sale of assets decreased
$1.8&nbsp;million from a gain of $2.1&nbsp;million in first nine
months of 2003 to a gain of $0.2&nbsp;million in the first nine
months of 2004. The gain on sale of assets in 2003 occurred in
relation to the sale of the Hannah Land property, which was
acquired by A. T. Massey
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Writedowns and other items.</I> Writedowns and other items
increased $1.1&nbsp;million in the first nine months of 2004 as
compared to the same period in 2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Interest expense.</I> Interest expense increased
$4.2&nbsp;million to $114.2&nbsp;million during the first nine
months of 2004 as compared to the same period in 2003. This
increase was primarily due to default interest on unpaid
interest amounts.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Twelve Months Ended December&nbsp;31, 2002 of Predecessor
Compared to Twelve Months Ended December&nbsp;31, 2003 of
Predecessor</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Revenues</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 9pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="50%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Year ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Increase</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>(decrease)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2002<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>($ or tons)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>% change</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap><B>(in thousands, except percentages</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap><B>and per ton data)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Coal revenues</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>400,275</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>441,291</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>41,016</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10%</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Freight and handling revenues</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,979</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,008</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(971</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(11%</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other revenues</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>48,580</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>31,771</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(16,809</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(35%</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total revenues</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>457,834</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>481,070</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>23,236</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5%</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Tons sold</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16,540</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16,655</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>115</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1%</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Coal sales realization per ton sold</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>24.20</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>26.50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2.30</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10%</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 15%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 9pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><I>(1)&nbsp;</I></TD>
    <TD align="left">
    <I>Represents the combination of amounts for the period
    January&nbsp;1, 2002 to May&nbsp;9, 2002 with the amounts for
    the period May&nbsp;10, 2002 to December&nbsp;31, 2002.</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Coal revenues.</I> Coal revenues increased for the twelve
months ended December&nbsp;31, 2003 by $41.0&nbsp;million or
10%, to $441.3&nbsp;million, as compared to the twelve months
ended December&nbsp;31, 2002. This increase was due to a
$2.30&nbsp;per ton increase in the average sales price of
Horizon&#146;s coal. The increase in the average sales price of
Horizon&#146;s coal was due to the general increase in coal
prices during the latter part of 2003, as well as the favorable
renegotiations of coal sales contracts related to Horizon&#146;s
Chapter&nbsp;11 bankruptcy.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Freight and handling revenues.</I> Freight and handling
revenues decreased to $8.0&nbsp;million for the twelve months
ended December&nbsp;31, 2003, a decrease of $1.0&nbsp;million
compared to the twelve months ended December&nbsp;31, 2002 due
to a decrease in shipments where we pay the freight and handling
costs and are then reimbursed by the customer.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Other revenues.</I> Other revenues decreased for the twelve
months ended December&nbsp;31, 2003 by $16.8&nbsp;million, or
35%, to $31.8&nbsp;million, as compared to the same period in
2002. This decrease is primarily due to a $10.9&nbsp;million
decrease in revenue related to our highwall mining subsidiary
and a decrease of $3.6&nbsp;million in synfuel earnings.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 58</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Management&#146;s discussion and analysis of financial
condition and results of operations</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Costs and expenses</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 9pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="49%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Year ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Increase</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>(decrease)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>% change</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap><B>(in thousands, except percentages and per ton data)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cost of coal sales and other revenues (exclusive of
    depreciation, depletion and amortization)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>366,128</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>400,652</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>34,524</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9%</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <I>Cost of coal sales and other revenues as % of revenues</I></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>80</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>83</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Freight and handling costs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>8,979</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>8,008</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(971</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(11%</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <I>Freight and handling costs as % of revenues</I></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Depreciation, depletion and amortization</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>72,350</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>52,254</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(20,096</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(28%</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <I>Depreciation, depletion and amortization as % of revenues</I></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Selling, general and administrative expenses (exclusive of
    depreciation, depletion and amortization)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>26,372</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>23,350</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(3,022</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(11%</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <I>Selling, general and administrative expenses as % of
    revenues</I></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gain on sale of assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(132</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(4,320</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(4,188</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Writedowns and other items</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>738,275</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>9,100</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(729,175</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(99%</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total costs and expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,211,972</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>489,044</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(722,928</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(60%</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <I>Total costs and expenses as % of revenues</I></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>265</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>102</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cost of coal sales per ton sold</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>73.28</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>29.36</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(43.92</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(60%</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 15%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 9pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD><I>*&nbsp;</I></TD>
    <TD align="left">
    <I>Not meaningful</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Cost of coal sales and other revenues.</I> In the twelve
months ended December&nbsp;31, 2003, Horizon&#146;s cost of coal
sales, which excludes costs for depreciation, depletion and
amortization, increased $34.5&nbsp;million, or 9%, to
$400.7&nbsp;million compared to the twelve months ended
December&nbsp;31, 2002. Horizon&#146;s cost of coal sales
increased by approximately $34.5&nbsp;million primarily as a
result of increased prices for steel-related mine supplies,
escalating diesel fuel costs ($3.9&nbsp;million), increased cost
of blasting materials ($1.8&nbsp;million), increased equipment
rental costs ($2.9&nbsp;million) and increased variable
sales-related costs, such as royalties and severance taxes
($0.8&nbsp;million). These increased costs were offset by volume
related increases in purchased coal cost ($22.1&nbsp;million).
The average cost per ton sold decreased 60% from $73.28&nbsp;per
ton in 2002 to $29.36&nbsp;per ton in the same period of 2003.
The per ton cost in 2002 was impacted by writedowns and other
items that released to Horizon&#146;s bankruptcy. Horizon&#146;s
cost of coal sales as a percentage of coal revenues increased
from 80% in 2002 to 83% in 2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Freight and handling costs.</I> Freight and handling costs
decreased $1.0&nbsp;million, or 11%, to $8.0&nbsp;million
compared to the twelve months ended December&nbsp;31, 2002,
mainly due to the decrease in shipments where we pay the freight
and handling costs and are then reimbursed by the customer.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Depreciation, depletion and amortization.</I> Depreciation,
depletion and amortization decreased $20.0&nbsp;million, or 28%,
to $52.3&nbsp;million for the twelve months ended
December&nbsp;31, 2003 as compared to the same period in 2002.
Depreciation, depletion and amortization per ton decreased from
$4.37&nbsp;per ton in 2002 to $3.14&nbsp;per ton in 2003. The
principal components of the decrease were a reduction of
$7.4&nbsp;million in depreciation as original asset lives were
fully depreciated and not replaced with new assets due to cash
constraints related to Horizon&#146;s Chapter&nbsp;11
bankruptcy, as well as a $3.2&nbsp;million decrease related to
the amortization of major repair costs. Depletion in 2003 was
$9.2&nbsp;million less than the same period in 2002 due to a
change in depletion rates as a result of Horizon&#146;s first
Chapter&nbsp;11 bankruptcy.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Selling, general and administrative expenses.</I> Selling,
general and administrative expenses decreased $3.0&nbsp;million,
or 11%, to $23.3&nbsp;million in the twelve months ended
December&nbsp;31, 2003 as compared
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 59</B>
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Management&#146;s discussion and analysis of financial
condition and results of operations</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
to the same period in 2002. The decrease is attributed to
reduced bad debt expense ($0.9&nbsp;million) and a
$1.7&nbsp;million decrease in general and supervisory bonuses.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Gain on sale of assets.</I> Gain on sale of assets increased
$4.2&nbsp;million from a gain of $0.1&nbsp;million in 2002 to a
gain of $4.3&nbsp;million in 2003. The gain on sale of assets in
2003 occurred in relation to the sale of Cyrus Dock
($3.1&nbsp;million), and the Hannah Land property
($2.2&nbsp;million), which was acquired by A.T.&nbsp;Massey,
partially offset by a loss on sale of the Blue Springs property
($1.1&nbsp;million).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Writedowns and other items.</I> Writedowns and other items
decreased $729.2&nbsp;million in the 2003 as compared to 2002
due to the write off of goodwill ($697.1&nbsp;million).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Interest Expense.</I> Interest expense increased
$28.8&nbsp;million to $145.9&nbsp;million during 2003 as
compared to the same period in 2002. This increase was primarily
due to default interest on unpaid interest amounts.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>LIQUIDITY AND CAPITAL RESOURCES</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our business is capital intensive and requires substantial
capital expenditures for, among other things, purchasing,
upgrading and maintaining equipment used in developing and
mining our reserve base, as well as remaining in compliance with
environmental laws and regulations. Our principal liquidity
requirement is to finance our coal production, fund capital
expenditures and to service our debt and reclamation
obligations. We may also engage in acquisitions from time to
time. Our primary sources of liquidity to meet these needs are
cash flow from sales of our coal, other income and borrowings
under our senior credit facility.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We believe the principal indicators of our liquidity are our
cash position and remaining availability under our credit
facility. As of December&nbsp;31, 2004, our available liquidity
was $79.6&nbsp;million, including cash of $24.0&nbsp;million and
$55.6&nbsp;million available under our credit facility. Total
debt represented 54% of our total capitalization at
December&nbsp;31, 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We currently expect our capital expenditures to be approximately
$92.2&nbsp;million for the remainder of 2005, and approximately
$145.1&nbsp;million in 2006, primarily for investments in new
equipment and for mining development operations. We expect to
fund these capital expenditures for the next two years from our
internal operations. As we take advantage of planned expansion
opportunities from 2007 through 2009, we expect to spend
approximately $571.8&nbsp;million on capital expenditures, which
may require external financing. However, our capital
expenditures may be different than currently anticipated
depending upon the size and nature of new business opportunities
and actual cash flows generated by our operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Cash flows</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Cash provided by operating activities was $30.2&nbsp;million for
the last three months of 2004, an increase of $26.1&nbsp;million
from the same period in 2003. Cash provided by operations for
the last three months of 2004 benefited from the strength of the
coal markets during the period. This increase is attributable to
an increase in net income of $69.3&nbsp;million for the last
three months of 2004 over the same period the previous year, and
the effects of a $42.3&nbsp;million reduction in net operating
assets and liabilities primarily related to accrued interest
charges in 2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Net cash used in investing activities was $329.2&nbsp;million
during the last three months of 2004 as compared to cash of
$4.1&nbsp;million generated by investing activities in the year
ended December&nbsp;31, 2003. Cash used in investing activities
of $323.6&nbsp;million was for the purchase of certain assets of
Horizon in the last three months of 2004. Capital expenditures
were virtually unchanged between the two periods, with the
increase in cash generated in the last three months of 2003
related to the sale of assets during Horizon&#146;s
Chapter&nbsp;11 bankruptcy.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Net cash provided by financing activities was
$322.9&nbsp;million in the last three months of 2004 compared
with net cash used by financing activities of $10.9&nbsp;million
in the prior period. The increase
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 60</B>
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Management&#146;s discussion and analysis of financial
condition and results of operations</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
in financing activities was a result of the initial capital
contribution of $150.2&nbsp;million and borrowings of
$175&nbsp;million used in the purchase of certain Horizon
assets. Net cash used in financing activities by Horizon in 2003
related to the use of proceeds from the sale of assets to pay
down debtor-in-possession financing related to Horizon&#146;s
Chapter&nbsp;11 bankruptcy.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Cash provided by operating activities was $17.8&nbsp;million for
the full year 2003, an increase of $239.6&nbsp;million from the
same period in 2002. This increase is attributable to the
effects of a $905.7&nbsp;million change in non-cash items
related to Horizon&#146;s first Chapter&nbsp;11 bankruptcy case,
a decrease in net income of $761.0&nbsp;million for 2003 as
compared to the same period in 2002, and the effects of a
$94.9&nbsp;million increase in net operating assets and
liabilities primarily related to accrued interest charges in
2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Net cash used in investing activities decreased
$22.1&nbsp;million in 2003 to $1.6&nbsp;million as compared to
$23.6&nbsp;million in 2002. This decrease is the result of
decreased capital expenditures of $7.5&nbsp;million as well as
an increase in proceeds from the sale of assets of
$14.6&nbsp;million in 2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Net cash used in financing activities decreased
$196.4&nbsp;million in 2003 to $15.5&nbsp;million as compared to
a source of cash of $180.9&nbsp;million in 2002. This change is
entirely related to various debt transactions in 2002 related to
Horizon&#146;s first Chapter&nbsp;11 bankruptcy.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Credit facility and long-term debt obligations</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
As of December&nbsp;31, 2004, our total long-term indebtedness,
including capital lease obligations, consisted of the following:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="68%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="13%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="12%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>As of</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>December&nbsp;31, 2004</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(dollars in thousands)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Term loan due 2010</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>175,000</TD>
    <TD align="left" valign="bottom" nowrap><SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Revolving credit facility</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Capital lease obligations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>681</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,787</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total long-term debt</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>179,468</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Less current portion</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(6,022</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Long term debt, net of current portion</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>173,446</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 15%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 9pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><I>(1)</I></TD>
    <TD align="left">
    <I>We are required to use 50% of the net proceeds of this
    offering to repay amounts outstanding under the term loan.</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
On September&nbsp;30, 2004 (later amended and restated on
November&nbsp;5, 2004), ICG, LLC, entered into a credit facility
with a group of lending institutions, for which UBS
Securities&nbsp;LLC serves as Arranger, Bookmanager and
Syndication Agent. The $285.0&nbsp;million credit facility
provides for a term loan of $175.0&nbsp;million and a revolving
credit facility of up to $110.0&nbsp;million with a letter of
credit sub-limit of up to $60.0&nbsp;million. As of
December&nbsp;31, 2004, the $175.0&nbsp;million term loan
principal amount was outstanding and letters of credit totaling
$54.4&nbsp;million were outstanding under the revolving credit
facility, leaving $55.6&nbsp;million available for borrowing on
the revolving credit facility. The interest rate on both the
term loan and revolving credit facility bear interest at a
variable rate based upon either the prime rate or a London
Interbank Offered Rate (LIBOR), in each case plus a spread that
is dependent on our leverage ratio. The interest rate applicable
to our borrowings under the term loan was 4.99% as of
December&nbsp;31, 2004. The principal balance of the term loan
is due on October&nbsp;1, 2010 and the revolving credit facility
expires on October&nbsp;1, 2009. ICG and each of the
subsidiaries of ICG, LLC, have guaranteed ICG, LLC&#146;s
obligations under the credit facility. The obligations of ICG,
LLC, under the credit facility are secured by a lien on all of
the assets of ICG, ICG, LLC and their subsidiaries. We
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 61</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Management&#146;s discussion and analysis of financial
condition and results of operations</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
must pay an annual commitment fee up to a maximum of
<FONT style="font-size: 70%"><SUP>1</SUP></FONT>/<FONT style="font-size: 60%">2</FONT>
of 1% of the unused portion of the commitment under the
revolving credit facility. We were in compliance with our debt
covenants under the credit facility as of December&nbsp;31, 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The credit facility imposes certain restrictions on us,
including restrictions on our ability to: incur debt, grant
liens, enter into agreements with negative pledge clauses,
provide guarantees in respect of obligations of any other
person, pay dividends and make other distributions, make loans,
investments, advances and acquisitions, sell our assets, make
redemptions and repurchases of capital stock, make capital
expenditures, prepay, redeem or repurchase debt, liquidate or
dissolve; engage in mergers or consolidations, engage in
affiliate transactions, change our business, change our fiscal
year, amend certain debt and other material agreements, issue
and sell capital stock of subsidiaries, engage in sale and
leaseback transactions, and restrict distributions from
subsidiaries. In addition, the credit facility provides that we
must comply with certain covenants, including certain interest
coverage ratios. For a more detailed description of these
ratios, see &#147;Description of indebtedness.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
At December&nbsp;31, 2004, we had $54.4&nbsp;million in letters
of credit outstanding, all of which are supported by our
$60.0&nbsp;million letter of credit sub-limit contained in our
$285.0&nbsp;million credit facility. We paid $0.3&nbsp;million
in interest on our credit facility on October&nbsp;10, 2004, the
first scheduled interest payment date on the credit facility and
another $2.4&nbsp;million in interest on our credit facility on
January&nbsp;10, 2005. We also made a term loan amortization
payment of $0.4&nbsp;million on January&nbsp;10, 2005, which was
the first scheduled amortization payment date.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
As a regular part of our business, we review opportunities for,
and engage in discussions and negotiations concerning, the
acquisition of coal mining assets and interests in coal mining
companies, and acquisitions of, or combinations with, coal
mining companies. When we believe that these opportunities are
consistent with our growth plans and our acquisition criteria,
we will make bids or proposals and/or enter into letters of
intent and other similar agreements, which may be binding or
nonbinding, that are customarily subject to a variety of
conditions and usually permit us to terminate the discussions
and any related agreement if, among other things, we are not
satisfied with the results of our due diligence investigation.
Any acquisition opportunities we pursue could materially affect
our liquidity and capital resources and may require us to incur
indebtedness, seek equity capital or both. There can be no
assurance that additional financing will be available on terms
acceptable to us, or at all.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Additionally, we have long-term liabilities relating to mine
reclamation, end-of-mine closure costs and &#147;black
lung&#148; costs, and all of our operating and
management-services subsidiaries have long-term liabilities
relating to retiree health care (post-retirement benefits).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our ability to meet our long-term debt obligations will depend
upon our future performance, which in turn, will depend upon
general economic, financial and business conditions, along with
competition, legislation and regulation&#151; factors that are
largely beyond our control. Based upon our current operations,
the historical results of our predecessors, as well as those of
Anker and CoalQuest, we believe that cash flow from operations,
together with other available sources of funds, including
additional borrowings under our credit facility and the proceeds
from this offering, will be adequate for at least the next
12&nbsp;months for making required payments of principal and
interest on our indebtedness and for funding anticipated capital
expenditures and working capital requirements. However, we
cannot assure you that our operating results, cash flow and
capital resources will be sufficient for repayment of our debt
obligations in the future.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 62</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Management&#146;s discussion and analysis of financial
condition and results of operations</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>CONTRACTUAL OBLIGATIONS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The following is a summary of our significant future contractual
obligations by year as of December&nbsp;31, 2004, on a pro forma
basis after giving effect to the Anker acquisition:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="40%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap><B>Payments due by period</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Less than</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>More than</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>1&nbsp;year</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>1-3&nbsp;years</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>3-5&nbsp;years</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>5&nbsp;years</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Total</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap><B>(in thousands)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Long-term debt obligations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>7,067</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,039</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,553</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>166,273</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>182,932</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    UBS revolving credit facility</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15,957</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15,957</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Capital leases obligations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>513</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>168</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>681</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating leases</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,506</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,058</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25,564</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Coal purchase obligation</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>114,620</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>134,389</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>57,644</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25,186</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>331,839</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Advisory Services
    agreement<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,500</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Minimum royalties</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,348</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>19,876</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,195</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>29,345</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>62,764</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total<SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>161,011</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>175,530</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>72,392</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>224,304</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>633,237</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 15%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 9pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><I>(1)</I></TD>
    <TD align="left">
    <I>See &#147;Certain relationships and related party
    transactions.&#148;</I></TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><I>(2)</I></TD>
    <TD align="left">
    <I>Our contractual obligations exclude interest amounts due for
    the years shown above because it is at a variable rate. We are
    also a party to an employment agreement with our President and
    Chief Executive Officer. See &#147;Management&#151; Employment
    agreements&#148; regarding the terms and conditions of this
    employment agreement.</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>OFF-BALANCE SHEET ARRANGEMENTS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In the normal course of business, we are a party to certain
off-balance sheet arrangements. These arrangements include
guarantees and financial instruments with off-balance sheet
risk, such as bank letters of credit and performance or surety
bonds. No liabilities related to these arrangements are
reflected in our combined balance sheets, and we do not expect
any material adverse effects on our financial condition, results
of operations or cash flows to result from these off-balance
sheet arrangements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Federal and state laws require us to secure payment of certain
long-term obligations such as mine closure and reclamation
costs, federal and state workers&#146; compensation, coal leases
and other obligations. We typically secure these payment
obligations by using surety bonds, an off-balance sheet
instrument. The use of surety bonds is less expensive for us
than the alternative of posting a 100% cash bond or a bank
letter of credit, either of which would require a greater use of
our credit facility. We then use bank letters of credit to
secure our surety bonding obligations as a lower cost
alternative than securing those bonds with cash. ICG has a
$60.0&nbsp;million committed bonding facility pursuant to which
we are required to provide bank letters of credit in an amount
up to 50% of the aggregate bond liability. Recently, surety bond
costs have increased, while the market terms of surety bonds
have generally become less favorable to us. To the extent that
surety bonds become unavailable, we would seek to secure our
reclamation obligations with letters of credit, cash deposits or
other suitable forms of collateral.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
As of December&nbsp;31, 2004, we had outstanding surety bonds
with third parties for post-mining reclamation totaling
$67.5&nbsp;million plus $9.4&nbsp;million for miscellaneous
purposes. We maintained letters of credit as of
December&nbsp;31, 2004 totaling $54.7&nbsp;million to secure
reclamation surety bonds and other obligations, including
$10.0&nbsp;million related to Lexington Coal Company. Of the
$54.7&nbsp;million, $54.4&nbsp;million of these letters of
credit are issued under our $60.0&nbsp;million bonding facility
with another approximately $300,000 of letters of credit which
are cash collateralized and issued by a third party bank.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 63</B>
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Management&#146;s discussion and analysis of financial
condition and results of operations</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>RECENT ACCOUNTING PRONOUNCEMENTS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Emerging Issues Task Force (&#147;EITF&#148;) Issue&nbsp;04-02
addresses the issue of whether mineral rights are tangible or
intangible assets. FASB Statement No.&nbsp;141, Business
Combinations, requires the acquirer in a business combination to
allocate the cost of the acquisition to the acquired assets and
liabilities. At the March 17-18, 2004 meeting, the EITF reached
a consensus that mineral rights (defined as the legal right to
explore, extract and retain at least a portion of the benefits
from mineral deposits) are tangible assets. As a result of the
EITF&#146;s consensus, the Financial Accounting Standards Board
(the &#147;FASB&#148;) issued FASB Staff Position
(&#147;FSP&#148;) Nos. SFAS&nbsp;No.&nbsp;141-a and
SFAS&nbsp;No.&nbsp;142-a, Interaction of FASB Statements
No.&nbsp;141, Business Combinations, and No.&nbsp;142, Goodwill
and Other Intangible Assets, and EITF Issue No.&nbsp;04-02,
Whether Mineral Rights Are Tangible or Intangible Assets, which
amend SFAS&nbsp;Nos. 141 and 142 and results in the
classification of mineral rights as tangible assets. We have
recorded mineral rights as tangible assets.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In January 2003, the FASB issued Interpretation No.&nbsp;46,
Consolidation of Variable Interest Entities
(&#147;FIN&nbsp;46&#148;), and subsequently revised FIN&nbsp;46
in December 2003. As revised, FIN&nbsp;46&#146;s consolidation
provisions apply to interest in variable interest entities
(&#147;VIEs&#148;) that are referred to as special-purpose
entities for periods ending afterDecember&nbsp;15, 2003. For all
other VIEs, FIN&nbsp;46&#146;s consolidation provisions apply
for periods ending after March&nbsp;15, 2004, or as of
March&nbsp;31, 2004. FIN&nbsp;46 did not have a material effect
on our consolidated financial position or results of operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In January 2005, the FASB issued Statement&nbsp;123R, Accounting
for Stock Based Compensation. FASB Statement&nbsp;123R
supersedes APB Opinion&nbsp;25, Accounting for Stock Issued to
Employees. This statement establishes standards for accounting
transactions in which an entity exchanges its equity instruments
for goods or services. It also addresses transactions in which
an entity incurs liabilities in exchange for goods or services
that are based on the fair value of the entity&#146;s equity
instruments or that may be settled by the issuance of those
equity instruments. FASB 123R is effective as of the beginning
of the first fiscal year beginning after June&nbsp;15, 2005. We
believe adoption of FASB 123R will have no material impact on
our financial position, results of operations, or cash flows.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Commodity price risk.</B> We manage our commodity price risk
for coal sales through the use of long-term coal supply
agreements rather than through the use of derivative
instruments. As of February&nbsp;28, 2005, we had sales
commitments for 88% of our planned 2005 production. Some of the
products used in our mining activities, such as diesel fuel, are
subject to price volatility. Through our suppliers, we utilize
forward contracts to manage the exposure related to this
volatility.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Interest rate risk.</B> Historically, we have had exposure to
changes in interest rates on a portion of our existing level of
indebtedness. This exposure had been hedged at 50% of the debt
for a two year period using pay-fixed, receive-variable interest
rate swaps. As a result of the transactions, we anticipate
exposure to changes in interest rates on a portion of our new
level of indebtedness. A hypothetical increase or decrease in
interest rates by 1% would have changed interest expense on our
credit facility by $437,500 for the three months ended
December&nbsp;31, 2004. We expect to use interest rate swaps to
manage this risk.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our concentration of credit risk is substantially with electric
utilities the majority of which are investment grade, producers
of steel and foreign customers. Our policy is to evaluate
independently each customer&#146;s creditworthiness prior to
entering into transactions and to constantly monitor the credit
extended.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 64</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">

</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<A name='113'></A>
</DIV>

<!-- link1 "The coal industry" -->

<DIV align="left" style="font-size: 16pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The coal industry
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>OVERVIEW</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
A major contributor to the world energy supply, coal represents
over 23% of the world&#146;s primary energy consumption
according to the World Coal Institute. The primary use for coal
is to fuel electric power generation. In 2004, coal-fired plants
generated 50% of the electricity produced in the United States,
according to the EIA, a statistical agency of the
U.S.&nbsp;Department of Energy.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The United States produces over one-fifth of the world&#146;s
coal and is the second largest coal producer in the world,
exceeded only by China. Other leading coal producers include
India, Australia and South Africa. The United States is the
largest holder of coal reserves in the world, with over
250&nbsp;years supply at current production rates.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>U.S.&nbsp;coal demand trends&#151; 1975-2003</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<IMG src="y07947y0794703.gif" alt="(LINE GRAPH)">
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 15%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<I>Source: EIA</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>DEMAND FOR U.S.&nbsp;COAL PRODUCTION</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Coal produced in the United States is used primarily by
utilities to generate electricity, by steel companies to produce
coke for use in blast furnaces and by a variety of industrial
users to heat and power foundries, cement plants, paper mills,
chemical plants and other manufacturing and processing
facilities. Significant quantities of coal are also exported
from both east and west coast terminals. According to the EIA,
98% of coal consumed in the United States in 2003 was from
domestic production sources. Coal produced in the United States
is also exported, primarily from east coast
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 65</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>The coal industry</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
terminals. The breakdown of 2003 U.S.&nbsp;coal consumption by
sector, according to the EIA, is as follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="64%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="center" nowrap><B>End use</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Tons (millions)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>% of total</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="8" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Electric Power</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>91.7</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other Industrial Plants</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>62</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5.7</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Coke Plants</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>24</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2.2</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Residential&nbsp;&#38; Commercial</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.4</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,095</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100.0</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 15%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<I>Source: EIA</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Coal has long been favored as an electricity generating fuel by
regulated utilities because of its basic economic advantage. The
largest cost component in electricity generation is fuel.
According to the National Mining Association, coal is by far the
cheapest source of power fuel per million Btu, averaging less
than one-third the price of both petroleum and natural gas.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
According to the EIA, for a new coal-fired plant built today,
fuel costs would represent about one-half of total operating
costs, whereas the share for a new natural-gas-fired plant would
be almost 90%. Coal used as fuel to generate electricity is
commonly referred to as &#147;steam coal.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Other factors that influence each utility&#146;s choice of
electricity generation mode, include facility cost, fuel
transportation infrastructure, environmental restrictions and
other factors. The breakdown of U.S.&nbsp;electricity generation
by fuel source in 2003, as estimated by the EIA, is as follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="81%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>% of total</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>electricity</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="left" nowrap><B>Electricity generation source</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>generation</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Coal</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>51</TD>
    <TD align="left" valign="top" nowrap>%</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Nuclear</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>20</TD>
    <TD align="left" valign="top" nowrap>%</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Natural Gas</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>16</TD>
    <TD align="left" valign="top" nowrap>%</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Hydro</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>7</TD>
    <TD align="left" valign="top" nowrap>%</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Petroleum</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>3</TD>
    <TD align="left" valign="top" nowrap>%</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>3</TD>
    <TD align="left" valign="top" nowrap>%</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>100</TD>
    <TD align="left" valign="top" nowrap>%</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 15%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<I>Source: EIA</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The EIA projects that generators of electricity will increase
their demand for coal as demand for electricity increases.
Because coal-fired generation is used in most cases to meet base
load requirements, coal consumption has generally grown at the
pace of electricity demand growth. Demand for electricity has
historically grown in proportion to U.S.&nbsp;economic growth as
measured by gross domestic product. According to the EIA, coal
use for electricity generation is expected to increase on
average by 1.6%&nbsp;per year from 2003 to 2025.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 66</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>The coal industry</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>U.S.&nbsp;electricity demand increasing&#151; 1970-2025
forecasted</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<IMG src="y07947y0794704.gif" alt="(LINE GRAPH)">
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 15%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<I>Source: EIA</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The other major market for coal is the steel industry. The type
of coal used in steel making is referred to as metallurgical
coal and is distinguished by special quality characteristics
that include high carbon content, low expansion pressure, low
sulfur content, and various other chemical attributes.
Metallurgical coal is also high in heat content (as measured in
Btus), and therefore is desirable to utilities as fuel for
electricity generation. Consequently, metallurgical coal
producers have the ongoing opportunity to select the market that
provides maximum revenue. The premium price offered by steel
makers for the metallurgical quality attributes is typically
higher than the price offered by utility coal buyers that value
only the heat content.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>U.S.&nbsp;COAL PRODUCTION AND DISTRIBUTION</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In 2004, total coal production as estimated by the DOE was
1.1&nbsp;billion tons. The primary producing regions were
Appalachia (35%), Interior (13%) and Western (52%). Most of our
coal production comes from the Central Appalachian region. In
2003, approximately 67% of U.S.&nbsp;coal was produced by
surface mining methods. The remaining 33% was produced by
underground mining methods that include room and pillar mining
and longwall mining.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>U.S.&nbsp;coal production</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="30%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>1998</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>1999</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2000</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2001</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="28" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="26" align="center" nowrap><B>(tons in millions</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Area:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Appalachian</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>460.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>425.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>419.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>431.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>396.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>376.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>390.7</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interior (includes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Illinois Basin)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>168.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>162.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>143.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>146.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>146.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>146.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>147.5</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Western</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>488.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>512.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>510.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>547.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>550.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>548.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>573.3</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,117.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,100.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,073.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,126.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,093.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,070.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,111.4</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 15%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<I>Source: Coal Industry Annual Review and Coal Weekly,
1998-2004, EIA.</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Central Appalachia</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Central Appalachia, including eastern Kentucky, Virginia and
southern West Virginia, produced 21% of the total U.S.&nbsp;coal
production in 2003. Coal mined from this region generally has a
high heat content of between 12,000 and 14,000 Btus per pound
and a low sulfur content ranging from 0.7% to 1.5%. From 2000 to
2004 according to the EIA, the Central Appalachian region
experienced a decline in production from 258&nbsp;million tons
to 230&nbsp;million tons, or a 11% decline, primarily as a
result of the depletion of economically attractive reserves,
permitting issues and increasing costs of production,
</DIV>

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<DIV align="right" style="font-size: 8pt;">
<B> 67</B>
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<B>The coal industry</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
which was partially offset by production increases in Southern
West Virginia due to the expansion of more economically
attractive surface mines.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The structural issues in Central Appalachia have led to
exceedingly high barriers to entry. These barriers are likely to
prevent large-scale development in the region in both the short
and medium term. In addition, alternative fuel sources have
limited benefits and eastern utilities are reluctant to invest
heavily to switch to PRB coal. Thus, the increasing demand
coupled with the supply constraints will likely result in price
stabilization at higher levels in Central Appalachia.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>INDUSTRY TRENDS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In recent years, the coal industry has experienced several
significant trends including:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Significant gains in mining productivity.</B> U.S.&nbsp;coal
production more than doubled from 1968 to 1998 due largely to
changes in work practices and the introduction of new
technologies that have greatly increased mine productivity.
According to the EIA, overall coal mine productivity, measured
in tons produced per miner shift, has increased from 30.6 tons
in 1990 to 55.6 tons in 2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Growth in coal consumption.</B> According to EIA, from 1990
to 2003 coal consumption in the United States increased from
895&nbsp;million tons to 1,095&nbsp;million tons, or 22%. The
largest driver of increased coal consumption during this period
was increased demand for electricity. The EIA estimates that
coal use for electricity generation is expected to increase on
average by 1.6%&nbsp;per year from 2003 to 2025.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Increased utilization of existing capacity of coal-fired
power plants.</B> We believe that existing coal-fired plants
will supply much of the projected increase in the demand for
electricity because they possess excess capacity that can be
utilized at low incremental costs. The NETL has identified 106
coal-fired plants, representing 65,000 megawatts of electric
generation capacity, that have been proposed and are currently
in various stages of development.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Restructuring of electricity industry</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In October 1992, Congress enacted the Energy Policy Act of 1992,
which gave wholesale electricity suppliers access to the
transmission lines of U.S.&nbsp;utility companies. In May 1996,
the Federal Energy Regulatory Commission issued the first of a
series of orders establishing rules to promote competition in
wholesale electricity markets by providing wholesale electricity
suppliers open access to electricity transmission systems. In
1999, the Federal Energy Regulatory Commission issued a rule to
encourage the establishment of regional transmission
organizations. Wholesale competition has resulted in a
substantial increase in non-utility generating capacity in the
United States.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Increasingly stringent air quality laws</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The coal industry has witnessed a recent shift in demand to low
sulfur coal production driven by regulatory restrictions on
sulfur dioxide emissions from coal-fired power plants. In 1995,
Phase&nbsp;I of the Clean Air Act Acid Rain program required
high sulfur coal plants to reduce their emissions of sulfur
dioxide to 2.5 pounds or less per million Btu, and in 2000,
Phase&nbsp;II of the Clean Air Act tightened these sulfur
dioxide restrictions further to 1.2 pounds of sulfur dioxide per
million Btu. Currently, electric power generators operating
coal-fired plants can comply with these requirements by:
</DIV>

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<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    burning lower sulfur coal, either exclusively or mixed with
    higher sulfur coal;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    installing pollution control devices such as scrubbers, which
    reduce the emissions from high sulfur coal;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    reducing electricity generating levels;&nbsp;or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    purchasing or trading emission credits to allow them to comply
    with the sulfur dioxide emission compliance requirements.</TD>
</TR>

</TABLE>

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</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 68</B>
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<B>The coal industry</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
However, as new and proposed laws and regulations, including the
Clean Air Interstate Rule and the Clean Air Mercury Rule require
further reductions in emissions, coal-fired utilities may need
to install additional pollution control equipment, such as wet
scrubbers, to comply. Installation of such additional pollution
control equipment required could potentially result in a
decrease in the demand for low sulfur coal (because sulfur would
be removed by the new equipment), potentially driving down
prices for low sulfur coal.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>RECENT COAL MARKET CONDITIONS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
According to traded coal indices and reference prices, U.S. and
international coal demand is currently at high levels, and coal
pricing has increased year-over-year in nearly every significant
U.S. and international market. We believe that current
fundamentals in the U.S.&nbsp;coal industry are among the
strongest witnessed over the past decade, supported primarily by:
</DIV>

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<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    stronger industrial demand following a recovery in the
    U.S.&nbsp;manufacturing sector;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    relatively low customer stockpiles;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    production difficulties and reserve degradation experienced by
    some U.S.&nbsp;coal producers;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    capacity constraints of U.S.&nbsp;nuclear-powered electricity
    generators;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    high current and forward prices for natural gas and oil;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    transportation disruptions including constrained rail line
    capacity and increased costs faced by the trucking
    industry;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    increased international demand for U.S.&nbsp;coal for
    electricity generation and steelmaking, driven by global
    economic growth, high ocean freight rates and the weak
    U.S.&nbsp;dollar.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Coal prices are influenced by a number of factors and often vary
dramatically by region. The following charts illustrate coal
spot prices and annual production for Central Appalachia and the
Illinois Basin.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Central Appalachian pricing environment</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<IMG src="y07947y0794705.gif" alt="(LINE GRAPH)">
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 15%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<I>Source: EIA, Bloomberg</I>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 69</B>
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<B>The coal industry</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Illinois Basin Pricing Environment</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<IMG src="y07947y0794706.gif" alt="(LINE GRAPH)">
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 15%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<I>Source: EIA, Bloomberg</I>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 70</B>
</DIV>

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<DIV align="left" style="font-size: 9pt;">

</DIV>

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<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

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<A name='114'></A>
</DIV>

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Business
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>OVERVIEW</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We are a leading producer of coal in Northern and Central
Appalachia with a broad range of mid to high Btu, low sulfur
steam and metallurgical coal. Our Appalachian mining complexes,
which include 11 of our mining complexes, are located in West
Virginia, Kentucky and Maryland. We also have a complementary
mining complex of mid to high sulfur steam coal strategically
located in the Illinois Basin. We market our coal to a diverse
customer base of largely investment grade electric utilities, as
well as domestic and international industrial customers. The
high quality of our coal and the availability of multiple
transportation options, including rail, truck and barge,
throughout the Appalachian region enable us to participate in
both the domestic and international coal markets. Due to the
decline in Appalachian coal production in recent years, these
markets are currently characterized by strong demand with
limited supply response and elevated spot and contract prices.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The company was formed by WLR and other investors in May 2004 to
acquire and operate competitive coal mining facilities. Through
the acquisition of certain key assets from the bankruptcy estate
of Horizon the WLR investor group was able to acquire high
quality reserves strategically located in Appalachia and the
Illinois Basin that are union free, have limited reclamation
liabilities and are substantially free of other legacy
liabilities. Due to our initial capitalization, we were able to
complete the acquisition without incurring a significant level
of indebtedness. Following this offering, we expect to retire
substantially all of our long term debt and will be
strategically well-positioned. Consistent with the WLR investor
group&#146;s strategy to consolidate profitable coal assets, the
Anker acquisition further diversifies our reserves.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
As of January&nbsp;1, 2005, we owned or controlled approximately
315&nbsp;million tons of metallurgical quality coal reserves and
approximately 572&nbsp;million tons of steam coal reserves.
Based on expected 2005 production rates, our Northern and
Central Appalachian reserves could support existing production
levels for approximately 35&nbsp;years and all of our reserves
could support existing production levels for approximately
49&nbsp;years. Further, we own or control approximately
707&nbsp;million tons of coal resources.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Steam coal is primarily consumed by large electric utilities and
industrial customers as fuel for electricity generation. Demand
for low sulfur steam coal has grown significantly since the
introduction of certain controls associated with the Clean Air
Act and the decline in coal production in the eastern half of
the United States. Metallurgical coal is primarily used to
produce coke, a key raw material used in the steel making
process. Generally, metallurgical coal sells at a premium to
steam coal because of its higher quality and its importance and
value in the steel making process. During 2004 and the first
quarter of 2005, the demand for metallurgical coal increased
substantially as the global demand for steel increased.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
For the year ended December&nbsp;31, 2004, we sold
18.4&nbsp;million tons of coal, of which 18.2&nbsp;million tons
were steam coal and 0.2&nbsp;million tons were metallurgical
coal. Our steam coal sales volume in 2004 consisted of mid to
high quality, high Btu (greater than 12,000&nbsp;Btu/lb.), low
sulfur (1.5% or less) coal, which typically sells at a premium
to lower quality, lower Btu, higher sulfur steam coal. We
generated total pro forma revenues of $673.8&nbsp;million and
$84.2&nbsp;million of pro forma EBITDA for the year ended
December&nbsp;31, 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>OUR HISTORY</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>The Horizon acquisition</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
On February&nbsp;28, 2002, Horizon (at that time operating as
AEI Resources Holdings, Inc.) filed a voluntary petition for
Chapter&nbsp;11 and its plan of reorganization became effective
on May&nbsp;8, 2002. However, Horizon&#146;s profit margins and
cash flows were negatively impacted in fiscal year 2002 by,
</DIV>

<DIV align="left" style="font-size: 3pt;">
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</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 71</B>
</DIV>
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<DIV align="left" style="font-size: 10pt;">
<B>Business</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
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</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
among other things, the falling price of coal and continued
increases in certain operating expenses. Due to capital and
permit constraints, Horizon had to mine in areas which produced
coal but at greatly reduced profit margins thus severely
reducing cash flow.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
As a result of its continuing financial and operational
difficulties, Horizon filed a second voluntary petition for
relief under Chapter&nbsp;11 on November&nbsp;13, 2002. Horizon
obtained a debtor-in-possession financing facility of up to
$350.0&nbsp;million and was effective in rationalizing its
operations, selling non-core assets, paying down outstanding
borrowings and generating substantial operating profit. With
stabilized operations and a significantly improved coal market,
Horizon filed a joint plan of reorganization and a joint plan of
liquidation under Chapter&nbsp;11.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The Horizon assets were sold to us through a public auction on
August&nbsp;17, 2004. Presented as a combined
$290.0&nbsp;million cash bid with A.T. Massey, ICG, Inc. agreed
to pay $285.0&nbsp;million in cash plus the assumption of up to
$5.0&nbsp;million in cure costs to acquire the assets plus ICG,
Inc. also contributed a credit bid of $482.0&nbsp;million in
second lien Horizon bonds, and A.T. Massey agreed to pay
$5.0&nbsp;million in cash to acquire a separate group of assets
associated with two Horizon subsidiaries. In addition, Lexington
Coal Company, LLC, a newly formed entity, was organized by the
founding ICG, Inc. stockholders to assume certain reclamation
liabilities and assets not otherwise being purchased by A.T.
Massey or ICG, Inc. In order to provide support to Lexington
Coal, we agreed to provide a $10.0&nbsp;million letter of credit
to support reclamation obligations and to pay a 0.75% royalty on
the gross sales receipts for coal mined and sold from the assets
we acquired from Horizon until the completion by Lexington Coal
of all reclamation liabilities acquired from Horizon. The
bankruptcy court confirmed the sale on September&nbsp;16, 2004
as part of the completion of the Horizon bankruptcy proceedings.
At closing, we increased the purchase price by
$6.25&nbsp;million, primarily to satisfy increased
administrative expenses, and the sale was completed as of
September&nbsp;30, 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The acquisition was financed through equity investments and
borrowings under our senior secured credit facility, which we
entered into at the closing of the Horizon acquisition. See
&#147;Description of indebtedness&#148; for a discussion of our
senior credit facility. We expect to repay a portion of the term
loan facility with the proceeds of this offering.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>The Anker acquisition</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
On March&nbsp;31, 2005, ICG, Inc. entered into a business
combination agreement with Anker Coal Group, Inc., International
Coal Group, Inc. (formerly known as ICG Holdco, Inc.), a wholly
owned subsidiary of ICG, Inc., ICG Merger Sub, Inc., an indirect
wholly owned subsidiary of ICG, and Anker Merger Sub, Inc., an
indirect wholly owned subsidiary of ICG. Under the terms of the
business combination agreement, simultaneously with the
effective time of the mergers under the CoalQuest business
combination agreement, ICG Merger Sub will merge with and into
ICG, Inc. and Anker Merger Sub will merge with and into Anker,
with each of ICG, Inc. and, Anker surviving their respective
mergers as indirect wholly owned subsidiaries of ICG and ICG
will be the new parent holding company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In the reorganization, the stockholders of ICG, Inc. are
expected to receive one&nbsp;share of ICG common stock for each
share of ICG, Inc. common stock. The shares of our common stock
being issued to the ICG, Inc. stockholders are expected to be
registered pursuant to a separate registration statement to be
filed with the SEC. The stockholders of Anker, collectively, are
entitled to receive the lesser of
(i)&nbsp;19,498,581&nbsp;shares of ICG common stock and
(ii)&nbsp;the number of shares of ICG common stock equal to the
quotient of 173,250,000 divided by the price per share at which
our stock is offered in this offering (the &#147;base merger
share number&#148;), subject to the following possible
adjustments. If certain events relating to the commencement of
specified coal production and the execution of a coal purchase
contract do not occur prior to the effectiveness of the merger,
ICG will only issue shares equal to the lesser of
(i)&nbsp;18,373,122&nbsp;shares of ICG common stock and
(ii)&nbsp;the number of shares of ICG common stock equal to the
quotient of 163,250,000 divided by the price per share at which
our common stock
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<B>Business</B>
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is offered in this offering (the &#147;adjusted merger share
number&#148;) at the effective time of the merger and will
reserve but not issue the number of shares equal to the
difference between the adjusted merger share number and base
merger share number (this difference, the &#147;contingent
shares&#148;). These contingent shares are only issuable to the
former stockholders of Anker if one of the specified release
events occurs before the completion of this offering.
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On March&nbsp;31, 2005, ICG, Inc. also entered into a business
combination agreement with CoalQuest, ICG and CoalQuest Merger
Sub LLC, an indirect wholly owned subsidiary of ICG, and the
members of CoalQuest. Under the terms of the business
combination agreement, simultaneously with the effective time of
the mergers under the Anker business combination agreement. The
members of CoalQuest will contribute their interests in
CoalQuest to us in exchange for shares of our common stock. As a
result of this contribution, CoalQuest will become our wholly
owned subsidiary.
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The members of CoalQuest, collectively, will receive the lesser
of (i)&nbsp;11,451,548&nbsp;shares of ICG common stock and
(ii)&nbsp;the number of shares of common stock equal to the
quotient of 101,750,000 divided by the price per share at which
our common stock is offered in this offering.
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The former stockholders of Anker and former members of CoalQuest
will be granted certain piggyback registration rights with
respect to the ICG common stock issued to them.
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The completion of both transactions is subject to various
conditions, all of which have been fulfilled other than the
approval by the ICG, Inc. stockholders of the reorganization. In
addition, the completion of the transactions under each business
combination agreement is conditioned upon the satisfaction of
the conditions precedent of the transactions under the other
business combination agreement.
</DIV>

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<B>OUR COMPETITIVE STRENGTHS</B>
</DIV>

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We believe that the following competitive strengths enhance our
prominent market position in the United States:
</DIV>

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<B><I>Ability to provide variety of high-quality steam and
metallurgical coal.</I></B> Our customers, which include largely
investment grade electric utilities, as well as domestic and
international industrial customers, demand a variety of coal
products. Our variety of coal qualities also allows us to blend
coal in order to meet the exact specifications of our customers.
Our access to a comprehensive range of high Btu steam and
metallurgical quality coal allows us to market differentiated
coal products to a variety of customers with different coal
quality demands, which allows us to benefit from particularly
strong pricing dynamics in the current metallurgical coal market.
</DIV>

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<B><I>Concentration in highly valued Central Appalachian
region.</I></B> Our operations are primarily located in Central
Appalachia, a region known for its high quality coal
characterized by low sulfur and high Btu content. Production
from Central Appalachian mines accounted for approximately 73.2%
of our 2004 coal sales volume. Increased electricity generation
and steel production both domestically and internationally has
lead to a substantial increase in demand and a significantly
improved pricing environment. In addition to general market
factors creating a favorable environment, the Central
Appalachian region has experienced production declines in five
out of the last six years, primarily due to difficult mining
conditions, yet demand continues to increase. We believe that
generally favorable market dynamics and trends in Central
Appalachian coal supply and demand, the high quality of Central
Appalachian coal and the low transportation costs that result
from the relative proximity of Central Appalachian producers and
customers have created favorable pricing dynamics that provide
us with an advantage over producers from other regions.
</DIV>

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<B><I>Significant reserve base providing internal expansion
opportunities.</I></B> We own approximately 613&nbsp;million
tons of reserves and control an additional 274&nbsp;million tons
of reserves through long-term leases. We own or control an
additional 707&nbsp;million tons of coal resources. We have not
yet developed approximately 73% of these owned and controlled
reserves. We believe these owned and controlled
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<B> 73</B>
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<B>Business</B>
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but as yet undeveloped reserves and resources would allow us to
as much as double our existing production levels over the next
several years. Our ownership and control of such a substantial
portion of undeveloped reserves in both Northern and Central
Appalachia and the Illinois Basin provides us with significant
internal growth opportunities, this is in contrast to other
U.S.&nbsp;coal producers who must acquire or lease new reserves
to enable their growth. We also have coalbed methane reserves in
our owned reserves in West Virginia, which provides us with
additional growth opportunities in this complementary energy
market.
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<B><I>Ability to capitalize on strong coal market
dynamics.</I></B> A significant portion of our coal supply
contracts were renegotiated during the second half of 2004 in
connection with Horizon&#146;s bankruptcy and were re-priced at
that time to then-current (and more favorable) market prices and
terms. On average, our coal supply contracts have a life of
approximately five years, however, the majority of our contracts
contain annual price reopeners. Our marketing effort is focused
on maintaining a balance of longer-term contracts and spot
sales. We typically have 50% of our production contracted by the
early part of the previous year with another 35% contracted by
the second half of the year with the remainder of our production
used to take advantage of market dynamics and maximize value in
the spot market.
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<B><I>Diversity of reserves, resources and production.</I></B>
Our reserves, resources and production are located in three of
the four major coal regions in the United States. Our
production, reserves and resources in Northern and Central
Appalachia and the Illinois Basin provide important geographical
diversity in terms of markets, transportation and labor. The
diversity of our operations and reserves provides us with a
significant competitive advantage, allowing us to source coal
from multiple operations to meet the needs of our customers and
reduce transportation costs.
</DIV>

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<B><I>Minimal level of long-term liabilities.</I></B> We believe
that compared to other publicly-traded U.S.&nbsp;coal producers
we have among the lowest legacy reclamation liabilities and
post-retirement employee obligations. As of December&nbsp;31,
2004, we had total accrued reclamation liabilities of only
$68.7&nbsp;million, post-retirement employee obligations of only
$8.0&nbsp;million, &#147;black lung&#148; liabilities of
approximately $10.0&nbsp;million and Coal Act liabilities of
only $4.8&nbsp;million. We maintain a comprehensive mine
reclamation plan which we believe ensures that all of our mining
operations are current on reclamation requirements. In addition,
our entire workforce is union free, which minimizes
employee-related liabilities commonly associated with
union-represented mines. As of December&nbsp;31, 2004, our pro
forma total long-term debt was $180.4&nbsp;million and after
this offering we expect to retire substantially all of this
long-term debt. We believe that our financial leverage is among
the lowest of the publicly traded U.S.&nbsp;coal producers. We
believe this low leverage will afford significant financial and
operational flexibility.
</DIV>

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<B><I>Highly skilled management team.</I></B> The members of our
senior management team have, on average, 23&nbsp;years of
industry work experience across a variety of mining methods,
including longwall mining. We have substantial Appalachian
mining experience in increasing productivity, reducing costs,
enhancing work safety practices, and maintaining strong customer
relationships. In addition, the majority of our senior
management team has extensive mine development and expansion
experience.
</DIV>

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<B><I>Recognized leadership in safety and environmental
stewardship.</I></B> The injury incident rates at our mines
throughout 2004, according to MSHA, were below industry
averages. We have been recognized by safety and environmental
agencies with several prestigious awards for our safety and
environmental record, such as the &#147;Sentinels of Safety
Award&#148; from MSHA, The Department of Interior
&#147;Excellence in Surface Coal Mining and Reclamation
Award&#148; and a reclamation award for innovative methods from
the West Virginia Coal Association. Our focus on safety and
environmental performance results in the reduced likelihood of
disruption of production at our mines, which leads to higher
productivity and improved financial performance.
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<B> 74</B>
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<B>Business</B>
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<B>OUR BUSINESS STRATEGY</B>
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Our objective is to increase stockholder value through sustained
earnings and cash flow growth. Our key strategies to achieve
this objective are described below:
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<B><I>Maximize profitability through highly efficient and
productive mining operations.</I></B> We are continuing to
evaluate and assess our current operations in order to maximize
operating efficiency and returns on invested capital. We are
focused on maintaining low-cost, highly productive operations by
continuing to invest substantial capital in state-of-the-art
equipment and advanced technologies. We expect to internally
fund approximately $264&nbsp;million of capital expenditures in
the next two years. As we take advantage of planned expansion
opportunities from 2007 through 2009, we expect to spend
approximately $572&nbsp;million on capital expenditures, which
may require external financing. We have developed and cultivated
a productivity-focused culture through incentive programs that
encourage employees to work efficiently, safely and
productively. We intend to further leverage the scale of our
purchasing power to obtain favorable pricing from suppliers of
raw materials in addition to developing reserves and utilizing
mining techniques, such as longwall mining and dragline
operation, to enhance and streamline our operations.
</DIV>

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<B><I>Leverage owned and controlled reserve base to generate
substantial internal growth.</I></B> We own a large undeveloped
reserve in Northern Appalachia containing approximately
194&nbsp;million tons of high Btu, low sulfur steam and
metallurgical quality coal. We currently expect underground
longwall mining operations at this reserve to commence within
the next four years, which will increase our production level by
providing highly valued premium quality coal in an increasingly
tight supply market. In addition, we have two substantial
reserves in Central Appalachia, which contain 56.5&nbsp;million
tons of premium metallurgical coal and are expected to be
developed in the next three to six years. Further, the
substantial reserve position that we own in the Illinois Basin
is expected to allow us to benefit from the expected increase in
demand for high sulfur coal to generate electricity. We are in
the process of developing and exploiting our coalbed methane
reserves (the first such development and exploration in the
region). Finally, we intend to opportunistically acquire new
coal reserves and/or coal companies to expand our coal market
opportunities and increase shareholder value.
</DIV>

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<B><I>Capitalize on favorable industry fundamentals by
opportunistically marketing coal.</I></B> U.S.&nbsp;coal market
fundamentals are among the strongest in the last 20&nbsp;years.
We believe this generally favorable pricing environment will
persist given systemic changes in market dynamics such as
long-term supply constraints and increasing demand, particularly
in Central Appalachia and for our metallurgical coal.
Furthermore, because of the high quality of our coal, our access
to a variety of alternative transportation methods, including
truck, rail and barge, and our mix of long-term contract and
spot market sales, we will be able to capitalize on the
favorable industry dynamics to maximize our revenues and
profits. We plan to extend the life of our longer-term contract
arrangements and limit price reopeners in order to lock in
margins and enhance our financial stability, while at the same
time, we plan to maintain an uncommitted portion of planned
production to allow for additional future pricing upside
exposure. As of April&nbsp;25, 2005, we had entered into
contracts to sell approximately 88% of 2005 planned production,
approximately 66% of 2006 planned production and approximately
49% of 2007 planned production.
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<B><I>Continue to focus on improving workplace safety and
environmental compliance.</I></B> We have maintained and plan to
continue to maintain an excellent safety and environmental
performance record. We continue to implement safety measures and
environmental initiatives that are designed to promote safe
operating practices and improved environmental stewardship among
our employees. Our ability to maintain a good safety and
environmental record improves our productivity and lowers our
overall cost structure as well as bolsters employee morale.
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<B> 75</B>
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<B>Business</B>
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<B>COAL MINING METHODS</B>
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We produce coal using two mining methods: underground room and
pillar mining using continuous and longwall mining equipment,
and surface mining, which are explained as follows:
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<B>Underground mining</B>
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Underground mines in the United States are typically operated
using one of two different techniques: room and pillar mining or
longwall mining. In 2004, approximately 36% of our produced and
processed coal volume came from underground mining operations
generally using the room and pillar method with continuous
mining equipment.
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<I>Room and pillar mining</I>
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In room and pillar mining, rooms are cut into the coalbed
leaving a series of pillars, or columns of coal, to help support
the mine roof and control the flow of air. Continuous mining
equipment is used to cut the coal from the mining face.
Generally, openings are driven 20&nbsp;feet wide and the pillars
are generally rectangular in shape measuring 35-50&nbsp;feet
wide by 35-80&nbsp;feet long. As mining advances, a grid-like
pattern of entries and pillars is formed. Shuttle cars are used
to transport coal to the conveyor belt for transport to the
surface. When mining advances to the end of a panel, retreat
mining may begin. In retreat mining, as much coal as is feasible
is mined from the pillars that were created in advancing the
panel, allowing the roof to cave. When retreat mining is
completed to the mouth of the panel, the mined panel is
abandoned. The room and pillar method is often used to mine
smaller coal blocks or thinner seams. It is also employed
whenever subsidence is prohibited. Seam recovery ranges from 35%
to 70%, with higher seam recovery rates applicable where retreat
mining is combined with room and pillar mining. Productivity for
continuous room and pillar mining in the United States
averages&nbsp;3.3 tons per employee per hour, according to the
EIA.
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<I>Longwall mining</I>
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The other underground mining method commonly used in the United
States is the longwall mining method. ICG does not currently
have any longwall mining operations, but expects to use this
mining method in the development for two of its undeveloped
mining properties in West Virginia. In longwall mining, a
rotating drum is trammed mechanically across the face of coal
and a hydraulic system supports the roof of the mine while it
advances through the coal. Chain conveyors then move the
loosened coal to an underground mine conveyor system for
delivery to the surface.
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<B>Surface mining</B>
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Surface mining is used when coal is found close to the surface.
In 2004, approximately 64% of our produced and processed coal
volume came from surface mines. This method involves the removal
of overburden (earth and rock covering the coal) with heavy
earth moving equipment and explosives, loading out the coal,
replacing the overburden and topsoil after the coal has been
excavated and reestablishing vegetation and plant life and
making other improvements that have local community and
environmental benefit. Overburden is typically removed at our
mines using large, rubber-tired diesel loaders. Seam recovery
for surface mining is typically between 80% and 90%.
Productivity depends on equipment, geological composition and
mining ratios and averages 4.2&nbsp;tons per employee per hour
in eastern regions of the United States, according to the EIA.
</DIV>

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We use the following four types of surface mining methods.
</DIV>

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<B>Truck-and-shovel/loader mining</B>
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Truck-and-shovel/loader mining is a surface mining method that
uses large shovels or loaders to remove overburden which is used
to backfill pits after coal removal. Shovels or loaders load
coal into haul trucks for transportation to a preparation plant
or unit train loadout facility. Seam recovery using the
truck-and-shovel/ loader mining method is typically 85% or more.
</DIV>

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<B>Business</B>
</DIV>

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<B>Dragline mining</B>
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Dragline mining is a surface mining method that uses large
capacity draglines to remove overburden to expose the coal
seams. Shovels load coal in haul trucks for transportation to a
preparation plant or unit train loadout facility. Seam recovery
using the dragline method is typically 85% or more and
productivity levels are similar to those for
truck-and-shovel/loader mining.
</DIV>

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<B>Highwall mining</B>
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Highwall mining is a surface mining method generally utilized in
conjunction with truck-and-shovel/ loader surface mining. At the
highwall exposed by the truck-and-shovel/ loader operation a
modified continuous miner with an attached beltline system cuts
horizontal passages from the highwall into a seam. These
passages can penetrate to a depth of up to 1,600&nbsp;feet. This
method typically can recover up to 65% of the reserve block
penetrated.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Auger mining</B>
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Auger mining is a surface mining method generally utilized in
conjunction with truck-and-shovel/ loader operations. At the
highwall exposed by a truck-and-shovel/ loader operation, a
spiral steel auger bit is used to bore a horizontal hole into
the coal seam up to a depth of 400&nbsp;feet. The auger also
conveys the coal to the highwall. Seam recovery using auger
mining is typically 33%.
</DIV>

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<B>Coal preparation and blending</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Depending on coal quality and customer requirements, raw coal
may in some cases be shipped directly from the mine to the
customer. Generally, raw coal from mountaintop removal, contour
and strip mines can be shipped in this manner. However, the
quality of most underground raw coal does not allow it to be
shipped directly to the customer without processing in a
preparation plant. Preparation plants separate impurities from
coal. This processing upgrades the quality and heating value of
the coal by removing or reducing sulfur and ash-producing
materials, but entails additional expense and results in some
loss of coal. Coals of various sulfur and ash contents can be
mixed or &#147;blended&#148; at a preparation plant or loading
facility to meet the specific combustion and environmental needs
of customers. Coal blending helps increase profitability by
reducing the cost of meeting the quality requirements of
specific customer contracts, thereby optimizing contract revenue.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>COAL CHARACTERISTICS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In general, coal of all geological composition is characterized
by end use as either steam coal or metallurgical coal. Heat
value and sulfur content are the most important variables in the
profitable marketing and transportation of steam coal, while
ash, sulfur and various coking characteristics are important
variables in the profitable marketing and transportation of
metallurgical coal. We mine, process, market and transport
bituminous and sub-bituminous coal, characteristics of which are
described below.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Heat value</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The heat value of coal is commonly measured in Btus per pound of
coal. A Btu is the amount of heat needed to raise one pound of
water one degree Fahrenheit. Coal found in the Eastern and
Midwestern regions of the United States tends to have a heat
content ranging from 10,000 to 14,000&nbsp;Btus per pound, as
received. As received Btus per pound includes the weight of
moisture in the coal on an as sold basis. Most coal found in the
Western United States ranges from 8,000 to 10,000&nbsp;Btus per
pound, as received.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Lignite coal</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Lignite coal is a brownish-black coal with a heat content that
generally ranges from 4,000 to 8,000&nbsp;Btus per pound. Major
lignite operations are located in Louisiana, Montana, North
Dakota and Texas. Lignite is used almost exclusively in power
plants located adjacent to or near these mines
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 77</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Business</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
because any significant transportation costs, coupled with
mining costs, would render its use uneconomical.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Sub-bituminous coal</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Sub-bituminous coal is a black coal with a heat content that
ranges from 8,300 to 11,500&nbsp;Btus per pound. Most
sub-bituminous reserves are located in Alaska, Colorado,
Montana, New Mexico, Washington and Wyoming. Sub-bituminous coal
is used almost exclusively by electricity generators and some
industrial consumers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Bituminous coal</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Bituminous coal is a relatively soft black coal with a heat
content that ranges from 10,000 to 14,000&nbsp;Btus per pound.
This coal is located primarily in Appalachia, Arizona, Colorado,
the Midwest and Utah, and is the type most commonly used for
electricity generation in the United States. Bituminous coal is
also used for industrial steam purposes by utility and
industrial customers, and as metallurgical coal in steel
production. Coal used in metallurgical processes has higher
expansion/contraction characteristics than steam coal.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Anthracite coal</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Anthracite coal is a hard coal with a heat content that can
range from 14,000 to 15,000&nbsp;Btus per pound. There is a
limited number of anthracite deposits primarily located in the
Appalachian region of Pennsylvania. Anthracite is used primarily
for utility, industrial and home heating purposes.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Sulfur content</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Sulfur content can vary from seam to seam and sometimes within
each seam. When coal is burned, it produces sulfur dioxide, the
amount of which varies depending on the chemical composition and
the concentration of sulfur in the coal. Compliance coal is coal
which, when burned, emits 1.2&nbsp;pounds or less of sulfur
dioxide per million Btus and complies with the requirements of
the Clean Air Act Acid Rain program. Low sulfur coal is coal
which, when burned, emits approximately 1.6&nbsp;pounds or less
of sulfur dioxide per million Btus.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Sub-bituminous coal typically has a lower sulfur content than
bituminous coal, but some of our bituminous coal in West
Virginia also has a low sulfur content.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
High sulfur coal can be burned in electric utility plants
equipped with sulfur-reduction technology, such as scrubbers,
which can reduce sulfur dioxide emissions by up to 90%. Plants
without scrubbers can burn high sulfur coal by blending it with
lower sulfur coal, or by purchasing emission allowances on the
open market, which credits allow the user to emit a ton of
sulfur dioxide. Each emission allowance permits the user to emit
a ton of sulfur dioxide. By 2000, 90,000 megawatts of electric
generation capacity utilized scrubbing technologies. According
to the EIA, by 2025, an additional 27,000 megawatts of electric
generation capacity will have installed scrubbers. Additional
scrubbing will provide new market opportunities for our mid
sulfur coal. All new coal-fired electric utility generation
plants built in the United States will use clean coal-burning
technology.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Other characteristics</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Ash is the inorganic residue remaining after the combustion of
coal. As with sulfur content, ash content varies from coal seam
to coal seam. Ash content is an important characteristic of coal
because it increases transportation costs and electric
generating plants must handle and dispose of ash following
combustion.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Moisture content of coal varies by the type of coal, the region
where it is mined and the location of coal within a seam. In
general, high moisture content decreases the heat value per
pound of coal, thereby increasing the delivered cost per Btu.
Moisture content in coal, as sold, can range from approximately
5% to 30% of the coal&#146;s weight.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 78</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Business</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>COAL RESERVES</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
&#147;Reserves&#148; are defined by SEC Industry Guide 7 as that
part of a mineral deposit which could be economically and
legally extracted or produced at the time of the reserve
determination. &#147;Proven (Measured) Reserves&#148; are
defined by SEC Industry Guide 7 as reserves for which
(1)&nbsp;quantity is computed from dimensions revealed in
outcrops, trenches, workings or drill holes; grade and/or
quality are computed from the results of detailed sampling and
(2)&nbsp;the sites for inspection, sampling and measurement are
spaced so closely and the geologic character is so well defined
that size, shape, depth and mineral content of reserves are
well-established. &#147;Probable reserves&#148; are defined by
SEC Industry Guide 7 as reserves for which quantity and grade
and/or quality are computed from information similar to that
used for proven (measured)&nbsp;reserves, but the sites for
inspection, sampling, and measurement are farther apart or are
otherwise less adequately spaced. The degree of assurance,
although lower than that for proven (measured)&nbsp;reserves, is
high enough to assume continuity between points of observation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We estimate that there are approximately 242&nbsp;million tons
of coal reserves that can be developed by our existing
operations which will allow us to maintain current production
levels for an extended period of time. ICG Natural Resources,
LLC and CoalQuest own and lease all of our reserves that are not
currently assigned to or associated with one of our mining
operations. These reserves contain approximately
645&nbsp;million tons of mid to high Btu, low and high sulfur
coal located in Kentucky, West Virginia, Maryland, Illinois,
Pennsylvania and Virginia. Our multi-region base and flexible
product line allows us to adjust to changing market conditions
and sustain high sales volume by supplying a wide range of
customers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our total coal reserves could support current production levels
for more than 49&nbsp;years. The following table provides the
&#147;quality&#148; (average Btu content, sulfur content and ash
content per pound) of our coal reserves as of January&nbsp;1,
2005:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 6pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
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    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
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    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>


<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="9" align="center" nowrap><B>Quality characteristics</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="9" align="center" nowrap><B>(as received)</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Recoverable</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="9" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>reserves proven</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Total tons</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="9">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>and probable</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>(in millions</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="9">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Tons by market</B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>as of 1/1/2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>of tons)</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Reserve</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Heat</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>classification</B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(in millions</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>life</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>content</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Sulfur</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Ash</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="2" align="center" nowrap><B>Mining companies</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>State</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>of tons)<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Owned</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Leased</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(years)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(Btu/lb)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(%)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>(%)</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Steam</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Metallurgical<SUP style="font-size: 85%; vertical-align: text-top">(4)(5)</SUP></B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="33" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <I>Northern Appalachia:</I></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Vindex Energy Corporation</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    MD</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10.64</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">
    0.00</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">
    10.64</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>14.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="right" valign="top">11,500-<BR>13,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top" nowrap>1.2%-<BR>2.0%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">
    7.0%- 19.0%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7.98</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2.66</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Patriot Mining Company</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    WV, PA</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>1.05</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">
    0.71</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">
    0.34</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>1.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>11,700</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>2.1%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">
    16.2%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.05</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.00</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Spruce Fork Division</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    WV</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>48.57</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">
    46.70</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">
    1.88</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>19.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>13,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>1.2%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">
    9.0%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.30</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>47.27</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Philippi Development Division</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    WV</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>40.97</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">
    32.34</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">
    8.63</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>20.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>13,100</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>1.4%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">
    8.3%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>40.97</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Harrison Division</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    WV</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>17.51</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">
    0.23</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">
    17.28</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>9.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>12,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>3.2%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">
    12.5%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17.51</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.00</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mount Storm Division</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    WV, MD</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>6.01</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">
    0.47</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">
    5.54</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>13,200</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>1.0%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">
    9.0%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.01</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Sycamore Group, LLC</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    WV</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>1.21</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">
    0.17</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">
    1.04</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>2.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>12,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>3.2%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">
    12.0%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.21</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.00</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    CoalQuest Development LLC</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    WV</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>194.30</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">
    194.30</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">
    0.00</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>21.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>13,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>1.3%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">
    9.8%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>32.70</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>161.60</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="34">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Northern Appalachia Total</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>320.27</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">
    274.92</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">
    45.35</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>61.75</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>258.52</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <I>Central Appalachia:</I></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    ICG - Knott Country</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    KY</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>6.73</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">
    5.81</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">
    0.92</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>5.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>12,700</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>1.3%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">
    8.4%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.73</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.00</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    ICG - Hazard</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    KY</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>71.38</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">
    0.23</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">
    71.15</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>11.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>12,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>1.6%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">
    11.2%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>71.38</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.00</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    ICG - East Kentucky</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    KY</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>2.62</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">
    0.00</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">
    2.62</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>2.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>12,400</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>1.2%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">
    12.2%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2.62</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.00</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    ICG - Eastern</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    WV</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>23.69</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">
    7.27</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">
    16.42</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>7.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>12,300</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>1.1%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">
    12.2%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>23.69</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.00</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    ICG - Natural
    Resources<SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    WV</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>44.90</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">
    2.20</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">
    42.70</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>NA</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>12,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>0.8%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">
    12.2%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>44.90</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.00</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    ICG - Natural
    Resources<SUP style="font-size: 85%; vertical-align: text-top">(3)</SUP></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    KY</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>4.40</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">
    0.00</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">
    4.40</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>NA</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>12,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>1.1%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">
    12.0%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4.40</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.00</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Beckley-Smokeless
    Division<SUP style="font-size: 85%; vertical-align: text-top">(4)</SUP></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    WV</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>28.97</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">
    1.28</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">
    27.70</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>29.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>13,800</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>0.7%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">
    4.8%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>28.97</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Anker Virginia Mining Company</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    VA</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>27.50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">
    0.00</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">
    27.50</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>27.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>14,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>0.6%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">
    4.0%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>27.50</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="34">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Central Appalachia Total</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>210.19</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">
    16.79</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">
    193.71</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>153.72</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>56.47</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <I>Illinois Basin:</I></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    ICG - Illinois</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    IL</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>29.63</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">
    11.38</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">
    18.25</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>12.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>3.2%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">
    9.5%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>29.63</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.00</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    ICG - Natural Resources</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    IL</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>326.71</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">
    309.42</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">
    17.29</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>NA</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>11,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>3.0%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">
    9.0%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>326.71</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.00</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="34">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Illinois Basin Total</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>356.34</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">
    320.80</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">
    35.64</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>356.34</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.00</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="34">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Total Reserves</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>886.81</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">
    612.51</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">
    274.3</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>571.81</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>314.99</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="34" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 79</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Business</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 9pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><I>(1)</I></TD>
    <TD align="left">
    <I>Recoverable reserves represent the amount of coal reserves
    that can actually be recovered taking into account all mining
    and preparation losses involved in producing a saleable product
    using existing methods under current law. The reserve numbers
    set forth in this table exclude reserves for which we have
    leased our mining rights to third parties. Reserve information
    reflects a moisture factor of approximately 6.0%. This moisture
    factor represents the average moisture present on our delivered
    coal.</I></TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><I>(2)</I></TD>
    <TD align="left">
    <I>ICG - Natural Resources (Jenny&#146;s Creek)</I></TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><I>(3)</I></TD>
    <TD align="left">
    <I>ICG - Natural Resources (Mount Sterling)</I></TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><I>(4)</I></TD>
    <TD align="left">
    <I>Beckley Smokeless and Anker Virginia meet historical
    metallurgical coal quality specifications.</I></TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><I>(5)</I></TD>
    <TD align="left">
    <I>Currently, ICG reports selling coal with ash and sulfur
    contents as high as 10% and 1.5%, respectively into the current
    metallurgical market from the Vindex Energy, Spruce Fork, and
    Phillipi Divisions. Similarly, all production Mount Storm and
    portions of Hillman could be sold on this metallurgical market
    when production begins.</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our reserve estimate is based on geological data assembled and
analyzed by our staff of geologists and engineers. Reserve
estimates are periodically updated to reflect past coal
production, new drilling information and other geologic or
mining data. Acquisitions or sales of coal properties will also
change the reserve base. Changes in mining methods may increase
or decrease the recovery basis for a coal seam as will plant
processing efficiency tests. We maintain reserve information in
secure computerized databases, as well as in hard copy. The
ability to update and/or modify the reserve base is restricted
to a few individuals and the modifications are documented.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Actual reserves may vary substantially from the estimates.
Estimated minimum recoverable reserves are comprised of coal
that is considered to be merchantable and economically
recoverable by using mining practices and techniques prevalent
in the coal industry at the time of the reserve study, based
upon then-current prevailing market prices for coal. We use the
mining method that we believe will be most profitable with
respect to particular reserves. We believe the volume of our
current reserves exceeds the volume of our contractual delivery
requirements. Although the reserves shown in the table above
include a variety of qualities of coal, we presently blend coal
of different qualities to meet contract specifications. See
&#147;Risk factors&#151;Risks relating to our business.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Periodically, we retain outside experts to independently verify
our coal reserve base. The most recent review was completed
during the first quarter of 2005 and covered all of our
reserves. The results verified our reserve estimates, with very
minor adjustments, and included an in-depth review of our
procedures and controls. As of January&nbsp;1, 2005, Marshall
Miller&nbsp;&#38; Associates, Inc. confirmed our reserve base of
887&nbsp;million tons on a consolidated basis.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We currently own approximately 69% of our coal reserves, with
the remainder of our coal reserves subject to leases from
third-party landowners. Generally, these leases convey mining
rights to the coal producer in exchange for a percentage of
gross sales in the form of a royalty payment to the lessor,
subject to minimum payments. Leases generally last for the
economic life of the reserves. The average royalties paid by us
for coal reserves from our producing properties was $1.57 per
ton in 2004, representing approximately 3.8% of our coal sales
revenue in 2004. Consistent with industry practice, we conduct
only limited investigations of title to our coal properties
prior to leasing. Title to lands and reserves of the lessors or
grantors and the boundaries of our leased priorities are not
completely verified until we prepare to mine those reserves.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 80</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Business</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Coal Resources</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Coal resources are coal-bearing bodies that have been
sufficiently sampled and analyzed in trenches, outcrops,
drilling, and underground workings to assume continuity between
sample points, and therefore warrants further exploration stage
work. However, this coal does not qualify as a commercially
viable coal reserve as prescribed by SEC standards until a final
comprehensive evaluation based on unit cost per ton,
recoverability, and other material factors concludes legal and
economic feasibility. Resources may be classified as such by
either limited property control or geologic limitations, or both.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The following table provides the &#147;quality&#148; (average
Btu content, sulfur content and ash content per pound) of our
coal resources as of January&nbsp;1, 2005:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="23%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>


<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="9" align="center" nowrap><B>Quality characteristics</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="9" align="center" nowrap><B>(as received)</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="9" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Recoverable</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="9">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap><B>Tons by market</B></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>resources</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Resource</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Heat</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap><B>classification</B></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>as of 1/1/2005</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>life</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>content</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Sulfur</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Ash</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="2" align="left" nowrap><B>Mining company</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>State</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>(in millions of tons)<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>(years)</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>(Btu/lb)</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>(%)</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>(%)</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Steam</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Metallurgical<SUP style="font-size: 85%; vertical-align: text-top">(4)</SUP></B></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="30" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <I>Northern Appalachia:</I></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Patriot Mining Company</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">
    WV, PA</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.89</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.89</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.00</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Spruce Fork Division</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">
    WV</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2.42</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">
    13,000</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.2</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9.0</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2.42</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.00</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Philippi Development Division</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">
    WV</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2.40</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">
    13,100</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.4</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8.3</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2.40</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.00</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Harrison Division</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">
    WV</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.28</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">
    12,500</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3.2</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12.5</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.28</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.00</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    CoalQuest Development LLC</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">
    WV</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>37.04</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>37.04</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.00</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Upshur Property</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">
    WV</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>92.96</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>46.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">
    8,000</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2.0</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>43.0</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>92.96</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.00</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="30">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Northern Appalachia Total</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>137.99</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>137.99</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.00</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <I>Central Appalachia:</I></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    ICG&nbsp;&#150; Knott County</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">
    KY</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">
    12,700</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.3</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8.4</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.00</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    ICG&nbsp;&#150; Hazard</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">
    KY</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">
    12,000</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.6</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11.2</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.00</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    ICG&nbsp;&#150; East Kentucky</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">
    KY</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">
    12,400</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.2</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12.2</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.00</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    ICG&nbsp;&#150; Eastern</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">
    WV</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.02</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">
    12,300</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.1</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12.2</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.02</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.00</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    ICG&nbsp;&#150; Natural
    Resources<SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">
    WV</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.22</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">
    12,000</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.8</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12.2</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.22</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.00</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    ICG&nbsp;&#150; Natural
    Resources<SUP style="font-size: 85%; vertical-align: text-top">(3)</SUP></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">
    KY</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.01</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">
    12,000</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.1</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12.0</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.01</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.00</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Beckley&nbsp;&#150; Smokeless
    Division<SUP style="font-size: 85%; vertical-align: text-top">(4)</SUP></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">
    WV</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.88</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">
    13,800</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.7</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4.8</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.88</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Anker Virginia Mining Company</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">
    VA</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2.57</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">
    13,500</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.6</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7.4</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2.57</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.00</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="30">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Central Appalachia Total</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7.70</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5.82</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.88</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <I>Illinois Basin</I></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    ICG&nbsp;&#150; Illinois</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">
    IL</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>38.47</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">
    10,500</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3.2</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9.5</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>38.47</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.00</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    ICG&nbsp;&#150; Natural Resources</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">
    IL</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>522.52</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">
    11,000</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3.0</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9.0</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>522.52</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.00</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="30">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Illinois Basin Total</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>560.99</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>560.99</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.00</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Total Resources</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>706.68</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>704.80</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.88</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="30" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><I>(1)&nbsp;</I></TD>
    <TD align="left">
    <I>Currently, ICG reports selling coal with ash and sulfur
    contents as high as 10% and 1.5%, respectively into the current
    metallurgical market from the Vindex Energy, Spruce Fork, and
    Philippi Divisions. Similarly, all of Mount Storm and portions
    of Hillman can be sold on this metallurgical market.</I></TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><I>(2)&nbsp;</I></TD>
    <TD align="left">
    <I>ICG&nbsp;&#150; Natural Resources (Jenny&#146;s Creek)</I></TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><I>(3)&nbsp;</I></TD>
    <TD align="left">
    <I>ICG&nbsp;&#150; Natural Resources (Mount Sterling)</I></TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><I>(4)&nbsp;</I></TD>
    <TD align="left">
    <I>Beckley Smokeless and Anker Virginia meet historical
    metallurgical coal quality specifications.</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 81</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Business</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>OPERATIONS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
As of December&nbsp;31, 2004, we operated a total of 13 surface
and 10 underground coal mines located in Kentucky, Maryland,
West Virginia and Illinois. Historically, approximately 36% of
our production has come from surface mines, and the remaining
production has come from our underground mines. These mining
facilities include 8 preparations plants, each of which receive,
blend, process and ship coal that is produced from one or more
of our 23 active mines. Our underground mines generally consist
of one or more single or dual continuous miner sections which
are made up of the continuous miner, shuttle cars, roof bolters
and various ancillary equipment. Our surface mines are a
combination of mountain top removal, dragline, highwall contour
and cross ridge operations using truck/loader equipment fleets
along with large production tractors. Most of our preparation
plants are modern heavy media plants that generally have both
coarse and fine coal cleaning circuits. We currently own most of
the equipment utilized in our mining operations. We employ
preventive maintenance and rebuild programs to ensure that our
equipment is modern and well maintained. The mobile equipment
utilized at our mining operation is scheduled to be replaced on
an on-going basis with new, more efficient units during the next
five years. Each year we endeavor to replace the oldest units,
thereby maintaining productivity while minimizing capital
expenditures. The following table provides summary information
regarding our principal mining complexes as of December&nbsp;31,
2004.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 3pt; ">

<TR style="font-size: 1pt;">
    <TD width="24%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>


<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="center" nowrap><B>Number and</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="center" nowrap><B>type of mines</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Tons</B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Preparation</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Under-</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Mining</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>produced</B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD align="left" nowrap><B>Mining complex</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" nowrap><B>Location</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>plant(s)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>ground</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Surface</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Total</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>method<SUP style="font-size: 85%; vertical-align: text-top">(a)</SUP></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD align="right" nowrap><B>Transportation</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>in 2004</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="29" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="25">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>(in thousands)</B></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    ICG Eastern, LLC</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Cowen, WV</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>MTR-DL-TSL</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <BR>
    Rail</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>2,712.1</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    ICG Hazard, LLC</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Hazard, KY</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>1</TD>
    <TD align="left" valign="top" nowrap><SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" nowrap>R&#38;P-CM, HW</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <BR>
    Rail</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>3,978.0</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    ICG Knott County, LLC</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Kite, KY</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" nowrap>MTR-TSL CM</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <BR>
    Rail</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>1,386.6</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    ICG East Kentucky, LLC</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Pike Co., KY</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>MTR-TSL</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <BR>
    Rail</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>1,576.3</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    ICG Illinois, LLC</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Williamsville, IL</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>R&#38;P-CM</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <BR>
    Truck</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>2,117.6</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Vindex Energy Corporation</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Garrett Co., MD</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top" nowrap><BR>CRM&nbsp;&#38; CTR</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <BR>
    Truck, Rail
    <SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>170.7</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Patriot Mining Company</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Monongalia Co., WV</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>CTR</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <BR>
    Barge, Rail</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>921.3</TD>
    <TD align="left" valign="top" nowrap><SUP style="font-size: 85%; vertical-align: text-top">(3)</SUP></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Spruce Fork Division</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Upshur Co., WV</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>R&#38;P</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <BR>
    Rail</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>1,213.9</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Philippi Development Division</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Barbour Co., WV</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>1</TD>
    <TD align="left" valign="top" nowrap><SUP style="font-size: 85%; vertical-align: text-top">(4)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>R&#38;P</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <BR>
    Rail</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>255.4</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Beckley-Smokeless Division</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Raleigh Co., WV</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>R&#38;P</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <BR>
    Rail</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>0.0</TD>
    <TD align="left" valign="top" nowrap><SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Sycamore Group</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Harrison Co., WV</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>R&#38;P</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <BR>
    Truck</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>259.3</TD>
    <TD align="left" valign="top" nowrap><SUP style="font-size: 85%; vertical-align: text-top">(5)(6)</SUP></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    CoalQuest Development LLC</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Taylor Co., WV</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top" nowrap><BR>R&#38;P&nbsp;&#38; LW</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <BR>
    Rail</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>0.0</TD>
    <TD align="left" valign="top" nowrap><SUP style="font-size: 85%; vertical-align: text-top">(7)</SUP></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Juliana Complex</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Webster Co., WV</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top" nowrap><BR>R&#38;P&nbsp;&#38; CTR</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <BR>
    Rail</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>0.0</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 15%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 9pt;">

<TR>
    <TD width="1%"></TD>
    <TD width="4%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><I>(a)</I></TD>
    <TD align="left">
    <I>CRM&nbsp;= Cross Ridge Mining; CTR&nbsp;= Contour Mining;
    R&#38;P&nbsp;= Room and Pillar; LW&nbsp;= Longwall; MTR&nbsp;=
    Mountain Top Removal; DL&nbsp;= Dragline; HW&nbsp;= Highwall;
    CM&nbsp;= Continuous Miner; TSL&nbsp;= Truck and Shovel/
    Loader</I></TD>
</TR>

</TABLE>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 9pt;">

<TR>
    <TD width="1%"></TD>
    <TD width="4%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><I>(1)</I></TD>
    <TD align="left">
    <I>Expected to begin operation in second half of 2005</I></TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><I>(2)</I></TD>
    <TD align="left">
    <I>Utilizing third-party loadout</I></TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><I>(3)</I></TD>
    <TD align="left">
    <I>Including waste-fuel</I></TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><I>(4)</I></TD>
    <TD align="left">
    <I>Currently utilizing one circuit</I></TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><I>(5)</I></TD>
    <TD align="left">
    <I>Mine permitted but undeveloped</I></TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><I>(6)</I></TD>
    <TD align="left">
    <I>Represents Anker&#146;s 50% share in The Sycamore Group LLC
    joint venture plus the Sycamore No.&nbsp;2 mine, expected to
    begin production in 2005</I></TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><I>(7)</I></TD>
    <TD align="left">
    <I>Undeveloped, permit in progress</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The following provides a description of the operating
characteristics of the principal mines and reserves of each of
our mining operations.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 82</B>
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Business</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>MINING OPERATIONS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Northern and Central Appalachia mining operations</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our Northern and Central Appalachian mining facilities are
strategically located across West Virginia, Kentucky, Maryland,
Pennsylvania and Virginia and are used to produce and ship coal
to its customers located primarily in the eastern half of the
United States. We believe that the quality and experience of our
workforce in Northern and Central Appalachia are among the
highest in the coal mining industry. All of our Northern and
Central Appalachia mining operations are union free.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our mines in Central Appalachia produced 9.7&nbsp;million tons
of coal in 2004 and our mines in Northern Appalachia produced
2.8&nbsp;million tons of coal in 2004. The coal produced in 2004
was, on average, 12,207 Btu/lb, 1.2% sulfur and 12.4% ash by
content. This year we estimate that our mines in Central
Appalachia region will produce approximately 10.5&nbsp;million
tons. This year we estimate that our mines in the Northern
Appalachian region will produce approximately 4.5&nbsp;million
tons. This high Btu, low sulfur coal is very marketable to major
utility customers throughout the eastern United States.
Shipments to electric utilities, accounted for approximately 78%
of the coal shipped by these mines in 2004, compared to 80% of
shipments in 2003. Within each mining complex, mines have been
developed at strategic locations in proximity to our preparation
plants and rail shipping facilities. The mines located in
Central Appalachia ship the majority of their coal by the
Norfolk Southern and CSX rail lines, although production may
also be delivered by truck or barge, depending on the customer.
ICG Natural Resources, LLC owns two idle river docks along the
Kanawha River from which we could ship coal to our customers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
As of December&nbsp;31, 2004, these mines had 1,425 employees.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>ICG Eastern, LLC</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
ICG Eastern, LLC operates the Birch River surface mine, located
60&nbsp;miles east of Charleston, near Cowen in Webster County,
West Virginia. Birch River started operations in 1990 under
Shell Mining Company, was purchased by Zeigler Coal Holding
Company, or &#147;Zeigler,&#148; in 1992, and was subsequently
acquired by AEI Resources, Inc. from Zeigler in 1998.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Birch River is extracting coal from five distinct coalbeds:
(i)&nbsp;Freeport; (ii)&nbsp;Upper Kittanning; (iii)&nbsp;Middle
Kittanning; (iv)&nbsp;Upper Clarion and (v)&nbsp;Lower Clarion.
Coal mined from this operation has an average sulfur content of
1.1%, an average ash content of 12.2% and an average Btu content
of 12,300. We estimate that Birch River controls
23.7&nbsp;million tons of coal reserves.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Approximately 69% of the coal reserves are leased, while
approximately 31% are owned in fee. Most of the leased reserves
are held by four lessors. The leases are retained by annual
minimum payments and by tonnage-based royalty payments. All
leases can be renewed until all mineable and merchantable coal
has been exhausted.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Overburden is removed by a dragline, shovel, front-end loaders,
end dumps and bulldozers. Approximately one-third of the coal
can be marketed run-of-mine, while the other two-thirds is
washed at Birch River&#146;s preparation plant. Coal is
transported by conveyor belt from the preparation plant to Birch
River&#146;s rail loadout, which is served by CSX. The loadout
is a batch weigh system capable of loading unit trains in less
than four hours.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The preparation plant is rated at 800 raw tons per hour. The
preparation plant is comprised of heavy media vessels, heavy
media cyclones, and spirals. The plant, overland conveyor
system, and rail loadout are in excellent condition.
</DIV>

<DIV align="left" style="font-size: 3pt;">
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</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 83</B>
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<B>Business</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>ICG Hazard, LLC</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
ICG Hazard, LLC is currently operating six surface mines, a unit
train loadout (Kentucky River Loading) and other support
facilities in eastern Kentucky, near Hazard. The coal reserves
and operations were acquired in late-1997 and 1998 by AEI
Resources.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
ICG Hazard&#146;s six surface mines include: (i)&nbsp;County
Line; (ii)&nbsp;Flint Ridge; (iii)&nbsp;Vicco; (iv)&nbsp;Rowdy
Gap; (v)&nbsp;Tip Top; and (vi)&nbsp;Thunder Ridge. The coal
from these mines is being extracted from the Hazard&nbsp;11,
Hazard&nbsp;10, Hazard&nbsp;9, Hazard&nbsp;8, Hazard&nbsp;7 and
Hazard&nbsp;5A seams, and has an average sulfur content of 1.2%,
an average ash content of 12% and an average Btu content of
12,000. Nearly all of the coal is marketed run-of-mine. We
estimate that ICG&nbsp;Hazard controls 71.4&nbsp;million tons of
coal reserves, plus 3.0&nbsp;million tons of coal that is
classified as resources. Most of the property has been
adequately explored, but additional core drilling will be
conducted within specified locations to better define the
reserve base.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Approximately 99.7% of ICG&nbsp;Hazard&#146;s reserves are
leased, while 0.3% are owned in fee. Most of the leased reserves
are held by seven lessors. In several cases, ICG&nbsp;Hazard has
multiple leases with each lessor. The leases are retained by
annual minimum payments and by tonnage-based royalty payments.
Most leases can be renewed until all mineable and merchantable
coal has been exhausted.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Overburden is removed by front-end loaders, end dumps,
bulldozers and blast casting. Coal is transported from the mines
to the Kentucky River Loading rail loadout by on-highway trucks.
The loadout is served by CSX, and is a batch weigh system
capable of loading 120-car trains in less than three hours. Most
of the coal is transported by rail, but some coal is direct
shipped to the customer by truck from the mine pits.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
An existing preparation plant structure is being extensively
upgraded. It will process coal from ICG&nbsp;Hazard&#146;s new
Flint Ridge underground mine complex. Flint Ridge will be a room
and pillar mine, producing coal from the Hazard&nbsp;8 coalbed.
It will utilize continuous miners and shuttle cars. Both the
plant and the underground mine are scheduled to begin operation
in July&nbsp;2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>ICG Knott County, LLC</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
ICG&nbsp;Knott County, LLC operates four underground mines, the
Supreme Energy preparation plant and rail loadout, and other
facilities necessary to support the mining operations in eastern
Kentucky, near Kite. ICG&nbsp;Knott County was acquired by
AEI&nbsp;Resources, Inc. from Zeigler in 1998.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
ICG Knott County is producing coal from the Hazard&nbsp;4 and
the Elkhorn&nbsp;3 coalbeds. Three mines are operating in the
Hazard&nbsp;4 coalbed: Calvary, Clean Energy and Elk Hollow. The
Classic mine is operating in the Elkhorn&nbsp;3 coalbed. The
coal produced from the four mines has an average sulfur content
of 1.3%, an average ash content of 9%, and an average Btu
content of 12,700. We estimate these properties contain
6.7&nbsp;million tons of coal reserves. Most of the property has
been extensively explored, but additional core drilling will be
conducted within specified locations to better define the
reserve base.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Approximately 86% of ICG&nbsp;Knott County&#146;s reserves are
owned in fee, while approximately 14% are leased. The leases are
retained by annual minimum payments and by tonnage-based royalty
payments. The leases can be renewed until all mineable and
merchantable coal has been exhausted.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
ICG&nbsp;Knott County&#146;s four underground mines are room and
pillar operations, utilizing continuous miners and shuttle cars.
Nearly all of the run-of-mine coal is processed at the Supreme
Energy preparation plant; some of the Hazard&nbsp;4 run-of-mine
coal is blended with the washed coal.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Nearly all of ICG&nbsp;Knott County&#146;s coal is transported
by rail. The loadout is a batch weigh system that is served by
CSX.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 84</B>
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<B>Business</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>ICG East Kentucky, LLC</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
ICG East Kentucky, LLC is a surface mining operation located in
Pike County, Kentucky, near Phelps. ICG&nbsp;East Kentucky
currently operates the Blackberry surface mine and the Phelps
Loadout. ICG&nbsp;East Kentucky was acquired by
AEI&nbsp;Resources in the second quarter of 1999.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Blackberry is an area surface mine that produces coal from three
separate coalbeds: (i)&nbsp;Taylor; (ii)&nbsp;Fireclay; and
(iii)&nbsp;Lower Fireclay. All of the coal is sold run-of-mine,
with an average sulfur content of 1.2%, an average ash content
of 12% and an average Btu content of 12,400.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We estimate that the Blackberry mine controls 2.6&nbsp;million
tons of coal reserves; no additional exploration is required.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
After Blackberry is depleted, ICG&nbsp;East Kentucky will begin
mining the Mount Sterling property, which contains an additional
4.4&nbsp;million tons of coal reserves. Mount Sterling is
located in Martin and Pike Counties, Kentucky near the Tug Fork
River. Although Mount Sterling is expected to be mined by
ICG&nbsp;East Kentucky, the property is held by ICG&nbsp;Natural
Resources, LLC. The leases are retained by annual minimum
payments and by tonnage-based royalty payments. The leases can
be renewed until all mineable and merchantable coal has been
exhausted.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Overburden at the Blackberry mine is removed by front end
loaders, end dumps, bull dozers and blast casting. Coal from the
pits is transported by truck to the Phelps Loadout, which is a
batch weigh system.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Vindex Energy Corporation</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Vindex Energy Corporation operates two surface mines, the Island
mine and the Douglas mine, in the Potomac Basin in Garrett
County, Maryland. The reserves at Vindex are leased primarily
from one major landowner. The lease expires in 2010 and is
renewable on a year-by-year basis with a minimum annual holding
cost. Vindex Energy is a cross-ridge mining operation extracting
coal from the Upper Freeport, Middle Kittanning and Upper
Kittanning seams. Both mines are truck-and-shovel/loader mining
operations utilizing dozers, hydraulic excavators, loaders and
trucks. Operations are conducted with relatively new equipment
and exploration and development is conducted on a continual
basis ahead of mining.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Vindex has been operating its mines at full production since the
first quarter 2005, and it is projected that the mines will
produce a combined 654,000&nbsp;tons in 2005. Approximately 20%
of the raw coal production is screened at the Island Mine for
sales directly to the customers. Such an arrangement increases
our margins by reducing transportation costs to and from
preparation plants, resulting in cost savings. The remainder of
the coal is processed at our 200&nbsp;TPH heavy media
preparation plant located near Mount Storm, West Virginia, where
the product is shipped to the customer by either truck or rail
using a third-party rail loading facility.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Four new surface mines are under development in the Potomac
Basin in Garrett County, Maryland. Anker anticipates mining to
commence at one of these operations in 2007, an additional two
in 2008 and the last mine producing by 2009. Like the Island and
Douglas mines, these four mines will utilize
truck-and-shovel/loaders and will be extracting coal from the
Bakerstown, Upper Freeport, Mahoning, Upper Kittanning and
Middle Kittanning seams. These future reserves are currently
being explored and permitted for mining.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Patriot Mining Company</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Patriot Mining Company consists of three active surface mines
near Morgantown, West Virginia: Crown No.&nbsp;2 and New Hill
East located in Monongalia County, West Virginia and Keener
located in Green County, Pennsylvania. The majority of the coal
and surface is leased under renewable contracts with small
annual minimum holding costs. Patriot&#146;s mines are
extracting coal from the Waynesburg seam using contour mining
methods with dozers, loaders and trucks. As mining progresses,
reserves
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 85</B>
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<B>Business</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
are being acquired and permitted for future operations. The
mining equipment is maintained in good condition.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We have projected that Patriot&#146;s three mines will produce
approximately 750,000&nbsp;tons in 2005. Patriot is planning six
new mines on property currently being acquired, explored and
permitted that will begin phasing into production starting next
year through 2009. These mines will also extract coal from the
Waynesburg seam using contour mining methods with dozers,
loaders and trucks.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Spruce Fork Division&#151; Anker West Virginia Mining
Company</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The Spruce Fork Division currently consists of two active
underground mines; Spruce No.&nbsp;1 and Sago located in Upshur
County, West Virginia, near the town of Buckhannon. The Spruce
No.&nbsp;1 Mine is extracting coal from the Upper Freeport seam
and the Sago mine is extracting coal from the Middle Kittanning
seam. Nearly all of the reserves in the Spruce Fork Division are
owned by ICG. The Spruce No.&nbsp;1 Mine opened in 1997 and we
anticipate that its reserves will be depleted sometime during
the third quarter of 2005. The Sago mine, which was originally
opened in 1999 as a contract mine, closed in 2002, and then
reopened as a captive operation in the first quarter of 2004.
Sago is expected to reach full production by the fourth quarter
of 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Both operations utilize the room-and-pillar mining method with
continuous miners and shuttle cars for coal removal from the
face. The Sago mine was re-opened using brand new mining
equipment and infrastructure from the original portal location.
All of the coal extracted from these mines is processed at a
rate of nearly 750&nbsp;TPH through the nearby Sawmill Run heavy
media preparation plant where coal is then primarily shipped by
CSX rail, although some coal is trucked to local industrial
customers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We have projected that the Spruce Fork Division will produce
approximately 1.3&nbsp;million tons of coal in 2005. The
Sago&nbsp;3 mine, scheduled for production in 2007, is a
replacement for the Spruce No.&nbsp;1 Mine. The reserves at
Spruce Fork have characteristics that make it marketable to both
steam and metallurgical coal customers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Sycamore Group</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Sycamore Group consists of The Sycamore Group LLC and the
Harrison Division. The Sycamore Group LLC is a joint venture
between ICG and Emily Gibson Coal Company. The joint venture
operates one underground mine, the Sycamore No.&nbsp;1 mine
(a.k.a.&nbsp;the Fairfax No.&nbsp;3 Mine), in Harrison County,
West Virginia, approximately ten miles west of Clarksburg, where
coal is extracted from the Pittsburgh seam by room-and-pillar
mining methods with continuous miners and shuttle cars for coal
extraction.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The majority of the coal is leased with an annual minimum
holding cost. It is anticipated that this reserve will be
depleted and the mine closed during the second quarter of 2006.
Operations are conducted utilizing the room and pillar mining
method. Newly rebuilt mining equipment was recently installed to
facilitate the complete extraction of the remaining reserves. We
expect that ICG&#146;s 50% share of the 2005 production to be
approximately 210,000&nbsp;tons, all of which is sold on a raw
basis and shipped to Allegheny Power Service Corporation&#146;s
Harrison Power Station by truck.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The Harrison Division consists of the Sycamore&nbsp;2 Mine,
which is located in Harrison County, West Virginia,
approximately ten miles west of Clarksburg The Sycamore&nbsp;2
Mine is expected to begin producing coal from the Pittsburgh
seam using room-and-pillar mining methods with continuous miners
and shuttle cars in the second quarter of 2005. The reserve is
primarily leased from one major landowner with an annual minimum
holding cost and an automatic renewal based on an annual minimum
production of 250,000&nbsp;tons. The coal is being accessed with
a box-cut and will be mined utilizing room and pillar mining
methods with new mining equipment.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The planned annual production is expected to increase from
approximately 430,000&nbsp;tons in 2005 to over 1.6&nbsp;million
tons in 2006. The coal produced from Sycamore No.&nbsp;2 will be
sold on a raw basis
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 86</B>
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<B>Business</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
and shipped to Allegheny Power Service Corporation&#146;s
Harrison Power Station by truck under a new life of mine, total
production coal supply agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Philippi Development Division&#151; Anker West Virginia
Mining Company</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The Philippi Development Division operates the Sentinel mine, in
Barbour County, West Virginia near the town of Philippi. The
mine was acquired by Anker in 1990 and has been operating ever
since. Historically, coal was extracted from the Lower
Kittanning seam; however, mining is currently conducted in the
Upper Kittanning seam by room-and-pillar mining method with a
new low-seam continuous haulage mining system which was
installed in the fourth quarter of 2004. The current operations
are expected to be supplemented with a second continuous haulage
mining system in the first quarter of 2007.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Coal is fed directly from the mine to a 600&nbsp;TPH heavy media
preparation plant and loadout facility served by the CSX
railroad. The product can be shipped on steam or metallurgical
markets. The Sentinel Mine is projected to produce approximately
317,000&nbsp;tons in 2005. Production is expected to increase to
634,000 tons by 2008 with the addition of the second continuous
haulage mining system.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>New Appalachian mine developments</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Hillman property</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The Hillman property, located in Central Appalachia, includes
194&nbsp;million tons of deep coal reserves of both steam and
metallurgical quality coal in the Lower Kittanning seam covering
approximately 65,000-acres located predominantly in Taylor
County, West Virginia, near Grafton. The reserve extends into
parts of Barbour, Marion, and N. Harrison Counties as well. ICG
owns the Hillman coal reserve in addition to nearly
4,000&nbsp;acres of surface property to accommodate the
development of three projected mining operations. In addition to
the Lower Kittanning reserves, we also own significant coal
resources in the Kittanning, Freeport, Clarion and Mercer seams
on the Hillman property.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The Hillman reserves are currently being permitted for the
development of three mining operations; two longwall and one
room and pillar. Production from the first complex is projected
to begin in 2007 with a full annual production of 9&nbsp;million
tons expected from the three mines by 2010.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Big Creek property</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our Big Creek reserve, located in Northern Appalachia, covers
10,000 acres of leased coal lands located north of the town of
Richlands in Tazewell County, Virginia. Total recoverable
reserves are 27.5&nbsp;million tons in the Jawbone, Greasy Creek
and War Creek seams. The largest coal block is a deep reserve in
the War Creek seam, which is a high-quality metallurgical coal
ranging from low to mid vol. The Big Creek reserve is all leased
from Southern Regional Industrial Reality. Production from the
permitted War Creek Mine is expected to begin in 2007 utilizing
the room and pillar mining method with continuous haulage. The
mine is expected to reach full production of nearly
1&nbsp;million tons per year by 2008. The coalbed methane at Big
Creek is currently leased to and being produced by Pocahontas
Gas Partnership with an overriding royalty paid to us.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Bay Hill property</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The Bay Hill reserve, located in Northern Appalachia, is a
29&nbsp;million-ton deep reserve of high quality low-vol
metallurgical coal in the Pocahontas No.&nbsp;3 seam in Raleigh
County west of Beckley, West Virginia. The southwest portion of
the reserve underlies part of the recently closed BayBeck Mine
in the Beckley seam. Most of the 16,800 acre Bay Hill reserve is
leased from three land companies: Western Pocahontas Properties,
Crab Orchard Coal Company and Beaver Coal Company. We have
permitted a portion of the Bay Hill reserve for deep mine
development.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 87</B>
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<B>Business</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Upshur property</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The Upshur Property, located in Northern Appalachia, is a
88&nbsp;million tons of resource owned or controlled by us in
the Middle and Lower Kittanning seams. The resource is surface
mineable at a ratio of slightly greater than 2&nbsp;to&nbsp;1.
Both Kittanning seams will be mined as a 7,500&nbsp;Btu fuel by
extracting all of the coal splits and associated partings. The
low product heat content limits the distance over which the fuel
can be transported and sold; however, the low mining cost makes
Upshur an attractive location for an on-site power plant. Some
preliminary research, including air quality monitoring, has been
completed in association with the future construction of a
circulating fluidized bed power plant at Upshur.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Juliana Complex</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Mining on the Juliana property, located in Central Appalachia,
in Webster County,&nbsp;WV, began in 1979 and was stopped in
December&nbsp;1999. Contour and mountain top removal stripping
methods were utilized to produce coal from the Kittanning and
Upper Freeport seams. In addition, a substantial amount of
deep-mined coal was produced from the Middle Kittanning seam. A
500&nbsp;TPH preparation facility with 100,000 tons of raw and
clean coal storage and a unit-train loadout was used to process
and load coal on the CSX railroad.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Currently at Juliana, there are two Kittanning deep mine permits
and one surface mine permit in place. Permitted deep and surface
coal resources are 1.2&nbsp;million tons and 1.9&nbsp;million
tons, respectively. The ratio for the surface reserve is 17.3 to
1 bulk cubic yard per clean ton. The projected clean coal
quality for deep and surface-mined coal combined is
7.5&nbsp;ash, 0.82%&nbsp;sulfur and 13,100&nbsp;Btu, on an as
received basis.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Illinois Basin mining operations</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
ICG Illinois, LLC operates one large underground coal mine, the
Viper mine, in central Illinois. Viper commenced mining
operations in 1982 as a union free operation for Shell Oil
Company. Viper was acquired by Ziegler in 1992 and subsequently
acquired by Horizon in 1998.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The Viper Mine is working the Illinois No.&nbsp;5 Seam, also
referred to as the Springfield Seam, with all raw coal
production washed at Viper&#146;s preparation plant. Coal mined
from this operation has an average sulfur content of 3.2%, an
average ash content of 9.5% and an average Btu content of
10,500. We estimate that Viper controls approximately
29.6&nbsp;million tons of coal reserves, plus an additional
38.5&nbsp;million resource tons. Viper has an ongoing
exploration program to accurately assess floor and roof
conditions within the immediate mine plan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Approximately two-thirds of the coal reserves are leased, while
one-third is owned in fee. The leases are retained by annual
minimum payments and by tonnage-based royalty payments. The
leases can be renewed until all mineable and merchantable coal
has been exhausted.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The Viper mine is a room and pillar operation, utilizing
continuous miners and shuttle cars. ICG&nbsp;Illinois is one of
the lowest cost and highest productivity mines in the Illinois
Basin. All of the raw coal is processed at Viper&#146;s
preparation plant. The clean coal is transported to the
customers by on highway trucks. A major rail line is located a
short distance from the plant, giving Viper the option of
constructing a rail loadout.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
ICG Illinois ships by independent trucking companies to utility
and industrial customers located in North Central Illinois.
Shipments to electric utilities account for approximately 71% of
coal sales. Currently 1.7&nbsp;million tons (80%) of
ICG&nbsp;Illinois&#146; 2005 production is under contract. The
City of Springfield Water, Light and Power purchases nearly 50%
of Viper&#146;s production and the contract does not expire
until 2020.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The preparation plant is rated at 800&nbsp;raw tons per hour. It
is comprised of heavy media vessels, heavy media cyclones, and
spirals.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 88</B>
</DIV>

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<B>Business</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The underground equipment, infrastructure, and preparation plant
are well maintained. The underground equipment will be replaced
or rebuilt over the next five years.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>OTHER OPERATIONS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Coal sales</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In addition to the coal we mine, from time to time we also
opportunistically secure coal purchase agreements with other
coal producers to take advantage of differences in market prices.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>ICG ADDCAR Systems, LLC</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In our highwall mining business, we operate or lease six systems
using our patented ADDCAR highwall mining system and intend to
build additional ADDCAR systems as required. The ADDCAR highwall
mining system is an innovative and efficient mining system. The
system is often deployed at reserves that cannot be economically
mined by other methods.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In a typical ADDCAR highwall mining system, there is a launch
vehicle, continuous miner, conveyor cars, a stacker conveyor,
electric generator, water tanker for cooling and dust
suppression and a wheel loader with forklift attachment.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
A five person crew operates the entire ADDCAR highwall mining
system with control of the continuous miner being performed
remotely by one person from the climate-controlled cab located
at the rear of the launch vehicle. Our system utilizes a
navigational package to provide horizontal guidance, which helps
to control rib width and thus roof stability. Also, the system
provides vertical guidance for control out of seam dilutions.
The ADDCAR highwall mining system is also equipped with high
quality video monitors to provide the operator with visual
displays of the mining process from inside each entry being
mined.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The mining cycle begins by aligning the ADDCAR highwall mining
system onto the desired heading and starting the entry. As the
remotely controlled continuous miner penetrates the coal seam,
ADDCAR conveyor cars are added behind it, forming a continuous
cascading conveyor train. This continues until the entry is at
the planned full depths of up to 1,200 to 1,500&nbsp;feet. After
retraction, the launch vehicle is moved to the next entry,
leaving a support pillar of coal between entries. This process
recovers as much as 65% of the reserves while keeping all
personnel outside the coal seam in a safe working environment. A
wide range of seam heights can be mined with high production in
seams as low as 3.5&nbsp;feet and as high as 15&nbsp;feet in a
single pass. If the seam height is greater than 15&nbsp;feet,
then multi lifts can be mined to create an unlimited entry
height. The navigational features on the ADDCAR highwall mining
system allow for multi lift mining while ensuring that the
designed pillar width is maintained.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
During the mining cycle, in addition to the tractive effort
provided by the crawler drive of the continuous miner the ADDCAR
highwall mining system bolsters the cutting capability of the
machine through an additional pumping force provided by
hydraulic cylinders which transmit thrust to the back of the
miner through blocks mounted on the side of the conveyor cars.
This additional energy allows the continuous miner to achieve
maximum cutting and loading rates as it moves forward into the
seam.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We currently have the exclusive North American distribution
rights for the ADDCAR highwall mining system.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Coalbed methane</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Through a joint venture, CoalQuest is planning to produce
coalbed methane which is pipeline quality gas that resides in
coal seams. In the eastern United States, conventional natural
gas fields are typically located in various sedimentary
formations at depths ranging from 2,000 to 15,000&nbsp;feet. We
believe this is the first such development and exploration in
the region. Exploration companies often put their
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 89</B>
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<B>Business</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
capital at risk by searching for gas in commercially exploitable
quantities at these depths. By contrast, gas in coal seams that
we anticipate drilling is typically in formations less than
2,500&nbsp;feet deep which are usually better defined than
deeper formations. We believe that this contributes to lower
exploration costs than those incurred by producers that operate
in deeper, less defined formations. We have not filed reserve
estimates with any federal agency.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>CUSTOMERS AND COAL CONTRACTS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Customers</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our primary customers are investment grade electric utility
companies primarily in the eastern half of the United States.
The majority of our customers purchase coal for terms of one
year or longer, but we also supply coal on a spot basis for some
of our customers. Our three largest customers for the year ended
December&nbsp;31, 2004 were Georgia Power Company, Carolina
Power&nbsp;&#38; Light Company and Duke Power and we derived
approximately 51% of our pro&nbsp;forma coal revenues from sales
to our five largest customers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Long-term coal supply agreements</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
As is customary in the coal industry, we enter into long-term
supply contracts (exceeding one year in duration) with many of
our customers when market conditions are appropriate. These
contracts allow customers to secure a supply for their future
needs and provides us with greater predictability of sales
volume and sales price. For the year ended December&nbsp;31,
2004, approximately 66% of our sales volume was delivered
pursuant to long-term contracts. We sell the remainder of our
coal through short-term contracts and on the spot market. We
have also entered into certain brokered transactions to purchase
certain amounts of coal to meet our sales commitments. The
purchase coal contracts expire between 2006 and 2010 and provide
us a minimum of approximately 10.7&nbsp;million tons of coal
through the remaining lives of the contracts.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
As a result of the Horizon bankruptcy process, we were able to
renegotiate certain contracts at significantly higher prices
that reflected the current pricing environment and not purchase
unfavorable contracts. However, we do have certain contracts
which are set below current market rates because Anker entered
into these contracts before the recent rise in the coal prices.
As the net costs associated with producing coal have risen, such
as higher energy, transportation and steel prices, the price
adjustments within several of our long-term contracts have not
caught up to the new coal prices. This has resulted in certain
counterparties to these contracts benefiting from below market
prices for our coal.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The terms of our coal supply agreements result from competitive
bidding and extensive negotiations with customers. Consequently,
the terms of these contracts vary significantly by customer,
including price adjustment features, price reopener terms, coal
quality requirements, quantity parameters, permitted sources of
supply, future regulatory changes, extension options, force
majeure provisions and termination and assignment provisions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Some of our long-term contracts provide for a pre-determined
adjustment to the stipulated base price at times specified in
the agreement or at other periodic intervals to account for
changes due to inflation or deflation. In addition, most of our
contracts contain provisions to adjust the base price due to new
statutes, ordinances or regulations that impact our costs
related to performance of the agreement. Also, some of our
contracts contain provisions that allow for the recovery of
costs impacted by modifications or changes in the
interpretations or application of any applicable government
statutes.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Price reopener provisions are present in most of our long-term
contracts. These price reopener provisions may automatically set
a new price based on prevailing market price or, in some
instances, require the parties to agree on a new price,
sometimes between a specified range of prices. In a limited
number of agreements, failure of the parties to agree on a price
under a price reopener provision can
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 90</B>
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<B>Business</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
lead to termination of the contract. Under some of our
contracts, we have the right to match lower prices offered to
our customers by other suppliers. These price reopener
provisions have enabled us to negotiate higher selling prices in
several contracts over the last several months.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Quality and volumes for the coal are stipulated in coal supply
agreements, and in some instances buyers have the option to vary
annual or monthly volumes. Most of our coal supply agreements
contain provisions requiring us to deliver coal within certain
ranges for specific coal characteristics such as heat content,
sulfur, ash, hardness and ash fusion temperature. Failure to
meet these specifications can result in economic penalties,
suspension or cancellation of shipments or termination of the
contracts. Assuming steady or increasing coal prices over the
near-term, we expect to renew many of our expiring sales
contracts at significantly higher prices.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Transportation/logistics</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We ship coal to our customers by rail, truck or barge. We
typically pay the transportation costs for our coal to be
delivered to the barge or rail loadout facility, where the coal
is then loaded for final delivery. Once the coal is loaded in
the barge or railcar, our customer is typically responsible for
the freight costs to the ultimate destination. Transportation
costs vary greatly based on the customer&#146;s proximity to the
mine and our proximity to the loadout facilities. We use a
variety of independent companies for our transportation needs
and typically enter into multiple non-contract agreements with
trucking companies throughout the year.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In 2004, approximately 85% of our coal from our Central
Appalachian operations was delivered to our customers by rail on
either the Norfolk Southern or CSX&nbsp;rail lines, with the
remaining 15% delivered by truck. For our Illinois Basin
operations, 100% of our coal was delivered by truck to
customers, generally within an 80&nbsp;mile radius of our
Illinois mine.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We believe we enjoy good relationships with rail carriers and
barge companies due, in part, to our modern coal-loading
facilities and the experience of our transportation and
distribution employees.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Suppliers</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We have historically spent more than $188&nbsp;million per year
to procure goods and services in support of our business
activities, excluding capital expenditures. Principal
commodities include maintenance and repair parts and services,
electricity, fuel, roof control and support items, explosives,
tires, conveyance structure, ventilation supplies and
lubricants. We use suppliers for a significant portion of our
equipment rebuilds and repairs both on- and off-site, as well as
construction and reclamation activities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Each of our regional mining operations has developed its own
supplier base consistent with local needs. We have a centralized
sourcing group for major supplier contract negotiation and
administration, for the negotiation and purchase of major
capital goods, and to support the business units. The supplier
base has been relatively stable for many years, but there has
been some consolidation. We are not dependent on any one
supplier in any region. We promote competition between suppliers
and seek to develop relationships with those suppliers whose
focus is on lowering our costs. We seek suppliers who identify
and concentrate on implementing continuous improvement
opportunities within their area of expertise.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Competition</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The coal industry is intensely competitive. Our main competitors
are Massey Energy Company, Alpha Natural Resources and
Foundation Coal Holdings. The most important factors on which we
compete are coal price at the mine, coal quality and
characteristics, transportation costs and the reliability of
supply. Demand for coal and the prices that we will be able to
obtain for our coal are closely linked to coal consumption
patterns of the domestic electric generation industry which has
accounted for approximately 92% of domestic coal consumption in
recent years. These coal consumption patterns
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 91</B>
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<B>Business</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
are influenced by factors beyond our control, including the
demand for electricity which is significantly dependent upon
economic activity and summer and winter temperatures in the
United States, government regulation, technological developments
and the location, availability, quality and price of competing
sources of coal, alternative fuels such as natural gas, oil and
nuclear and alternative energy sources such as hydroelectric
power.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Employees</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
As of December&nbsp;31, 2004, we had 1,901 employees of which
21% were salaried and 79% were hourly. We believe our
relationship with our employees is good. All of our workforce is
union free.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Legal proceedings</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
From time to time, we are involved in legal proceedings arising
in the ordinary course of business. We believe we have recorded
adequate reserves for these liabilities and that there is no
individual case or group of related cases pending that is likely
to have a material adverse effect on our financial condition,
results of operations or cash flows. With respect to any claims
relating to Horizon which arose prior to November&nbsp;12, 2002,
such claims are subject to an automatic stay of the
U.S.&nbsp;Bankruptcy Code. In limited circumstances, the
Bankruptcy Court has lifted the stay but only to the extent of
insurance coverage relating to Horizon. In any event, we believe
all or substantially all of the claims will be resolved in
accordance with Horizon&#146;s plan of reorganization.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Equipment and capital expenditures</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
As of December&nbsp;31, 2004, our leased equipment was, on
average, 8.5&nbsp;years old. We believe that a significant
portion our equipment needs to be upgraded in the near-term.
Accordingly, we expect to retire much of our current equipment
and invest approximately $156.4&nbsp;million in new equipment in
the next two years and $107.9&nbsp;million for mining
development operations. We believe our capital investment plan
will provide us with a cost-effective fleet of equipment and
enable us to improve production efficiencies. As we take
advantage of planned expansion opportunities from 2007 through
2009, we expect to spend approximately $571.8&nbsp;million on
capital expenditures which may require external financing.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
While we currently operate our mines with a high percentage of
leased equipment due primarily to Horizon&#146;s preference for
leasing, we will be purchasing equipment in the future. Current
equipment is leased primarily from Caterpillar Finance,
GE&nbsp;Capital and other leasing companies. Our operating
leases typically have a term of three to five years, with us
having the right to purchase the equipment at the end of the
lease at fair market value.
</DIV>

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<B>Reclamation</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Reclamation expenses are a significant part of any coal mining
operation. Prior to commencing mining operations, a company is
required to apply for numerous permits in the state where the
mining is to occur. Before a state will approve and issue these
permits, it typically requires the mine operator to present a
reclamation plan which meets regulatory criteria and to secure a
surety bond to guarantee performance of reclamation in an amount
determined under state law. These bonding companies, in turn,
require that we backstop the surety bonds with cash and/or
letters of credit. While bonds are issued against reclamation
liability for a particular permit at a particular site,
collateral posted in support of the bond is not allocated to a
specific bond, but instead is part of a collateral pool
supporting all bonds issued by that particular insurer. Bonds
are released in phases as reclamation is completed in a
particular area.
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<B> 92</B>
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<A name='115'></A>
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<DIV align="left" style="font-size: 16pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Environmental and other regulatory matters
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Federal, state and local authorities regulate the U.S.&nbsp;coal
mining industry with respect to matters such as permitting and
licensing requirements, employee health and safety, air quality
standards, water pollution, plant and wildlife protection, the
reclamation and restoration of mining properties after mining
has been completed, the discharge of materials into the
environment, surface subsidence from underground mining, and the
effects of mining on groundwater quality and availability. These
laws and regulations have had and will continue to have a
significant effect on our costs of production and competitive
position. Future legislation, regulations or orders may be
adopted or become effective which may adversely affect our
mining operations, cost structure or the ability of our
customers to use coal. For instance, new legislation,
regulations or orders, as well as future interpretations and
more rigorous enforcement of existing laws, may require
substantial increases in equipment and operating costs to us and
delays, interruptions, or a termination of operations, the
extent of which we cannot predict. Future legislation,
regulations or orders may also cause coal to become a less
attractive fuel source, resulting in a reduction in coal&#146;s
share of the market for fuels used to generate electricity.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We endeavor to conduct our mining operations in compliance with
all applicable federal, state and local laws and regulations.
However, due in part to the extensive and comprehensive
regulatory requirements, violations during mining operations
occur from time to time in the industry.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>MINING PERMITS AND APPROVALS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Numerous governmental permits or approvals are required for
mining operations. In connection with obtaining these permits
and approvals, we may be required to prepare and present to
federal, state or local authorities data pertaining to the
effect or impact that any proposed production or processing of
coal may have upon the environment. The requirements imposed by
any of these authorities may be costly and time consuming and
may delay commencement or continuation of mining operations.
Regulations also provide that a mining permit or modification
can be delayed, refused or revoked if an officer, director or a
stockholder with a 10% or greater interest in the entity is
affiliated with or is in a position to control another entity
that has outstanding permit violations. Thus, past or ongoing
violations of federal and state mining laws could provide a
basis to revoke existing permits and to deny the issuance of
additional permits.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In order to obtain mining permits and approvals from state
regulatory authorities, mine operators must submit a reclamation
plan for restoring, upon the completion of mining operations,
the mined property to its prior condition, productive use or
other permitted condition. Typically, we submit our necessary
mining permit applications several months before we plan to
begin mining a new area. In our experience, mining permit
approvals generally require 12 to 18&nbsp;months after initial
submission.
</DIV>

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<B>SURFACE MINING CONTROL AND RECLAMATION ACT</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The Surface Mining Control and Reclamation Act of 1977, or
SMCRA, which is administered by the Office of Surface Mining
Reclamation and Enforcement, or OSM, establishes mining,
environmental protection and reclamation standards for all
aspects of surface mining as well as many aspects of deep
mining. Mine operators must obtain SMCRA permits and permit
renewals from the OSM or the appropriate state regulatory agency
for authorization of certain mining operations that result in a
disturbance of the surface. If a state regulatory agency adopts
federal mining programs under SMCRA, the state becomes the
regulatory authority. States in which we have active mining
operations have achieved primary control of enforcement through
federal authorization.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
SMCRA permit provisions include requirements for coal
prospecting, mine plan development, topsoil removal, storage and
replacement, selective handling of overburden materials, mine
pit backfilling and grading, protection of the hydrologic
balance, subsidence control for underground mines, surface
drainage control, mine drainage and mine discharge control and
treatment and revegetation.
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<B> 93</B>
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<DIV align="left" style="font-size: 10pt;">
<B>Environmental and other regulatory matters</B>
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The mining permit application process is initiated by collecting
baseline data to adequately characterize the pre-mine
environmental condition of the permit area. This work includes
surveys of cultural resources, soils, vegetation, wildlife,
assessment of surface and ground water hydrology, climatology
and wetlands. In conducting this work, we collect geologic data
to define and model the soil and rock structures and coal that
it will mine. We develop mine and reclamation plans by utilizing
this geologic data and incorporating elements of the
environmental data. The mine and reclamation plan incorporates
the provisions of SMCRA, the state programs and the
complementary environmental programs that impact coal mining.
</DIV>

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Also included in the permit application are documents defining
ownership and agreements pertaining to coal, minerals, oil and
gas, water rights, rights of way and surface land, and documents
required by the OSM&#146;s Applicant Violator System, including
the mining and compliance history of officers, directors and
principal owners of the entity.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Once a permit application is prepared and submitted to the
regulatory agency, it goes through a completeness review and
technical review. Public notice and opportunity for public
comment on a proposed permit is required before a permit can be
issued. Some SMCRA mine permits take over a year to prepare,
depending on the size and complexity of the mine and may take
six months to two years or even longer to be issued. Regulatory
authorities have considerable discretion in the timing of the
permit issuance and the public has rights to comment on and
otherwise engage in the permitting process including through
intervention in the courts.
</DIV>

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Before a SMCRA permit is issued, a mine operator must submit a
bond or otherwise secure the performance of reclamation
obligations. The Abandoned Mine Land Fund, which is part of
SMCRA, requires a fee on all coal produced. The proceeds are
used to reclaim mine lands closed or abandoned prior to 1977.
This program is currently set to expire in June&nbsp;2005, and
Congress is considering various reauthorization proposals.
</DIV>

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SMCRA stipulates compliance with many other major environmental
statues, including: the Clean Air Act, the Clean Water Act, the
Resource Conservation and Recovery Act, or RCRA, and the
Comprehensive Environmental Response, Compensation and Liability
Act, or either CERCLA or Superfund.
</DIV>

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<B>SURETY BONDS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Federal and state laws require us to obtain surety bonds to
secure payment of certain long-term obligations including mine
closure or reclamation costs, federal and state workers&#146;
compensation costs, coal leases and other miscellaneous
obligations. Many of these bonds are renewable on a yearly basis.
</DIV>

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Surety bond costs have increased in recent years while the
market terms of such bonds have generally become more
unfavorable. In addition, the number of companies willing to
issue surety bonds has decreased.
</DIV>

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<B>CLEAN AIR ACT</B>
</DIV>

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The federal Clean Air Act, and comparable state laws that
regulate air emissions, directly affect coal mining operations,
but have a far greater indirect affect. Direct impacts on coal
mining and processing operations may occur through permitting
requirements and/or emission control requirements relating to
particulate matter, such as fugitive dust or fine particulate
matter measuring 2.5 micrometers in diameter or smaller. The
Clean Air Act indirectly affects coal mining operations by
extensively regulating the air emissions of sulfur dioxide,
nitrogen oxides, mercury and other compounds emitted by
coal-fired electricity generating plants and coke ovens. The
general effect of such extensive regulation of emissions from
coal-fired power plants could be to reduce demand for coal.
</DIV>

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<B> 94</B>
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</DIV>

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Clean Air Act requirements that may directly or indirectly
affect our operations include the following:
</DIV>

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<B>Acid rain</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Title&nbsp;IV of the Clean Air Act required a two-phase
reduction of sulfur dioxide emissions by electric utilities.
Phase&nbsp;II became effective in 2000 and extended the
Title&nbsp;IV requirements to all coal-fired power plants with
generating capacity greater than 25 Megawatts. The affected
electricity generators have sought to meet these requirements
by, among other compliance methods, switching to lower sulfur
fuels, installing pollution control devices, reducing
electricity generating levels or purchasing sulfur dioxide
emission allowances. We cannot accurately predict the effect of
these provisions of the Clean Air Act on us in future years. At
this time, we believe that implementation of Phase&nbsp;II has
resulted in an upward pressure on the price of lower sulfur
coals, as coal-fired power plants continue to comply with the
more stringent restrictions of Title&nbsp;IV.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Fine particulate matter and ozone</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The Clean Air Act requires the EPA to set standards, referred to
as National Ambient Air Quality Standards, or NAAQS, for certain
pollutants. Areas that are not in compliance (referred to as
&#147;non-attainment areas&#148;) with these standards must take
steps to reduce emissions levels. In 1997, the EPA revised the
NAAQS for particulate matter and ozone; although previously
subject to legal challenge, these revisions were subsequently
upheld but implementation was delayed for several years.
</DIV>

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For ozone, these changes include replacement of the existing
one-hour average standard with a more stringent eight-hour
average standard. On April&nbsp;15, 2004, the EPA announced that
counties in 32&nbsp;states fail to meet the new eight-hour
standard for ozone. States which fail to meet the new standard
will have until June&nbsp;2007 to develop plans for pollution
control measures that allow them to come into compliance with
the standards. For particulates, the changes include retaining
the existing standard for particulate matter with an aerodynamic
diameter less than or equal to 10&nbsp;microns, or PM10, and
adding a new standard for fine particulate matter with an
aerodynamic diameter less than or equal to 2.5&nbsp;microns, or
PM2.5. On December&nbsp;17, 2004 the EPA announced that regions
in 20&nbsp;states and the District of Columbia did not achieve
the fine particulate matter standard. Following identification
of non-attainment areas, each individual state will identify the
sources of emissions and develop emission reduction plans. These
plans may be state-specific or regional in scope. Under the
Clean Air Act, individual states have up to twelve years from
the date of designation to secure emissions reductions from
sources contributing to the problem. Meeting the new
PM2.5&nbsp;standard may require reductions of nitrogen oxide and
sulfur dioxide emissions. Future regulation and enforcement of
these new ozone and PM2.5&nbsp;standards will affect many power
plants, especially coal-fired plants and all plants in
&#147;nonattainment&#148; areas.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The EPA continues to review these ambient air standards. For
example, EPA is under a court imposed deadline to decide by the
end of 2005 whether to propose a revision to the fine
particulate matter standard. EPA is also considering whether to
revise the ozone standard.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Ozone</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Significant additional emissions control expenditures will be
required at coal-fired power plants to meet the current NAAQS
for ozone. Nitrogen oxides, which are a by-product of coal
combustion, can lead to the creation of ozone. Accordingly,
emissions control requirements for new and expanded coal-fired
power plants and industrial boilers will continue to become more
demanding in the years ahead.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOx SIP Call</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The NOx SIP Call program was established by the EPA in October
of 1998 to reduce the transport of ozone on prevailing winds
from the Midwest and South to states in the Northeast, which
said they could not meet federal air quality standards because
of migrating pollution. Under Phase&nbsp;I of the
</DIV>

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<DIV align="right" style="font-size: 8pt;">
<B> 95</B>
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<B>Environmental and other regulatory matters</B>
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program, the EPA is requiring 90,000 tons of nitrogen oxides
reductions from power plants in 22&nbsp;states east of the
Mississippi River and the District of Columbia beginning in May
2004. Phase&nbsp;II of the rule requires a further reduction of
about 100,000 tons of nitrogen oxides per year by May&nbsp;1,
2007. Installation of additional control measures, such as
selective catalytic reduction devices, required under the final
rules will make it more costly to operate coal-fired electricity
generating plants, thereby making coal a less attractive fuel.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Clear Skies Initiative</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The Bush Administration has proposed new legislation, commonly
referred to as the Clear Skies Initiative, that could require
dramatic reductions in nitrous oxide, sulfur dioxide, and
mercury emissions by power plants through
&#147;cap-and-trade&#148; programs similar to the existing acid
rain regulations and current NOx&nbsp;budget programs. The
proposed bill also authorizes up to $2.5&nbsp;billion for clean
coal technology demonstration projects. There are mixed views on
whether this legislation will have a net positive or negative
effect. Congress has also considered several competing bills.
Recently, the EPA adopted a set of regulations which are
intended to limit emissions for new and existing power plants in
ways similar to the Clear Skies Initiative. The principle
regulations are the Clean Air Interstate Rule and the Clean Air
Mercury Rule, which were adopted March&nbsp;15, 2005. The EPA
predicts that these rules will cause coal production to rise in
the Appalachian and Interior coal regions based on EPA&#146;s
predictions as to how states and electric utilities will decide
to implement these rules. However, those decisions have not been
made, and it is not possible to predict with certainty what, if
any, impact these rules will have on coal-buying decisions in
the future.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Interstate air quality rule</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
On March&nbsp;10, 2005, the EPA adopted new rules for reducing
emissions of sulfur dioxide and nitrogen oxides. This Clean Air
Interstate Rule calls for power plants in 29 eastern states and
the District of Columbia to reduce emission levels of sulfur
dioxide and nitrous oxide. The rule regulates these pollutants
under a cap and trade program similar to the system now in
effect for acid deposition control and to that proposed by the
Clear Skies Initiative. The stringency of the cap may require
many coal-fired sources to install additional pollution control
equipment, such as wet scrubbers. This increased sulfur emission
removal capability caused by the rule could result in decreased
demand for low sulfur coal, potentially driving down prices for
low sulfur coal. Emissions would be permanently capped and could
not increase. The rule seeks to cut sulfur dioxide emissions by
45% in 2010, and by&nbsp;57% in 2015. The rule is likely to be
subject to judicial challenge, which makes it difficult to
determine its precise impact.
</DIV>

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<B>Utility mercury reductions rule</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
On March&nbsp;18, 2005, the EPA issued the Clean Air Mercury
Rule to control mercury emissions from power plants. The rule
sets a mandatory, declining cap on the total mercury emissions
allowed from coalfired power plants nationwide. This approach,
which allows emissions trading, seeks to reduce mercury
emissions by nearly 70&nbsp;percent from current levels once
facilities reach a final mercury cap which takes effect in 2018.
The rule is likely to be subject to judicial challenge, which
makes it difficult to determine its precise impact.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Other proposals for controlling mercury emissions from
coal-fired power plants have been made, such as establishing
regional emission standards. If these or the EPA proposals were
enacted, the mercury content and variability of our coal would
become a factor in future sales.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Carbon dioxide</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In February 2003, a number of states notified the EPA that they
planned to sue the agency to force it to set new source
performance standards for utility emissions of carbon dioxide
and to tighten existing standards for sulfur dioxide and
particulate matter for utility emissions. In June&nbsp;2003,
three of these
</DIV>

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<DIV align="left" style="font-size: 8pt;">
<B> 96</B>
</DIV>
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</DIV>

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</DIV>

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states sued the EPA seeking a court order requiring the EPA to
designate carbon dioxide as a criteria pollutant and to issue a
new NAAQS for carbon dioxide. If these lawsuits result in the
issuance of a court order requiring the EPA to set emission
limitations for carbon dioxide and/or lower emission limitations
for sulfur dioxide and particulate matter, it could reduce the
amount of coal our customers would purchase from us.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Regional haze</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The EPA has initiated a regional haze program designed to
protect and to improve visibility at and around national parks,
national wilderness areas and international parks. This program
restricts the construction of new coal-fired power plants whose
operation may impair visibility at and around federally
protected areas. Moreover, this program may require certain
existing coal-fired power plants to install additional control
measures designed to limit haze-causing emissions, such as
sulfur dioxide, nitrogen oxides, volatile organic chemicals and
particulate matter. These limitations could affect the future
market for coal.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>CLEAN WATER ACT</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The federal Clean Water Act, or CWA, and corresponding state
laws, affect coal mining operations by imposing restrictions of
the discharge of certain pollutants into water and on dredging
and filling wetlands. The CWA establishes in-stream water
quality standards and treatment standards for wastewater
discharge through the National Pollutant Discharge Elimination
System, or NPDES. Regular monitoring, as well as compliance with
reporting requirements and performance standards, are
preconditions for the issuance and renewal of NPDES permits that
govern the discharge of pollutants into water.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Permits under Section&nbsp;404 of the CWA are required for coal
companies to conduct dredging or filling activities in
jurisdictional waters for the purpose of creating slurry ponds,
water impoundments, refuse areas, valley fills or other mining
activities. Jurisdictional waters typically include ephemeral,
intermittent, and perennial streams and may in certain instances
include man-made conveyances that have a hydrologic connection
to a stream or wetland. Presently, under the Stream Buffer Zone
Rule, valley fills are prohibited from being placed within
100&nbsp;feet of streams if negative effects on water quality
are expected. OSM has proposed changes to this rule, which would
make exemptions available if mine operators take steps to reduce
the amount of waste and its effect on nearby waters.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In particular, permits under Section&nbsp;404 of the Clean Water
Act are required for coal companies to conduct dredging or
filling activities in jurisdictional waters for the purpose of
creating slurry ponds, water impoundments, refuse areas, or
valley fills or other mining activities. The Army Corps of
Engineers, or ACOE, is empowered to issue &#147;nationwide&#148;
permits for specific categories of filling activity that are
determined to have minimal environmental adverse effects in
order to save the cost and time of issuing individual permits
under Section&nbsp;404. Nationwide Permit&nbsp;21 authorizes the
disposal of dredge-and-fill material from mining activities into
the waters of the United States. On October&nbsp;23, 2003,
several citizens groups sued ACOE in the U.S.&nbsp;District
Court for the Southern District of West Virginia seeking to
invalidate &#147;nationwide&#148; permits utilized by ACOE and
the coal industry for permitting most in-stream disturbances
associated with coal mining, including excess spoil valley fills
and refuse impoundments. The plaintiffs sought to enjoin the
prospective approval of these nationwide permits and to enjoin
some coal operators from additional use of existing nationwide
permit approvals until they obtain more detailed
&#147;individual&#148; permits. On July&nbsp;8, 2004, the court
issued an order enjoining the further issuance of Nationwide 21
permits within the Southern District of West&nbsp;Virginia. This
decision is being appealed. Although we had no operations that
were immediately impacted or interrupted, this decision, if more
widely adopted, may require us to convert certain current and
planned applications for Nationwide&nbsp;21 permits to
applications for individual permits. A similar suit challenging
the validity of Nationwide Permit&nbsp;21 by ACOE for coal
mining operations in
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 97</B>
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<B>Environmental and other regulatory matters</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Kentucky was filed on January&nbsp;27, 2005 by a number of
environmental groups, <I>Kentucky RiverKeeper&nbsp;v.
Rowlette,</I> in the United&nbsp;States Court for the Eastern
District of Kentucky. The suit seeks, among other things, an
injunction preventing ACOE to authorize pursuant to Nationwide
Permit&nbsp;21, &#147;further discharges of mining rock, dirt or
coal refuse into valley fills or surface impoundments&#148;
associated with certain specific mining permits, including
permits issued to some of our mines in Kentucky. Granting of
such relief would interfere with the further operation of these
mines.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Total Maximum Daily Load, or TMDL, regulations established a
process by which states designate these stream segments
considered to be impaired (i.e., not meeting present water
quality standards). Industrial dischargers, including coal
mines, will be required to meet new TMDL effluent standards for
these stream segments.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Under Clean Water Act, states must conduct an anti-degradation
review before approving permits for the discharge of pollutants
to waters that have been designated as high quality. A
state&#146;s anti-degradation regulations would prohibit the
diminution of water quality in these streams. Several
environmental groups and individuals recently challenged, and in
part successfully, West Virginia&#146;s anti-degradation policy.
In general, waters discharged from coal mines to high quality
streams will be required to meet or exceed new &#147;high
quality&#148; standards. This could cause increases in the
costs, time and difficulty associated with obtaining and
complying with NPDES permits, and could aversely affect our coal
production.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>MINE SAFETY AND HEALTH</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Stringent health and safety standards have been in effect since
Congress enacted the Coal Mine Health and Safety Act of 1969.
The Federal Mine Safety and Health Act of 1977 significantly
expanded the enforcement of safety and health standards and
imposed safety and health standards on all aspects of mining
operations. All of the states in which we operate have state
programs for mine safety and health regulation and enforcement.
Collectively, federal and state safety and health regulation in
the coal mining industry is perhaps the most comprehensive and
pervasive system for protection of employee health and safety
affecting any segment of U.S.&nbsp;industry. While this
regulation has a significant effect on our operating costs, the
Company&#146;s U.S.&nbsp;competitors are subject to the same
degree of regulation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Under the Black Lung Benefits Revenue Act of 1977 and the Black
Lung Benefits Reform Act of 1977, as amended in 1981, each coal
mine operator must secure payment of federal black lung benefits
to claimants who are current and former employees and to a trust
fund for the payment of benefits and medical expenses to
claimants who last worked in the coal industry prior to
July&nbsp;1, 1973. The trust fund is funded by an excise tax on
production of up to $1.10&nbsp;per ton for underground coal and
up to $0.55&nbsp;per ton for surface-mined coal, neither amount
to exceed 4.4% of the gross sales price. The excise tax does not
apply to coal shipped outside the United States. In 2003, we
recorded $10.3&nbsp;million of expense related to this excise
tax.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>RESOURCE CONSERVATION AND RECOVERY ACT</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
RCRA affects coal mining operations by establishing requirements
for the treatment, storage, and disposal of hazardous wastes.
Certain coal mine wastes, such as overburden and coal cleaning
wastes, are exempted from hazardous waste management.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Subtitle&nbsp;C of RCRA exempted fossil fuel combustion wastes
from hazardous waste regulation until the EPA completed a report
to Congress and, in 1993, made a determination on whether the
wastes should be regulated as hazardous. In the 1993 regulatory
determination, the EPA addressed some high volume-low toxicity
coal combustion wastes generated at electric utility and
independent power producing facilities, such as coal ash.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 98</B>
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<B>Environmental and other regulatory matters</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In May 2000, the EPA concluded that coal combustion wastes do
not warrant regulation as hazardous under RCRA and that the
hazardous waste exemption for these wastes. However, the EPA has
determined that national non-hazardous waste regulations under
RCRA Subtitle&nbsp;D are needed for coal combustion wastes
disposed in surface impoundments and landfills and used as
mine-fill. The agency also concluded beneficial uses of these
wastes, other than for mine-filling, pose no significant risk
and no additional national regulations are needed. As long as
this exemption remains in effect, it is not anticipated that
regulation of coal combustion waste will have any material
effect on the amount of coal used by electricity generators.
Most state hazardous waste laws also exempt coal combustion
waste, and instead treat it as either a solid waste or a special
waste. Any costs associated with handling or disposal of coal
combustion wastes would increase our customers&#146; operating
costs and potentially reduce their coal purchases. In addition,
contamination caused by the past disposal of ash can lead to
material liability.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Due to the hazardous waste exemption for coal combustion waste
such as ash, much coal combustion waste is currently put to
beneficial use. For example, in one Pennsylvania mine from which
we have the right to receive coal, the Company has used some ash
as mine fill. The ash used for this purpose is mixed with lime
and serves to help alleviate the potential for acid mine
drainage.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>FEDERAL AND STATE SUPERFUND STATUTES</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Superfund and similar state laws affect coal mining and hard
rock operations by creating liability for investigation and
remediation in response to releases of hazardous substances into
the environment and for damages to natural resources caused by
such releases. Under Superfund, joint and several liability may
be imposed on waste generators, site owners or operators and
others regardless of fault. In addition, mining operations may
have reporting obligations under these laws.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>CLIMATE CHANGE</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Although the United States has refused to join the 1992
Framework Convention on Global Climate Change, commonly known as
the Kyoto Protocol, future regulation of greenhouse gas could
occur either pursuant to future U.S.&nbsp;treaty obligations or
pursuant to statutory or regulatory changes under the Clean Air
Act. The Bush Administration has proposed a package of voluntary
emission reductions for greenhouse gases reduction targets which
provide for certain incentives if targets are met. The Climate
Stewardship Act which was recently reintroduced into the Senate,
would require a reduction in carbon dioxide emissions to 2000
levels by 2010 by capping the overall greenhouse gas emissions
from the power, transportation, industrial, and commercial
sectors, and by creating a market for individual companies to
trade pollution credits. Some states, such as Massachusetts,
have already issued regulations regulating greenhouse gas
emissions from large power plants. Increased efforts to control
greenhouse gas emissions, including the future joining of the
Kyoto Protocol, could result in reduced demand for coal if
electric power generators switch to lower carbon sources of
fuel. If the United States were to ratify the Kyoto Protocol,
our nation would be required to reduce greenhouse gas emissions
to 93% of 1990 levels in a series of phased reductions from 2008
to 2012.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>COAL INDUSTRY RETIREE HEALTH BENEFIT ACT OF 1992</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Unlike many companies in the coal business, we do not have
significant liabilities under the Coal Industry Retiree Health
Benefit Act of 1992 (the &#147;Coal&nbsp;Act&#148;), which
requires the payment of substantial sums to provide lifetime
health benefits to union-represented miners (and their
dependents) who retired before 1992, because liabilities under
the Coal Act that had been imposed on our predecessor or
acquired companies were retained by the sellers and, if
applicable, their parent companies, in the applicable
acquisition agreements. We should not be liable for these
liabilities retained by the sellers unless they and, if
applicable, their parent companies, fail to satisfy their
obligations with respect to Coal Act claims and retained
liabilities covered by the acquisition agreements.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 99</B>
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<B>Environmental and other regulatory matters</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>ENDANGERED SPECIES ACT</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The federal Endangered Species Act and counterpart state
legislation protect species threatened with possible extinction.
Protection of threatened and endangered species may have the
effect of prohibiting or delaying us from obtaining mining
permits and may include restrictions on timber harvesting, road
building and other mining or agricultural activities in areas
containing the affected species or their habitats. A number of
species indigenous to our properties are protected under the
Endangered Species Act. Based on the species that have been
identified to date and the current application of applicable
laws and regulations, however, we do not believe there are any
species protected under the Endangered Species Act that would
materially and adversely affect our ability to mine coal from
our properties in accordance with current mining plans.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 100</B>
</DIV>

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<DIV align="left" style="font-size: 10pt;">

</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<A name='116'></A>
</DIV>

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<DIV align="left" style="font-size: 16pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Management
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>DIRECTORS AND EXECUTIVE OFFICERS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The following table sets forth the names, ages and positions of
our directors and executive officers:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="45%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="46%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="center" nowrap><B>Name</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Age</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Position</B></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Wilbur L. Ross,&nbsp;Jr.&nbsp;</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">
    67</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Non-Executive Chairman and Director</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Bennett K. Hatfield</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">
    48</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    President, Chief Executive Officer and Director</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    William D. Campbell</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">
    57</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Vice President, Treasurer and Secretary</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Roger L. Nicholson</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">
    44</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Senior Vice President and General Counsel</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Samuel R. Kitts</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">
    43</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Senior Vice President, West Virginia and Maryland Operations</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    William Scott Perkins</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">
    49</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Senior Vice President, Kentucky and Illinois Operations</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Michael Hardesty</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">
    42</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Senior Vice President, Sales&nbsp;and Marketing</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Oren Eugene Kitts</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">
    50</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Senior Vice President, Mining Services</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Jon R. Bauer</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">
    48</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Director</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cynthia B. Bezik</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">
    52</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Director</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    William J. Catacosinos</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">
    74</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Director</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    George R. Desko</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">
    61</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Director</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Marcia Page</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">
    44</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Director</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Wendy L. Teramoto</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">
    30</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Director</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Each executive officer serves at the discretion of our board of
directors and holds office until his or her successor is elected
and qualified or until his or her earlier resignation or
removal. There are no family relationships among any of our
directors or executive officers other than among two of our
executive officers, Samuel R. Kitts and Oren Eugene Kitts, who
are brothers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Set forth below is certain background information relating to
our directors and executive officers as of April&nbsp;22, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Wilbur L. Ross,&nbsp;Jr.&#151; Non-Executive Chairman</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Mr.&nbsp;Ross has served as the Non-Executive Chairman of our
board of directors since April 2005 and has served in the same
capacity at ICG, Inc. since October 2004. Mr.&nbsp;Ross is the
Chairman and Chief Executive Officer of WL&nbsp;Ross&nbsp;&#38;
Co. LLC, a merchant banking firm, a position he has held since
April 2000. Mr.&nbsp;Ross is also the Chairman and Chief
Executive Officer of WLR Recovery Fund&nbsp;L.P., WLR Recovery
Fund&nbsp;II L.P., Asia Recovery Fund, Asia Recovery
Fund&nbsp;Co-Investment, Nippon Investment Partners and Absolute
Recovery Hedge Fund. Mr.&nbsp;Ross is also Chairman of
International Textiles Group, Inc. and Nano-Tex, LLC in the
United States. Mr.&nbsp;Ross is a board member of Mittal Steel
Company, N.V. (which recently acquired International Steel
Group, Inc.) in the Netherlands, Insuratex, Ltd. in Bermuda,
Nikko Electric Co. and Ohizumi Manufacturing Company in Japan,
Tong Yang Life Insurance Co. in Korea, and of Syms Corp.,
Clarent Hospital Corp. and News Communications Inc. in the
United States. Mr.&nbsp;Ross is also a member of the Business
Roundtable. Previously, Mr.&nbsp;Ross served as the Executive
Managing Director at Rothschild Inc., an investment banking
firm, from October 1974 to March 2000. Mr.&nbsp;Ross was also
formerly Chairman of the Smithsonian Institution National Board
and currently is a board member of the Japan Society and the
Yale University School of Management. He holds an A.B. from Yale
University and an M.B.A., with distinction, from Harvard
University.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 101</B>
</DIV>
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<DIV align="left" style="font-size: 10pt;">
<B>Management</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Bennett K. Hatfield&#151; President, Chief Executive Officer
and Director</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Mr.&nbsp;Hatfield has been our President and Chief Executive
Officer since March 2005. Prior to joining us, Mr.&nbsp;Hatfield
served as President, Eastern Operations of Arch Coal, Inc. from
March 2003 until March 2005. Prior to joining Arch Coal, Inc.,
Mr.&nbsp;Hatfield was Executive Vice President of El&nbsp;Paso
Energy&#146;s Coastal Coal Company from December 2001 through
February 2003. That assignment was preceded by a lengthy career
with Massey Energy Company where he last served as Executive
Vice President and Chief Operating Officer from June 1998
through December 2001. Mr.&nbsp;Hatfield has a B.S. in mining
engineering from Virginia Polytechnic Institute and University.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>William D. Campbell&#151; Vice President, Treasurer and
Secretary</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Mr.&nbsp;Campbell has been our Vice President and Treasurer
since March 2005 and our Secretary since April 2005.
Mr.&nbsp;Campbell was a Vice President and Treasurer of ICG,
Inc. since October 2004. Prior to his employment with us,
Mr.&nbsp;Campbell held various positions with our predecessor.
From November 2003 until September 2004, Mr.&nbsp;Campbell was
Horizon&#146;s Vice President and Controller and Vice President,
Planning and Budgets from June 2002 until October 2003. From
1998 until June 2002, Mr.&nbsp;Campbell was Assistant
Controller&#151; Operations/ Budget/ Forecasts at AEI Resources,
Inc. Mr.&nbsp;Campbell received his B.S. in accounting from
Brescia College.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Roger L. Nicholson&#151; Senior Vice President and General
Counsel</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Mr.&nbsp;Nicholson has been our Senior Vice President and
General Counsel since April 2005. Prior to joining us,
Mr.&nbsp;Nicholson was a member at the law firm of Jackson
Kelly, PLLC from April 2002 to March 2005. His practice focused
on energy and natural resources, mergers and acquisitions and
commercial and mineral real estate. Before joining, Jackson
Kelly, PLLC, Mr.&nbsp;Nicholson served as Vice President,
Secretary and General Counsel of Massey Energy Company. He
earned a B.S. in economics from Georgetown College and a J.D.
from the University of Kentucky.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Samuel R. Kitts&#151; Senior Vice President, West Virginia
and Maryland Operations</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Mr.&nbsp;Kitts has been our Senior Vice President, West Virginia
Operations since April 2005. Prior to his employment with us,
Mr.&nbsp;Kitts was the Vice President of Alpha Natural Resources
Services since April 2003 and the President of Brooks Run Mining
Co. from March 2003. Prior to that time, Mr.&nbsp;Kitts was the
President of Omar Mining Co.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>William Scott Perkins&#151; Senior Vice President, Kentucky
and Illinois Operations</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Mr.&nbsp;Perkins has been our Senior Vice President, Eastern
Operations since April 2005 and held the same positions at ICG,
Inc. since January 2005. Prior to his employment with us,
Mr.&nbsp;Perkins held various positions with our predecessors.
From July 2003 through January 2005, Mr.&nbsp;Perkins was the
Vice President and General Manager of the Evergreen Mining
Company Division of Horizon, the Vice President and General
Manager of Horizon&#146;s Kentucky Division&#151; Union Free
Horizon Natural Resources from October 2001 until June 2003 and
the Vice President&#151; Appalachian region Union Free Surface
Operations of AEI Resources from May 1999 until September 2001.
Mr.&nbsp;Perkins received his B.S. in geology from Kansas State
University.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Michael Hardesty&#151; Senior Vice President, Sales&nbsp;and
Marketing</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Mr.&nbsp;Hardesty has been our Senior Vice President,
Sales&nbsp;and Marketing since April 2005. Previously,
Mr.&nbsp;Hardesty held various positions with Arch Coal, Inc.
From January 2005 through April 2005, Mr.&nbsp;Hardesty was Vice
President, Commercial Optimization, Vice President, Market
Services from 2002 until 2004 and Director Market Services from
1999 until 2001. Mr.&nbsp;Hardesty received his B.S. in
accounting from University of Kentucky.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 102</B>
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<B>Management</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Oren Eugene Kitts&#151; Senior Vice President, Mining
Services</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Mr.&nbsp;Kitts has been our Senior Vice President, Mining
Services since April 2005. Prior to his employment with us,
Mr.&nbsp;Kitts was most recently Vice President,
Environmental&nbsp;&#38; Technical Affairs for Eastern
Operations at Arch Coal, Inc. from May 2003 until the present.
Prior to Arch, Mr.&nbsp;Kitts was a partner in Summit
Engineering Company from May 1996 until May 2003 and prior to
that was President of Massey Coal Services. Mr.&nbsp;Kitts
initially worked for Pickands Mather Company as the
environmental engineer at their coal mining operations in
Southern West Virginia and Eastern Kentucky. Mr.&nbsp;Kitts has
a B.S. in civil engineering from West Virginia University.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Jon R. Bauer&#151; Director</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Mr.&nbsp;Bauer has served as our Director since April 2005 and
as a Director of ICG, Inc. since October 2004. Since May 1995,
Mr.&nbsp;Bauer has been the managing member and chief investment
officer of Contrarian Capital Management LLC, a multi-strategy
distressed securities money management firm. From July 1986 to
May 1995, he was managing director at Oppenheimer&nbsp;&#38;
Co., Inc. where he founded the High Yield Department.
Mr.&nbsp;Bauer is also a director of Arpeggio Acquisition Corp.
Mr.&nbsp;Bauer received a bachelors degree (with honors) from
Rutgers College and an M.B.A. from Harvard Business School.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Cynthia B. Bezik&#151; Director</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Ms.&nbsp;Bezik has been a Director since April 2005 and as a
Director of ICG, Inc. since December 2004. Ms.&nbsp;Bezik has
over twenty-five years of financial management experience.
Ms.&nbsp;Bezik is currently a financial consultant to the
$300&nbsp;million Senior Secured Noteholders in the contested
WCI Steel bankruptcy proceedings. She was senior Vice
President&#151; Finance and Chief Financial Officer at
Cleveland-Cliffs Inc, from 1997 through 2003. Prior to that, she
was the Treasurer at Cleveland-Cliffs since 1994.
Cleveland-Cliffs Inc., a NYSE-listed company, is a major
supplier to the steel industry. Earlier in her career, she was
on the audit staff of Ernst&nbsp;&#38; Young, LLP, and worked
for AM International, a large manufacturing concern.
Ms.&nbsp;Bezik was a Director and chair of the Audit Committee
of Oxford Automotive, Inc., a privately held, tier-one
automotive supplier, prior to its filing for reorganization in
2004. In addition, she is on the Board of Trustees and the
Executive Committee and serves as Treasurer of the Achievement
Centers for Children, a non-profit organization serving special
needs children in Northeastern Ohio. Ms.&nbsp;Bezik is a CMA
(Certified Management Accountant) and holds an M.B.A. from Case
Western Reserve University.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>William J. Catacosinos&#151; Director</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Mr.&nbsp;Catacosinos has been a Director since April 2005 and as
a Director of ICG, Inc. since December 2004. Since November
1998, Dr.&nbsp;Catacosinos has served as Managing Partner of
Laurel Hill Capital Partners. He also serves as the Chairman,
President and CEO of TNP Enterprises, Inc., the parent of
Texas-New Mexico Power, an electric utility located in
Fort&nbsp;Worth, Texas. Dr.&nbsp;Catacosinos was Chairman and
Chief Executive Officer of Long Island Lighting Company from
January 1984 to July 1998. Dr.&nbsp;Catacosinos is also a
director of Preservation Sciences, Inc., a company in St.
Petersburg, Florida, that researches, develops and markets
preservatives and preservative technologies for food, beverage
and industrial products. He earned a B.S. degree, an M.B.A. and
a Ph.D. in Economics from New York University.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>George R. Desko&#151; Director</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Mr.&nbsp;Desko has served as a Director since April 2005, a
Director of ICG, Inc. since October 2004 and from December 2004
to March 2005, he was Interim President, Chief Executive Officer
of ICG Inc. Previously, he was President, Chief Executive
Officer, and Director of Anker Coal Group, Inc. since June 2003
until December 2004. Prior to his employment with Anker,
Mr.&nbsp;Desko served as Anker&#146;s Restructuring Consultant
from August 2001 through December 2002. During his tenure with
Anker,
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 103</B>
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<B>Management</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Mr.&nbsp;Desko managed Anker&#146;s day-to-day operations as
well as overseeing its Chapter&nbsp;11 reorganization.
Mr.&nbsp;Desko has over 40&nbsp;years experience in the coal
industry holding various positions in engineering and management
with Union Carbide Corporation, Continental Oil Corporation,
United States Steel Corporation, Cedar Coal Company, and New Era
Recourses Inc. Since 1979, Mr.&nbsp;Desko has owned and operated
Desko Enterprises, Inc. (consulting engineering company),
Millers Cove Energy Company, Straight Creek Processing LP, and
most recently Canterbury Coal Company from March 1989 through
July 1998.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Marcia Page&#151; Director</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Ms.&nbsp;Page has served as a Director since April 2005 and as a
Director of ICG, Inc. since October 2004. Since May 1994,
Ms.&nbsp;Page has been a Managing Partner of V&#228;rde
Partners, Inc., an investment management firm focused on
distressed debt and other event-driven strategies. Prior to
funding V&#228;rde, Ms.&nbsp;Page was Vice President of
EBF&nbsp;&#38; Associates. Prior to EBF, she managed
fixed-income portfolios for Cargill Financial Services
Corporation. Ms.&nbsp;Page earned her B.A. (magna cum laude)
from Gustavus Adolphus College and an M.B.A. from the University
of Minnesota.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Wendy L. Teramoto&#151; Director</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Ms.&nbsp;Teramoto has been a Director since October 2004 and was
Secretary of ICG, Inc. from October 2004 until April 2005.
Ms.&nbsp;Teramoto is also chairman of the Board of Directors of
Anker and Sole Manager and chief executive officer of CoalQuest.
Ms.&nbsp;Teramoto has been a Vice President at W.L.
Ross&nbsp;&#38; Co. LLC since April 2000. Prior to joining W. L.
Ross&nbsp;&#38; Co., Ms.&nbsp;Teramoto worked at Rothschild
Inc., an investment banking firm. Ms.&nbsp;Teramoto received a
B.S. in accounting and finance from the University of Colorado.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>COMPOSITION OF THE BOARD</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our board of directors currently consists of eight directors,
six of whom meet the independence standards of The New York
Stock Exchange. Following this offering, we expect to appoint an
additional director.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Classified board of directors</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our amended and restated certificate of incorporation provides
that our board of directors will be divided into three classes
of directors, as nearly equal in number as possible, serving
staggered terms. Approximately one-third of our board will be
elected each year. At any meeting of stockholders at which
directors are to be elected, the number of directors elected may
not exceed the greatest number of directors then in office in
any class of directors. Under Section&nbsp;141 of the General
Corporation Law of Delaware, directors serving on a classified
board can only be removed for cause. The provision for our
classified board may be amended, altered or repealed only upon
the affirmative vote of the holders of 80% of our outstanding
voting stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The provision for a classified board could prevent a party that
acquires control of a majority of the outstanding voting stock
from obtaining control of our board until the second annual
stockholders meeting following the date the acquiror obtains the
controlling stock interest. The classified board provision could
have the effect of discouraging a potential acquiror from making
a tender offer for our shares or otherwise attempting to obtain
control of us and could increase the likelihood that our
incumbent directors will retain their positions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We believe that a classified board will help to assure the
continuity and stability of our board and our business
strategies and policies as determined by our board, because a
majority of the directors at any given time will have prior
experience on our board. The classified board provision should
also help to ensure that our board, if confronted with an
unsolicited proposal from a third party that has acquired a
block of our voting stock will have sufficient time to review
the proposal and appropriate alternatives and to seek the best
available result for all stockholders.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 104</B>
</DIV>
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<DIV align="left" style="font-size: 10pt;">
<B>Management</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Number of directors; removal; vacancies</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our amended and restated certificate of incorporation and bylaws
provide that the number of directors shall be set by resolution
adopted by the affirmative vote of a majority of the total
number of directors that we would have if there were no
vacancies on our board. This provision regarding the size of our
board may not be amended, altered, changed or repealed in any
respect without the affirmative vote of 80% of our outstanding
voting stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Pursuant to our amended and restated certificate of
incorporation, each director will serve until his or her
successor is duly elected and qualified, unless he or she dies,
resigns, retires, becomes disqualified or is removed. Our
amended and restated certificate of incorporation also provides
that, subject to the rights of the holders of any series of
preferred stock, directors may be removed, but only for cause by
the affirmative vote of the holders of at least 80% of our
voting stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our amended and restated certificate of incorporation further
provides that newly created directorships in our board may only
be filled by a resolution approved by a majority of our board,
provided a quorum is present, and any other vacancies in our
board may be filled by a resolution approved by a majority of
our board, even if less than a quorum, or by a sole remaining
director. Any director chosen to fill a newly created
directorship will hold office for a term that will coincide with
the remaining term of that class. For other vacancies, the
chosen director will hold office for the remaining term as that
of his or her predecessor.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>COMMITTEES OF THE BOARD OF DIRECTORS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our board of directors has a standing audit committee,
compensation committee and a nominating and corporate governance
committee.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Audit committee</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our audit committee currently consists of Jon R. Bauer, Cynthia
B. Bezik and William J. Catacosinos, all of whom meet the
relevant New York Stock Exchange independence requirements. In
addition, Cynthia B. Bezik meets The New York Stock Exchange
standard of possessing accounting or related financial
management expertise. The audit committee will oversee the
engagement of independent public accountants, review our annual
financial statements and the scope of annual audits and consider
matters relating to accounting policies and internal controls.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The board of directors has approved and adopted a Code of
Business Conduct and Ethics for all directors, officers and
employees, a copy of which will be available on our website and
upon written request by our stockholders at no cost.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Compensation committee</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our compensation committee currently consists of Cynthia&nbsp;B.
Bezik and Marcia Page, both of whom meet the relevant New York
Stock Exchange requirements. The compensation committee will
review, approve and make recommendations to our board of
directors concerning our compensation practices, policies and
procedures for our executive officers. The compensation
committee&#146;s duties will include the administration of our
stock option plans, equity incentive plans and compensation
arrangements for our executives.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Nominating and corporate governance committee</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our nominating and corporate governance committee currently
consists of Jon&nbsp;R. Bauer and William&nbsp;J. Catacosinos,
both of whom meet the relevant New York Stock Exchange
requirements. The duties of the nominating and corporate
governance committee include, among other things, identifying
individuals qualified to become members of our board of
directors, recommending candidates to fill vacancies and
newly-created positions on our board of directors, recommending
whether incumbent directors should be nominated for re-election
to our board of directors and developing and
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 105</B>
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Management</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
recommending corporate governance principles applicable to our
board of directors and our employees. We intend to comply with
the recently enacted New York Stock Exchange corporate
governance rules with respect to nominating and corporate
governance committees once we are listed on The New York Stock
Exchange.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>DIRECTORS&#146; COMPENSATION</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Members of our board of directors currently are not compensated
for serving on the board of directors other than for travel or
other expenses incurred in connection with their service, nor
are they paid a retainer or additional compensation for
attendance at board or committee meetings. However, we currently
compensate two of our non-employee directors, Cynthia B. Bezik
and William J. Catacosinos, in the amount of $50,000&nbsp;per
year and $1,600&nbsp;per meeting and upon completion of this
offering, we will compensate our other non-employee directors in
the same manner.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>COMPENSATION COMMITTEE INTERLOCKS AND INSIDER
PARTICIPATION</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
None of our executive officers serves or has served as a member
of the board of directors, compensation committee or other board
committee performing equivalent functions of any entity that has
one or more executive officers serving as one of our directors
or on our compensation committee.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>EXECUTIVE COMPENSATION</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The following table sets forth information concerning the
compensation of our chief executive officer and our other four
most highly compensated executive officers for the year ended
December&nbsp;31, 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Summary compensation table</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="41%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap><B>Annual compensation</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="right" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Other annual</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>All other</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Salary</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Bonus</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>compensation</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>compensation</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="left" nowrap><B>Name and principal position</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Year</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>($)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>($)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>($)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>($)</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="20" align="right" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Bennett K. Hatfield, President and<BR>
    Chief Executive
    Officer<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    George R. Desko, Chief Executive Officer
    <SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>450,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Coy K. Lane, Senior Vice President of
    Operations<SUP style="font-size: 85%; vertical-align: text-top">(3)</SUP></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>300,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    William D. Campbell, Vice President and
    Treasurer<SUP style="font-size: 85%; vertical-align: text-top">(4)</SUP></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>265,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    William Scott Perkins, President&#151; ICG
    Eastern<SUP style="font-size: 85%; vertical-align: text-top">(5)</SUP></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>200,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    James Ketron, Vice President and General
    Counsel<SUP style="font-size: 85%; vertical-align: text-top">(6)</SUP></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>190,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Roger L. Nicholson, Senior Vice President and General
    Counsel<SUP style="font-size: 85%; vertical-align: text-top">(7)</SUP></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Samuel R. Kitts, Senior Vice President, West Virginia and
    Maryland
    Operations<SUP style="font-size: 85%; vertical-align: text-top">(8)</SUP></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 15%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 9pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><I>(1)</I></TD>
    <TD align="left">
    <I>Mr.&nbsp;Hatfield became our President and Chief Executive
    Officer in March 2005. For 2005, Mr.&nbsp;Hatfield will receive
    an annual salary of $500,000, and is entitled to certain other
    perquisites. For other information about his compensation, see
    &#147;&#151;Employment agreements&#148; below.</I></TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><I>(2)</I></TD>
    <TD align="left">
    <I>Mr. Desko was ICG, Inc.&#146;s Interim President and Chief
    Executive Officer from October 2004 until March 2005.</I></TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><I>(3)</I></TD>
    <TD align="left">
    <I>Mr.&nbsp;Lane was ICG, Inc.&#146;s Senior Vice President of
    Operations until January 2005.</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 106</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Management</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 15pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 9pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><I>(4)</I></TD>
    <TD align="left">
    <I>Mr.&nbsp;Campbell also became our Secretary in April 2005.</I></TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><I>(5)</I></TD>
    <TD align="left">
    <I>Mr.&nbsp;Perkins was ICG, Inc.&#146;s Vice President, ICG
    Eastern until January 2005, when he became our Senior Vice
    President, Kentucky and Illinois.</I></TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><I>(6)</I></TD>
    <TD align="left">
    <I>Mr.&nbsp;Ketron was ICG, Inc.&#146;s Vice President and
    General Counsel until February 2005.</I></TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><I>(7)</I></TD>
    <TD align="left">
    <I>Mr. Nicholson became our Senior Vice President and General
    Counsel in April 2005. For 2005, Mr.&nbsp;Nicholson will receive
    an annual salary of $260,000.</I></TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><I>(8)</I></TD>
    <TD align="left">
    <I>Mr. Kitts became our Senior Vice President, West Virginia and
    Maryland Operations in April 2005. For 2005, Mr.&nbsp;Kitts will
    receive an annual salary of $250,000.</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Employee benefit plans</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
There were no individual grants of stock options made during the
year ended December&nbsp;31, 2004 to any of the named executive
officers. Prior to the effectiveness of the registration
statement of which this prospectus is a part, we expect to adopt
a plan and grant stock options and restricted shares to our
executive officers, including the following
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="49%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Number of</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Securities</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Underlying</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Restricted</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Exercise Price</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="left" nowrap><B>Name</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Options Granted<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Stock<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>per Share</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="12" align="right" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    William D. Campbell</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>45,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>45,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD align="left" valign="bottom" nowrap><SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Michael Hardesty</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>40,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>40,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD align="left" valign="bottom" nowrap><SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Bennett K. Hatfield</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>319,052</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>275,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>10.97</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Oren Eugene Kitts</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>50,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>50,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD align="left" valign="bottom" nowrap><SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Samuel R. Kitts</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>50,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>50,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD align="left" valign="bottom" nowrap><SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Roger L. Nicholson</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>50,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>50,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    William Scott Perkins</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>50,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>50,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD align="left" valign="bottom" nowrap><SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 15%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 9pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><I>(1)</I></TD>
    <TD align="left">
    <I>All option and restricted share grants will be grants 25%
    vested upon grant, with the remaining vesting ratably over three
    years.</I></TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><I>(2)</I></TD>
    <TD align="left">
    <I>To be priced at the price of the shares of common stock sold
    in this offering.</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Employment agreements</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We currently have an employment agreement with Bennett&nbsp;K.
Hatfield our President and Chief Executive Officer. We expect to
execute a similar employment agreement with Roger L. Nicholson,
our Vice President and General Counsel.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Bennett K. Hatfield.</I> On March&nbsp;14, 2005, we entered
into an employment agreement with Bennett K. Hatfield to serve
as our President, Chief Executive Officer and as a member of our
board of directors. The initial term of Mr.&nbsp;Hatfield&#146;s
employment agreement ends on March&nbsp;31, 2008, unless
extended in one-year increments beginning on March&nbsp;31,
2007. The employment agreement provides a base salary to
Mr.&nbsp;Hatfield of $500,000&nbsp;per year, subject to annual
review by the board of directors. In addition, Mr.&nbsp;Hatfield
is entitled to receive an annual bonus based upon the
achievement of certain results measured by us meeting certain
EBITDA targets. For 2005 and 2006, Mr.&nbsp;Hatfield&#146;s
bonus will not be less than $500,000&nbsp;per year. Under the
terms of the employment agreement, Mr.&nbsp;Hatfield will
receive term life insurance in the amount of $3.0&nbsp;million
for a period of 120&nbsp;months owned by a designee of
Mr.&nbsp;Hatfield, and will be eligible to participate in
employee benefit plans and programs adopted by us for executive
level employees.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Pursuant to the employment agreement and the expected terms of
our 2005 Management Equity Incentive Compensation Plan,
Mr.&nbsp;Hatfield has been granted (i)&nbsp;$3.5&nbsp;million of
stock options, which vest 25% on the date of grant and 25%
annually on each March&nbsp;14, 2006, 2007 and 2008,
(ii)&nbsp;206,250 restricted shares of common stock, which vest
in three equal installments annually on each March&nbsp;14,
2006, 2007 and 2008, and (iii)&nbsp;68,750 shares of common
stock. Should certain events
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 107</B>
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Management</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
occur, such as an underwritten public offering that meets
certain criteria, a &#147;change of control&#148; or the
termination of Mr.&nbsp;Hatfield&#146;s employment for
&#147;cause&#148; or for &#147;good reason&#148; (as such terms
are defined in the employment agreement), all of the
unrestricted shares and options will immediately vest and the
options will become immediately exercisable. If
Mr.&nbsp;Hatfield makes a timely election under
Section&nbsp;83(b) of the Internal Revenue Code to include the
restricted shares in gross income for 2005, we will pay
Mr.&nbsp;Hatfield an income tax gross-up payment to make
Mr.&nbsp;Hatfield whole for the income tax impact of the
restricted and unrestricted shares of common stock received by
Mr.&nbsp;Hatfield.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We may terminate Mr.&nbsp;Hatfield&#146;s employment at any time
and for any reason and Mr.&nbsp;Hatfield may resign at any time
and for any reason. If Mr.&nbsp;Hatfield&#146;s employment is
terminated by us without &#147;cause&#148; or if
Mr.&nbsp;Hatfield resigns for &#147;good reason&#148; (as such
terms are defined in the employment agreement), we will be
required to pay Mr.&nbsp;Hatfield (i)&nbsp;his accrued but
unpaid salary and bonus compensation through the date of
termination, (ii)&nbsp;the bonus compensation for the year of
termination, prorated to the amount of time actually employed
during such year and (iii)&nbsp;subject to
Mr.&nbsp;Hatfield&#146;s compliance with the non-solicitation
provisions, a severance payment of three times base salary and
three times annual bonus compensation (measured using the
previous year&#146;s bonus payment), along with coverage under
the Company&#146;s welfare benefit programs for a period not to
exceed two years. Such severance compensation will be paid
quarterly over the two year period following the date of
Mr.&nbsp;Hatfield&#146;s termination of employment. In the event
that the severance payments or benefits would subject
Mr.&nbsp;Hatfield to an excise tax because such payments or
benefits are deemed to be &#147;excess parachute payments&#148;
within the meaning of Section&nbsp;280G of the Internal Revenue
Code, then Mr.&nbsp;Hatfield would be entitled to a tax gross-up
payment to restore Mr.&nbsp;Hatfield to the same after-tax
position that he would have been in if the excise tax had not
been imposed.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Under the terms of the employment agreement, Mr.&nbsp;Hatfield
may not disclose any confidential information or data concerning
us or our business during the term of Mr.&nbsp;Hatfield&#146;s
employment and thereafter. In addition, during
Mr.&nbsp;Hatfield&#146;s term of employment and for a period of
two years following the date Mr.&nbsp;Hatfield ceases to be
employed by us, Mr.&nbsp;Hatfield may neither solicit certain of
our employees to leave our employment nor solicit our customers
or business associates to cease doing business with us.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 108</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">

</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<A name='117'></A>
</DIV>

<!-- link1 "Principal stockholders" -->

<DIV align="left" style="font-size: 16pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Principal stockholders
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The following table and accompanying footnotes show information
regarding the beneficial ownership of our common stock before
and after this offering by:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    each person who is known by us to own beneficially more than 5%
    of our common stock;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    each member of our board of directors and each of our named
    executive officers;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    all members of our board of directors and our executive officers
    as a group.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We have determined beneficial ownership in accordance with the
rules of the Securities and Exchange Commission. We believe that
each stockholder named in the table has sole voting and
dispositive power for the shares shown as beneficially owned by
them.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The number of shares and percentages of beneficial ownership
before the offering set forth below are based on
106,605,999&nbsp;shares of our common stock issued and
outstanding as of March&nbsp;31, 2005. The number of shares and
percentages of beneficial ownership after the offering are based
on &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of our common stock to be issued and outstanding immediately
after this offering, including the shares of common stock
expected to be issued in connection with the Anker acquisition.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="35%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap><B>Shares beneficially</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap><B>owned after the offering</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="right" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Assuming</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Assuming</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Shares beneficially</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>the underwriters&#146;</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>the underwriters&#146;</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>owned</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>option is</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>option is</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>prior to the offering</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>not exercised</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>exercised in full</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="left" nowrap><B>Name and address of</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="right" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="right" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="right" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="left" nowrap><B>beneficial owner</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Number</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Percent</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Number</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Percent</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Number</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Percent</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="24" align="right" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    V&#228;rde Coal Inc.&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>9,868,755</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>9.26%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    Attn: Kathy Ricke<BR>
    8500 Normandale Lake<BR>
    Boulevard<BR>
    Suite&nbsp;1570<BR>
    Minneapolis, MN 55347</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    Contrarian Capital Management&nbsp;LLC</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10,822,865</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10.15%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    Attn: Michael J. Restifo<BR>
    411 West Putnam Avenue<BR>
    Suite&nbsp;225<BR>
    Greenwich, CT 06830</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    WLR Recovery Fund&nbsp;II, L.P.&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>9,804,172</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>9.20%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    Attn: Wendy Teramoto<BR>
    101 East
    52<SUP style="font-size: 85%; vertical-align: text-top">nd
    </SUP>Street<BR>
    19<SUP style="font-size: 85%; vertical-align: text-top">th
    </SUP>Floor<BR>
    New York, NY 10022</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    Shepherd International Coal Holdings Inc.&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>7,670,349</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>7.20%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    Attn: Colin M. Lancaster<BR>
    3600 S. Lake Drive<BR>
    St. Francis, WI 53235</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    Stark Trading</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>7,670,350</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>7.20%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    Attn: Colin M. Lancaster<BR>
    3600&nbsp;S.&nbsp;Lake Drive<BR>
    St. Francis, WI 53235</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    Wilbur L. Ross,
    Jr.<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>9,804,172</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>9.20%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    Bennett K.
    Hatfield<SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>68,750</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 109</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Principal stockholders</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="35%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap><B>Shares beneficially</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap><B>owned after the offering</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="right" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Assuming</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Assuming</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Shares beneficially</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>the underwriters&#146;</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>the underwriters&#146;</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>owned</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>option is</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>option is</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>prior to the offering</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>not exercised</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>exercised in full</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="left" nowrap><B>Name and address of</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="right" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="right" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="right" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="left" nowrap><B>beneficial owner</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Number</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Percent</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Number</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Percent</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Number</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Percent</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="24" align="right" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    William D.
    Campbell<SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>22,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Michael
    Hardesty<SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>20,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Oren Eugene
    Kitts<SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>25,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Samuel R.
    Kitts<SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>25,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Roger L.
    Nicholson<SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>25,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    William Scott
    Perkins<SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>25,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    Jon R.
    Bauer<SUP style="font-size: 85%; vertical-align: text-top">(3)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10,822,865</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10.15%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    George R. Desko</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Marcia
    Page<SUP style="font-size: 85%; vertical-align: text-top">(4)</SUP></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>9,868,755</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>9.26%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    All directors and executive officers as a group (13 persons)
    <SUP style="font-size: 85%; vertical-align: text-top">(1)(2)(3)(4)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>30,972,361</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>29.1%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 15%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 9pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><I>&nbsp; *&nbsp;</I></TD>
    <TD align="left">
    <I>Less than 1%.</I></TD>
</TR>

</TABLE>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 9pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><I>(1)</I></TD>
    <TD align="left">
    <I>Represents 9,804,172&nbsp;shares of common stock held of
    record by WLR Recovery Fund&nbsp;II L.P. Mr.&nbsp;Ross serves as
    a principal of WL&nbsp;Ross&nbsp;&#38; Co. LLC, which manages
    WLR Recovery Fund&nbsp;II L.P. To the extent Mr.&nbsp;Ross is
    deemed to beneficially own these shares as a result of his
    position as a principal of WL Ross&nbsp;&#38; Co. LLC,
    Mr.&nbsp;Ross disclaims beneficial ownership of these shares.</I></TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><I>(2)</I></TD>
    <TD align="left">
    <I>Represents options to purchase shares of our common stock
    which are currently exercisable.</I></TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><I>(3)</I></TD>
    <TD align="left">
    <I>Represents 10,822,865&nbsp;shares of common stock held of
    record by investment management clients of Contrarian Capital
    Management LLC. Mr.&nbsp;Bauer serves as the Managing Member of
    Contrarian Capital Management LLC. To the extent Mr.&nbsp;Bauer
    is deemed to beneficially own these shares as a result of his
    position as the Managing Member of Contrarian Capital Management
    LLC, Mr.&nbsp;Bauer disclaims beneficial ownership of these
    shares.</I></TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><I>(4)</I></TD>
    <TD align="left">
    <I>Represents 9,868,755&nbsp;shares of common stock held of
    record by V&#228;rde Coal Inc. All of these shares are
    controlled by V&#228;rde Partners, Inc., V&#228;rde Management,
    Inc. or V&#228;rde Management International, Inc., which are
    controlled by Ms.&nbsp;Page, Gregory S. McMillan and George G.
    Hicks. Ms.&nbsp;Page and Messrs.&nbsp;McMillan and Hicks are
    (i)&nbsp;the principals, directors and managing partners of
    V&#228;rde Partners, Inc. and (ii)&nbsp;the principals,
    directors and vice president of V&#228;rde Management, Inc. and
    V&#228;rde Management International, Inc. To the extent
    Ms.&nbsp;Page is deemed to beneficially own these shares as a
    result of her position as a principal director or managing
    partner or vice president of V&#228;rde Partners, Inc.
    V&#228;rde Management Inc. or V&#228;rde Management
    International, Inc., Ms.&nbsp;Page disclaims beneficial
    ownership of these shares.</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 110</B>
</DIV>
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<DIV align="left" style="font-size: 10pt;">

</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<A name='118'></A>
</DIV>

<!-- link1 "Certain relationships and related party transactions" -->

<DIV align="left" style="font-size: 16pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Certain relationships and related party transactions
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Under the Advisory Services Agreement, dated as of
October&nbsp;1, 2004 between ICG, Inc. and
WL&nbsp;Ross&nbsp;&#38; Co. LLC, WLR has agreed to provide
advisory services to ICG, Inc. (consisting of consulting and
advisory services in connection with strategic and financial
planning, investment management and administration and other
matters relating to the business and operation of ICG, Inc. of a
type customarily provided by sponsors of U.S.&nbsp;private
equity firms to companies in which they have substantial
investments, including any consulting or advisory services which
the Board of Directors reasonably requests). WLR is to be paid a
quarterly fee of $500,000 and reimbursed for any reasonable out
of pocket expenses (including expenses of third-party advisors
retained by WLR). ICG will assume the Advisory Services
Agreement in connection with the reorganization.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The advisory services agreement is for a term until the earlier
of (i)&nbsp;the entry of a final non-appealable judgment that
WLR is in breach of its obligation under the agreement or in
breach of its duty of loyalty to ICG, Inc. as an equity holder;
(ii)&nbsp;the seventh anniversary of the effective date; or
(iii)&nbsp;the 30th day after receipt by WLR of a termination
payment (as defined in the agreement). ICG, Inc. also has the
right to terminate the agreement upon written notice to WLR
following (i)&nbsp;the 90th&nbsp;day after which WLR and its
affiliated entities cease to own at least 25% of the ICG, Inc.
equity beneficially owned by them on the effective date of the
agreement or (ii)&nbsp;the 30th&nbsp;day after which Wilbur L.
Ross,&nbsp;Jr. is no longer affiliated with or involved in the
business of WLR.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
On October&nbsp;1, 2004, ICG entered into an agreement with
Insuratex, LTD, a wholly owned subsidiary of funds controlled by
WLR, to administer and pay workers&#146; compensation claims
incurred by ICG. ICG paid an initial $2.5 million premium to
fund such claims and will continue to pay monthly installments
of $0.2&nbsp;million until a total premium of $5.0 million is
paid by ICG. The $5.0 million annual premium is to be adjusted
after the initial 18 months based on actual workers&#146;
compensation loss experienced. We believe that the rates, terms
and provisions contained in this agreement are comparable to
those that we could have obtained through negotiations with an
unrelated party.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 111</B>
</DIV>

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<DIV align="left" style="font-size: 10pt;">

</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<A name='119'></A>
</DIV>

<!-- link1 "Description of indebtedness" -->

<DIV align="left" style="font-size: 16pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Description of indebtedness
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>OUR CREDIT FACILITY</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In connection with the Horizon asset acquisition in the third
quarter of 2004, our subsidiary, ICG, LLC, entered into a new
credit facility, which, among other things, financed a portion
of the Horizon acquisition and provided working capital for us
and our subsidiaries. Our current amended and restated credit
facility consists of a $110.0&nbsp;million revolving credit
facility, of which up to a maximum of $60.0&nbsp;million may be
utilized for letters of credit, and a $175.0&nbsp;million term
loan facility. The revolving credit facility has a five-year
term and is due on October&nbsp;1, 2009. The term loan facility
has a six-year term and is due on October&nbsp;1, 2010. As of
December&nbsp;31, 2004, we had $175.0&nbsp;million outstanding
under our credit facility, including $54.4&nbsp;million of
outstanding and undrawn letters of credit. Borrowings under the
revolving credit facility are subject to our total leverage
ratio and bear interest, at our option, at either LIBOR
(adjusted for statutory reserves) plus a margin ranging from
2.00% to 2.50%&nbsp;per annum or the alternate base rate plus a
margin ranging from 1.00% to 1.50%&nbsp;per annum. Borrowings
under the term loan bear interest, at our option, at either
LIBOR (adjusted for statutory reserves) plus 2.75%&nbsp;per
annum or the alternate base rate plus 1.75%&nbsp;per annum.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Borrowings under our credit facility are secured by
substantially all of our assets and the assets of all of our
subsidiaries, as well as by a pledge of 100% of the stock of our
subsidiaries. In addition, we and each of our other non-borrower
subsidiaries guarantee all of the indebtedness under the credit
facility.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our credit facility requires certain mandatory prepayments upon
the receipt of the proceeds from certain asset sales, casualty
events, debt or equity offerings, including this offering, and
in the event that we have excess cash flow as determined in
accordance with the credit facility. Our credit facility
requires 50% of the proceeds of this offering (net of any
customary fees, underwriting discounts, commissions and other
costs and expenses) to be applied as a prepayment of the term
loan facility, with such prepayment to be applied, first, to the
next scheduled amortization payment and, second, to the
remaining amortization payments on a pro rata basis.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our credit facility contains customary affirmative and negative
covenants for senior credit facilities of this type, including,
but not limited to, limitations on the incurrence of
indebtedness, asset dispositions, acquisitions, investments,
dividends and other restricted payments, liens and transactions
with affiliates. Our credit facility also contains the following
financial covenants:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    a maximum leverage ratio, set at 2.75 to 1.00 from the closing
    date of the credit facility through December&nbsp;31, 2005 and
    decreasing to 2.50 to 1.00 for the 2006 fiscal year, and 2.25 to
    1.00 from January&nbsp;1, 2007 through the final maturity date
    of the credit facility;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    a minimum interest coverage ratio set at 4.00 to 1.00 for each
    of the four consecutive quarters then last ended;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    a minimum fixed charge coverage ratio, set at 1.00 to 1.00 from
    the closing date of the credit facility through March&nbsp;31,
    2005, and adjusted as follows: 0.75 to 1.00 from April&nbsp;1,
    2005 through September&nbsp;30, 2005, 0.90 to 1.00 from
    October&nbsp;1, 2005 through December&nbsp;31, 2005, 1.00 to
    1.00 for the 2006 fiscal year and 1.25 to 1.00 from
    January&nbsp;1, 2007 through the final maturity date of the
    credit facility;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    a limit on capital expenditures from the closing date of the
    credit facility through December&nbsp;31, 2005 of
    $100.0&nbsp;million, for the 2006 fiscal year of
    $70.0&nbsp;million, for the 2007 fiscal year of
    $70.0&nbsp;million, for the 2008 fiscal year of
    $60.0&nbsp;million, for the 2009 fiscal year of
    $60.0&nbsp;million and from January&nbsp;1, 2010 through the
    final maturity date of the credit facility of $60.0&nbsp;million.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 112</B>
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<B>Description of indebtedness</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Although we have not reached a covenant test period we believe
that ICG, LLC maintained the leverage and interest coverage
ratios specified in, and were in compliance with, the credit
facility as of December&nbsp;31, 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our credit facility contains customary events of default,
including, but not limited to, failure to pay principal or
interest, breach of covenants or representations and warranties,
cross-default to other indebtedness, judgment default and
insolvency. If an event of default occurs under the credit
facility, the lenders under the credit facility will be entitled
to take various actions, including demanding payment for all
amounts outstanding thereunder and foreclosing on any collateral.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 113</B>
</DIV>

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<DIV align="left" style="font-size: 10pt;">

</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<A name='120'></A>
</DIV>

<!-- link1 "Description of capital stock" -->

<DIV align="left" style="font-size: 16pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Description of capital stock
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The following is a description of the material terms of our
amended and restated certificate of incorporation and bylaws as
each is in effect as of the date of this prospectus. We refer
you to our amended and restated certificate of incorporation and
bylaws, copies of which have been filed as exhibits to the
registration statement of which this prospectus forms a part.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>COMMON STOCK</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
As of March&nbsp;31, 2005, our authorized capital stock
consisted of 2,000,000,000&nbsp;shares of common stock, par
value $0.01&nbsp;per share, of
which &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
were issued and outstanding immediately prior to this offering,
and 200,000,000&nbsp;shares of preferred stock, par value
$0.01&nbsp;per share, of which no shares were issued and
outstanding immediately prior to this offering. Shares of our
common stock were held of record
by &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;stockholders.
Immediately following the completion of this offering, we will
have &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of our common stock, and no shares of our preferred stock,
outstanding.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Holders of common stock will be entitled to one vote per share
on all matters submitted to be voted upon by the stockholders.
The holders of our common stock will not have cumulative voting
rights in the election of directors.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Subject to any superior rights of any holders of preferred stock
or any class or series of stock having a preference over the
common stock with respect to payment of dividends, holders of
our common stock will be entitled to such dividends as may be
declared and paid from time to time by our board of directors
out of legally available funds. Our credit facility imposes
restrictions on our ability to declare dividends with respect to
our common stock. For additional information, see &#147;Dividend
policy&#148; below.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In the event of our liquidation, dissolution or winding up, the
holders of common stock will be entitled to receive ratably the
assets available for distribution to the stockholders after
payment of liabilities and any amounts due to the holders of
preferred stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The holders of our common stock have no preemptive rights and no
rights to convert or exchange their common stock into any other
securities. There are no redemption or sinking fund provisions
applicable to our common stock. All outstanding shares of our
common stock, including the common stock offered in this
offering, are and will be fully paid and non-assessable.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>PREFERRED STOCK</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our amended and restated certificate of incorporation will
authorize our board of directors to, without stockholder
approval, issue up to 200,000,000&nbsp;shares of preferred stock
in one or more series and to fix the rights, preferences,
privileges and restrictions granted to or imposed upon the
preferred stock, including voting rights, dividend rights,
conversion rights, terms of redemption, liquidation preference,
sinking fund terms, subscription rights and the number of shares
constituting any series or the designation of a series.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our board of directors can issue preferred stock with voting and
conversion rights that could adversely affect the voting power
of the holders of common stock, without stockholder approval. No
shares of preferred stock are currently outstanding and we have
no present plan to issue any shares of preferred stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>DIVIDEND POLICY</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We may retain any future earnings to support the development and
expansion of our business or make additional payments under our
credit facility and, as a result, we may not pay cash dividends
in the foreseeable future. Our payment of any future dividends
will be at the discretion of our board of directors after taking
into account various factors, including our financial condition,
operating results, cash needs, growth plans and the terms of any
credit agreements that we may be a party to at the
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 114</B>
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Description of capital stock</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
time. Our credit facility limits us from paying any cash
dividends or other payments or distributions with respect to our
capital stock in excess of certain limitations. In addition, the
terms of any future credit agreement may contain similar
restrictions on our ability to pay dividends or making any
distributions or payments with respect to our capital stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>REGISTRATION RIGHTS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Prior to the consummation of this offering, we expect to grant
our founding stockholders &#147;demand&#148; and
&#147;piggyback&#148; registration rights relating to their
shares of common stock pursuant to a registration rights
agreement. The former Anker and CoalQuest holders will receive
&#147;piggyback&#148; registration rights with respect to the
shares of ICG common stock they are receiving in the Anker
acquisition pursuant to a registration rights agreement to be
entered into at the closing of the Anker acquisition. These
rights are summarized below.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
After the completion of this offering, holders
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock, or their permitted transferees, will be
entitled to unlimited &#147;piggyback&#148; registration rights.
These rights will entitle the holders to notice of a
registration prior to the filing of a registration statement and
to include, at our expense, their shares of common stock in any
of our registrations of our common stock (other than
registrations we file on Form&nbsp;S-4 or S-8, or any successor
forms thereto, or filed solely in connection with an offering
made solely to our existing stockholders or employees). We and
our underwriters can reduce the number of shares of common stock
requested to be included by holders of &#147;piggyback&#148;
registration rights in view of market conditions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In addition, WLR or any other founding stockholder or
stockholders representing 30% of all registrable securities or
their permitted transferees will be entitled to
&#147;demand&#148; rights to register all or a portion of their
registrable securities under the Securities Act if the
reasonably anticipated aggregate price to the public of these
shares (net of underwriting discounts and commission) would
exceed $75.0&nbsp;million. We will also be obligated to
undertake three demand registrations by WLR, one demand
registration by each other individual founding stockholder and
two additional demand registrations by a group of the founding
stockholders representing 30% of the registrable securities. If
at any time we are eligible to register our securities on a
Form&nbsp;S-3 under the Securities Act, holders may specify that
the requested registration be a &#147;shelf registration&#148;
for an offering on a delayed or continuous basis pursuant to
Rule&nbsp;415 of the Securities Act.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
If our stockholders with registration rights cause a large
number of securities to be registered and sold in the public
market, those sales could cause the market price of our common
stock to decline. If we initiate a registration and include
registrable securities as a result of the exercise of
registration rights, the inclusion of registrable securities
could adversely affect our ability to raise capital.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>ANTI-TAKEOVER EFFECTS OF CERTAIN PROVISIONS OF OUR AMENDED
AND RESTATED CERTIFICATE OF INCORPORATION AND BYLAWS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our amended and restated certificate of incorporation and bylaws
contain several provisions that may make it more difficult to
acquire us by means of a tender offer, open market purchase,
proxy fight or otherwise.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
These provisions in our amended and restated certificate of
incorporation and bylaws are designed to encourage persons
seeking to acquire control of us to negotiate with our board. We
believe that, as a general rule, our interests and the interests
of our stockholders would be served best if any change in
control results from negotiations with our board based upon
careful consideration of the proposed terms, such as the price
to be paid to stockholders, the form of consideration to be paid
and the anticipated tax effects of the transaction.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
These anti-takeover provisions in our amended and restated
certificate of incorporation and bylaws could, however, have the
effect of discouraging a prospective acquiror from making a
tender offer for
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 115</B>
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<B>Description of capital stock</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
our shares or otherwise attempting to obtain control of us. To
the extent that these provisions discourage takeover attempts,
they could deprive stockholders of opportunities to realize
takeover premiums for their shares. Moreover, these provisions
could discourage accumulations of large blocks of common stock,
thus depriving stockholders of any advantages which large
accumulations of stock might provide.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Set forth below is a summary of the relevant provisions of our
amended and restated certificate of incorporation and bylaws and
certain applicable sections of the General Corporation Law of
the State of Delaware. This summary does not purport to be
complete and is subject to, and qualified in its entirety by
reference to, all of the provisions of our amended and restated
certificate of incorporation, our bylaws and sections of the
General Corporation Law of the State of Delaware.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Delaware anti-takeover statute</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We are governed by Section&nbsp;203 of the General Corporation
Law of the State of Delaware. Section&nbsp;203, subject to
certain exceptions, prohibits a Delaware corporation from
engaging in any business combination with any interested
stockholder for a period of three years following the time that
such stockholder became an interested stockholder, unless:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    prior to such time, the board of directors of the corporation
    approved either the business combination or the transaction
    which resulted in the stockholder becoming an interested
    stockholder;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    upon consummation of the transaction that resulted in the
    stockholder becoming an interested stockholder, the interested
    stockholder owned at least 85% of the voting stock of the
    corporation outstanding at the time the transaction commenced,
    excluding specified shares;&nbsp;or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    at or subsequent to such time, the business combination is
    approved by the board of directors and authorized at an annual
    or special meeting of stockholders, and not by written consent,
    by the affirmative vote of at least
    66<FONT style="font-size: 70%"><SUP>2</SUP></FONT>/<FONT style="font-size: 60%">3</FONT>%
    of the outstanding voting stock that is not owned by the
    interested stockholder.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The application of Section&nbsp;203 may limit the ability of
stockholders to approve a transaction that they may deem to be
in their best interests.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In general, Section&nbsp;203 defines &#147;business
combination&#148; to include:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    any merger or consolidation involving the corporation and the
    interested stockholder;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    any sale, lease, exchange, mortgage, pledge, transfer or other
    disposition of 10% or more of the assets of the corporation to
    or with the interested stockholder;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    subject to certain exceptions, any transaction which results in
    the issuance or transfer by the corporation of any stock of the
    corporation to the interested stockholder;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    any transaction involving the corporation which has the effect
    of increasing the proportionate share of the stock of any class
    or series of the corporation beneficially owned by the
    interested stockholder;&nbsp;or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    the receipt by the interested stockholder of the benefit of any
    loans, advances, guarantees, pledges or other financial benefits
    provided by or through the corporation.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In general, Section&nbsp;203 defines an &#147;interested
stockholder&#148; as any person that is:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    the owner of 15% or more of the outstanding voting stock of the
    corporation;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    an affiliate or associate of the corporation and was the owner
    of 15% or more of the outstanding voting stock of the
    corporation at any time within three years immediately prior to
    the relevant date;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    the affiliates and associates of the above.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 116</B>
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Description of capital stock</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Under specific circumstances, Section&nbsp;203 makes it more
difficult for an &#147;interested stockholder&#148; to effect
various business combinations with a corporation for a
three-year period, although the stockholders may, by adopting an
amendment to the corporation&#146;s certificate of incorporation
or bylaws, elect not to be governed by this section, effective
twelve months after adoption.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our amended and restated certificate of incorporation and bylaws
do not exclude us from the restrictions imposed under
Section&nbsp;203. We anticipate that the provisions of
Section&nbsp;203 may encourage companies interested in acquiring
us to negotiate in advance with our board of directors since the
stockholder approval requirement would be avoided if a majority
of the directors then in office approve either the business
combination or the transaction that resulted in the stockholder
becoming an interested stockholder.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Stockholder action; special meetings</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our certificate of incorporation provides that stockholder
action can be taken only at an annual or special meeting of
stockholders and cannot be taken by written consent in lieu of a
meeting. Our certificate of incorporation and our bylaws provide
that, except as otherwise required by law, special meetings of
the stockholders can only be called by the chairman of our
board, our chief executive officer, our president or our
secretary at the request of a majority of the number of
directors that we would have if there were no vacancies on our
board. Stockholders are not permitted to call a special meeting
or to require our board to call a special meeting.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Stockholder proposals</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
At an annual meeting of stockholders, only business that is
properly brought before the meeting will be conducted or
considered. To be properly brought before an annual meeting of
stockholders, business must be specified in the notice of the
meeting (or any supplement to that notice), brought before the
meeting by the presiding officer or by or at the direction of
the majority of the total number of directors that our board
would have if there were no vacancies, or properly requested by
a stockholder to be brought before the meeting.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
For business to be properly requested by a stockholder to be
brought before an annual meeting, the stockholder must:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

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    <TD width="3%"></TD>
    <TD width="97%"></TD>
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<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    be a stockholder of record at the time of the giving of the
    notice for the meeting;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    be entitled to vote at the meeting;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    have given timely written notice of the business to our
    secretary.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
To be timely, a stockholder&#146;s notice must be delivered to
or mailed and received at our principal executive offices not
less than 60, nor more than 90, calendar days prior to the first
anniversary date on which we first mailed our proxy materials
for the preceding year&#146;s annual meeting of stockholders;
provided, however, that if there was no annual meeting in the
preceding year or the date of the annual meeting is advanced
more than 30&nbsp;calendar days prior to, or delayed by more
than 30 calendar days after the anniversary of the preceding
year&#146;s annual meeting, notice by the stockholder to be
timely must be so delivered not later than the close of business
on the later of the 90th calendar day prior to such annual
meeting or the 10th&nbsp;calendar day following the day on which
public disclosure of the date of such meeting is first made. A
stockholder&#146;s notice must set forth, as to each matter the
stockholder proposes to bring before the meeting:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    a description in reasonable detail of the business proposed to
    be brought before the meeting and the reasons for conducting
    such business at the meeting;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    the name and address of the stockholder proposing such business
    and of the beneficial owner, if any, on whose behalf the
    proposal is made;</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 117</B>
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Description of capital stock</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    the class and series and number of shares that are owned of
    record and beneficially by the stockholder proposing the
    business and by the beneficial owner, if any, on whose behalf
    the proposal is made;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    a description of all arrangements or understandings among the
    stockholder, the beneficial owner on whose behalf the proposal
    is made, if any, and any other person or persons (including
    their names) in connection with the proposal of such business by
    the stockholders and any material interest of the stockholder in
    such business;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    whether such stockholder or beneficial owner intends to deliver
    a proxy statement and forms of proxy to holders of at least the
    percentage of shares of our voting stock required to approve
    such proposal;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    a representation that the stockholder intends to appear in
    person or by proxy at the annual meeting to bring such business
    before the meeting.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Similarly, at a special meeting of stockholders, only such
business as is properly brought before the meeting will be
conducted or considered. To be properly brought before a special
meeting, business must be specified in the notice of the meeting
(or any supplement to that notice) given by or at the direction
of the chairman of our board, our chief executive officer, our
president or our secretary at the request of a majority of the
number of directors that we would have if there were no
vacancies on our board or, otherwise brought before the meeting
by the presiding officer or by or at the direction of the
majority of the total number of directors that our board would
have if there were no vacancies.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Nomination of candidates for election to our board</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Under our bylaws, only persons that are properly nominated will
be eligible for election to be members of our board. To be
properly nominated, a director candidate must be nominated at an
annual meeting of the stockholders by or at the direction of our
board or committee thereof or properly nominated by a
stockholder. To be properly nominated by a stockholder, such
stockholder must have delivered a proxy statement and form of
proxy to the holders of at least the percentage of shares of our
voting stock required to approve such nomination and included in
such materials a timely and proper notice in proper written form
to our secretary.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
To be timely, a stockholder&#146;s notice must be delivered to
or mailed and received at our principal executive offices not
less than 60 nor more than 90&nbsp;calendar days prior to the
first anniversary of the date on which we first mailed our proxy
materials for the preceding year&#146;s annual meeting of
stockholders. If, however, there was no annual meeting in the
preceding year or the date of the annual meeting is advanced
more than 30&nbsp;calendar days prior to, or delayed by more
than 30&nbsp;calendar days after the anniversary of the
preceding year&#146;s annual meeting, notice by the stockholder
to be timely must be so delivered not later than the later of
the 90th calendar day prior to such annual meeting or the tenth
calendar day following the day on which public announcement of
the date of such meeting is first made.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
To be in proper written form, such stockholder&#146;s notice
must include:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    the name and address of the stockholder giving the notice and of
    the beneficial owner, if any, on whose behalf the nomination is
    made;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    a representation that the stockholder giving the notice is a
    holder of record of shares of our voting stock entitled to vote
    at such annual meeting and intends to appear in person or by
    proxy at the annual meeting to nominate the person or persons
    specified in the notice;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    the class and series and number of shares of stock owned
    beneficially and of record by the stockholder giving the notice
    and by the beneficial owner, if any, on whose behalf the
    nomination in made;</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 118</B>
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<B>Description of capital stock</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    a description of all arrangements or understandings between or
    among any of:</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="3%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    the stockholder giving the notice;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    the beneficial owner on whose behalf the notice is given;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    each nominee;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    any other person or persons (naming such person or persons)
    pursuant to which the nomination or nominations are to be made
    by the stockholder giving the notice;</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    the name, age, business address, residence address and
    occupation of the nominee proposed by the stockholder;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    such other information regarding each nominee proposed by the
    stockholder giving the notice as would be required to be
    included in a proxy statement filed pursuant to the proxy rules
    of the SEC had the nominee been nominated, or intended to be
    nominated, by our board;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    the signed consent of each nominee to serve as a director on our
    board if so elected;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    whether such stockholder or beneficial owner intends to deliver
    a proxy statement and form of proxy to holders of at least the
    percentage of shares of our voting stock required to elect such
    nominee or nominees. In addition, a stockholder must also comply
    with all applicable requirements of the Exchange Act and the
    rules and regulations thereunder with respect to matters
    relating to nomination of candidates for directors.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Amendment to our bylaws</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Except for certain provisions indicated above, our bylaws may be
amended, altered or repealed by the affirmative vote of the
holders of a majority of our voting stock or by the affirmative
vote of a majority of our board. Certain provisions that require
the affirmative vote of the holders of 80% of our voting stock
may make it more difficult to change our bylaws for the purpose
of gaining control over us.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>TRANSFER AGENT AND REGISTRAR</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We have appointed Registrar and Transfer Company as the transfer
agent and registrar for our common stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>LISTING</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We will apply to have our common stock listed on The New York
Stock Exchange under the symbol &#147;ICO.&#148;
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 119</B>
</DIV>

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<DIV align="left" style="font-size: 10pt;">

</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<A name='121'></A>
</DIV>

<!-- link1 "Shares eligible for future sale" -->

<DIV align="left" style="font-size: 16pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Shares eligible for future sale
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Prior to this offering, there was no public market for our
common stock. Future sales of substantial amounts of our common
stock in the public market, or the perception that these sales
could occur, could adversely affect the price of our common
stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Based on the number of shares outstanding as
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2005, we will have
approximately &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of our common stock outstanding after the completion of this
offering and after giving effect to the reorganization and the
Anker acquisition
(approximately &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
if the underwriters exercise their over-allotment option in
full). Of those shares,
the &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock sold in this offering
(&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
if the underwriters exercise their over-allotment option in
full) and
the &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
issued to the holders of ICG, Inc.&#146;s common stock in
connection with the reorganization will be freely tradable
without restriction or further registration under the Securities
Act, except that any shares held by our &#147;affiliates,&#148;
as that term is defined under Rule&nbsp;144 of the Securities
Act, may be sold only in compliance with the limitations
described below. The remaining outstanding shares of common
stock will be deemed &#147;restricted securities&#148; as that
term is defined under Rule&nbsp;144. Restricted securities may
not be resold except pursuant to an effective registration
statement or an applicable exemption from registration,
including an exemption under Rule&nbsp;144 or 144(k) under the
Securities Act, which are summarized below.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>RULE&nbsp;144</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In general, under Rule&nbsp;144, as currently in effect, an
affiliate of ours who beneficially owns shares of our common
stock that are not restricted securities, or a person who
beneficially owns for more than one year shares of our common
stock that are restricted securities, may generally sell, within
any three-month period, a number of shares that does not exceed
the greater of:
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

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    <TD width="3%"></TD>
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    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    1% of the then-outstanding shares of common stock or
    approximately shares assuming no exercise by the underwriters of
    their option to purchase additional shares;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    the average weekly reported volume of trading in the common
    stock on The New York Stock Exchange during the four calendar
    weeks preceding the date on which notice of sale is filed,
    subject to restrictions.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Sales under Rule&nbsp;144 are also subject to requirements with
respect to manner of sale, notice and the availability of
current public information about us. Generally, a person who was
not our affiliate at any time during the three months before the
sale, and who has beneficially owned shares of our common stock
that are restricted securities for at least two years, may sell
those shares without regard to the volume limitations, manner of
sale provisions, notice requirements or the requirements with
respect to availability of current public information about us.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Rule&nbsp;144 does not supersede the contractual obligations of
our security holders set forth in the lock-up agreements
described above.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>RULE&nbsp;144(K)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In addition, a person who is not deemed to have been an
affiliate of ours at any time during the 90&nbsp;days preceding
a sale and who has beneficially owned the shares proposed to be
sold for at least two years, would be entitled to sell those
shares under Rule&nbsp;144(k) without regard to the manner of
sale, public information, volume limitation or notice
requirements of Rule&nbsp;144. To the extent that our affiliates
sell their shares, other than pursuant to Rule&nbsp;144 or a
registration statement, the purchaser&#146;s holding period for
the purpose of effecting a sale under Rule&nbsp;144 commences on
the date of transfer from the affiliate.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>RULE&nbsp;701</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Generally, an employee, officer, director or consultant who
purchased shares of our common stock before the effective date
of the registration statement of which this prospectus is a
part, or who holds
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 120</B>
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Shares eligible for future sale</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
options as of that date, pursuant to a written compensatory plan
or contract, may rely on the resale provisions of Rule&nbsp;701
under the Securities Act. Under Rule&nbsp;701, these persons who
are not our affiliates may generally sell their eligible
securities, commencing 90&nbsp;days after the effective date of
the registration statement of which this prospectus is a part,
without having to comply with the public information, holding
period, volume limitation or notice provisions of Rule&nbsp;144.
These persons who are our affiliates may generally sell their
eligible securities under Rule&nbsp;701, commencing 90&nbsp;days
after the effective date of the registration statement of which
this prospectus is a part, without having to comply with
Rule&nbsp;144&#146;s one-year holding period restriction.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Neither Rule&nbsp;144 nor Rule&nbsp;701 supersedes the
contractual obligations of our security holders set forth in the
lock-up agreements described above.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>SALE OF RESTRICTED SHARES</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of our common stock that were outstanding
on &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2005 will become eligible for sale, pursuant to Rule&nbsp;144 or
Rule&nbsp;701, without registration approximately as follows:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    of common stock will be immediately eligible for sale in the
    public market without restriction;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    of common stock will be eligible for sale in the public market
    under Rule&nbsp;144 or Rule&nbsp;701, beginning 90&nbsp;days
    after the effective date of the registration statement of which
    this prospectus is a part, subject to the volume, manner of sale
    and other limitations under those rules;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    the
    remaining &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    of common stock will become eligible under Rule&nbsp;144 for
    sale in the public market from time to time after the effective
    date of the registration statement of which this prospectus is a
    part upon expiration of their respective holding periods.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The above does not take into consideration the effect of the
lock-up agreements described above.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>LOCK-UP AGREEMENTS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The holders of
approximately &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of outstanding common stock as of the closing of this offering
and the holders
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock underlying options as of the closing of this
offering, including all of our executive officers and directors,
have entered into lock-up agreements pursuant to which they have
generally agreed, subject to certain exceptions, not to offer or
sell any shares of common stock or securities convertible into
or exchangeable or exercisable for shares of common stock for a
period of at least 180&nbsp;days from the date of this
prospectus without the prior written consent of UBS Securities
LLC. See &#147;Underwriting&#151;No sale of similar
securities.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>STOCK OPTIONS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Pursuant to the stock option plan that we intend to adopt prior
to the effectiveness of the registration statement of which this
prospectus is a part, we expect to grant options to members of
senior management to purchase an aggregate
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of our common stock. Of the outstanding shares of common stock
to be granted as options,
approximately &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;%
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
will, subject to the continued employment of such members of
senior management, vest and become exercisable on
each &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;beginning &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;and
ending
on &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
As soon as practicable following this offering, we intend to
file one or more registration statements on Form&nbsp;S-8 under
the Securities Act to register all shares of common stock
subject to outstanding stock options. After expiration of the
applicable contractual resale restrictions, shares covered by
these registration statements will be eligible for sale in the
public markets, other than shares owned by our affiliates, which
may be sold in the public market if they are registered or
qualify for an exemption from registration under Rule&nbsp;144.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 121</B>
</DIV>
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</DIV>

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<A name='122'></A>
</DIV>

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<DIV align="left" style="font-size: 16pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Certain U.S.&nbsp;federal income and estate tax consequences to
non-U.S.&nbsp;holders
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The following is a summary of certain material United States
federal income and estate tax consequences of the purchase,
ownership and disposition of our common stock as of the date
hereof. Except where noted, this summary deals only with common
stock that is held as a capital asset by a non-U.S.&nbsp;holder.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
A &#147;non-U.S.&nbsp;holder&#148; means a person (other than a
partnership) that is not for United States federal income tax
purposes any of the following:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

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    <TD width="3%"></TD>
    <TD width="97%"></TD>
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<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    an individual citizen or resident of the United States;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    a corporation (or any other entity treated as a corporation for
    United States federal income tax purposes) created or organized
    in or under the laws of the United States, any state thereof or
    the District of Columbia;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    an estate the income of which is subject to United States
    federal income taxation regardless of its source;&nbsp;or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    a trust if it (1)&nbsp;is subject to the primary supervision of
    a court within the United States and one or more United States
    persons have the authority to control all substantial decisions
    of the trust or (2)&nbsp;has a valid election in effect under
    applicable United States Treasury regulations to be treated as a
    United States person.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
This summary is based upon provisions of the Internal Revenue
Code of 1986, as amended (the &#147;Code&#148;), and
regulations, rulings and judicial decisions as of the date
hereof. Those authorities may be changed, perhaps retroactively,
so as to result in United States federal income and estate tax
consequences different from those summarized below. This summary
does not address all aspects of United States federal income and
estate taxes and does not deal with foreign, state, local or
other tax considerations that may be relevant to
non-U.S.&nbsp;holders in light of their personal circumstances.
In addition, it does not represent a detailed description of the
United States federal income and estate tax consequences
applicable to you if you are subject to special treatment under
the United States federal income tax laws (including if you are
a United States expatriate, &#147;controlled foreign
corporation,&#148; &#147;passive foreign investment
company,&#148; corporation that accumulates earnings to avoid
United States federal income tax or an investor in a
pass-through entity). A change in law may alter significantly
the tax considerations that we describe in this summary.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
If a partnership holds our common stock, the tax treatment of a
partner will generally depend upon the status of the partner and
the activities of the partnership. If you are a partner of a
partnership holding our common stock, you should consult your
tax advisors.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
If you are considering the purchase of our common stock, we
recommend that you consult your own tax advisors concerning the
particular United States federal income and estate tax
consequences to you of the ownership of the common stock, as
well as the consequences to you arising under the laws of any
other taxing jurisdiction.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>DIVIDENDS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Cash distributions on our common stock will constitute dividends
for U.S.&nbsp;federal income tax purposes to the extent paid
from our current or accumulated earnings and profits, as
determined under U.S.&nbsp;federal income tax principals.
Distributions in excess of our earnings and profits will
constitute a return of capital that is applied against and
reduces the non-U.S.&nbsp;holder&#146;s adjusted tax basis in
our common stock. Any remaining excess will be treated as gain
realized on the sale or other disposition of the common stock
and will be treated as described under &#147;&#151;&nbsp;Gain on
Disposition of Common
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 122</B>
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<B>Certain U.S.&nbsp;federal income and estate tax consequences
to non-U.S.&nbsp;holders</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Stock&#148; below. Dividends paid to a non-U.S.&nbsp;holder of
our common stock generally will be subject to withholding of
United States federal income tax at a 30% rate or such lower
rate as may be specified by an applicable income tax treaty.
However, dividends that are effectively connected with the
conduct of a trade or business by the non-U.S.&nbsp;holder
within the United States are not subject to the withholding tax,
provided certain certification and disclosure requirements are
satisfied. Instead, such dividends are generally subject to
United States federal income tax on a net income basis in the
same manner as if the non-U.S.&nbsp;holder were a United States
person as defined under the Code. Any such effectively connected
dividends received by a foreign corporation may be subject to an
additional &#147;branch profits tax&#148; at a 30% rate or such
lower rate as may be specified by an applicable income tax
treaty.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
A non-U.S.&nbsp;holder of our common stock who wishes to claim
the benefit of an applicable treaty rate and avoid backup
withholding, as discussed below, for dividends will be required
to (a)&nbsp;complete Internal Revenue Service Form&nbsp;W-8BEN
(or other applicable form) and certify under penalty of perjury
that such holder is not a United States person as defined under
the Code or (b)&nbsp;if our common stock is held through certain
foreign intermediaries, satisfy the relevant certification
requirements of applicable United States Treasury regulations.
Special certification and other requirements apply to certain
non-U.S.&nbsp;holders that are entities rather than individuals.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
A non-U.S.&nbsp;holder of our common stock eligible for a
reduced rate of United States withholding tax pursuant to an
income tax treaty may obtain a refund of any excess amounts
withheld by filing an appropriate claim for refund with the
Internal Revenue Service.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>GAIN ON DISPOSITION OF COMMON STOCK</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Any gain realized on the disposition of our common stock
generally will not be subject to United States federal income
tax unless:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    the gain is effectively connected with a trade or business of
    the non-U.S.&nbsp;holder in the United States, and, if required
    by an applicable income tax treaty, is attributable to a United
    States permanent establishment of the non-U.S.&nbsp;holder;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    the non-U.S.&nbsp;holder is an individual who is present in the
    United States for 183&nbsp;days or more in the taxable year of
    that disposition, and certain other conditions are met;&nbsp;or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    we are or have been a &#147;United States real property holding
    corporation&#148; for United States federal income tax purposes.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
A non-corporate non-U.S.&nbsp;holder described in the first
bullet point immediately above will be subject to tax on the net
gain derived from the sale under regular graduated United States
federal income tax rates. An individual non-U.S.&nbsp;holder
described in the second bullet point immediately above will be
subject to a flat 30% tax on the gain derived from the sale,
which may be offset by United States source capital losses, even
though the individual is not considered a resident of the United
States. If a non-U.S.&nbsp;holder that is a foreign corporation
falls under the first bullet point immediately above, it will be
subject to tax on its net gain in the same manner as if it were
a United States person as defined under the Code and, in
addition, may be subject to the branch profits tax equal to 30%
of its effectively connected earnings and profits or at such
lower rate as may be specified by an applicable income tax
treaty.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We believe that we are currently a &#147;United States real
property holding corporation&#148; for United States federal
income tax purposes. So long as our common stock continues to be
regularly traded on an established securities market, only a
non-U.S.&nbsp;holder who holds or held (at any time during the
shorter of the five year period preceding the date of
disposition or the holder&#146;s holding period) more than 5% of
our common stock will generally be subject to United States
federal income tax on the disposition of our common stock. If a
non-U.S.&nbsp;holder owned directly or indirectly more than 5%
of our common stock at any time during the applicable period,
then any gain recognized by such 5% non-U.S.&nbsp;holder
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 123</B>
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<B>Certain U.S.&nbsp;federal income and estate tax consequences
to non-U.S.&nbsp;holders</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
on the sale or other disposition of our common stock would be
treated as effectively connected with a U.S.&nbsp;trade or
business and would be subject to U.S.&nbsp;federal income tax at
regular graduated U.S.&nbsp;federal income tax rates and in much
the same manner as applicable to U.S.&nbsp;persons. Furthermore,
if our common stock were not considered to be &#147;regularly
traded on an established securities market,&#148; then any gain
recognized by a non-U.S.&nbsp;holder on the sale or other
disposition of our common stock would be treated as effectively
connected with a U.S.&nbsp;trade or business and would be
subject to U.S.&nbsp;federal income tax at regular graduated
U.S.&nbsp;federal income tax rates and in much the same manner
as applicable to U.S.&nbsp;persons. In such a case, the
non-U.S.&nbsp;holder could also be subject to certain
withholding taxes imposed on the gross proceeds realized with
respect to the sale or other disposition of our common stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>FEDERAL ESTATE TAX</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Common stock owned or treated as owned by an individual
non-U.S.&nbsp;holder at the time of death will be included in
such holder&#146;s gross estate for United States federal estate
tax purposes, unless an applicable estate tax treaty provides
otherwise.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>INFORMATION REPORTING AND BACKUP WITHHOLDING</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We must report annually to the Internal Revenue Service and to
each non-U.S.&nbsp;holder the amount of dividends paid to such
holder and the tax withheld with respect to such dividends,
regardless of whether withholding was required. Copies of the
information returns reporting such dividends and withholding may
also be made available to the tax authorities in the country in
which the non-U.S.&nbsp;holder resides under the provisions of
an applicable income tax treaty.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
A non-U.S.&nbsp;holder will be subject to backup withholding for
dividends paid to such holder unless such holder certifies under
penalty of perjury that it is a non-U.S.&nbsp;holder, and the
payor does not have actual knowledge or reason to know that such
holder is a United States person as defined under the Code, or
such holder otherwise establishes an exemption.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Information reporting and, depending on the circumstances,
backup withholding will apply to the proceeds of a sale or other
disposition (including a redemption) of our common stock within
the United States or conducted through certain United
States-related financial intermediaries, unless the beneficial
owner certifies under penalty of perjury that it is a
non-U.S.&nbsp;holder (and the payor does not have actual
knowledge or reason to know that the beneficial owner is a
United States person as defined under the Code) or such owner
otherwise establishes an exemption.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Backup withholding is not an additional tax. Any amounts
withheld under the backup withholding rules may be allowed as a
refund or a credit against a non-U.S.&nbsp;holder&#146;s United
States federal income tax liability provided the required
information is furnished to the Internal Revenue Service.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 124</B>
</DIV>

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<DIV align="left" style="font-size: 10pt;">

</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

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<A name='123'></A>
</DIV>

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<DIV align="left" style="font-size: 16pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Underwriting
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We are offering the shares of our common stock described in this
prospectus through the underwriters named below. UBS Securities
LLC and Lehman Brothers Inc. are the representatives of the
underwriters. UBS Securities LLC and Lehman Brothers Inc. are
the joint book-running managers of this offering. We will enter
into an underwriting agreement with the representatives. Subject
to the terms and conditions of the underwriting agreement, each
underwriter will severally agree to purchase the number of
shares of common stock listed next to its name in the following
table.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="72%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2" align="left" nowrap><B>Underwriters</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Number of shares</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    UBS Securities LLC</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Lehman Brothers Inc.&nbsp;</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The underwriting agreement provides that the underwriters must
buy all of the shares if they buy any of them. However, the
underwriters will not be required to take or pay for the shares
covered by the underwriters&#146; over-allotment option
described below.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our common stock is offered subject to a number of conditions,
including:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

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    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    receipt and acceptance of our common stock by the
    underwriters;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    the underwriters&#146; right to reject orders in whole or in
    part.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In connection with this offering, certain of the underwriters or
securities dealers may distribute prospectuses electronically.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Sales of the shares made outside the United States may be made
by affiliates of the underwriters.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>OVER-ALLOTMENT OPTION</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We have granted the underwriters an option to buy up to an
aggregate of additional shares of our common stock. The
underwriters may exercise this option solely for the purpose of
covering over-allotments, if any, made in connection with this
offering. The underwriters have 30&nbsp;days from the date of
this prospectus to exercise this option. If the underwriters
exercise this option in whole or in part, they will each
purchase additional shares from us approximately in proportion
to the amounts specified in the table above.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>COMMISSIONS AND DISCOUNTS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Shares sold by the underwriters to the public will initially be
offered at the public offering price set forth on the cover of
this prospectus. Any shares sold by the underwriters to
securities dealers may be sold at a discount of up to
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share from the public offering price. Any of these securities
dealers may resell any shares purchased from the underwriters to
other brokers or dealers at a discount of up to
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share from the public offering price. If all the shares are not
sold at the public offering price, the representatives may
change the offering price and the other selling terms. Sales of
shares outside of the United States may be made by affiliates of
the underwriters. Upon execution of the underwriting agreement,
the underwriters will be obligated to purchase the shares at the
prices and upon the terms stated therein and, as a result, will
thereafter bear any risk associated with changing the offering
price to the public or other selling terms. The underwriters
have informed us that they do not expect discretionary sales to
exceed 5% of the shares of common stock to be offered.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 125</B>
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Underwriting</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The following table shows the per share and total underwriting
discounts and commissions we will pay to the underwriters. These
amounts are shown assuming both no exercised and full exercise
of the underwriters&#146; option to purchase up to an
additional &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
from us.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="42%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Paid by us</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Total</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>No exercise</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Full exercise</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>No exercise</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Full exercise</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="16" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Per share</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We estimate that the total expenses of this offering payable by
us, not including underwriting discounts and commissions, will
be approximately
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NO SALES OF SIMILAR SECURITIES</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We and each of our directors, executive officers and certain of
our current stockholders have entered into lock-up agreements
with the underwriters. Under these lock-up agreements we and
each of these persons may not, without the prior written consent
of UBS Securities LLC, sell, offer to sell, contract or agree to
sell, hypothecate, hedge, pledge, grant any option to purchase
or otherwise dispose of or agree to dispose of, directly or
indirectly, any of our common stock or any securities
convertible into or exercisable or exchangeable for our common
stock, or warrants or other rights to purchase our common stock.
These restrictions will be in effect for a period of
180&nbsp;days after the date of this prospectus. These lock-up
agreements are subject to such stockholders&#146; rights to
transfer their shares of common stock as a bona fide gift or to
a trust for the benefit of an immediate family member or to an
affiliate, provided that such done or transferee agrees in
writing to be bound by the terms of the lock- up agreement. At
any time and without public notice, UBS Securities LLC may, in
its sole discretion release some or all of the affected
securities from these lock-up agreements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>INDEMNIFICATION AND CONTRIBUTION</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We have agreed to indemnify the underwriters and their
controlling persons against certain liabilities, including
liabilities under the Securities Act. If we are unable to
provide this indemnification, we will contribute to payments the
underwriters and their controlling persons may be required to
make in respect of those liabilities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NEW YORK STOCK EXCHANGE LISTING</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We will apply to have our common stock listed on The New York
Stock Exchange under the symbol &#147;ICO.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>PRICE STABILIZATION, SHORT POSITIONS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In connection with this offering, the underwriters may engage in
activities that stabilize, maintain or otherwise affect the
price of our common stock, including:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    stabilizing transactions;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    short sales;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    purchases to cover positions created by short sales;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    imposition of penalty bids;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    syndicate covering transactions.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Stabilizing transactions consist of bids or purchases made for
the purpose of preventing or retarding a decline in the market
price of our common stock while this offering is in progress.
These transactions
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 126</B>
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Underwriting</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
may also include making short sales of our common stock, which
involve the sale by the underwriters of a greater number of
shares of common stock than they are required to purchase in
this offering and purchasing shares of common stock on the open
market to cover positions created by short sales. Short sales
may be &#147;covered short sales,&#148; which are short
positions in an amount not greater than the underwriters&#146;
over-allotment option referred to above, or may be &#147;naked
short sales,&#148; which are short positions in excess of that
amount.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The underwriters may close out any covered short position either
by exercising their over-allotment option, in whole or in part,
or by purchasing shares in the open market. In making this
determination, the underwriters will consider, among other
things, the price of shares available for purchase in the open
market as compared to the price at which they may purchase
shares through the over-allotment option.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Naked short sales are in excess of the over-allotment option.
The underwriters must close out any naked short position by
purchasing shares in the open market. A naked short position is
more likely to be created if the underwriters are concerned that
there may be downward pressure on the price of the common stock
in the open market that could adversely affect investors who
purchased in this offering.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The underwriters also may impose a penalty bid. This occurs when
a particular underwriter repays to the underwriters a portion of
the underwriting discount received by it because the
representatives have repurchased shares sold by or for the
account of that underwriter in stabilizing or short covering
transactions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
As a result of these activities, the price of our common stock
may be higher than the price that otherwise might exist in the
open market. If these activities are commenced, they may be
discontinued by the underwriters at any time. The underwriters
may carry out these transactions on The New York Stock Exchange,
in the over-the-counter market or otherwise.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>DETERMINATION OF OFFERING PRICE</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Prior to this offering, there has been no public market for our
common stock, although certain private sales of our shares of
common stock are quoted on the Pink Sheets Electronic Quotation
Service. Our common stock is not listed, traded or quoted on any
other securities exchange. The public offering price for the
shares of common stock being sold in this offering will be
determined by negotiation between us and the representative of
the underwriters. In addition to the recent prices of our common
stock as quoted on the Pink Sheets Electronic Quotation Service,
the principal factors to be considered in determining the public
offering price include:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    the information set forth in this prospectus and otherwise
    available to the representatives;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    our history and prospects and the history of, and the prospects
    for, the industry in which we compete;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    our past and present financial performance and an assessment of
    our management;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    our prospects for future earnings and the present state of our
    development;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    the general condition of the securities markets at the time of
    this offering;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    the recent market prices of, and the demand for, publicly traded
    common stock of generally comparable companies;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    other factors deemed relevant by the underwriters and us.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The public offering price determined by negotiation between us
and the representative of the underwriters may differ from the
recent sales prices of our common stock as quoted on the Pink
Sheets Electronic Quotation Service.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 127</B>
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Underwriting</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>AFFILIATIONS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Certain of the underwriters and their affiliates have in the
past provided and may provide from time to time certain
commercial banking, financial advisory, investment banking and
other services for us which they were and will be entitled to
receive separate fees. The underwriters and their affiliates may
from time to time in the future engage in transactions with us
and perform services for us in the ordinary course of their
business. In particular, UBS Securities LLC and its affiliates
act as agent and are lenders under our senior credit facility
and have received and will continue to receive certain fees for
their services. We believe that the fees and commissions payable
in respect of participation in the credit facilities are
customary for borrowers with credit profiles similar to ours, in
a similar size financing as for borrowers in our industry. In
addition, UBS Securities LLC served as an advisor to us in
connection with the Anker acquisition, for which it received
customary fees for its services. Lehman Brothers Inc. acted as
the financial advisor to the ICG special committee with respect
to the Anker acquisition and received customary fees in
connection with its services. Lehman Brothers Inc. also owns 4.3
million shares of our common stock. The underwriters and their
affiliates may from time to time in the future engage in
transactions with us and perform services for us in the ordinary
course of their business.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 128</B>
</DIV>

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<DIV align="left" style="font-size: 10pt;">

</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<A name='124'></A>
</DIV>

<!-- link1 "Validity of the shares" -->

<DIV align="left" style="font-size: 16pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Validity of the shares
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The validity of the issuance of the shares of common stock to be
sold in this offering will be passed upon for us by Jones Day,
New York, New York. Latham&nbsp;&#38; Watkins LLP, New York, New
York will act as counsel to the underwriters.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 129</B>
</DIV>

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<DIV align="left" style="font-size: 10pt;">

</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<A name='125'></A>
</DIV>

<!-- link1 "Experts" -->

<DIV align="left" style="font-size: 16pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Experts
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The combined financial statements of Horizon NR, LLC and certain
subsidiaries (&#147;Combined Companies&#148;) as of
September&nbsp;30, 2004 and December&nbsp;31, 2003, and for the
period January&nbsp;1, 2004 to September&nbsp;30, 2004, the year
ended December&nbsp;31, 2003, the period May&nbsp;10, 2002 to
December&nbsp;31, 2002, and for the period January&nbsp;1, 2002
to May&nbsp;9, 2002, included in this prospectus and the related
financial statement schedule included elsewhere in the
registration statement have been audited by Deloitte&nbsp;&#38;
Touche LLP, an independent registered public accounting firm, as
stated in their reports appearing in this prospectus and
elsewhere in the registration statement (which report on the
combined financial statements expresses an unqualified opinion
on the financial statements and includes explanatory paragraphs
referring to (1)&nbsp;fresh start reporting as of May&nbsp;9,
2002, (2)&nbsp;allocations of certain assets and expense items
applicable to Horizon and subsidiaries, and (3)&nbsp;the
bankruptcy filing of the Combined Companies and the fact the
combined financial statements do not include any adjustments
relating to the recoverability and classification of asset
carrying amounts or the amount and classification of liabilities
that might result should the Combined Companies be unable to
continue as a going concern), and are so included in reliance
upon the reports of such firm given upon their authority as
experts in accounting and auditing.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The consolidated financial statements of ICG, Inc. and
subsidiaries as of December&nbsp;31, 2004 and for period
October&nbsp;1, 2004 to December&nbsp;31, 2004, included in this
prospectus and the related financial statement schedule included
elsewhere the registration statement have been audited by
Deloitte&nbsp;&#38; Touche LLP, an independent registered public
accounting firm, as stated in their reports appearing in this
prospectus and elsewhere in the registration statement, and are
included in reliance upon the reports of such firm given upon
their authority as experts in accounting and auditing.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The consolidated financial statements of Anker Coal Group, Inc.
and subsidiaries as of December&nbsp;31, 2004 and for the year
ended December&nbsp;31, 2004, included in this prospectus have
been audited by Deloitte&nbsp;&#38; Touche LLP, an independent
registered public accounting firm, as stated in their report
appearing in this prospectus, and are included in reliance upon
the report of such firm given upon their authority as experts in
accounting and auditing.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The financial statements of CoalQuest Development LLC as of
December&nbsp;31, 2004 and for the year ended December&nbsp;31,
2004, included in this prospectus have been audited by
Deloitte&nbsp;&#38; Touche LLP, an independent registered public
accounting firm, as stated in their report appearing in this
prospectus, and are included in reliance upon the report of such
firm given upon their authority as experts in accounting and
auditing.
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='126'></A>
</DIV>

<!-- link1 "Experts--coal reserves" -->

<DIV align="left" style="font-size: 16pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Experts&#151;coal reserves
</DIV>

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The estimates of our proven and probable coal reserves referred
to in this prospectus, to the extent described in this
prospectus, have been prepared by us and reviewed by Marshall
Miller&nbsp;&#38; Associates, Inc.
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Where you can find additional information
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We have filed with the SEC a registration statement on
Form&nbsp;S-1 under the Securities Act with respect to the
issuance of shares of our common stock being offered by this
prospectus. This prospectus, which forms a part of the
registration statement, does not contain all of the information
set forth in the registration statement. For further information
with respect to us and the shares of our common stock, reference
is made to the registration statement. We are not currently
subject to the informational requirements of the Exchange Act.
As a result of the offering of the shares of our common stock,
we will become subject to the informational requirements of the
Exchange Act, and, in accordance therewith, will file reports
and other information with the SEC. The registration statement,
such reports and other information can be inspected and copied
at the Public Reference Room of the SEC located at
Room&nbsp;1024, Judiciary Plaza, 450&nbsp;Fifth Street, N.W.,
Washington&nbsp;D.C. 20549. Copies of such materials, including
copies of all or any portion of the registration statement, can
be obtained from the Public Reference Room of the SEC at
prescribed rates. You can call the SEC at 1-800-SEC-0330 to
obtain information on the operation of the Public Reference
Room. These materials may also be accessed electronically by
means of the SEC&#146;s home page on the Internet
(http://www.sec.gov).
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<I>Ash.</I> Impurities consisting of iron, alumina and other
incombustible matter that are contained in coal. Since ash
increases the weight of coal, it adds to the cost of handling
and can affect the burning characteristics of coal.
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<I>Base load.</I> The lowest level of power production needs
during a season or year.
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<I>Bituminous coal.</I> A middle rank coal (between
sub-bituminous and anthracite) formed by additional pressure and
heat on lignite. The most common type of coal with moisture
content less than 20% by weight and heating value of 10,500 to
14,000&nbsp;Btus per pound. It is dense and black and often has
well-defined bands of bright and dull material. It may be
referred to as soft coal.
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<I>British thermal unit, or &#147;Btu.&#148;</I> A measure of
the thermal energy required to raise the temperature of one
pound of pure liquid water one degree Fahrenheit at the
temperature at which water has its greatest density
(39&nbsp;degrees Fahrenheit). On average, coal contains about
22&nbsp;million Btu per ton.
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<I>By-product.</I> Useful substances made from the gases and
liquids left over when coal is changed into coke.
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<I>Central Appalachia.</I> Coal producing area in eastern
Kentucky, Virginia and southern West Virginia.
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<I>Clean Air Act Amendments.</I> A comprehensive set of
amendments to the federal law governing the nation&#146;s air
quality. The Clean Air Act was extensively amended in 1970, 1977
and 1990 to address significant air pollution problems. The 1990
amendments broadened and strengthened the original law to
address specific problems such as acid deposition, urban smog,
hazardous air pollutants, and stratospheric ozone depletion.
</DIV>

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<I>Clean coal burning technologies.</I> A number of innovative,
new technologies designed to use coal in a more efficient and
cost-effective manner while enhancing environmental protection.
Several promising technologies include fluidized-bed combustion,
integrated gasification combined cycle, limestone injection
multi-stage burner, enhanced flue gas desulfurization (or
scrubbing), coal liquefaction, and coal gasification.
</DIV>

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<I>Coal Resources.</I> Coal resources are coal bearing bodies
that have been sufficiently sampled and analyzed, but do not
qualify as a commercially viable coal reserve as prescribed by
SEC rules until a final comprehensive SEC prescribed evaluation
is performed.
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<I>Coal seam.</I> A bed or stratum of coal. Usually applies to a
large deposit.
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<I>Coal washing.</I> The process of separating undesirable
materials from coal based on differences in densities. Pyritic
sulfur, or noncarbonaceous material, is heavier and sinks in
water; coal is lighter and floats.
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<I>Coke.</I> A hard, dry carbon substance produced by heating
coal to a very high temperature in the absence of air. Coke is
used in the manufacture of iron and steel. Its production
results in a number of useful byproducts.
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<I>Compliance coal.</I> Coal which, when burned, emits
1.2&nbsp;pounds or less of sulfur dioxide per million Btu, as
required by Phase&nbsp;II of the Clean Air Act Acid Rain program.
</DIV>

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<I>Continuous miner.</I> A machine that simultaneously extracts
and loads coal. This is distinguished from a conventional, or
cyclic, unit, which must stop the extraction process for loading
to commence.
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<I>Continuous mining.</I> Any coal mining process which tears
the coal from the face mechanically (see &#147;Face&#148;) and
loads continuously, thus eliminating the separate cycles of
cutting, drilling, shooting and loading. This is to be
distinguished from conventional mining, an older process in
which these operations are cyclical.
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<I>Conventional mining.</I> A deep mining method that includes
inserting explosives in a coal seam, blasting the seam and
removing the coal onto a conveyor or shuttle car.
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<I>Deep mine.</I> An underground coal mine.
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<I>Dragline.</I> A large excavating machine used in the surface
mining process to remove overburden (see
&#147;Overburden&#148;). The dragline has a large bucket
suspended from the end of a huge boom, which may be
275&nbsp;feet long or larger. The bucket is suspended by cables
and capable of scooping up vast amounts of overburden as it is
pulled across the excavation area. The dragline, which can
&#147;walk&#148; on huge pontoon-like &#147;feet&#148;, is one
of the largest land-based machines in the world.
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<I>Face.</I> The exposed area of an underground coalbed from
which coal is extracted.
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<I>Fluidized bed combustion.</I> A process with a high success
rate in removing sulfur from coal during combustion. Crushed
coal and limestone are suspended in the bottom of a boiler by an
upward stream of hot air. The coal is burned in this bubbling,
liquid-like (or fluidized) mixture. Rather than released as
emissions, sulfur from combustion gases combines with the
limestone to form a solid compound recovered with the ash.
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<I>Fossil fuel.</I> Fuel such as coal, crude oil or natural gas,
formed from the fossil remains of organic material.
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<I>Gasification.</I> Any of various processes by which coal is
turned into low, medium or high-Btu gas.
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<I>High Btu coal.</I> Coal which has an average heat content of
12,500&nbsp;Btus per pound or greater.
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<I>Highwall.</I> The unexcavated face of exposed overburden and
coal in a surface mine or in a face or bank on the uphill side
of a contour mine excavation.
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<I>Highwall miner.</I> A mining system consisting of a remotely
controlled continuous miner that extracts coal and conveys it by
auger, belt, or chain conveyors to the outside. The cut is
typically a rectangular, horizontal cut from a highwall bench,
reaching depths of several hundred feet or deeper.
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<I>Illinois Basin.</I> Coal producing area in Illinois, Indiana
and western Kentucky.
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<I>Lignite.</I> The lowest rank of coal with a high moisture
content of up to 45% by weight and heating value of 6,500 to
8,300&nbsp;Btus per pound. It is brownish black and tends to
oxidize and disintegrate when exposed to air.
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<I>Longwall miner.</I> A deep mining machine that uses a steel
plow or rotating drum, which is pulled mechanically
back-and-forth across a long face of coal. The loosened coal
falls onto a conveyed for removal from the mine.
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<I>Longwall mining.</I> The most productive underground mining
method in the United States. One of three main underground coal
mining methods currently in use. Employs a steel plow, or
rotation drum, which is pulled mechanically back and forth
across a face of coal that is usually several hundred feet long.
The loosened coal falls onto a conveyor for removal from the
mine.
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<I>Low sulfur coal.</I> Coal which, when burned, emits
1.6&nbsp;pounds or less of sulfur dioxide per million Btu.
</DIV>

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<I>Mid sulfur coal.</I> Coal which, when burned, emits between
1.6 and 4.5&nbsp;pounds of sulfur dioxide per million Btu.
</DIV>

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<I>Metallurgical coal.</I> The various grades of coal suitable
for carbonization to make coke for steel manufacture. Also known
as &#147;met&#148; coal, its quality depends on four important
criteria: volatility, which affects coke yield; the level of
impurities including sulfur and ash, which affects coke quality;
composition, which affects coke strength; and basic
characteristics, which affect coke oven safety. Met coal
typically has a particularly high Btu but low ash and sulfur
content.
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<I>Mountaintop mining.</I> A method of surface mining practiced
in the Appalachian coal fields of the eastern United States.
Mountaintop mining allows the mine operator to completely remove
the layers of dirt and rock covering a coal seam, making the
entire deposit economical for extraction. Although valley
fill&#151;the depositing of rock and dirt from the surface mine
into adjacent valleys&#151;has recently become controversial, it
is a practice that is not unique to the mining industry.
Hundreds of valley fills were constructed throughout the country
during the building of the vital Interstate Highway System.
Mountaintop mining is essential to viability of the modern
Appalachian coal industry.
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<I>Nitrogen oxide (NOx).</I> A gas formed in high temperature
environments such as coal combustion. It is a harmful pollutant
that contributes to acid rain.
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<I>Northern Appalachia.</I> Coal producing area in Maryland,
Ohio, Pennsylvania and northern West Virginia.
</DIV>

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<I>Overburden.</I> Layers of earth and rock covering a coal
seam. In surface mining operations, overburden is removed prior
to coal extraction.
</DIV>

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<I>Pillar.</I> An area of coal left to support the overlying
strata in a mine; sometimes left permanently to support surface
structures.
</DIV>

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<I>Powder River Basin.</I> Coal producing area in northeastern
Wyoming and southeastern Montana. This is the largest known
source of coal reserves and the largest producing region in the
United States.
</DIV>

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<I>Preparation plant.</I> Usually located on a mine site,
although one plant may serve several mines. A preparation plant
is a facility for crushing, sizing and washing coal to prepare
it for use by a particular customer. The washing process has the
added benefit of removing some of the coal&#146;s sulfur content.
</DIV>

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<I>Probable reserves.</I> Reserves for which quantity and grade
and/or quality are computed from information similar to that
used for proven reserves, but the sites for inspection, sampling
and measurement are farther apart or are otherwise less
adequately spaced. The degree of assurance, although lower than
that for proven reserves, is high enough to assume continuity
between points of observation.
</DIV>

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<I>Proven reserves.</I> Reserves for which: (a)&nbsp;quantity is
computed from dimensions revealed in outcrops, trenches,
workings or drill holes; grade and/or quality are computed from
the results of detailed sampling; and (b)&nbsp;the sites for
inspection, sampling and measurement are spaced so closely and
the geologic character is so well defined that size, shape,
depth and mineral content of reserves are well-established.
</DIV>

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<I>Reclamation.</I> The process of restoring land and
environmental values to a mining site after the coal or ore is
extracted. Reclamation operations are usually underway where the
resources have already been taken from a mine, even as
production operations are taking place elsewhere at the site.
This process commonly includes recontouring or reshaping the
land to its approximate original appearance, restoring topsoil
and planting native grasses, trees and ground covers. Mining
reclamation is closely regulated by both state and federal law.
</DIV>

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<I>Recoverable reserve.</I> The amount of coal that can be
recovered from the Demonstrated Reserve Base. The recovery
factor for underground mines is about 60.0%, and for surface
mines about 80.0% to 90.0%. Using these percentages, there are
about 275&nbsp;billion tons of recoverable reserves in the
United States.
</DIV>

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<I>Reserve.</I> That part of a mineral deposit that could be
economically and legally extracted or produced at the time of
the reserve determination.
</DIV>

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<I>Roof.</I> The stratum of rock or other mineral above a coal
seam; the overhead surface of a coal working place.
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<I>Resources.</I> Concentrations of coal in such forms that
economic extraction is currently or may become feasible.
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<I>Room and pillar mining.</I> A method of underground mining in
which about half of the coal is left in place to support the
roof of the active mining area. Large &#147;pillars&#148; are
left at regular intervals while &#147;rooms&#148; of coal are
extracted.
</DIV>

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<I>Scrubber (flue gas desulfurization system).</I> Any of
several forms of chemical/physical devices which operate to
neutralize sulfur compounds formed during coal combustion. These
devices combine the sulfur in gaseous emissions with other
chemicals to form inert compounds, such as gypsum, that must
then be removed for disposal. Although effective in
substantially reducing sulfur from combustion gases, scrubbers
require about 6% to 7% of a power plant&#146;s electrical output
and thousands of gallons of water to operate.
</DIV>

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<I>Steam coal.</I> Coal used by electric power plants and
industrial steam boilers to produce electricity, steam or both.
It generally is lower in Btu heat content and higher in volatile
matter than metallurgical coal.
</DIV>

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<I>Sub-bituminous coal.</I> Dull coal that ranks between lignite
and bituminous coal. Its moisture content is between 20% and 30%
by weight, and its heat content ranges from 7,800 to
9,500&nbsp;Btus per pound of coal.
</DIV>

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<I>Sulfur.</I> One of the elements present in varying quantities
in coal that contributes to environmental degradation when coal
is burned. Sulfur dioxide is produced as a gaseous by-product of
coal combustion.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Surface mine.</I> A mine in which the coal lies near the
surface and can be extracted by removing the covering layer of
soil (see &#147;Overburden&#148;). About 60% of total
U.S.&nbsp;coal production comes from surface mines.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Tons.</I> A &#147;short&#148; or net ton is equal to 2,000
pounds. A &#147;long&#148; or British ton is equal to
2,240&nbsp;pounds; a &#147;metric&#148; tonne is approximately
2,205&nbsp;pounds. The short ton is the unit of measure referred
to in this prospectus.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Truck-and-shovel/loader mining.</I> Similar forms of mining
where large shovels or front-end loaders are used to remove
overburden, which is used to backfill pits after the coal is
removed. Smaller shovels load coal in haul trucks for
transportation to the preparation plant or rail loadout.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Underground mine.</I> Also known as a deep mine. Usually
located several hundred feet below the earth&#146;s surface, an
underground mine&#146;s resource is removed mechanically and
transferred by shuttle car or conveyor to the surface. Most
common in the coal industry, underground mines primarily are
located east of the Mississippi River, and account for about
37.4% of total annual U.S.&nbsp;coal production.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Unit train.</I> A train of 100 or more cars carrying only
coal. A typical unit train can carry at least 10,000 tons of
coal in a single shipment.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 135</B>
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">

</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<A name='129'></A>
</DIV>

<!-- link1 "Index to financial statements" -->

<DIV align="left" style="font-size: 16pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Index to financial statements
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="85%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>ICG, Inc. and Subsidiaries</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Report of Independent Registered Public Accounting Firm</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>F-2</B></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Consolidated Balance Sheet as of December&nbsp;31, 2004</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>F-3</B></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Consolidated Statement of Operations for the period
    October&nbsp;1, 2004 to December&nbsp;31, 2004</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>F-4</B></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Consolidated Statement of Stockholders&#146; Equity for the
    period October&nbsp;1, 2004 to December&nbsp;31, 2004</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>F-5</B></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Consolidated Statements of Cash Flows for the period
    October&nbsp;1, 2004 to December&nbsp;31, 2004</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>F-6</B></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Notes to Consolidated Financial Statements as of
    December&nbsp;31, 2004 and for the period October&nbsp;1, 2004
    to December&nbsp;31, 2004</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>F-7</B></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Horizon NR, LLC and Certain Subsidiaries</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Report of Independent Registered Public Accounting Firm</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>F-22</B></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Combined Balance Sheets as of September&nbsp;30, 2004 and
    December&nbsp;31, 2003</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>F-24</B></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Combined Statements of Operations for the period January&nbsp;1,
    2004 to September&nbsp;30, 2004, the year ended
    December&nbsp;31, 2003, the period May&nbsp;10, 2002 to
    December&nbsp;31, 2002 (reorganized companies) and the period
    January&nbsp;1, 2002 to May&nbsp;9, 2002 (predecessor companies)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>F-25</B></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Combined Statements of Members&#146; Deficit for the period
    January&nbsp;1, 2004 to September&nbsp;30, 2004, the year ended
    December&nbsp;31, 2003, the period May&nbsp;10, 2002 to
    December&nbsp;31, 2002 (reorganized companies) and the period
    January&nbsp;1, 2002 to May&nbsp;9, 2002 (predecessor companies)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>F-26</B></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Combined Statements of Cash Flows for the period January&nbsp;1,
    2004 to September&nbsp;30, 2004, the year ended
    December&nbsp;31, 2003, the period May&nbsp;10, 2002 to
    December&nbsp;31, 2002 (reorganized companies) and the period
    January&nbsp;1, 2002 to May&nbsp;9, 2002 (predecessor companies)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>F-27</B></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Notes to Combined Financial Statements as of September&nbsp;30,
    2004, for the period January&nbsp;1, 2004 to September&nbsp;30,
    2004, year ended December&nbsp;31, 2003, the period May&nbsp;10,
    2002 to December&nbsp;31, 2002 (reorganized companies) and the
    period January&nbsp;1, 2002 to May&nbsp;9, 2002 (predecessor
    companies)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>F-28</B></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Anker Coal Group, Inc.</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Independent Auditors&#146; Report</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>F-59</B></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Consolidated Balance Sheet as of December&nbsp;31, 2004</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>F-60</B></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Consolidated Statement of Operations for the year ended
    December&nbsp;31, 2004</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>F-61</B></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Consolidated Statement of Stockholders&#146; Deficit for the
    year ended December&nbsp;31, 2004</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>F-62</B></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Consolidated Statement of Cash Flows for the year ended
    December&nbsp;31, 2004</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>F-63</B></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Notes to Consolidated Financial Statements for the year ended
    December&nbsp;31, 2004</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>F-64</B></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>CoalQuest Development, LLC</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Independent Auditors&#146; Report</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>F-73</B></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Balance Sheet as of December&nbsp;31, 2004</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>F-74</B></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Statement of Income for the year ended December&nbsp;31, 2004</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>F-75</B></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Statement of Members&#146; Equity for year ended
    December&nbsp;31, 2004</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>F-76</B></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Statement of Cash Flows for the year ended December&nbsp;31, 2004</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>F-77</B></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Notes to Financial Statements for the year ended
    December&nbsp;31, 2004</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>F-78</B></TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> F-1</B>
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>ICG, Inc. and Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 15pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The Board of Directors
</DIV>

<DIV align="left" style="font-size: 10pt;">
ICG, Inc.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We have audited the accompanying consolidated balance sheet of
ICG, Inc. and subsidiaries (the Company) as of December&nbsp;31,
2004, and the related consolidated statements of operations,
stockholders&#146; equity, and cash flows for the period from
October&nbsp;1, 2004 through December&nbsp;31, 2004. These
financial statements are the responsibility of the
Company&#146;s management. Our responsibility is to express an
opinion on these financial statements based on our audit.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. The Company is not required to
have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audit included
consideration of internal control over financial reporting as a
basis for designing audit procedures that are appropriate in the
circumstances but not for the purpose of expressing an opinion
on the effectiveness of the Company&#146;s internal control over
financial reporting. Accordingly, we express no such opinion. An
audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In our opinion, such consolidated financial statements present
fairly, in all material respects, the financial position of the
Company as of December&nbsp;31, 2004 and the results of its
operations and its cash flows for the period from
October&nbsp;1, 2004 through December&nbsp;31, 2004, in
conformity with accounting principles generally accepted in the
United States of America.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Louisville, Kentucky
</DIV>

<DIV align="left" style="font-size: 10pt;">
April&nbsp;22, 2005
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> F-2</B>
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>ICG, Inc. and Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>CONSOLIDATED BALANCE SHEET</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="75%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>



<TR style="font-size: 8pt;">
    <TD colspan="6" align="right" nowrap><B>December&nbsp;31, 2004</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(in</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>thousands,</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>except share</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>and per</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>share data)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="7" align="left" valign="top">
    <B>ASSETS</B></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    CURRENT ASSETS:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash and cash equivalents</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>23,967</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Trade accounts receivable (net of allowance for doubtful
    accounts of $2,669)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>40,417</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Inventories, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,943</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred income taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,188</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Prepaid insurance</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,142</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Prepaid expenses and other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,899</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total current assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>93,556</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    PROPERTY, PLANT AND EQUIPMENT, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>157,136</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    DEBT ISSUANCE COSTS, Net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,865</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    ADVANCE ROYALTIES</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,424</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    GOODWILL</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>183,946</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    DEFERRED INCOME TAXES, NON-CURRENT</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,741</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    OTHER NON-CURRENT ASSETS</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,307</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>459,975</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="7" align="left" valign="top">
    <B>LIABILITIES AND STOCKHOLDERS&#146; EQUITY</B></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    CURRENT LIABILITIES:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Trade accounts payable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>21,250</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current portion of long-term debt and capital leases</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,022</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current portion of reclamation and mine closure costs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,682</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued income tax</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,232</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued expenses and other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>33,854</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total current liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>66,040</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    NON-CURRENT LIABILITIES, less current portion</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Long-term debt and capital leases</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>173,446</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Reclamation and mine closure costs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>40,616</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Long-term employee benefits</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>18,007</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other non-current liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,466</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total non-current liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>239,535</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>305,575</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    STOCKHOLDERS&#146; EQUITY</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Preferred stock-par value $0.0001, 200,000,000 shares
    authorized, none issued</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Common stock-par value $0.0001, 1,800,000,000 shares authorized,
    106,605,999 issued and outstanding</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Paid-in capital</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>150,140</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Retained earnings</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,249</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total stockholders&#146; equity</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>154,400</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total liabilities and stockholders&#146; equity</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>459,975</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
See notes to consolidated financial statements.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> F-3</B>
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>ICG, Inc. and Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>CONSOLIDATED STATEMENT OF OPERATIONS</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="64%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="12%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Period from</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>October&nbsp;1, 2004 to</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>December&nbsp;31, 2004</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="7" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>(in thousands,</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>except share</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>and per share</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>data</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    REVENUES</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Coal sales revenues</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>130,463</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Freight and handling revenues</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>880</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other revenues</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,766</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total revenues</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>136,109</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    COSTS AND EXPENSES:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Freight and handling costs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>880</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cost of coal sales and other revenues</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>113,707</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    (exclusive of items shown separately below)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Depreciation, depletion and amortization</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,943</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Selling, general and administrative</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,194</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    (exclusive of depreciation and amortization shown separately
    above)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gain on sale of assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(10</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total costs and expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>126,714</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income from operations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,395</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    INTEREST AND OTHER INCOME (EXPENSE):</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,453</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>898</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total interest and other income (expense)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,555</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income before income tax expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,840</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    INCOME TAX EXPENSE</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,591</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,249</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="8">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Earnings per share:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Basic</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.04</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Diluted</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.04</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Average common shares outstanding:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Basic</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>106,605,999</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Diluted</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>106,605,999</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
See notes to consolidated financial statements.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> F-4</B>
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>ICG, Inc. and Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>CONSOLIDATED STATEMENT OF STOCKHOLDERS&#146; EQUITY</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="51%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap><B>For the Period October&nbsp;1, 2004 to</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap><B>December&nbsp;31, 2004</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Additional</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Common</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Paid-in</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Retained</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Stock</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Capital</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Earnings</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Total</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="17" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap><B>(In thousands)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Capital Contribution, October 1, 2004</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>11</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>150,140</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>150,151</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income for the period</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,249</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,249</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Balance&#151;December&nbsp;31, 2004</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>11</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>150,140</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,249</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>154,400</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
See notes to the consolidated financial statements.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> F-5</B>
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>ICG, Inc. and Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>CONSOLIDATED STATEMENT OF CASH FLOWS</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="62%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="13%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="12%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Period from</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>October 1, 2004 to</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>December 31, 2004</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right"><B>(in thousands)</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    CASH FLOWS FROM OPERATING ACTIVITIES:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,249</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Adjustments to reconcile net income to net cash provided by
    (used in) operating activities:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Depreciation, depletion and amortization</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,943</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Amortization of finance costs included in interest expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>266</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    (Gain) on sale of assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(10</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred income taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>359</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    CHANGES IN ASSETS AND LIABILITIES:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    (Increase) decrease in:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Receivables</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>19,713</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Inventories</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,140</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Prepaid expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,030</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,308</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred finance costs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(53</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Increase (decrease)&nbsp;in:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accounts payable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,815</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,527</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Reclamation and mine closure costs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(591</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>873</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total adjustments</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25,960</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net cash provided by operating activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>30,209</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    CASH FLOWS FROM INVESTING ACTIVITIES:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Proceeds from the sale of assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Additions to property, plant and equipment and mine development</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(5,583</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Acquisition of Horizon Natural Resources</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(323,593</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net cash (used in) investing activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(329,166</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    CASH FLOWS FROM FINANCING ACTIVITIES:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Capital contribution</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>150,151</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Repayments on long-term debt</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,969</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Repayments on capital leases</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(235</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Long-term borrowings</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>175,977</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net cash provided by financing activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>322,924</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net increase in cash and cash equivalents, and cash and cash
    equivalents, end of period</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>23,967</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Supplemental information:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash paid for interest</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>536</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Supplemental disclosure of non-cash items:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Acquisition of Horizon Natural Resources included in accrued
    expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,191</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
See notes to the consolidated financial statements.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> F-6</B>
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>ICG, Inc. and Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>As of December 31, 2004 and for the period October 1, 2004 to
December 31, 2004</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>(Dollars in thousands)</B>
</DIV>

<DIV style="margin-top: 15pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B>1.</B></TD>
    <TD>
    <B>ORGANIZATION</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
ICG, Inc. and Subsidiaries (&#147;ICG&#148; or
&#147;Company&#148;) was formed in 2004 by
WL&nbsp;Ross&nbsp;&#38; Co., LLC, (&#147;WLR&#148;), and other
investors to acquire and operate competitive coal mining
facilities. On September&nbsp;30, 2004 ICG acquired certain
properties and assets, and assumed certain liabilities, of
Horizon Natural Resources Company (&#147;Horizon&#148;) through
Section 363 asset sales of the United States Bankruptcy Court.
Prior to the acquisition, ICG did not have any material assets,
liabilities or results of operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
ICG has one reportable segment: the extracting, processing and
marketing of steam and metallurgical coal from deep and surface
mines, principally located in Kentucky, West Virginia and
Illinois, for sale to electric utilities and industrial
customers primarily in the eastern United&nbsp;States.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The September&nbsp;30, 2004 acquisition of certain properties,
assets and liabilities was accounted for as a purchase. The
aggregate purchase price of $325,784 was allocated to the assets
acquired and liabilities assumed based on the respective fair
values as determined partially by an independent
appraisal/valuation. In connection with the acquisition, the
Company is required to make certain payments to Lexington Coal
Company (see note 10).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The following table summarizes the estimated fair values of
assets acquired and liabilities assumed at the date of
acquisition.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="72%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>At September 30,</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2004</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accounts receivable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>60,130</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Inventory</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>20,083</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Prepaids and other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,508</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Property, plant, and equipment, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>159,496</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Advance royalties</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,314</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Debt issuance costs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,078</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,256</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Goodwill</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>183,896</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accounts payable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(25,065</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(35,422</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Employee benefits</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(17,127</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued reclamation</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(43,889</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other long-term liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(7,474</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net assets acquired</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>325,784</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Funded by:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Capital contribution</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>150,151</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Long-term debt</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>175,633</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>325,784</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> F-7</B>
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>ICG, Inc. and Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&#151;(CONTINUED)</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>As of December 31, 2004 and for the period October 1, 2004 to
December 31, 2004</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>(Dollars in thousands)</B>
</DIV>

<DIV style="margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B>2.</B></TD>
    <TD>
    <B>SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND GENERAL</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Principles of Consolidation</I></B>&#151; The consolidated
financial statements include the accounts of ICG and its
wholly-owned subsidiaries. Significant intercompany transactions
and balances have been eliminated in consolidation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Company Environment and Risk Factors</I></B>&#151; In the
course of business activities the Company is exposed to a number
of risks including: the possibility of the termination or
alteration of coal sales contracts, fluctuating market
conditions of coal (often impacted by the weather) and
transportation/fuel costs, competitive industry and
overcapacity, changing government regulations, unexpected
maintenance and equipment failure, employee benefits cost
control, changes in estimates of proven and probable mineral
interests, labor relations issues, loss of key employees,
satisfactory resolution of technology issues, as well as the
ability to obtain financing, necessary mining permits and
control of adequate recoverable mineral interests. In addition,
adverse weather and geological conditions may increase mining
costs, sometimes substantially.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Cash and Cash Equivalents</I></B>&#151; The Company
considers all highly liquid debt instruments with maturities of
three months or less at the time of purchase to be cash
equivalents.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Trade Accounts Receivable and Allowance for Doubtful
Accounts</I></B>&#151; Trade accounts receivable are recorded at
the invoiced amount and do not bear interest. The allowance for
doubtful accounts is the Company&#146;s best estimate of the
amount of probable credit losses in the Company&#146;s existing
accounts receivable. The Company establishes provisions for
losses on accounts receivable when it is probable that all or
part of the outstanding balance will not be collected. The
Company regularly reviews collectibility and establishes or
adjusts the allowance as necessary using the specific
identification method. The Company does not have any off-balance
sheet credit exposure related to its customers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Inventories</I></B>&#151; Inventories are stated at lower
of average cost, determined on a first-in, first-out
(&#147;FIFO&#148;) basis, or market. Components of inventories
consist of coal and parts and supplies, net of an allowance for
obsolesence (see Note&nbsp;3). Coal inventories represent coal
contained in stockpiles and exposed in the pit.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Derivative Financial Instruments</I></B>&#151; The Company
utilizes derivative financial instruments in the management of
its interest rate exposures. The Company does not use derivative
financial instruments for trading or speculative purposes.
Statement of Financial Accounting Standards (&#147;SFAS&#148;)
No.&nbsp;133, <I>Accounting for Derivative Instruments and
Hedging Activities, </I>as amended, establishes accounting and
reporting standards for derivative instruments and hedging
activities, requiring that all derivatives be recognized in the
financial statements as assets or liabilities and that they be
measured at fair value. Changes in fair value are recorded as
adjustments to the assets or liabilities being hedged in
&#147;Other Comprehensive Income,&#148; or in current earnings,
depending on whether the derivative is designated and qualifies
for hedge accounting, the type of hedge transaction represented
and the effectiveness of the hedge.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In December 2004, the Company entered into an Interest Rate Cap
Agreement (&#147;Cap Agreement&#148;). The Cap Agreement is for
a notional amount of $88,000. This agreement, at a cap rate of
4.5%&nbsp;per annum, expires December&nbsp;15, 2006. The Cap
Agreement, included in other noncurrent assets in the
Company&#146;s consolidated balance sheet, was written down to
its fair value of approximately $164 as of December&nbsp;31,
2004. The writedown resulted in a loss of approximately $20 in
the period ended December&nbsp;31, 2004.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> F-8</B>
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>ICG, Inc. and Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&#151;(CONTINUED)</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>As of December 31, 2004 and for the period October 1, 2004 to
December 31, 2004</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>(Dollars in thousands)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Advance Royalties</I></B>&#151; The Company is required,
under certain royalty lease agreements, to make minimum royalty
payments whether or not mining activity is being performed on
the leased property. These minimum payments may be recoupable
once mining begins on the leased property. The recoupable
minimum royalty payments are capitalized and amortized based on
the units-of-production method at a rate defined in the lease
agreement once mining activities begin. Unamortized deferred
royalty costs are expensed when mining has ceased or a decision
is made not to mine on such property. The Company has recorded
advance royalties of $7,022 ($1,598 included in prepaid expense
and other and $5,424 included in non-current assets) at
December&nbsp;31, 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Property, Plant and Equipment </I></B>&#151; Property,
plant and equipment, including mineral interest and mine
development costs are recorded at cost, which includes
construction overhead and interest, where applicable.
Expenditures for major renewals and betterments are capitalized
while expenditures for maintenance and repairs are expensed as
incurred. Mineral interest costs are depleted using the
units-of-production method, based on estimated recoverable
interest. Mine development costs are amortized using the
units-of-production method, based on estimated recoverable
interest. Other property, plant and equipment is depreciated
using the straight-line method with estimated useful lives
substantially as follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="86%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Years</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Buildings</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10 to 45</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mining and other equipment and related facilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1 to 20</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Land improvements</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Transportation equipment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2 to &nbsp;7</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Furniture and fixtures</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3 to 10</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Depreciation, depletion and amortization expense for the period
October&nbsp;1, 2004 to December&nbsp;31, 2004 was $7,943.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Goodwill</I></B>&#151; Goodwill represents the excess of
costs over fair value of net assets of the former Horizon
businesses acquired. Pursuant to SFAS&nbsp;No.&nbsp;142,
<I>Goodwill and Other Intangible Assets</I>, goodwill and
intangible assets acquired in a purchase business combination
and determined to have an indefinite useful life are not
amortized, but instead tested for impairment at least annually
in accordance with the provisions of SFAS&nbsp;No.&nbsp;142. The
Company performs its impairment test in December of each year.
The impairment review in December 2004 supported the carrying
value of goodwill.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Debt Issuance Costs</I></B>&#151; Debt issuance costs
reflect fees incurred to obtain financing. Debt issuance costs
are amortized (included in interest expense) using the effective
interest method, over the life of the related debt. Amortization
expense for the period October&nbsp;1, 2004 to December&nbsp;31,
2004 was $266.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Restricted Cash</I></B>&#151; Restricted cash includes
amounts required by various royalty and reclamation agreements.
Restricted cash of $4,243 at December&nbsp;31, 2004 is included
in other non-current assets ($3,744) and prepaid expenses and
other ($499).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Coal Mine Reclamation and Mine Closure Costs</I></B>&#151;
Future cost requirements for land reclamation are estimated
where surface and deep mining operations have been conducted,
based on the Company&#146;s interpretation of the technical
standards of regulations enacted by the U.S. Office of Surface
Mining, as well as state regulations. These costs relate to
reclaiming the pit and support acreage at surface mines and
sealing portals at deep mines. Other costs common to both types
of mining are related to reclaiming refuse and slurry ponds as
well as holding and related termination/exit costs.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> F-9</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>ICG, Inc. and Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&#151;(CONTINUED)</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>As of December 31, 2004 and for the period October 1, 2004 to
December 31, 2004</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>(Dollars in thousands)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The Company records these reclamation obligations under the
provision of SFAS&nbsp;No.&nbsp;143, <I>Accounting for Asset
Retirement Obligations. </I>SFAS&nbsp;No.&nbsp;143 addresses
asset retirement obligations that result from the acquisition,
construction or normal operation of long-lived assets. It
requires companies to recognize asset retirement obligations at
fair value when the liability is incurred. Upon initial
recognition of a liability, that cost should be capitalized as
part of the related long-lived asset and allocated to expense
over the useful life of the asset. The asset retirement costs
are recorded in mineral interests.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The Company expenses reclamation performed prior to final mine
closure. The establishment of the end of mine reclamation and
closure liability is based upon permit requirements and requires
significant estimates and assumptions, principally associated
with regulatory requirements, costs and recoverable mineral
interest. Annually, the end of mine reclamation and closure
liability is reviewed and necessary adjustments are made,
including adjustments due to mine plan and permit changes and
revisions to cost and production levels to optimize mining and
reclamation efficiency. The amount of such adjustments is
reflected in the SFAS&nbsp;No.&nbsp;143 year-end calculation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Asset Impairments and Accelerated Mine Closing
Accruals</I></B>&#151; The Company follows
SFAS&nbsp;No.&nbsp;144, <I>Accounting for the Impairment or
Disposal of Long-Lived Assets,</I> which requires that projected
future cash flows from use and disposition of assets be compared
with the carrying amounts of those assets. When the sum of
projected cash flows is less than the carrying amount,
impairment losses are recognized. In determining such impairment
losses, discounted cash flows are utilized to determine the fair
value of the assets being evaluated. Also, in certain
situations, expected mine lives are shortened because of changes
to planned operations. When that occurs and it is determined
that the mine&#146;s underlying costs are not recoverable in the
future, reclamation and mine closing obligations are accelerated
and the mine closing accrual is increased accordingly. To the
extent it is determined asset carrying values will not be
recoverable during a shorter mine life, a provision for such
impairment is recognized.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Income Tax Provision</I></B>&#151; The provision for
income taxes includes federal, state and local income taxes
currently payable and deferred taxes arising from temporary
differences between the financial statement and tax basis of
assets and liabilities. Income taxes are recorded under the
liability method. Under this method, deferred income taxes are
recognized for the estimated future tax effects of differences
between the tax basis of assets and liabilities and their
financial reporting amounts as well as net operating loss
carryforwards and tax credits based on enacted tax laws.
Valuation allowances are established when necessary to reduce
deferred tax assets to the amount expected to be realized.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Revenue Recognition</I></B>&#151; Most revenues result
from sales under long-term coal contracts with electric
utilities, industrial companies or other coal-related
organizations, primarily in the eastern United States. Revenues
are recognized on coal sales in accordance with the terms of the
sales agreement, which is usually when the coal is shipped to
the customer, and title has passed.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Freight and handling costs paid directly to third-party carriers
and invoiced to coal customers are recorded as freight and
handling costs and freight and handling revenues, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Other revenues generally consist of equipment and parts sales,
equipment rebuild and maintenance services, coal handling and
processing, royalties, commissions on coal trades, contract
mining and rental income. These revenues are recognized in the
period earned or when the service is completed. Advance payments
received are deferred and recognized in revenue as coal is
shipped or rentals are earned.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> F-10</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>ICG, Inc. and Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&#151;(CONTINUED)</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>As of December 31, 2004 and for the period October 1, 2004 to
December 31, 2004</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>(Dollars in thousands)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Postretirement Benefits Other Than Pensions</I></B>&#151;
As prescribed by SFAS&nbsp;No.&nbsp;106, <I>Employers&#146;
Accounting for Postretirement Benefits Other Than Pensions</I>,
accruals are made, based on annual outside actuarial valuations,
for the expected costs of providing postretirement benefits
other than pensions, which are primarily medical benefits,
during an employee&#146;s actual working career.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The Company accounts for health care and life insurance benefits
provided for current and future retired employees and their
dependents by accruing the cost of such benefits over the
service lives of employees. Unrecognized actuarial gains and
losses are amortized over the estimated average remaining
service period for active employees.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Workers&#146; Compensation and Black Lung
Benefits</I></B>&#151; The Company is liable under federal and
state laws to pay workers&#146; compensation and pneumoconiosis
(black lung) benefits to eligible employees. The Company
utilizes a combination of a large deductible insurance program,
self-insurance and state workers&#146; compensation fund
participation to secure on-going obligations depending on the
location of the operation. Each of these liabilities are
evaluated annually by outside actuaries.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Management&#146;s Use of Estimates</I></B>&#151; The
preparation of the consolidated financial statements in
conformity with U.S. generally accepted accounting principles
requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues
and expenses during the reporting period. Significant items
subject to such estimates and assumptions include the allowance
for doubtful accounts; inventories; mineral interest; asset
retirement obligations; employee benefit liabilities; future
cash flows associated with assets; useful lives for
depreciation, depletion and amortization; workers&#146;
compensation claims; postretirement benefits other than
pensions; income taxes; and fair value of financial instruments.
Due to the subjective nature of these estimates, actual results
could differ from those estimates.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Accounting Pronouncements</I></B>&#151;In January 2005,
the Financial Accounting Standards Board (&#147;FASB&#148;)
issued Statement 123R, <I>Accounting for Stock Based
Compensation</I>. FASB Statement&nbsp;123R supersedes APB
Opinion&nbsp;25, <I>Accounting for Stock Issued to
Employees</I>. This statement establishes standards for
accounting transactions in which an entity exchanges its equity
instruments for goods or services. It also addresses
transactions in which an entity incurs liabilities in exchange
for goods or services that are based on the fair value of the
entity&#146;s equity instruments or that may be settled by the
issuance of those equity instruments. FASB&nbsp;123R is
effective as of the beginning of the first fiscal year beginning
after June&nbsp;15, 2005. The Company believes adoption of FASB
123R will have no material impact on its financial position,
results of operations, or cash flows.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In December 2003, the FASB issued FASB Interpretation
NO.&nbsp;46 (&#147;FIN&nbsp;46-R&#148;), <I>Consolidation of
Variable Interest Entities&#151;an Interpretation of Accounting
Research Bulletin </I>(ARB)&nbsp;No.&nbsp;51 which is effective
for financial statements issued for fiscal years beginning after
December&nbsp;15, 2003. This Interpretation of Accounting
Research Bulletin&nbsp;No.&nbsp;51, <I>Consolidated Financial
Statements </I>which replaces FASB Interpretation No.&nbsp;46,
<I>Consolidation of Variable Interest Entities</I>, addresses
consolidation by business enterprises of variable interest
entities. Management has determined the adoption of
FIN&nbsp;46-R did not have a material effect on its consolidated
financial statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Emerging Issues Task Force (&#147;EITF&#148;) Issue&nbsp;04-02
addresses the issue of whether mineral rights are tangible or
intangible assets. FASB Statement No.&nbsp;141, <I>Business
Combinations</I>, requires the acquirer in
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> F-11</B>
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>ICG, Inc. and Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&#151;(CONTINUED)</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>As of December 31, 2004 and for the period October 1, 2004 to
December 31, 2004</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>(Dollars in thousands)</B>
</DIV>

<DIV align="left" style="font-size: 9pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
a business combination to allocate the cost of the acquisition
to the acquired assets and liabilities. At the
March&nbsp;17&#151;18, 2004 meeting, the EITF reached a
consensus that mineral rights (defined as the legal right to
explore, extract and retain at least a portion of the benefits
from mineral deposits) are tangible assets. As a result of the
EITF&#146;s consensus, the FASB issued FASB Staff Position
(&#147;FSP&#148;) Nos. SFAS&nbsp;No.&nbsp;141-a and
SFAS&nbsp;No.&nbsp;142-a, Interaction of FASB Statements
No.&nbsp;141, <I>Business Combinations </I>and No&nbsp;142,
<I>Goodwill and Other Intangible Assets</I>, and EITF Issue
No.&nbsp;04-02, <I>Whether Mineral Rights Are Tangible or
Intangible Assets</I>, which amend SFAS&nbsp;Nos.&nbsp;141
and&nbsp;142 and results in the classification of mineral rights
as tangible assets. The Company has recorded mineral rights as
tangible assets.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>3.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;INVENTORIES</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
As of December&nbsp;31, 2004 inventories consisted of the
following:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="86%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Coal</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,443</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Parts and supplies, net of a reserve for obsolescence of $3,089</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,500</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>13,943</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>4.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;PROPERTY, PLANT AND
EQUIPMENT</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
As of December&nbsp;31, 2004 property, plant and equipment are
summarized by major classification as follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="85%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Land and land improvements</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>16,798</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mining and other equipment and related facilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>72,590</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mine development and contract costs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16,012</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mineral interests</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>53,031</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mine development in process</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,373</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Construction work in process</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,275</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>165,079</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Less-accumulated depreciation, depletion and amortization</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(7,943</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net property, plant and equipment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>157,136</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Included in property, plant and equipment is $6,648, as of
December&nbsp;31, 2004, related to development and construction
projects for which depreciation, depletion and amortization have
not yet commenced. Realization of these projects is reviewed on
a periodic basis.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> F-12</B>
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>ICG, Inc. and Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&#151;(CONTINUED)</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>As of December 31, 2004 and for the period October 1, 2004 to
December 31, 2004</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>(Dollars in thousands)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>5.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ACCRUED EXPENSES AND OTHER</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
As of December&nbsp;31, 2004 accrued expenses and other
consisted of the following:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="86%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Payroll, bonus and vacation expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>16,163</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Sales and use tax</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>143</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Severance tax</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,355</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Federal reclamation tax</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>918</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Excise/black lung tax</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>344</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Personal property tax</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,080</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Franchise tax</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>58</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,793</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>33,854</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>6.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;DEBT</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
As of December&nbsp;31, 2004 debt consisted of the following:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="82%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="6" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Term Notes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>175,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Capital leases (Note&nbsp;10)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>681</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Insurance financing and other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,787</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>179,468</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Less&#151;current portion</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,022</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Long-term debt and capital leases</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>173,446</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Credit Facility</I></B>&#151;At December&nbsp;31, 2004 the
Company has a Credit Facility consisting of a $110,000 revolving
credit facility, of which up to a maximum of $60,000 may be
utilized for letters of credit, and a $175,000 term loan
facility.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The revolving credit facility has a five-year term and matures
on November&nbsp;5, 2009. Borrowings bear interest, at the
Company&#146;s option, at either LIBOR plus a margin ranging
from 2.00% to 2.50% per annum or the prime rate plus a margin
ranging from 1.00% to 1.50% per annum. As of December&nbsp;31,
2004, ICG had $55,575 available on this revolving credit
facility, net of $54,425 in letters of credit for insurance,
workers&#146; compensation and reclamation bonds.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The Term Notes mature on November&nbsp;5, 2010. Principal
payments of $438 per quarter are due from January&nbsp;10, 2005
through October&nbsp;10, 2009 and payments of $41,563 per
quarter are due each of the remaining four quarters. The Notes
bear interest, at the Company&#146;s option, at either LIBOR
plus 2.75% per annum or the prime rate plus 1.75% per annum. As
of December&nbsp;31, 2004 the Notes bear interest at 4.99%.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Borrowings under the Credit Facility are secured by
substantially all of the Company&#146;s and its subsidiaries
assets, as well as by a pledge of 100% of the stock of all
subsidiaries. In addition, the Company and each of its other
non-borrower subsidiaries guarantee all of the indebtedness
under the Credit Facility.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The Credit Facility requires certain mandatory prepayments upon
the receipt of the proceeds from certain asset sales, casualty
events, debt or equity offerings and in the event that there is
excess cash flow as determined in accordance with the credit
facility. The Credit Facility requires 50% of the
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> F-13</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>ICG, Inc. and Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&#151;(CONTINUED)</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>As of December 31, 2004 and for the period October 1, 2004 to
December 31, 2004</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>(Dollars in thousands)</B>
</DIV>

<DIV align="left" style="font-size: 9pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
proceeds of a public offering (net of any underwriting fees,
discounts, commissions and other costs and expenses) to be
applied as a prepayment of the Term Notes.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The Credit Facility contains financial covenants including; a
maximum leverage ratio, a minimum interest coverage ratio, a
minimum fixed charge coverage ratio and a limit on capital
expenditures. The Credit Facility also contains certain other
covenants, including, but not limited to, limitations on the
incurrence of indebtedness, asset dispositions, acquisitions,
investments, dividends and other restricted payments, liens and
transactions with affiliates. At December&nbsp;31, 2004, the
Company was in compliance with all the above covenants.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Future maturities of the Term Notes are as follows as of
December&nbsp;31, 2004:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="86%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="left" nowrap><B>Year ending December 31:</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2005</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,750</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2006</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,750</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2007</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,750</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2008</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,750</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2009</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,750</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Thereafter</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>166,250</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>175,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B>7.</B></TD>
    <TD>
    <B>ASSET RETIREMENT OBLIGATION</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
At December&nbsp;31, 2004 the Company recorded an asset
retirement obligation accrual for reclamation and mine closure
costs totaling $43,298.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The following schedule represents activity in the accrual for
reclamation and mine closure cost obligation.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; ">

<TR style="font-size: 1pt;">
    <TD width="73%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="12%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>October 1, 2004 to</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December 31, 2004</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Liabilities assumed in the acquisition</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>43,889</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Expenditures</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,349</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accretion</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>758</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Balance</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>43,298</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The accrued reclamation and mine closure cost obligations are
included in the accompanying consolidated balance sheet as
follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="74%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December&nbsp;31, 2004</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current portion of reclamation and mine closure costs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,682</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Non-current reclamation and mine closure costs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>40,616</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>43,298</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> F-14</B>
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>ICG, Inc. and Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&#151;(CONTINUED)</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>As of December 31, 2004 and for the period October 1, 2004 to
December 31, 2004</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>(Dollars in thousands)</B>
</DIV>

<DIV style="margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B>8.</B></TD>
    <TD>
    <B>INCOME TAXES</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The income tax provision for the period October&nbsp;1, 2004 to
December&nbsp;31, 2004 is comprised of the following:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="71%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>October 1, 2004 to</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December 31, 2004</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Federal</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,901</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    State</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>331</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2"><FONT style="font-size: 10pt">&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,232</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>359</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,591</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The following table presents the difference between the actual
tax provision and the amounts obtained by applying the statutory
U.S.&nbsp;federal income tax rate of 35% to income and losses
before income taxes.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="74%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>October 1, 2004 to</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December 31, 2004</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Federal provision computed at statutory rate</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,394</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    State income tax provision (net of federal tax benefits and
    apportionment factors) computed at statutory rate</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>219</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(22</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,591</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Significant components of the Company&#146;s deferred tax assets
and liabilities as of December&nbsp;31, 2004 are summarized as
follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="81%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="7" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred Tax Assets:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued employee benefits</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>6,932</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued reclamation and closure</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16,670</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,720</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3"><FONT style="font-size: 10pt">&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>27,322</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred Tax Liabilities:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Property, mineral reserves and mine development costs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16,514</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>879</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3"><FONT style="font-size: 10pt">&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17,393</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net deferred tax asset</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>9,929</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Classified in balance sheet:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred income taxes&#151;current</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,188</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred income taxes&#151;non-current</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,741</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>9,929</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> F-15</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>ICG, Inc. and Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&#151;(CONTINUED)</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>As of December 31, 2004 and for the period October 1, 2004 to
December 31, 2004</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>(Dollars in thousands)</B>
</DIV>

<DIV style="margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B>9.</B></TD>
    <TD>
    <B>EMPLOYEE BENEFITS</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Employee benefits at December&nbsp;31, 2004 are summarized as
follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="84%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="6" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Postretirement benefits</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>8,013</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Black lung benefits</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,994</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>18,007</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Less&#151; current portion</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Long-term portion</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>18,007</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Certain employees of the Company, who have completed eight years
of service with the former Horizon companies, will be eligible
to receive postretirement benefits after two years of service
with the Company. Upon reaching the retirement age of 65, in
order to receive a maximum medical life-time benefit of one
hundred thousand dollars per family, eligible retired employees
must pay two hundred and fifty dollars per month per family. The
Company accrues postretirement benefit expense based on
actuarially determined amounts. The amount of postretirement
benefit cost accrued is impacted by various assumptions
(discount rate, health care cost increases, etc.) that the
Company uses in determining its postretirement obligations.
Postretirement benefit expense for the Company totaled $330 for
the period October&nbsp;1, 2004 to December&nbsp;31, 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Valuation Date</I></B>&#151; All actuarially determined
benefits were determined as of December&nbsp;31, 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Postretirement Benefits</I></B>&#151; The following
postretirement benefit information was prepared for ICG for the
period October&nbsp;1, 2004 to December&nbsp;31, 2004.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="68%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="13%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="12%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Other Postretirement</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Benefits</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>December 31, 2004</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Changes in Benefit Obligations:</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Benefit obligations assumed in the acquisition</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>7,683</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Service costs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>219</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest cost</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>111</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Actuarial loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>121</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Benefit obligation at end of period</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>8,134</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Fair value of plan assets at end of period</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Funded Status of the Plan:</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accumulated obligations less plan assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(8,134</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Unrecognized actuarial loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>121</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net liability recognized</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(8,013</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Weighted Average Assumptions:</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="85%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Discount rate</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    5.75%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> F-16</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>ICG, Inc. and Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&#151;(CONTINUED)</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>As of December 31, 2004 and for the period October 1, 2004 to
December 31, 2004</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>(Dollars in thousands)</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 18pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="71%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>October 1, 2004 to</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December 31, 2004</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net periodic benefit cost:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Service cost</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>219</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest cost</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>111</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Benefit cost</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>330</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
For measurement purposes, a 10% annual rate of increase in the
per capita cost of covered health care benefits was assumed,
gradually decreasing to 5% in 2014 and remaining level
thereafter.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The expense and liability estimates can fluctuate by significant
amounts based upon the assumptions used by the actuaries. As of
December&nbsp;31, 2004, a one-percentage-point change in assumed
health care cost trend rates would have the following effects:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 3pt; ">

<TR style="font-size: 1pt;">
    <TD width="64%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>1-Percentage-</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>1-Percentage-</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Point</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Point</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Increase</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Decrease</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="8" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Effect on total of service and interest cost components</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>174</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(156</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Effect on postretirement benefit obligation</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>987</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(889</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
On December&nbsp;8, 2003, the President of the United States
signed into law the Medicare Prescription Drug, Improvement and
Modernization Act of 2003 (&#147;the Act&#148;). The Act
introduces a prescription drug benefit under Medicare
(&#147;Medicare Part&nbsp;D&#148;) as well as a federal subsidy
to sponsors of retiree health care benefit plans that provide a
benefit that is at least actuarially equivalent to Medicare
Part&nbsp;D.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In May 2004, the FASB issued further guidance with the release
of FASB Staff Position No.&nbsp;FAS 106-2, <I>Accounting and
Disclosure Requirements related to the Medicare Prescription
Drug, Improvement and Modernization Act of 2003 </I>(&#147;FSP
106-2&#148;). The effective date of FSP&nbsp;106-2 is for the
first interim or annual period beginning after June&nbsp;15,
2004. As of December&nbsp;31, 2004, the Company is unable to
conclude whether the benefits provided by the plan are
actuarially equivalent to benefits under Part D. Consequently,
the Company has not reduced its other post-employment benefit
obligation for the potential benefit of the Act.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Workers&#146; Compensation and Black Lung</I></B>&#151;
The operations of the Company are subject to the federal and
state workers&#146; compensation laws. These laws provide for
the payment of benefits to disabled workers and their
dependents, including lifetime benefits for black lung. The
Company&#146;s subsidiary operations are fully insured by either
a large deductible insurance program or state fund for
workers&#146; compensation obligations and self-insured for
black lung obligations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The Company&#146;s actuarially determined liability for
self-insured black lung benefits is based on a 5.75% discount
rate and various other assumptions including incidence of
claims, benefits escalation, terminations and life expectancy.
The annual black lung expense consists of actuarially determined
amounts for self-insured obligations. The estimated amount of
discounted obligations for self-insured black lung claims plus
an estimate for incurred but not reported claims was $9,917 as
of December&nbsp;31, 2004. The unrecognized projected black lung
benefit obligations (difference between recorded accrual and
projected obligations) at December&nbsp;31, 2004 was
approximately $77 and is being provided for over the future
service period of current employees. The projected black lung
obligations may vary in a given year based on the timing of
claims filed and changes in actuarial assumptions. The Company
recorded expenses related to black lung of $551 for the period
October&nbsp;1, 2004 to December&nbsp;31, 2004.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> F-17</B>
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>ICG, Inc. and Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&#151;(CONTINUED)</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>As of December 31, 2004 and for the period October 1, 2004 to
December 31, 2004</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>(Dollars in thousands)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>401(k) Plans</I></B>&#151; The Company sponsors a savings
and retirement plan for substantially all employees. The Company
matches voluntary contributions of participants up to a maximum
contribution of 3% of a participant&#146;s salary. The Company
also contributes an additional 3% non-elective contribution for
every employee eligible to participate in the program. The
expense under this plan for the Company was $733 for the period
October&nbsp;1, 2004 to December&nbsp;31, 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>10.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;COMMITMENTS AND
CONTINGENCIES</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Guarantees and Financial Instruments with Off-balance
Sheet Risk</I></B>&#151; In the normal course of business, the
Company is a party to certain guarantees and financial
instruments with off-balance sheet risk, such as bank letters of
credit and performance or surety bonds. No liabilities related
to these arrangements are reflected in the Company&#146;s
consolidated balance sheet. Management does not expect any
material losses to result from these guarantees or off-balance
sheet financial instruments. The amount of bank letters of
credit outstanding as of December&nbsp;31, 2004 is $54,677,
including $54,425 outstanding under the revolving credit
facility. The Company is in the process of transferring
outstanding surety bonds, related to its reclamation
obligations, applicable to certain of the former Horizon
companies acquired on September&nbsp;30, 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Coal Sales Contracts and Contingency</I></B>&#151;As of
December&nbsp;31, 2004, the Company had commitments under
thirteen sales contracts to deliver annually scheduled base
quantities of coal to nine customers. The contracts expire from
2005 through 2020 with the Company contracted to supply a
minimum of approximately 48&nbsp;million tons of coal over the
remaining lives of the contracts (maximum of approximately
10.5&nbsp;million tons in 2005). The Company also has
commitments to purchase certain amounts of coal to meet its
sales commitments. The purchase coal contracts expire through
2006 and provide the Company a minimum of approximately
5.2&nbsp;million tons of coal through the remaining lives of the
contracts (approximately 2.6&nbsp;million tons per year).
Certain of the contracts have sales price adjustment provisions,
subject to certain limitations and adjustments, based on a
variety of factors and indices.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Leases</I></B>&#151;The Company leases various mining,
transportation and other equipment under operating and capital
leases. Lease expense for the period October&nbsp;1, 2004 to
December&nbsp;31, 2004 was $5,885. Property under capital leases
included in property, plant and equipment in the consolidated
balance sheet at December&nbsp;31, 2004 was approximately $975,
less accumulated depreciation of approximately $97. Depreciation
of assets under capital leases is included in depreciation
expense.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The Company also leases mineral interests under agreements that
call for royalties to be paid as the coal is mined. Total
royalty expense for the period October&nbsp;1, 2004 to
December&nbsp;31, 2004 was approximately $5,119. Certain
agreements require minimum annual royalties to be paid
regardless of
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> F-18</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>ICG, Inc. and Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&#151;(CONTINUED)</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>As of December 31, 2004 and for the period October 1, 2004 to
December 31, 2004</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>(Dollars in thousands)</B>
</DIV>

<DIV align="left" style="font-size: 9pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
the amount of coal mined during the year. Certain agreements may
be cancelable at the Company&#146;s discretion. Approximate
non-cancelable future minimum lease and royalty payments are as
follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="60%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Operating</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Capital</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Royalties</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Leases</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Leases</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="12" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Year ended December&nbsp;31,</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2005</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>7,348</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>13,506</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>540</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2006</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,348</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>172</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2007</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,339</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,059</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2008</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,189</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2009</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,195</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Thereafter</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>29,345</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total minimum lease payments</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>712</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Less&#151;amount representing interest</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>31</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Present value of minimum lease payments (Note&nbsp;6)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>681</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Less&#151;current portion</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>485</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>196</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Bonding Royalty and Additional
Royalty</I></B>&#151;Lexington Coal Company, LLC (LCC) was
organized in part by the founding ICG Stockholders in
conjunction with the acquisition of the former Horizon
companies. LCC was organized to assume certain reclamation
liabilities and assets of Horizon not otherwise being acquired
by ICG or others. There is a limited commonality of ownership of
LCC and ICG. In order to provide support to LCC, ICG provided a
$10,000 letter of credit to support reclamation obligations
(Bonding Royalty) and in addition agreed to pay a .75% royalty
on the gross sales receipts for coal mined and sold by the
former Horizon companies that ICG acquired from Horizon until
the completion by LCC of all reclamation liabilities that LCC
assumed from Horizon (Additional Royalty). On September&nbsp;30,
2004 the Company prepaid $4,000 of such Additional Royalties,
accounting for the payment as additional purchase consideration.
All such Additional Royalties paid in the future will be
recorded as additional purchase price. For the Bonding Royalty,
ICG is required to pay an additional .75% on gross sales
referred to above, to a fund, controlled by one of its sureties
until all letters of credit issued by such surety for both ICG
and LCC are cash collateralized. As of December&nbsp;31, 2004,
ICG had accrued approximately $831 under this Bonding Royalty.
Amounts in the fund controlled by the Surety under this Bonding
Royalty will be returned to ICG as reclamation of properties is
performed by&nbsp;LCC or ICG and Surety Bonds are released.
Under the provisions of FIN&nbsp;46, ICG has determined it does
not hold a significant variable interest in LCC and it is not
the primary beneficiary of LCC.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Legal Matters</I></B>&#151;From time to time, the Company
is involved in legal proceedings arising in the ordinary course
of business. In the opinion of management the Company has
recorded adequate reserves for these liabilities and there is no
individual case or group of related cases pending that is likely
to have a material adverse effect on the financial condition,
results of operations or cash flows of the Company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Commissions</I></B>&#151;The Company has various sales and
agency agreements with third parties, whereby the Company pays a
$.05 per ton commission on various coal sales agreements. The
costs are expensed as the coal is delivered. The Company
incurred commission expense of $1 for the period October&nbsp;1,
2004 to December&nbsp;31, 2004.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> F-19</B>
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>ICG, Inc. and Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&#151;(CONTINUED)</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>As of December 31, 2004 and for the period October 1, 2004 to
December 31, 2004</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>(Dollars in thousands)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Environmental Matters</I></B>&#151;Based upon current
knowledge, the Company believes it is in material compliance
with environmental laws and regulations as currently
promulgated. However, the exact nature of environmental control
problems, if any, which the Company may encounter in the future
cannot be predicted, primarily because of the increasing number,
complexity and changing character of environmental requirements
that may be enacted by federal and state authorities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Performance Bonds</I></B>&#151;The Company has $54,677,
including $54,425 outstanding under the revolving credit
facility, of letters of credit outstanding, a portion of which
($45,000, including $10,000 to LCC&#151;see bonding royalty
above) provide support to the third parties for their issuance
of surety bonds. In addition, the Company has posted cash
collateral of $4,243 to secure other reclamation and performance
commitments. This cash collateral is included in other
non-current assets on the consolidated balance sheet as of
December&nbsp;31, 2004. The Company presently has a minimal
amount of outstanding surety bonds with third parties to secure
reclamation and other performance commitments. The Company is in
the process of transferring outstanding surety bonds, related to
its reclamation obligations, applicable to certain of the former
Horizon companies acquired on September&nbsp;30, 2004. As of
December&nbsp;31, 2004 the Company has accrued approximately
$251 for premiums related to the surety bonds that will be
transferred.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Contract Mining Agreements</I></B>&#151;The Company
performs contract-mining services for various third parties and
utilizes contract miners on some of its operations. Terms of the
agreements generally allow either party to terminate the
agreements on a short-term basis.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
ICG, Inc&#146;s subsidiary, ICG ADDCAR Systems, LLC (ADDCAR) has
entered into a contract to provide mining services for a period
of five years or until all mineable coal is removed. ADDCAR is
expected to produce and deliver a minimum of 500,000 tons per
year up to a maximum of 1,500,000 tons per year. The guaranteed
monthly contract tonnage shall be mutually agreed upon. Failure
to meet the guaranteed contract tonnage for three consecutive
months may result in termination of the contract. All work under
the contract must be completed no later than March&nbsp;31, 2008.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
ADDCAR entered into a three year contract to provide mining
services for a period of three years or until all mineable coal
is removed. ADDCAR is expected to produce and deliver a minimum
of 50,000 tons of coal per month that has an ash content of less
than fifteen percent. Failure to meet the guaranteed contract
tonnage and ash requirements for three consecutive months may
result in termination of the contract. All work under the
contract must be completed no later than January&nbsp;15, 2007.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>11.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;MAJOR CUSTOMERS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The Company had coal sales to the following major customers that
equaled or exceeded 10% of revenues:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="60%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>October&nbsp;1, 2004 to</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Total</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2004</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Receivable</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Total</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Balance</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Revenues</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="8" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Customer A</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,563</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>17,720</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Customer B</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,581</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>19,151</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Customer C</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,751</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>19,759</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> F-20</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>ICG, Inc. and Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&#151;(CONTINUED)</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>As of December 31, 2004 and for the period October 1, 2004 to
December 31, 2004</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>(Dollars in thousands)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>12.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;FAIR VALUE OF FINANCIAL
INSTRUMENTS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The estimated fair values of the Company&#146;s financial
instruments are determined based on relevant market information.
These estimates involve uncertainty and cannot be determined
with precision. The following methods and assumptions were used
to estimate the fair value of each class of financial instrument.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Cash and Cash Equivalents, Trade Accounts Receivable,
Trade Accounts Payable, and Other Current Liabilities:
</I></B>The carrying amounts approximate the fair value due to
the short maturity of these instruments.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Long-term Debt and Interest Rate Cap: </I></B>The fair
value of the term loan facility at December&nbsp;31, 2004 is
based on the market value of the facility, as the interest rate
is stated at LIBOR plus a margin. The carrying value of the
Company&#146;s capital lease obligations and other debt
approximate fair value at December&nbsp;31, 2004. The fair value
of the Company&#146;s interest rate cap was $164 at
December&nbsp;31, 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>13.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;RELATED-PARTY TRANSACTIONS
AND BALANCES</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Under an Advisory Services Agreement, dated as of
October&nbsp;1, 2004 between ICG and WLR, WLR has agreed to
provide advisory services to ICG (consisting of consulting and
advisory services in connection with strategic and financial
planning, investment management and administration and other
matters relating to the business and operation of ICG of a type
customarily provided by sponsors of U.S. private equity firms to
companies in which they have substantial investments, including
any consulting or advisory services which the Board of Directors
reasonably requests). WLR is to be paid a quarterly fee of
$500,000 and reimbursed for any reasonable out of pocket
expenses (including expenses of third-party advisors retained by
WLR). The agreement is for a period of seven years; however, it
may be terminated upon the occurrence of certain events.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
On October 1, 2004, ICG entered into an agreement with
Insuratex, LTD, a wholly owned subsidiary of funds controlled by
WLR, to administer and pay workers&#146; compensation claims
incurred by ICG. ICG paid an initial $2.5 million premium to
fund such claims and will continue to pay monthly installments
of $0.2&nbsp;million until a total premium of $5.0 million is
paid by ICG. The $5.0 million annual premium is to be adjusted
after the initial 18 months based on actual workers&#146;
compensation loss experienced.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>14.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SUBSEQUENT EVENT</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
On March&nbsp;31, 2005, ICG, Inc. entered into business
combination agreements with each of Anker Coal Group, Inc. and
CoalQuest Development LLC pursuant to which each of Anker and
CoalQuest are to become indirect wholly owned subsidiaries of
ICG. Holders of all of the outstanding stock of Anker and the
membership interests in CoalQuest will be issued shares of ICG
common stock with an aggregate value of $275&nbsp;million, up to
a maximum number of shares equal to 22.5% of the common stock of
ICG outstanding on the date of the agreement. The aggregate
number of common shares to be issued will be based upon the
price of the shares of common stock in a public offering. The
acquisitions are subject to certain closing conditions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
On March&nbsp;14, 2005, the Company entered into an employment
agreement with its President and Chief Executive Officer
containing provisions for base salary, bonus and grant of stock
options and restricted shares of common stock.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> F-21</B>
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Horizon NR, LLC and Certain Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Members</B>
</DIV>

<DIV align="left" style="font-size: 10pt;">
<B>Horizon NR, LLC and Certain Subsidiaries:</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We have audited the accompanying combined balance sheets of
Horizon NR, LLC and Certain Subsidiaries (&#147;Combined
Companies&#148;) (&#147;Debtors-in-Possession&#148;) as of
September&nbsp;30, 2004 and December&nbsp;31, 2003
(&#147;Reorganized Companies&#148;), and the related combined
statements of operations, members&#146; deficit and cash flows
for the Period January&nbsp;1, 2004 to September&nbsp;30, 2004,
for year ended December&nbsp;31, 2003, for the period
May&nbsp;10, 2002 to December&nbsp;31, 2002 (&#147;Reorganized
Companies&#148;), and for the period January&nbsp;1, 2002 to
May&nbsp;9, 2002 (&#147;Predecessor Companies&#148;). The
Combined Companies are wholly owned subsidiaries of Horizon
Natural Resources Company. These financial statements are the
responsibility of the Combined Companies&#146; management. Our
responsibility is to express an opinion on these financial
statements based on our audits.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit also includes examining,
on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing
the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
As more fully described in Notes&nbsp;2 to 4 to the combined
financial statements, the combined financial statements reflect
the application of fresh-start reporting as of May&nbsp;9, 2002
and, therefore, the combined financial statements for periods
after May&nbsp;9, 2002 are not comparable in all respects to the
combined financial statements for periods prior to such date.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In our opinion, such financial statements present fairly, in all
material respects, the combined financial position of the
Reorganized Companies as of September&nbsp;30, 2004 and
December&nbsp;31, 2003 and the combined results of their
operations and their combined cash flows for the period
January&nbsp;1, 2004 to September&nbsp;30, 2004, year ended
December&nbsp;31, 2003 and for the period from May&nbsp;10, 2002
through December&nbsp;31, 2002, in conformity with accounting
principles generally accepted in the United States of America.
Further, in our opinion, the financial statements referred to
above present fairly, in all material respects, the combined
results of the Predecessor Companies&#146; operations and their
combined cash flows for the period from January&nbsp;1, 2002
through May&nbsp;9, 2002, in conformity with accounting
principles generally accepted in the United States of America.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
As described in Note&nbsp;1 to the combined financial
statements, the accompanying combined financial statements have
been prepared from the separate records maintained by the
Combined Companies and are not necessarily indicative of the
conditions that would have existed or the results of operations
if the Combined Companies has been operated as unaffiliated
entities. Portions of certain assets and expense items represent
allocations made from items applicable to Horizon Natural
Resources Company (Parent) and subsidiaries as a whole.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The accompanying combined financial statements have been
prepared assuming that the Combined Companies will continue as a
going concern, which contemplates continuity of the Combined
Companies&#146; operations and realization of its assets and
payments of its liabilities in the ordinary course of business.
As discussed in Notes&nbsp;1 and&nbsp;2 of the combined
financial statements, the Combined Companies have suffered
recurring losses from operations and have a net members&#146;
deficit as of September&nbsp;30, 2004. The Combined Companies
also have significant debt obligations maturing in October 2004.
Furthermore, during November 2002, the Combined Companies&#146;
Parent and its other subsidiaries, inclusive of the Combined
Companies, filed voluntary petitions for reorganization under
Chapter&nbsp;11 of the United States Bankruptcy Code. The
accompanying combined financial statements
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> F-22</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Horizon NR, LLC and Certain Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
do not purport to reflect or provide for the consequences of
those bankruptcy proceedings. In particular, such combined
financial statements do not purport to show (a)&nbsp;as to
assets, their realizable value on a liquidation basis or their
availability to satisfy liabilities; (b)&nbsp;as to pre-petition
liabilities, the amounts that may be allowed for claims or
contingencies, or the status and priority thereof; (c)&nbsp;as
to member accounts, the effect of any changes that may be made
in the capitalization of the Combined Companies; or (d)&nbsp;as
to operations, the effect of any changes that may be made in its
business. In addition, as also described in Note&nbsp;2, the
Combined Companies are in default of various covenants and
provisions, including debt service payments, of its principal
debt instruments (other than its debtor-in-possession financing
facility) which makes such obligations currently due. These
matters raise substantial doubt about the Combined
Companies&#146; ability to continue as a going concern.
Management&#146;s plans in regard to these matters are also
described in Notes&nbsp;1 and 2. The Combined Companies are
currently operating their business as a debtor-in-possession
under the jurisdiction of the United States Bankruptcy Court,
and continuation of the Combined Companies as a going concern is
contingent upon, among other things, the Combined
Companies&#146; ability to comply with all debt covenants under
the existing debtor-in-possession financing agreements, to
generate sufficient cash flow from operations, and to obtain
financing sources to meet its future obligations. If no
reorganization plan is approved or no refinancing of the October
2004 debt obligations is obtained, it is possible that the
Combined Companies&#146; assets may be liquidated. The combined
financial statements do not include any adjustments relating to
the recoverability and classification of asset carrying amounts
or the amount and classification of liabilities that might
result should the Combined Companies be unable to continue as a
going concern.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
LOUISVILLE, KENTUCKY
</DIV>

<DIV align="left" style="font-size: 10pt;">
MARCH&nbsp;25, 2005
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> F-23</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Horizon NR, LLC and Certain Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>COMBINED BALANCE SHEETS</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>As of September 30, 2004 and</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>December 31, 2003</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="58%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Reorganized Companies</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>September 30,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>December 31,</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2003</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>(dollars in thousands)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>ASSETS</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    CURRENT ASSETS:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash and cash equivalents</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>859</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Trade accounts receivable (net of allowance for doubtful
    accounts of $5,441 and $7,798, respectively)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>46,117</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>35,658</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Inventories, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17,721</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,479</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred income taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,931</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,020</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Prepaid insurance</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,668</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,707</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Prepaid expenses and other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,399</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,333</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total current assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>78,836</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>73,056</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    PROPERTY, PLANT AND EQUIPMENT, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>276,157</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>318,552</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    DEBT ISSUANCE COSTS, Net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,437</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    ADVANCE ROYALTIES</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,501</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,976</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    OTHER NON-CURRENT ASSETS</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,804</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,043</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>370,298</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>407,064</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>LIABILITIES AND MEMBERS&#146; DEFICIT</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    LIABILITIES NOT SUBJECT TO COMPROMISE:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    CURRENT LIABILITIES:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Trade accounts payable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>29,975</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>36,670</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current portion of long-term debt and capital leases</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>30,603</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>62,698</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current portion of reclamation and mine closure costs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,206</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,206</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued expenses and other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>27,977</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>27,872</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total current liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>89,761</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>128,446</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    NON-CURRENT LIABILITIES, Less current portion</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Long-term debt and capital leases</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>29</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>315</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Reclamation and mine closure costs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>22,436</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>27,443</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred income taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,931</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,020</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other non-current liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>18,326</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>18,422</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total non-current liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>46,722</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>52,200</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total liabilities not subject to compromise</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>136,483</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>180,646</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    LIABILITIES SUBJECT TO COMPROMISE</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,272,609</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,170,747</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,409,092</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,351,393</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    MEMBERS&#146; DEFICIT:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Paid-In Capital</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>234,800</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>234,800</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Members&#146; investment (52,802 units authorized)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>200</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>200</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accumulated other comprehensive loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,683</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,683</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accumulated deficit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,270,111</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,175,646</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total members&#146; deficit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,038,794</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(944,329</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total liabilities and members&#146; deficit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>370,298</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>407,064</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
See notes to combined financial statements.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> F-24</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Horizon NR, LLC and Certain Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>COMBINED STATEMENTS OF OPERATIONS</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>For the period January&nbsp;1, 2004 to September&nbsp;30,
2004,</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>the Year Ended December&nbsp;31, 2003, the period
May&nbsp;10, 2002 to December&nbsp;31, 2002</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>(reorganized companies) and the period January&nbsp;1, 2002
to May&nbsp;9, 2002 (predecessor companies)</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 9pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="26%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>


<TR style="font-size: 7pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Reorganized</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Predecessor</B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Companies</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Companies</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="right" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Period from</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Period from</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Period from</B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>January 1, 2004 to</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Year Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>May 10, 2002 to</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>January 1, 2002 to</B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>September 30, 2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>December 31, 2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>December 31, 2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>May 9, 2002</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="18" align="right" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 7pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="right" nowrap><B>(in thousands)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    REVENUES (including amounts to related parties of $3,061 in the
    Predecessor period)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Coal Sales revenues</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>346,981</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>441,291</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>264,235</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>136,040</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Freight and handling revenues</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,700</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,008</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,032</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,947</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other revenues</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>22,702</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>31,771</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>27,397</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>21,183</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total revenues</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>373,383</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>481,070</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>297,664</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>160,170</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    COSTS AND EXPENSES:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Freight and handling costs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,700</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,008</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,032</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,947</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cost of coal sales and other revenues (including amounts to
    related parties of $9,116 in the Predecessor period) (exclusive
    of items shown separately below)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>306,429</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>400,652</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>251,361</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>114,767</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Depreciation, depletion and amortization</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>27,547</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>52,254</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>40,033</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>32,316</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Selling, general and administrative (including amounts to
    related parties of $3 in the Predecessor period) (exclusive of
    depreciation and amortization shown separately above)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,477</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>23,350</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16,695</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,677</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gain on sale of assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(226</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(4,320</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(39</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(93</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Writedowns and special items</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,018</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,100</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>729,953</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,323</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total costs and expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>355,945</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>489,044</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,044,035</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>167,937</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income (Loss) from operations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17,438</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(7,974</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(746,371</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(7,767</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    INTEREST AND OTHER INCOME (EXPENSE):</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(114,211</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(145,892</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(80,405</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(36,666</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Reorganization items</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>727</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(52,784</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(143,663</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,567,689</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other, net (including amounts to related parties of $93 in the
    Predecessor period)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,581</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>187</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,256</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>499</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total interest and other income (expense)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(111,903</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(198,489</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(222,812</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,531,522</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    NET INCOME (LOSS)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(94,465</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(206,463</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(969,183</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,523,755</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
See notes to combined financial statements.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> F-25</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Horizon NR, LLC and Certain Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>COMBINED STATEMENTS OF MEMBERS&#146; DEFICIT</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>For the Period January&nbsp;1, 2004 to September&nbsp;30,
2004,</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>the Year Ended December&nbsp;31, 2003, the period
May&nbsp;10, 2002 to December&nbsp;31, 2002</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>(reorganized companies) and the period January&nbsp;1, 2002
to May&nbsp;9, 2002 (predecessor companies)</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="31%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Accumulated</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Additional</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Other</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Members&#146;</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Paid-in</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Comprehensive</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Accumulated</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Investment</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Capital</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Loss</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Deficit</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Total</B></TD><TD></TD>
</TR>



<TR valign="bottom" style="font-size: 1px">
    <TD colspan="21" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap><B>(Dollars in thousands)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    PREDECESSOR COMPANIES:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Balance&#151;January&nbsp;1, 2002</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>53</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>163,913</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(7,720</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>$(878,508</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(722,262</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    January&nbsp;1, 2002 to May&nbsp;9, 2002, net income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,523,755</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,523,755</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Fresh-start accounting adjustments</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(53</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>71,087</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,720</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(645,247</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(566,493</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Balance&#151;May&nbsp;9, 2002 after fresh start adjustments</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>235,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>235,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    REORGANIZED COMPANIES:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Balance-May&nbsp;10, 2002</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>200</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>234,800</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>235,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    May&nbsp;10, 2002 to December&nbsp;31, 2002, net loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(969,183</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(969,183</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Minimum Pension Liability Adjustment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,824</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,824</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    BALANCE&#151;December&nbsp;31, 2002</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>200</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>234,800</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,824</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(969,183</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(738,007</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    January&nbsp;1, 2003 to December&nbsp;31, 2003, net loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(206,463</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(206,463</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Minimum pension liability adjustment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>141</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>141</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Balance- December&nbsp;31, 2003</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>200</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>234,800</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,683</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,175,646</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(944,329</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    January&nbsp;1, 2004 to September&nbsp;30, 2004, net loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(94,465</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(94,465</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    BALANCE&#151;September&nbsp;30, 2004</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>200</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>234,800</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(3,683</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>$(1,270,111</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1,038,794</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
See notes to combined financial statements.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> F-26</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Horizon NR, LLC and Certain Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>COMBINED STATEMENTS OF CASH FLOWS</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>For the Period January 1, 2004 to September 30, 2004,</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>Year Ended December 31, 2003 and the period May 10, 2002 to
December 31, 2002</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>(reorganized companies) and for the period January 1, 2002 to
May 9, 2002 (predecessor companies)</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 9pt; margin-top: 10pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="33%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
</TR>


<TR style="font-size: 7pt;">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Reorganized Companies</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Predecessor Companies</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Period from</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>For the</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Period from</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>January 1, 2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>year ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>May 10, 2002 to</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Period from</B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>to September 30,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>December 31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>December 31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>January 1, 2002 to</B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>May 9, 2002</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="19" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    CASH FLOWS FROM OPERATING ACTIVITIES:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income (loss)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(94,465</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(206,463</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(969,183</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,523,755</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Adjustments to reconcile net income (loss)&nbsp;to net cash
    provided by (used in) operating activities:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Depreciation, depletion and amortization</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>27,547</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>52,254</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>40,033</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>32,316</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Depreciation&nbsp;&#151; Allocation from Affiliates</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>127</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,118</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,930</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,723</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Amortization of finance costs included in interest expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,437</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,698</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,644</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,676</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gain on sale of assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(226</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(4,320</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(39</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(93</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gain on lease buyout</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,736</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Fresh start revaluation</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(645,824</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Fresh start adjustments</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(801,495</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gain on debt extinguishment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(161,584</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Writedowns and special items</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,018</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,100</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>729,953</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,323</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Provision for doubtful accounts</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>247</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,656</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,535</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,594</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Writeoff of net payables to other Horizon subsidiaries</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,272</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(5,432</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>188,282</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(264,621</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Changes in Assets and Liabilities:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    (Increase) decrease in:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Receivables</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(10,706</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>18,616</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(11,419</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,050</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Inventories</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(4,242</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(273</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,806</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(37,197</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Prepaid expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,971</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>19,374</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>64,809</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(17,032</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,287</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,313</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,811</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,666</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Increase (decrease)&nbsp;in:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accounts payable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,754</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(4,912</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>24,703</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(12,782</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>85,520</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>150,144</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>32,388</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>87,079</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Reclamation and mine closure costs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(4,007</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(11,942</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(31,957</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(23,060</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(95</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(5,552</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(8,924</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(15,690</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total adjustments</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>128,522</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>224,216</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,045,555</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,821,951</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net cash provided by (used in) operating activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>34,057</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17,753</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>76,372</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(298,196</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    CASH FLOWS FROM INVESTING ACTIVITIES:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Proceeds from the sale of assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,089</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15,388</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>636</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>122</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Additions to property, plant and equipment and mine development</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(6,624</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(16,937</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(13,435</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(10,963</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net cash used in investing activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,535</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,549</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(12,799</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(10,841</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    CASH FLOWS FROM FINANCING ACTIVITIES:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Repayments on long-term debt</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(4,698</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(13,729</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(183,162</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(304,449</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Borrowings on long-term debt</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>50,003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>574,700</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net borrowings/(repayments) on debtor-in-possession financing</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(27,080</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(737</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>56,027</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Financing costs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(11,238</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Repayments on capital leases</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(603</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(993</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(893</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net cash provided by (used in) financing activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(32,381</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(15,459</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(78,025</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>259,011</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net increase (decrease)&nbsp;in cash and cash equivalents</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(859</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>745</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(14,452</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(50,026</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash and cash equivalents, beginning of period</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>859</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>114</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,566</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>64,592</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash and cash equivalents, end of period</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>859</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>114</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>14,566</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt;">
See notes to combined financial statements.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> F-27</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Horizon NR, LLC and Certain Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO COMBINED FINANCIAL STATEMENTS</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>As of September 30, 2004, for the period January 1, 2004 to
September 30, 2004,</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>Year Ended December 31, 2003, the period May 10, 2002 to
December 31, 2002</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>(reorganized companies) and the period January 1, 2002 to May
9, 2002 (predecessor companies)</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>(Dollars in thousands)</B>
</DIV>

<DIV style="margin-top: 15pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B>1.</B></TD>
    <TD>
    <B>ORGANIZATION AND BASIS OF PRESENTATION</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Horizon NR, LLC (&#147;HNR&#148;) is a wholly-owned subsidiary
of Horizon Natural Resources Company. HNR has seventy-five
direct and indirect wholly-owned subsidiaries, seventeen of
which are included in the accompanying combined financial
statements. HNR and the seventeen subsidiaries are referred to
as the &#147;Combined Companies&#148; in the accompanying
combined financial statements and related footnotes. The
seventeen subsidiaries included are: Appalachian Realty Company,
Ayrshire Land Company, Bluegrass Coal Development Company,
Evergreen Mining Company, Fairview Land Company, LLC, Horizon
Natural Resources Sales Company, Leslie Resources, Inc.
(exclusive of Chaives Job), Leslie Resources Management, Inc.,
Sunny Ridge Enterprises, Inc., Sunny Ridge Mining Company, Inc.
(exclusive of Job&nbsp;10), Turris Coal Company, Ikerd-Bandy
Co., Inc., Shipyard River Coal Terminal Company, Franklin Coal
Sales Company, Kentucky Prince Mining Company, RP Terminal, LLC,
and Mining Technologies, Inc.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Horizon, formerly known as AEI Resources Holding, Inc.
(&#147;AEI&#148;), operated a coal mining business through its
subsidiaries in the United States. As discussed in Note&nbsp;2,
on November&nbsp;13, 2002 and November&nbsp;14, 2002, Horizon
filed voluntary petitions for reorganization under
Chapter&nbsp;11 of the United States Bankruptcy Code (the
&#147;Bankruptcy Code&#148;) in the United States Bankruptcy
Court (the &#147;Bankruptcy Court&#148;). Horizon completed its
November 2002 bankruptcy proceedings on September&nbsp;30, 2004
through the sale or transfer of certain properties, assets and
liabilities to International Coal Group, Inc. (&#147;ICG&#148;)
and others. Horizon had previously filed a voluntary petition
for reorganization under the Bankruptcy Code accompanied by a
prepackaged plan of reorganization on February&nbsp;28, 2002.
Horizon&#146;s first bankruptcy Plan of Reorganization became
effective May&nbsp;9, 2002 (see note&nbsp;4).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The combined financial statements as of September&nbsp;30, 2004,
for the period January&nbsp;1, 2004 to September&nbsp;30, 2004,
as of December&nbsp;31, 2003 and for the year then ended, and
the periods May&nbsp;10, 2002 to December&nbsp;31, 2002 and
January&nbsp;1, 2002 to May&nbsp;9, 2002 are carve-out financial
statements reflecting the operations and financial condition of
the Horizon properties acquired by ICG on September&nbsp;30,
2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Throughout the notes to the combined financial statements, the
term &#147;Predecessor Companies&#148; refers to the Combined
Companies, their operations and their cash flows for the period
from January&nbsp;1, 2002 through May&nbsp;9, 2002, while the
term &#147;Reorganized Companies&#148; refers to the Combined
Companies, their operations and their cash flows for periods
thereafter.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
These combined financial statements were prepared from the
separate accounts and records maintained by the Combined
Companies and are not necessarily indicative of the conditions
that would have existed or the results of operations if the
Combined Companies had been operated as unaffiliated
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> F-28</B>
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Horizon NR, LLC and Certain Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<DIV align="left" style="font-size: 10pt;">
<B>NOTES TO COMBINED FINANCIAL STATEMENTS&#151;(CONTINUED)</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>As of September 30, 2004, for the period January 1, 2004 to
September 30, 2004,</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>Year Ended December 31, 2003, the period May 10, 2002 to
December 31, 2002</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>(reorganized companies) and the period January 1, 2002 to May
9, 2002 (predecessor companies)</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>(Dollars in thousands)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
entities. Certain assets and expense items represent allocations
from Horizon. The accounts allocated, amount, and basis of
allocation are:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="57%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Horizon Amounts</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="left" nowrap><B>Account</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>September 30, 2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>December 31, 2003</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="8" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Vendor Advances</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>169</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>691</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Reclamation Deposits</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>52,706</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>54,743</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="37%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Amounts allocated to</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Combined Companies</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>September 30, 2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>December 31, 2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Basis of Allocation</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="12" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Vendor Advances</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>93</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>373</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom" nowrap>Coal Production Tons</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Reclamation Deposits</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,343</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom" nowrap>Premiums Paid</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="28%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap><B>Horizon Amounts</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>January 1, 2004-</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>January 1, 2003-</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>May 10, 2002-</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>January 1, 2002-</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>September 30, 2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>December 31, 2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>December 31, 2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>May 9, 2002</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="16" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Selling, general, and administrative expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>17,100</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>25,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>12,541</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>20,285</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="21%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>


<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap><B>Amounts allocated to</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap><B>Combined Companies</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>January 1, 2004-</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>January 1, 2003-</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>May 10, 2002-</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>January 1, 2002-</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>September 30, 2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>December 31, 2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>December 31, 2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>May 9, 2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Basis of Allocation</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="20" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Selling, general, and administrative expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>9,081</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>9,860</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,974</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>8,305</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="right" valign="bottom">Coal Production Hours</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Vendor advances were allocated to the Combined Companies using a
formula based on the ratio of actual coal production tons for
the Combined Companies compared to the actual coal production
tons for Horizon. Reclamation deposits were allocated to the
Combined Companies using a formula based on the ratio of
reclamation premiums paid for the Combined Companies compared to
reclamation premiums paid for Horizon. Selling, general and
administrative expenses were allocated to the Combined Companies
using a formula based on the ratio of budgeted coal production
hours for the Combined Companies compared to the budgeted coal
production hours for Horizon.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The combined financial statements also include the entire amount
owed through the DIP Facility and Senior Secured Notes (see
Note&nbsp;8) as these borrowings and related accrued interest
were the legal obligations of the Combined Companies.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The Combined Companies&#146; financial statements have been
presented on the basis that they are a going concern, which
contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. The Combined
Companies&#146; recurring losses from operations, the related
bankruptcy filing, the maturity of their debt obligations in
2004 and the Combined Companies&#146; defaults under their
various debt covenants raise substantial doubt about the
Combined Companies&#146; ability to
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> F-29</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Horizon NR, LLC and Certain Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<DIV align="left" style="font-size: 10pt;">
<B>NOTES TO COMBINED FINANCIAL STATEMENTS&#151;(CONTINUED)</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>As of September 30, 2004, for the period January 1, 2004 to
September 30, 2004,</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>Year Ended December 31, 2003, the period May 10, 2002 to
December 31, 2002</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>(reorganized companies) and the period January 1, 2002 to May
9, 2002 (predecessor companies)</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>(Dollars in thousands)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
continue as a going concern. The combined financial statements
do not include any adjustments relating to the recoverability
and classification of asset carrying amounts or the amount and
classification of liabilities that might result should the
Combined Companies be unable to continue as a going concern.
Realization of the carrying amounts of the Combined
Companies&#146; assets and satisfaction of their liabilities is
dependent upon, among other things, the ability to comply with
their debtor-in-possession financing agreement, the ability to
refinance or extend the 2004 debt obligations and the ability to
generate sufficient cash flows from operations to meet their
obligations. The Combined Companies&#146; operating plan
includes actions they believe will improve operating profits and
cash flows. There can be no assurances that operating profits
and cash flows will be realized in an amount sufficient to fund
obligations or other liquidity needs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Since filing for protection under the Bankruptcy Code on
November&nbsp;13, 2002 and November&nbsp;14, 2002 (see
Note&nbsp;2), Horizon has operated its business as a
debtor-in-possession subject to the jurisdiction of the
Bankruptcy Court. Accordingly, the combined financial statements
of the Combined Companies have been prepared in accordance with
the American Institute of Certified Public Accountants Statement
of Position 90-7, <I>Financial Reporting by Entities in
Reorganization Under the Bankruptcy Code
</I>(&#147;SOP&nbsp;90-7&#148;) and generally accepted
accounting principles applicable to a going concern, which
assume that assets will be realized and liabilities will be
discharged in the normal course of business.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The Combined Companies operate one segment: the production of
steam coal from surface and deep mines in Kentucky, West
Virginia and Illinois.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Fresh-Start Accounting</I></B>&#151; On May&nbsp;9, 2002,
Horizon emerged from Chapter&nbsp;11 upon approval of their
Prepackaged Plan of Reorganization (see Note&nbsp;2). Horizon
has accounted for all transactions related to that
reorganization in accordance with SOP&nbsp;90-7 (see
Note&nbsp;2). The adjustments to reflect the Combined
Companies&#146; emergence from bankruptcy have been reflected in
the accompanying combined financial statements. Accordingly, a
vertical black line is shown in the combined statements of
operations and combined statements of cash flows to separate
post-emergence operations from those prior to May&nbsp;10, 2002,
since they have not been prepared on a comparable basis.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B>2.</B></TD>
    <TD>
    <B>LIQUIDITY AND BANKRUPTCY PROCEEDINGS</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Chapter&nbsp;11 Reorganization</I></B>&#151; On
November&nbsp;13, 2002 and November&nbsp;14, 2002, Horizon filed
voluntary petitions for reorganization under Chapter&nbsp;11 of
the Bankruptcy Code. On September&nbsp;30, 2004, in connection
with the completion of Horizon&#146;s bankruptcy proceedings,
ICG acquired certain properties and assets, and assumed certain
liabilities of Horizon through Section&nbsp;363 asset sales of
the United States Bankruptcy Court.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The Combined Companies reorganization and administrative
expenses (primarily legal and consulting expenses) related to
the Chapter&nbsp;11 proceedings have been separately identified
in the combined statements of operations as reorganization items.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In accordance with SOP&nbsp;90-7, the accompanying combined
balance sheets as of September&nbsp;30, 2004 and
December&nbsp;31, 2003, segregate liabilities subject to
compromise, such as unsecured claims, from
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> F-30</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Horizon NR, LLC and Certain Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<DIV align="left" style="font-size: 10pt;">
<B>NOTES TO COMBINED FINANCIAL STATEMENTS&#151;(CONTINUED)</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>As of September 30, 2004, for the period January 1, 2004 to
September 30, 2004,</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>Year Ended December 31, 2003, the period May 10, 2002 to
December 31, 2002</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>(reorganized companies) and the period January 1, 2002 to May
9, 2002 (predecessor companies)</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>(Dollars in thousands)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
liabilities not subject to compromise and liabilities arising
subsequent to filing bankruptcy. Liabilities subject to
compromise for the Combined Companies are set forth below.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 3pt; ">

<TR style="font-size: 1pt;">
    <TD width="63%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>September&nbsp;30,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2003</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="8" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Long-term debt</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>915,304</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>915,304</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued postretirement medical benefits</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>59,578</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>56,633</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accounts payable and accrued expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>22,652</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>23,872</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued interest</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>275,075</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>174,938</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,272,609</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,170,747</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Horizon had previously filed a voluntary petition for
reorganization under the Bankruptcy Code accompanied by a
prepackaged plan of reorganization on February&nbsp;28, 2002.
This plan of reorganization became effective May&nbsp;9, 2002
(see note&nbsp;4).
</DIV>

<DIV style="margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B>3.</B></TD>
    <TD>
    <B>SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND GENERAL</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Basis of Presentation and Principles of
Combination</I></B>&#151;Significant intercompany transactions
and balances have been eliminated in combination. Minority
interests have not been recorded due to insignificance or
deficit equity. Investments in 20% to 50% owned entities are
accounted for under the equity method and are not significant.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Company Environment and Risk Factors</I></B>&#151;In the
course of business activities the Combined Companies are exposed
to a number of risks including: the possibility of the
termination or alteration of coal sales contacts, fluctuating
market conditions of coal (often impacted by the weather) and
transportation/fuel costs, competitive industry and
overcapacity, changing government regulations, unexpected
maintenance and equipment failure, employee benefits cost
control, changes in estimates of proven and probable mineral
interest, labor relations issues, loss of key employees,
satisfactory resolution of technology issues, as well as the
ability to obtain financing, necessary mining permits and
control of adequate recoverable mineral interest. In addition,
adverse weather and geological conditions may increase mining
costs, sometimes substantially.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The Combined Companies are also exposed to risks associated with
the bankruptcy proceedings and risks associated with a highly
leveraged organization. Such risks include: increased
vulnerability to adverse economic and industry conditions,
limited ability to fund future working capital, capital
expenditures, business acquisitions or other corporate
requirements, and possible liquidity problems, as well as
financing and credit constraints (see Note&nbsp;2).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Bankruptcy Accounting</I></B>&#151;In preparing the
accompanying combined financial statements, the Combined
Companies applied the provisions of SOP 90-7, which does not
significantly change the application of accounting principles
generally accepted in the United States of America; however, it
does require that the combined financial statements for periods
including and subsequent to filing the Chapter&nbsp;11 petition
distinguish transactions and events that are directly associated
with the reorganization from the ongoing operations of the
business (see Note&nbsp;4).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Cash and Cash Equivalents</I></B>&#151;The Combined
Companies consider all highly liquid debt instruments with
original maturities of three months or less to be cash
equivalents.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> F-31</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Horizon NR, LLC and Certain Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO COMBINED FINANCIAL STATEMENTS&#151;(CONTINUED)</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>As of September 30, 2004, for the period January 1, 2004 to
September 30, 2004,</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>Year Ended December 31, 2003, the period May 10, 2002 to
December 31, 2002</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>(reorganized companies) and the period January 1, 2002 to May
9, 2002 (predecessor companies)</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>(Dollars in thousands)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Trade Accounts Receivable and Allowance for Doubtful
Accounts</I></B>&#151;Trade accounts receivable are recorded at
the invoiced amount and do not bear interest. The allowance for
doubtful accounts is the Combined Companies&#146; best estimate
of the amount of probable credit losses in the Combined
Companies&#146; existing accounts receivable. The Combined
Companies establish provisions for losses on accounts receivable
when it is probable that all or part of the outstanding balance
will not be collected. The Combined Companies regularly review
collectibility and establish or adjust the allowance as
necessary using the specific identification method. The Combined
Companies do not have any off-balance sheet credit exposure
related to its customers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Inventories</I></B>&#151;Inventories are stated at lower
of average cost, determined on a first-in, first-out
(&#147;FIFO&#148;) basis, or market. Components of inventories
consist of coal and parts and supplies, net of allowance for
obsolescence (see Note&nbsp;5). Coal inventories represent coal
contained in stockpiles and exposed in the pit.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Advance Royalties</I></B>&#151;The Combined Companies are
required, under certain royalty lease agreements, to make
minimum royalty payments whether or not mining activity is being
performed on the leased property. These minimum payments may be
recoupable once mining begins on the leased property. The
recoupable minimum royalty payments are capitalized and
amortized based on the units-of-production method at a rate
defined in the lease agreement once mining activities begin.
Unamortized deferred royalty costs are expensed when mining has
ceased or a decision is made not to mine on such property. The
Combined Companies have recorded advance royalties of $12,284
($1,783 in prepaid expense and other and $10,501 included in
non-current assets) at September&nbsp;30, 2004 and $12,429
($2,453 in prepaid expense and other and $9,976 included in
non-current assets) at December&nbsp;31, 2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Property, Plant and Equipment</I></B>&#151;Property, plant
and equipment, including mineral interest and mine development
costs are recorded at cost, which includes construction overhead
and interest, where applicable. Expenditures for major renewals
and betterments are capitalized while expenditures for
maintenance and repairs are expensed as incurred. Mineral
interest costs are depleted using the units-of-production
method, based on estimated recoverable interest. Mine
development costs are amortized using the units-of-production
method, based on estimated recoverable interest. Other property,
plant and equipment is depreciated using the straight-line
method with estimated useful lives substantially as follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="86%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" nowrap><B>Years</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Buildings</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    10 to 45</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mining and other equipment and related facilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    1 to 20</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Land improvements</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    15</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Transportation equipment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    2 to 7</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Furniture and fixtures</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    3 to 10</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Depreciation, depletion and amortization expense for property,
plant and equipment for the Combined Companies for the period
January&nbsp;1, 2004 to September&nbsp;30, 2004, excluding
depreciation allocated from affiliates, was $27,547 and year
ended 2003 was $52,254. For the period May&nbsp;10, 2002 to
December 31, 2002 and January&nbsp;1, 2002 to May&nbsp;9, 2002
depreciation expense was $40,033 and $32,316 respectively.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> F-32</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Horizon NR, LLC and Certain Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO COMBINED FINANCIAL STATEMENTS&#151;(CONTINUED)</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>As of September 30, 2004, for the period January 1, 2004 to
September 30, 2004,</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>Year Ended December 31, 2003, the period May 10, 2002 to
December 31, 2002</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>(reorganized companies) and the period January 1, 2002 to May
9, 2002 (predecessor companies)</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>(Dollars in thousands)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Debt Issuance Costs</I></B>&#151;Debt issuance costs
reflect fees incurred to obtain financing. Debt issuance costs
are amortized (included in interest expense) using the effective
interest method, over the life of the related debt. Amortization
expense for the nine months ended September&nbsp;30, 2004, the
year ended December&nbsp;31, 2003, the period May&nbsp;10, 2002
to December&nbsp;31, 2002 and period January&nbsp;1, 2002 to
May&nbsp;9, 2002 was $1,437, $3,698, $11,282 and $5,676
respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Restricted Cash</I></B>&#151;Included in other non-current
assets as of September&nbsp;30, 2004 and December&nbsp;31, 2003
is restricted cash of $4,361 and $2,597, respectively.
Restricted cash includes amounts required by various royalty and
reclamation agreements. Certain of these agreements have been
disputed by third parties, requiring that cash be paid into an
escrow account until the rightful recipient is determined.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Coal Mine Reclamation and Mine Closure
Costs</I></B>&#151;Future cost requirements for land reclamation
are estimated where surface and deep mining operations have been
conducted, based on the Combined Companies&#146; interpretation
of the technical standards of regulations enacted by the U.S.
Office of Surface Mining, as well as state regulations. These
costs relate to reclaiming the pit and support acreage at
surface mines and sealing portals at deep mines. Other costs
common to both types of mining are related to reclaiming refuse
and slurry ponds as well as holding and related termination/exit
costs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The Combined Companies early adopted Statement of Financial
Accounting Standards (&#147;SFAS&#148;) No.&nbsp;143,
<I>Accounting for Asset Retirement Obligations </I>as a result
of fresh-start accounting on May&nbsp;9, 2002.
SFAS&nbsp;No.&nbsp;143 addresses asset retirement obligations
that result from the acquisition, construction or normal
operation of long-lived assets. It requires companies to
recognize asset retirement obligations at fair value when the
liability is incurred. Upon initial recognition of a liability,
that cost should be capitalized as part of the related
long-lived asset and allocated to expense over the useful life
of the asset. The asset retirement costs are recorded in mineral
interests.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
During the Predecessor period, the Combined Companies accrued
the cost of final mine closure and related exit costs over the
estimated useful mining life of the developed property or, if
purchased, at the date of acquisition.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The Combined Companies expense reclamation performed prior to
final mine closure. The establishment of the end of mine
reclamation and closure liability is based upon permit
requirements and requires significant estimates and assumptions,
principally associated with regulatory requirements, costs and
recoverable mineral interest. Annually, the end of mine
reclamation and closure liability is reviewed and necessary
adjustments are made, including adjustments due to mine plan and
permit changes and revisions to cost and production levels to
optimize mining and reclamation efficiency. The amount of such
adjustments is reflected in the SFAS&nbsp;No. 143&nbsp;year-end
calculation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Asset Impairments and Accelerated Mine Closing
Accruals</I></B>&#151;The Combined Companies follow
SFAS&nbsp;No.&nbsp;144, <I>Accounting for the Impairment or
Disposal of Long-Lived Assets</I>, which requires that projected
future cash flows from use and disposition of assets be compared
with the carrying amounts of those assets. When the sum of
projected cash flows is less than the carrying amount,
impairment losses are recognized. In determining such impairment
losses, discounted cash flows are utilized to determine the fair
value of the assets being evaluated. Also, in certain
situations, expected mine lives
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> F-33</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Horizon NR, LLC and Certain Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO COMBINED FINANCIAL STATEMENTS&#151;(CONTINUED)</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>As of September 30, 2004, for the period January 1, 2004 to
September 30, 2004,</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>Year Ended December 31, 2003, the period May 10, 2002 to
December 31, 2002</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>(reorganized companies) and the period January 1, 2002 to May
9, 2002 (predecessor companies)</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>(Dollars in thousands)</B>
</DIV>

<DIV align="left" style="font-size: 9pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
are shortened because of changes to planned operations. When
that occurs and it is determined that the mine&#146;s underlying
costs are not recoverable in the future, reclamation and mine
closing obligations are accelerated and the mine closing accrual
is increased accordingly. To the extent it is determined asset
carrying values will not be recoverable during a shorter mine
life, a provision for such impairment is recognized.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Income Tax Provision</I></B>&#151;The provision for income
taxes includes federal, state and local income taxes currently
payable and deferred taxes arising from temporary differences
between the financial statement and tax basis of assets and
liabilities. Income taxes are recorded under the liability
method. Under this method, deferred income taxes are recognized
for the estimated future tax effects of differences between the
tax basis of assets and liabilities and their financial
reporting amounts as well as net operating loss carryforwards
and tax credits based on enacted tax laws. Valuation allowances
are established when necessary to reduce deferred tax assets to
the amount expected to be realized.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The Combined Companies file a consolidated federal income tax
return that includes other subsidiaries of Horizon Natural
Resources Company. Consolidated net operating losses are
allocated to the various subsidiaries in accordance with IRS
regulations and may not reflect actual losses incurred by the
Combined Companies on a stand alone basis.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Revenue Recognition</I></B>&#151;Most revenues result from
sales under long-term sales contracts with electric utilities,
industrial companies or other coal-consuming organizations,
primarily in the eastern United States. Revenues are recognized
on coal sales in accordance with the terms of the sales
agreement, which is usually when the coal is shipped to the
customers and title has passed.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Freight and handling costs paid directly to third-party carriers
and invoiced to coal customers are recorded as freight and
handling costs and freight and handling revenues, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Other revenues generally consist of equipment and parts sales,
equipment rebuild and maintenance services, coal handling and
processing, royalties, commissions on coal trades, contract
mining and rental income. These revenues are recognized in the
period earned or when the service is completed. Advance payments
received are deferred and recognized in revenue as coal is
shipped or rentals are earned.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Postretirement Benefits Other Than
Pensions</I></B>&#151;As prescribed by SFAS&nbsp;No.&nbsp;106,
<I>Employers&#146; Accounting for Postretirement Benefits Other
Than Pensions</I>, accruals are made, based on annual outside
actuarial valuations, for the expected costs of providing
postretirement benefits other than pensions, which are primarily
medical benefits, during an employee&#146;s actual working
career.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The Combined Companies account for health care and life
insurance benefits provided for future retired employees and
their dependents by accruing the cost of such benefits over the
service lives of employees. Unrecognized actuarial gains and
losses are amortized over the estimated average remaining
service period for active employees and over the estimated
average remaining life for retirees.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Workers&#146; Compensation and Black Lung
Benefits</I></B>&#151;Certain of the Combined Companies are
liable under federal and state laws to pay workers&#146;
compensation and pneumoconiosis (black lung) benefits to
eligible employees, former employees and their dependents. The
Combined Companies were
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> F-34</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Horizon NR, LLC and Certain Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO COMBINED FINANCIAL STATEMENTS&#151;(CONTINUED)</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>As of September 30, 2004, for the period January 1, 2004 to
September 30, 2004,</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>Year Ended December 31, 2003, the period May 10, 2002 to
December 31, 2002</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>(reorganized companies) and the period January 1, 2002 to May
9, 2002 (predecessor companies)</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>(Dollars in thousands)</B>
</DIV>

<DIV align="left" style="font-size: 9pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
formerly self-insured for significant federal and state
workers&#146; compensation and black lung benefits. The Combined
Companies currently utilize a combination of a large deductible
insurance program, self-insurance and state workers&#146;
compensation fund participation to secure its on-going
obligations depending on the location of the operation. The
Combined Companies accrue for their workers&#146; compensation
and black lung obligations on a present value basis determined
by outside actuaries.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Management&#146;s Use of Estimates</I></B>&#151;The
preparation of the combined financial statements in conformity
with U.S. generally accepted accounting principles requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses
during the reporting period. Significant items subject to such
estimates and assumptions include the allowance for doubtful
accounts; inventories; mineral interest; asset retirement
obligations; employee benefit liabilities; future cash flows
associated with assets; useful lives for depreciation, depletion
and amortization; workers&#146; compensation claims;
postretirement benefits other than pensions; income taxes; and
fair value of financial instruments. Due to the subjective
nature of these estimates, actual results could differ from
those estimates.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Statements of Cash Flows</I></B>&#151;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Supplemental disclosure:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="55%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Reorganized Companies</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>January 1, 2004 to</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Year ended</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>September 30, 2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>December 31, 2003</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="8" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash paid for interest</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>6,814</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>7,797</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income taxes paid (refunded)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(69</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>38</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="53%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Reorganized Companies</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Predecessor Companies</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>May 10, 2002 to</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>January 1, 2002 to</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>December 31, 2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>May 9, 2002</B></TD><TD></TD>
</TR>



<TR valign="bottom" style="font-size: 1px">
    <TD colspan="8" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash paid for interest</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>20,405</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>150,502</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income taxes paid (refunded)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>45</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>106</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Non-cash transactions excluded from the December&nbsp;31, 2003
Combined Statement of Cash Flows are comprised of a non-cash
settlement involving the exchange of accrued expenses of $1,652
for accounts receivables of $1,652 and prepaid insurance
financing through the issuance of current debt obligations of
$13,927. Non cash transactions excluded from the January&nbsp;1,
2004 to September&nbsp;30, 2004, the December&nbsp;31, 2003, the
May&nbsp;10, 2002 to December&nbsp;31, 2002 and the
January&nbsp;1, 2002 to May&nbsp;9, 2002 Combined Statements of
Cash Flows are comprised of $0, $205, $3,127 and $0,
respectively, of additions to property, plant and equipment
through the incurrence of capital lease obligations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Comprehensive Income or Loss</I></B>&#151;Under generally
accepted accounting principals other comprehensive income or
loss can include, among other items, foreign currency items,
minimum pension liability adjustments and unrealized gains and
losses on certain investments in debt and equity securities. The
Combined Companies recorded minimum pension liability
adjustments of $0, $141, ($3,824) and $0 in Other Comprehensive
Income (Loss) in members&#146; deficit as of September&nbsp;30,
2004, December&nbsp;31, 2003, December&nbsp;31, 2002 and
May&nbsp;9, 2002 respectively, to properly record the pension
liability in
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> F-35</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Horizon NR, LLC and Certain Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO COMBINED FINANCIAL STATEMENTS&#151;(CONTINUED)</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>As of September 30, 2004, for the period January 1, 2004 to
September 30, 2004,</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>Year Ended December 31, 2003, the period May 10, 2002 to
December 31, 2002</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>(reorganized companies) and the period January 1, 2002 to May
9, 2002 (predecessor companies)</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>(Dollars in thousands)</B>
</DIV>

<DIV align="left" style="font-size: 9pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
accordance with actuarial calculations. The Combined Companies
had no other items of Other Comprehensive Income (Loss).
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B>4.</B></TD>
    <TD>
    <B>FRESH-START ACCOUNTING</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
On May&nbsp;9, 2002, Horizon emerged from Chapter&nbsp;11 upon
approval of their Prepackaged Plan of Reorganization. The
Combined Companies have accounted for all transactions related
to that reorganization in accordance with SOP 90-7. The
adjustments to reflect the emergence from bankruptcy have been
reflected in the accompanying combined financial statements.
Accordingly, a vertical black line is shown in the combined
statements of operations and combined statements of cash flows
to separate post-emergence operations from those prior to
May&nbsp;10, 2002, since they have not been prepared on a
comparable basis.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
As required by SOP 90-7, the provisions of fresh-start
accounting were applied as of May&nbsp;9, 2002. In adopting
fresh-start accounting, an independent financial advisor was
engaged to assist in the fair value estimate of the reorganized
entity. The valuation model is based on comparable company
analysis and discontinued future cash flows.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The reorganized value of the Combined Companies prior to the
confirmation date was less than the total of all post-petition
liabilities and allowed claims as reflected in the following
summary:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="84%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Post-petition liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,281,218</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Liabilities subject to compromise</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>436,255</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total post-petition liabilities and allowed claims</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,717,473</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Reorganization value</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,521,320</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Excess of liabilities over reorganization value</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>196,153</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Liabilities subject to compromise</I></B>&#151;The
Predecessor Companies eliminated $436,255 of liabilities subject
to compromise in exchange for equity valued at $235,000. These
liabilities subject to compromise included the following debt
instruments:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="63%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Accrued</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Debt</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Interest</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Total</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="12" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    10.5% Senior Notes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>200,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>48,177</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>248,177</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    11.5% Senior Subordinated Notes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>150,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>38,078</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>188,078</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Liabilities Subject to Compromise</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>350,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>86,255</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>436,255</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The elimination of these liabilities subject to compromise
resulted in recognition of a gain on cancellation of debt
totaling $161,584 (see table below), which has been reflected in
reorganization items in the combined statement of operations of
the Predecessor Companies for the period from January&nbsp;1,
2002 to May&nbsp;9, 2002.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The Combined Companies refinanced their old secured bank debt
and repaid its entire outstanding balance, including all
outstanding interest and exit fees. The old secured bank debt
was replaced by three debt instruments: $47,349 draw on the
$250,000 Exit Facility, $475,000 Senior Secured Term Notes and
$450,000 Senior Secured Notes.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> F-36</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Horizon NR, LLC and Certain Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO COMBINED FINANCIAL STATEMENTS&#151;(CONTINUED)</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>As of September 30, 2004, for the period January 1, 2004 to
September 30, 2004,</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>Year Ended December 31, 2003, the period May 10, 2002 to
December 31, 2002</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>(reorganized companies) and the period January 1, 2002 to May
9, 2002 (predecessor companies)</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>(Dollars in thousands)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The impact of the debt restructuring entries is reflected below.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="84%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Liabilities subject to compromise</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>436,255</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Unamortized financing costs associated with retired debt</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(39,671</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>396,584</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    New equity</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>235,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gain on debt extinguishment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>161,584</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Reorganization items reflected in the Predecessor Companies
operations are as follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="84%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gain on fresh-start revaluation</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>645,824</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gain on debt extinguishment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>161,584</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Write off amounts payable to other subsidiaries of Horizon</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>779,789</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Professional fees incurred during bankruptcy proceedings</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(19,508</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Reorganization items</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,567,689</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> F-37</B>
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Horizon NR, LLC and Certain Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<DIV align="left" style="font-size: 10pt;">
<B>NOTES TO COMBINED FINANCIAL STATEMENTS&#151;(CONTINUED)</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>As of September 30, 2004, for the period January 1, 2004 to
September 30, 2004,</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>Year Ended December 31, 2003, the period May 10, 2002 to
December 31, 2002</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>(reorganized companies) and the period January 1, 2002 to May
9, 2002 (predecessor companies)</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>(Dollars in thousands)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The following reflects the impact of fresh-start accounting on
the balance sheet as of May&nbsp;9, 2002.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="38%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap><B>Balance Sheet at May&nbsp;9, 2002 (Unaudited)</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Fresh Start</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>AEI</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Horizon</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Predecessor</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Debt</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Predecessor</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Companies</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Restructuring</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Adjustments</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Companies</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="18" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="19" align="left" valign="top">
    <B>ASSETS</B></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    CURRENT ASSETS:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash and cash equivalents</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>14,566</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>14,566</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Restricted cash</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>72,712</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>72,712</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accounts receivable&#151;net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>47,697</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>47,697</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Inventories</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>53,109</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(29,020</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>24,089</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred income taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25,270</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17,241</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>42,511</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Prepaid expenses and other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,949</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(171</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,778</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total current assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>226,303</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(11,950</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>214,353</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    PROPERTY, PLANT, AND EQUIPMENT, INCLUDING MINERAL RESERVES, MINE
    DEVELOPMENT AND CONTRACT COSTS&#151;net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>427,433</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(34,187</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>393,246</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    GOODWILL</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>697,063</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>697,063</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    NET RECEIVABLE FROM OTHER HORIZON SUBSIDIARIES</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>191,360</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>191,360</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    DEBT ISSUANCE COSTS&#151;net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>50,450</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(39,671</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,779</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    OTHER NON-CURRENT ASSETS</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,519</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,519</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>910,065</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(39,671</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>650,926</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,521,320</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>LIABILITIES AND MEMBERS&#146; EQUITY (DEFICIT)</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    CURRENT LIABILITIES:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accounts payable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>16,876</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>16,876</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current portion of long-term debt and capital leases</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>875,565</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(755,933</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>119,632</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued expenses and other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>194,414</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(157,250</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,553</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>41,717</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total current liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,086,855</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(913,183</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,553</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>178,225</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    NON-CURRENT LIABILITIES, less current portion</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Long-term debt and capital leases</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>19,923</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>913,183</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>933,106</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Employee benefits</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>57,035</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>57,035</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Reclamation and mine closure costs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>64,703</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(22,157</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>42,546</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred non-current liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25,270</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17,241</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>42,511</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other non-current liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>27,432</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,465</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>32,897</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Liabilities subject to compromise</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>436,255</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(436,255</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,717,473</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(436,255</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,102</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,286,320</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    MEMBERS&#146; EQUITY</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accumulated earnings (deficit)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(963,655</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>161,584</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>802,071</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other members&#146; equity (deficit)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>156,247</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>235,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(156,247</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>235,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total liabilities and members&#146; equity (deficit)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>910,065</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(39,671</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>650,926</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,521,320</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> F-38</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Horizon NR, LLC and Certain Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<DIV align="left" style="font-size: 10pt;">
<B>NOTES TO COMBINED FINANCIAL STATEMENTS&#151;(CONTINUED)</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>As of September 30, 2004, for the period January 1, 2004 to
September 30, 2004,</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>Year Ended December 31, 2003, the period May 10, 2002 to
December 31, 2002</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>(reorganized companies) and the period January 1, 2002 to May
9, 2002 (predecessor companies)</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>(Dollars in thousands)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The nature of the more significant fresh-start adjustments is
discussed in further detail below:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Inventory</I></B>&#151;The inventory adjustments reflect
three items:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="3%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    $1,453 write-up of stockpile inventory to market.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    Reclassification to development costs of deferred overburden
    ($29,229), where it will be amortized based on the
    units-of-production method.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    Adjustment to decrease parts and supplies ($1,244) to estimated
    market value.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Deferred income taxes</I></B>&#151;Reflects gross up of
current deferred tax asset and long-term deferred tax liability
to reflect fresh-start accounting.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Property, plant and equipment, including mineral interest,
mine development and contract costs, net</I></B>&#151;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The following adjustments, among others, were made:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="3%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    The property, plant and equipment were valued at net book value,
    which approximates the fair market value.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    Mineral interests were decreased $65,178 to reflect an
    independent valuation assessment. The interests were valued on a
    discounted royalty approach, which considered the current net
    royalty value of both leased and owned interest. The relevant
    royalty revenue streams were projected into the future based on
    budgeted production and discounted back to generate the mineral
    reserve value.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    Development cost was increased $29,229 to reflect the
    reclassification of deferred overburden (see inventory section
    above).</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    Contract costs were decreased $30,105 to reflect the current
    market value of existing sales contracts.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    Asset retirement costs of $31,867 were recorded to reflect
    adoption of SFAS&nbsp;No.&nbsp;143 (Note&nbsp;3).</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Goodwill</I></B>&#151;The Combined Companies engaged an
independent financial advisor to assist in the fair value
estimate of the reorganized entity prior to the confirmation
date. The amount of reorganized value in excess of the fair
market value of identifiable assets is included in this account.
SFAS&nbsp;No.&nbsp;142 was applied to test for impairment.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Accrued expenses and other</I></B>&#151;Consists primarily
of lease loss reserves of $3,108 recorded to capture future
expected payments on equipment and royalty leases related to
non-productive properties due to change in management of the
Combined Companies. An additional $5,292 is included in
non-current liabilities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Reclamation and mine closure costs</I></B>&#151;Reflects
adoption of SFAS&nbsp;No.&nbsp;143 (Note 3). The discounting of
future expected mine closure and related exit costs caused a
decrease of $20,838. The Predecessor Companies had followed a
different reclamation policy by which it accrued on an
undiscounted basis for the cost of final mine closure and exit
costs over the estimated useful mining life of the developed
property or, if purchased, at the date of acquisition.
Additionally, $1,319 was reclassified to current accrued
reclamation.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> F-39</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Horizon NR, LLC and Certain Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO COMBINED FINANCIAL STATEMENTS&#151;(CONTINUED)</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>As of September 30, 2004, for the period January 1, 2004 to
September 30, 2004,</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>Year Ended December 31, 2003, the period May 10, 2002 to
December 31, 2002</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>(reorganized companies) and the period January 1, 2002 to May
9, 2002 (predecessor companies)</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>(Dollars in thousands)</B>
</DIV>

<DIV style="margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B>5.</B></TD>
    <TD>
    <B>INVENTORIES</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
As of September&nbsp;30, 2004 and December&nbsp;31, 2003
inventories consisted of the following:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="64%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>September 30,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>December 31,</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2003</B></TD><TD></TD>
</TR>



<TR valign="bottom" style="font-size: 1px">
    <TD colspan="8" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Coal</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>8,717</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,478</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Parts and supplies, net of allowance of $2,797 and $2,803</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,001</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>17,721</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>13,479</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B>6.</B></TD>
    <TD>
    <B>PROPERTY, PLANT AND EQUIPMENT</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
As of September&nbsp;30, 2004 and December&nbsp;31, 2003
property, plant and equipment, including mineral interest, mine
development and contract costs, are summarized by major
classification as follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="64%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>September 30,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>December 31,</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2003</B></TD><TD></TD>
</TR>



<TR valign="bottom" style="font-size: 1px">
    <TD colspan="8" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Land and land improvements</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>17,084</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>17,420</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mining and other equipment and related facilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>137,720</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>144,601</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mine development and contract costs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>50,151</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>44,907</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mineral interests</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>186,420</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>202,240</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mine development in process</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,081</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,139</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Construction work in process</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,243</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,116</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>395,699</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>415,423</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Less-accumulated depreciation, depletion and amortization</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(119,542</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(96,871</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net property, plant and equipment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>276,157</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>318,552</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Included in property, plant and equipment is $4,324 and $6,255
as of September&nbsp;30, 2004 and December&nbsp;31, 2003,
respectively, related to development and construction projects
for which depreciation, depletion and amortization have not yet
commenced. Realization of these projects is reviewed on a
periodic basis.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B>7.</B></TD>
    <TD>
    <B>ACCRUED EXPENSES AND OTHER</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
As of September&nbsp;30, 2004 and December&nbsp;31, 2003 accrued
expenses and other consisted of the following:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="64%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>September 30,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>December 31,</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2003</B></TD><TD></TD>
</TR>



<TR valign="bottom" style="font-size: 1px">
    <TD colspan="8" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Payroll, bonus and vacation expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>15,247</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>13,742</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Non-income taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,065</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,369</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred revenues</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>747</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,665</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,014</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>27,977</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>27,872</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> F-40</B>
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Horizon NR, LLC and Certain Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<DIV align="left" style="font-size: 10pt;">
<B>NOTES TO COMBINED FINANCIAL STATEMENTS&#151;(CONTINUED)</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>As of September 30, 2004, for the period January 1, 2004 to
September 30, 2004,</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>Year Ended December 31, 2003, the period May 10, 2002 to
December 31, 2002</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>(reorganized companies) and the period January 1, 2002 to May
9, 2002 (predecessor companies)</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>(Dollars in thousands)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>8.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;DEBT</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
As of September&nbsp;30, 2004 and December&nbsp;31, 2003 debt
consisted of the following:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="61%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>September 30,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>December 31,</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2003</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="9" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    DIP Facility</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>30,016</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>57,096</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Senior Secured Term Notes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>465,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>465,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Senior Secured Notes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>450,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>450,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Capital leases (Note&nbsp;12)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>859</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,463</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>61</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,758</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>945,936</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>978,317</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Less&#151;long-term debt subject to compromise</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>915,304</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>915,304</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Less&#151;current portion of long-term debt and capital leases
    not subject to compromise</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>30,603</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>62,698</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Long-term debt and capital leases</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>29</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>315</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Debtor-In-Possession Facility</I></B>&#151;The Debtor in
Possession (&#147;DIP&#148;) Facility provides revolving loans
and letters of credit (with a sub-limit on the issuance of
letters of credit) comprised of Tranche&nbsp;A DIP Loans and
Tranche&nbsp;B DIP Letters of Credit and Credit-Linked Deposits
with $125,000 and $150,000 originally available, respectively.
The DIP Facility could have been increased to $350,000 if
certain requirements had been met: (1)&nbsp;an additional
$25,000 draw down capacity under the DIP Facility if the lender
approved Horizon&#146;s, including the Combined Companies&#146;,
five-year business plan and (2)&nbsp;an additional $50,000 draw
down capacity under the DIP Facility if the lender syndicated a
portion of the DIP Facility. However, these requirements were
not met, and the DIP Facility was not increased. The DIP
Facility agreement was amended as of June&nbsp;30, 2004, and all
defaults were waived. The maturity date is October&nbsp;15,
2004. In addition, the maturity date may be extended to
November&nbsp;15, 2004, based on the sole discretion of the
lender. The DIP Facility has been reduced by proceeds from asset
sales, tax refunds and negotiations with the lender totaling
$79,858. On August&nbsp;18, 2004, the lender decreased the
Combined Companies&#146; draw down capacity to $195,142.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Loans under the credit agreement bear interest, at the Combined
Companies&#146; option, at either a market base rate plus 4.5%
per year or at a market reserved adjusted Euro-dollar rate plus
5.5% per year. The DIP Facility is collateralized primarily by
capital stock of most of Horizon&#146;s subsidiaries, along with
substantially all accounts receivable, inventory, property,
plant and equipment, intangible assets, contract rights and
other personal and real property of Horizon and most of its
subsidiaries, including the Combined Companies. As of
September&nbsp;30, 2004 and December 31, 2003, the Combined
Companies had $5,805 and $23,320 available on this revolving
credit agreement, respectively, net of $159,851 and $155,688 in
letters of credit, respectively.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> F-41</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Horizon NR, LLC and Certain Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<DIV align="left" style="font-size: 10pt;">
<B>NOTES TO COMBINED FINANCIAL STATEMENTS&#151;(CONTINUED)</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>As of September 30, 2004, for the period January 1, 2004 to
September 30, 2004,</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>Year Ended December 31, 2003, the period May 10, 2002 to
December 31, 2002</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>(reorganized companies) and the period January 1, 2002 to May
9, 2002 (predecessor companies)</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>(Dollars in thousands)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
As of September&nbsp;30, 2004 and December&nbsp;31, 2003 letters
of credit outstanding consisted of the following:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="58%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>September 30,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>December 31,</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2003</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Letters of Credit:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Insurance/Workers&#146; compensation/Reclamation bonds</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>159,851</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>155,238</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mineral interests/Royalties</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>450</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>159,851</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>155,688</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
As of September&nbsp;30, 2004 and December&nbsp;31, 2003,
borrowings under the DIP Facility bear interest at variable
rates ranging from 4.625% to 9.5%.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The DIP Facility and senior secured term notes contain customary
covenants including, without limitation, restrictions on
Horizon&#146;s, including the Combined Companies&#146;, ability
to:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    Incur additional indebtedness, pay dividends and make other
    restricted payments and investments;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    Acquire or dispose of assets;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    Engage in transactions with affiliates;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    Merge, consolidate, or transfer substantially all of its assets.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Horizon, including the Combined Companies, is also required to
maintain compliance with a minimum trailing consolidated
adjusted EBITDA covenant. Beginning December 2002, Horizon,
including the Combined Companies, was in violation of various
provisions of the DIP Facility. Horizon negotiated a waiver of
these events of default with the administrative agent as of
June&nbsp;30, 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Senior Secured Notes</I></B>&#151;The senior secured term
notes bear interest at a market base rate plus 4.25% per year
and mature on May&nbsp;8, 2008. Principal payments of $5,000 per
quarter are due on these notes. As of September&nbsp;30, 2004,
the interest rate is 9% plus an additional 2.0% penalty as
Horizon, including the Combined Companies, is in violation of
certain covenants.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The senior secured notes bear interest at the rate of 11.75% per
annum payable semi-annually on May&nbsp;15 and November&nbsp;15
of each year with a final maturity date of May&nbsp;8, 2009. As
of September&nbsp;30, 2004 the interest rate is 11.75% plus an
additional 2.0% penalty as Horizon, including the Combined
Companies, is in violation of certain covenants.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The senior secured notes contain covenants similar to those of
the DIP Facility. As of September&nbsp;30, 2004, Horizon,
including the Combined Companies, was in violation of various
financial and other covenants regarding the senior secured term
notes and senior secured notes including the non-payment of
principal and interest payments due giving rise to an Event of
Default. During the default period, Horizon, including the
Combined Companies, must pay or accrue an additional interest of
2.0% per year to the holders of such notes. The entire balance
of the senior secured notes is classified as liabilities subject
to compromise in the accompanying financial statements.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> F-42</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Horizon NR, LLC and Certain Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO COMBINED FINANCIAL STATEMENTS&#151;(CONTINUED)</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>As of September 30, 2004, for the period January 1, 2004 to
September 30, 2004,</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>Year Ended December 31, 2003, the period May 10, 2002 to
December 31, 2002</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>(reorganized companies) and the period January 1, 2002 to May
9, 2002 (predecessor companies)</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>(Dollars in thousands)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Interest</I></B>&#151;Accrued interest at
September&nbsp;30, 2004 and December&nbsp;31, 2003 is $277,651
and $175,631 ($275,075 and $174,938 included in liabilities
subject to compromise), respectively. Horizon, including the
Combined Companies, has not made various interest payments due
as scheduled. However, accruals of amounts due are reflected in
the accompanying financial statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>9.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ASSET RETIREMENT
OBLIGATION</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
At September&nbsp;30, 2004 and December&nbsp;31, 2003 the
Combined Companies recorded asset retirement obligation accruals
for mine reclamation and closure costs totaling $23,642 and
$28,649, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The following schedule represents activity in the accrued
reclamation and closure cost obligation.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="58%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Reorganized Companies</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>January 1, 2004 to</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>September 30, 2004</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="8" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Beginning Balance</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1/1/2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>28,649</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Expenditures</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1/1/2004-9/30/2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(9,092</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accretion</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1/1/2004-9/30/2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,399</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Allocation from other Horizon Subsidiaries</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1/1/2004-9/30/2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>686</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Ending Balance</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>23,642</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="24%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Reorganized Companies</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Year Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>May 10, 2002 to</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>December 31, 2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>December 31, 2002</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="16" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Beginning Balance</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1/1/2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>35,765</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5/9/2002</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>90,973</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    SFAS&nbsp;No.&nbsp;143 adoption</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(48,071</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Liability for new mining locations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1/1/2003-12/31/2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>228</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Expenditures</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1/1/2003-12/31/2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(9,478</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5/10/2002-12/31/2002</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(11,033</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accretion</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1/1/2003-12/31/2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,986</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5/10/2002-12/31/2002</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,232</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Allocation (to)/from other Horizon Subsidiaries</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1/1/2003-12/31/2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,852</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5/10/2002-12/31/2002</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>664</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Ending Balance</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>28,649</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>35,765</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> F-43</B>
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Horizon NR, LLC and Certain Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<DIV align="left" style="font-size: 10pt;">
<B>NOTES TO COMBINED FINANCIAL STATEMENTS&#151;(CONTINUED)</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>As of September 30, 2004, for the period January 1, 2004 to
September 30, 2004,</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>Year Ended December 31, 2003, the period May 10, 2002 to
December 31, 2002</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>(reorganized companies) and the period January 1, 2002 to May
9, 2002 (predecessor companies)</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>(Dollars in thousands)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The accrued reclamation and closure cost obligations are
included in the accompanying consolidated balance sheets as
follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="58%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>September 30,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>December 31,</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2003</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="8" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current portion of reclamation and mine closure costs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,206</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,206</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Non-current reclamation and mine closure costs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>22,436</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>27,443</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>23,642</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>28,649</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>10.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;INCOME TAXES</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Because of the Combined Companies&#146; continuing losses, no
provision (benefit) for income taxes has been recorded in any
period presented.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> F-44</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Horizon NR, LLC and Certain Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<DIV align="left" style="font-size: 10pt;">
<B>NOTES TO COMBINED FINANCIAL STATEMENTS&#151;(CONTINUED)</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>As of September 30, 2004, for the period January 1, 2004 to
September 30, 2004,</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>Year Ended December 31, 2003, the period May 10, 2002 to
December 31, 2002</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>(reorganized companies) and the period January 1, 2002 to May
9, 2002 (predecessor companies)</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>(Dollars in thousands)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The following table presents the difference between the actual
tax provision (benefit)&nbsp;and the amounts obtained by
applying the statutory U.S. federal income tax rate of 35% to
income and losses before income taxes.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="57%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Reorganized Companies</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>January 1, 2004 to</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>January 1, 2003 to</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>September 30, 2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>December 31, 2003</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="8" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Federal provision (benefit) computed at statutory rate</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(33,063</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(72,263</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    State income tax provision (benefit) (net of federal tax
    benefits and apportionment factors) computed at statutory rate</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(4,043</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(8,837</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Valuation allowance</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>37,608</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>85,741</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Nondeductible items</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>285</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,592</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(787</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,049</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="57%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Reorganized</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Predecessor</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Companies</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Companies</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>May 10, 2002 to</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>January 1, 2002 to</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>December 31, 2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>May 9, 2002</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="8" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Federal provision (benefit) computed at statutory rate</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(339,214</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>533,314</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    State income tax provision (benefit) (net of federal tax
    benefits and apportionment factors) computed at statutory rate</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(41,481</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>65,217</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Valuation allowance</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>49,930</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,881</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Excess of purchase price over net assets acquired</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>524,533</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(524,533</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gain on extinguishment of debt</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(79,053</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Nondeductible items</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(191,862</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,297</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,906</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,361</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> F-45</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Horizon NR, LLC and Certain Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<DIV align="left" style="font-size: 10pt;">
<B>NOTES TO COMBINED FINANCIAL STATEMENTS&#151;(CONTINUED)</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>As of September 30, 2004, for the period January 1, 2004 to
September 30, 2004,</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>Year Ended December 31, 2003, the period May 10, 2002 to
December 31, 2002</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>(reorganized companies) and the period January 1, 2002 to May
9, 2002 (predecessor companies)</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>(Dollars in thousands)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Significant components of the Combined Companies&#146; deferred
tax assets and liabilities as of September&nbsp;30, 2004 and
December&nbsp;31, 2003 are summarized as follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="58%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>September 30,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>December 31,</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2003</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred Tax Assets:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued employee benefits</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>23,361</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>30,677</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued reclamation and closure</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,270</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,194</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Reserve for losses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,534</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,437</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net operating loss carryforwards</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>160,855</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>135,317</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,241</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,972</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3"><FONT style="font-size: 10pt">&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>210,261</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>195,597</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Valuation allowance</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(145,628</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(116,436</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3"><FONT style="font-size: 10pt">&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>64,633</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>79,161</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred Tax Liabilities:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Property, mineral reserves and mine development costs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>64,538</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>78,943</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>95</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>218</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3"><FONT style="font-size: 10pt">&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>64,633</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>79,161</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net deferred tax liability</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Classified in balance sheet:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other current assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,931</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>6,020</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Non-current liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,931</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>6,020</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In connection with fresh-start accounting, the Combined
Companies&#146; assets and liabilities were recorded at their
respective fair values. Deferred tax assets and liabilities were
then recognized for the differences between fair values and tax
basis. In addition, deferred tax assets were recognized for
future tax benefits of net operating loss carryforwards
(&#147;NOLs&#148;) and other tax attributes. A valuation
allowance has been provided for deferred tax assets because the
Combined Companies&#146; believe it was more likely than not
that the deferred tax assets will not be realized.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In connection with the Plan of Reorganization effective
May&nbsp;9, 2002, the Combined Companies realized a gain from
the cancellation of certain indebtedness (&#147;COI&#148;). This
gain was not taxable since the gain resulted from the
reorganization under the Bankruptcy Code. However, the Combined
Companies were required, as of the beginning of its 2003 taxable
year, to reduce their NOLs in an amount equal to such COI income.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Prior to October&nbsp;1, 2004 The Combined Companies filed a
consolidated federal income tax return that included other
subsidiaries of Horizon Natural Resources Company. Consolidated
net operating losses were allocated to the various subsidiaries
in accordance with IRS regulations and may not reflect actual
losses incurred by the Combined Companies on a stand alone basis.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Based on such allocations and the reductions discussed above, at
December 31, 2003 the Combined Companies had NOLs and
alternative minimum tax (AMT) NOLs. Upon the sale to ICG
effective September&nbsp;30, 2004, these NOLs are no longer
available due to a change in control.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> F-46</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Horizon NR, LLC and Certain Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<DIV align="left" style="font-size: 10pt;">
<B>NOTES TO COMBINED FINANCIAL STATEMENTS&#151;(CONTINUED)</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>As of September 30, 2004, for the period January 1, 2004 to
September 30, 2004,</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>Year Ended December 31, 2003, the period May 10, 2002 to
December 31, 2002</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>(reorganized companies) and the period January 1, 2002 to May
9, 2002 (predecessor companies)</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>(Dollars in thousands)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Included in the valuation allowance at September&nbsp;30, 2004,
December&nbsp;31, 2003, and 2002 is $1,444, $1,444 and $1,500,
respectively, related to the deferred tax asset recognized by
the recording of the additional minimum pension liability in
other comprehensive loss (OCL)&nbsp;for the period from
May&nbsp;10, 2002 to December&nbsp;31, 2002. Pursuant to
SFAS&nbsp;No.&nbsp;109, if the tax asset that results from
recording pension liability through equity is fully reserved
with a valuation allowance, there is no net income tax expense
or benefit to be allocated to the OCL component of equity.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>11.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;EMPLOYEE BENEFITS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Certain employees of the Combined Companies were eligible to
participate in defined benefit pension plans sponsored by
Horizon and receive other postretirement benefits. On
December&nbsp;2, 2003, the Board of Directors of Horizon
approved the termination of the Horizon NR, LLC Employee Pension
Plan (&#147;Horizon Pension Plan&#148;). Effective
March&nbsp;31, 2004, an employee who was not a participant in
the Plan on March&nbsp;31, 2004, could not become a participant
in the Horizon Pension Plan. No employee should accrue any
additional pension credited service or days of service for any
period after March&nbsp;31, 2004. Effective March&nbsp;31, 2004
Horizon froze all future accrual of benefits under the Horizon
pension plan. On June&nbsp;25, 2004 the Pension Benefit Guaranty
Corporation announced that it would assume responsibility for
the pensions of more than 4,800 Horizon employees. Accordingly,
pension and other postretirement benefit information as of
September&nbsp;30, 2004 and for the period January&nbsp;1, 2004
to September&nbsp;30, 2004 for these carve-out financial
statements is not applicable.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Employee benefits at September&nbsp;30, 2004 and
December&nbsp;31, 2003 are summarized as follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="61%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>September 30,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>December 31,</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2003</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="9" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Postretirement benefits</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>11,083</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>10,104</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Workers&#146; compensation benefits</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,315</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,666</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Black lung benefits</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>21,540</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>20,618</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Pension benefits</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16,640</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16,245</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>59,578</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>56,633</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Less&#151;current portion</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Less&#151;liabilities subject to compromise (Note&nbsp;2)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>59,578</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>56,633</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Long-term portion</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Benefits under the plans were generally related to an
employees&#146; length of service and salary. Horizon allocated
pension expense and other postretirement benefit expense to the
Combined Companies based on actuarially determined amounts. The
amount of pension cost and other postretirement benefit cost
allocated to the Combined Companies was impacted by various
assumptions (discount rate, rate of return on plan assets, etc.)
that Horizon used in determining its pension and other
postretirement obligations. Pension expense allocated to the
Combined Companies totaled $388 for the period January&nbsp;1,
2004 to September&nbsp;30, 2004, $2,013 for the year ended
December&nbsp;31, 2003, $3,235 for the period May&nbsp;10, 2002
to December&nbsp;31, 2002 and $508 for the period
January&nbsp;1, 2002 to May&nbsp;9, 2002. Other postretirement
benefit expense allocated to the Combined Companies totaled
$1,450 for the period January&nbsp;1, 2004 to September&nbsp;30,
2004, $1,513 for the year ended December&nbsp;31, 2003,
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> F-47</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Horizon NR, LLC and Certain Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<DIV align="left" style="font-size: 10pt;">
<B>NOTES TO COMBINED FINANCIAL STATEMENTS&#151;(CONTINUED)</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>As of September 30, 2004, for the period January 1, 2004 to
September 30, 2004,</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>Year Ended December 31, 2003, the period May 10, 2002 to
December 31, 2002</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>(reorganized companies) and the period January 1, 2002 to May
9, 2002 (predecessor companies)</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>(Dollars in thousands)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
$1,024 for the period May&nbsp;10, 2002 to December&nbsp;31,
2002 and $583 for the period January&nbsp;1, 2002 to
May&nbsp;10, 2002.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Valuation Date</I></B>&#151;All actuarially determined
benefits were determined as of December&nbsp;31, 2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Pension and Other Postretirement Benefits</I></B>&#151;The
following pension and other postretirement benefit information
was prepared for Horizon and its seventy-six subsidiaries for
the year ended December&nbsp;31, 2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In conjunction with certain 1998 and 1999 acquisitions, Horizon
acquired, or agreed to put in place, benefit plans providing
pension benefits to certain employees and postretirement
healthcare and life insurance to eligible employees, including
union employees.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
During 1998, Horizon acquired a non-contributory defined benefit
pension plan covering all salaried and non-union employees of an
acquired company. Effective January&nbsp;1, 1999, Horizon
amended and restated this plan to cover all salaried and
non-union employees of Horizon, including the employees of the
Combined Companies. Benefits are generally based on the
employee&#146;s years of service and compensation during each
year of employment. Horizon&#146;s funding policy is to make the
minimum payment required by the Employee Retirement Income
Security Act of 1974 (&#147;ERISA&#148;).
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> F-48</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Horizon NR, LLC and Certain Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<DIV align="left" style="font-size: 10pt;">
<B>NOTES TO COMBINED FINANCIAL STATEMENTS&#151;(CONTINUED)</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>As of September 30, 2004, for the period January 1, 2004 to
September 30, 2004,</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>Year Ended December 31, 2003, the period May 10, 2002 to
December 31, 2002</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>(reorganized companies) and the period January 1, 2002 to May
9, 2002 (predecessor companies)</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>(Dollars in thousands)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Summaries of the changes in the benefit obligations, plan assets
(consisting principally of common stocks, U.S. government and
corporate obligations and cash equivalents) and funded status of
the plan for 2003 are as follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="73%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Pension</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Benefits</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>December 31,</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2003</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Changes in Benefit Obligations:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Benefit obligations at beginning of period</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>92,594</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Service costs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,999</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest cost</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,098</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Actuarial loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,708</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Benefits paid</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(18,511</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Benefit obligation at end of period</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>87,888</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Change in Plan Assets:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Fair value of plan assets at beginning of period</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>49,693</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Actual return on plan assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,537</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Employer contributions</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,272</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Benefits paid</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(18,511</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Fair value of plan assets at end of period</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>41,991</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Funded Status of the Plan:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accumulated obligations less plan assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(45,897</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Unrecognized actuarial loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15,247</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Unrecognized prior service cost</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(508</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Additional minimum pension liability</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(10,660</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net liability recognized</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(41,818</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Weighted Average Assumptions:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Discount rate</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.25</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Expected return on plan assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8.50</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Rate of compensation increase</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4.00</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> F-49</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Horizon NR, LLC and Certain Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<DIV align="left" style="font-size: 10pt;">
<B>NOTES TO COMBINED FINANCIAL STATEMENTS&#151;(CONTINUED)</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>As of September 30, 2004, for the period January 1, 2004 to
September 30, 2004,</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>Year Ended December 31, 2003, the period May 10, 2002 to
December 31, 2002</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>(reorganized companies) and the period January 1, 2002 to May
9, 2002 (predecessor companies)</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>(Dollars in thousands)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The expected long-term rate of return on pension plan assets is
based on long-term historical return information and future
estimates of long-term investment returns for the target asset
allocation of investments that comprise plan assets.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="73%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Other</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Postretirement</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Benefits</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>December 31,</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2003</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Changes in Benefit Obligations:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Benefit obligations at beginning of period</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>501,061</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Service costs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,251</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest cost</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>42,278</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Actuarial loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>79,142</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Benefits paid</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(33,975</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Benefit obligation at end of period</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>594,757</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Change in Plan Assets:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Fair value of plan assets at beginning of period</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Actual return on plan assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Employer contributions</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>33,975</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Benefits paid</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(33,975</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Fair value of plan assets at end of period</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Funded Status of the Plan:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accumulated obligations less plan assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(594,757</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Unrecognized actuarial loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>142,494</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Unrecognized prior service cost</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Additional minimum pension liability</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net liability recognized</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(452,263</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Weighted Average Assumptions:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Discount rate</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.50</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Expected return on plan assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>N/A</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Rate of compensation increase</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>N/A</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Amounts recognized in the Combined Companies&#146; statements of
financial position consist of:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="63%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Other</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Pension</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Postretirement</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Benefits</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Benefits</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>December 31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>December 31,</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2003</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="8" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued benefit cost included in liabilities subject to
    compromise</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(16,245</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(10,104</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Intangible assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accumulated other comprehensive income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,683</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net amount recognized</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(12,557</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(10,104</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> F-50</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Horizon NR, LLC and Certain Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<DIV align="left" style="font-size: 10pt;">
<B>NOTES TO COMBINED FINANCIAL STATEMENTS&#151;(CONTINUED)</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>As of September 30, 2004, for the period January 1, 2004 to
September 30, 2004,</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>Year Ended December 31, 2003, the period May 10, 2002 to
December 31, 2002</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>(reorganized companies) and the period January 1, 2002 to May
9, 2002 (predecessor companies)</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>(Dollars in thousands)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Net periodic benefit costs of Horizon and all of its
subsidiaries, including the Combined Companies were as follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="39%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Pension Benefits</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Reorganized</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Predecessor</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Companies</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Companies</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>January 1, 2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>May 10, 2002 to</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>January 1, 2002</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>December 31, 2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>December 31, 2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>to May 9, 2002</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="14" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net periodic benefit cost:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Service cost</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,999</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,145</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,173</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest cost</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,098</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,213</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,303</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Settlement charge</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,184</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,821</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Expected return on assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(5,468</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(4,812</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,631</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Amortization of:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Prior service cost</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(72</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(47</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(26</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Actuarial loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>21</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>222</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>122</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Benefit cost</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,762</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,542</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>941</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="42%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Other Postretirement Benefits</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Reorganized</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Predecessor</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Companies</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Companies</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>January 1, 2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>May 10, 2002 to</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>January 1, 2002</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>December 31, 2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>December 31, 2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>to May 9, 2002</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="13" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net periodic benefit cost:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Service cost</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>6,251</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,253</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,758</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest cost</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>42,278</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>20,132</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,004</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Amortization of&#151;Actuarial (gain)&nbsp;loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>897</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(566</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(310</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Benefit cost</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>49,426</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>23,819</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>12,452</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
For measurement purposes, a 10% annual rate of increase in the
per capita cost of covered health care benefits was assumed,
gradually decreasing to 5% in 2010 and remaining level
thereafter.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Net periodic benefit cost is determined using the assumptions as
of the beginning of the year, and the funded status is
determined using the assumptions as of the end of the year.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The projected benefit obligations, accumulated benefit
obligations and fair value of plan assets for the Horizon
pension plans with accumulated benefit obligations in excess of
plan assets were $87,888, $83,809 and $41,991 as of
December&nbsp;31, 2003, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The expense and liability estimates can fluctuate by significant
amounts based upon the assumptions used by the actuaries. As of
December&nbsp;31, 2003, a one-percentage-point change in assumed
health care
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> F-51</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Horizon NR, LLC and Certain Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<DIV align="left" style="font-size: 10pt;">
<B>NOTES TO COMBINED FINANCIAL STATEMENTS&#151;(CONTINUED)</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>As of September 30, 2004, for the period January 1, 2004 to
September 30, 2004,</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>Year Ended December 31, 2003, the period May 10, 2002 to
December 31, 2002</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>(reorganized companies) and the period January 1, 2002 to May
9, 2002 (predecessor companies)</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>(Dollars in thousands)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
cost trend rates would have the following effects on the amounts
presented previously for the Horizon postretirement benefit plan:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="64%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>1-Percentage-</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>1-Percentage-</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Point</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Point</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Increase</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Decrease</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="8" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Effect on total of service and interest cost components</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>6,300</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(5,200</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Effect on postretirement benefit obligation</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>81,300</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(67,300</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Plan Assets</I></B>&#151;Horizon&#146;s pension plan
weighted-average asset allocations at December&nbsp;31, 2003 by
asset category are as follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="86%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2" align="left" nowrap><B>Asset Category</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2003</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mutual funds</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>49</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash Equivalents</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>51</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Workers&#146; Compensation and Black Lung</I></B>&#151;The
operations of the Combined Companies are subject to federal and
state workers&#146; compensation laws. These laws provide for
the payment of benefits to disabled workers and their
dependents, including lifetime benefits for black lung. The
Combined Companies&#146; subsidiary operations are either fully
insured or self-insured for their workers&#146; compensation and
black lung obligations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The Combined Companies actuarially determined liability for
self-insured workers&#146; compensation and black lung benefits
was based on a 6.75% discount rate and various other assumptions
including incidence of claims, benefits escalation, terminations
and life expectancy. The annual black lung expense consisted of
actuarially determined amounts for self-insured obligations. The
estimated amount of the Combined Companies&#146; discounted
obligations for self-insured workers&#146; compensation and
black lung claims plus an estimate for incurred but not reported
claims was $32,847 as of December&nbsp;31, 2003. The
unrecognized projected black lung benefit obligations
(difference between recorded accrual and projected obligations)
at December&nbsp;31, 2003 was approximately $2,563 and was to be
provided for over the future service period of current employees
as of December&nbsp;31, 2003. The projected black lung
obligations may vary in a given year based on the timing of
claims filed and changes in actuarial assumptions. The Combined
Companies recorded expenses related to self-insured
workers&#146; compensation and black lung of $1,512 for the
period January&nbsp;1, 2004 to September&nbsp;30, 2004, $2,806
for the year ended December&nbsp;31, 2003, $1,563 for the period
May&nbsp;10, 2002 to December&nbsp;31, 2002 and $1,065 for the
period January&nbsp;1, 2002 to May&nbsp;9, 2002.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>401(k) Plan</I></B>&#151;The Combined Companies sponsor
savings and retirement plans for substantially all employees.
The plans match voluntary contributions of participants up to a
maximum contribution based upon a percentage of a
participant&#146;s salary with an additional matching
contribution possible at the Combined Companies&#146;
discretion. The expense under these plans for the Combined
Companies was $2,488, $1,897, $1,196 and $543 for the period
January&nbsp;1, 2004 through September&nbsp;30, 2004, year ended
December&nbsp;31, 2003, and for the period May&nbsp;10, 2002 to
December&nbsp;31, 2002 and January&nbsp;1, 2002 to May&nbsp;9,
2002, respectively.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> F-52</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Horizon NR, LLC and Certain Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<DIV align="left" style="font-size: 10pt;">
<B>NOTES TO COMBINED FINANCIAL STATEMENTS&#151;(CONTINUED)</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>As of September 30, 2004, for the period January 1, 2004 to
September 30, 2004,</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>Year Ended December 31, 2003, the period May 10, 2002 to
December 31, 2002</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>(reorganized companies) and the period January 1, 2002 to May
9, 2002 (predecessor companies)</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>(Dollars in thousands)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>12.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;COMMITMENTS AND
CONTINGENCIES</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Coal Sales Contracts and Contingency</I></B>&#151;As of
September&nbsp;30, 2004, the Combined Companies had commitments
under eighteen sales contracts to deliver annually scheduled
base quantities of coal to fifteen customers. The contracts
expire from 2004 through 2020 with the Combined Companies
contracted to supply a minimum of approximately 64&nbsp;million
tons of coal over the remaining lives of the contracts (maximum
of approximately 16&nbsp;million tons in 2004). The Combined
Companies also has commitments to purchase certain amounts of
coal to meet its sales commitments. The purchase coal contracts
expire through 2006 and provide the Combined Companies a minimum
of approximately 5.9&nbsp;million tons of coal through the
remaining lives of the contracts (approximately 2.6&nbsp;million
tons per year). Certain of the contracts have sales price
adjustment provisions, subject to certain limitations and
adjustments, based on a variety of factors and indices.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Leases</I></B>&#151;The Combined Companies lease various
mining, transportation and other equipment under operating and
capital leases. Lease expense for the period January&nbsp;1,
2004 to September&nbsp;30, 2004, year ended December&nbsp;31,
2003, and for the period May&nbsp;10, 2002 to December&nbsp;31,
2002, and January&nbsp;1, 2002 to May&nbsp;9, 2002 was $17,711,
$23,302, $13,429, and $7,093, respectively. Property under
capital leases included in property, plant and equipment in the
combined balance sheets at September&nbsp;30, 2004 and
December&nbsp;31, 2003 was approximately $2,905 and $3,010, less
accumulated depreciation of approximately $2,208 and $1,619,
respectively. Depreciation of assets under capital leases is
included in depreciation expense.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The Combined Companies also lease mineral interest under
agreements that call for royalties to be paid as the coal is
mined. Total royalty expense for the period January&nbsp;1, 2004
through September&nbsp;30, 2004, the year ended
December&nbsp;31, 2004, and for the periods May&nbsp;10, 2002 to
December&nbsp;31, 2002 and January&nbsp;1, 2002 to May&nbsp;9,
2002 was approximately $13,854, $16,726, $6,698, and $10,574,
respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Legal Matters</I></B>&#151;From time to time, the Combined
Companies are involved in legal proceedings arising in the
ordinary course of business. In the opinion of management the
Combined Companies have recorded adequate reserves for these
liabilities and there is no individual case or group of related
cases pending that is likely to have a material adverse effect
on the financial condition, results of operations or cash flows
of the Combined Companies. With respect to any claims relating
to Horizon which arose prior to November&nbsp;12, 2002, such
claims are subject to an automatic stay of the U.S. Bankruptcy
Code. In limited circumstances, the Bankruptcy Court has lifted
the stay but only to the extent of insurance coverage relating
to Horizon.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Commissions</I></B>&#151;The Combined Companies have
various sales and agency agreements with third parties, whereby
they pay a $.10&#151;$2.75 per ton commission on various coal
sales agreements. The costs are expensed as the coal is
delivered. The Combined Companies incurred commission expense of
$303 for the period January&nbsp;1, 2004 to September&nbsp;30,
2004, $1,706 for the year ended December&nbsp;31, 2003 and
$1,408 and $653 for the periods May&nbsp;10, 2002 to
December&nbsp;31, 2002 and January&nbsp;1, 2002 to May&nbsp;9,
2002, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Environmental Matters</I></B>&#151;Based upon current
knowledge, the Combined Companies believe they are in material
compliance with environmental laws and regulations as currently
promulgated. However, the exact nature of environmental control
problems, if any, which the Combined Companies may
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> F-53</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Horizon NR, LLC and Certain Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<DIV align="left" style="font-size: 10pt;">
<B>NOTES TO COMBINED FINANCIAL STATEMENTS&#151;(CONTINUED)</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>As of September 30, 2004, for the period January 1, 2004 to
September 30, 2004,</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>Year Ended December 31, 2003, the period May 10, 2002 to
December 31, 2002</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>(reorganized companies) and the period January 1, 2002 to May
9, 2002 (predecessor companies)</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>(Dollars in thousands)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
encounter in the future cannot be predicted, primarily because
of the increasing number, complexity and changing character of
environmental requirements that may be enacted by federal and
state authorities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Contract Mining Agreements</I></B>&#151;The Combined
Companies perform contract-mining services for various third
parties and utilize contract miners on some of its operations.
Terms of the agreements generally allow either party to
terminate the agreements on a short-term basis.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In October 2002, Horizon NR, LLC&#146;s subsidiary, Mining
Technologies, Inc. (MTI), entered into a five year contract for
work beginning in April 2003 to provide mining services for a
period of five years or until all mineable coal is removed. MTI
is expected to produce and deliver a minimum of 500,000 tons per
year up to a maximum of 1,500,000 tons per year. The guaranteed
monthly contract tonnage shall be mutually agreed upon. Failure
to meet the guaranteed contract tonnage for three consecutive
months may result in termination of the contract. All work under
the contract must be completed no later than March&nbsp;31, 2008.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In December 2003, MTI entered into a three year contract for
work beginning in January 2004 to provide mining services for a
period of three years or until all mineable coal is removed. MTI
is expected to produce and deliver a minimum of 50,000 tons of
coal per month that has an ash content of less than fifteen
percent. Failure to meet the guaranteed contract tonnage and ash
requirements for three consecutive months may result in
termination of the contract. All work under the contract must be
completed no later than January&nbsp;15, 2007.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
On February&nbsp;1, 2004 MTI and Lauren Land agreed to the
assumption and amendment of three highwall mining system lease
agreements between them. The three leases ran for various
remaining terms ranging from 2004 to 2009. Subject to Bankruptcy
Court approval, the agreement called for MTI to assume and amend
the leases by accepting prepayment of all rentals due or to
become due during the current term, plus extensions, of the
three leases, and to grant to Lauren an option to purchase any
or all of the leased systems for the price of $200,000 each. As
of February&nbsp;1, 2004 Lauren&#146;s lease payment obligations
for all three leases totaled $9,500,000. Bankruptcy Court
approval was received and the transaction closed on
June&nbsp;18, 2004.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> F-54</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Horizon NR, LLC and Certain Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<DIV align="left" style="font-size: 10pt;">
<B>NOTES TO COMBINED FINANCIAL STATEMENTS&#151;(CONTINUED)</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>As of September 30, 2004, for the period January 1, 2004 to
September 30, 2004,</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>Year Ended December 31, 2003, the period May 10, 2002 to
December 31, 2002</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>(reorganized companies) and the period January 1, 2002 to May
9, 2002 (predecessor companies)</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>(Dollars in thousands)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>13.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;MAJOR CUSTOMERS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The Company and Predecessor Companies have coal sales to the
following major customers that in any period equaled or exceeded
10% of revenues:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="30%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>2003</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>September 30,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>January&nbsp;1, 2004 to</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>January 1, 2003 to</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>September&nbsp;30,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Total</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Total</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2003</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Receivable</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Total</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Receivable</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Total</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Balance</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Revenues</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Balance</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Revenues</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="16" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Customer A</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,105</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>44,788</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,342</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>119,817</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Customer B</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,187</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>58,712</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>224</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>89,459</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Customer C</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,499</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>36,244</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,233</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>42,317</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="35%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD><!-- Right VRule -->
    <TD width="2%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>May 10, 2002 to</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>January 1, 2002 to</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>December 31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>May 9,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Total</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Total</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Revenues</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Revenues</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="9" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Customer A</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>58,566</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>34,209</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Customer B</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>48,033</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>24,584</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Customer C</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>18,235</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,543</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> F-55</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Horizon NR, LLC and Certain Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO COMBINED FINANCIAL STATEMENTS&#151;(CONTINUED)</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>As of September 30, 2004, for the period January 1, 2004 to
September 30, 2004,</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>Year Ended December 31, 2003, the period May 10, 2002 to
December 31, 2002</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>(reorganized companies) and the period January 1, 2002 to May
9, 2002 (predecessor companies)</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>(Dollars in thousands)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>14.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WRITEDOWNS AND OTHER
ITEMS</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 3pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="37%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Reorganized Companies</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>January 1, 2004 to</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Year Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>May 10, 2002 to</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>September 30, 2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>December 31, 2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>December 31, 2002</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="13" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Goodwill impairment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>697,063</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Sale of mineral rights, equipment and impairment of operating
    assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,018</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,416</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>32,890</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Inventory writedown and other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,684</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>10,018</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>9,100</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>729,953</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="43%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Predecessor</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Companies</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>January 1, 2002 to</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>May 9, 2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Impairment of operating assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>8,323</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>8,323</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
After the petition date, the Combined Companies identified
certain non-core assets to be sold to generate cash flow. The
decision was based on the relative value of these assets to the
Combined Companies and the applicability of them to the long
term mine plan. During the period of January&nbsp;1, 2004 to
September&nbsp;30, 2004 a $13,327 loss was recognized on the
sale of mineral interests, a $7,736&nbsp;gain on lease buyout, a
lease on retirement of highwall mining system of $6,168 and
other items.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
SFAS&nbsp;No.&nbsp;144 addresses the applicable accounting when
companies are unable to generate sufficient cash flows to
recover the carrying amount of its fixed assets, mineral
interest, contract costs, development costs and long-term
advance royalties. As a result of applying
SFAS&nbsp;No.&nbsp;144 for the year ending December&nbsp;31,
2003, the Combined Companies wrote down assets aggregating
$6,416. These losses resulted from deteriorating market
conditions, poor mining conditions and a change in mine plans.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
For the year ended December&nbsp;31, 2003, the Combined
Companies wrote down parts inventory of $2,677 as a result of
the annual physical inventory at a subsidiary warehouse and
incurred other writedowns of $7.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
As of December&nbsp;31, 2002, the Combined Companies wrote off
their goodwill value as a result of the application of
SFAS&nbsp;No.&nbsp;142. Under SFAS&nbsp;No.&nbsp;142, if the
carrying amount of the goodwill exceeds the fair value of that
goodwill, an impairment loss is recognized in an amount equal to
the excess. The Combined Companies used a discounted cash flow
approach to estimate the fair value of its assets. Upon
completing the calculation, it was determined that after
covering the Combined Companies&#146; identifiable assets
carrying amounts, there was no excess value remaining to cover
the goodwill value. The impairment resulted from the conditions
leading to Horizon&#146;s November&nbsp;13, 2002 Chapter&nbsp;11
filing.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> F-56</B>
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Horizon NR, LLC and Certain Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<DIV align="left" style="font-size: 10pt;">
<B>NOTES TO COMBINED FINANCIAL STATEMENTS&#151;(CONTINUED)</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>As of September 30, 2004, for the period January 1, 2004 to
September 30, 2004,</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>Year Ended December 31, 2003, the period May 10, 2002 to
December 31, 2002</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>(reorganized companies) and the period January 1, 2002 to May
9, 2002 (predecessor companies)</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>(Dollars in thousands)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
After the Petition Date, the Combined Companies identified one
under performing mine (Blue Springs Job&nbsp;21) at which
operations were closed. The Combined Companies based its
decision to close this operation on various factors, including
minable reserve depletion, operating costs, productivity, and
whether this particular property fit within their long term
business plan. The Combined Companies also idled a significant
amount of equipment which it has identified either for sale to
third parties (if owned) or for rejection (if leased).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
During the period January&nbsp;1, 2002 to May&nbsp;9, 2002, the
Combined Companies identified certain idle properties that had
excess asset values and also closed certain of its mines.
Impairment charges were recorded to reduce these assets to
recoverable values at the idled properties and closed mines of
$8,323.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>15.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;REORGANIZATION ITEMS</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="40%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Reorganized Companies</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>January 1, 2004 to</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Year Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>May 10, 2002 to</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>September 30, 2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>December 31, 2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>December 31, 2002</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="13" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Bankruptcy related reorganization expenses, including
    professional services fees and labor costs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(12,471</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(23,064</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(4,075</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Write-offs of payables to/ receivables from other Horizon
    subsidiaries</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,198</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(29,720</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(139,588</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>727</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(52,784</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(143,663</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="67%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="13%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="13%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Predecessor Companies</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>January 1, 2002 to</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>May 9, 2002</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gain on Fresh Start Valuation</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>645,824</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gain on Debt Extinguishment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>161,584</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Bankruptcy related reorganization expenses, including
    professional services fees and labor costs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(19,508</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Write-offs of payables to/ receivables from other Horizon
    subsidiaries</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>779,789</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,567,689</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>16.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;FAIR VALUE OF FINANCIAL
INSTRUMENTS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The book values of cash and cash equivalents, accounts
receivable and accounts payable are considered to be
representative of their respective fair values because of the
immediate short-term maturity of these financial instruments.
Given the Combined Companies&#146; current liquidity status (see
Notes&nbsp;2 and 8), the fair value of the senior secured term
notes and senior secured notes could not be determined or
estimated. The carrying value of the Combined Companies&#146;
other debt instruments approximates fair value.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> F-57</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Horizon NR, LLC and Certain Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<DIV align="left" style="font-size: 10pt;">
<B>NOTES TO COMBINED FINANCIAL STATEMENTS&#151;(CONTINUED)</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>As of September 30, 2004, for the period January 1, 2004 to
September 30, 2004,</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>Year Ended December 31, 2003, the period May 10, 2002 to
December 31, 2002</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>(reorganized companies) and the period January 1, 2002 to May
9, 2002 (predecessor companies)</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>(Dollars in thousands)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>17.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;RELATED-PARTY TRANSACTIONS
AND BALANCES</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Prior to May&nbsp;10, 2002, the Combined Companies dealt with
certain companies or individuals which were related parties
either by having stockholders in common or because they were
controlled by stockholders/ officers of Horizon, including the
Combined Companies, or by relatives of stockholders/ officers of
Horizon. For the period May&nbsp;10, 2002 to September&nbsp;30,
2004, the Combined Companies had no related-party transactions.
In addition to related-party transactions and balances described
elsewhere, the following related-party transactions and balances
are summarized and approximated as follows below:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="73%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>January 1, 2002</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>through</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>May 9, 2002</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Revenues, costs and expenses:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Coal sales</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,537</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Equipment rental and repair income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>524</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Administrative and miscellaneous income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>93</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Trucking expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>885</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Repair, maintenance&nbsp;&#38; other mining costs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,818</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Equipment rental cost</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,413</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Administrative and miscellaneous expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> F-58</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Anker Coal Group, Inc. and Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>INDEPENDENT AUDITORS&#146; REPORT</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
To the Boards of Directors and Stockholders
</DIV>

<DIV align="left" style="font-size: 10pt;">
Anker Coal Group, Inc. and Subsidiaries
</DIV>

<DIV align="left" style="font-size: 10pt;">
Morgantown, West Virginia
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 15pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We have audited the accompanying consolidated balance sheet of
Anker Coal Group, Inc. and Subsidiaries (Company), as of
December&nbsp;31, 2004, and the related consolidated statements
of operations, stockholders&#146; deficit, and cash flows for
the year then ended. These financial statements are the
responsibility of the Company&#146;s management. Our
responsibility is to express an opinion on these financial
statements based on our audit.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We conducted our audit in accordance with auditing standards
generally accepted in the United States of America. Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes consideration
of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the Company&#146;s internal control over
financial reporting. Accordingly, we express no such opinion. An
audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In our opinion, such consolidated financial statements present
fairly, in all material respects, the financial position of the
Company as of December&nbsp;31, 2004, and the results of its
operations and its cash flows for the year then ended in
conformity with accounting principles generally accepted in the
United States of America.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Louisville, Kentucky
</DIV>

<DIV align="left" style="font-size: 10pt;">
April&nbsp;22, 2005
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> F-59</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Anker Coal Group, Inc. and Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>CONSOLIDATED BALANCE SHEET</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="69%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2004</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="7" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>ASSETS</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    CURRENT ASSETS:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash and cash equivalents</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,165,559</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accounts receivable&nbsp;&#151; trade, net of allowance of
    $1,194,985</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,050,468</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accounts receivable&nbsp;&#151; other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,311,255</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Coal and supply inventory</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,026,612</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Prepaid expenses and other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,457,087</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total current assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>18,010,981</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    PROPERTY, PLANT AND EQUIPMENT, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>54,122,751</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    NOTES RECEIVABLE, net of allowance of $795,797</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>500,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    ADVANCE ROYALTIES</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,439,379</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    OTHER NON-CURRENT ASSETS:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Bonds and deposits</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,583,082</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Investment in joint venture</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>434,322</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,280,186</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total other non-current assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,297,590</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    TOTAL</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>83,370,701</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="8">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>LIABILITIES AND STOCKHOLDERS&#146; DEFICIT</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    CURRENT LIABILITIES:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accounts payable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>10,281,124</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,253,453</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Reclamation&nbsp;&#151; current portion</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>105,413</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current portion of long-term debt</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,369,801</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total current liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>29,009,791</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    LONG-TERM DEBT</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,178,642</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    OTHER NON-CURRENT LIABILITIES:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Reclamation</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25,168,633</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred gain on sale-leaseback</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,832,792</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,783,509</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total other non-current liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>38,784,934</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>81,973,367</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    STOCKHOLDERS&#146; DEFICIT:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Common stock, no par value, 1,000,000 shares authorized and
    issued</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Paid-in capital</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>145,588,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accumulated deficit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(144,190,666</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total stockholders&#146; deficit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,397,334</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total liabilities and stockholders&#146; equity</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>83,370,701</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
See notes to consolidated financial statements.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> F-60</B>
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Anker Coal Group, Inc. and Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>CONSOLIDATED STATEMENT OF OPERATIONS</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="67%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="12%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>For the year ended</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2004</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    REVENUES:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Coal revenue</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>146,675,714</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Freight and handling</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,415,952</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Waste and blended fuel revenue</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,228,786</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total revenues</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>164,320,452</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    COSTS AND EXPENSES:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cost of coal sold</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>145,985,163</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Freight and handling costs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,415,952</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Depreciation, depletion and amortization</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,754,467</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Selling, general and administrative</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,585,793</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total costs and expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>171,741,375</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    OPERATING LOSS</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(7,420,923</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    OTHER INCOME (EXPENSE):</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>181,164</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,485,481</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,528,267</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total other income (expense)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,223,950</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(3,196,973</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
See notes to consolidated financial statements.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> F-61</B>
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Anker Coal Group, Inc. and Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>CONSOLIDATED STATEMENT OF STOCKHOLDERS&#146; DEFICIT</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="50%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>For the year ended December&nbsp;31, 2004</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Accumulated</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Paid-in capital</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>deficit</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Total</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="13" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Balances at January&nbsp;1, 2004, as previously reported</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>145,588,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(141,925,000</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,663,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Prior period adjustment: reduce income taxes payable recorded in
    previous year (Note&nbsp;13)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>931,307</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>931,307</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    As adjusted</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>145,588,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(140,993,693</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,594,307</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,196,973</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,196,973</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Balances at December&nbsp;31, 2004</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>145,588,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(144,190,666</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,397,334</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
See notes to consolidated financial statements.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> F-62</B>
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Anker Coal Group, Inc. and Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>CONSOLIDATED STATEMENT OF CASH FLOWS</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="61%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="12%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>For the Year Ended</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2004</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="8" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="5" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    OPERATING ACTIVITIES:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(3,196,973</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Adjustments to reconcile net loss to net cash provided by
    operating activities:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Depreciation, depletion and amortization</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,754,467</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gain on sales of property, plant and equipment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>105,805</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Equity in loss of joint venture</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>26,929</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Changes in assets and liabilities:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accounts receivable&#151; trade</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,608,549</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accounts receivable&#151; other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,299,892</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Coal and supply inventory</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,023,272</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other current assets and other assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(568,336</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Advance royalties</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,616,922</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accounts payable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,339,644</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,086,921</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other non-current liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,149,579</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net cash provided by operating activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,149,401</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="5" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    INVESTING ACTIVITIES:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Expenditures for purchases of property, plant and equipment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(27,238,311</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Proceeds from sales of property, plant and equipment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>151,750</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net cash used in investing activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(27,086,561</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="5" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    FINANCING ACTIVITIES:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Principal payments on debt</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(165,521,844</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Proceeds from debt</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>179,659,834</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Proceeds from notes receivable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>787,979</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net cash provided by financing activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,925,969</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net decrease in cash and cash equivalents</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,011,191</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash and cash equivalents, beginning of year</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,176,750</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash and cash equivalents, end of year</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,165,559</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash paid during the year for interest</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>703,417</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
See notes to consolidated financial statements.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> F-63</B>
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Anker Coal Group, Inc. and Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B>
</DIV>

<DIV align="left" style="font-size: 10pt;">
<B>For the year ended December&nbsp;31, 2004</B>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B>1.</B></TD>
    <TD>
    <B>DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING
    POLICIES</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Description of business</I></B>&#151;Anker Coal Group,
Inc. and Subsidiaries (the &#147;Company&#148;) was formed in
August 1996 under the laws of the State of Delaware. The Company
was organized in order to effect a recapitalization of its
predecessor, Anker Group, Inc., which had been engaged in the
production of coal since 1975. The operations of the Company and
its subsidiaries, which are principally located in West Virginia
and Maryland, consist of mining and selling coal from mineral
rights that it owns and/or leases, as well as brokering coal
from other producers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
On October&nbsp;29, 2002, the Company filed petitions under
Chapter&nbsp;11 of the United States Bankruptcy Code (the
&#147;Code&#148;). On July&nbsp;29, 2003, the Company&#146;s
Plan of Reorganization (the &#147;Plan&#148;) was approved and
the Company emerged from bankruptcy with the approval of the
exit financing on October&nbsp;10, 2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Principles of consolidation</I></B>&#151;The consolidated
financial statements include the accounts of Anker Coal Group,
Inc. and its wholly and majority-owned subsidiaries. All
material intercompany accounts and transactions have been
eliminated in consolidation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Company environment and risk factors</I></B>&#151;In the
course of business activities the Company is exposed to a number
of risks including: the possibility of the termination or
alteration of coal sales contracts, fluctuating market
conditions of coal (often impacted by the weather) and
transportation/fuel costs, competitive industry and
overcapacity, changing government regulations, unexpected
maintenance and equipment failure, employee benefits cost
control, changes in estimates of proven and probable coal
reserves, labor relations issues, loss of key employees,
satisfactory resolution of technology issues, as well as the
ability to obtain financing, necessary mining permits and
control of adequate recoverable mineral reserves. In addition,
adverse weather and geological conditions may increase mining
costs, sometimes substantially.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Cash equivalents</I></B>&#151;The Company classifies
highly liquid investments with original maturities of three
months or less at the time of purchase as cash equivalents.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Trade accounts receivable and allowance for doubtful
accounts</I></B>&#151;Trade accounts receivable are recorded at
the invoiced amount and do not bear interest. The allowance for
doubtful accounts is the Company&#146;s best estimate of the
amount of probable credit losses in the Company&#146;s existing
accounts receivable. The Company establishes provisions for
losses on accounts receivable when it is probable that all or
part of the outstanding balance will not be collected. The
Company regularly reviews collectibility and establishes or
adjusts the allowance as necessary using the specific
identification method. Losses are charged off against the
allowance. The Company does not have any off-balance sheet
credit exposure related to its customers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Coal and supply inventory</I></B>&#151;Coal inventory is
stated at the lower of average cost, determined on a first in,
first out (FIFO)&nbsp;basis, or market and amounted to
approximately $3,672,000 as of December&nbsp;31, 2004. Supply
inventories are stated at the lower of average cost or market
and amounted to approximately $354,000 as of December&nbsp;31,
2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Property, plant and equipment</I></B>&#151;Property, plant
and equipment, including mineral reserves and mine development
costs are recorded at cost, which includes construction overhead
and interest, where applicable. Expenditures for major renewals
and betterments are capitalized while expenditures for
maintenance and repairs are expensed as incurred. Mineral
reserves are depleted using the units-of-production method,
based on estimated recoverable reserves. Mine development costs
are amortized using the units-of-production method, based on
estimated recoverable reserves. Other property, plant
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> F-64</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Anker Coal Group, Inc. and Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&#151;(CONTINUED)</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>For the year ended December&nbsp;31, 2004</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
and equipment is depreciated using the straight-line method with
estimated useful lives substantially as follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="82%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" nowrap><B>&nbsp;&nbsp;Years</B></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Buildings and improvements</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    10 to 30</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Machinery and equipment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    &nbsp;3 to 15</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Vehicles</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    &nbsp;3 to &nbsp;5</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Furniture and fixtures</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    &nbsp;3 to 10</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Advance royalties</I></B>&#151;The Company is required,
under certain royalty lease agreements, to make minimum royalty
payments whether or not mining activity is being performed on
the leased property. These minimum payments may be recoupable
once mining begins on the leased property. The recoupable
minimum royalty payments are capitalized and the deferred costs
amortized based on the units-of-production method at a rate
defined in the lease agreement once mining activities begin, or
the deferred costs are expensed when mining has ceased or a
decision is made not to mine on such property.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Investment in joint venture</I></B>&#151;The investment in
joint venture, accounted for on the equity method, represents
the Company&#146;s 50% ownership in a venture with an unrelated
party to mine coal on a specific property. The Company&#146;s
share of earnings of the joint venture of approximately $26,000
are included in other income.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Coal mine reclamation and mine closure
costs</I></B>&#151;Future cost requirements for reclamation of
land are estimated where surface and deep mining operations have
been conducted, based on the Company&#146;s interpretation of
the technical standards of regulations enacted by the
U.S.&nbsp;Office of Surface Mining, as well as state
regulations. These costs relate to reclaiming the pit and
support acreage at surface mines and sealing portals at deep
mines. Other costs common to both types of mining are related to
reclaiming refuse and slurry ponds as well as holding and
related termination/exit costs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The Company records these reclamation obligations under the
provision of Statement of Financial Accounting Standards
(&#147;SFAS&#148;) No.&nbsp;143, <I>Accounting for Asset
Retirement Obligations</I>. SFAS&nbsp;No.&nbsp;143 addresses
asset retirement obligations that result from the acquisition,
construction or normal operation of long-lived assets. It
requires companies to recognize asset retirement obligations at
fair value when the liability is incurred. Upon initial
recognition of a liability, that cost should be capitalized as
part of the related long-lived asset and allocated to expense
over the useful life of the asset. The asset retirement costs
are recorded in mineral reserves.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The Company expenses contemporaneous reclamation which is
performed prior to final mine closure. The establishment of the
end of mine reclamation and closure liability is based upon
permit requirements and requires significant estimates and
assumptions, principally associated with regulatory
requirements, costs and recoverable coal reserves. Annually, the
end of mine reclamation and closure liability is reviewed and
necessary adjustments are made, including mine plan and permit
changes and revisions to cost and production levels to optimize
mining and reclamation efficiency. The amount of such
adjustments is reflected in the
SFAS&nbsp;No.&nbsp;143&nbsp;year-end calculation. When a mine
life is shortened due to a change in the mine plan, mine closing
obligations are accelerated and the related accrual is increased
accordingly.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Income tax provision</I></B>&#151;The provision for income
taxes includes federal, state and local income taxes currently
payable and those deferred because of temporary differences
between the financial statement and tax basis of assets and
liabilities. Income taxes are recorded under the liability
method. Under this
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> F-65</B>
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Anker Coal Group, Inc. and Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&#151;(CONTINUED)</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>For the year ended December&nbsp;31, 2004</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
method, deferred income taxes are recognized for the estimated
future tax effects of differences between the tax basis of
assets and liabilities and their financial reporting amounts as
well as net operating loss carryforwards and tax credits based
on enacted tax laws. Valuation allowances are established when
necessary to reduce deferred tax assets to the amount expected
to be realized.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Revenue recognition</I></B>&#151;Coal revenue includes
sales to customers of company-produced coal and coal purchased
from third parties. The Company recognizes revenue from the sale
of company-produced coal and brokered coal at the time title
passes to the customer, which is either upon shipment or upon
customer receipt of coal, based on contractual terms. Freight
and handling billed to customers is included in revenues. Waste
and blended fuel revenue is generated from shipments of waste
fuel and blended fuel, and is recognized as revenue as shipments
are made.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Asset impairments and accelerated mine closing
accruals</I></B>&#151;The Company follows
SFAS&nbsp;No.&nbsp;144, <I>Accounting for the Impairment or
Disposal of Long-Lived Assets</I>, which requires that projected
future cash flows from use and disposition of assets be compared
with the carrying amounts of those assets. When the sum of
projected cash flows is less than the carrying amount,
impairment losses are recognized. In determining such impairment
losses, discounted cash flows are utilized to determine the fair
value of the assets being evaluated.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Workers&#146; compensation and black lung
benefits</I></B>&#151;The Company is liable under federal and
state laws to pay workers&#146; compensation and pneumoconiosis
(black lung) benefits to eligible employees, former employees
and their dependents. The Company utilizes a state workers&#146;
compensation and black lung fund to secure on-going obligations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Management&#146;s use of estimates</I></B>&#151;The
preparation of the consolidated financial statements in
conformity with U.S.&nbsp;generally accepted accounting
principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues
and expenses during the reporting period. Significant items
subject to such estimates and assumptions include the allowance
for doubtful accounts; inventories; mineral reserves; asset
retirement obligations; future cash flows associated with
assets; useful lives for depreciation, depletion and
amortization; and income taxes. Due to the subjective nature of
these estimates, actual results could differ from those
estimates.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> F-66</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Anker Coal Group, Inc. and Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&#151;(CONTINUED)</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>For the year ended December&nbsp;31, 2004</B>
</DIV>

<DIV style="margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B>2.</B></TD>
    <TD>
    <B>PROPERTY, PLANT AND EQUIPMENT</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Property, plant and equipment consist of the following at
December&nbsp;31, 2004:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="78%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>



<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Land</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,127,202</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Buildings and improvements</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>19,233,942</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mine development</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>37,623,860</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Machinery and equipment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>56,830,387</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Vehicles</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>579,096</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Furniture and fixtures</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,451,851</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Construction in progress</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,631,545</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mineral rights</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,567,906</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total property, plant and equipment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>134,045,789</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Less accumulated depreciation, depletion and amortization</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>79,923,038</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Property, plant and equipment, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>54,122,751</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B>3.</B></TD>
    <TD>
    <B>LONG-TERM DEBT</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Long-term debt consists of the following at December&nbsp;31,
2004:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="79%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>



<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Senior notes, interest at 10%</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>7,000,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Note payable, interest at 8%</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,592,622</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Related party note payable, interest at 8%</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,580,834</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Related party revolving credit line, interest at 8%</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,500,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Equipment notes (fixed rates ranging from 4% to 7.643%)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,874,987</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>24,548,443</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Less: current portion</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,369,801</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total long-term debt</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>14,178,642</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The senior notes represent amounts that mature in October 2013
with quarterly principal payments of $350,000 beginning in
October 2008 and interest payable upon maturity. The senior
notes are collateralized by substantially all of the
Company&#146;s assets.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The note payable is for workers&#146; compensation premiums due
the state of West Virginia. Interest is fixed at 8%. The note is
due in January 2005. The note payable is collateralized by
substantially all of the Company&#146;s assets.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The related party note payable is a multi-draw loan with due
dates ranging from February 2007 to November 2007. Each draw is
fixed at 8% interest. The notes are collateralized by
substantially all of the Company&#146;s assets.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The related party revolving credit line bears interest at 8%
annually. The revolving credit line matures on January&nbsp;31,
2005. The credit line is collateralized by substantially all of
the Company&#146;s assets.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The equipment notes have maturities ranging from April 2005 to
November 2009 and are collateralized by mining equipment with a
net book value of approximately $4,405,000.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> F-67</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Anker Coal Group, Inc. and Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&#151;(CONTINUED)</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>For the year ended December&nbsp;31, 2004</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
At December&nbsp;31, 2004, maturities of long-term debt are as
follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 9pt; ">

<TR style="font-size: 1pt;">
    <TD width="82%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="center" nowrap><B>Year ending December&nbsp;31</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2005</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>10,369,801</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2006</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,890,154</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2007</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,212,180</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2008</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>981,119</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2009</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,822,478</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Thereafter</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,272,711</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>24,548,443</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B>4.</B></TD>
    <TD>
    <B>DEFERRED GAIN ON SALE-LEASEBACK</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
On December&nbsp;29, 2003, the Company sold specific coal
reserves to CoalQuest Development LLC (CoalQuest), a related
party under common control, for $19,000,000. The Company
subsequently leased back specific coal properties and mining
rights that represented approximately 8% of the coal reserves
sold to CoalQuest. The initial lease term is for five years and
will automatically renew for additional one-year terms until all
coal has been removed. The Company has the option to terminate
the lease by providing written notice 90 days prior to the
expiration of the then current term. The lease requires a
tonnage royalty of the greater of $1.25 per ton or 4% of the
average gross sales price with a 2,000,000 ton annual minimum.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
For the coal reserves leased back, a deferred gain of $9,200,000
was recorded. The gain is being amortized over the lease term
under the units-of-production method.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B>5.</B></TD>
    <TD>
    <B>OTHER INCOME, net</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Other income, net consists of the following at December&nbsp;31,
2004:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 9pt; ">

<TR style="font-size: 1pt;">
    <TD width="84%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Ash revenue</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,637,798</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Commissions revenue</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,434,934</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Miscellaneous revenue</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,676,140</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Royalty revenue</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>779,395</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,528,267</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B>6.</B></TD>
    <TD>
    <B>LEASES</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The Company leases office space under an operating lease. Lease
expense related to this lease for the year ended
December&nbsp;31, 2004 was approximately $228,000. The lease
requires minimum annual payments of $240,000 through January
2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The Company leases coal reserves under agreements that call for
royalties to be paid as the coal is mined. Total royalty
expense, including related party expense discussed in
Note&nbsp;4, for the year ended December&nbsp;31, 2004 was
approximately $4,322,000. Certain agreements require minimum
annual royalties to be paid regardless of the amount of coal
mined during the year. Certain agreements may be cancelable at
the Company&#146;s discretion.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> F-68</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Anker Coal Group, Inc. and Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&#151;(CONTINUED)</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>For the year ended December&nbsp;31, 2004</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Approximate non-cancelable future minimum royalty payments as of
December&nbsp;31, 2004, are as follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="84%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="13%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Total</B></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2005</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">
    $1,218,620</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2006</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">
    1,176,476</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2007</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">
    824,583</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2008</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">
    818,567</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2009</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">
    813,534</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Thereafter</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">
    813,118</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">
    $5,664,898</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B>7.</B></TD>
    <TD>
    <B>INCOME TAXES</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The Company files a consolidated federal income tax return. The
income tax provision (benefit) for the year ended
December&nbsp;31, 2004 is composed of the following:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 9pt; ">

<TR style="font-size: 1pt;">
    <TD width="82%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,038,328</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Valuation allowance</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,038,328</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The following table presents the difference between the actual
tax provision (benefit) and the amounts obtained by applying the
statutory U.S.&nbsp;federal income tax rate of 35% to the income
and losses before income taxes.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 9pt; ">

<TR style="font-size: 1pt;">
    <TD width="78%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2004</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Federal provision (benefit) computed at statutory rate</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1,118,941</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    State income tax provision (benefit) (net of federal tax
    benefits and apportionment factors) computed at statutory rate</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(159,849</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Valuation allowance</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,038,328</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Nondeductible items</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>141,456</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>99,006</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> F-69</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Anker Coal Group, Inc. and Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&#151;(CONTINUED)</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>For the year ended December&nbsp;31, 2004</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Significant components of the Company&#146;s deferred tax assets
and liabilities as of December&nbsp;31, 2004 are summarized as
follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 9pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="72%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2004</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred Tax Assets:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued employee benefits</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,347,632</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued reclamation and closure</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,725,829</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,365,676</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>451,984</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3"><FONT style="font-size: 10pt">&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15,891,121</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Valuation allowance</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,622,294</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total deferred tax assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,268,827</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred Tax Liabilities:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Property, mineral reserves and mine development costs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>13,268,827</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net deferred tax asset/liability</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Classified in balance sheet:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other current assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>241,052</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Non-current liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>241,052</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
A valuation allowance has been provided for deferred tax assets
because the Company believes it is more likely than not that the
deferred tax assets will not be realized.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In connection with the emergence from bankruptcy on
October&nbsp;10, 2003 the Company realized a gain from the
cancellation of certain indebtedness (COI) of approximately
$92,000,000. This gain will not be taxable since the gain
resulted from the reorganization under the Bankruptcy Code.
However, the Company is required, as of the beginning of its
2004 taxable year, to reduce certain tax attributes including
NOL and capital loss carryforwards, credits, and tax basis in
assets in an amount not to exceed such COI income.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
As a result of this requirement the Company&#146;s NOLs for
regular tax and alternative minimum tax have been eliminated and
capital loss carryforwards and alternative minimum tax credit
carryforwards have also been eliminated. In addition the Company
reduced the tax basis in its assets by approximately $38,000,000.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B>8.</B></TD>
    <TD>
    <B>BENEFIT PLAN</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The Company has a contributory defined contribution retirement
plan covering all employees who meet certain eligibility
requirements. The plan provides for employer contributions
representing 5% of compensation. The Company&#146;s
contributions amounted to approximately $703,000 for the year
ended December&nbsp;31, 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The Company also has a 401(k) savings plan for all employees who
meet eligibility requirements. The plan provides for mandatory
employer contributions to match 100% of the first 3% of employee
contributions and 50% of the next 2% of employee contributions.
Thus, the Company&#146;s contribution could be as much as 4% of
each participant&#146;s compensation, subject to statutory
limits. In addition,
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> F-70</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Anker Coal Group, Inc. and Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&#151;(CONTINUED)</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>For the year ended December&nbsp;31, 2004</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
the Company may make discretionary contributions of 1% of
employee compensation. The Company&#146;s contributions amounted
to approximately $326,000 for the year ended December&nbsp;31,
2004.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B>9.</B></TD>
    <TD>
    <B>RELATED PARTY</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
As of and for the year ended December&nbsp;31, 2004, the Company
had the following balances and transactions with CoalQuest:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="84%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Advance royalties</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,038,960</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accounts payable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>70,345</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,168,384</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Royalty expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,769,324</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>10.</B></TD>
    <TD>
    <B>COMMITMENTS AND CONTINGENCIES</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Coal Sales Contracts and Contingency</I></B>&#151;As of
December&nbsp;31, 2004, the Company had commitments under five
sales contracts that extend past 2005 to deliver annually
scheduled base quantities of coal to four customers. The
contracts expire from 2005 through 2020 with the Company
contracted to supply a minimum of approximately 22&nbsp;million
tons of coal over the remaining lives of the contracts (maximum
of approximately 3.4&nbsp;million tons in 2005). The Company
also has commitments to purchase certain amounts of coal to meet
its sales commitments. The purchase coal contracts expire
through 2010 and provide the Company a minimum of approximately
3.6&nbsp;million tons of coal through the remaining lives of the
contracts (approximately .6&nbsp;million tons per year). Certain
of the contracts have sales price adjustment provisions, subject
to certain limitations and adjustments, based on a variety of
factors and indices.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Legal Matters</I></B>&#151;The Company is named as
defendant in various actions in the ordinary course of business.
These actions generally involve disputes related to contract
performance and property rights. Management is defending these
matters vigorously. Management believes the ultimate disposition
of these matters will not have a material adverse effect upon
the financial position or results of operations of the Company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Environmental Matters</I></B>&#151;Based upon current
knowledge, the Company believes it is in material compliance
with environmental laws and regulations as currently
promulgated. However, the exact nature of environmental control
problems, if any, which the Company may encounter in the future
cannot be predicted, primarily because of the increasing number,
complexity and changing character of environmental requirements
that may be enacted by federal and state authorities.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> F-71</B>
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Anker Coal Group, Inc. and Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&#151;(CONTINUED)</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>For the year ended December&nbsp;31, 2004</B>
</DIV>

<DIV style="margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>11.</B></TD>
    <TD>
    <B>MAJOR CUSTOMERS</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The Company had coal sales to the following major customers that
in any period equaled or exceeded 10% of revenues:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="70%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="12%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="12%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2004</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Total</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>receivable</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Total</B></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>balance</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>revenues</B></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Customer A</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">
    $3,253,195</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">
    $31,377,653</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Customer B</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">
    488,537</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">
    25,146,998</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Customer C</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">
    3,037,820</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">
    24,324,298</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Customer D</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">
    563,485</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">
    17,734,949</TD>
</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>12.</B></TD>
    <TD>
    <B>SUBSEQUENT EVENT</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
On March&nbsp;31, 2005, the Company entered into an agreement to
become a wholly-owned subsidiary of another company. The
agreement will be affected through issuance of shares of common
stock and is subject to certain closing conditions.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>13.</B></TD>
    <TD>
    <B>PRIOR PERIOD ADJUSTMENT</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The accumulated deficit of $141,925,000 previously reported at
December&nbsp;31, 2003 has been adjusted to reflect the
reduction of $931,307 of income taxes payable incorrectly
recorded in the previous year.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> F-72</B>
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>CoalQuest Development LLC</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>INDEPENDENT AUDITORS&#146; REPORT</B>
</DIV>

<DIV align="left" style="font-size: 10pt;">
To the Board of Directors and Stockholders
</DIV>

<DIV align="left" style="font-size: 10pt;">
CoalQuest Development LLC
</DIV>

<DIV align="left" style="font-size: 10pt;">
New York, New York
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 15pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We have audited the accompanying balance sheet of CoalQuest
Development LLC (Company) as of December&nbsp;31, 2004, and the
related statements of income, members&#146; equity, and cash
flows for the year then ended. These financial statements are
the responsibility of the Company&#146;s management. Our
responsibility is to express an opinion on these financial
statements based on our audit.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We conducted our audit in accordance with auditing standards
generally accepted in the United States of America. Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes consideration
of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the Company&#146;s internal control over
financial reporting. Accordingly, we express no such opinion. An
audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In our opinion, such financial statements present fairly, in all
material respects, the financial position of the Company as of
December&nbsp;31, 2004, and the results of its operations and
its cash flows for the year then ended in conformity with
accounting principles generally accepted in the United States of
America.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Louisville, Kentucky
</DIV>

<DIV align="left" style="font-size: 10pt;">
April&nbsp;22, 2005
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> F-73</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>CoalQuest Development LLC</B>
</DIV>

<DIV align="center" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>BALANCE SHEET</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="72%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2004</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="7" align="left" valign="top">
    <B>ASSETS</B></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    CURRENT ASSETS:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash and cash equivalents</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,818,883</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Royalties receivable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,238,729</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Prepaid expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15,150</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total current assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,072,762</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mineral interests, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>18,920,896</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    TOTAL</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>21,993,658</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="7" align="left" valign="top">
    <B>LIABILITIES AND MEMBERS&#146; EQUITY</B></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    CURRENT LIABILITIES:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accounts payable and accrued expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>546,082</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest payable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>535,200</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total current liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,081,282</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    NOTES PAYABLE</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16,250,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    DEFERRED ROYALTY INCOME</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,038,960</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>18,370,242</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    MEMBERS&#146; EQUITY:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Paid-in capital</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,250,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Retained earnings</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>373,416</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total members&#146; equity</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,623,416</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total liabilities and members&#146; equity</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>21,993,658</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
See notes to financial statements.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> F-74</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>CoalQuest Development LLC</B>
</DIV>

<DIV align="center" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 30pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>STATEMENT OF INCOME</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="67%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="12%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>For the Year Ended</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2004</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    ROYALTY INCOME</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,769,324</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    OPERATING EXPENSES</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>449,112</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    OPERATING INCOME</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,320,212</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    OTHER INCOME (EXPENSE):</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,934</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(535,200</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>132,607</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total other income (expense)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(394,659</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>925,553</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
See notes to financial statements.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> F-75</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>CoalQuest Development LLC</B>
</DIV>

<DIV align="center" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 30pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>STATEMENT OF MEMBERS&#146; EQUITY</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="56%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>For the year ended December&nbsp;31, 2004</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Retained</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Paid-in</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>earnings</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>capital</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>(deficit)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Total</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="13" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Balance at January&nbsp;1, 2004</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>8,450,890</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(174,491</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>8,276,399</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Capital contribution</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,592,243</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,592,243</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>925,553</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>925,553</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Distributions</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(6,793,133</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(377,646</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(7,170,779</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Balance at December&nbsp;31, 2004</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,250,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>373,416</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,623,416</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
See notes to financial statements.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> F-76</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>CoalQuest Development LLC</B>
</DIV>

<DIV align="center" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 30pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>STATEMENT OF CASH FLOWS</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="61%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="12%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>For the year ended</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2004</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="8" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="5" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    OPERATING ACTIVITIES:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>925,553</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Adjustments to reconcile net income to net cash provided by
    operating activities:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Depletion</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>79,104</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Changes in assets and liabilities:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Royalties receivable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(199,769</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Prepaid expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(15,150</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accounts payable and accrued expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(6,835</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest payable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>535,200</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net cash provided by operating activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,318,103</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="5" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    FINANCING ACTIVITIES:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Principal payments on debt</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(11,049,110</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Proceeds from debt</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16,250,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Capital contribution</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,592,243</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Distributions of capital</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(6,793,133</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net cash provided by financing activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net increase in cash and cash equivalents</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,318,103</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash and cash equivalents, beginning of year</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>500,780</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash and cash equivalents, end of year</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,818,883</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Supplemental disclosure of non-cash items:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="9">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Dividends declared included in accounts payable and accrued
    expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>377,646</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred royalty income included in royalties receivable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,038,960</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
See notes to financial statements.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> F-77</B>
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
 <B>CoalQuest Development LLC</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO FINANCIAL STATEMENTS</B>
</DIV>

<DIV align="left" style="font-size: 9pt;">
<B>For the year ended December&nbsp;31, 2004</B>
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B>1.</B></TD>
    <TD>
    <B>DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING
    POLICIES</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Description of business</I></B>&#151; CoalQuest
Development LLC (the &#147;Company&#148;) was formed in
December&nbsp;2003 under the laws of the State of Delaware. The
Company is a property holding company which holds and leases
land consisting of coal reserves. The Company is under common
control with a related party which is the Company&#146;s only
customer.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Cash equivalents</I></B>&#151; The Company classifies
highly liquid investments with original maturities of three
months or less at the time of purchase as cash equivalents.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Royalties receivable</I></B>&#151; Royalties receivable
are recorded at the invoiced amount and do not bear interest.
The Company establishes provisions for losses when it is
probable that all or part of the outstanding balance will not be
collected. The Company does not have any off-balance sheet
credit exposure related to its customers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Mineral interests</I></B>&#151; Mineral interests are
recorded at the cost purchased from a related party. These
reserves are depleted to the estimated land value using the
units-of-production method, based on estimated recoverable
reserves.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Coal mine reclamation and mine closure costs</I></B>&#151;
Future cost requirements for reclamation of land owned by the
Company where surface and deep mining operations have been
conducted are the responsibility of the Company&#146;s related
party customer as set out in the lease agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Income taxes</I></B>&#151; The Company is a limited
liability corporation for federal and state income tax purposes.
Accordingly, the members report the Company&#146;s taxable
income or loss on their individual tax returns.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Deferred Royalty Income</I></B>&nbsp;&#151; The
Company&#146;s related party customer has a minimum royalty
tonnage requirement of 2,000,000 tons per year. Any tons short
of the annual minimum can be recouped in the subsequent five
years. The Company records the difference between tons actually
mined and the minimum tonnage requirement as a deferred royalty
and will amortize the deferred amounts into income when the
related party customer exceeds the minimum tonnage requirement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Revenue recognition</I></B>&#151; Royalty income includes
contractual obligations of the related party customer to pay for
the right to mine coal on Company owned property.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Management&#146;s use of estimates</I></B>&#151; The
preparation of financial statements in conformity with
accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues
and expenses during the reporting period. Significant items
subject to such estimates and assumptions include the allowance
for doubtful accounts, mineral reserves, future cash flows
associated with assets, and useful lives for depletion. Due to
the subjective nature of these estimates, actual results could
differ from those estimates.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> F-78</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>CoalQuest Development LLC</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 30pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B>2.</B></TD>
    <TD>
    <B>MINERAL INTERESTS</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Mineral interests consisted of the following at
December&nbsp;31, 2004:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="82%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>



<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mineral interests</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>19,000,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Less accumulated depletion</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>79,104</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mineral interests, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>18,920,896</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B>3.</B></TD>
    <TD>
    <B>NOTES PAYABLE</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Notes payable consists of notes payable to members of
$16,250,000 at December&nbsp;31, 2004. Interest is fixed at
3.49%. The notes are due on January&nbsp;29, 2009 and require
semi-annual interest payments.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B>4.</B></TD>
    <TD>
    <B>SUBSEQUENT EVENT</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
On March&nbsp;31, 2005, the Company entered into an agreement to
become a wholly-owned subsidiary of another company. The
agreement will be affected through issuance of shares of common
stock and is subject to certain closing conditions.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> F-79</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>[Back cover graphics to be filed by amendment]</B>
</DIV>

<DIV style="margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<IMG src="y07947y0794700.gif" alt="LOGO">
</DIV>

<DIV style="margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
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<DIV align="left" style="font-size: 10pt;">

</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 16pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Part&nbsp;II
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>INFORMATION NOT REQUIRED IN PROSPECTUS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Item&nbsp;13.&nbsp;&nbsp;Other expenses of issuance and
distribution.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The following table sets forth the costs and expenses payable in
connection with the distribution of the securities being
registered. All amounts are estimated except the Securities and
Exchange Commission registration fee.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 9pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="84%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Securities and Exchange Commission Registration Fee</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>29,425</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    NYSE Listing Fees</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Printing and Engraving Expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Blue Sky Fees and Expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Legal Fees and Expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accounting Fees and Expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Registrar and Transfer Agent Fees</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    NASD Filing Fee</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>25,500</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Miscellaneous Expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 15%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>*</TD>
    <TD align="left">
    To be filed by amendment.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Item&nbsp;14.&nbsp;&nbsp;Indemnification of directors and
officers.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
As permitted by Section&nbsp;102 of the Delaware General
Corporation Law, or the DGCL, our amended and restated
certificate of incorporation will include a provision that
eliminates the personal liability of our directors for monetary
damages for breach of fiduciary duty as a director.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our amended and restated certificate of incorporation and bylaws
will also provide that:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    we must indemnify our directors and officers to the fullest
    extent permitted by Delaware law;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    we may advance expenses, as incurred, to our directors and
    executive officers in connection with a legal proceeding to the
    fullest extent permitted by Delaware Law;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    we may indemnify our other employees and agents to the same
    extent that we indemnified our officers and directors, unless
    otherwise determined by our board of directors.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Pursuant to Section&nbsp;145(a) of the DGCL, we may indemnify
any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or
proceeding (other than an action by or in the right of the
corporation) by reason of the fact that the person is or was a
director, officer, agent or employee of our company or is or was
serving at our request as a director, officer, agent, or
employee of another corporation, partnership, joint venture,
trust or other enterprise, against expenses, including
attorneys&#146; fees, judgment, fines and amounts paid in
settlement actually and reasonably incurred by the person in
connection with such action, suit or proceeding. Pursuant to
Section&nbsp;145(b) of the DGCL, the power to indemnify also
applies to actions brought by or in the right of the corporation
as well, but only to the extent of defense expenses (including
attorneys&#146; fees) actually and reasonably incurred by the
person in connection with the defense or settlement of such
action or suit. Pursuant to Section&nbsp;145(b), we shall not
indemnify any person in respect of any claim, issue or matter as
to which such person shall have been adjudged to be liable to us
unless and only to the extent that the Court of Chancery or the
court in which such action or suit was brought
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B>II- 1</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Part II</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
shall determine upon application that, despite the adjudication
of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for
such expenses which the Court of Chancery or such other court
shall deem proper. The power to indemnify under
Sections&nbsp;145(a) and (b)&nbsp;of the DGCL applies
(i)&nbsp;if such person is successful on the merits or otherwise
in defense of any action, suit or proceeding, or (ii)&nbsp;if
such person acted in good faith and in a manner he reasonably
believed to be in the best interest, or not opposed to the best
interest, of the corporation, and with respect to any criminal
action or proceeding, had no reasonable cause to believe his
conduct was unlawful.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Section&nbsp;174 of the DGCL provides, among other things, that
a director, who willfully or negligently approves of an unlawful
payment of dividends or an unlawful stock purchase or
redemption, may be held liable for such actions. A director who
was either absent when the unlawful actions were approved or
dissented at the time, may avoid liability by causing his or her
dissent to such actions to be entered in the books containing
the minutes of the meetings of the board of directors at the
time such action occurred or immediately after such absent
director receives notice of the unlawful acts.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The indemnification provisions contained in our amended and
restated certificate of incorporation and bylaws will not be
exclusive of any other rights to which a person may be entitled
by law, agreement, vote of stockholders or disinterested
directors or otherwise. In addition, we will maintain insurance
on behalf of our directors and executive officers insuring them
against any liability asserted against them in their capacities
as directors or officers or arising out of such status.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Item&nbsp;15.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Recent sales of
unregistered securities.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
On March&nbsp;31, 2005, in connection with our initial
formation, we issued 100&nbsp;shares of common stock to ICG,
Inc. pursuant to Section&nbsp;4(2) of the Securities Act as a
private placement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Item&nbsp;16.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Exhibits and
Financial Statement Schedules.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Exhibits
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="13%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="84%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="center" nowrap><B>Exhibit</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="center" nowrap><B>no.</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" nowrap><B>Description of exhibit</B></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    1.1*</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Form of Underwriting Agreement</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2.1*</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Business Combination Agreement among International Coal Group,
    Inc., ICG Holdco, Inc., ICG Merger Sub, Inc., Anker Merger Sub,
    Inc. and Anker Coal Group, Inc., dated as of March&nbsp;31, 2005</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2.2*</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Business Combination Agreement among International Coal Group,
    Inc., ICG Holdco, Inc., CoalQuest merger Sub LLC, CoalQuest
    Development LLC and the members of CoalQuest Development LLC
    dated as of March&nbsp;31, 2005</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    3.1</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Amended and Restated Certificate of Incorporation of
    International Coal Group, Inc.</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    3.2</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Amended and Restated By-laws of International Coal Group, Inc.</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    4.1*</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Form of certificate of International Coal Group, Inc. common
    stock</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    4.3*</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Registration Rights Agreement by and between International Coal
    Group, Inc., WLR Recovery Fund&nbsp;II, L.P, Contrarian Capital
    Management LLC, V&#228;rde Partners, Inc., Greenlight Capital,
    Inc., and Stark Trading, Sheperd International Coal Holdings Inc.</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    4.4*</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Form of Registration Rights Agreement between International Coal
    Group, Inc. and certain former Anker stockholders and CoalQuest
    members</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    5.1*</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Opinion of Jones Day</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B>II- 2</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Part II</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 18pt; ">

<TR style="font-size: 1pt;">
    <TD width="13%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="84%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="center" nowrap><B>Exhibit</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="center" nowrap><B>no.</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" nowrap><B>Description of exhibit</B></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    10.1</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Amended and Restated Credit Agreement dated as of
    November&nbsp;5, 2004 among ICG, LLC, as Borrower, International
    Coal Group Inc., the guarantors party thereto, UBS Securities
    LLC, as Arranger, Bookmanager and Syndication Agent, General
    Electric Capital Corporation, as Documentation Agent, UBS AG,
    Stamford Branch, as Issuing Bank, Administrative Agent and
    Collateral Agent, and UBS Loan&nbsp;Finance, LLC, as Swingline
    Lender</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    10.2</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    First Amendment, dated as of November&nbsp;30, 2004, to the
    Amended and Restated Credit Agreement dated as of
    November&nbsp;5, 2004 among ICG, LLC, as Borrower, International
    Coal Group Inc., the guarantors party thereto, UBS Securities
    LLC, as Arranger, Bookmanager and Syndication Agent, General
    Electric Capital Corporation, as Documentation Agent, UBS AG,
    Stamford Branch, as Issuing Bank, Administrative Agent and
    Collateral Agent, and UBS Loan&nbsp;Finance, LLC, as Swingline
    Lender</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    10.3</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Security Agreement dated as of September&nbsp;30, 2004 among
    ICG, LLC and the guarantors party thereto and UBS AG, Stamford
    Branch, as Collateral Agent</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    10.4</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Advisory Services Agreement effective as of October&nbsp;1, 2004
    between International Coal Group, LLC and W.L. Ross&nbsp;&#38;
    Co. LLC</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    10.5</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Employment Agreement dated March&nbsp;14, 2005 by and between
    Bennett K. Hatfield and International Coal Group, Inc.</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    10.6*</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Coal Lease between Kycoga Company, LLC, lessor, and ICG Hazard,
    LLC, lessee, of Flint Ridge Surface&nbsp;Mine</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    10.7*</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Fee Lease between Leo and Josephine Goff, et&nbsp;al., lessor,
    and ICG Hazard, LLC, lessee, of Flint Ridge Surface&nbsp;Mine</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    10.8*</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Coal Lease between Ark Land Company, lessor, and ICG Hazard,
    LLC, lessee, of Flint Ridge Surface&nbsp;Mine</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    10.9*</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Fee Lease between Kentucky Union Company, lessor, and ICG
    Hazard, LLC, lessee, of Flint Ridge Surface&nbsp;Mine</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    10.10*</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Fee Lease between Kentucky Union Company, lessor, and ICG
    Hazard, LLC, lessee, of Flint Ridge Surface&nbsp;Mine</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    10.11*</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Fee Lease between Pocahontas Development Corp., lessor, and ICG
    East Kentucky, LLC, lessee, of Blackberry Creek Surface&nbsp;Mine</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    10.12*</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Coal Lease between N&#38;G Holdings Company, lessor, and ICG
    Hazard, LLC, lessee, of Vicco Surface&nbsp;Mine</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    10.13*</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Coal Lease between Louise Hall et&nbsp;al., lessor, and ICG
    Knott County, LLC, lessee, of Classic Underground
    Surface&nbsp;Mine</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    10.14*</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Coal Lease between Mary L. Jones, et&nbsp;al., lessor, and ICG
    Illinois, LLC, lessee, of Viper Mine</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    10.15*</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Coal Lease between Charles E. Lynch,&nbsp;Jr., lessor, and ICG
    Illinois, LLC, lessee, of Viper Mine</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    10.16*</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Coal Lease between Robert A. Williamson, lessor, and ICG
    Illinois, LLC, lessee, of Viper Mine</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    10.17*</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Coal Lease between Knight-Ink Heirs, lessor, and ICG Eastern,
    LLC, lessee, of Birch River&nbsp;Mine</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    10.18*</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Surface Lease between Beckwith Lumber Company, lessor, and ICG
    Eastern, LLC, lessee, of Birch River&nbsp;Mine</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    10.19*</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Surface Lease between NGDH Land, et&nbsp;al., lessor, and ICG
    Eastern, LLC, lessee, of Birch River&nbsp;Mine</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    10.20*</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Coal Lease between NGDH Land, et&nbsp;al., lessor, and ICG
    Eastern, LLC, lessee, of Birch River&nbsp;Mine</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B>II- 3</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Part II</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 18pt; ">

<TR style="font-size: 1pt;">
    <TD width="13%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="84%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="center" nowrap><B>Exhibit</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="center" nowrap><B>no.</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" nowrap><B>Description of exhibit</B></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    10.21*</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Fee Lease between M-B, LLC, lessor, and ICG Eastern, LLC,
    lessee, of Birch River&nbsp;Mine</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    10.22*</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Coal Lease between Kycoga Company, LLC, lessor, and ICG Hazard,
    LLC, lessee, of County Line&nbsp;Mine</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    10.23*</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Coal Lease between Edward Clemons Revocable Trust, lessor, and
    ICG Hazard, LLC, lessee, of County Line&nbsp;Mine</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    10.24*</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Surface Lease between Mountain Properties, Inc., lessor, and ICG
    Hazard, LLC, lessee, of County Line&nbsp;Mine</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    10.25*</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Coal Lease between Peter Dassler, lessor, and ICG Hazard, LLC,
    lessee, of County Line&nbsp;Mine</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    10.26*</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Fee Lease between CSTL, LLC, lessor, and ICG Hazard, LLC,
    lessee, of County Line&nbsp;and Rowdy Gap Mines</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    10.27*</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Fee Lease between Kentucky River Properties, LLC, lessor, and
    ICG Hazard, LLC, lessee, of County Line&nbsp;and Thunder Ridge
    Mines</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    10.28*</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Coal Lease between Ed Ross Chaney, et&nbsp;al., lessor, and ICG
    Hazard, LLC, lessee, of East Mac&nbsp;&#38; Nellie&nbsp;Mine</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    10.29*</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Fee Lease between Victor Holliday, et&nbsp;al., lessor, and ICG
    Hazard, LLC, lessee, of East Mac&nbsp;&#38; Nellie&nbsp;Mine</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    10.30*</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Fee Lease between Kentucky River Properties, LLC, lessor, and
    ICG Hazard, LLC, lessee, of East Mac&nbsp;&#38; Nellie&nbsp;Mine</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    10.31*</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Fee Lease between Rex McDaniel, et. al, lessor, and ICG Natural
    Resources, LLC, lessee, of East Mac&nbsp;&#38; Nellie&nbsp;Mine</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    10.32*</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Fee Lease between Kentucky River Properties, LLC, lessor, and
    ICG Hazard, LLC, lessee, of Rowdy Gap&nbsp;and Thuder Ridge Mines</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    10.33*</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Coal Lease between Kycoga Company, LLC, lessor, and ICG Natural
    Resources, LLC, lessee, of Kentucky Prince&nbsp;Mine</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    10.34*</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Sublease between Spruce Pine Land Company, lessor, and ICG
    Natural Resources, LLC, lessee, of Kentucky Prince&nbsp;Mine</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    10.35*</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Lease between Allegany Coal and Land Company, lessor, and
    Patriot Mining Company, Inc., lessee, of Allegany County,
    Maryland Mine</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    10.36*</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Lease between The Crab Orchard Coal and Land Company, lessor,
    and Anker West Virginia Mining Company, Beckley Smokeless
    Division, lessee, of Bay Hill Mine</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    10.37*</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Lease between Beaver Coal Corporation, lessor, and Anker West
    Virginia Mining Company, Beckley Smokeless Division, of Bay Hill
    Mine</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    10.38*</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Lease between Douglas Coal Company, lessor, and Patriot Mining
    Company, Inc., lessee, of Island and Douglas Mine</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    10.39*</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Lease between Southern Region Industrial Realty, Inc., lessor,
    and Anker Virginia Mining Company, Inc., lessee, of War Creek
    Mine</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    10.40*</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Sublease between Reserve Coal Properties, sublessors, and
    Patriot Mining Company, sublessee, of Sycamore 2 Mine</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    10.41*</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Sublease between Appalachian Environmental, LLC, sublessor, and
    Anker West Virginia Mining Company, sublessee, of Upper
    Kittaning seam of coal at Sentinel Mine</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    10.42*</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Lease between Appalachian Environmental, LLC, lessor, and Anker
    West Virginia Mining Company, lessee, of Upper Kittaning seam of
    coal at Sentinel Mine</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B>II- 4</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Part II</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 18pt; ">

<TR style="font-size: 1pt;">
    <TD width="13%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="84%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="center" nowrap><B>Exhibit</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="center" nowrap><B>no.</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" nowrap><B>Description of exhibit</B></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    10.43*</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Amended and Restated Agreement for Sale and Purchase of Coal
    dated July&nbsp;1, 1996, between Carolina Power&nbsp;&#38; Light
    Company and Mountaineer Coal Development Company, d/b/a
    Marrowbone Development Company and ICG, LLC, amended by:</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    (a)&nbsp;Letter Agreement dated and effective July&nbsp;19, 1996</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    (b)&nbsp;Letter Agreement dated and effective July&nbsp;19, 1996</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    (c)&nbsp;Amendment 1 dated July&nbsp;29, 1998, effective
    January&nbsp;1, 1998</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    (d)&nbsp;Amendment 2 dated April&nbsp;19, 1999, effective
    January&nbsp;1, 1999</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    (e)&nbsp;Letter Agreement dated and effective March&nbsp;25, 2002</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    (f)&nbsp;Letter Agreement dated October&nbsp;14, 2002, effective
    October&nbsp;15, 2002</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    (g)&nbsp;Letter Agreement dated and effective July&nbsp;28, 2003</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    (h)&nbsp;Amendment No.&nbsp;3 dated July&nbsp;28, 2003,
    effective January&nbsp;1, 2003</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    10.44*</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Agreement for Purchase and Sales of Coal dated April&nbsp;10,
    2003 and effective January&nbsp;1, 2004, between Georgia Power
    Company and ICG Hazard, LLC</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    10.45*</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Contract for Sale and Purchase of Coal dated July&nbsp;1, 1980,
    between City of Springfield, Illinois and Shell Oil Company,
    amended by:</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    (a)&nbsp;Letter dated October&nbsp;16, 1980, assigning Shell Oil
    Company&#146;s rights and obligations under the contract to
    Turris Coal Company</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    (b)&nbsp;Letter Agreement dated November&nbsp;13, 1982,
    effective January&nbsp;1, 1983</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    (c)&nbsp;Amendment dated March&nbsp;4, 1986, effective
    January&nbsp;1, 1986</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    (d)&nbsp;Letter Agreement dated and effective March&nbsp;4, 1986</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    (e)&nbsp;Second Amendment dated April&nbsp;22, 1986, effective
    January&nbsp;1, 1986</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    (f)&nbsp;Modification dated and effective June&nbsp;8, 1987</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    (g)&nbsp;Modification dated and effective November&nbsp;4, 1988</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    (h)&nbsp;Amendment dated and effective January&nbsp;1, 1989</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    (i)&nbsp;Letter Agreement dated and effective November&nbsp;4,
    1991</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    (j)&nbsp;Letter Agreement dated and effective November&nbsp;27,
    1991</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    (k)&nbsp;Amendment dated March&nbsp;20, 1992, effective
    January&nbsp;1, 1992</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    (l)&nbsp;Amendment dated March&nbsp;21, 1995, effective
    January&nbsp;1, 1995</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    (m)&nbsp;Letter Agreement dated and effective August&nbsp;28,
    1996</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    (n)&nbsp;Amendment dated May&nbsp;10, 1996, effective
    May&nbsp;1, 1996</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    (o)&nbsp;Amendment dated August&nbsp;20, 1998, effective
    January&nbsp;1, 1998</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    (p)&nbsp;Amendment dated May&nbsp;30, 2001, effective
    January&nbsp;1, 2001</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    (q)&nbsp;Letter dated October&nbsp;8, 2004 assigning to ICG
    Illinois, LLC</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    10.46*</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Coal Supply Agreement, dated as of April&nbsp;1, 1992, between
    Anker Energy and Logan Generating Company (formerly Keystone
    Energy Service Company, L.P.), amended by</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    (a)&nbsp;First Amendment, effective as of September&nbsp;1, 1995</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    (b)&nbsp;Second Amendment, effected as of March&nbsp;15, 2002</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    11.1</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Statement regarding computation of per share earnings</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    21.1</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    List of Subsidiaries</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    23.1*</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Consent of Jones Day (included as part of its opinion filed as
    Exhibit&nbsp;5.1 hereto)</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B>II- 5</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Part II</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 18pt; ">

<TR style="font-size: 1pt;">
    <TD width="13%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="84%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="center" nowrap><B>Exhibit</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="center" nowrap><B>no.</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" nowrap><B>Description of exhibit</B></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    23.2</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Consent of Deloitte&nbsp;&#38; Touche, LLP</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    23.3</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Consent of Marshall Miller&nbsp;&#38; Associates, Inc.</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    24.1</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Power of Attorney</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD>*&nbsp;</TD>
    <TD align="left">
    To be filed by amendment</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
(b)&nbsp;Financial Statement Schedules
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="90%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Page</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Schedule&nbsp;II&nbsp;&#151; Valuation and Qualifying Accounts</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>II-9</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Schedules other than that noted above are omitted because of an
absence of other conditions under which they are required or
because the information required to be disclosed is presented in
the financial statements or notes thereto.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B>II- 6</B>
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Part II</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 16pt; margin-top: 36pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Report of independent registered public accounting firm
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
To the Board of Directors of
</DIV>

<DIV align="left" style="font-size: 10pt;">
International Coal Group, Inc.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We have audited the consolidated financial statements of ICG,
Inc. and subsidiaries (the &#147;Company&#148;) as of
December&nbsp;31, 2004 and for period October&nbsp;1, 2004 to
December&nbsp;31, 2004, and have issued our report thereon dated
April&nbsp;22, 2005 (included elsewhere in this Registration
Statement). Our audit also included the financial statement
schedule listed in Item&nbsp;16(b) of this Registration
Statement. This financial statement schedule is the
responsibility of the Company&#146;s management. Our
responsibility is to express an opinion based on our audit. In
our opinion, the financial statement schedule, when considered
in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set
forth therein.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
DELOITTE &#38; TOUCHE LLP
</DIV>

<DIV align="left" style="font-size: 10pt;">
Louisville, Kentucky
</DIV>

<DIV align="left" style="font-size: 10pt;">
April&nbsp;22, 2005
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B>II- 7</B>
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Part II</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 16pt; margin-top: 36pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Report of independent registered public accounting firm
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
To the Board of Directors of
</DIV>

<DIV align="left" style="font-size: 10pt;">
Horizon NR, LLC and Certain Subsidiaries
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We have audited the combined financial statements of
Horizon&nbsp;NR, LLC and Certain Subsidiaries (&#147;Combined
Companies&#148;) as of September&nbsp;30, 2004 and
December&nbsp;31, 2003 (&#147;Reorganized Companies&#148;) and
for the period January&nbsp;1, 2004 to September&nbsp;30, 2004,
the year ended December&nbsp;31, 2003, the period May&nbsp;10,
2002 to December&nbsp;31, 2002 (&#147;Reorganized
Companies&#148;), and for the period January&nbsp;1, 2002 to
May&nbsp;9, 2002 (&#147;Predecessor Companies&#148;), and have
issued our report thereon dated March&nbsp;25, 2005 (included
elsewhere in this Registration Statement). Our audits also
included the financial statement schedule listed in
Item&nbsp;16(b) of this Registration Statement. This financial
statement schedule is the responsibility of the Company&#146;s
management. Our responsibility is to express an opinion based on
our audits. In our opinion, such financial statement schedule,
when considered in relation to the basic financial statements
taken as a whole, presents fairly in all material respects the
information set forth therein.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
DELOITTE &#38; TOUCHE LLP
</DIV>

<DIV align="left" style="font-size: 10pt;">
Louisville, Kentucky
</DIV>

<DIV align="left" style="font-size: 10pt;">
March&nbsp;25, 2005
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B>II- 8</B>
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Part II</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 36pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Schedule&nbsp;II&nbsp;&#151;&nbsp;Valuation and Qualifying
Accounts</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="37%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Balance at</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Charged to</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Other</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>beginning of</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>revenue, costs</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>additions</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Balance at</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="left" nowrap><B>Description</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>period</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>or expenses</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>(deductions)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>end of period</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="16" align="right" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Period from October&nbsp;1, 2004 to December&nbsp;31, 2004
    (ICG, Inc. period) :</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Allowance for doubtful accounts</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,669</TD>
    <TD align="left" valign="bottom" nowrap>(1)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,669</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Reserve for inventory obsolescence</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>74</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,015</TD>
    <TD align="left" valign="bottom" nowrap>(1)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,089</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Reserve for loss&#151; Advance Royalties</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(8</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,110</TD>
    <TD align="left" valign="bottom" nowrap>(1)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,102</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Period ended September&nbsp;30, 2004 (Predecessor
    Horizon):</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Allowance for doubtful accounts</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,798</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,357</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,441</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Reserve for inventory obsolescence</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,803</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(6</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,797</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Allowance for doubtful Notes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,422</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(442</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,980</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Reserve for loss&#151; Advance Royalties</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Year ended December&nbsp;31, 2003 (Predecessor Horizon):</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Allowance for doubtful accounts</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,453</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,655</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,798</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Reserve for inventory obsolescence</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,485</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>318</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,803</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Allowance for doubtful Notes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,451</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(29</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,422</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Reserve for loss&#151; Advance Royalties</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Period from May 10, 2002 to December 31, 2002 (Predecessor
    Horizon):</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Allowance for doubtful accounts</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,918</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,529</TD>
    <TD align="left" valign="bottom" nowrap>(3)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,453</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Reserve for inventory obsolescence</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,485</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,485</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Reserve for loss&#151; Advance Royalties</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Allowance for doubtful Notes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,451</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,451</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Period from January 1, 2002 to May 9, 2002 (Predecessor
    AEI):</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Allowance for doubtful accounts</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,324</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,594</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,918</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Reserve for inventory obsolescence</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,241</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,244</TD>
    <TD align="left" valign="bottom" nowrap>(1)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,485</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Reserve for loss&#151; Advance Royalties</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Allowance for doubtful Notes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,980</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>471</TD>
    <TD align="left" valign="bottom" nowrap>(2)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,451</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><I>(1)</I></TD>
    <TD align="left">
    <I>Reflects opening balance sheet adjustments.</I></TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><I>(2)</I></TD>
    <TD align="left">
    <I>Reflects reclass of excise tax attributable to export
    sales.</I></TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><I>(3)</I></TD>
    <TD align="left">
    <I>Reflects anticipated non-collection of balloon payment
    related to a lease agreement.</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B>II- 9</B>
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Part II</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 30pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Item&nbsp;17.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Undertakings.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended, or the Securities Act, may
be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion
of the Securities Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is,
therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment
by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant
will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Securities Act and will be governed by the final
adjudication of such issue.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The undersigned registrant hereby undertakes that:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    (1)&nbsp;It will provide to the underwriter at the closing
    specified in the underwriting agreements, certificates in such
    denominations and registered in such names as required by the
    underwriter to permit prompt delivery to each purchaser.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    (2)&nbsp;For purposes of determining any liability under the
    Securities Act, the information omitted from the form of
    prospectus filed as part of this registration statement in
    reliance upon Rule&nbsp;430A and contained in a form of
    prospectus filed by the registrant pursuant to
    Rule&nbsp;424(b)(1) or (4)&nbsp;or 497(h) under the Securities
    Act shall be deemed to be part of this registration statement as
    of the time it was declared effective.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    (3)&nbsp;For purposes of determining any liability under the
    Securities Act, each post-effective amendment that contains a
    form of prospectus shall be deemed to be a new registration
    statement relating to the securities offering therein, and the
    offering of such securities at that time shall be deemed to be
    the initial <I>bona fide </I>offering thereof.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B>II- 10</B>
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">

</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 16pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Signatures
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this amendment to the registration
statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the city of Ashland, State of
Kentucky, on April&nbsp;28, 2005.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="38%"></TD>
    <TD width="62%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    International Coal Group, Inc.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 15pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="38%"></TD>
    <TD width="2%"></TD>
    <TD width="60%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>By:&nbsp;</TD>
    <TD align="left">
    /s/ <FONT style="font-variant:SMALL-CAPS">Bennett K. Hatfield
    </FONT></TD>
</TR>

</TABLE>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 3pt;">

<TR>
    <TD width="38%"></TD>
    <TD width="62%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt" align="left">&nbsp;</DIV></TD>
</TR>

<TR valign="top"  style="font-size: 10pt;">
    <TD>&nbsp;</TD>
    <TD align="left">
    Name:&nbsp;Bennett K. Hatfield&nbsp;</TD>
</TR>

</TABLE>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="38%"></TD>
    <TD width="10%"></TD>
    <TD width="52%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>Title:&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</TD>
    <TD align="left">
    President, Chief Executive Officer and Director</TD>
</TR>

</TABLE>

<DIV align="center" style="font-size: 10pt;">

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Pursuant to the requirements of the Securities Act of 1933, this
amendment to the registration statement has been signed by the
following persons in the capacities indicated on April 27, 2005.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="48%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="34%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="12%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="center" nowrap><B>Signature</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Title</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Date</B></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD align="center" valign="top">
    /s/ <FONT style="font-variant:SMALL-CAPS">Bennett K. Hatfield<BR>
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt;">&nbsp;</DIV></FONT>Bennett
    K. Hatfield</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    President, Chief Executive Officer and Director (Principal
    Executive Officer)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">
    April 28, 2005</TD>
</TR>

<TR>
    <TD align="center" valign="top">
    /s/ <FONT style="font-variant:SMALL-CAPS">William D. Campbell<BR>
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt;">&nbsp;</DIV></FONT>William
    D. Campbell</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Vice President, Treasurer and Secretary (Principal Financial and
    Accounting Officer)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">
    April 28, 2005</TD>
</TR>

<TR>
    <TD align="center" valign="top">
    &nbsp;<FONT style="font-variant:SMALL-CAPS">*<BR>
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt;">&nbsp;</DIV></FONT>Wilbur
    L. Ross,&nbsp;Jr.&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Non-Executive Chairman and Director</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">
    April 28, 2005</TD>
</TR>

<TR>
    <TD align="center" valign="top">
    <FONT style="font-variant:SMALL-CAPS">*<BR>
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt;">&nbsp;</DIV></FONT>Jon
    R. Bauer</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Director</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">
    April 28, 2005</TD>
</TR>

<TR>
    <TD align="center" valign="top">
    <FONT style="font-variant:SMALL-CAPS">*<BR>
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt;">&nbsp;</DIV></FONT>Cynthia
    B. Bezik</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Director</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">
    April 28, 2005</TD>
</TR>

<TR>
    <TD align="center" valign="top">
    <FONT style="font-variant:SMALL-CAPS">*<BR>
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt;">&nbsp;</DIV></FONT>William
    J. Catacosinos</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Director</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">
    April 28, 2005</TD>
</TR>

<TR>
    <TD align="center" valign="top">
    <FONT style="font-variant:SMALL-CAPS">*<BR>
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt;">&nbsp;</DIV></FONT>George
    R. Desko</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Director</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">
    April 28, 2005</TD>
</TR>

<TR>
    <TD align="center" valign="top">
    <FONT style="font-variant:SMALL-CAPS">*<BR>
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt;">&nbsp;</DIV></FONT>Marcia
    Page</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Director</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">
    April 28, 2005</TD>
</TR>

<TR>
    <TD align="center" valign="top">
    <FONT style="font-variant:SMALL-CAPS">*<BR>
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt;">&nbsp;</DIV></FONT>Wendy
    L. Teramoto</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Director</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">
    April 28, 2005</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 15%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 9pt; margin-top: 2pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;
<I>*&nbsp;&nbsp;&nbsp;&nbsp;The undersigned, pursuant to a power
of attorney, executed by each of the officers and directors
above and filed with the SEC herewith, by signing his name
hereto, does hereby sign and deliver this Registration Statement
on behalf of the persons noted above in the capacities
indicated.</I>
</DIV>

<DIV style="margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 9pt;">

<TR>
    <TD width="40%"></TD>
    <TD width="2%"></TD>
    <TD width="58%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>By:&nbsp;</TD>
    <TD align="left">
    /s/ <FONT style="font-variant:SMALL-CAPS">William D. Campbell
    </FONT></TD>
</TR>

</TABLE>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 3pt;">

<TR>
    <TD width="40%"></TD>
    <TD width="60%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt" align="left">&nbsp;</DIV></TD>
</TR>

<TR valign="top"  style="font-size: 10pt;">
    <TD>&nbsp;</TD>
    <TD align="left">
    Name:&nbsp;William D. Campbell&nbsp;</TD>
</TR>

</TABLE>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="40%"></TD>
    <TD width="10%"></TD>
    <TD width="50%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>Title:&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</TD>
    <TD align="left">
    Vice President, Treasurer and Secretary</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B>II- 11</B>
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">

</DIV>

<DIV align="left" style="font-size: 3pt;">
<FONT style="font-size: 10pt">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</FONT>
</DIV>

<DIV align="left" style="font-size: 16pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Exhibit index
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="88%">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>1.1*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of Underwriting Agreement</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>2.1*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Business Combination Agreement among International Coal Group,
    Inc., ICG Holdco, Inc., ICG Merger Sub, Inc., Anker Merger Sub,
    Inc. and Anker Coal Group, Inc., dated as of March&nbsp;31, 2005</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>2.2*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Business Combination Agreement among International Coal Group,
    Inc., ICG Holdco, Inc., CoalQuest merger Sub LLC, CoalQuest
    Development LLC and the members of CoalQuest Development LLC
    dated as of March&nbsp;31, 2005</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>3.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amended and Restated Certificate of Incorporation of
    International Coal Group, Inc.</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>3.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amended and Restated By-laws of International Coal Group, Inc.</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>4.1*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of certificate of International Coal Group, Inc. common
    stock</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>4.3*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Registration Rights Agreement by and between International Coal
    Group, Inc., WLR Recovery Fund&nbsp;II, L.P, Contrarian Capital
    Management LLC, V&#228;rde Partners, Inc., Greenlight Capital,
    Inc., and Stark Trading, Sheperd International Coal Holdings Inc.</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>4.4*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of Registration Rights Agreement between International Coal
    Group, Inc. and certain former Anker stockholders and CoalQuest
    members</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>5.1*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Opinion of Jones Day</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amended and Restated Credit Agreement dated as of
    November&nbsp;5, 2004 among ICG, LLC, as Borrower, International
    Coal Group Inc., the guarantors party thereto, UBS Securities
    LLC, as Arranger, Bookmanager and Syndication Agent, General
    Electric Capital Corporation, as Documentation Agent, UBS AG,
    Stamford Branch, as Issuing Bank, Administrative Agent and
    Collateral Agent, and UBS Loan&nbsp;Finance, LLC, as Swingline
    Lender</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    First Amendment, dated as of November&nbsp;30, 2004, to the
    Amended and Restated Credit Agreement dated as of
    November&nbsp;5, 2004 among ICG, LLC, as Borrower, International
    Coal Group Inc., the guarantors party thereto, UBS Securities
    LLC, as Arranger, Bookmanager and Syndication Agent, General
    Electric Capital Corporation, as Documentation Agent, UBS AG,
    Stamford Branch, as Issuing Bank, Administrative Agent and
    Collateral Agent, and UBS Loan&nbsp;Finance, LLC, as Swingline
    Lender</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Security Agreement dated as of September&nbsp;30, 2004 among
    ICG, LLC and the guarantors party thereto and UBS AG, Stamford
    Branch, as Collateral Agent</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Advisory Services Agreement effective as of October&nbsp;1, 2004
    between International Coal Group, LLC and W.L. Ross&nbsp;&#38;
    Co. LLC</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Employment Agreement dated March&nbsp;14, 2005 by and between
    Bennett K. Hatfield and International Coal Group, Inc.</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10.6*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Coal Lease between Kycoga Company, LLC, lessor, and ICG Hazard,
    LLC, lessee, of Flint Ridge Surface&nbsp;Mine</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10.7*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Fee Lease between Leo and Josephine Goff, et&nbsp;al., lessor,
    and ICG Hazard, LLC, lessee, of Flint Ridge Surface&nbsp;Mine</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10.8*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Coal Lease between Ark Land Company, lessor, and ICG Hazard,
    LLC, lessee, of Flint Ridge Surface&nbsp;Mine</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10.9*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Fee Lease between Kentucky Union Company, lessor, and ICG
    Hazard, LLC, lessee, of Flint Ridge Surface&nbsp;Mine</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10.10*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Fee Lease between Kentucky Union Company, lessor, and ICG
    Hazard, LLC, lessee, of Flint Ridge Surface&nbsp;Mine</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt;">

</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 9pt;">
<B>Exhibit index</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="88%">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10.11*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Fee Lease between Pocahontas Development Corp., lessor, and ICG
    East Kentucky, LLC, lessee, of Blackberry Creek Surface&nbsp;Mine</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10.12*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Coal Lease between N&#38;G Holdings Company, lessor, and ICG
    Hazard, LLC, lessee, of Vicco Surface&nbsp;Mine</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10.13*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Coal Lease between Louise Hall et&nbsp;al., lessor, and ICG
    Knott County, LLC, lessee, of Classic Underground
    Surface&nbsp;Mine</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10.14*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Coal Lease between Mary L. Jones, et&nbsp;al., lessor, and ICG
    Illinois, LLC, lessee, of Viper Mine</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10.15*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Coal Lease between Charles E. Lynch,&nbsp;Jr., lessor, and ICG
    Illinois, LLC, lessee, of Viper Mine</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10.16*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Coal Lease between Robert A. Williamson, lessor, and ICG
    Illinois, LLC, lessee, of Viper Mine</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10.17*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Coal Lease between Knight-Ink Heirs, lessor, and ICG Eastern,
    LLC, lessee, of Birch River&nbsp;Mine</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10.18*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Surface Lease between Beckwith Lumber Company, lessor, and ICG
    Eastern, LLC, lessee, of Birch River&nbsp;Mine</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10.19*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Surface Lease between NGDH Land, et&nbsp;al., lessor, and ICG
    Eastern, LLC, lessee, of Birch River&nbsp;Mine</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10.20*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Coal Lease between NGDH Land, et&nbsp;al., lessor, and ICG
    Eastern, LLC, lessee, of Birch River&nbsp;Mine</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10.21*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Fee Lease between M-B, LLC, lessor, and ICG Eastern, LLC,
    lessee, of Birch River&nbsp;Mine</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10.22*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Coal Lease between Kycoga Company, LLC, lessor, and ICG Hazard,
    LLC, lessee, of County Line&nbsp;Mine</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10.23*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Coal Lease between Edward Clemons Revocable Trust, lessor, and
    ICG Hazard, LLC, lessee, of County Line&nbsp;Mine</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10.24*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Surface Lease between Mountain Properties, Inc., lessor, and ICG
    Hazard, LLC, lessee, of County Line&nbsp;Mine</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10.25*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Coal Lease between Peter Dassler, lessor, and ICG Hazard, LLC,
    lessee, of County Line&nbsp;Mine</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10.26*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Fee Lease between CSTL, LLC, lessor, and ICG Hazard, LLC,
    lessee, of County Line and Rowdy Gap Mines</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10.27*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Fee Lease between Kentucky River Properties, LLC, lessor, and
    ICG Hazard, LLC, lessee, of County Line and Thunder Ridge Mines</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10.28*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Coal Lease between Ed Ross Chaney, et&nbsp;al., lessor, and ICG
    Hazard, LLC, lessee, of East Mac&nbsp;&#38; Nellie&nbsp;Mine</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10.29*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Fee Lease between Victor Holliday, et&nbsp;al., lessor, and ICG
    Hazard, LLC, lessee, of East Mac&nbsp;&#38; Nellie&nbsp;Mine</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10.30*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Fee Lease between Kentucky River Properties, LLC, lessor, and
    ICG Hazard, LLC, lessee, of East Mac&nbsp;&#38; Nellie&nbsp;Mine</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10.31*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Fee Lease between Rex McDaniel, et. al, lessor, and ICG Natural
    Resources, LLC, lessee, of East Mac&nbsp;&#38; Nellie&nbsp;Mine</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10.32*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Fee Lease between Kentucky River Properties, LLC, lessor, and
    ICG Hazard, LLC, lessee, of Rowdy Gap and Thunder Ridge Mines</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10.33*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Coal Lease between Kycoga Company, LLC, lessor, and ICG Natural
    Resources, LLC, lessee, of Kentucky Prince&nbsp;Mine</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10.34*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Sublease between Spruce Pine Land Company, lessor, and ICG
    Natural Resources, LLC, lessee, of Kentucky Prince&nbsp;Mine</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt;">

</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 9pt;">
<B>Exhibit index</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="88%">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10.35*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Lease between Allegany Coal and Land Company, lessor, and
    Patriot Mining Company, Inc., lessee, of Allegany County,
    Maryland Mine</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10.36*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Lease between The Crab Orchard Coal and Land Company, lessor,
    and Anker West Virginia Mining Company, Beckley Smokeless
    Division, lessee, of Bay Hill Mine</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10.37*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Lease between Beaver Coal Corporation, lessor, and Anker West
    Virginia Mining Company, Beckley Smokeless Division, of Bay Hill
    Mine</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10.38*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Lease between Douglas Coal Company, lessor, and Patriot Mining
    Company, Inc., lessee, of Island and Douglas Mine</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10.39*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Lease between Southern Region Industrial Realty, Inc., lessor,
    and Anker Virginia Mining Company, Inc., lessee, of War Creek
    Mine</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10.40*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Sublease between Reserve Coal Properties, sublessors, and
    Patriot Mining Company, sublessee, of Sycamore 2 Mine</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10.41*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Sublease between Appalachian Environmental, LLC, sublessor, and
    Anker West Virginia Mining Company, sublessee, of Upper
    Kittaning seam of coal at Sentinel Mine</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10.42*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Lease between Appalachian Environmental, LLC, lessor, and Anker
    West Virginia Mining Company, lessee, of Upper Kittaning seam of
    coal at Sentinel Mine</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10.43*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amended and Restated Agreement for Sale and Purchase of Coal
    dated July&nbsp;1, 1996, between Carolina Power&nbsp;&#38; Light
    Company and Mountaineer Coal Development Company, d/b/a
    Marrowbone Development Company and ICG, LLC, amended by:</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    (a)&nbsp;Letter Agreement dated and effective July&nbsp;19, 1996</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    (b)&nbsp;Letter Agreement dated and effective July&nbsp;19, 1996</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    (c)&nbsp;Amendment 1 dated July&nbsp;29, 1998, effective
    January&nbsp;1, 1998</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    (d)&nbsp;Amendment 2 dated April&nbsp;19, 1999, effective
    January&nbsp;1, 1999</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    (e)&nbsp;Letter Agreement dated and effective March&nbsp;25, 2002</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    (f)&nbsp;Letter Agreement dated October&nbsp;14, 2002, effective
    October&nbsp;15, 2002</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    (g)&nbsp;Letter Agreement dated and effective July&nbsp;28, 2003</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    (h)&nbsp;Amendment No.&nbsp;3 dated July&nbsp;28, 2003,
    effective January&nbsp;1, 2003</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10.44*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Agreement for Purchase and Sales of Coal dated April&nbsp;10,
    2003 and effective January&nbsp;1, 2004, between Georgia Power
    Company and ICG Hazard, LLC</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt;">

</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 9pt;">
<B>Exhibit index</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="88%">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10.45*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Contract for Sale and Purchase of Coal dated July&nbsp;1, 1980,
    between City of Springfield, Illinois and Shell Oil Company,
    amended by:</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    (a)&nbsp;Letter dated October&nbsp;16, 1980, assigning Shell Oil
    Company&#146;s rights and obligations under the contract to
    Turris Coal Company</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    (b)&nbsp;Letter Agreement dated November&nbsp;13, 1982,
    effective January&nbsp;1, 1983</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    (c)&nbsp;Amendment dated March&nbsp;4, 1986, effective
    January&nbsp;1, 1986</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    (d)&nbsp;Letter Agreement dated and effective March&nbsp;4, 1986</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    (e)&nbsp;Second Amendment dated April&nbsp;22, 1986, effective
    January&nbsp;1, 1986</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    (f)&nbsp;Modification dated and effective June&nbsp;8, 1987</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    (g)&nbsp;Modification dated and effective November&nbsp;4, 1988</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    (h)&nbsp;Amendment dated and effective January&nbsp;1, 1989</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    (i)&nbsp;Letter Agreement dated and effective November&nbsp;4,
    1991</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    (j)&nbsp;Letter Agreement dated and effective November&nbsp;27,
    1991</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    (k)&nbsp;Amendment dated March&nbsp;20, 1992, effective
    January&nbsp;1, 1992</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    (l)&nbsp;Amendment dated March&nbsp;21, 1995, effective
    January&nbsp;1, 1995</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    (m)&nbsp;Letter Agreement dated and effective August&nbsp;28,
    1996</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    (n)&nbsp;Amendment dated May&nbsp;10, 1996, effective
    May&nbsp;1, 1996</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    (o)&nbsp;Amendment dated August&nbsp;20, 1998, effective
    January&nbsp;1, 1998</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    (p)&nbsp;Amendment dated May&nbsp;30, 2001, effective
    January&nbsp;1, 2001</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    (q)&nbsp;Letter dated October&nbsp;8, 2004 assigning to ICG
    Illinois, LLC</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10.46*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Coal Supply Agreement, dated as of April&nbsp;1, 1992, between
    Anker Energy and Logan Generating Company (formerly Keystone
    Energy Service Company, L.P.), amended by</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    (a)&nbsp;First Amendment, effective as of September&nbsp;1, 1995</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    (b)&nbsp;Second Amendment, effected as of March&nbsp;15, 2002</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>11.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Statement regarding computation of per share earnings</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>21.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    List of Subsidiaries</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>23.1*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Consent of Jones Day (included as part of its opinion filed as
    Exhibit&nbsp;5.1 hereto)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>23.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Consent of Deloitte&nbsp;&#38; Touche, LLP</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>23.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Consent of Marshall Miller&nbsp;&#38; Associates, Inc.</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>24.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Power of Attorney</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD>*&nbsp;</TD>
    <TD align="left">
    To be filed by amendment</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;">

</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>
</BODY>
</HTML>
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{"company-data": {"conformed-name": "International Coal Group, Inc.", "cik": "0001320934", "irs-number": "202641185", "fiscal-year-end": "1231"}, "filing-values": {"form-type": "S-1", "act": "33", "file-number": "333-124393", "film-number": "05778045"}, "business-address": {"street1": "2000 ASHLAND DRIVE", "city": "ASHLAND", "state": "KY", "zip": "41101", "phone": "609-920-7400"}, "mail-address": {"street1": "2000 ASHLAND DRIVE", "city": "ASHLAND", "state": "KY", "zip": "41101"}}
FORM S-1
Table of Contents
As filed with the Securities and Exchange Commission on
April 28, 2005
Registration
No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
INTERNATIONAL COAL GROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware
1222
20-2641185
(State of incorporation)
(Primary Standard Industrial
Classification Code Number)
(I.R.S. Employer
Identification No.)
2000 Ashland Drive
Ashland, Kentucky 41101
(606) 920-7400
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
William D. Campbell
Vice President, Treasurer and Secretary
International Coal Group, Inc.
2000 Ashland Drive
Ashland, Kentucky 41101
(606) 920-7400
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
With Copies to:
Randi L. Strudler, Esq.
Jones Day
222 East 41st Street
New York, New York 10017
(212) 326-3939
Kirk A. Davenport II, Esq.
Latham & Watkins LLP
885 Third Avenue
New York, New York 10022
(212) 906-1200
Approximate date of commencement of proposed sale to the
public:
As soon as practicable after this Registration
Statement becomes effective.
If any of the securities being registered on this form are being
offered on a delayed or continuous basis pursuant to
Rule 415 under the Securities Act of 1933, check the
following
box.
o
If this form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act,
check the following box and list the Securities Act registration
statement number of the earlier effective registration statement
for the same
offering.
o
If this form is a post-effective amendment filed pursuant to
Rule 462(c) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering.
o
If this form is a post-effective amendment filed pursuant to
Rule 462(d) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering.
o
If delivery of the prospectus is expected to be made pursuant to
Rule 434 under the Securities Act of 1933, check the
following
box.
o
CALCULATION OF REGISTRATION FEE
Proposed Maximum
Title of Each Class of
Aggregate Offering
Amount of
Securities to be Registered
Offering Price(1)(2)
Registration Fee(2)
Common stock, par value $0.01 per share
$250,000,000
$29,425
(1)
Estimated solely for determining the registration fee
    pursuant to Rule 457(o) promulgated under Securities Act of
    1933.
(2)
Includes common stock issuable upon the exercise of the
    underwriters' over-allotment option.
The Registrant hereby amends this Registration Statement on
such date or dates as may be necessary to delay its effective
date until the Registrant shall file a further amendment which
specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a)
of the Securities Act of 1933 or until this Registration
Statement shall become effective on such date as the Commission,
acting pursuant to said Section 8(a), may determine.
Table of Contents
The information in this prospectus is not complete and may be
changed. We may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is
effective. This prospectus is not an offer to sell these
securities and we are not soliciting offers to buy these
securities in any state where the offer or sale is not
permitted.
PRELIMINARY PROSPECTUS
Subject to completion
April 28, 2005
Shares
Common Stock
We are
offering                      shares
of common stock. Prior to this offering, there has been no
public market for our shares of common stock.
Shares of our common stock are currently quoted on the Pink
Sheets Electronic Quotation Service. The last sale price of our
common stock
on                     ,
2005, as reported on the Pink Sheets Electronic Quotation
Service, was
$          per
share. We will apply to list our shares of common stock on The
New York Stock Exchange under the symbol "ICO."
Investing in our common stock involves a high degree of risk.
Before buying any shares of our common stock, you should
carefully read the discussion of material risks of investing in
our common stock under "Risk factors" beginning on
page 13 of this prospectus.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or determined if this prospectus is truthful or
complete. Any representation to the contrary is a criminal
offense.
Per Share
Total
Public offering price
$
$
Underwriting discounts and commissions
$
$
Proceeds, before expenses to us
$
$
The underwriters may also purchase up to an
additional                      shares
of our common stock at the public offering price, less the
underwriting discounts and commissions, to cover
over-allotments, if any, within 30 days of the date of this
prospectus. If the underwriters exercise this option in full,
the total underwriting discounts and commissions will be
$          ,
and our total proceeds, before expenses, will be
$          .
The underwriters are offering our common stock as set forth
under "Underwriting." Delivery of the shares of common
stock will be made on or
about                     ,
2005.
UBS Investment Bank
Lehman Brothers
The date of this prospectus
is                     ,
2005.
Table of Contents
[Inside cover graphics to be filed by amendment]
________________________________________________________________________________
You should rely only on the information contained in this
prospectus. We have not, and the underwriters have not,
authorized anyone to provide you with additional information or
information different from that contained in this prospectus. We
are offering to sell, and seeking offers to buy, shares of our
common stock only in jurisdictions where those offers and sales
are permitted. The information contained in this prospectus is
accurate only as of the date of this prospectus, regardless of
the time of delivery of this prospectus or any sale of our
common stock.
TABLE OF CONTENTS
Prospectus summary
1
Risk factors
13
Special note regarding forward-looking
    statements
35
Industry data
36
Price range of common stock
36
Use of proceeds
37
Dividend policy
37
Capitalization
38
Dilution
39
Unaudited consolidated pro forma financial
    data
41
Selected historical consolidated financial
    data of ICG
47
Selected historical consolidated financial
    data of Anker and CoalQuest
49
Management's discussion and analysis
    of financial condition and results of operations
50
The coal industry
65
Business
71
Environmental and other regulatory
    matters
93
Management
101
Principal stockholders
109
Certain relationships and related party
    transactions
111
Description of indebtedness
112
Description of capital stock
114
Shares eligible for future sale
120
Certain U.S. federal income and estate
    tax consequences to non-U.S. holders
122
Underwriting
125
Validity of the shares
129
Experts
130
Experts— coal reserves
130
Where you can find additional
    information
131
Glossary of selected terms
132
Index to financial statements
F-1
EX-3.1: AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
EX-3.2: AMENDED AND RESTATED BY-LAWS
EX-10.1: AMENDED AND RESTATED CREDIT AGREEMENT
EX-10.2: FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT
EX-10.3: SECURITY AGREEMENT
EX-10.4: ADVISORY SERVICES AGREEMENT
EX-10.5: EMPLOYMENT AGREEMENT
EX-11.1: STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
EX-21.1: LIST OF SUBSIDIARIES
EX-23.2: CONSENT OF DELOITTE & TOUCHE, LLP
EX-23.3: CONSENT OF MARSHALL MILLER & ASSOCIATES, INC.
EX-24.1: POWERS OF ATTORNEY
ADDCAR
tm
is the registered trademark of ICG, Inc.
Through and
including                     ,
2005 (the 25th day after the date of this prospectus),
federal securities law may require all dealers that effect
transactions in our common stock, whether or not participating
in this offering, to deliver a prospectus. This requirement is
in addition to the dealers' obligation to deliver a
prospectus when acting as underwriters and with respect to their
unsold allotments or subscriptions.
i
Table of Contents
Prospectus summary
The following summarizes information contained elsewhere in
this prospectus and does not contain all of the information you
should consider in making your investment decision. You should
read this summary together with the more detailed information,
including our financial statements and the related notes,
elsewhere in this prospectus. You should carefully consider,
among other things, the matters discussed in "Risk
factors" and "Management's discussion and
analysis of financial condition and results of
operations."
Unless the context otherwise requires, the term
"Horizon" refers to Horizon Natural Resources Company
and its consolidated subsidiaries, the term "Anker"
refers to Anker Coal Group, Inc. and its consolidated
subsidiaries, and the term "CoalQuest" refers to
CoalQuest Development, LLC. References to the "Anker
acquisition" refer to ICG's acquisition of both Anker
and CoalQuest, which is expected to occur in the second quarter
of 2005. Immediately prior to this offering, ICG and its
subsidiaries will be reorganized so that ICG will be the parent
holding company and ICG, Inc., the current parent holding
company, will become a subsidiary of ICG. Unless the context
otherwise indicates, as used in this prospectus, the terms
"ICG," "we," "our," "us"
and similar terms refer to International Coal Group, Inc. and
its consolidated subsidiaries, after giving effect to the
reorganization and the Anker acquisition. For purposes of the
discussion in this prospectus, references to ICG include all the
assets and coal reserves resulting from the Anker acquisition.
For purposes of all financial disclosure contained in this
prospectus, ICG, Inc. and Horizon (together with its predecessor
AEI Resources Holding, Inc. and its consolidated subsidiaries)
are the predecessors to ICG. All information in this prospectus
relating to the beneficial ownership of our common stock is
presented assuming that all existing shares of ICG, Inc. common
stock are exchanged at a 1-for-1 exchange ratio in the
reorganization and that we issue 30,950,129 shares of
common stock in the Anker acquisition. The term "coal
reserves" as used in this prospectus means proven and
probable reserves and the term "coal resources" in
this prospectus means inferred and indicated reserves.
THE COMPANY
We are a leading producer of coal in Northern and Central
Appalachia with a broad range of mid to high Btu, low sulfur
steam and metallurgical coal. Our Appalachian mining operations,
which include 11 of our mining complexes, are located in West
Virginia, Kentucky and Maryland. We also have a complementary
mining complex of mid to high sulfur steam coal strategically
located in the Illinois Basin. We market our coal to a diverse
customer base of largely investment grade electric utilities, as
well as domestic and international industrial customers. The
high quality of our coal and the availability of multiple
transportation options, including rail, truck and barge,
throughout the Appalachian region enable us to participate in
both the domestic and international coal markets. Due to the
decline in Appalachian coal production in recent years, these
markets are currently characterized by strong demand with
limited supply response and elevated spot and contract prices.
The company was formed by WL Ross & Co. LLC, or WLR,
and other investors in May 2004 to acquire and operate
competitive coal mining facilities. Through the acquisition of
certain key assets from the bankruptcy estate of Horizon, the
WLR investor group was able to acquire high quality reserves
strategically located in Appalachia and the Illinois Basin that
are union free, have limited reclamation liabilities and are
substantially free of other legacy liabilities. Due to our
initial capitalization, we were able to complete the acquisition
without incurring a significant level of indebtedness. Following
this offering, we expect to retire substantially all of our
long-term debt and, thus, will be strategically well-positioned.
Consistent with the WLR investor group's strategy to
consolidate profitable coal assets, the Anker acquisition
further diversifies our reserves.
As of January 1, 2005, we owned or controlled approximately
315 million tons of metallurgical quality coal reserves and
approximately 572 million tons of steam coal reserves. Coal
reserves are the part of a mineral deposit that can be
economically and legally extracted or produced at the time of the
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reserve determination. Based on expected 2005 production rates,
our Northern and Central Appalachian reserves could support
existing production levels for approximately 35 years and
all of our reserves could support existing production levels for
approximately 49 years. Further, we own or control
approximately 707 million tons of coal resources. Coal
resources are coal bearing bodies that have been sufficiently
sampled and analyzed, but do not qualify as a commercially
viable coal reserve as prescribed by SEC rules until a final
comprehensive SEC prescribed evaluation is performed.
Steam coal is primarily consumed by large electric utilities and
industrial customers as fuel for electricity generation. Demand
for low sulfur steam coal has grown significantly since the
introduction of certain controls associated with the Clean Air
Act and the decline in coal production in the eastern half of
the United States.
Metallurgical coal is primarily used to produce coke, a key raw
material used in the steel making process. Generally,
metallurgical coal sells at a premium to steam coal because of
its higher quality and its importance and value in the steel
making process. During 2004 and the first quarter of 2005, the
demand for metallurgical coal increased substantially as the
global demand for steel increased.
For the year ended December 31, 2004, we sold
18.4 million tons of coal, of which 18.2 million tons
were steam coal and 0.2 million tons were metallurgical
coal. Our steam coal sales volume in 2004 consisted of mid to
high quality, high Btu (greater than 12,000 Btu/lb.), low sulfur
(1.5% or less) coal, which typically sells at a premium to lower
quality, lower Btu, higher sulfur steam coal. We generated total
pro forma revenues of $673.8 million and $84.2 million
of pro forma earnings before interest, taxes, depreciation and
amortization, as adjusted, or EBITDA, for the year ended
December 31, 2004. For a reconciliation of EBITDA, as
adjusted, to the most comparable financial measure calculated in
accordance with GAAP and of EBITDA, as adjusted, to pro forma
EBITDA, an explanation of why we present EBITDA, as adjusted,
and pro forma EBITDA, and how management uses these financial
measures, see "—Summary historical consolidated and
pro forma financial data of ICG."
OUR STRENGTHS
Ability to provide variety of high-quality steam and
metallurgical coal.
Our customers, which include largely
investment grade electric utilities, as well as domestic and
international industrial customers, demand a variety of coal
products. Our variety of coal qualities also allows us to blend
coal in order to meet the specifications of our customers. Our
access to a comprehensive range of high Btu steam and
metallurgical quality coal allows us to market differentiated
coal products to a variety of customers with different coal
quality demands, which allows us to benefit from particularly
strong pricing dynamics in the current market.
Concentration in highly valued Central Appalachian
region.
Our operations are primarily located in Central
Appalachia, a region known for its high quality coal
characterized by low sulfur and high Btu content. Production
from Central Appalachian mines accounted for approximately 73.2%
of our 2004 coal sales volume. We believe that generally
favorable market dynamics and trends in Central Appalachian coal
supply and demand, the high quality of Central Appalachian coal
and the low transportation costs that result from the relative
proximity of Central Appalachian producers and customers have
created favorable pricing dynamics that will continue to provide
us with an advantage over producers from other regions.
Significant reserve base providing internal expansion
opportunities.
We own approximately 613 million
tons of reserves and control an additional 274 million tons
of reserves through long-term leases. We own or control an
additional 707 million tons of coal resources. We have not
yet developed approximately 73% of these owned and controlled
reserves. We believe these owned and controlled but as yet
undeveloped reserves and resources would allow us to as much as
double our existing production levels over the next several
years. Our ownership and control of such a substantial portion
of undeveloped reserves in both Northern and Central Appalachia
and the Illinois Basin provides us with significant internal
growth opportunities, which is in contrast to other
U.S. coal producers who
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must acquire or lease new reserves to enable their growth. We
also have coalbed methane reserves in our owned reserves in West
Virginia, which provides us with additional growth opportunities
in this complementary energy market.
Ability to capitalize on strong coal market
dynamics.
A significant portion of our coal supply
contracts were renegotiated during the second half of 2004 in
connection with Horizon's bankruptcy and were re-priced at
that time to then-current (and more favorable) market prices and
terms. Our marketing effort is focused on maintaining a balance
of longer-term contracts and spot sales. We typically have 50%
of our production contracted by the early part of the previous
year with another 35% contracted by the second half of the year
with the remainder of our production used to take advantage of
market dynamics and maximize value in the spot market.
Diversity of reserves, resources and production.
Our production, reserves and resources are located in three of
the four major coal regions in the United States. Our
production, reserves and resources in Northern and Central
Appalachia and the Illinois Basin provide important geographical
diversity in terms of markets, transportation and labor. The
diversity of our operations and reserves provides us with a
significant competitive advantage, allowing us to source coal
from multiple operations to meet the needs of our customers and
reduce transportation costs.
Minimal level of long-term liabilities.
We believe
that compared to other publicly traded U.S. coal producers
we have among the lowest legacy reclamation liabilities and
post-retirement employee obligations. As of December 31,
2004, we had total accrued reclamation liabilities of only
$68.7 million, post-retirement employee obligations of only
$8.0 million, "black lung" liabilities of
approximately $10.0 million and Coal Act liabilities of
only $4.8 million. In addition, our entire workforce is
union free, which minimizes employee-related liabilities
commonly associated with union-represented mines. As of
December 31, 2004, our pro forma total long-term debt was
$180.4 million and after this offering we expect to retire
substantially all of this long-term debt. We believe this low
leverage will afford significant financial and operational
flexibility.
Highly skilled management team.
The members of our
senior management team have, on average, 23 years of
industry work experience across a variety of mining methods,
including longwall mining. We have substantial Appalachian
mining experience in increasing productivity, reducing costs,
enhancing work safety practices, and maintaining strong customer
relationships. In addition, the majority of our senior
management team has extensive mine development and expansion
experience.
Recognized leadership in safety and environmental
stewardship.
The injury incident rates at our mines
throughout 2004, according to the Mine Safety and Health
Administration, or MSHA, were below industry averages. We have
been recognized by safety and environmental agencies with
several prestigious awards for our safety and environmental
record, such as the "Sentinels of Safety Award" from
MSHA, The Department of Interior "Excellence in Surface
Coal Mining and Reclamation Award" and a reclamation award
for innovative methods from the West Virginia Coal Association.
Our focus on safety and environmental performance results in the
reduced likelihood of disruption of production at our mines,
which leads to higher productivity and improved financial
performance.
OUR BUSINESS STRATEGY
Maximize profitability through highly efficient and
productive mining operations.
We are continuing to
evaluate and assess our current operations in order to maximize
operating efficiency and returns on invested capital. We are
focused on maintaining low-cost, highly productive operations by
continuing to invest substantial capital in state-of-the-art
equipment and advanced technologies. We expect to internally
fund approximately $264 million of capital expenditures in
the next two years. As we take advantage of planned expansion
opportunities from 2007 through 2009, we expect to spend
approximately $572 million on capital expenditures, which
may require external financing.
Leverage owned and controlled reserve base to generate
substantial internal growth.
We own a large undeveloped
reserve in Northern Appalachia containing approximately
194 million tons of high Btu,
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low sulfur steam and metallurgical quality coal. We currently
expect underground longwall mining operations at this reserve to
commence within the next four years, which will increase our
production level by providing highly valued premium quality coal
in an increasingly tight supply market. In addition, we have two
substantial undeveloped reserves in Central Appalachia, which
contain 56.5 million tons of premium metallurgical coal and
are expected to be developed in the next three to six years.
Further, the substantial reserve position that we own in the
Illinois Basin is expected to allow us to benefit from the
expected increase in demand for high sulfur coal to generate
electricity. We are in the process of developing and exploiting
our coalbed methane reserves. Finally, we intend to
opportunistically acquire new coal reserves and/or coal
companies to expand our coal market opportunities and increase
shareholder value.
Capitalize on favorable industry fundamentals by
opportunistically marketing coal.
U.S. coal market
fundamentals are among the strongest in the last 20 years.
We believe this generally favorable pricing environment will
persist given systemic changes in market dynamics such as
long-term supply constraints and increasing demand, particularly
in Central Appalachia and for our metallurgical coal.
Furthermore, because of the high quality of our coal, our access
to a variety of alternative transportation methods, including
truck, rail and barge, and our mix of long-term contract and
spot market sales, we will be able to capitalize on the
favorable industry dynamics to maximize our revenues and
profits. We plan to extend the life of our longer-term contract
arrangements and limit price reopeners in order to lock in
margins and enhance our financial stability, while at the same
time, we plan to maintain an uncommitted portion of planned
production to allow for additional future pricing upside
exposure. As of April 25, 2005, we had entered into
contracts to sell approximately 88% of 2005 planned production,
approximately 66% of 2006 planned production and approximately
49% of 2007 planned production.
Continue to focus on improving workplace safety and
environmental compliance.
We have maintained and plan to
continue to maintain an excellent safety and environmental
performance record. We continue to implement safety measures and
environmental initiatives that are designed to promote safe
operating practices and improved environmental stewardship among
our employees. Our ability to maintain a good safety and
environmental record improves our productivity and lowers our
overall cost structure as well as bolsters employee morale.
COAL MARKET OUTLOOK
According to traded coal indices and reference prices, U.S. and
international coal demand is currently strong, and coal pricing
has increased year-over-year in each of our coal production
markets. We believe that the current strong fundamentals in the
U.S. coal industry result primarily from:
4
stronger industrial demand following a recovery in the
    U.S. manufacturing sector, evidenced by the final estimate
    of 3.8% real gross domestic product growth in the fourth quarter
    of 2004, as reported by the Bureau of Economic Analysis;
4
relatively low customer stockpiles, estimated by the
    U.S. Energy Information Administration, or EIA, to be
    approximately 99 million tons at the end of February 2005,
    down 8% from the same period in the prior year;
4
declining coal production in Central Appalachia, including a
    decline of 11% in Central Appalachian coal production volume
    from 2000 to 2004, primarily a result of the depletion of
    economically attractive reserves, permitting issues that delay
    mine development and increasing costs of production;
4
capacity constraints of U.S. nuclear-powered electricity
    generators, which operated at an average utilization rate of
    88.4% in 2003, up from 70.5% in 1993, as estimated by the EIA;
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4
high current and forward prices for natural gas and oil, the
    primary fuels for electricity generation, with spot prices as of
    April 22, 2005 for natural gas and heating oil at
    $7.06 per million Btu and $1.55 per gallon,
    respectively, as reported by Bloomberg L.P.; and
4
increased international demand for U.S. coal for
    steelmaking, driven by global economic growth, high ocean
    freight rates and the weak U.S. dollar.
U.S. spot steam coal prices have steadily increased since
mid-2003, particularly for coals sourced in the eastern United
States. As reported by Bloomberg L.P., the average price of high
Btu, low sulfur Central Appalachia coal was $61.00/ton, during
the week of April 22, 2005. This price level represents a
dramatic 64.9% increase in the price of coal since January 2004.
CENTRAL APPALACHIA COAL REFERENCE
PRICE
1
Source: Bloomberg L.P.
Note:  (1)
Represents coal which meets the specifications (minimum
    12,000 Btu/lb, maximum 1.00% sulfur) for Central Appalachian
    steam coal traded on the New York Mercantile Exchange.
We expect near-term volume growth in U.S. coal consumption
to be driven by greater utilization at existing coal-fired
electricity generating plants. Nationally, capacity utilization
for coal plants (excluding combined heat and power) is expected
to rise from 72% in 2003 to 83% in 2025, according to the EIA.
If existing U.S. coal-fired plants operate at estimated
potential utilization rates of 85%, we believe they would
consume approximately 180 million additional tons of coal
per year, which represents an increase of approximately 18% over
current coal consumption.
We expect longer-term volume growth in U.S. coal
consumption to be driven by the construction of new coal-fired
plants. The National Energy Technology Laboratory, or NETL, an
arm of the U.S. Department of Energy, or DOE, projects that
112,000 megawatts of new coal-fired electric generation capacity
will be constructed in the United States by 2025. The NETL has
identified 106 coal-fired plants, representing 65,000 megawatts
of electric generation capacity, that have been proposed and are
currently in various stages of development.
The current pricing environment for U.S. metallurgical coal
is also strong in both the domestic and seaborne export markets.
Demand for metallurgical coal in the United States has recently
increased due to a recovery in the U.S. steel industry. In
addition, the supply for metallurgical coal in the United States
has been temporarily restricted as Consol Energy was forced to
seal its Buchanan mine on February 14, 2005 due to an
underground fire. The Buchanan mine produced 4.4 million
tons of metallurgical coal in 2004 and has yet to return into
service. In addition to increased demand for metallurgical coal
in the United States, demand for metallurgical coal has
increased in international markets. According to the
International Iron and Steel Institute, Chinese steel
consumption increased 25% in 2003 as compared to 2002, and
Asia-Pacific Rim consumption of metallurgical coal continues
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to strain supply. For example, BHP Billiton, a major Australian
coal producer, reported average 2005 price settlement
increases of 120% for approximately three quarters of its
annually priced metallurgical coal contracts from the prior
year. Fording Canadian Coal Trust, a major Canadian
metallurgical coal producer, announced substantially all
metallurgical coal contracts for the 2005 coal year are priced
at an average of $125 per ton, an increase of 140% over the
average sales price during 2004. The dramatic rise in
metallurgical coal prices in global markets is due in part to
concerns over the availability of sufficient supply and the
significant increase in steel production in China. In addition,
weakness of the U.S. dollar has made
U.S. metallurgical coal more competitive in international
markets.
RISKS RELATED TO OUR BUSINESS AND STRATEGY
Our ability to execute our strategy is subject to the risks that
are generally associated with the coal industry. For example,
our profitability could decline due to changes in coal prices or
coal consumption patterns, as well as unanticipated mine
operating conditions, loss of customers, changes in our ability
to access our coal reserves and other factors that are not
within our control. Furthermore, the heavily regulated nature of
the coal industry imposes significant actual and potential costs
on us, and future regulations could increase those costs or
limit our ability to produce coal.
We are also subject to a number of risks related to our
competitive position and business strategies. For example, our
business strategy exposes us to the risks involving our
long-term coal supply contracts, the demand for coal,
electricity and steel, our projected plans and objectives for
future operations and expansion or consolidation, the
integration of Anker and CoalQuest into our business, and future
economic or capital market conditions. In addition, our focus on
the Central Appalachian region exposes us to the risks of
operating in this region, including higher costs of production
as compared to other coal-producing regions and more costly and
restrictive permitting, licensing and other environmental and
regulatory requirements.
For additional risks relating to our business, the coal industry
and this offering, see "Risk factors" beginning on
page 13 of this prospectus.
RECENT DEVELOPMENTS
The Anker acquisition
On March 31, 2005, ICG, Inc. entered into business
combination agreements with each of Anker and CoalQuest pursuant
to which each of Anker and CoalQuest are to become indirect
wholly owned subsidiaries of ICG. Holders of all of the
outstanding stock of Anker and the membership interests in
CoalQuest will be issued shares of ICG common stock equal to up
to 22.5% of the common stock of ICG outstanding on the date of
the agreement. The aggregate amount of common stock to be issued
will be based upon the price of the shares of common stock sold
in this offering. The acquisitions are subject to certain
closing conditions. See "Business— Our history—
The Anker acquisition" for additional information regarding
the acquisitions.
The reorganization
In connection with the acquisitions of Anker and CoalQuest, the
current parent holding company, ICG, Inc., will merge with and
into a merger subsidiary and become a subsidiary of ICG. Upon
consummation of the merger, ICG will become the new parent
holding company. All stockholders of ICG, Inc. prior to the
reorganization, all Anker stockholders and all CoalQuest members
prior to the Anker acquisition will be stockholders of ICG after
the reorganization and the Anker acquisition. The
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following chart reflects our corporate organizational structure
following the consummation of the Anker acquisition, the
reorganization and this offering:
OUR SPONSOR
WL Ross & Co. LLC was organized on April 1, 2000
by Wilbur L. Ross, Jr. and other members of the
Restructuring Group of Rothschild Inc. This team had
restructured more than $200 billion of liabilities in North
America and other parts of the world. The firm maintains offices
in New York City and has become the sponsor of more than
$2.0 billion of alternative investment partnerships on
behalf of major U.S., European and Japanese institutional
investors. Selected current and recent portfolio companies
include International Steel Group, the largest integrated steel
producer in North America, and International Textile Group, a
combination of Burlington Industries and Cone Mills.
Our principal executive office is located at 2000 Ashland Drive,
Ashland, Kentucky 41101 and our telephone number is
(606) 920-7400.
You should carefully consider the information contained in the
"Risk factors" section of this prospectus before you
decide to purchase shares of our common stock.
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The offering
Shares of common stock offered by us
shares.
Shares of common stock to be outstanding after this offering
shares.
Use of proceeds
We estimate that the net proceeds from this offering, after
    expenses, will be approximately
    $          ,
    or approximately
    $                                if
    the underwriters exercise their over-allotment option in full,
    assuming a public offering price of
    $           per
    share. As of March 31, 2005, $174.6 million was
    outstanding under our term loan facility. We will use
    $174.6 million to repay our term loan facility and the
    remaining proceeds to further reduce debt or for general
    corporate purposes. See "Use of proceeds."
Over-allotment option
We have granted the underwriters an option to purchase up to
    additional shares of our common stock to cover over-allotments.
Proposed New York Stock Exchange symbol
ICO
The number of shares of our common stock outstanding after this
offering is based on
approximately                      shares
outstanding as
of                     ,
2005. Unless otherwise indicated, all information in this
prospectus assumes that we
issue                      shares
of our common stock in the Anker acquisition and all outstanding
shares of common stock of ICG, Inc. are exchanged for shares of
our common stock at a 1-for-1 exchange ratio in the
reorganization.
The number of shares of our common stock to be outstanding
immediately after this offering excludes:
4
the shares of our common stock issuable upon exercise of options
    we plan to grant prior to the effectiveness of the registration
    statement of which this prospectus is a part; and
4
the shares of our common stock expected to be available for
    future grant under the equity incentive plan we plan to adopt
    prior to the effectiveness of the registration statement of
    which this prospectus is a part.
Unless we specifically state otherwise, all information in this
prospectus assumes no exercise by the underwriters of their
option to purchase additional shares. See
"Underwriting."
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Summary historical consolidated and pro forma financial data of
ICG
ICG is a recently formed holding company which does not have any
independent external operations, assets or liabilities, other
than through its operating subsidiaries. Prior to the
acquisition of certain assets of Horizon as of
September 30, 2004, our predecessor, ICG, Inc., did not
have any material assets, liabilities or results of operations.
The summary historical consolidated financial data as of and for
the period from October 1, 2004 to December 31, 2004
have been derived from the audited consolidated financial
statements of ICG, Inc. The following summary historical
consolidated financial data as of and for the period
January 1, 2004 to September 30, 2004, the year ended
December 31, 2003 and the period May 10, 2002 to
December 31, 2002 has been derived from the audited
consolidated financial statements of Horizon (the predecessor to
ICG for accounting purposes). The summary historical
consolidated financial data for the period January 1, 2002
to May 9, 2002 has been derived from the audited
consolidated financial statements of AEI Resources (the
predecessor to Horizon for accounting purposes). The financial
statements for the predecessor periods have been prepared on a
"carve-out" basis to include the assets, liabilities
and results of operations of ICG that were previously included
in the consolidated financial statements of Horizon. The
financial statements for the predecessor periods include
allocations of certain expenses, taxation charges, interest and
cash balances relating to the predecessor based on
management's estimates. The predecessor financial
information is not necessarily indicative of the consolidated
financial position, results of operations and cash flows of ICG
if it had operated during the predecessor periods presented. In
the opinion of management, such financial data reflect all
adjustments, consisting only of normal and recurring
adjustments, necessary for a fair presentation of the results
for those periods. The results of operations for the interim
periods are not necessarily indicative of the results to be
expected for the full year or any future period.
The following summary unaudited pro forma consolidated financial
data of ICG, Inc. and its subsidiaries as of and for the year
ended December 31, 2004 have been prepared to give pro
forma effect to our reorganization and our acquisitions of
Horizon, Anker and CoalQuest, as if each had occurred on
January 1, 2004, in the case of unaudited pro forma
statement of operations data, and on December 31, 2004, in
the case of unaudited pro forma balance sheet data. The
successor balance sheet data and pro forma adjustments used in
preparing the pro forma financial data reflect our preliminary
estimates of the purchase price allocation to certain assets and
liabilities. The pro forma financial data are for informational
purposes only and should not be considered indicative of actual
results that would have been achieved had the transactions
actually been consummated on the dates indicated and do not
purport to indicate balance sheet data or results of operations
as of any future date or for any future period. You should read
the following data in conjunction with "Unaudited
consolidated pro forma financial information,"
"Management's discussion and analysis of financial
condition and results of operations" and the audited
consolidated financial statements and related notes of each of
ICG, Inc., Horizon (and its predecessors), Anker and CoalQuest,
each included elsewhere in this prospectus.
9
Table of Contents
AEI RESOURCES
Predecessor to
HORIZON
Horizon
Predecessor to ICG, Inc.
ICG, Inc.
Period from
Period January 1,
Pro forma year
Period from
May 10, 2002 to
Year ended
2004 to
Period October 1,
ended
January 1, 2002
December 31,
December 31,
September 30,
2004 to
December 31,
to May 9, 2002
2002
2003
2004
December 31, 2004
2004
(3)
(in thousands, except share data)
Statement of operations data:
Revenues:
Coal sales revenues
$
136,040
$
264,235
$
441,291
$
346,981
$
130,463
$
624,120
Freight and handling revenues
2,947
6,032
8,008
3,700
880
15,996
Other revenues
21,183
27,397
31,771
22,702
4,766
33,696
Total revenues
160,170
297,664
481,070
373,383
136,109
673,812
Cost and expenses:
Freight and handling costs
2,947
6,032
8,008
3,700
880
15,996
Cost of coal sales and other revenues (exclusive of
    depreciation, depletion and amortization shown separately below)
114,767
251,361
400,652
306,429
113,707
564,723
Depreciation, depletion and amortization
32,316
40,033
52,254
27,547
7,943
45,323
Selling, general and administrative (exclusive of depreciation,
    depletion and amortization shown separately above)
9,677
16,695
23,350
8,477
4,194
17,257
(Gain)/loss on sale of assets
(93
)
(39
)
(4,320
)
(226
)
(10
)
(236
)
Writedowns and other items
8,323
729,953
9,100
10,018
—
(140
)
Total costs and expenses
167,937
1,044,035
489,044
355,945
126,714
642,923
Income (loss) from operations
(7,767
)
(746,371
)
(7,974
)
17,438
9,395
30,889
Other income (expense):
Interest expense
(36,666
)
(80,405
)
(145,892
)
(114,211
)
(3,453
)
(14,348
)
Reorganization items
1,567,689
(143,663
)
(52,784
)
727
Other, net
499
1,256
187
1,581
898
8,329
Total interest and other income (expense)
1,531,522
(222,812
)
(198,489
)
(111,903
)
(2,555
)
(6,019
)
Income (loss) before income taxes
1,523,755
(969,183
)
(206,463
)
(94,465
)
6,840
24,870
Income tax expense
—
—
—
—
(2,591
)
(9,421
)
Net income (loss)
$
1,523,755
$
(969,183
)
$
(206,463
)
$
(94,465
)
$
4,249
$
15,449
Earnings (loss) per
    share
(1)
:
Basic
—
—
—
—
0.04
0.11
Diluted
—
—
—
—
0.04
0.11
Average common shares
    outstanding
(1)
:
Basic
—
—
—
—
106,605,999
137,556,128
Diluted
—
—
—
—
106,605,999
137,556,128
Balance sheet data (at period end):
Cash and cash equivalents
$
87,278
$
114
$
859
—
$
23,967
$
18,359
Total assets
1,521,318
484,212
407,064
370,298
459,975
826,724
Long term debt and capital leases
933,106
1,157
315
29
173,446
180,388
Total liabilities
1,286,318
1,222,218
1,351,393
1,409,092
305,575
381,076
Total stockholders' equity (members deficit)
$
235,000
$
(738,006
)
$
(944,329
)
$
(1,038,794
)
$
154,400
$
445,648
Total liabilities and stockholders' equity (members deficit)
$
1,521,318
$
484,212
$
407,064
$
370,298
$
459,975
$
826,724
Other financial data (unaudited):
EBITDA, as
    adjusted
(2)
$
33,278
$
24,832
$
49,247
$
56,358
$
18,226
$
84,165
(4)
Net cash provided by (used in)
Operating activities
$
(298,196
)
$
76,372
$
17,753
$
34,057
$
30,209
$
—
Investing activities
$
(10,841
)
$
(12,799
)
$
(1,549
)
$
(2,535
)
$
(329,166
)
$
—
Financing activities
$
259,011
$
(78,025
)
$
(15,459
)
$
(32,381
)
$
322,924
$
—
Capital expenditures
$
10,963
$
13,435
$
16,937
$
6,624
$
5,583
$
—
Operating data (unaudited):
Tons sold
5,416
11,124
16,655
10,421
3,582
18,400
Tons produced
4,231
7,139
12,041
8,812
2,959
14,591
Average coal sales realization (per ton)
$
25.12
$
23.75
$
26.50
$
33.30
$
36.42
$
33.92
10
Table of Contents
(1)
Earnings per share data and average shares outstanding are
    not presented for the period from January 1, 2002 to
    May 9, 2002, period from May 10, 2002 to
    December 31, 2002, year ended December 31, 2003 and
    the period from January 1, 2004 to September 30, 2004
    because they were prepared on a "carve-out" basis.
(2)
EBITDA, as adjusted, represents net income (but excluding
    gain on the sale of assets, reorganization items and writedowns
    and other items) before deducting net interest expense, income
    taxes and depreciation, depletion and amortization. We present
    EBITDA and pro forma EBITDA because we consider them important
    supplemental measures of our performance and believe they are
    frequently used by securities analysts, investors and other
    interested parties in the evaluation of companies in our
    industry, substantially all of which present EBITDA when
    reporting their results.
We also use EBITDA for the following purposes: Our executive
    compensation plan bases incentive compensation payments on our
    EBITDA performance measured against budgets and a peer group.
    Our credit agreement uses EBITDA (with additional adjustments)
    to measure our compliance with covenants, such as interest
    coverage and debt incurrence. EBITDA is also widely used by us
    and others in our industry to evaluate and price potential
    acquisition candidates.
EBITDA and pro forma EBITDA have limitations as analytical
    tools, and you should not consider them in isolation, or as a
    substitute for analysis of our results as reported under GAAP.
    Some of these limitations are:
4
EBITDA and pro forma EBITDA do
    not reflect our cash expenditures, or future requirements, for
    capital expenditures or contractual commitments;
4
EBITDA and pro forma EBITDA do
    not reflect changes in, or cash requirements for, our working
    capital needs;
4
EBITDA and pro forma EBITDA do
    not reflect the significant interest expense, or the cash
    requirements necessary to service interest or principal
    payments, on our debts;
4
Although depreciation and
    amortization are non-cash charges, the assets being depreciated
    and amortized will often have to be replaced in the future, and
    EBITDA and pro forma EBITDA do not reflect any cash requirements
    for such replacements; and
4
Other companies in our industry
    may calculate EBITDA and pro forma EBITDA differently than we
    do, limiting their usefulness as comparative measures
4
EBITDA and pro forma EBITDA are
    a measure of our performance that are not required by, or
    presented in accordance with, GAAP and we also believe each is a
    useful indicator of our ability to meet debt service and capital
    expenditure requirements. EBITDA and pro forma EBITDA are not
    measurements of our financial performance under GAAP and should
    not be considered as alternatives to net income, operating
    income or any other performance measures derived in accordance
    with GAAP or as an alternative to cash flow from operating
    activities as a measure of our liquidity.
11
Table of Contents
The following table reconciles (i) net income, which we
    believe to be the closest GAAP performance measure, to EBITDA
    and (ii) EBITDA to EBITDA, as adjusted.
AEI Resources
(Predecessor
Horizon
to Horizon)
(Predecessor to ICG, Inc.)
ICG, Inc.
Period from
Period from
Period from
Period from
May 10,
January 1,
October 1,
January 1,
2002 to
Year ended
2004 to
2004 to
2002 to
December 31,
December 31,
September 30,
December 31,
May 9, 2002
2002
2003
2004
2004
(in thousands)
Net income (loss)
$
1,523,755
$
(969,183
)
$
(206,463
)
$
(94,465
)
$
4,249
Interest expense
36,666
80,405
145,892
114,211
3,453
Income tax expense
—
—
—
—
2,591
Depreciation, depletion and amortization expense
32,316
40,033
52,254
27,547
7,943
EBITDA
$
1,592,737
$
(848,745
)
$
(8,317
)
$
47,293
$
18,236
(Gain)/loss on sale of assets
(93
)
(39
)
(4,320
)
(226
)
(10
)
Reorganization items
(1,567,689
)
143,663
52,784
(727
)
—
Writedowns and other items
8,323
729,953
9,100
10,018
—
Total EBITDA adjustments
(1,559,459
)
873,577
57,564
9,065
(10
)
EBITDA, as adjusted
$
33,278
$
24,832
$
49,247
$
56,358
$
18,226
(3)
The summary unaudited pro forma data of ICG, Inc. and its
    subsidiaries as of and for the year ended December 31, 2004
    have been prepared to give pro forma effect to our
    reorganization, the acquisition of Horizon, Anker and CoalQuest,
    as if each had occurred on January 1, 2004, in the case of
    unaudited statements of operations data, and on
    December 31, 2004, in the case of unaudited pro forma
    balance sheet data.
(4)
The following table reconciles (i) pro forma net income,
    which we believe to be the closest GAAP performance measure, to
    pro forma EBITDA and (ii) pro forma EBITDA to pro forma
    EBITDA, as adjusted.
Pro forma year ended
December 31, 2004
(in thousands)
Net income
$
15,449
Interest expense
14,348
Income tax expense
9,421
Depreciation, depletion and amortization expense
45,323
Pro forma EBITDA
84,541
(Gain)/loss on sale of assets
(236
)
Reorganization items
—
Other items
(140
)
Total pro forma EBITDA adjustments
(376
)
Pro forma EBITDA, as adjusted
$
84,165
12
Table of Contents
Risk factors
An investment in our common stock involves a high degree of
risk. You should carefully consider the following risk factors,
together with the other information contained in this
prospectus, before investing in our common stock. If any of the
following risks develop into actual events, our business,
financial condition or results of operations could be materially
adversely affected, the trading price of your shares of our
common stock could decline and you may lose all or part of your
investment.
RISKS RELATING TO OUR BUSINESS
Because of our limited operating history, we believe that
historical information regarding our company prior to
October 1, 2004 and for Horizon, our predecessor for
accounting purposes, is of little relevance in understanding our
business as currently conducted.
We are subject to the risks, uncertainties, expenses and
problems encountered by companies in the early stages of
operations. ICG was incorporated in March 2005 as a holding
company and our predecessor, ICG, Inc., was incorporated in
May 2004 for the sole purpose of acquiring certain assets
of Horizon. Until we completed that acquisition we had
substantially no operations. As a result, we believe the
historical financial information presented in this prospectus,
other than for the three month period ended December 31,
2004, which does not include the historical financial
information for Anker and CoalQuest, is of limited relevance in
understanding our business as currently conducted. The financial
statements for the predecessor periods have been prepared from
the books and records of Horizon as if ICG had existed as a
separate legal entity under common management for all periods
presented (that is, on a "carve-out" basis). The
financial statements for the predecessor periods include
allocations of certain expenses, taxation charges, interest and
cash balances relating to the predecessor based on
management's estimates. In light of these allocations and
estimates, the predecessor financial information is not
necessarily indicative of the consolidated financial position,
results of operations and cash flows of ICG if it had operated
during the predecessor period presented. See "Unaudited
consolidated pro forma financial data," "Selected
historical consolidated financial data of ICG" and
"Management's discussion and analysis of financial
condition and results of operations."
A substantial or extended decline in coal prices could reduce
our revenues and the value of our coal reserves.
Our results of operations are substantially dependent upon the
prices we receive for our coal. The prices we receive for coal
depend upon factors beyond our control, including:
4
the supply of and demand for domestic and foreign coal;
4
the demand for electricity;
4
domestic and foreign demand for steel and the continued
    financial viability of the domestic and/or foreign steel
    industry;
4
the proximity to, capacity of and cost of transportation
    facilities;
4
domestic and foreign governmental regulations and taxes;
4
air emission standards for coal-fired power plants;
4
regulatory, administrative and judicial decisions;
4
the price and availability of alternative fuels, including the
    effects of technological developments; and
13
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Risk factors
4
the effect of worldwide energy conservation measures.
Our results of operations are dependent upon the prices we
charge for our coal as well as our ability to improve
productivity and control costs. Any decreased demand would cause
spot prices to decline and require us to increase productivity
and decrease costs in order to maintain our margins. Declines in
the prices we receive for our coal could adversely affect our
operating results and our ability to generate the cash flows we
require to improve our productivity and invest in our operations.
Our coal mining production is subject to operating risks that
could result in higher operating expenses and/or decreased
production.
Our revenues depend on our level of coal mining production. The
level of our production is subject to operating conditions and
events beyond our control that could disrupt operations and
affect production at particular mines for varying lengths of
time. These conditions and events include:
4
the unavailability of qualified labor;
4
our inability to acquire, maintain or renew necessary permits or
    mining or surface rights in a timely manner, if at all;
4
unfavorable geologic conditions, such as the thickness of the
    coal deposits and the amount of rock embedded in or overlying
    the coal deposit;
4
failure of reserve estimates to prove correct;
4
changes in governmental regulation of the coal industry,
    including the imposition of additional taxes, fees or actions to
    suspend or revoke our permits or changes in the manner of
    enforcement of existing regulations;
4
mining and processing equipment failures and unexpected
    maintenance problems;
4
adverse weather and natural disasters, such as heavy rains and
    flooding;
4
increased water entering mining areas and increased or
    accidental mine water discharges;
4
increased or unexpected reclamation costs;
4
interruptions due to transportation delays;
4
the unavailability of required equipment of the type and size
    needed to meet production expectations; and
4
unexpected mine safety accidents, including fires and explosions
    from methane.
These conditions and events may increase our cost of mining and
delay or halt production at particular mines either permanently
or for varying lengths of time. In addition, we may experience
disruptions in our supply of coal from third parties who produce
coal for us due to the foregoing conditions and events. Any
interruptions in the production of coal by us or third parties
who supply us with coal could adversely affect our business and
revenues.
Any change in coal consumption patterns by North American
electric power generators resulting in a decrease in the use of
coal by those consumers could result in lower prices for our
coal, which would reduce our revenues and adversely impact our
earnings and the value of our coal reserves.
Steam coal accounted for nearly all of our coal sales volume in
2004. The majority of our sales of steam coal in 2004 were to
electric power generators. Domestic electric power generation
accounted for approximately 92% of all U.S. coal
consumption in 2003, according to the EIA. The amount of
14
Table of Contents
Risk factors
coal consumed for U.S. electric power generation is
affected primarily by the overall demand for electricity, the
location, availability, quality and price of competing fuels for
power such as natural gas, nuclear, fuel oil and alternative
energy sources such as hydroelectric power, technological
developments, and environmental and other governmental
regulations.
We expect that many new power plants will be built to produce
electricity during peak periods of demand, when the demand for
electricity rises above the "base load demand," or
minimum amount of electricity required if consumption occurred
at a steady rate. However, we also expect that many of these new
power plants will be fired by natural gas because gas-fired
plants are cheaper to construct than coal-fired plants and
because natural gas is a cleaner burning fuel. Gas-fired
generation from existing and newly constructed gas-fired
facilities has the potential to displace coal-fired generation,
particularly from older, less efficient coal-powered generators.
In addition, the increasingly stringent requirements of the
Clean Air Act may result in more electric power generators
shifting from coal to natural gas-fired plants. Any reduction in
the amount of coal consumed by North American electric power
generators could reduce the price of steam coal that we mine and
sell, thereby reducing our revenues and adversely impacting our
earnings and the value of our coal reserves.
Weather patterns also can greatly affect electricity generation.
Extreme temperatures, both hot and cold, cause increased power
usage and, therefore, increased generating requirements from all
sources. Mild temperatures, on the other hand, result in lower
electrical demand, which allows generators to choose the
lowest-cost sources of power generation when deciding which
generation sources to dispatch. Accordingly, significant changes
in weather patterns could reduce the demand for our coal.
Overall economic activity and the associated demands for power
by industrial users can have significant effects on overall
electricity demand. Robust economic activity can cause much
heavier demands for power, particularly if such activity results
in increased utilization of industrial assets during evening and
nighttime periods. The economic slowdown experienced during the
last several years significantly slowed the growth of electrical
demand and, in some locations, resulted in contraction of
demand. Any downward pressure on coal prices, whether due to
increased use of alternative energy sources, changes in weather
patterns, decreases in overall demand or otherwise, would likely
cause our profitability to decline.
Our profitability may be adversely affected by the status of
our long-term coal supply agreements and changes in purchasing
patterns in the coal industry may make it difficult for us to
extend existing agreements or enter into long-term supply
agreements, which could adversely affect the capability and
profitability of our operations.
We sell a significant portion of our coal under long-term coal
supply agreements, which we define as contracts with a term
greater than 12 months. As of December 31, 2004
approximately 66% of our pro forma revenues were derived from
coal sales that were made under long-term coal supply
agreements. As of that date, we had 28 long-term sales
agreements with a volume-weighted average term of approximately
4.6 years. The prices for coal shipped under these
agreements are fixed for the initial year of the contract,
subject to certain adjustments in later years, and thus may be
below the current market price for similar type coal at any
given time, depending on the timeframe of contract execution or
initiation. As a consequence of the substantial volume of our
sales that are subject to these long-term agreements, we have
less coal available with which to capitalize on higher coal
prices, if and when they arise. In addition, in some cases, our
ability to realize the higher prices that may be available in
the spot market may be restricted when customers elect to
purchase higher volumes allowable under some contracts.
15
Table of Contents
Risk factors
When our current contracts with customers expire or are
otherwise renegotiated, our customers may decide not to extend
or enter into new long-term contracts or, in the absence of
long-term contracts, our customers may decide to purchase fewer
tons of coal than in the past or on different terms, including
under different pricing terms. For additional information
relating to these contracts, see "Business— Customers
and coal contracts— Long-term coal supply agreements."
Furthermore, as electric utilities seek to adjust to
requirements of the Clean Air Act, particularly the Acid Rain
regulations, the Clean Air Mercury Rule and the Clean Air
Interstate Rule, and the possible deregulation of their
industry, they could become increasingly less willing to enter
into long-term coal supply agreements and instead may purchase
higher percentages of coal under short-term supply agreements.
To the extent the electric utility industry shifts away from
long-term supply agreements, it could adversely affect us and
the level of our revenues. For example, fewer electric utilities
will have a contractual obligation to purchase coal from us,
thereby increasing the risk that we will not have a market for
our production. Furthermore, spot market prices tend to be more
volatile than contractual prices, which could result in
decreased revenues.
Certain provisions in our long-term supply agreements may
provide limited protection during adverse economic conditions or
may result in economic penalties upon the failure to meet
specifications.
Price adjustment, "price reopener" and other similar
provisions in long-term supply agreements may reduce the
protection from short-term coal price volatility traditionally
provided by such contracts. Most of our coal supply agreements
contain provisions that allow for the purchase price to be
renegotiated at periodic intervals. These price reopener
provisions may automatically set a new price based on the
prevailing market price or, in some instances, require the
parties to agree on a new price, sometimes between a specified
range of prices. In some circumstances, failure of the parties
to agree on a price under a price reopener provision can lead to
termination of the contract. Any adjustment or renegotiations
leading to a significantly lower contract price would result in
decreased revenues. Accordingly, supply contracts with terms of
one year or more may provide only limited protection during
adverse market conditions.
Coal supply agreements also typically contain force majeure
provisions allowing temporary suspension of performance by us or
our customers during the duration of specified events beyond the
control of the affected party. Most of our coal supply
agreements contain provisions requiring us to deliver coal
meeting quality thresholds for certain characteristics such as
Btu, sulfur content, ash content, hardness and ash fusion
temperature. Failure to meet these specifications could result
in economic penalties, including price adjustments, the
rejection of deliveries or, in the extreme, termination of the
contracts.
Consequently, due to the risks mentioned above with respect to
long-term supply agreements, we may not achieve the revenue or
profit we expect to achieve from these sales commitments. In
addition, we may not be able to successfully convert these sales
commitments into long-term supply agreements.
A decline in demand for metallurgical coal would limit our
ability to sell our high quality steam coal as higher-priced
metallurgical coal.
Portions of our coal reserves possess quality characteristics
that enable us to mine, process and market them as either
metallurgical coal or high quality steam coal, depending on the
prevailing conditions in the metallurgical and steam coal
markets. We will decide whether to mine, process and market
these coals as metallurgical or steam coal based on
management's assessment as to which market is likely to
provide us with a higher margin. We will consider a number of
factors when making this assessment, including the difference
between the current and anticipated future market prices of
steam coal and metallurgical coal, the lower volume of saleable
tons that results from producing a given quantity of
16
Table of Contents
Risk factors
reserves for sale in the metallurgical market instead of the
steam market, the increased costs incurred in producing coal for
sale in the metallurgical market instead of the steam market,
the likelihood of being able to secure a longer-term sales
commitment by selling coal into the steam market and our
contractual commitments to deliver different types of coals to
our customers. A decline in the metallurgical market relative to
the steam market could cause us to shift coal from the
metallurgical market to the steam market, thereby reducing our
revenues and profitability.
Most of our metallurgical coal reserves possess quality
characteristics that enable us to mine, process and market them
as high quality steam coal. However, some of our mines operate
profitably only if all or a portion of their production is sold
as metallurgical coal to the steel market. If demand for
metallurgical coal declined to the point where we could earn a
more attractive return marketing the coal as steam coal, these
mines may not be economically viable and may be subject to
closure. Such closures would lead to accelerated reclamation
costs, as well as reduced revenue and profitability.
We face numerous uncertainties in estimating our economically
recoverable coal reserves, and inaccuracies in our estimates
could result in lower than expected revenues, higher than
expected costs or decreased profitability.
We base our reserve information on engineering, economic and
geological data assembled and analyzed by our staff, which
includes various engineers and geologists, and which is
periodically reviewed by outside firms. The reserves estimates
as to both quantity and quality are annually updated to reflect
production of coal from the reserves and new drilling or other
data received. There are numerous uncertainties inherent in
estimating quantities and qualities of and costs to mine
recoverable reserves, including many factors beyond our control.
Estimates of economically recoverable coal reserves and net cash
flows necessarily depend upon a number of variable factors and
assumptions, all of which may vary considerably from actual
results such as:
4
geological and mining conditions which may not be fully
    identified by available exploration data or which may differ
    from experience in current operations;
4
historical production from the area compared with production
    from other similar producing areas; and
4
the assumed effects of regulation and taxes by governmental
    agencies and assumptions concerning coal prices, operating
    costs, mining technology improvements, severance and excise tax,
    development costs and reclamation costs.
For these reasons, estimates of the economically recoverable
quantities and qualities attributable to any particular group of
properties, classifications of reserves based on risk of
recovery and estimates of net cash flows expected from
particular reserves prepared by different engineers or by the
same engineers at different times may vary substantially. Actual
coal tonnage recovered from identified reserve areas or
properties and revenues and expenditures with respect to our
reserves may vary materially from estimates. These estimates
thus may not accurately reflect our actual reserves. Any
inaccuracy in our estimates related to our reserves could result
in lower than expected revenues, higher than expected costs or
decreased profitability.
We depend heavily on a small number of large customers, the
loss of any of which would adversely affect our operating
results.
Our three largest customers for the year ended December 31,
2004 were Georgia Power, Carolina Power & Light and
Duke Power and we derived approximately 51% of our pro
forma coal revenues from sales to our five largest customers. At
December 31, 2004, we had 16 coal supply agreements
with these customers that expire at various times from 2005 to
2020. We are currently discussing the
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extension of existing agreements or entering into new long-term
agreements with some of these customers, but we cannot assure
you that these negotiations will be successful or that those
customers will continue to purchase coal from us without
long-term coal supply agreements. If a number of these customers
were to significantly reduce their purchases of coal from us, or
if we were unable to sell coal to them on terms as favorable to
us as the terms under our current agreements, our financial
condition and results of operations could suffer materially.
Disruptions in transportation services could limit our
ability to deliver coal to our customers.
We depend primarily upon railroads, trucks and barges to deliver
coal to our customers. Disruption of railroad service due to
weather-related problems, strikes, lockouts, and other events
could temporarily impair our ability to supply coal to our
customers, resulting in decreased shipments. Decreased
performance levels over longer periods of time could cause our
customers to look elsewhere for their fuel needs, negatively
affecting our revenues and profitability.
During 2004, the major eastern railroads (CSX and Norfolk
Southern) experienced significant service problems. These
problems were caused by an increase in overall rail traffic from
the expanding economy and shortages of both equipment and
personnel. The service problems had an adverse effect on our
shipments during several months in 2004. If these service
problems persist, they could have an adverse impact on our
financial results in 2005 and beyond.
The states of West Virginia and Kentucky have recently increased
enforcement of weight limits on coal trucks on its public roads.
Additionally, West Virginia legislation, which raised coal truck
weight limits in West Virginia, includes provisions supporting
enhanced enforcement. The legislation went into effect on
October 1, 2003 and implementation began on January 1,
2004. It is possible that other states in which our coal is
transported by truck could conduct similar campaigns to increase
enforcement of weight limits. Such stricter enforcement actions
could result in shipment delays and increased costs. An increase
in transportation costs could have an adverse effect on our
ability to increase or to maintain production and could
adversely affect revenues.
Some of our mines depend on a single transportation carrier or a
single mode of transportation. Disruption of any of these
transportation services due to weather-related problems,
mechanical difficulties, strikes, lockouts, bottlenecks, and
other events could temporarily impair our ability to supply coal
to our customers. Our transportation providers may face
difficulties in the future that may impair our ability to supply
coal to our customers, resulting in decreased revenues.
Currently, there is a shortage of available train cars to
service our coal operations in eastern Kentucky.
If there are disruptions of the transportation services provided
by our primary rail carriers that transport our produced coal
and we are unable to find alternative transportation providers
to ship our coal, our business could be adversely affected.
Fluctuations in transportation costs could reduce revenues by
causing us to reduce our production or impairing our ability to
supply coal to our customers.
Transportation costs represent a significant portion of the
total cost of coal for our customers and, as a result, the cost
of transportation is a critical factor in a customer's
purchasing decision. Increases in transportation costs could
make coal a less competitive source of energy or could make our
coal production less competitive than coal produced from other
sources.
On the other hand, significant decreases in transportation costs
could result in increased competition from coal producers in
other parts of the country. For instance, coordination of the
many eastern loading facilities, the large number of small
shipments, the steeper average grades of the terrain and a
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more unionized workforce are all issues that combine to make
shipments originating in the eastern United States inherently
more expensive on a per-mile basis than shipments originating in
the western United States. The increased competition could have
a material adverse effect on the business, financial condition
and results of operations.
Disruption in supplies of coal produced by third parties
could temporarily impair our ability to fill our customers'
orders or increase our costs.
In addition to marketing coal that is produced from our
controlled reserves, we purchase and resell coal produced by
third parties from their controlled reserves to meet customer
specifications. Disruption in our supply of third-party coal
could temporarily impair our ability to fill our customers'
orders or require us to pay higher prices in order to obtain the
required coal from other sources. Any increase in the prices we
pay for third-party coal could increase our costs and therefore
lower our earnings.
Because our profitability is substantially dependent on the
availability of an adequate supply of coal reserves that can be
mined at competitive costs, the unavailability of these types of
reserves would cause our profitability to decline.
We have not yet applied for or obtained all of the permits
required, or developed the mines necessary, to use all of our
reserves. Furthermore, we may not be able to mine all of our
reserves as profitably as we do at our current operations. Our
planned development projects and acquisition activities may not
result in significant additional reserves and we may not have
continuing success developing new mines or expanding existing
mines beyond our existing reserve base. Most of our mining
operations are conducted on properties owned or leased by us.
Because title to most of our leased properties and mineral
rights is not thoroughly verified until a permit to mine the
property is obtained, our right to mine some of our reserves may
be materially adversely affected if defects in title or
boundaries exist. In addition, in order to develop our reserves,
we must receive various governmental permits. We may be unable
to obtain the permits necessary for us to operate profitably in
the future. Some of these permits are becoming increasingly more
difficult and expensive to obtain and the review process
continues to lengthen.
Our profitability depends substantially on our ability to mine
coal reserves that have the geological characteristics that
enable them to be mined at competitive costs and to meet the
quality needed by our customers. Because our reserves decline as
we mine our coal, our future success and growth depend, in part,
upon our ability to acquire additional coal reserves that are
economically recoverable. Replacement reserves may not be
available when required or, if available, may not be capable of
being mined at costs comparable to those characteristic of the
depleting mines. We may not be able to accurately assess the
geological characteristics of any reserves that we acquire,
which may adversely affect our profitability and financial
condition. Exhaustion of reserves at particular mines also may
have an adverse effect on our operating results that is
disproportionate to the percentage of overall production
represented by such mines. Our ability to obtain other reserves
in the future could be limited by restrictions under our
existing or future debt agreements, competition from other coal
companies for attractive properties, the lack of suitable
acquisition candidates or the inability to acquire coal
properties on commercially reasonable terms.
Unexpected increases in raw material costs could
significantly impair our operating results.
Our coal mining operations use significant amounts of steel,
petroleum products and other raw materials in various pieces of
mining equipment, supplies and materials, including the roof
bolts required by the room and pillar method of mining described
below. Scrap steel prices have risen
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significantly in recent months, and historically, the prices of
scrap steel and petroleum have fluctuated. If the price of steel
or other of these materials increase, our operational expenses
will increase, which could have a significant negative impact on
our operating results.
A shortage of skilled labor in the mining industry could pose
a risk to achieving optimal labor productivity and competitive
costs, which could adversely affect our profitability.
Efficient coal mining using modern techniques and equipment
requires skilled laborers, preferably with at least a year of
experience and proficiency in multiple mining tasks. In order to
support our planned expansion opportunities, we intend to
sponsor both in-house and vocational coal mining programs at the
local level in order to train additional skilled laborers. In
the event the shortage of experienced labor continues or worsens
or we are unable to train the necessary amount of skilled
laborers, there could be an adverse impact on our labor
productivity and costs and our ability to expand production and
therefore have a material adverse effect on our results of
operations.
We have a new management team, and if they are unable to work
effectively together, our business may be harmed.
Most of our and ICG, Inc.'s management team was hired in
2005, and the group has only been working together for a short
period of time. Moreover, several other key employees were hired
in 2005. Because many of our executive officers and key
employees are new and we also expect to add additional key
personnel in the near future, there is a risk that our
management team will not be able to work together effectively.
If our management team is unable to work together, our
operations could be disrupted and our business harmed.
Our ability to operate our company effectively could be
impaired if we fail to attract and retain key personnel.
Our senior management team averages 23 years of
experience in the coal industry, which includes developing
innovative, low-cost mining operations, maintaining strong
customer relationships and making strategic, opportunistic
acquisitions. The loss of any of our senior executives could
have a material adverse effect on our business. There may be a
limited number of persons with the requisite experience and
skills to serve in our senior management positions. We cannot
assure you that we would be able to locate or employ qualified
executives on acceptable terms. In addition, as our business
develops and expands, we believe that our future success will
depend greatly on our continued ability to attract and retain
highly skilled personnel with coal industry experience.
Competition for these persons in the coal industry is intense
and we may not be able to successfully recruit, train or retain
qualified personnel. We cannot assure you that we will continue
to employ key personnel or that we will be able to attract and
retain qualified personnel in the future. Our failure to retain
or attract key personnel could have a material adverse effect on
our operations.
Acquisitions that we may undertake involve a number of
inherent risks, any of which could cause us not to realize the
anticipated benefits.
We continually seek to expand our operations and coal reserves
through acquisitions. If we are unable to successfully integrate
the companies, businesses or properties we are able to acquire,
our
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profitability may decline and we could experience a material
adverse effect on our business, financial condition, or results
of operations. Acquisition transactions involve various inherent
risks, including:
4
uncertainties in assessing the value, strengths, and potential
    profitability of, and identifying the extent of all weaknesses,
    risks, contingent and other liabilities (including environmental
    or mine safety liabilities) of, acquisition candidates;
4
the potential loss of key customers, management and employees of
    an acquired business;
4
the ability to achieve identified operating and financial
    synergies anticipated to result from an acquisition;
4
problems that could arise from the integration of the acquired
    business; and
4
unanticipated changes in business, industry or general economic
    conditions that affect the assumptions underlying our rationale
    for pursuing the acquisition.
Any one or more of these factors could cause us not to realize
the benefits anticipated to result from an acquisition. Any
acquisition opportunities we pursue could materially affect our
liquidity and capital resources and may require us to incur
indebtedness, seek equity capital or both. In addition, future
acquisitions could result in our assuming more long-term
liabilities relative to the value of the acquired assets than we
have assumed in our previous acquisitions.
We may not be able to effectively integrate Anker and
CoalQuest into our operations.
Our future success will depend largely on our ability to
consolidate and effectively integrate Anker's and
CoalQuest's operations into our operations. We may not be
able to do so successfully without substantial costs, delays or
other difficulties. We may face significant challenges in
consolidating functions and integrating procedures, information
technology systems, personnel and operating philosophies in a
timely and efficient manner. The integration process is complex
and time consuming and may pose a number of obstacles, such as:
4
the loss of key employees or customers;
4
the challenge of maintaining the quality of customer service;
4
the need to coordinate geographically diverse operations;
4
retooling and reprogramming of equipment and information
    technology systems; and
4
the resulting diversion of management's attention from our
    day-to-day business and the need to hire and integrate
    additional management personnel to manage our expanded
    operations.
If we are not successful in completing the integration of Anker
and CoalQuest into our operations, if the integration takes
longer or is more complex or expensive than anticipated, if we
cannot operate the Anker and CoalQuest businesses as effectively
as we anticipate, whether as a result of deficiency of the
acquired business or otherwise, or if the integrated businesses
fail to achieve market acceptance, our operating performance,
margins, sales and reputation could be materially adversely
affected.
Failure to obtain or renew surety bonds in a timely manner
and on acceptable terms could affect our ability to secure
reclamation and coal lease obligations, which could adversely
affect our ability to mine or lease coal.
Federal and state laws require us to obtain surety bonds to
secure payment of certain long-term obligations, such as mine
closure or reclamation costs, federal and state workers'
compensation costs, coal leases and other obligations. These
bonds are typically renewable annually. Surety bond issuers and
holders may not continue to renew the bonds or may demand
additional collateral or other less
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favorable terms upon those renewals. The ability of surety bond
issuers and holders to demand additional collateral or other
less favorable terms has increased as the number of companies
willing to issue these bonds has decreased over time. Our
failure to maintain, or our inability to acquire, surety bonds
that are required by state and federal law would affect our
ability to secure reclamation and coal lease obligations, which
could adversely affect our ability to mine or lease coal. That
failure could result from a variety of factors including,
without limitation:
4
lack of availability, higher expense or unfavorable market terms
    of new bonds;
4
restrictions on availability of collateral for current and
    future third-party surety bond issuers under the terms of our
    credit facility; and
4
the exercise by third-party surety bond issuers of their right
    to refuse to renew the surety.
Failure to maintain capacity for required letters of credit
could limit our ability to obtain or renew surety bonds.
At December 31, 2004, on a combined basis, we had
$54.4 million of letters of credit in place, of which
$45.0 million serve as collateral for reclamation surety
bonds and $9.4 million secure miscellaneous obligations.
Included in the $45.0 million letters of credit securing
collateral for reclamation surety bonds is a $10.0 million
letter of credit related to Lexington Coal Company. Our credit
facility provides for a $110.0 million revolving credit
facility, of which up to $60.0 million may be used for
letters of credit. If we do not maintain sufficient borrowing
capacity under our revolving credit facility for additional
letters of credit, we may be unable to obtain or renew surety
bonds required for our mining operations.
Our business requires substantial capital investment and
maintenance expenditures, which we may be unable to provide.
Our business strategy will require additional substantial
capital investment. We require capital for, among other
purposes, managing acquired assets, acquiring new equipment,
maintaining the condition of our existing equipment and
maintaining compliance with environmental laws and regulations.
To the extent that cash generated internally and cash available
under our credit facilities are not sufficient to fund capital
requirements, we will require additional debt and/or equity
financing. However, this type of financing may not be available
or, if available, may not be on satisfactory terms. Future debt
financings, if available, may result in increased interest and
amortization expense, increased leverage and decreased income
available to fund further acquisitions and expansion. In
addition, future debt financings may limit our ability to
withstand competitive pressures and render us more vulnerable to
economic downturns. If we fail to generate or obtain sufficient
additional capital in the future, we could be forced to reduce
or delay capital expenditures, sell assets or restructure or
refinance our indebtedness.
Our level of indebtedness and other demands on our cash
resources could materially adversely affect our ability to
execute our business strategy and make us more vulnerable to
economic downturns.
As of December 31, 2004, on a pro forma basis, we had cash
of approximately $18.4 million and total consolidated
indebtedness, including current maturities and capital lease
obligations, of approximately $195.4 million. During 2005,
our anticipated principal repayments will be approximately
$1.8 million on the term loan. Subject to the limits
contained in our credit facilities, we may also incur additional
debt in the future. In addition to the principal repayments on
our outstanding debt, we have other demands on our cash
resources, including, among others, capital expenditures and
operating expenses.
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Our credit facilities are secured by substantially all our
assets. If we default under these facilities, the lenders could
choose to declare all outstanding amounts immediately due and
payable, and seek foreclosure of the assets we granted to them
as collateral. If the amounts outstanding under the credit
facilities were accelerated, we may not have sufficient
resources to repay all outstanding amounts, and our assets may
not be sufficient to repay all of our outstanding debt in full.
Foreclosures on any of our material assets could disrupt our
operations, and have a material adverse effect on our
reputation, production volume, sales and earnings.
Our variable rate indebtedness subjects us to interest rate
risk, which could cause our annual debt service obligations to
increase significantly.
Our borrowings under our credit facilities are at variable rates
of interest and expose us to interest rate risk. If interest
rates increase, our debt service obligations on our variable
rate indebtedness would increase even if the amount borrowed
remained the same, resulting in a decrease in our net income. We
have developed a hedging program to actively manage the risks
associated with interest rate fluctuations but our program may
not effectively eliminate all of the financial exposure
associated with interest rate fluctuations. We currently have
instruments in place that have the effect of fixing the interest
rate on a portion of our outstanding debt for various time
periods up to two years.
Increased consolidation and competition in the U.S. coal
industry may adversely affect our ability to sell coal.
During the last several years, the U.S. coal industry has
experienced increased consolidation, which has contributed to
the industry becoming more competitive. According to the EIA, in
1995, the top ten coal producers accounted for approximately 50%
of total domestic coal production. By 2003, however, the top ten
coal producers' share had increased to approximately 63% of
total domestic coal production. Consequently, many of our
competitors in the domestic coal industry are major coal
producers who have significantly greater financial resources
than us. The intense competition among coal producers may impact
our ability to retain or attract customers and may therefore
adversely affect our future revenues and profitability.
The demand for U.S. coal exports is dependent upon a number
of factors outside of our control, including the overall demand
for electricity in foreign markets, currency exchange rates,
ocean freight rates, the demand for foreign-produced steel both
in foreign markets and in the U.S. market (which is
dependent in part on tariff rates on steel), general economic
conditions in foreign countries, technological developments and
environmental and other governmental regulations. If foreign
demand for U.S. coal were to decline, this decline could
cause competition among coal producers in the United States to
intensify, potentially resulting in additional downward pressure
on domestic coal prices.
Our ability to collect payments from our customers could be
impaired if their creditworthiness deteriorates.
Our ability to receive payment for coal sold and delivered
depends on the continued creditworthiness of our customers. Our
customer base is changing with deregulation as utilities sell
their power plants to their non-regulated affiliates or third
parties that may be less creditworthy, thereby increasing the
risk we bear on payment default. These new power plant owners
may have credit ratings that are below investment grade. In
addition, competition with other coal suppliers could force us
to extend credit to customers and on terms that could increase
the risk we bear on payment default.
We have contracts to supply coal to energy trading and brokering
companies under which those companies sell coal to end users.
During 2004, the creditworthiness of the energy trading and
brokering companies with which we do business declined,
increasing the risk that we may not be able
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to collect payment for all coal sold and delivered to or on
behalf of these energy trading and brokering companies.
Defects in title or loss of any leasehold interests in our
properties could limit our ability to mine these properties or
result in significant unanticipated costs.
We conduct a significant part of our mining operations on
properties that we lease. A title defect or the loss of any
lease could adversely affect our ability to mine the associated
reserves. Title to most of our leased properties and mineral
rights is not usually verified until we make a commitment to
develop a property, which may not occur until after we have
obtained necessary permits and completed exploration of the
property. Our right to mine some of our reserves has in the past
been, and may again in the future be, adversely affected if
defects in title or boundaries exist. In order to obtain leases
or mining contracts to conduct our mining operations on property
where these defects exist, we may in the future have to incur
unanticipated costs. In addition, we may not be able to
successfully negotiate new leases or mining contracts for
properties containing additional reserves, or maintain our
leasehold interests in properties where we have not commenced
mining operations during the term of the lease. Some leases have
minimum production requirements. Failure to meet those
requirements could result in losses of prepaid royalties and, in
some rare cases, could result in a loss of the lease itself.
Our work force could become unionized in the future, which
could adversely affect the stability of our production and
reduce our profitability.
All of our coal production is from mines operated by union-free
employees. However, our subsidiaries' employees have the
right at any time under the National Labor Relations Act to form
or affiliate with a union. If the terms of a union collective
bargaining agreement are significantly different from our
current compensation arrangements with our employees, any
unionization of our subsidiaries' employees could adversely
affect the stability of our production and reduce our
profitability.
Our ability and the ability of some of our subsidiaries to
engage in some business transactions may be limited by the terms
of our debt.
Our credit facilities contain a number of financial covenants
requiring us to meet financial ratios and financial condition
tests, as well as covenants restricting our ability to:
4
incur additional debt;
4
pay dividends on, redeem or repurchase capital stock;
4
allow our subsidiaries to issue new stock to any person other
    than us or any of our other subsidiaries;
4
make investments;
4
make acquisitions;
4
incur or permit to exist liens;
4
enter into transactions with affiliates;
4
guarantee the debt of other entities, including joint ventures;
4
merge or consolidate or otherwise combine with another
    company; and
4
transfer or sell a material amount of our assets outside the
    ordinary course of business.
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These covenants could adversely affect our ability to finance
our future operations or capital needs or to execute preferred
business strategies.
Additionally, our ability to borrow under our credit facilities
will depend upon our ability to comply with these covenants and
our borrowing base requirements. Our ability to meet these
covenants and requirements may be affected by events beyond our
control and we may not meet these obligations. Our failure to
comply with these covenants and requirements could result in an
event of default under our credit facilities that, if not cured
or waived, could terminate our ability to borrow further, permit
acceleration of the relevant debt and permit foreclosure on any
collateral granted as security under our credit facilities. If
our indebtedness is accelerated, we may not be able repay our
debt or borrow sufficient funds to refinance it. Even if we were
able to obtain new financing, it may not be on commercially
reasonable terms, on terms that are acceptable to us, or at all.
If our debt is in default for any reason, our business,
financial condition and results of operations could be
materially and adversely affected.
See "Management's discussion and analysis of financial
condition and results of operations— Liquidity and capital
resources" and Note 6 to our audited consolidated
financial statements appearing elsewhere in this prospectus.
If our business does not generate sufficient cash for
operations, we may not be able to repay our indebtedness.
Our ability to pay principal and interest on and to refinance
our debt depends upon the operating performance of our
subsidiaries, which will be affected by, among other things,
general economic, financial, competitive, legislative,
regulatory and other factors, some of which are beyond our
control. In particular, economic conditions could cause the
price of coal to fall, our revenue to decline, and hamper our
ability to repay our indebtedness.
Our business may not generate sufficient cash flow from
operations and future borrowings may not be available to us
under our new credit facility or otherwise in an amount
sufficient to enable us to pay our indebtedness or to fund our
other liquidity needs. We may need to refinance all or a portion
of our indebtedness on or before maturity. We may not be able to
refinance any of our indebtedness on commercially reasonable
terms, on terms acceptable to us or at all.
RISKS RELATING TO GOVERNMENT REGULATION
The government extensively regulates our mining operations,
which imposes significant costs on us, and future regulations
could increase those costs or limit our ability to produce and
sell coal.
The coal mining industry is subject to increasingly strict
regulation by federal, state and local authorities with respect
to matters such as:
4
limitations on land use;
4
employee health and safety;
4
mandated benefits for retired coal miners;
4
mine permitting and licensing requirements;
4
reclamation and restoration of mining properties after mining is
    completed;
4
air quality standards;
4
water pollution;
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4
protection of human health, plantlife and wildlife;
4
the discharge of materials into the environment;
4
surface subsidence from underground mining; and
4
the effects of mining on groundwater quality and availability.
In particular, federal and state statutes require us to restore
mine property in accordance with specific standards and an
approved reclamation plan, and require that we obtain and
periodically renew permits for mining operations. If we do not
make adequate provisions for all expected reclamation and other
costs associated with mine closures, it could harm our future
operating results. In addition, state and federal regulations
impose strict standards for particulate matter emissions which
may restrict our ability to develop new mines or could require
us to modify our existing operations and increase our costs of
doing business.
Federal and state safety and health regulation in the coal
mining industry may be the most comprehensive and pervasive
system for protection of employee safety and health affecting
any segment of the U.S. industry. It is costly and
time-consuming to comply with these requirements and new
regulations or orders may materially adversely affect our mining
operations or cost structure, any of which could harm our future
results.
Under federal law, each coal mine operator must secure payment
of federal black lung benefits to claimants who are current and
former employees and contribute to a trust fund for the payment
of benefits and medical expenses to claimants who last worked in
the coal industry before July 1973. The trust fund is funded by
an excise tax on coal production. If this tax increases, or if
we could no longer pass it on to the purchaser of our coal under
many of our long-term sales contracts, it could increase our
operating costs and harm our results. New regulations that took
effect in 2001 could significantly increase our costs with
contesting and paying black lung claims. If new laws or
regulations increase the number and award size of claims, it
could substantially harm our business.
The costs, liabilities and requirements associated with these
and other regulations may be costly and time-consuming and may
delay commencement or continuation of exploration or production
operations. Failure to comply with these regulations may result
in the assessment of administrative, civil and criminal
penalties, the imposition of cleanup and site restoration costs
and liens, the issuance of injunctions to limit or cease
operations, the suspension or revocation of permits and other
enforcement measures that could have the effect of limiting
production from our operations. We may also incur costs and
liabilities resulting from claims for damages to property or
injury to persons arising from our operations. We must
compensate employees for work-related injuries. If we do not
make adequate provisions for our workers' compensation
liabilities, it could harm our future operating results. If we
are pursued for these sanctions, costs and liabilities, our
mining operations and, as a result, our profitability could be
adversely affected. See "Environmental and other regulatory
matters."
The possibility exists that new legislation and/or regulations
and orders may be adopted that may materially adversely affect
our mining operations, our cost structure and/or our
customers' ability to use coal. New legislation or
administrative regulations (or new judicial interpretations or
administrative enforcement of existing laws and regulations),
including proposals related to the protection of the environment
that would further regulate and tax the coal industry, may also
require us or our customers to change operations significantly
or incur increased costs. These regulations, if proposed and
enacted in the future, could have a material adverse effect on
our financial condition and results of operations.
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Mining in Northern and Central Appalachia is more complex and
involves more regulatory constraints than mining in the other
areas, which could affect the mining operations and cost
structures of these areas.
The geological characteristics of Northern and Central
Appalachian coal reserves, such as depth of overburden and coal
seam thickness, make them complex and costly to mine. As mines
become depleted, replacement reserves may not be available when
required or, if available, may not be capable of being mined at
costs comparable to those characteristic of the depleting mines.
In addition, as compared to mines in the Powder River Basin,
permitting, licensing and other environmental and regulatory
requirements are more costly and time-consuming to satisfy.
These factors could materially adversely affect the mining
operations and cost structures of, and customers' ability
to use coal produced by, our mines in Northern and Central
Appalachia.
Judicial rulings that restrict how we may dispose of mining
wastes could significantly increase our operating costs,
discourage customers from purchasing our coal, and materially
harm our financial condition and operating results.
In our surface mining operations, we use mountaintop removal
mining wherever feasible because it allows us to recover more
tons of coal per acre and facilitates the permitting of larger
projects, which allows mining to continue over a longer period
of time than would be the case using other mining methods. To
dispose of mining waste generated by mountaintop removal
operations, as well as other mining operations, we obtain
permits to construct and operate valley fills and surface
impoundments. Some of these permits are "nationwide"
permits (as opposed to individual permits) issued by the Army
Corps of Engineers, or ACOE, for dredging and filling in streams
and wetlands. Lawsuits challenging ACOE's authority to
issue Nationwide Permit 21 have been instituted by
environmental groups. In 2004, a federal court issued an order
enjoining ACOE from issuing further Nationwide 21 permits
in the South District of West Virginia. This decision is being
appealed. A similar lawsuit has been filed in federal court in
Kentucky, which seeks invalidate the ACOE issuance of Nationwide
Permit 21 and enjoin ACOE from allowing pursuant to this
permit further discharges into valley fills or surface
impoundments from 54 mines in Kentucky, including some of our
mines. We cannot predict the final outcomes of these lawsuits.
If mining methods at issue are limited or prohibited, it could
significantly increase our operational costs, make it more
difficult to economically recover a significant portion of our
reserves and lead to a material adverse effect on our financial
condition and results of operation. We may not be able to
increase the price we charge for coal to cover higher production
costs without reducing customer demand for our coal.
We may be unable to obtain and renew permits necessary for
our operations, which would reduce our production, cash flow and
profitability.
Mining companies must obtain numerous permits that impose strict
regulations on various environmental and safety matters in
connection with coal mining. These include permits issued by
various federal and state agencies and regulatory bodies. The
permitting rules are complex and may change over time, making
our ability to comply with the applicable requirements more
difficult or even impossible, thereby precluding continuing or
future mining operations. Private individuals and the public
have certain rights to comment upon and otherwise engage in the
permitting process, including through court intervention.
Accordingly, the permits we need may not be issued, maintained
or renewed, or may not be issued or renewed in a timely fashion,
or may involve requirements that restrict our ability to conduct
our mining operations. An inability to conduct our mining
operations pursuant to applicable permits would reduce our
production, cash flow, and profitability.
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Risk factors
We have significant reclamation and mine closure obligations.
If the assumption underlying our accruals are materially
inaccurate, we could be required to expend greater amounts than
anticipated.
The Surface Mining Control and Reclamation Act of 1977, or
SMCRA, establishes operational, reclamation and closure
standards for all aspects of surface mining as well as most
aspects of deep mining. Estimates of our total reclamation and
mine-closing liabilities are based upon permit requirements and
our engineering expertise related to these requirements. The
estimate of ultimate reclamation liability is reviewed
periodically by our management and engineers. The estimated
liability can change significantly if actual costs vary from
assumptions or if governmental regulations change significantly.
We adopted Statement of Financial Accounting Standard
No. 143, "Accounting for Asset Retirement
Obligations" ("Statement No. 143") effective
January 1, 2003. Statement No. 143 requires that
retirement obligations be recorded as a liability based on fair
value, which is calculated as the present value of the estimated
future cash flows. In estimating future cash flows, we
considered the estimated current cost of reclamation and applied
inflation rates and a third-party profit, as necessary. The
third-party profit is an estimate of the approximate markup that
would be charged by contractors for work performed on behalf of
us. The resulting estimated liability could change significantly
if actual amounts change significantly from our assumptions.
Our operations may substantially impact the environment or
cause exposure to hazardous substances, and our properties may
have significant environmental contamination, any of which could
result in material liabilities to us.
We use, and in the past have used, hazardous materials and
generate, and in the past have generated, hazardous wastes. In
addition, many of the locations that we own or operate were used
for coal mining and/or involved hazardous materials usage either
before or after we were involved with those locations. We may be
subject to claims under federal and state statutes, and/or
common law doctrines, for toxic torts, natural resource damages,
and other damages as well as the investigation and clean up of
soil, surface water, groundwater, and other media. Such claims
may arise, for example, out of current or former activities at
sites that we own or operate currently, as well as at sites that
we or predecessor entities owned or operated in the past, and at
contaminated sites that have always been owned or operated by
third parties. Our liability for such claims may be joint and
several, so that we may be held responsible for more than our
share of the remediation costs or other damages, or even for the
entire share. We have from time to time been subject to claims
arising out of contamination at our own and other facilities and
may incur such liabilities in the future.
Mining operations can also impact flows and water quality in
surface water bodies and remedial measures may be required, such
as lining of stream beds, to prevent or minimize such impacts.
We are currently involved with state environmental authorities
concerning impacts or alleged impacts of our mining operations
on water flows in several surface streams. We are studying, or
addressing, those impacts and we have not finally resolved those
matters. Many of our mining operations take place in the
vicinity of streams, and similar impacts could be asserted or
identified at other streams in the future. The costs of our
efforts at the streams we are currently addressing, and at any
other streams that may be identified in the future, could be
significant.
We maintain extensive coal slurry impoundments at a number of
our mines. Such impoundments are subject to regulation. Slurry
impoundments maintained by other coal mining operations have
been known to fail, releasing large volumes of coal slurry.
Structural failure of an impoundment can result in extensive
damage to the environment and natural resources, such as bodies
of water that the coal slurry reaches, as well as liability for
related personal injuries and property damages, and injuries to
wildlife. Some of our impoundments overlie mined out areas,
which can pose a heightened risk of failure and of damages
arising out of failure. We have commenced measures to modify our
method of
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Risk factors
operation at one surface impoundment containing slurry wastes in
order to reduce the risk of releases to the environment from it,
a process that will take several years to complete. If one of
our impoundments were to fail, we could be subject to
substantial claims for the resulting environmental contamination
and associated liability, as well as for fines and penalties.
These and other impacts that our operations may have on the
environment, as well as exposures to hazardous substances or
wastes associated with our operations and environmental
conditions at our properties, could result in costs and
liabilities that would materially and adversely affect us.
Extensive environmental regulations affect our customers and
could reduce the demand for coal as a fuel source and cause our
sales to decline.
The Clean Air Act and similar state and local laws extensively
regulate the amount of sulfur dioxide, particulate matter,
nitrogen oxides, and other compounds emitted into the air from
coke ovens and electric power plants, which are the largest
end-users of our coal. Such regulations will require significant
emissions control expenditures for many coal-fired power plants
to comply with applicable ambient air quality standards. As a
result, these generators may switch to other fuels that generate
less of these emissions, possibly reducing future demand for
coal and the construction of coal-fired power plants.
The Federal Clean Air Act, including the Clean Air Act
Amendments of 1990 and corresponding state laws that regulate
emissions of materials into the air affect coal mining
operations both directly and indirectly. Measures intended to
improve air quality that reduce coal's share of the
capacity for power generation could diminish our revenues and
harm our business, financial condition and results of
operations. The price of higher sulfur coal may decrease as more
coal-fired utility power plants install additional pollution
control equipment to comply with stricter sulfur dioxide
emission limits, which may reduce our revenues and harm our
results. In addition, regulatory initiatives including the
nitrogen oxide rules, new ozone and particulate matter
standards, regional haze regulations, new source review,
regulation of mercury emissions, and legislation or regulations
that establish restrictions on greenhouse gas emissions or
provide for other multiple pollutant reductions could make coal
a less attractive fuel to our utility customers and
substantially reduce our sales.
Various new and proposed laws and regulations may require
further reductions in emissions from coal-fired utilities. For
example, under the Clean Air Interstate Rule issued in March
2005, the U.S. Environmental Protection Agency, or EPA, has
further regulated sulfur dioxide and nitrogen oxides from
coal-fired power plants. Among other things, in affected states,
the rule mandates reductions in sulfur dioxide emissions by
approximately 45% below 2003 levels by 2010, and by
approximately 57% below 2003 levels by 2015. The stringency of
this cap may require many coal-fired sources to install
additional pollution control equipment, such as wet scrubbers.
Installation of additional pollution control equipment required
by this proposed rule could result in a decrease in the demand
for low sulfur coal (because sulfur would be removed by the new
equipment), potentially driving down prices for low sulfur coal.
In March 2005, the EPA also adopted the Clean Air Mercury Rule
to control mercury emissions from power plants, which could
require coal-fired power plants to install new pollution
controls or comply with a mandatory, declining cap on the total
mercury emissions allowed from coal-fired power plants
nationwide. These and other future standards could have the
effect of making the operation of coal-fired plants less
profitable, thereby decreasing demand for coal. The majority of
our coal supply agreements contain provisions that allow a
purchaser to terminate its contract if legislation is passed
that either restricts the use or type of coal permissible at the
purchaser's plant or results in specified increases in the
cost of coal or its use.
There have been several recent proposals in Congress, including
the Clear Skies Initiative, that are designed to further reduce
emissions of sulfur dioxide, nitrogen oxides and mercury from
power
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Risk factors
plants, and certain ones could regulate additional air
pollutants. If such initiatives are enacted into law, power
plant operators could choose fuel sources other than coal to
meet their requirements, thereby reducing the demand for coal.
A regional haze program initiated by the EPA to protect and to
improve visibility at and around national parks, national
wilderness areas and international parks restricts the
construction of new coal-fired power plants whose operation may
impair visibility at and around federally protected areas, and
may require some existing coal-fired power plants to install
additional control measures designed to limit haze-causing
emissions.
One major by-product of burning coal is carbon dioxide, which is
considered a greenhouse gas and is a major source of concern
with respect to global warming. The Kyoto Protocol to the 1992
Framework Convention on Global Climate Change, which establishes
a binding set of emission targets for greenhouse gases, became
binding on ratifying countries on February 16, 2005. Four
industrialized nations have refused to ratify the Kyoto
Protocol— Australia, Liechtenstein, Monaco and the United
States. Although the targets vary from country to country, if
the United States were to ratify the Kyoto Protocol, our nation
would be required to reduce greenhouse gas emissions to 93% of
1990 levels in a series of phased reductions from 2008 to 2012.
Future regulation of greenhouse gases in the United States could
occur pursuant to future U.S. treaty obligations, statutory
or regulatory changes under the Clean Air Act, or otherwise. The
Bush Administration has proposed a package of voluntary emission
reductions for greenhouse gases which provide for certain
incentives if targets are met. Some states, such as
Massachusetts, have already issued regulations regulating
greenhouse gas emissions from large power plants. Further, in
2002, the Conference of New England Governors and Eastern
Canadian Premiers adopted a Climate Change Action Plan, calling
for reduction in regional greenhouse emissions to 1990 levels by
2010, and a further reduction of at least 10% below 1990 levels
by 2020. Increased efforts to control greenhouse gas emissions,
including the future ratification of the Kyoto Protocol by the
United States, could result in reduced demand for our coal. See
"Environmental and other regulatory matters" for a
discussion of these and other regulations affecting our business.
RISKS RELATING TO OUR COMMON STOCK AND THIS OFFERING
Implementation of required public company corporate
governance and financial reporting practices and policies will
increase our costs, and we may be unable to provide the required
financial information in a timely and reliable manner.
Our current operations consist primarily of the assets of our
predecessor, Horizon, and the Anker and CoalQuest businesses
that we have acquired, each of which had different historical
operating, financial, accounting and other systems. Due to our
rapid growth and limited history operating our acquired
operations as an integrated business, and our internal controls
and procedures do not currently meet all the standards
applicable to public companies, including those contemplated by
Section 404 of the Sarbanes-Oxley Act of 2002, as well as
rules and regulations enacted by the Securities and Exchange
Commission and The New York Stock Exchange. Areas of deficiency
in our internal controls requiring improvement include
documentation of controls and procedures, insufficient
experience in public company accounting and periodic reporting
matters among our financial and accounting staff.
Our management may not be able to effectively and timely
implement controls and procedures that adequately respond to the
increased regulatory compliance and reporting requirements that
will be applicable to us as a public company. If we are not able
to implement the requirements of Section 404 in a timely
manner or with adequate compliance, our independent auditors may
not be able to attest to the adequacy of our internal controls
over financial reporting. This result may subject us to adverse
regulatory consequences, and there could also be a negative
reaction in the financial markets
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Risk factors
due to a loss of confidence in the reliability of our financial
statements. We could also suffer a loss of confidence in the
reliability of our financial statements if our auditors report a
material weakness in our internal controls. In addition, if we
fail to develop and maintain effective controls and procedures,
we may be unable to provide the required financial information
in a timely and reliable manner or otherwise comply with the
standards applicable to us as a public company. Any failure by
us to timely provide the required financial information could
materially and adversely impact our financial condition and the
market value of our securities.
We will incur incremental costs not reflected in our historical
financial statements as a result of these increased regulatory
compliance and reporting requirements, including increased
auditing and legal fees. We also will need to hire additional
accounting and administrative staff with experience managing
public companies. Moreover, the standards that will be
applicable to us as a public company after this offering could
make it more difficult and expensive for us to attract and
retain qualified members of our board of directors and qualified
executive officers. We also anticipate that the regulations
related to the Sarbanes-Oxley Act will make it more difficult
and more expensive for us to obtain director and officer
liability insurance, and we may be required to accept reduced
coverage or incur substantially higher costs to obtain coverage.
Our stock price may be extremely volatile, and you may not be
able to resell your shares at or above the public offering
price.
There has been significant volatility in the market price and
trading volume of equity securities, which is unrelated to the
financial performance of the companies issuing the securities.
These broad market fluctuations may negatively affect the market
price of our common stock. The public offering price for the
shares of common stock being sold in this offering will be
determined by negotiations between the representative of the
underwriters and us and may not be indicative of prices that
will prevail in the open market following this offering. You may
not be able to resell your shares at or above the public
offering price due to fluctuations in the market price of our
common stock caused by changes in our operating performance or
prospects and other factors.
Some specific factors that may have a significant effect on our
common stock market price include:
4
actual or anticipated fluctuations in our operating results or
    future prospects;
4
the public's reaction to our press releases, our other
    public announcements and our filings with the SEC;
4
strategic actions by us or our competitors, such as acquisitions
    or restructurings;
4
new laws or regulations or new interpretations of existing laws
    or regulations applicable to our business;
4
changes in accounting standards, policies, guidance,
    interpretations or principles;
4
conditions of the coal industry as a result of changes in
    financial markets or general economic conditions, including
    those resulting from war, incidents of terrorism and responses
    to such events;
4
sales of common stock by us or members of our management
    team; and
4
changes in stock market analyst recommendations or earnings
    estimates regarding our common stock, other comparable companies
    or the coal industry generally.
Prior to this offering, there has not been a public market for
our common stock. We cannot predict the extent to which investor
interest in our company will lead to the development of an
active trading market on The New York Stock Exchange or
otherwise or how liquid that market might become. If an active
trading market does not develop, you may have difficulty selling
any of our common stock that
31
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Risk factors
you buy. Consequently, you may not be able to sell our common
stock at prices equal to or greater than the price you paid in
this offering.
Anti-takeover provisions in our charter documents and
Delaware corporate law may make it difficult for our
stockholders to replace or remove our current board of directors
and could deter or delay third-parties from acquiring us, which
may adversely affect the marketability and market price of our
common stock.
Provisions in our amended and restated certificate of
incorporation and bylaws and in Delaware corporate law may make
it difficult for stockholders to change the composition of our
board of directors in any one year, and thus prevent them from
changing the composition of management. In addition, the same
provisions may make it difficult and expensive for a third-party
to pursue a tender offer, change in control or takeover attempt
that is opposed by our management and board of directors. Public
stockholders who might desire to participate in this type of
transaction may not have an opportunity to do so. These
anti-takeover provisions could substantially impede the ability
of public stockholders to benefit from a change in control or
change our management and board of directors and, as a result,
may adversely affect the marketability and market price of our
common stock.
We are also subject to the anti-takeover provisions of
Section 203 of the Delaware General Corporation Law. Under
these provisions, if anyone becomes an "interested
stockholder," we may not enter into a "business
combination" with that person for three years without
special approval, which could discourage a third party from
making a takeover offer and could delay or prevent a change of
control. For purposes of Section 203, "interested
stockholder" means, generally, someone owning more than 15%
or more of our outstanding voting stock or an affiliate of ours
that owned 15% or more of our outstanding voting stock during
the past three years, subject to certain exceptions as described
in Section 203.
Under any change of control, the lenders under our credit
facilities would have the right to require us to repay all of
our outstanding obligations under the facility.
You will incur immediate and substantial dilution as a result
of this offering.
Investors purchasing shares of our common stock in this offering
will incur immediate and substantial dilution in net tangible
book value per share because the price that new investors pay
will be substantially greater than the net tangible book value
per share of the shares acquired. This dilution is due in large
part to the fact that our existing investors paid substantially
less than the public offering price of the shares of common
stock being sold in this offering when they purchased their
shares. To the extent that we raise additional capital by
issuing equity security or shares of our common stock are issued
upon the exercise of stock options or under the restricted stock
plan we intend to adopt prior to the consummation of this
offering, investors may experience additional substantial
dilution.
There may be circumstances in which the interests of our
major stockholders could be in conflict with your interests as a
stockholder.
Funds sponsored by WLR will own
approximately           %
of our common stock on a fully consolidated basis following the
completion of the offering and after giving effect to the Anker
acquisition, assuming no exercise of the underwriters'
over-allotment option. Circumstances may occur in which WLR or
other major investors may have an interest in pursuing
acquisitions, divestitures or other transactions, including
among other things, taking advantage of certain corporate
opportunities that, in their judgment, could enhance their
investment in us or another company in which they invest. These
transactions might invoke risks to our other holders of common
stock or adversely affect us or other investors, including
investors who purchase common stock in this offering.
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Risk factors
We may from time to time engage in transactions with related
parties and affiliates that include, among other things,
business arrangements, lease arrangements for certain coal
reserves and the payment of fees or commissions for the transfer
of coal reserves by one operating company to another. These
transactions, if any, may adversely affect our sales volumes,
margins and earnings.
If our stockholders sell substantial amounts of our common
stock following this offering, the market price of our common
stock may decline.
Sales of shares of our common stock in the public market
following this offering, or the perception that these sales may
occur, could cause the market price of our common stock to
decline. After this offering, our reorganization and after
giving effect to the Anker acquisition, we will have
approximately            shares
of common stock outstanding. The number of shares of common
stock available for sale in the public market is limited by
restrictions under federal securities law and under lock-up
agreements that our directors, executive officers and certain
holders of our common stock have entered into with the
underwriters and with us. Those lock-up agreements restrict
these persons from selling, pledging or otherwise disposing of
their shares for a period of 180 days after the date of
this prospectus without the prior written consent of UBS
Securities LLC. However, UBS Securities LLC, may release all or
any portion of the common stock from the restrictions of the
lock-up agreements. These sales might make it difficult or
impossible for us to sell additional securities if we need to
raise capital. All of the shares sold in this offering, as well
as                     of
the shares to be issued by us in the reorganization to the
holders of ICG, Inc. common stock, will be freely tradable
without restrictions or further registration under the
Securities Act, except for any shares held by our affiliates, as
defined in Rule 144 of the Securities Act. The remaining
shares of common stock outstanding after this offering,
including those issued to former Anker stockholders and
CoalQuest members, will be available for sale into the public
market at various times in the future. Additional shares of
common stock underlying options to be granted will become
available for sale in the public market. We expect to file
registration statements on Form S-8 that will register up
to            shares
of common stock covering the shares of common stock to be issued
pursuant to the exercise of options expected to be granted under
our employee stock option plan.
In addition, under a registration rights agreement that we
expect to enter into with certain of our existing stockholders,
certain of our stockholders will have "demand" and
"piggyback" registration rights in connection with
future offerings of our common stock. "Demand" rights
enable the holders to demand that their shares of common stock
be registered and may require us to file a registration
statement under the Securities Act at our expense.
"Piggyback" rights require us to provide notice to the
relevant holders of our stock if we propose to register any of
our securities under the Securities Act and grant such holders
the right to include their shares in our registration statement.
We will also grant "piggyback" registration rights to
the former Anker and CoalQuest holders who will receive shares
of our common stock at the closing of the Anker acquisition. As
restrictions on resale end, our stock price could drop
significantly if the holders of these restricted shares sell
them or the market perceives they intend to sell them. These
sales may also make it more difficult for us to sell securities
in the future at a time and at a price we deem appropriate.
The requirements of being a public company may strain our
resources and distract management.
As a public company, we will be subject to the reporting
requirements of the Securities Exchange Act of 1934 and the
Sarbanes-Oxley Act. These requirements may place a strain on our
people, systems and resources. The Exchange Act requires that we
file annual, quarterly and current reports with respect to our
business and financial condition. The Sarbanes-Oxley Act
requires that we maintain effective disclosure controls and
procedures and internal controls over financial reporting. In
order to
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Risk factors
maintain and improve the effectiveness of our disclosure
controls and procedures and internal controls over financial
reporting, significant resources and management oversight will
be required. This may divert management's attention from
other business concerns. Upon consummation of this offering, our
costs will increase as a result of having to comply with the
Exchange Act, the Sarbanes-Oxley Act and The New York Stock
Exchange listing requirements, which will require us, among
other things, to establish an internal audit function. We may
not be able to do so in a timely fashion or without incurring
material costs.
We may not pay dividends for the foreseeable future.
We may retain any future earnings to support the development and
expansion of our business or make additional payments under our
credit facilities and, as a result, we may not pay cash
dividends in the foreseeable future. Our payment of any future
dividends will be at the discretion of our board of directors
after taking into account various factors, including our
financial condition, operating results, cash needs, growth plans
and the terms of any credit agreements that we may be a party to
at the time. Our credit facilities limit us from paying cash
dividends or other payments or distributions with respect to our
capital stock in excess of certain limitations. In addition, the
terms of any future credit agreement may contain similar
restrictions on our ability to pay any dividends or make any
distributions or payments with respect to our capital stock.
Accordingly, investors must rely on sales of their common stock
after price appreciation, which may never occur, as the only way
to realize their investment.
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Special note regarding forward-looking statements
This prospectus contains forward-looking statements that are not
statements of historical fact and may involve a number of risks
and uncertainties. We have used the words
"anticipate," "believe," "could,"
"estimate," "expect," "intend,"
"may," "plan," "predict,"
"project" and similar terms and phrases, including
references to assumptions, in this prospectus to identify
forward-looking statements. These forward-looking statements are
made based on expectations and beliefs concerning future events
affecting us and are subject to uncertainties and factors
relating to our operations and business environment, all of
which are difficult to predict and many of which are beyond our
control, that could cause our actual results to differ
materially from those matters expressed in or implied by these
forward-looking statements. The following factors are among
those that may cause actual results to differ materially from
our forward-looking statements:
4
market demand for coal, electricity and steel;
4
availability of qualified workers;
4
future economic or capital market conditions;
4
weather conditions or catastrophic weather-related damage;
4
our production capabilities;
4
our consummation of the reorganization and the Anker acquisition
    and the integration of these businesses;
4
the consummation of financing, acquisition or disposition
    transactions and the effect thereof on our business;
4
our plans and objectives for future operations and expansion or
    consolidation;
4
our relationships with, and other conditions affecting, our
    customers;
4
timing of reductions or increases in customer coal inventories;
4
long-term coal supply arrangements;
4
risks in coal mining;
4
unexpected maintenance and equipment failure;
4
environmental laws and regulations, including those directly
    affecting our coal mining and production, and those affecting
    our customers' coal usage;
4
competition;
4
railroad, barge, trucking and other transportation performance
    and costs;
4
employee benefits costs and labor relations issues;
4
our assumptions concerning economically recoverable coal reserve
    estimates;
4
regulatory and court decisions;
4
future legislation and changes in regulations or governmental
    policies or changes in interpretations thereof; and
4
our liquidity, results of operations and financial condition.
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Special note regarding forward-looking statements
You should keep in mind that any forward-looking statement made
by us in this prospectus speaks only as of the date on which we
make it. New risks and uncertainties arise from time to time,
and it is impossible for us to predict these events or how they
may affect us. We have no duty to, and do not intend to, update
or revise the forward-looking statements in this prospectus
after the date of this prospectus, except as may be required by
law. In light of these risks and uncertainties, you should keep
in mind that any forward-looking statement made in this
prospectus or elsewhere might not occur.
Industry data
In this prospectus, we rely on and refer to information
regarding the coal industry in the United States from the
U.S. Department of Energy, or DOE, the U.S. Energy
Information Administration, or EIA, the National Mining
Association, or NMA, the National Energy Technology Laboratory,
or NETL, the Bureau of Economic Analysis and Bloomberg L.P.
These organizations are not affiliated with us. They are not
aware of and have not consented to being named in this
prospectus. We believe that this information is reliable. In
addition, in many cases we have made statements in this
prospectus regarding our industry and our position in the
industry based on our experience in the industry and our own
investigation of market conditions. We have made determinations
based on publicly available information of production by
competitors and our internal estimates of competitors'
production based on discussions with industry participants.
Statements relating to our leadership in safety and
environmental performance are based on our receipt of numerous
awards from state and federal agencies, including awards from
the Mine Safety and Health Administration, or MSHA, the
principal federal agency regulating health and safety in the
coal mining industry, and the Office of Surface Mining, the
principal federal agency regulating environmental performance in
the coal mining industry.
Price range of common stock
The following table shows, for the quarterly periods indicated,
the high and low quotes for the shares of our common stock as
reported on the Pink Sheets Electronic Quotation Service. Prior
to this offering, there has not been a public market for our
common stock. These quotes are provided solely for informational
purposes and are not necessarily representative of trading
prices in a public trading market nor of any price at which the
shares of common stock purchased in this offering may trade in
the future. See "Risk Factors—Risks relating to our
common stock and this offering—Our stock price may be
extremely volatile and you may not be able to resell your shares
at or above the public offering price."
Stock Price Average
Average
Daily
High
Low
Volume(1)
November 15, 2004 through December 31,
    2004
(2)
$
14.50
$
7.63
673,493
Three months ended March 31, 2005
$
15.00
$
12.13
224,952
(1)
Does not include days on which there were no quotes for the
    shares of the common stock.
(2)
Quotes for the shares of our common stock were not reported
    prior to November 15, 2004.
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Use of proceeds
The net proceeds to us from the sale
of                      shares
of common stock in this offering are estimated to be
approximately
$           million,
or
$           million
if the underwriters exercise their over-allotment option in
full, based on the public offering price of
$          and
after deducting estimated underwriting discounts and commissions
and the estimated offering expenses, which are payable by us.
Under the terms of our credit facilities, we are required to use
50% of our net proceeds from this offering to repay amounts
outstanding under our term loan facility, which otherwise
matures on October 1, 2010. As of March 31, 2005,
$174.6 million was outstanding under our term loan
facility. As of March 31, 2005, amounts outstanding under
our term loan facility bore interest at a weighted average rate
of approximately 5.36%. For additional information, see
"Description of indebtedness."
We will use $174.6 million to repay all of our term loan
facility and our remaining net proceeds for general corporate
purposes. We may also use a portion of the remaining proceeds to
pursue possible acquisitions of businesses, technologies,
products or assets complementary to our business. Although we
currently have no commitments or agreements to make any
additional material acquisitions for cash, we may make
acquisitions in the future. Pending our use of any excess net
proceeds, we intend to invest the excess net proceeds of this
offering in short-term, interest-bearing investment-grade or
government securities.
Dividend policy
We have never declared or paid a dividend on our common stock.
We may retain any future earnings to support the development and
expansion of our business or make additional payments under our
credit facilities and, as a result, we may not pay cash
dividends in the foreseeable future. Our payment of any future
dividends will be at the discretion of our board of directors
after taking into account various factors, including our
financial condition, operating results, cash needs, growth plans
and the terms of any credit agreements that we may be a party to
at the time. Our credit facilities limit us from paying cash
dividends or other payments or distributions with respect to our
capital stock in excess of certain limitations. In addition, the
terms of any future credit agreement may contain similar
restrictions on our ability to pay dividends or make payments or
distributions with respect to our capital stock.
37
Table of Contents
Capitalization
The following table sets forth cash and cash equivalents and
capitalization as of December 31, 2004:
4
for ICG, Inc. on an actual basis;
4
for ICG on a pro forma basis to give effect to the Anker
    acquisition; and
4
for ICG on a pro forma, as adjusted basis, to give effect to the
    Anker acquisition and the sale by us of
    approximately                      shares
    of our common stock in this offering at an assumed public
    offering price of
    $                    ,
    the last sale price of our common stock
    on                     ,
    2005, as quoted on the Pink Sheets Electronic Quotation Service,
    after deducting underwriting discounts and estimated offering
    expenses and the application of the estimated net proceeds as
    described under "Use of proceeds."
The following table assumes no exercise of the
underwriter's over-allotment option in connection with this
offering. You should read the information in this table in
conjunction with "Unaudited consolidated pro forma
financial information," "Management's discussion
and analysis of financial condition and results of
operations," "Description of indebtedness" and
the consolidated financial statements included elsewhere in this
prospectus.
As of December 31, 2004
Pro forma, as
adjusted for
Actual
Pro forma
the offering
(unaudited)
(unaudited)
(dollars in thousands)
Cash and cash equivalents
$
23,967
$
18,359
$
Long-term debt, including current portion:
Revolving credit
    facility
(1)
—
15,957
(3)
Term loan facility
175,000
175,000
Other long-term debt, including capital leases
4,468
4,468
Total debt
$
179,468
$
195,425
$
Stockholders' equity:
Common stock, par value $0.0001 per share,
    1,800,000,000 shares authorized, 106,605,999 shares
    issued and outstanding, actual
    and            shares
    issued and outstanding, as adjusted for the offering and the
    Anker
    acquisition
(2)
11
1,376
Preferred stock, par value $0.0001 per share,
    200,000,000 shares authorized, no shares issued and
    outstanding
(2)
—
—
Paid-in-capital
150,140
440,023
Retained earnings
4,249
4,249
Total stockholders' equity
154,400
445,648
Total capitalization
$
333,868
$
641,073
$
(1)
Our credit facility provides for a $110.0 million
    revolving credit facility, of which up to $60.0 million may
    be used for letters of credit. As of December 31, 2004,
    $54.4 million of letters of credit were outstanding.
(2)
Represents stock of our predecessor, ICG, Inc. The par value
    of our common stock is $0.01 per share and the par value of
    our preferred stock is $0.01 per share.
(3)
Represents debt to be assumed in the Anker acquisition.
38
Table of Contents
Dilution
If you invest in our common stock, you will experience dilution
to the extent of the difference between the public offering
price per share you pay in this offering and the pro forma net
tangible book value per share of our common stock immediately
after this offering.
Our pro forma net tangible book value as of December 31,
2004 equaled approximately
$           million,
or
$           per
share of common stock. Pro forma net tangible book value per
share of common stock is equal to the amount of our total
tangible assets (total assets less intangible assets) less total
liabilities, divided by the total number of shares of common
stock outstanding.
On a pro forma basis, after giving effect to the sale
of                      shares
of common stock offered by us in this offering at an assumed
public offering price of
$           per
share (the last sale price of our common stock
on                     ,
2005, as quoted on the Pink Sheets Electronic Quotation Service)
and after deducting the estimated underwriting discounts and
commissions and offering expenses payable by us and the
application of the estimated net proceeds of this offering as
described under "Use of proceeds," and after giving
effect to the issuance
of                      shares
of common stock upon completion of the Anker acquisition at an
implied value of
$           per
share, our pro forma as adjusted net tangible book value, as of
December 31, 2004 would have equaled approximately
$          ,
or
$           per
share of common stock. This represents an immediate increase in
net tangible book value of
$           per
share to our existing stockholders and an immediate dilution in
net tangible book value of
$           per
share to new investors of common stock in this offering. If the
public offering price in this offering is higher or lower, the
dilution to new investors will be greater or less, respectively.
The following table illustrates this per share dilution to new
investors purchasing our common stock in this offering.
Assumed public offering price per share
$
Pro forma net tangible book value per share as of
    December 31, 2004
$
Increase in pro forma net tangible book value per share
    attributable to this offering
Net tangible book value per share after this offering
Dilution per share to new investors
$
The following table as of December 31, 2004 summarizes, on
a pro forma basis, to give effect to the shares issued in
connection with the Anker acquisition and the reorganization,
the number of shares of common stock purchased from us, the
total consideration paid to us and the average price per share
paid by the existing stockholders and by new investors. The
calculations with respect to existing stockholders include
shares that would be issued by us on the exercise of currently
outstanding options or other rights to acquire shares of our
common stock by directors, officers and affiliated parties, and
the proceeds that would be received by us in connection with
this exercise. The calculations with respect to shares purchased
by new investors in this offering reflect an assumed public
offering price of
$           per
share (the last sale price of our common stock
on                     ,
2005, as quoted on the Pink Sheets Electronic Quotation Service).
39
Table of Contents
Dilution
Shares purchased or
issuable upon the
exercise of currently
outstanding options
Total consideration
Average
price per
Number
Percent
Amount
Percent
share
Existing stockholders, directors, officers and affiliated parties
Former Anker stockholders and CoalQuest members
New investors
Total
The table and calculations above assume no exercise of
outstanding options. As
of                     ,                     2005,
shares of common stock were subject to outstanding options at a
weighted average exercise price of
$           per
share. To the extent outstanding options are exercised, there
will be further dilution to new investors.
40
Table of Contents
Unaudited consolidated pro forma financial data
The following unaudited pro forma financial data is based on the
information derived from audited consolidated financial
statements of ICG, Inc. and its subsidiaries (and its
predecessors), Anker and CoalQuest, each appearing elsewhere in
this prospectus, as adjusted to illustrate the estimated pro
forma effects of:
4
our reorganization;
4
our acquisition of the Horizon assets;
4
borrowings under our credit facilities, in part, to finance the
    Horizon asset acquisition (including the preliminary application
    of purchase accounting); and
4
the Anker acquisition.
The unaudited pro forma consolidated statements of operations
and unaudited pro forma balance sheet do not include any
adjustments for this offering or for future cost savings or
operating improvements as a result of the Anker acquisition. The
unaudited pro forma consolidated financial data should be read
in conjunction with the consolidated financial statements of
ICG, Inc. (and its predecessors), Anker and CoalQuest, and other
financial information appearing elsewhere in this prospectus,
including "Management's discussion and analysis of
financial condition and results of operations."
The unaudited pro forma balance sheet gives effect to our
reorganization, the acquisition of the Horizon assets, the
related financing and the Anker acquisition as if they had
occurred on December 31, 2004. The unaudited pro forma
statements of operations give effect to these transactions as if
they had occurred on January 1, 2004. The unaudited pro
forma consolidated statements of operations do not include any
adjustments for future cost savings or other operating
improvements. See "Risk factors," "Special note
regarding forward-looking statements," and
"Business" for a discussion of factors that may impact
consolidated future operating results.
The pro forma adjustments reflect our preliminary estimates of
the purchase price allocation of certain assets and liabilities
in the Anker acquisition. An allocation to inventory would
impact cost of coal sales subsequent to the acquisition date. An
allocation to coal reserves, property, plant and equipment, coal
supply agreements or other intangible assets would result in
additional depreciation, depletion and amortization expense
which may be significant.
The unaudited pro forma financial data is for informational
purposes only and is not intended to represent or be indicative
of the consolidated results of operations or financial position
that would have been reported had the transactions been
completed as of the dates presented, and should not be taken as
representative of future consolidated results of operations or
financial position.
41
Table of Contents
Unaudited consolidated pro forma financial data
Unaudited pro forma balance sheet data
as of December 31, 2004
ICG, Inc. Historical
Predecessor
(period
October 1,
2004 to
ICG, Inc.
Anker
CoalQuest
December 31,
Anker
CoalQuest
acquisition
acquisition
acquisition
2004)
historical
historical
adjustments
adjustments
adjustments
Pro forma
(in thousands)
ASSETS
Current assets:
Cash and cash equivalents
$
23,967
$
1,166
$
1,819
$
—
$
(8,593
)
(1)
$
—
$
18,359
Trade accounts receivable
40,417
11,361
1,238
—
—
—
53,016
Inventories
13,943
4,027
—
—
—
—
17,970
Deferred income taxes
2,188
—
—
—
—
—
2,188
Prepaid insurance
7,142
—
15
—
—
—
7,157
Prepaid expenses and other
5,899
1,457
—
—
—
—
7,356
Total current assets
$
93,556
$
18,011
$
3,072
$
—
$
(8,593
)
$
—
$
106,046
Property, plant and equipment, at cost including mineral
    interests, mine development and contract costs
$
165,079
$
134,046
$
19,000
$
—
$
23,183
(2)
$
55,091
(2)
$
396,399
Less accumulated depreciation, depletion and amortization
(7,943
)
(79,923
)
(79
)
—
—
—
(87,945
)
Net property, plant and equipment
157,136
54,123
18,921
—
23,183
55,091
308,454
Debt issuance costs, net
7,865
—
—
—
—
—
7,865
Advance royalties
5,424
3,439
—
—
—
—
8,863
Goodwill
183,946
—
—
—
148,668
(2)
43,036
(2)
375,650
Deferred tax asset non-current
7,741
—
—
—
—
—
7,741
Other non-current assets
4,307
7,798
—
—
—
—
12,105
Total assets
$
459,975
$
83,371
$
21,993
$
—
$
163,258
$
98,127
$
826,724
LIABILITIES AND STOCKHOLDERS' EQUITY/(DEFICIT)
Current liabilities
Trade accounts payable
$
21,250
$
10,281
$
546
$
—
$
—
$
—
$
32,077
Current portion of long-term debt and capital leases
6,022
10,370
—
—
(1,356
)
(1)
—
15,036
Current portion of reclamation and mine closure costs
2,682
105
—
—
—
—
2,787
Accrued income tax
2,232
—
—
—
—
—
2,232
Accrued expenses and other
33,854
8,253
535
—
—
—
42,642
Total current liabilities
$
66,040
$
29,009
$
1,081
$
—
$
(1,356
)
$
—
$
94,774
Non-current liabilities, less current portion
Long-term debt and capital leases
$
173,446
$
14,179
$
16,250
$
—
$
(7,237
)
(1)
$
(16,250
)
(3)
$
180,388
Reclamation and mine closure costs
40,616
25,169
—
—
—
—
65,785
Long-term employee benefits
18,007
—
—
—
—
—
18,007
Other non-current liabilities
7,466
13,617
1,039
—
—
—
22,122
Total non-current liabilities
239,535
52,965
17,289
—
(7,237
)
(16,250
)
286,302
Total liabilities
$
305,575
$
81,974
$
18,370
$
—
$
(8,593
)
$
(16,250
)
$
381,076
STOCKHOLDERS' EQUITY (DEFICIT):
Preferred stock-par value $0.0001, 200,000,000 shares
    authorized, none issued
—
—
—
—
—
—
—
42
Table of Contents
Unaudited consolidated pro forma financial data
ICG, Inc. Historical
Predecessor
(period
October 1,
2004 to
ICG, Inc.
Anker
CoalQuest
December 31,
Anker
CoalQuest
acquisition
acquisition
acquisition
2004)
historical
historical
adjustments
adjustments
adjustments
Pro forma
(in thousands)
Common stock-par value $0.0001, 1,800,000,000 shares
    authorized, 106,605,999 issued and outstanding (137,556,128
    issued and outstanding at a par value of $0.01 on a pro forma
    basis)
11
—
—
1,055
(4)
195
(4)
115
(4)
1,376
Paid-in Capital
150,140
145,588
3,250
(1,055
)
(4)
27,465
(2,4)
114,635
(2,3,4)
440,023
Comprehensive Income
—
—
Retained earnings (deficit)
4,249
(144,191
)
373
144,191
(3)
(373
)
(3)
4,249
Total stockholders' equity (members' deficit)
154,400
1,397
3,623
—
171,851
114,377
445,648
Total liabilities and stockholders' equity (members'
    deficit)
$
459,975
$
83,371
$
21,993
$
—
$
163,258
$
98,127
$
826,724
(1)
Reflects the repayment of Anker's senior notes
    ($7.0 million) and the payment of the worker's
    compensation premium to the state of West Virginia
    ($1.5 million).
(2)
Reflects the assumed issuance of 30,950,129 additional shares
    of common stock at an assumed $8.885 per share for the
    acquisitions of Anker ($173.25 million) and CoalQuest
    ($101.75 million) for a total of $275.0 million.
(3)
Reflects the conversion of CoalQuest's note payable
    ($16.3 million) to equity upon consummation of the Anker
    acquisition.
(4)
Reflects the change in par value from $0.0001 per share to
    $0.01 per share upon the effective date of this offering.
43
Table of Contents
Unaudited consolidated pro forma financial data
Unaudited pro forma statement of operations data
for the year ended December 31, 2004
Historical
Horizon
ICG, Inc.
Predecessor
Predecessor
(period
(period
January 1,
October 1,
2004 to
2004 to
Horizon
Anker
CoalQuest
September 30,
December 31,
Anker
CoalQuest
acquisition
acquisition
acquisition
2004)
2004)
historical
historical
adjustments
adjustments
adjustments
Pro forma
(dollars in thousands)
Revenues
Coal sales revenues
$
346,981
$
130,463
$
146,676
$
—
$
—
$
—
$
—
$
624,120
Freight and handling revenues
3,700
880
11,416
15,996
Other revenues
22,702
4,766
6,228
—
—
—
—
33,696
Total revenues
373,383
136,109
164,320
—
—
—
—
673,812
Costs and expenses
Freight and handling costs
3,700
880
11,416
—
—
—
—
15,996
Cost of coal sales and other revenues (exclusive of
    depreciation, depletion and amortization shown separately below)
306,429
113,707
145,985
371
—
(1,769
)
(1)
—
564,723
Depreciation, depletion and amortization
27,547
7,943
9,754
79
—
—
—
45,323
Selling, general and administrative (exclusive of depreciation,
    depletion and amortization shown separately above)
8,477
4,194
3,654
—
—
—
17,257
Gain on sale of assets
(226
)
(10
)
—
—
—
—
—
(236
)
Writedowns and other items
10,018
—
—
—
(10,158
)
(2)
—
—
(140
)
Total costs and expenses
355,945
126,714
170,809
450
(10,158
)
(1,769
)
—
642,923
Income (loss) from operations
17,438
9,395
(6,489
)
(450
)
10,158
1,769
—
30,889
Interest and other income (expense):
Interest expense
(114,211
)
(3,453
)
(1,485
)
(535
)
105,336
(3)
—
—
(14,348
)
Reorganization items
727
(727
)
(4)
—
—
Other, net
1,581
898
5,709
1,910
—
—
(1,769
)
(1)
8,329
Total interest and other income (expense)
(111,903
)
(2,555
)
4,224
1,375
104,609
—
(1,769
)
(6,019
)
Income (loss) before income taxes
(94,465
)
6,840
(2,265
)
925
114,767
1,769
(1,769
)
24,870
Income tax (expense) benefit
—
(2,591
)
—
—
(7,690
)
(5)
188
(5)
320
(5)
(9,421
)
Net income (loss)
$
(94,465
)
$
4,249
$
(2,265
)
$
925
$
107,077
$
1,957
$
(1,449
)
$
15,449
(footnotes on next page)
44
Table of Contents
Unaudited consolidated pro forma financial data
(1)     To eliminate intercompany
royalty revenue and expense ($1.8 million) between
CoalQuest and Anker.
(2)     Reflects the removal of
writedowns and other items related to the bankruptcy
reorganization during the predecessor period January 1,
2004 to September 30, 2004.
(3)     Represents pro forma
interest expense to reflect the acquisition of Horizon's
assets and the related debt required to finance the purchase as
shown in the tables below.
Historical interest expense
Horizon
ICG, Inc.
(Period Jan. 1,
(Period
2004 to
Oct. 1, 2004
Sep. 30,
to Dec. 31,
Description
2004)
2004)
Anker
CoalQuest
Total
Amortization of financing fee
$
1,437,278
$
—
$
—
$
—
$
1,437,278
DIP facility
11,114,618
—
—
—
11,114,618
Term loan
42,757,312
—
—
—
42,757,312
Wells Fargo loan
57,199,570
—
—
—
57,199,570
Funded letter of credit fees
—
130,278
—
—
130,278
Revolver letter of credit fees
—
248,351
—
—
248,351
Revolver unutilized portion
—
63,666
—
—
63,666
Term note
—
2,462,985
2,462,985
Amortization of finance cost
—
265,878
—
—
265,878
Annual administration fee
—
25,000
—
—
25,000
Interest rate cap
20,427
—
—
20,427
Revolver base rate interest
24,863
—
—
24,863
Anker related party term loan
—
—
294,215
—
294,215
Anker related party revolving line of credit
—
—
110,311
—
110,311
Anker senior notes
—
—
751,469
—
751,469
Miscellaneous other (capital lease, black lung, etc)
1,701,814
211,375
329,486
535,200
2,777,875
Total historical interest expense
$
114,210,592
$
3,452,822
$
1,485,481
$
535,200
$
119,684,095
45
Table of Contents
Unaudited consolidated pro forma financial data
Pro forma interest expense
Horizon
ICG, Inc.
Anker
CoalQuest
Total
Description
Revolver letter of credit fees(a)
$
—
$
1,469,475
$
—
$
—
$
1,469,475
Revolver(b)
—
756,353
—
—
756,353
Revolver unutilized portion(c)
—
198,091
—
—
198,091
Term note(d)
—
8,732,500
—
—
8,732,500
Amortization of finance costs(e)
—
1,096,553
—
—
1,096,553
Annual administration fee(f)
—
100,000
—
—
100,000
Interest rate cap(g)
—
82,187
—
—
82,187
Miscellaneous other (capital leases, black lung, etc.)
1,701,814
211,375
—
—
1,913,189
Total pro forma interest expense
1,701,814
12,646,534
—
—
14,348,348
Less: historical interest expense
114,210,592
3,452,822
1,485,481
535,200
119,684,095
Pro forma interest expense adjustment
$
112,508,778
$
(9,193,712
)
$
1,485,481
$
535,200
$
105,335,747
(a)
Reflects pro forma interest expense at the fixed rate of 2.7%
    on $54.4 million estimated letters of credit outstanding
    under the revolving letter of credit facility.
(b)
Reflects pro forma interest expense on the revolver at an
    estimated rate of 4.74% on an estimated average balance of
    $16.0 million.
(c)
Reflects pro forma interest expense at the fixed rate of 0.5%
    on an estimated unutilized balance of $39.6 million on the
    revolving facility.
(d)
Reflects pro forma interest expense at the actual
    December 31, 2004 rate of 4.99% on the $175 million
    term note. The term note utilizes LIBOR rate and is adjusted
    quarterly.
(e)
Reflects amortization of finance costs of $8.1 million
    at a nominal rate of 8.118% for 72 months.
(f)
Reflects the quarterly administration fee of $25,000 per
    quarter to UBS AG, Stamford Branch.
(g)
Reflects the estimated expense incurred on the two year
    interest rate cap agreement of $88 million at 4.5% per
    year.
A hypothetical 1/8% change in interest rates on our variable
rate debt would cause pro forma interest expense to increase
$239,031 for the year ended December 31, 2004.
(4)     Reflects the removal of
reorganization expenses incurred in the predecessor period
January 1, 2004 to September 30, 2004 that were
related to the Horizon bankruptcy filing.
(5)     Reflects the federal and
state tax effects on the combined historical net income and pro
forma adjustments assuming an estimated average tax rate at
December 31, 2004 of 37.88%.
46
Table of Contents
Selected historical consolidated financial data of ICG
ICG is a recently formed holding company which does not have any
independent external operations, assets or liabilities, other
than through its operating subsidiaries. Prior to the
acquisition of certain assets of Horizon as of
September 30, 2004, ICG, Inc. did not have any material
assets, liabilities or results of operations. The selected
historical consolidated financial data as of and for the year
ended December 31, 2004 are derived from ICG, Inc.'s
audited consolidated statement of operations for the period
October 1, 2004 to December 31, 2004 and the
predecessor audited consolidated financial data as of and for
the nine months ended September 30, 2004, which have been
audited by Deloitte & Touche LLP, an independent
registered public accounting firm and are included elsewhere in
the prospectus. The selected historical consolidated financial
data as of and for the year ended December 31, 2003 and the
period from May 10, 2002 to December 31, 2002 have
been derived from the audited consolidated statement of
operations of Horizon, the predecessor to ICG, which have been
audited by Deloitte & Touche LLP and which are included
elsewhere in the prospectus and from the audited consolidated
balance sheet of Horizon as of December 31, 2002, which has
been audited by Deloitte & Touche LLP and which is not
included in this prospectus. The selected historical
consolidated data for the period as of and for the years ended
December 31, 2001 and 2000 were derived from the audited
consolidated financial statements of AEI Resources, the
predecessor to Horizon, which were audited by Arthur Andersen
LLP, in the case of the financial data for the years ended
December 31, 2000 and 2001 and which are not included in
this prospectus. The statement of operations of AEI Resources,
the predecessor of Horizon, for the period January 1, 2002
to May 9, 2002, included elsewhere in this prospectus, has
been audited by Deloitte & Touche LLP. In the
opinion of management, the financial data reflect all
adjustments, consisting of all normal and recurring adjustments,
necessary for a fair presentation of the results for those
periods. The results of operations for interim periods are not
necessarily indicative of the results to be expected for the
full year or for any future period. The financial statements for
the predecessor periods have been prepared on a
"carve-out" basis to include the assets, liabilities
and results of operations of ICG, Inc. that were previously
included on the consolidated financial statements of Horizon.
The financial statements for the predecessor periods include
allocations of certain expenses, taxation charges, interest and
cash balances relating to the predecessor based on
management's estimates. The predecessor financial
information is not necessarily indicative of the consolidated
financial position, results of operations and cash flows of ICG
if it had operated during the predecessor periods presented.
You should read the following data in conjunction with
"Management's discussion and analysis of financial
condition and results of operations" and with the financial
information included elsewhere in this prospectus, including the
consolidated financial statements of ICG and Horizon (and its
predecessor) and the related notes thereto.
47
Table of Contents
Selected historical consolidated financial data of ICG
AEI RESOURCES
HORIZON
Predecessor to Horizon
Predecessor to ICG, Inc.
ICG, Inc.
Period from
Period from
Period
Period
Year ended
Year ended
January 1, 2002 to
May 10, 2002 to
Year ended
January 1, 2004 to
October 1, 2004 to
December 31, 2000*
December 31, 2001*
May 9, 2002
December 31, 2002
December 31, 2003
September 30, 2004
December 31, 2004
(in thousands, except share data)
Statement of Operations Data:
Revenues:
Coal sales revenues
$
486,848
$
500,829
$
136,040
$
264,235
$
441,291
$
346,981
$
130,463
Freight and handling revenues
11,050
14,728
2,947
6,032
8,008
3,700
880
Other revenues
23,491
34,835
21,183
27,397
31,771
22,702
4,766
Total revenues
521,389
550,392
160,170
297,664
481,070
373,383
136,109
Cost and expenses:
Freight and handling costs
11,050
14,728
2,947
6,032
8,008
3,700
880
Cost of coal sales and other revenues (exclusive of
    depreciation, depletion and amortization shown separately below)
409,536
379,333
114,767
251,361
400,652
306,429
113,707
Depreciation, depletion and amortization
94,183
92,602
32,316
40,033
52,254
27,547
7,943
Selling, general and administrative (exclusive of depreciation,
    depletion and amortization shown separately above)
20,364
19,324
9,677
16,695
23,350
8,477
4,194
(Gain)/loss on sale of assets
(594
)
189
(93
)
(39
)
(4,320
)
(226
)
(10
)
Writedowns and special items
12,306
20,218
8,323
729,953
9,100
10,018
—
Total costs and expenses
546,845
526,394
167,937
1,044,035
489,044
355,945
126,714
Income (loss) from operations
(25,456
)
23,998
(7,767
)
(746,371
)
(7,974
)
17,438
9,395
Other income (expense)
Interest expense
(116,319
)
(138,655
)
(36,666
)
(80,405
)
(145,892
)
(114,211
)
(3,453
)
Reorganization items
(429,751
)
(22,839
)
1,567,689
(143,663
)
(52,784
)
727
Other, net
(1,523
)
(2,941
)
499
1,256
187
1,581
898
Total interest and other income (expense)
(547,593
)
(164,435
)
1,531,522
(222,812
)
(198,489
)
(111,903
)
(2,555
)
Income (loss) before income taxes
(573,049
)
(140,437
)
1,523,755
(969,183
)
(206,463
)
(94,465
)
6,840
Income tax expense (benefit)
48,290
(4,155
)
—
—
—
—
(2,591
)
Net income (loss)
$
(524,759
)
$
(144,592
)
$
1,523,755
$
(969,183
)
$
(206,463
)
$
(94,465
)
$
4,249
Earnings (loss) per
    share
(1)
:
Basic
—
—
—
—
—
—
0.04
Diluted
—
—
—
—
—
—
0.04
Average common shares outstanding
(1)
:
Basic
—
—
—
—
—
—
106,605,999
Diluted
—
—
—
—
—
—
106,605,999
Balance sheet data (at period end):
Cash and cash equivalents
$
55,513
$
64,592
$
87,278
$
114
$
859
$
—
$
23,967
Total assets
881,847
859,084
1,521,318
484,212
407,064
370,298
459,975
Long term debt and capital leases
14
—
933,106
1,157
315
29
173,446
Total liabilities
1,451,796
1,581,346
1,286,318
1,222,218
1,351,393
1,409,092
305,575
Total stockholders' equity (members deficit)
$
(569,949
)
$
(722,262
)
$
235,000
$
(738,006
)
$
(944,329
)
$
(1,038,794
)
$
154,400
Total liabilities and stockholders' equity (members deficit)
$
881,847
$
859,084
$
1,521,318
$
484,212
$
407,064
$
370,298
$
459,975
Statement of cash flows data:
Net cash provided by (used in):
Operating activities
$
—
$
106,060
$
(298,196
)
$
76,372
$
17,753
$
34,057
$
30,209
Investing activities
$
—
$
(88,434
)
$
(10,841
)
$
(12,799
)
$
(1,549
)
$
(2,535
)
$
(329,166
)
Financing activities
$
—
$
(8,547
)
$
259,011
$
(78,025
)
$
(15,459
)
$
(32,381
)
$
322,924
Capital expenditures
$
24,143
$
34,254
$
10,963
$
13,435
$
16,937
$
6,624
$
5,583
*
The selected historical financial data of AEI Resources for
    the year ended December 31, 2000 and the year ended
    December 31, 2001 is not derived from audited financial
    statements.
(1)
Earnings per share data and average shares outstanding are
    not presented for the period from January 1, 2002 to
    May 9, 2002, the period from May 10, 2002 to
    December 31, 2002, the year ended December 31, 2003
    and the period from January 1, 2004 to September 30,
    2004 because they were prepared on a carve-out basis.
48
Table of Contents
Selected historical consolidated financial data of Anker and
CoalQuest
The following table presents the selected historical
consolidated financial data for Anker and CoalQuest. The
selected historical consolidated financial data for the year
ended December 31, 2004 have been derived from the audited
consolidated financial statements of Anker and CoalQuest,
respectively, each of which have been audited by
Deloitte & Touche LLP, an independent registered public
accounting firm.
You should read the following data in conjunction with
"Management's discussion and analysis of financial
condition and results of operations" and with the financial
information included elsewhere in this prospectus, including the
audited consolidated financial statements of Anker and CoalQuest
and related notes thereto.
Year ended December 31, 2004
Anker
CoalQuest
Statement of operations data:
Net income (loss)
$
(3,196,973
)
$
925,553
Balance sheet data (at period end):
Cash and cash equivalents
$
1,165,559
$
1,818,833
Total assets
83,370,701
21,993,658
Total liabilities
81,973,367
18,370,242
Total stockholders' equity (members' deficit)
$
1,397,334
$
3,623,416
Total liabilities and stockholders' equity/members'
    deficit
$
83,370,701
$
21,993,658
Statement of cash flows data:
Net cash provided by (used in)
Operating activities
$
10,149,401
$
1,318,103
Investing activities
$
(27,086,561
)
$
—
Financing activities
$
14,925,969
$
—
Capital expenditures
$
27,238,311
$
—
49
Table of Contents
Management's discussion and analysis of financial condition
and results of operations
The following discussion contains forward-looking statements
that include numerous risks and uncertainties. Actual results
could differ materially from those discussed in the
forward-looking statements as a result of these risks and
uncertainties, including those set forth in this prospectus
under "Special note regarding forward-looking
statements" and under "Risk factors." You should
read the following discussion in conjunction with "Selected
historical consolidated financial data of ICG," and audited
consolidated financial statements and notes of ICG, Inc. and the
audited consolidated financial statements and notes of Horizon
and its predecessors, each appearing elsewhere in this
prospectus.
Unless otherwise indicated, for purposes of the following
management's discussion and analysis of ICG, Inc.'s
financial condition and results of operations, all references to
"ICG," "we," "our" and
"us" refer only to ICG, Inc. and its consolidated
subsidiaries, without Anker and CoalQuest, but assuming the
reorganization.
OVERVIEW
The company was formed by WLR and other investors in May 2004 to
acquire and operate competitive coal mining facilities. Through
the acquisition of key assets from the Horizon bankruptcy
estate, the WLR investor group was able to target properties
strategically located in Appalachia and the Illinois Basin with
high quality reserves that are union free, have limited
reclamation liabilities and are substantially free of legacy
liabilities. Due to our initial capitalization, we were able to
complete the acquisition without significantly increasing our
level of indebtedness. Following this offering, we expect to
retire substantially all of our long term debt and, thus, will
be strategically well-positioned. Consistent with the WLR
investor group's strategy to acquire profitable coal
assets, the Anker acquisition further diversifies our reserves.
We produce, process and sell steam coal from five regional
business units, which, as of December 31, 2004 were
supported by five active underground mines, seven active surface
mines and three preparation plants located throughout West
Virginia, Kentucky and Illinois. We also broker coal produced by
others; the majority of which is shipped directly from the third
party producer to the ultimate customer. Our sales of steam coal
were made to large utilities and industrial customers in the
Eastern region of the United States.
In addition, we generate other revenues from the manufacture and
operation of highwall mining systems, parts sales and shop
services relating to those systems and coal handling and
processing fees. We also generate revenue when we are reimbursed
by our customers for freight and handling charges. However,
these freight and handling revenues are offset by equivalent
freight and handling costs and do not contribute to our
profitability.
Revenues are recognized on coal sales in accordance with the
terms of the sales agreement, which is when the coal is shipped
to the customer and title has passed. Freight and handling costs
paid directly to third-party carriers and invoiced to coal
customers are recorded as freight and handling costs and freight
and handling revenues, respectively. Other revenues are
recognized in the period earned or when the service is
completed. Advance payments received are deferred and recognized
in revenue as coal is shipped or rentals are earned.
Our primary expenses are wages and benefits, repair and
maintenance expenditures, diesel fuel purchases, blasting
supplies, coal transportation costs, cost of purchased coal,
royalties, freight and handling costs and taxes incurred in
selling our coal.
We have one reportable segment, coal mining operations, which
includes all of our revenues and costs from coal production and
sales, operations parts and shop services related to highwall
mining systems,
50
Table of Contents
Management's discussion and analysis of financial
condition and results of operations
freight and handling, rentals, royalties and coal handling and
processing services. We report the revenues from the operation
of highwall mining systems and coal handling and processing in
our other revenues category.
CERTAIN TRENDS AND ECONOMIC FACTORS AFFECTING THE COAL
INDUSTRY
Our revenues depend on the price at which we are able to sell
our coal. The current pricing environment for U.S. coal is
strong. Any decrease in coal prices due to, among other reasons,
the supply of domestic and foreign coal, the demand for
electricity and the price and availability of alternative fuels
for electricity generation could adversely affect our revenues
and our ability to generate cash flows. In addition, our results
of operations depend on the cost of coal production. We are
experiencing increased operating costs for fuel and explosives,
steel products, health care and contract labor. We expect to
experience higher costs for surety bonds and letters of credit.
In addition, historically low interest rates have had a negative
impact on expenses related to our actuarially determined
employee-related liabilities.
For additional information regarding some of the risks and
uncertainties that affect our business and the industry in which
we operate, and that apply to an investment in our common stock,
see "Risk factors."
CRITICAL ACCOUNTING ESTIMATES
Our financial statements are prepared in accordance with
accounting principles that are generally accepted in the United
States. The preparation of these financial statements requires
management to make estimates and judgments that affect the
reported amount of assets, liabilities, revenues and expenses as
well as the disclosure of contingent assets and liabilities.
Management evaluates its estimates on an on-going basis.
Management bases its estimates and judgments on historical
experience and other factors that are believed to be reasonable
under the circumstances. Actual results may differ from the
estimates used. Note 2 to our audited consolidated
financial statements provides a description of all significant
accounting policies. We believe that of these significant
accounting policies, the following may involve a higher degree
of judgment or complexity.
Reclamation
Our asset retirement obligations arise from the federal Surface
Mining Control and Reclamation Act of 1977 and similar state
statutes, which require that mine property be restored in
accordance with specified standards and an approved reclamation
plan. Significant reclamation activities include reclaiming
refuse and slurry ponds, reclaiming the pit and support acreage
at surface mines, and sealing portals at deep mines. We account
for the costs of our reclamation activities in accordance with
the provisions of SFAS No. 143, "Accounting for
Asset Retirement Obligations." We determine the future cash
flows necessary to satisfy our reclamation obligations on a
mine-by-mine basis based upon current permit requirements and
various estimates and assumptions, including estimates of
disturbed acreage, cost estimates, and assumptions regarding
productivity. Estimates of disturbed acreage are determined
based on approved mining plans and related engineering data.
Cost estimates are based upon third-party costs. Productivity
assumptions are based on historical experience with the
equipment that is expected to be utilized in the reclamation
activities. In accordance with the provisions of
SFAS No. 143, we determine the fair value of our asset
retirement obligations. In order to determine fair value, we
must also estimate a discount rate and third-party margin. Each
is discussed further below:
4
Discount rate.
SFAS No. 143 requires that asset
    retirement obligations be recorded at fair value. In accordance
    with the provisions of SFAS No. 143, we utilize
    discounted cash flow techniques to estimate the fair value of
    our obligations. We base our discount rate on the rates of
    treasury bonds with maturities similar to expected mine lives,
    adjusted for our credit standing.
51
Table of Contents
Management's discussion and analysis of financial
condition and results of operations
4
Third-party margin.
SFAS No. 143 requires the
    measurement of an obligation to be based upon the amount a
    third-party would demand to assume the obligation. Because we
    plan to perform a significant amount of the reclamation
    activities with internal resources, a third-party margin was
    added to the estimated costs of these activities. This margin
    was estimated based upon our historical experience with
    contractors performing certain types of reclamation activities.
    The inclusion of this margin will result in a recorded
    obligation that is greater than our estimates of our cost to
    perform the reclamation activities. If our cost estimates are
    accurate, the excess of the recorded obligation over the cost
    incurred to perform the work will be recorded as a gain at the
    time that reclamation work is completed.
On at least an annual basis, we review our entire reclamation
liability and make necessary adjustments for permit changes as
granted by state authorities, additional costs resulting from
accelerated mine closures and revisions to cost estimates and
productivity assumptions to reflect current experience. At
December 31, 2004, we had recorded asset retirement
obligation liabilities of $43.3 million, including amounts
reported as current liabilities. While the precise amount of
these future costs cannot be determined with certainty, as of
December 31, 2004, we estimate that the aggregate
undiscounted cost of final mine closure is approximately
$59.0 million.
Coal reserves
There are numerous uncertainties inherent in estimating
quantities of economically recoverable coal reserves. Many of
these uncertainties are beyond our control. As a result,
estimates of economically recoverable coal reserves are by their
nature uncertain. Information about our reserves consists of
estimates based on engineering, economic and geological data
assembled by our internal engineers and geologists and reviewed
by a third-party consultant. We believe that the most important
factors and assumptions that impact economically recoverable
reserve estimates are:
4
geological conditions;
4
historical production from the area compared with production
    from other producing areas;
4
the assumed effects of regulations and taxes by governmental
    agencies;
4
assumptions governing future demand and prices; and
4
assumptions regarding future operating costs.
Each of these factors may in fact vary considerably from the
assumptions used in estimating reserves. For these reasons,
estimates of the economically recoverable quantities of coal
attributable to a particular group of properties, and
classifications of these reserves based on risk of recovery and
estimates of future net cash flows, may vary substantially.
Actual production, revenues and expenditures with respect to
reserves will likely vary from estimates, and these variances
may be material.
Post-retirement medical benefits
All of our subsidiaries have long and short-term liabilities for
post-retirement benefit cost obligations. Detailed information
related to these liabilities is included in the notes to our
consolidated financial statements included elsewhere in this
prospectus. Liabilities for post-retirement benefits are not
funded. The liability is actuarially determined, and we use
various actuarial assumptions, including the discount rate and
future cost trends, to estimate the costs and obligations for
post-retirement benefits. The discount rate assumption reflects
the rates available on high quality fixed income debt
instruments. The discount rate used to determine the net
periodic benefit cost for post-retirement medical benefits was
5.75% for the year ended December 31, 2004. We make
assumptions related to future trends for medical care costs in
the estimates of retiree health care and work-related injury and
illness obligations. If our assumptions do not materialize as
expected, actual cash expenditures and costs that
52
Table of Contents
Management's discussion and analysis of financial
condition and results of operations
we incur could differ materially from our current estimates.
Moreover, regulatory changes could increase our requirement to
satisfy these or additional obligations.
Workers' compensation
Workers' compensation is a system by which individuals who
sustain personal injuries due to job-related accidents are
compensated for their disabilities, medical costs and on some
occasions, for the costs of their rehabilitation, and by which
the survivors of workers who suffer fatal injuries receive
compensation for lost financial support. The workers'
compensation laws are administered by state agencies with each
state having its own set of rules and regulations regarding
compensation that is owed to an employee who is injured in the
course of employment. Our operations are covered through a
combination of participation in a state run program and
insurance policies. Our estimates of these costs are adjusted
based upon actuarial studies. Actual losses may differ from
these estimates, which could increase or decrease our costs.
Coal workers' pneumoconiosis
We are responsible under various federal statutes, and various
states' statutes, for the payment of medical and disability
benefits to eligible employees resulting from occurrences of
coal workers' pneumoconiosis disease (black lung). Our
operations are covered through a combination of a self-insurance
program, in which we are a participant in a state run program,
and an insurance policy. We accrue for any self-insured
liability by recognizing costs when it is probable that a
covered liability has been incurred and the cost can be
reasonably estimated. Our estimates of these costs are adjusted
based upon actuarial studies. Actual losses may differ from
these estimates, which could increase or decrease our costs.
Income taxes
We account for income taxes in accordance with
SFAS No. 109, "Accounting for Income Taxes,"
which requires the recognition of deferred tax assets and
liabilities using enacted tax rates for the effect of temporary
differences between the book and tax bases of recorded assets
and liabilities. SFAS No. 109 also requires that
deferred tax assets be reduced by a valuation allowance if it is
more likely than not that some portion or all of the deferred
tax asset will not be realized. In evaluating the need for a
valuation allowance, we take into account various factors
including the expected level of future taxable income and
available tax planning strategies. If future taxable income is
lower than expected or if expected tax planning strategies are
not available as anticipated, we may record a change to the
valuation allowance through income tax expense in the period the
determination is made.
RESULTS OF CONTINUING OPERATIONS
Basis of presentation
Certain assets of Horizon and its subsidiaries were acquired by
ICG, Inc. as of September 30, 2004. The remaining Horizon
assets and all of its liabilities were transferred to A.T.
Massey Coal Company, Inc. and Lexington Coal Company. Due to the
change in ownership, and the resultant application of purchase
accounting, the historical financial statements of Horizon and
ICG, Inc. included in this prospectus have been prepared on
different bases for the periods presented and are not
comparable. In May 2002, Horizon, formerly operating as AEI
Resources, was reorganized.
The following provides a description of the basis of
presentation during all periods presented:
Successor
— ICG was formed on March 31, 2005 as
a holding company in order to effect the reorganization and the
Anker acquisition.
Predecessors
— Represents the consolidated financial
position of ICG, Inc. as of December 31, 2004 and its
consolidated results of operations and cash flows for the period
from October 1 through
53
Table of Contents
Management's discussion and analysis of financial
condition and results of operations
December 31, 2004 and the consolidated financial position
(at the end of the period), results of operations and cash flows
for AEI Resources for the period January 1, 2002 to
May 9, 2002 and for Horizon for the period May 10,
2002 to December 31, 2002, the year ended December 31,
2003 and for the period January 1 through
September 30, 2004. ICG, Inc. had no material assets,
liabilities or results of operations until the acquisition of
certain assets from Horizon as of September 30, 2004. ICG,
Inc.'s consolidated financial position at December 31,
2004 and its consolidated results of operations for the period
ending December 31, 2004 reflect the purchase price
allocation partially based on appraisals prepared by independent
valuation specialists and employee benefit valuations prepared
by independent actuaries. The application of purchase accounting
to the acquired assets of Horizon resulted in increases to coal
inventories and the asset arising from recognition of asset
retirement obligations. It also resulted in increases to plant
and equipment, coal supply agreements and goodwill and a
decrease in deferred taxes. With regard to consolidated results
of operations for the three month operating period ended
December 31, 2004, the principal effects of the application
of purchase accounting, in comparison to reporting for
historical periods, were to increase the net cost of coal sold
by $1.4 million due to the revaluation of coal inventories
to market price as required by purchase accounting.
The financial statements for the predecessor periods of Horizon
and AEI have been prepared on a "carve-out" basis to
include the assets, liabilities and results of operations of
ICG, Inc. that were previously included in the consolidated
financial statements of Horizon. The financial statements for
the Horizon predecessor periods include allocations of certain
expenses, taxation charges, interest and cash balances relating
to Horizon based on management's estimates. The Horizon
predecessor financial information is not necessarily indicative
of the consolidated financial position, results of operations
and cash flows of ICG, Inc. if it had operated during the
predecessor period presented.
Three months ended December 31, 2003 of Horizon compared
to three months ended December 31, 2004 of ICG, Inc.
Revenues
Horizon
ICG, Inc.
Three months ended
December 31,
Increase
(decrease)
2003
2004
($ or tons)
% change
(in thousands, except percentages and per ton data)
Coal revenues
$
111,428
$
130,463
$
19,305
17%
Freight and handling revenues
1,221
880
(341
)
(28%
)
Other revenues
6,398
4,766
(1,632
)
(26%
)
Total revenues
$
119,047
$
136,109
$
17,062
14%
Tons sold
3,855
3,582
(273
)
(7%
)
Coal sales realization per ton sold
$
28.90
$
36.42
$
7.52
26%
Coal revenues.
ICG, Inc.'s coal revenues increased
in the last three months of 2004 by $19.3 million, or 17%,
to $130.5 million, as compared to the last three months of
2003 for Horizon. This increase was due to a $7.52 per ton
increase in the average sales price of our coal, partially
offset by a sales tons decrease of 0.3 million tons, or 7%,
over the comparable period last year. The increase in the
average sales price of our coal was due to the general increase
in coal prices during the period as well as the favorable
renegotiations of coal sales contracts as a result of
Horizon's Chapter 11 bankruptcy.
Freight and handling revenues.
Freight and handling
revenues decreased to $0.9 million for the period ended
December 31, 2004 for ICG, Inc. a decrease of
$0.3 million compared to the period ended December 31,
2003 for Horizon, due to a decrease in shipments where we pay
the freight and handling costs and are then reimbursed by the
customer.
54
Table of Contents
Management's discussion and analysis of financial
condition and results of operations
Other revenues.
Other revenues of ICG, Inc. decreased for
the last three months of 2004 by $1.6 million, or 26%, to
$4.8 million, as compared to the last three months of 2003
for Horizon, primarily due to a $1.4 million decrease in
highwall miner lease revenue.
Costs and expenses
Horizon
ICG, Inc.
Three months ended
December 31,
Increase
(decrease)
2003
2004
($ or tons)
% change
(in thousands, except percentages and per ton data)
Cost of coal sales and other revenues (exclusive of
    depreciation, depletion and amortization)
$
100,267
$
113,707
$
13,440
13%
Cost of coal sales and other revenues as % of revenues
84
%
84
%
Freight and handling costs
$
1,221
$
880
$
(341
)
(28%
)
Freight and handling costs as % of revenues
1
%
1
%
Depreciation, depletion and amortization
$
13,230
$
7,943
$
(5,287
)
(40%
)
Depreciation, depletion and amortization as % of revenues
11
%
6
%
Selling, general and administrative expenses (exclusive of
    depreciation, depletion and amortization)
$
4,873
$
4,194
$
(679
)
(14%
)
Selling, general and administrative expenses as % of
    revenues
4
%
3
%
Gain on sale of assets
$
(2,260
)
$
(10
)
$
2,250
(100%
)
Writedowns and other items
$
203
$
—
$
(203
)
(100%
)
Total costs and expenses
$
117,534
$
126,714
$
9,180
8%
Total costs and expenses as % of revenues
99
%
93
%
Cost of coal sales per ton sold
$
30.49
$
35.38
$
4.89
16%
Cost of coal sales and other revenues.
In the last three
months of 2004, ICG, Inc.'s cost of coal sales, which
excludes charges for depreciation, depletion and amortization,
increased $13.4 million, or 13%, to $113.7 million
compared to the last three months of 2003 for Horizon. ICG,
Inc.'s cost of coal sales increased primarily as a result
of increased prices for steel-related mine supplies, escalating
diesel fuel costs ($1.9 million), increasing costs for
repair and maintenance of an aging equipment fleet
($2.8 million), increased coal trucking costs
($2.7 million) and increased variable sales-related costs
($2.2 million), such as royalties and severance taxes
related to increased sale realizations. The average cost per ton
sold increased 16% from $30.49 per ton in the last three
months of 2003 to $35.38 per ton in the last three months
of 2004. ICG, Inc.'s cost of coal sales as a percentage of
coal revenues remained constant at 84% for the last three months
of both 2003 and 2004.
Freight and handling costs.
Freight and handling costs
decreased $0.3 million to $0.9 million during the last
three months of 2004 as compared to the last three months of
2003, mainly due to the decrease in shipments where we initially
pay the freight and handling costs and are then reimbursed by
the customer.
Depreciation, depletion and amortization.
Depreciation,
depletion, and amortization decreased $5.3 million, or 40%,
to $7.9 million for the last three months of 2004 as
compared to the last three months of 2003. Depreciation,
depletion and amortization per ton decreased from $3.43 per
ton in the last three months of 2003 to $2.22 per ton in
the last three months of 2004. The principal components of the
decrease were a $3.1 million decrease in amortization
related to an above market contract that expired at the end of
2003, as well as a $1.5 million decrease in connection with
a change in accounting practice related to the capitalization
and amortization of major repair costs in excess of
$25,000 per occurrence.
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Management's discussion and analysis of financial
condition and results of operations
Selling, general and administrative expenses.
Selling,
general and administrative expenses decreased $0.7 million,
or 14%, to $4.2 million in the last three months of 2004
compared to the same period in 2003 for Horizon. This reduction
was due in large part to a significant reduction in salary
expense for senior management for the period. ICG, Inc.'s
selling, general and administrative expenses as a percentage of
total revenues decreased from 4.0% in the last three months of
2003 to 3.0% in the last three months of 2004.
Gain on sale of assets.
Gain on sale of assets decreased
$2.3 million from a gain of $2.3 million in last three
months of 2003 to a gain of $0.01 million in the last three
months of 2004. The gain on sale of assets in 2003 occurred in
relation to the sale of the Hannah Land property, also known as
the Republic Reserve, which was acquired by A. T. Massey.
Writedowns and other items.
Writedowns and other items
decreased $0.2 million in the last three months of 2004 as
compared to the same period in 2003.
Interest Expense.
Interest expense decreased
$32.4 million to $3.5 million during the last three
months of 2004 compared to the same period in 2003 for Horizon.
The decrease was mainly due to the elimination of approximately
$915 million of debt through our Horizon's
Chapter 11 bankruptcy. This debt was replaced with a
$175 million term loan that ICG, Inc. entered into at the
closing of the Horizon acquisition.
Nine Months Ended September 30, 2003 of Horizon Compared
to Nine Months Ended September 30, 2004 of Horizon.
Revenues
Nine months ended
September 30,
Increase
(decrease)
2003
2004
($ or tons)
% change
(in thousands, except percentages and per ton data)
Coal revenues
$
329,863
$
346,981
$
17,118
5%
Freight and handling revenues
6,786
3,700
(3,086
)
(45%
)
Other revenues
25,373
22,702
(2,671
)
(11%
)
Total revenues
$
362,022
$
373,383
$
11,361
3%
Tons sold
12,801
10,421
(2,380
)
(19%
)
Coal sales realization per ton sold
$
25.77
$
33.30
$
7.53
29%
Coal revenues.
Coal revenues increased in the first nine
months of 2004 by $17.1 million, or 5%, to
$347.0 million, as compared to the first nine months of
2003. This increase was due to a $7.53 per ton increase in
the average sales price of Horizon's coal, partially offset
by a sales tons decrease of 2.4 million tons, or 19%, over
the comparable period last year. The principal reason for the
reduction in sales tons in the first nine months of 2004 over
2003 is due to the elimination of 1.3 million tons of
synfuel sales in 2004. The increase in the average sales price
of our coal was due to the general increase in coal prices
during 2004, as well as the favorable renegotiations of coal
sales contracts related to Horizon's Chapter 11
bankruptcy.
Freight and handling revenues.
Freight and handling
revenues decreased to $3.7 million for the nine months
ended September 30, 2004, a decrease of $3.1 million
compared to the period ended September 30, 2003 due to a
decrease in shipments where we pay the freight and handling
costs and are then reimbursed by the customer.
Other revenues.
Other revenues decreased for the first
nine months of 2004 by $2.7 million, or 11%, to
$22.7 million, as compared to the first nine months of 2003
primarily due to a $2.4 million decrease in highwall miner
lease revenue.
56
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Management's discussion and analysis of financial
condition and results of operations
Costs and expenses
Nine months ended
September 30,
Increase
2003
2004
(decrease)
% change
(in thousands, except percentages and per ton data)
Cost of coal sales and other revenues (exclusive of
    depreciation, depletion and amortization)
$
300,386
$
306,429
$
6,043
2%
Cost of coal sales and other revenues as % of revenues
83
%
82
%
Freight and handling costs
$
6,786
$
3,700
$
(3,086
)
(45%
)
Freight and handling costs as % of revenues
2
%
1
%
Depreciation, depletion and amortization
$
39,023
$
27,547
$
(11,476
)
(29%
)
Depreciation, depletion and amortization as % of revenues
11
%
7
%
Selling, general and administrative expenses (exclusive of
    depreciation, depletion and amortization)
$
18,478
$
8,477
$
(10,001
)
(54%
)
Selling, general and administrative expenses as % of
    revenues
5
%
2
%
Gain on sale of assets
$
(2,060
)
$
(226
)
$
1,834
(89%
)
Writedowns and other items
$
8,897
$
10,018
$
1,121
13%
Total costs and expenses
$
371,510
$
355,945
$
(15,565
)
(4%
)
Total costs and expenses as % of revenues
103
%
95
%
Cost of coal sales per ton sold
$
29.02
$
34.16
$
5.14
18%
Cost of coal sales and other revenues.
In the first nine
months of 2004, Horizon's cost of coal sales, which
excludes charges for depreciation, depletion and amortization,
increased $6.0 million, or 2%, to $306.4 million
compared to the first nine months of 2003. Horizon's cost
of coal sales increased by approximately $6.0 million
primarily as a result of increased prices for steel-related mine
supplies, escalating diesel fuel costs ($5.2 million),
increasing costs for repair and maintenance of an aging
equipment fleet ($10.7 million), increased coal trucking
costs ($2.9 million) and increased variable sales-related
costs, such as royalties and severance taxes
($4.2 million). These increased costs were offset by volume
related decreases in purchased coal cost ($22.3 million).
The average cost per ton sold increased 18% from $29.02 per
ton in the first nine months of 2003 to $34.16 per ton in
the first nine months of 2004. Horizon's cost of coal sales
as a percentage of coal revenues decreased from 83% in the first
nine months of 2003 to 82% in the first nine months of 2004.
Freight and handling costs.
Freight and handling costs
decreased $3.1 million to $3.7 million during the
first nine months of 2004 as compared to the first nine months
of 2003, mainly due to the decrease in shipments where we pay
the freight and handling costs and are then reimbursed by the
customer.
Depreciation, depletion and amortization.
Depreciation,
depletion and amortization decreased $11.5 million, or 29%,
to $27.5 million for the first nine months of 2004 as
compared to the first nine months of 2003. Depreciation,
depletion and amortization per ton decreased from $3.05 per
ton in the first nine months of 2003 to $2.64 per ton in
the first nine months of 2004. The principal components of the
decrease were a $6.3 million decrease in amortization
related to an above market contract that expired at the end of
2003, as well as a $1.6 million decrease in connection with
a change in accounting practice related to the capitalization
and amortization of major repair costs in excess of
$25,000 per occurrence.
Selling, general and administrative expenses.
Selling,
general and administrative expenses decreased
$10.0 million, or 54%, to $8.5 million in the first
nine months of 2004 compared to the same period in 2003. The
decrease is primarily attributed to decreased general and
supervisory salaries ($1.7 million), reduction in building
rent ($0.7 million) as operations were consolidated to two
floors reducing total square footage utilized, reduced taxes and
licenses ($0.8 million), reduced sales
57
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Management's discussion and analysis of financial
condition and results of operations
commissions ($1.1 million), reduced bad debt expense
($3.6 million), decreased consulting fees, attorney fees
and professional services ($0.9 million).
Gain on sale of assets.
Gain on sale of assets decreased
$1.8 million from a gain of $2.1 million in first nine
months of 2003 to a gain of $0.2 million in the first nine
months of 2004. The gain on sale of assets in 2003 occurred in
relation to the sale of the Hannah Land property, which was
acquired by A. T. Massey
Writedowns and other items.
Writedowns and other items
increased $1.1 million in the first nine months of 2004 as
compared to the same period in 2003.
Interest expense.
Interest expense increased
$4.2 million to $114.2 million during the first nine
months of 2004 as compared to the same period in 2003. This
increase was primarily due to default interest on unpaid
interest amounts.
Twelve Months Ended December 31, 2002 of Predecessor
Compared to Twelve Months Ended December 31, 2003 of
Predecessor
Revenues
Year ended
December 31,
Increase
(decrease)
2002
(1)
2003
($ or tons)
% change
(in thousands, except percentages
and per ton data)
Coal revenues
$
400,275
$
441,291
$
41,016
10%
Freight and handling revenues
8,979
8,008
(971
)
(11%
)
Other revenues
48,580
31,771
(16,809
)
(35%
)
Total revenues
$
457,834
$
481,070
$
23,236
5%
Tons sold
16,540
16,655
115
1%
Coal sales realization per ton sold
$
24.20
$
26.50
$
2.30
10%
(1)
Represents the combination of amounts for the period
    January 1, 2002 to May 9, 2002 with the amounts for
    the period May 10, 2002 to December 31, 2002.
Coal revenues.
Coal revenues increased for the twelve
months ended December 31, 2003 by $41.0 million or
10%, to $441.3 million, as compared to the twelve months
ended December 31, 2002. This increase was due to a
$2.30 per ton increase in the average sales price of
Horizon's coal. The increase in the average sales price of
Horizon's coal was due to the general increase in coal
prices during the latter part of 2003, as well as the favorable
renegotiations of coal sales contracts related to Horizon's
Chapter 11 bankruptcy.
Freight and handling revenues.
Freight and handling
revenues decreased to $8.0 million for the twelve months
ended December 31, 2003, a decrease of $1.0 million
compared to the twelve months ended December 31, 2002 due
to a decrease in shipments where we pay the freight and handling
costs and are then reimbursed by the customer.
Other revenues.
Other revenues decreased for the twelve
months ended December 31, 2003 by $16.8 million, or
35%, to $31.8 million, as compared to the same period in
2002. This decrease is primarily due to a $10.9 million
decrease in revenue related to our highwall mining subsidiary
and a decrease of $3.6 million in synfuel earnings.
58
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Management's discussion and analysis of financial
condition and results of operations
Costs and expenses
Year ended
December 31,
Increase
2002
2003
(decrease)
% change
(in thousands, except percentages and per ton data)
Cost of coal sales and other revenues (exclusive of
    depreciation, depletion and amortization)
$
366,128
$
400,652
$
34,524
9%
Cost of coal sales and other revenues as % of revenues
80
%
83
%
Freight and handling costs
$
8,979
$
8,008
$
(971
)
(11%
)
Freight and handling costs as % of revenues
2
%
2
%
Depreciation, depletion and amortization
$
72,350
$
52,254
$
(20,096
)
(28%
)
Depreciation, depletion and amortization as % of revenues
16
%
11
%
Selling, general and administrative expenses (exclusive of
    depreciation, depletion and amortization)
$
26,372
$
23,350
$
(3,022
)
(11%
)
Selling, general and administrative expenses as % of
    revenues
6
%
5
%
Gain on sale of assets
$
(132
)
$
(4,320
)
$
(4,188
)
*
Writedowns and other items
$
738,275
$
9,100
$
(729,175
)
(99%
)
Total costs and expenses
$
1,211,972
$
489,044
$
(722,928
)
(60%
)
Total costs and expenses as % of revenues
265
%
102
%
Cost of coal sales per ton sold
$
73.28
$
29.36
$
(43.92
)
(60%
)
*
Not meaningful
Cost of coal sales and other revenues.
In the twelve
months ended December 31, 2003, Horizon's cost of coal
sales, which excludes costs for depreciation, depletion and
amortization, increased $34.5 million, or 9%, to
$400.7 million compared to the twelve months ended
December 31, 2002. Horizon's cost of coal sales
increased by approximately $34.5 million primarily as a
result of increased prices for steel-related mine supplies,
escalating diesel fuel costs ($3.9 million), increased cost
of blasting materials ($1.8 million), increased equipment
rental costs ($2.9 million) and increased variable
sales-related costs, such as royalties and severance taxes
($0.8 million). These increased costs were offset by volume
related increases in purchased coal cost ($22.1 million).
The average cost per ton sold decreased 60% from $73.28 per
ton in 2002 to $29.36 per ton in the same period of 2003.
The per ton cost in 2002 was impacted by writedowns and other
items that released to Horizon's bankruptcy. Horizon's
cost of coal sales as a percentage of coal revenues increased
from 80% in 2002 to 83% in 2003.
Freight and handling costs.
Freight and handling costs
decreased $1.0 million, or 11%, to $8.0 million
compared to the twelve months ended December 31, 2002,
mainly due to the decrease in shipments where we pay the freight
and handling costs and are then reimbursed by the customer.
Depreciation, depletion and amortization.
Depreciation,
depletion and amortization decreased $20.0 million, or 28%,
to $52.3 million for the twelve months ended
December 31, 2003 as compared to the same period in 2002.
Depreciation, depletion and amortization per ton decreased from
$4.37 per ton in 2002 to $3.14 per ton in 2003. The
principal components of the decrease were a reduction of
$7.4 million in depreciation as original asset lives were
fully depreciated and not replaced with new assets due to cash
constraints related to Horizon's Chapter 11
bankruptcy, as well as a $3.2 million decrease related to
the amortization of major repair costs. Depletion in 2003 was
$9.2 million less than the same period in 2002 due to a
change in depletion rates as a result of Horizon's first
Chapter 11 bankruptcy.
Selling, general and administrative expenses.
Selling,
general and administrative expenses decreased $3.0 million,
or 11%, to $23.3 million in the twelve months ended
December 31, 2003 as compared
59
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Management's discussion and analysis of financial
condition and results of operations
to the same period in 2002. The decrease is attributed to
reduced bad debt expense ($0.9 million) and a
$1.7 million decrease in general and supervisory bonuses.
Gain on sale of assets.
Gain on sale of assets increased
$4.2 million from a gain of $0.1 million in 2002 to a
gain of $4.3 million in 2003. The gain on sale of assets in
2003 occurred in relation to the sale of Cyrus Dock
($3.1 million), and the Hannah Land property
($2.2 million), which was acquired by A.T. Massey,
partially offset by a loss on sale of the Blue Springs property
($1.1 million).
Writedowns and other items.
Writedowns and other items
decreased $729.2 million in the 2003 as compared to 2002
due to the write off of goodwill ($697.1 million).
Interest Expense.
Interest expense increased
$28.8 million to $145.9 million during 2003 as
compared to the same period in 2002. This increase was primarily
due to default interest on unpaid interest amounts.
LIQUIDITY AND CAPITAL RESOURCES
Our business is capital intensive and requires substantial
capital expenditures for, among other things, purchasing,
upgrading and maintaining equipment used in developing and
mining our reserve base, as well as remaining in compliance with
environmental laws and regulations. Our principal liquidity
requirement is to finance our coal production, fund capital
expenditures and to service our debt and reclamation
obligations. We may also engage in acquisitions from time to
time. Our primary sources of liquidity to meet these needs are
cash flow from sales of our coal, other income and borrowings
under our senior credit facility.
We believe the principal indicators of our liquidity are our
cash position and remaining availability under our credit
facility. As of December 31, 2004, our available liquidity
was $79.6 million, including cash of $24.0 million and
$55.6 million available under our credit facility. Total
debt represented 54% of our total capitalization at
December 31, 2004.
We currently expect our capital expenditures to be approximately
$92.2 million for the remainder of 2005, and approximately
$145.1 million in 2006, primarily for investments in new
equipment and for mining development operations. We expect to
fund these capital expenditures for the next two years from our
internal operations. As we take advantage of planned expansion
opportunities from 2007 through 2009, we expect to spend
approximately $571.8 million on capital expenditures, which
may require external financing. However, our capital
expenditures may be different than currently anticipated
depending upon the size and nature of new business opportunities
and actual cash flows generated by our operations.
Cash flows
Cash provided by operating activities was $30.2 million for
the last three months of 2004, an increase of $26.1 million
from the same period in 2003. Cash provided by operations for
the last three months of 2004 benefited from the strength of the
coal markets during the period. This increase is attributable to
an increase in net income of $69.3 million for the last
three months of 2004 over the same period the previous year, and
the effects of a $42.3 million reduction in net operating
assets and liabilities primarily related to accrued interest
charges in 2003.
Net cash used in investing activities was $329.2 million
during the last three months of 2004 as compared to cash of
$4.1 million generated by investing activities in the year
ended December 31, 2003. Cash used in investing activities
of $323.6 million was for the purchase of certain assets of
Horizon in the last three months of 2004. Capital expenditures
were virtually unchanged between the two periods, with the
increase in cash generated in the last three months of 2003
related to the sale of assets during Horizon's
Chapter 11 bankruptcy.
Net cash provided by financing activities was
$322.9 million in the last three months of 2004 compared
with net cash used by financing activities of $10.9 million
in the prior period. The increase
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Table of Contents
Management's discussion and analysis of financial
condition and results of operations
in financing activities was a result of the initial capital
contribution of $150.2 million and borrowings of
$175 million used in the purchase of certain Horizon
assets. Net cash used in financing activities by Horizon in 2003
related to the use of proceeds from the sale of assets to pay
down debtor-in-possession financing related to Horizon's
Chapter 11 bankruptcy.
Cash provided by operating activities was $17.8 million for
the full year 2003, an increase of $239.6 million from the
same period in 2002. This increase is attributable to the
effects of a $905.7 million change in non-cash items
related to Horizon's first Chapter 11 bankruptcy case,
a decrease in net income of $761.0 million for 2003 as
compared to the same period in 2002, and the effects of a
$94.9 million increase in net operating assets and
liabilities primarily related to accrued interest charges in
2003.
Net cash used in investing activities decreased
$22.1 million in 2003 to $1.6 million as compared to
$23.6 million in 2002. This decrease is the result of
decreased capital expenditures of $7.5 million as well as
an increase in proceeds from the sale of assets of
$14.6 million in 2003.
Net cash used in financing activities decreased
$196.4 million in 2003 to $15.5 million as compared to
a source of cash of $180.9 million in 2002. This change is
entirely related to various debt transactions in 2002 related to
Horizon's first Chapter 11 bankruptcy.
Credit facility and long-term debt obligations
As of December 31, 2004, our total long-term indebtedness,
including capital lease obligations, consisted of the following:
As of
December 31, 2004
(dollars in thousands)
Term loan due 2010
$
175,000
(1)
Revolving credit facility
—
Capital lease obligations
$
681
Other
$
3,787
Total long-term debt
$
179,468
Less current portion
(6,022
)
Long term debt, net of current portion
$
173,446
(1)
We are required to use 50% of the net proceeds of this
    offering to repay amounts outstanding under the term loan.
On September 30, 2004 (later amended and restated on
November 5, 2004), ICG, LLC, entered into a credit facility
with a group of lending institutions, for which UBS
Securities LLC serves as Arranger, Bookmanager and
Syndication Agent. The $285.0 million credit facility
provides for a term loan of $175.0 million and a revolving
credit facility of up to $110.0 million with a letter of
credit sub-limit of up to $60.0 million. As of
December 31, 2004, the $175.0 million term loan
principal amount was outstanding and letters of credit totaling
$54.4 million were outstanding under the revolving credit
facility, leaving $55.6 million available for borrowing on
the revolving credit facility. The interest rate on both the
term loan and revolving credit facility bear interest at a
variable rate based upon either the prime rate or a London
Interbank Offered Rate (LIBOR), in each case plus a spread that
is dependent on our leverage ratio. The interest rate applicable
to our borrowings under the term loan was 4.99% as of
December 31, 2004. The principal balance of the term loan
is due on October 1, 2010 and the revolving credit facility
expires on October 1, 2009. ICG and each of the
subsidiaries of ICG, LLC, have guaranteed ICG, LLC's
obligations under the credit facility. The obligations of ICG,
LLC, under the credit facility are secured by a lien on all of
the assets of ICG, ICG, LLC and their subsidiaries. We
61
Table of Contents
Management's discussion and analysis of financial
condition and results of operations
must pay an annual commitment fee up to a maximum of
1
/
2
of 1% of the unused portion of the commitment under the
revolving credit facility. We were in compliance with our debt
covenants under the credit facility as of December 31, 2004.
The credit facility imposes certain restrictions on us,
including restrictions on our ability to: incur debt, grant
liens, enter into agreements with negative pledge clauses,
provide guarantees in respect of obligations of any other
person, pay dividends and make other distributions, make loans,
investments, advances and acquisitions, sell our assets, make
redemptions and repurchases of capital stock, make capital
expenditures, prepay, redeem or repurchase debt, liquidate or
dissolve; engage in mergers or consolidations, engage in
affiliate transactions, change our business, change our fiscal
year, amend certain debt and other material agreements, issue
and sell capital stock of subsidiaries, engage in sale and
leaseback transactions, and restrict distributions from
subsidiaries. In addition, the credit facility provides that we
must comply with certain covenants, including certain interest
coverage ratios. For a more detailed description of these
ratios, see "Description of indebtedness."
At December 31, 2004, we had $54.4 million in letters
of credit outstanding, all of which are supported by our
$60.0 million letter of credit sub-limit contained in our
$285.0 million credit facility. We paid $0.3 million
in interest on our credit facility on October 10, 2004, the
first scheduled interest payment date on the credit facility and
another $2.4 million in interest on our credit facility on
January 10, 2005. We also made a term loan amortization
payment of $0.4 million on January 10, 2005, which was
the first scheduled amortization payment date.
As a regular part of our business, we review opportunities for,
and engage in discussions and negotiations concerning, the
acquisition of coal mining assets and interests in coal mining
companies, and acquisitions of, or combinations with, coal
mining companies. When we believe that these opportunities are
consistent with our growth plans and our acquisition criteria,
we will make bids or proposals and/or enter into letters of
intent and other similar agreements, which may be binding or
nonbinding, that are customarily subject to a variety of
conditions and usually permit us to terminate the discussions
and any related agreement if, among other things, we are not
satisfied with the results of our due diligence investigation.
Any acquisition opportunities we pursue could materially affect
our liquidity and capital resources and may require us to incur
indebtedness, seek equity capital or both. There can be no
assurance that additional financing will be available on terms
acceptable to us, or at all.
Additionally, we have long-term liabilities relating to mine
reclamation, end-of-mine closure costs and "black
lung" costs, and all of our operating and
management-services subsidiaries have long-term liabilities
relating to retiree health care (post-retirement benefits).
Our ability to meet our long-term debt obligations will depend
upon our future performance, which in turn, will depend upon
general economic, financial and business conditions, along with
competition, legislation and regulation— factors that are
largely beyond our control. Based upon our current operations,
the historical results of our predecessors, as well as those of
Anker and CoalQuest, we believe that cash flow from operations,
together with other available sources of funds, including
additional borrowings under our credit facility and the proceeds
from this offering, will be adequate for at least the next
12 months for making required payments of principal and
interest on our indebtedness and for funding anticipated capital
expenditures and working capital requirements. However, we
cannot assure you that our operating results, cash flow and
capital resources will be sufficient for repayment of our debt
obligations in the future.
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Management's discussion and analysis of financial
condition and results of operations
CONTRACTUAL OBLIGATIONS
The following is a summary of our significant future contractual
obligations by year as of December 31, 2004, on a pro forma
basis after giving effect to the Anker acquisition:
Payments due by period
Less than
More than
1 year
1-3 years
3-5 years
5 years
Total
(in thousands)
Long-term debt obligations
$
7,067
$
5,039
$
4,553
$
166,273
$
182,932
UBS revolving credit facility
15,957
—
—
—
15,957
Capital leases obligations
513
168
—
—
681
Operating leases
13,506
12,058
—
—
25,564
Coal purchase obligation
114,620
134,389
57,644
25,186
331,839
Advisory Services
    agreement
(1)
2,000
4,000
4,000
3,500
13,500
Minimum royalties
7,348
19,876
6,195
29,345
62,764
Total
(2)
$
161,011
$
175,530
$
72,392
$
224,304
$
633,237
(1)
See "Certain relationships and related party
    transactions."
(2)
Our contractual obligations exclude interest amounts due for
    the years shown above because it is at a variable rate. We are
    also a party to an employment agreement with our President and
    Chief Executive Officer. See "Management— Employment
    agreements" regarding the terms and conditions of this
    employment agreement.
OFF-BALANCE SHEET ARRANGEMENTS
In the normal course of business, we are a party to certain
off-balance sheet arrangements. These arrangements include
guarantees and financial instruments with off-balance sheet
risk, such as bank letters of credit and performance or surety
bonds. No liabilities related to these arrangements are
reflected in our combined balance sheets, and we do not expect
any material adverse effects on our financial condition, results
of operations or cash flows to result from these off-balance
sheet arrangements.
Federal and state laws require us to secure payment of certain
long-term obligations such as mine closure and reclamation
costs, federal and state workers' compensation, coal leases
and other obligations. We typically secure these payment
obligations by using surety bonds, an off-balance sheet
instrument. The use of surety bonds is less expensive for us
than the alternative of posting a 100% cash bond or a bank
letter of credit, either of which would require a greater use of
our credit facility. We then use bank letters of credit to
secure our surety bonding obligations as a lower cost
alternative than securing those bonds with cash. ICG has a
$60.0 million committed bonding facility pursuant to which
we are required to provide bank letters of credit in an amount
up to 50% of the aggregate bond liability. Recently, surety bond
costs have increased, while the market terms of surety bonds
have generally become less favorable to us. To the extent that
surety bonds become unavailable, we would seek to secure our
reclamation obligations with letters of credit, cash deposits or
other suitable forms of collateral.
As of December 31, 2004, we had outstanding surety bonds
with third parties for post-mining reclamation totaling
$67.5 million plus $9.4 million for miscellaneous
purposes. We maintained letters of credit as of
December 31, 2004 totaling $54.7 million to secure
reclamation surety bonds and other obligations, including
$10.0 million related to Lexington Coal Company. Of the
$54.7 million, $54.4 million of these letters of
credit are issued under our $60.0 million bonding facility
with another approximately $300,000 of letters of credit which
are cash collateralized and issued by a third party bank.
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Management's discussion and analysis of financial
condition and results of operations
RECENT ACCOUNTING PRONOUNCEMENTS
Emerging Issues Task Force ("EITF") Issue 04-02
addresses the issue of whether mineral rights are tangible or
intangible assets. FASB Statement No. 141, Business
Combinations, requires the acquirer in a business combination to
allocate the cost of the acquisition to the acquired assets and
liabilities. At the March 17-18, 2004 meeting, the EITF reached
a consensus that mineral rights (defined as the legal right to
explore, extract and retain at least a portion of the benefits
from mineral deposits) are tangible assets. As a result of the
EITF's consensus, the Financial Accounting Standards Board
(the "FASB") issued FASB Staff Position
("FSP") Nos. SFAS No. 141-a and
SFAS No. 142-a, Interaction of FASB Statements
No. 141, Business Combinations, and No. 142, Goodwill
and Other Intangible Assets, and EITF Issue No. 04-02,
Whether Mineral Rights Are Tangible or Intangible Assets, which
amend SFAS Nos. 141 and 142 and results in the
classification of mineral rights as tangible assets. We have
recorded mineral rights as tangible assets.
In January 2003, the FASB issued Interpretation No. 46,
Consolidation of Variable Interest Entities
("FIN 46"), and subsequently revised FIN 46
in December 2003. As revised, FIN 46's consolidation
provisions apply to interest in variable interest entities
("VIEs") that are referred to as special-purpose
entities for periods ending afterDecember 15, 2003. For all
other VIEs, FIN 46's consolidation provisions apply
for periods ending after March 15, 2004, or as of
March 31, 2004. FIN 46 did not have a material effect
on our consolidated financial position or results of operations.
In January 2005, the FASB issued Statement 123R, Accounting
for Stock Based Compensation. FASB Statement 123R
supersedes APB Opinion 25, Accounting for Stock Issued to
Employees. This statement establishes standards for accounting
transactions in which an entity exchanges its equity instruments
for goods or services. It also addresses transactions in which
an entity incurs liabilities in exchange for goods or services
that are based on the fair value of the entity's equity
instruments or that may be settled by the issuance of those
equity instruments. FASB 123R is effective as of the beginning
of the first fiscal year beginning after June 15, 2005. We
believe adoption of FASB 123R will have no material impact on
our financial position, results of operations, or cash flows.
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Commodity price risk.
We manage our commodity price risk
for coal sales through the use of long-term coal supply
agreements rather than through the use of derivative
instruments. As of February 28, 2005, we had sales
commitments for 88% of our planned 2005 production. Some of the
products used in our mining activities, such as diesel fuel, are
subject to price volatility. Through our suppliers, we utilize
forward contracts to manage the exposure related to this
volatility.
Interest rate risk.
Historically, we have had exposure to
changes in interest rates on a portion of our existing level of
indebtedness. This exposure had been hedged at 50% of the debt
for a two year period using pay-fixed, receive-variable interest
rate swaps. As a result of the transactions, we anticipate
exposure to changes in interest rates on a portion of our new
level of indebtedness. A hypothetical increase or decrease in
interest rates by 1% would have changed interest expense on our
credit facility by $437,500 for the three months ended
December 31, 2004. We expect to use interest rate swaps to
manage this risk.
Our concentration of credit risk is substantially with electric
utilities the majority of which are investment grade, producers
of steel and foreign customers. Our policy is to evaluate
independently each customer's creditworthiness prior to
entering into transactions and to constantly monitor the credit
extended.
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The coal industry
OVERVIEW
A major contributor to the world energy supply, coal represents
over 23% of the world's primary energy consumption
according to the World Coal Institute. The primary use for coal
is to fuel electric power generation. In 2004, coal-fired plants
generated 50% of the electricity produced in the United States,
according to the EIA, a statistical agency of the
U.S. Department of Energy.
The United States produces over one-fifth of the world's
coal and is the second largest coal producer in the world,
exceeded only by China. Other leading coal producers include
India, Australia and South Africa. The United States is the
largest holder of coal reserves in the world, with over
250 years supply at current production rates.
U.S. coal demand trends— 1975-2003
Source: EIA
DEMAND FOR U.S. COAL PRODUCTION
Coal produced in the United States is used primarily by
utilities to generate electricity, by steel companies to produce
coke for use in blast furnaces and by a variety of industrial
users to heat and power foundries, cement plants, paper mills,
chemical plants and other manufacturing and processing
facilities. Significant quantities of coal are also exported
from both east and west coast terminals. According to the EIA,
98% of coal consumed in the United States in 2003 was from
domestic production sources. Coal produced in the United States
is also exported, primarily from east coast
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terminals. The breakdown of 2003 U.S. coal consumption by
sector, according to the EIA, is as follows:
End use
Tons (millions)
% of total
Electric Power
1,004
91.7
%
Other Industrial Plants
62
5.7
%
Coke Plants
24
2.2
%
Residential & Commercial
4
0.4
%
Total
1,095
100.0
%
Source: EIA
Coal has long been favored as an electricity generating fuel by
regulated utilities because of its basic economic advantage. The
largest cost component in electricity generation is fuel.
According to the National Mining Association, coal is by far the
cheapest source of power fuel per million Btu, averaging less
than one-third the price of both petroleum and natural gas.
According to the EIA, for a new coal-fired plant built today,
fuel costs would represent about one-half of total operating
costs, whereas the share for a new natural-gas-fired plant would
be almost 90%. Coal used as fuel to generate electricity is
commonly referred to as "steam coal."
Other factors that influence each utility's choice of
electricity generation mode, include facility cost, fuel
transportation infrastructure, environmental restrictions and
other factors. The breakdown of U.S. electricity generation
by fuel source in 2003, as estimated by the EIA, is as follows:
% of total
electricity
Electricity generation source
generation
Coal
51
%
Nuclear
20
%
Natural Gas
16
%
Hydro
7
%
Petroleum
3
%
Other
3
%
Total
100
%
Source: EIA
The EIA projects that generators of electricity will increase
their demand for coal as demand for electricity increases.
Because coal-fired generation is used in most cases to meet base
load requirements, coal consumption has generally grown at the
pace of electricity demand growth. Demand for electricity has
historically grown in proportion to U.S. economic growth as
measured by gross domestic product. According to the EIA, coal
use for electricity generation is expected to increase on
average by 1.6% per year from 2003 to 2025.
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U.S. electricity demand increasing— 1970-2025
forecasted
Source: EIA
The other major market for coal is the steel industry. The type
of coal used in steel making is referred to as metallurgical
coal and is distinguished by special quality characteristics
that include high carbon content, low expansion pressure, low
sulfur content, and various other chemical attributes.
Metallurgical coal is also high in heat content (as measured in
Btus), and therefore is desirable to utilities as fuel for
electricity generation. Consequently, metallurgical coal
producers have the ongoing opportunity to select the market that
provides maximum revenue. The premium price offered by steel
makers for the metallurgical quality attributes is typically
higher than the price offered by utility coal buyers that value
only the heat content.
U.S. COAL PRODUCTION AND DISTRIBUTION
In 2004, total coal production as estimated by the DOE was
1.1 billion tons. The primary producing regions were
Appalachia (35%), Interior (13%) and Western (52%). Most of our
coal production comes from the Central Appalachian region. In
2003, approximately 67% of U.S. coal was produced by
surface mining methods. The remaining 33% was produced by
underground mining methods that include room and pillar mining
and longwall mining.
U.S. coal production
1998
1999
2000
2001
2002
2003
2004
(tons in millions
Area:
Appalachian
460.4
425.6
419.4
431.2
396.2
376.0
390.7
Interior (includes
Illinois Basin)
168.4
162.5
143.5
146.9
146.6
146.0
147.5
Western
488.8
512.3
510.7
547.9
550.4
548.7
573.3
Total
1,117.6
1,100.4
1,073.6
1,126.0
1,093.2
1,070.7
1,111.4
Source: Coal Industry Annual Review and Coal Weekly,
1998-2004, EIA.
Central Appalachia
Central Appalachia, including eastern Kentucky, Virginia and
southern West Virginia, produced 21% of the total U.S. coal
production in 2003. Coal mined from this region generally has a
high heat content of between 12,000 and 14,000 Btus per pound
and a low sulfur content ranging from 0.7% to 1.5%. From 2000 to
2004 according to the EIA, the Central Appalachian region
experienced a decline in production from 258 million tons
to 230 million tons, or a 11% decline, primarily as a
result of the depletion of economically attractive reserves,
permitting issues and increasing costs of production,
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which was partially offset by production increases in Southern
West Virginia due to the expansion of more economically
attractive surface mines.
The structural issues in Central Appalachia have led to
exceedingly high barriers to entry. These barriers are likely to
prevent large-scale development in the region in both the short
and medium term. In addition, alternative fuel sources have
limited benefits and eastern utilities are reluctant to invest
heavily to switch to PRB coal. Thus, the increasing demand
coupled with the supply constraints will likely result in price
stabilization at higher levels in Central Appalachia.
INDUSTRY TRENDS
In recent years, the coal industry has experienced several
significant trends including:
Significant gains in mining productivity.
U.S. coal
production more than doubled from 1968 to 1998 due largely to
changes in work practices and the introduction of new
technologies that have greatly increased mine productivity.
According to the EIA, overall coal mine productivity, measured
in tons produced per miner shift, has increased from 30.6 tons
in 1990 to 55.6 tons in 2003.
Growth in coal consumption.
According to EIA, from 1990
to 2003 coal consumption in the United States increased from
895 million tons to 1,095 million tons, or 22%. The
largest driver of increased coal consumption during this period
was increased demand for electricity. The EIA estimates that
coal use for electricity generation is expected to increase on
average by 1.6% per year from 2003 to 2025.
Increased utilization of existing capacity of coal-fired
power plants.
We believe that existing coal-fired plants
will supply much of the projected increase in the demand for
electricity because they possess excess capacity that can be
utilized at low incremental costs. The NETL has identified 106
coal-fired plants, representing 65,000 megawatts of electric
generation capacity, that have been proposed and are currently
in various stages of development.
Restructuring of electricity industry
In October 1992, Congress enacted the Energy Policy Act of 1992,
which gave wholesale electricity suppliers access to the
transmission lines of U.S. utility companies. In May 1996,
the Federal Energy Regulatory Commission issued the first of a
series of orders establishing rules to promote competition in
wholesale electricity markets by providing wholesale electricity
suppliers open access to electricity transmission systems. In
1999, the Federal Energy Regulatory Commission issued a rule to
encourage the establishment of regional transmission
organizations. Wholesale competition has resulted in a
substantial increase in non-utility generating capacity in the
United States.
Increasingly stringent air quality laws
The coal industry has witnessed a recent shift in demand to low
sulfur coal production driven by regulatory restrictions on
sulfur dioxide emissions from coal-fired power plants. In 1995,
Phase I of the Clean Air Act Acid Rain program required
high sulfur coal plants to reduce their emissions of sulfur
dioxide to 2.5 pounds or less per million Btu, and in 2000,
Phase II of the Clean Air Act tightened these sulfur
dioxide restrictions further to 1.2 pounds of sulfur dioxide per
million Btu. Currently, electric power generators operating
coal-fired plants can comply with these requirements by:
4
burning lower sulfur coal, either exclusively or mixed with
    higher sulfur coal;
4
installing pollution control devices such as scrubbers, which
    reduce the emissions from high sulfur coal;
4
reducing electricity generating levels; or
4
purchasing or trading emission credits to allow them to comply
    with the sulfur dioxide emission compliance requirements.
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However, as new and proposed laws and regulations, including the
Clean Air Interstate Rule and the Clean Air Mercury Rule require
further reductions in emissions, coal-fired utilities may need
to install additional pollution control equipment, such as wet
scrubbers, to comply. Installation of such additional pollution
control equipment required could potentially result in a
decrease in the demand for low sulfur coal (because sulfur would
be removed by the new equipment), potentially driving down
prices for low sulfur coal.
RECENT COAL MARKET CONDITIONS
According to traded coal indices and reference prices, U.S. and
international coal demand is currently at high levels, and coal
pricing has increased year-over-year in nearly every significant
U.S. and international market. We believe that current
fundamentals in the U.S. coal industry are among the
strongest witnessed over the past decade, supported primarily by:
4
stronger industrial demand following a recovery in the
    U.S. manufacturing sector;
4
relatively low customer stockpiles;
4
production difficulties and reserve degradation experienced by
    some U.S. coal producers;
4
capacity constraints of U.S. nuclear-powered electricity
    generators;
4
high current and forward prices for natural gas and oil;
4
transportation disruptions including constrained rail line
    capacity and increased costs faced by the trucking
    industry; and
4
increased international demand for U.S. coal for
    electricity generation and steelmaking, driven by global
    economic growth, high ocean freight rates and the weak
    U.S. dollar.
Coal prices are influenced by a number of factors and often vary
dramatically by region. The following charts illustrate coal
spot prices and annual production for Central Appalachia and the
Illinois Basin.
Central Appalachian pricing environment
Source: EIA, Bloomberg
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Illinois Basin Pricing Environment
Source: EIA, Bloomberg
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OVERVIEW
We are a leading producer of coal in Northern and Central
Appalachia with a broad range of mid to high Btu, low sulfur
steam and metallurgical coal. Our Appalachian mining complexes,
which include 11 of our mining complexes, are located in West
Virginia, Kentucky and Maryland. We also have a complementary
mining complex of mid to high sulfur steam coal strategically
located in the Illinois Basin. We market our coal to a diverse
customer base of largely investment grade electric utilities, as
well as domestic and international industrial customers. The
high quality of our coal and the availability of multiple
transportation options, including rail, truck and barge,
throughout the Appalachian region enable us to participate in
both the domestic and international coal markets. Due to the
decline in Appalachian coal production in recent years, these
markets are currently characterized by strong demand with
limited supply response and elevated spot and contract prices.
The company was formed by WLR and other investors in May 2004 to
acquire and operate competitive coal mining facilities. Through
the acquisition of certain key assets from the bankruptcy estate
of Horizon the WLR investor group was able to acquire high
quality reserves strategically located in Appalachia and the
Illinois Basin that are union free, have limited reclamation
liabilities and are substantially free of other legacy
liabilities. Due to our initial capitalization, we were able to
complete the acquisition without incurring a significant level
of indebtedness. Following this offering, we expect to retire
substantially all of our long term debt and will be
strategically well-positioned. Consistent with the WLR investor
group's strategy to consolidate profitable coal assets, the
Anker acquisition further diversifies our reserves.
As of January 1, 2005, we owned or controlled approximately
315 million tons of metallurgical quality coal reserves and
approximately 572 million tons of steam coal reserves.
Based on expected 2005 production rates, our Northern and
Central Appalachian reserves could support existing production
levels for approximately 35 years and all of our reserves
could support existing production levels for approximately
49 years. Further, we own or control approximately
707 million tons of coal resources.
Steam coal is primarily consumed by large electric utilities and
industrial customers as fuel for electricity generation. Demand
for low sulfur steam coal has grown significantly since the
introduction of certain controls associated with the Clean Air
Act and the decline in coal production in the eastern half of
the United States. Metallurgical coal is primarily used to
produce coke, a key raw material used in the steel making
process. Generally, metallurgical coal sells at a premium to
steam coal because of its higher quality and its importance and
value in the steel making process. During 2004 and the first
quarter of 2005, the demand for metallurgical coal increased
substantially as the global demand for steel increased.
For the year ended December 31, 2004, we sold
18.4 million tons of coal, of which 18.2 million tons
were steam coal and 0.2 million tons were metallurgical
coal. Our steam coal sales volume in 2004 consisted of mid to
high quality, high Btu (greater than 12,000 Btu/lb.), low
sulfur (1.5% or less) coal, which typically sells at a premium
to lower quality, lower Btu, higher sulfur steam coal. We
generated total pro forma revenues of $673.8 million and
$84.2 million of pro forma EBITDA for the year ended
December 31, 2004.
OUR HISTORY
The Horizon acquisition
On February 28, 2002, Horizon (at that time operating as
AEI Resources Holdings, Inc.) filed a voluntary petition for
Chapter 11 and its plan of reorganization became effective
on May 8, 2002. However, Horizon's profit margins and
cash flows were negatively impacted in fiscal year 2002 by,
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among other things, the falling price of coal and continued
increases in certain operating expenses. Due to capital and
permit constraints, Horizon had to mine in areas which produced
coal but at greatly reduced profit margins thus severely
reducing cash flow.
As a result of its continuing financial and operational
difficulties, Horizon filed a second voluntary petition for
relief under Chapter 11 on November 13, 2002. Horizon
obtained a debtor-in-possession financing facility of up to
$350.0 million and was effective in rationalizing its
operations, selling non-core assets, paying down outstanding
borrowings and generating substantial operating profit. With
stabilized operations and a significantly improved coal market,
Horizon filed a joint plan of reorganization and a joint plan of
liquidation under Chapter 11.
The Horizon assets were sold to us through a public auction on
August 17, 2004. Presented as a combined
$290.0 million cash bid with A.T. Massey, ICG, Inc. agreed
to pay $285.0 million in cash plus the assumption of up to
$5.0 million in cure costs to acquire the assets plus ICG,
Inc. also contributed a credit bid of $482.0 million in
second lien Horizon bonds, and A.T. Massey agreed to pay
$5.0 million in cash to acquire a separate group of assets
associated with two Horizon subsidiaries. In addition, Lexington
Coal Company, LLC, a newly formed entity, was organized by the
founding ICG, Inc. stockholders to assume certain reclamation
liabilities and assets not otherwise being purchased by A.T.
Massey or ICG, Inc. In order to provide support to Lexington
Coal, we agreed to provide a $10.0 million letter of credit
to support reclamation obligations and to pay a 0.75% royalty on
the gross sales receipts for coal mined and sold from the assets
we acquired from Horizon until the completion by Lexington Coal
of all reclamation liabilities acquired from Horizon. The
bankruptcy court confirmed the sale on September 16, 2004
as part of the completion of the Horizon bankruptcy proceedings.
At closing, we increased the purchase price by
$6.25 million, primarily to satisfy increased
administrative expenses, and the sale was completed as of
September 30, 2004.
The acquisition was financed through equity investments and
borrowings under our senior secured credit facility, which we
entered into at the closing of the Horizon acquisition. See
"Description of indebtedness" for a discussion of our
senior credit facility. We expect to repay a portion of the term
loan facility with the proceeds of this offering.
The Anker acquisition
On March 31, 2005, ICG, Inc. entered into a business
combination agreement with Anker Coal Group, Inc., International
Coal Group, Inc. (formerly known as ICG Holdco, Inc.), a wholly
owned subsidiary of ICG, Inc., ICG Merger Sub, Inc., an indirect
wholly owned subsidiary of ICG, and Anker Merger Sub, Inc., an
indirect wholly owned subsidiary of ICG. Under the terms of the
business combination agreement, simultaneously with the
effective time of the mergers under the CoalQuest business
combination agreement, ICG Merger Sub will merge with and into
ICG, Inc. and Anker Merger Sub will merge with and into Anker,
with each of ICG, Inc. and, Anker surviving their respective
mergers as indirect wholly owned subsidiaries of ICG and ICG
will be the new parent holding company.
In the reorganization, the stockholders of ICG, Inc. are
expected to receive one share of ICG common stock for each
share of ICG, Inc. common stock. The shares of our common stock
being issued to the ICG, Inc. stockholders are expected to be
registered pursuant to a separate registration statement to be
filed with the SEC. The stockholders of Anker, collectively, are
entitled to receive the lesser of
(i) 19,498,581 shares of ICG common stock and
(ii) the number of shares of ICG common stock equal to the
quotient of 173,250,000 divided by the price per share at which
our stock is offered in this offering (the "base merger
share number"), subject to the following possible
adjustments. If certain events relating to the commencement of
specified coal production and the execution of a coal purchase
contract do not occur prior to the effectiveness of the merger,
ICG will only issue shares equal to the lesser of
(i) 18,373,122 shares of ICG common stock and
(ii) the number of shares of ICG common stock equal to the
quotient of 163,250,000 divided by the price per share at which
our common stock
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is offered in this offering (the "adjusted merger share
number") at the effective time of the merger and will
reserve but not issue the number of shares equal to the
difference between the adjusted merger share number and base
merger share number (this difference, the "contingent
shares"). These contingent shares are only issuable to the
former stockholders of Anker if one of the specified release
events occurs before the completion of this offering.
On March 31, 2005, ICG, Inc. also entered into a business
combination agreement with CoalQuest, ICG and CoalQuest Merger
Sub LLC, an indirect wholly owned subsidiary of ICG, and the
members of CoalQuest. Under the terms of the business
combination agreement, simultaneously with the effective time of
the mergers under the Anker business combination agreement. The
members of CoalQuest will contribute their interests in
CoalQuest to us in exchange for shares of our common stock. As a
result of this contribution, CoalQuest will become our wholly
owned subsidiary.
The members of CoalQuest, collectively, will receive the lesser
of (i) 11,451,548 shares of ICG common stock and
(ii) the number of shares of common stock equal to the
quotient of 101,750,000 divided by the price per share at which
our common stock is offered in this offering.
The former stockholders of Anker and former members of CoalQuest
will be granted certain piggyback registration rights with
respect to the ICG common stock issued to them.
The completion of both transactions is subject to various
conditions, all of which have been fulfilled other than the
approval by the ICG, Inc. stockholders of the reorganization. In
addition, the completion of the transactions under each business
combination agreement is conditioned upon the satisfaction of
the conditions precedent of the transactions under the other
business combination agreement.
OUR COMPETITIVE STRENGTHS
We believe that the following competitive strengths enhance our
prominent market position in the United States:
Ability to provide variety of high-quality steam and
metallurgical coal.
Our customers, which include largely
investment grade electric utilities, as well as domestic and
international industrial customers, demand a variety of coal
products. Our variety of coal qualities also allows us to blend
coal in order to meet the exact specifications of our customers.
Our access to a comprehensive range of high Btu steam and
metallurgical quality coal allows us to market differentiated
coal products to a variety of customers with different coal
quality demands, which allows us to benefit from particularly
strong pricing dynamics in the current metallurgical coal market.
Concentration in highly valued Central Appalachian
region.
Our operations are primarily located in Central
Appalachia, a region known for its high quality coal
characterized by low sulfur and high Btu content. Production
from Central Appalachian mines accounted for approximately 73.2%
of our 2004 coal sales volume. Increased electricity generation
and steel production both domestically and internationally has
lead to a substantial increase in demand and a significantly
improved pricing environment. In addition to general market
factors creating a favorable environment, the Central
Appalachian region has experienced production declines in five
out of the last six years, primarily due to difficult mining
conditions, yet demand continues to increase. We believe that
generally favorable market dynamics and trends in Central
Appalachian coal supply and demand, the high quality of Central
Appalachian coal and the low transportation costs that result
from the relative proximity of Central Appalachian producers and
customers have created favorable pricing dynamics that provide
us with an advantage over producers from other regions.
Significant reserve base providing internal expansion
opportunities.
We own approximately 613 million
tons of reserves and control an additional 274 million tons
of reserves through long-term leases. We own or control an
additional 707 million tons of coal resources. We have not
yet developed approximately 73% of these owned and controlled
reserves. We believe these owned and controlled
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but as yet undeveloped reserves and resources would allow us to
as much as double our existing production levels over the next
several years. Our ownership and control of such a substantial
portion of undeveloped reserves in both Northern and Central
Appalachia and the Illinois Basin provides us with significant
internal growth opportunities, this is in contrast to other
U.S. coal producers who must acquire or lease new reserves
to enable their growth. We also have coalbed methane reserves in
our owned reserves in West Virginia, which provides us with
additional growth opportunities in this complementary energy
market.
Ability to capitalize on strong coal market
dynamics.
A significant portion of our coal supply
contracts were renegotiated during the second half of 2004 in
connection with Horizon's bankruptcy and were re-priced at
that time to then-current (and more favorable) market prices and
terms. On average, our coal supply contracts have a life of
approximately five years, however, the majority of our contracts
contain annual price reopeners. Our marketing effort is focused
on maintaining a balance of longer-term contracts and spot
sales. We typically have 50% of our production contracted by the
early part of the previous year with another 35% contracted by
the second half of the year with the remainder of our production
used to take advantage of market dynamics and maximize value in
the spot market.
Diversity of reserves, resources and production.
Our reserves, resources and production are located in three of
the four major coal regions in the United States. Our
production, reserves and resources in Northern and Central
Appalachia and the Illinois Basin provide important geographical
diversity in terms of markets, transportation and labor. The
diversity of our operations and reserves provides us with a
significant competitive advantage, allowing us to source coal
from multiple operations to meet the needs of our customers and
reduce transportation costs.
Minimal level of long-term liabilities.
We believe
that compared to other publicly-traded U.S. coal producers
we have among the lowest legacy reclamation liabilities and
post-retirement employee obligations. As of December 31,
2004, we had total accrued reclamation liabilities of only
$68.7 million, post-retirement employee obligations of only
$8.0 million, "black lung" liabilities of
approximately $10.0 million and Coal Act liabilities of
only $4.8 million. We maintain a comprehensive mine
reclamation plan which we believe ensures that all of our mining
operations are current on reclamation requirements. In addition,
our entire workforce is union free, which minimizes
employee-related liabilities commonly associated with
union-represented mines. As of December 31, 2004, our pro
forma total long-term debt was $180.4 million and after
this offering we expect to retire substantially all of this
long-term debt. We believe that our financial leverage is among
the lowest of the publicly traded U.S. coal producers. We
believe this low leverage will afford significant financial and
operational flexibility.
Highly skilled management team.
The members of our
senior management team have, on average, 23 years of
industry work experience across a variety of mining methods,
including longwall mining. We have substantial Appalachian
mining experience in increasing productivity, reducing costs,
enhancing work safety practices, and maintaining strong customer
relationships. In addition, the majority of our senior
management team has extensive mine development and expansion
experience.
Recognized leadership in safety and environmental
stewardship.
The injury incident rates at our mines
throughout 2004, according to MSHA, were below industry
averages. We have been recognized by safety and environmental
agencies with several prestigious awards for our safety and
environmental record, such as the "Sentinels of Safety
Award" from MSHA, The Department of Interior
"Excellence in Surface Coal Mining and Reclamation
Award" and a reclamation award for innovative methods from
the West Virginia Coal Association. Our focus on safety and
environmental performance results in the reduced likelihood of
disruption of production at our mines, which leads to higher
productivity and improved financial performance.
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OUR BUSINESS STRATEGY
Our objective is to increase stockholder value through sustained
earnings and cash flow growth. Our key strategies to achieve
this objective are described below:
Maximize profitability through highly efficient and
productive mining operations.
We are continuing to
evaluate and assess our current operations in order to maximize
operating efficiency and returns on invested capital. We are
focused on maintaining low-cost, highly productive operations by
continuing to invest substantial capital in state-of-the-art
equipment and advanced technologies. We expect to internally
fund approximately $264 million of capital expenditures in
the next two years. As we take advantage of planned expansion
opportunities from 2007 through 2009, we expect to spend
approximately $572 million on capital expenditures, which
may require external financing. We have developed and cultivated
a productivity-focused culture through incentive programs that
encourage employees to work efficiently, safely and
productively. We intend to further leverage the scale of our
purchasing power to obtain favorable pricing from suppliers of
raw materials in addition to developing reserves and utilizing
mining techniques, such as longwall mining and dragline
operation, to enhance and streamline our operations.
Leverage owned and controlled reserve base to generate
substantial internal growth.
We own a large undeveloped
reserve in Northern Appalachia containing approximately
194 million tons of high Btu, low sulfur steam and
metallurgical quality coal. We currently expect underground
longwall mining operations at this reserve to commence within
the next four years, which will increase our production level by
providing highly valued premium quality coal in an increasingly
tight supply market. In addition, we have two substantial
reserves in Central Appalachia, which contain 56.5 million
tons of premium metallurgical coal and are expected to be
developed in the next three to six years. Further, the
substantial reserve position that we own in the Illinois Basin
is expected to allow us to benefit from the expected increase in
demand for high sulfur coal to generate electricity. We are in
the process of developing and exploiting our coalbed methane
reserves (the first such development and exploration in the
region). Finally, we intend to opportunistically acquire new
coal reserves and/or coal companies to expand our coal market
opportunities and increase shareholder value.
Capitalize on favorable industry fundamentals by
opportunistically marketing coal.
U.S. coal market
fundamentals are among the strongest in the last 20 years.
We believe this generally favorable pricing environment will
persist given systemic changes in market dynamics such as
long-term supply constraints and increasing demand, particularly
in Central Appalachia and for our metallurgical coal.
Furthermore, because of the high quality of our coal, our access
to a variety of alternative transportation methods, including
truck, rail and barge, and our mix of long-term contract and
spot market sales, we will be able to capitalize on the
favorable industry dynamics to maximize our revenues and
profits. We plan to extend the life of our longer-term contract
arrangements and limit price reopeners in order to lock in
margins and enhance our financial stability, while at the same
time, we plan to maintain an uncommitted portion of planned
production to allow for additional future pricing upside
exposure. As of April 25, 2005, we had entered into
contracts to sell approximately 88% of 2005 planned production,
approximately 66% of 2006 planned production and approximately
49% of 2007 planned production.
Continue to focus on improving workplace safety and
environmental compliance.
We have maintained and plan to
continue to maintain an excellent safety and environmental
performance record. We continue to implement safety measures and
environmental initiatives that are designed to promote safe
operating practices and improved environmental stewardship among
our employees. Our ability to maintain a good safety and
environmental record improves our productivity and lowers our
overall cost structure as well as bolsters employee morale.
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COAL MINING METHODS
We produce coal using two mining methods: underground room and
pillar mining using continuous and longwall mining equipment,
and surface mining, which are explained as follows:
Underground mining
Underground mines in the United States are typically operated
using one of two different techniques: room and pillar mining or
longwall mining. In 2004, approximately 36% of our produced and
processed coal volume came from underground mining operations
generally using the room and pillar method with continuous
mining equipment.
Room and pillar mining
In room and pillar mining, rooms are cut into the coalbed
leaving a series of pillars, or columns of coal, to help support
the mine roof and control the flow of air. Continuous mining
equipment is used to cut the coal from the mining face.
Generally, openings are driven 20 feet wide and the pillars
are generally rectangular in shape measuring 35-50 feet
wide by 35-80 feet long. As mining advances, a grid-like
pattern of entries and pillars is formed. Shuttle cars are used
to transport coal to the conveyor belt for transport to the
surface. When mining advances to the end of a panel, retreat
mining may begin. In retreat mining, as much coal as is feasible
is mined from the pillars that were created in advancing the
panel, allowing the roof to cave. When retreat mining is
completed to the mouth of the panel, the mined panel is
abandoned. The room and pillar method is often used to mine
smaller coal blocks or thinner seams. It is also employed
whenever subsidence is prohibited. Seam recovery ranges from 35%
to 70%, with higher seam recovery rates applicable where retreat
mining is combined with room and pillar mining. Productivity for
continuous room and pillar mining in the United States
averages 3.3 tons per employee per hour, according to the
EIA.
Longwall mining
The other underground mining method commonly used in the United
States is the longwall mining method. ICG does not currently
have any longwall mining operations, but expects to use this
mining method in the development for two of its undeveloped
mining properties in West Virginia. In longwall mining, a
rotating drum is trammed mechanically across the face of coal
and a hydraulic system supports the roof of the mine while it
advances through the coal. Chain conveyors then move the
loosened coal to an underground mine conveyor system for
delivery to the surface.
Surface mining
Surface mining is used when coal is found close to the surface.
In 2004, approximately 64% of our produced and processed coal
volume came from surface mines. This method involves the removal
of overburden (earth and rock covering the coal) with heavy
earth moving equipment and explosives, loading out the coal,
replacing the overburden and topsoil after the coal has been
excavated and reestablishing vegetation and plant life and
making other improvements that have local community and
environmental benefit. Overburden is typically removed at our
mines using large, rubber-tired diesel loaders. Seam recovery
for surface mining is typically between 80% and 90%.
Productivity depends on equipment, geological composition and
mining ratios and averages 4.2 tons per employee per hour
in eastern regions of the United States, according to the EIA.
We use the following four types of surface mining methods.
Truck-and-shovel/loader mining
Truck-and-shovel/loader mining is a surface mining method that
uses large shovels or loaders to remove overburden which is used
to backfill pits after coal removal. Shovels or loaders load
coal into haul trucks for transportation to a preparation plant
or unit train loadout facility. Seam recovery using the
truck-and-shovel/ loader mining method is typically 85% or more.
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Dragline mining
Dragline mining is a surface mining method that uses large
capacity draglines to remove overburden to expose the coal
seams. Shovels load coal in haul trucks for transportation to a
preparation plant or unit train loadout facility. Seam recovery
using the dragline method is typically 85% or more and
productivity levels are similar to those for
truck-and-shovel/loader mining.
Highwall mining
Highwall mining is a surface mining method generally utilized in
conjunction with truck-and-shovel/ loader surface mining. At the
highwall exposed by the truck-and-shovel/ loader operation a
modified continuous miner with an attached beltline system cuts
horizontal passages from the highwall into a seam. These
passages can penetrate to a depth of up to 1,600 feet. This
method typically can recover up to 65% of the reserve block
penetrated.
Auger mining
Auger mining is a surface mining method generally utilized in
conjunction with truck-and-shovel/ loader operations. At the
highwall exposed by a truck-and-shovel/ loader operation, a
spiral steel auger bit is used to bore a horizontal hole into
the coal seam up to a depth of 400 feet. The auger also
conveys the coal to the highwall. Seam recovery using auger
mining is typically 33%.
Coal preparation and blending
Depending on coal quality and customer requirements, raw coal
may in some cases be shipped directly from the mine to the
customer. Generally, raw coal from mountaintop removal, contour
and strip mines can be shipped in this manner. However, the
quality of most underground raw coal does not allow it to be
shipped directly to the customer without processing in a
preparation plant. Preparation plants separate impurities from
coal. This processing upgrades the quality and heating value of
the coal by removing or reducing sulfur and ash-producing
materials, but entails additional expense and results in some
loss of coal. Coals of various sulfur and ash contents can be
mixed or "blended" at a preparation plant or loading
facility to meet the specific combustion and environmental needs
of customers. Coal blending helps increase profitability by
reducing the cost of meeting the quality requirements of
specific customer contracts, thereby optimizing contract revenue.
COAL CHARACTERISTICS
In general, coal of all geological composition is characterized
by end use as either steam coal or metallurgical coal. Heat
value and sulfur content are the most important variables in the
profitable marketing and transportation of steam coal, while
ash, sulfur and various coking characteristics are important
variables in the profitable marketing and transportation of
metallurgical coal. We mine, process, market and transport
bituminous and sub-bituminous coal, characteristics of which are
described below.
Heat value
The heat value of coal is commonly measured in Btus per pound of
coal. A Btu is the amount of heat needed to raise one pound of
water one degree Fahrenheit. Coal found in the Eastern and
Midwestern regions of the United States tends to have a heat
content ranging from 10,000 to 14,000 Btus per pound, as
received. As received Btus per pound includes the weight of
moisture in the coal on an as sold basis. Most coal found in the
Western United States ranges from 8,000 to 10,000 Btus per
pound, as received.
Lignite coal
Lignite coal is a brownish-black coal with a heat content that
generally ranges from 4,000 to 8,000 Btus per pound. Major
lignite operations are located in Louisiana, Montana, North
Dakota and Texas. Lignite is used almost exclusively in power
plants located adjacent to or near these mines
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because any significant transportation costs, coupled with
mining costs, would render its use uneconomical.
Sub-bituminous coal
Sub-bituminous coal is a black coal with a heat content that
ranges from 8,300 to 11,500 Btus per pound. Most
sub-bituminous reserves are located in Alaska, Colorado,
Montana, New Mexico, Washington and Wyoming. Sub-bituminous coal
is used almost exclusively by electricity generators and some
industrial consumers.
Bituminous coal
Bituminous coal is a relatively soft black coal with a heat
content that ranges from 10,000 to 14,000 Btus per pound.
This coal is located primarily in Appalachia, Arizona, Colorado,
the Midwest and Utah, and is the type most commonly used for
electricity generation in the United States. Bituminous coal is
also used for industrial steam purposes by utility and
industrial customers, and as metallurgical coal in steel
production. Coal used in metallurgical processes has higher
expansion/contraction characteristics than steam coal.
Anthracite coal
Anthracite coal is a hard coal with a heat content that can
range from 14,000 to 15,000 Btus per pound. There is a
limited number of anthracite deposits primarily located in the
Appalachian region of Pennsylvania. Anthracite is used primarily
for utility, industrial and home heating purposes.
Sulfur content
Sulfur content can vary from seam to seam and sometimes within
each seam. When coal is burned, it produces sulfur dioxide, the
amount of which varies depending on the chemical composition and
the concentration of sulfur in the coal. Compliance coal is coal
which, when burned, emits 1.2 pounds or less of sulfur
dioxide per million Btus and complies with the requirements of
the Clean Air Act Acid Rain program. Low sulfur coal is coal
which, when burned, emits approximately 1.6 pounds or less
of sulfur dioxide per million Btus.
Sub-bituminous coal typically has a lower sulfur content than
bituminous coal, but some of our bituminous coal in West
Virginia also has a low sulfur content.
High sulfur coal can be burned in electric utility plants
equipped with sulfur-reduction technology, such as scrubbers,
which can reduce sulfur dioxide emissions by up to 90%. Plants
without scrubbers can burn high sulfur coal by blending it with
lower sulfur coal, or by purchasing emission allowances on the
open market, which credits allow the user to emit a ton of
sulfur dioxide. Each emission allowance permits the user to emit
a ton of sulfur dioxide. By 2000, 90,000 megawatts of electric
generation capacity utilized scrubbing technologies. According
to the EIA, by 2025, an additional 27,000 megawatts of electric
generation capacity will have installed scrubbers. Additional
scrubbing will provide new market opportunities for our mid
sulfur coal. All new coal-fired electric utility generation
plants built in the United States will use clean coal-burning
technology.
Other characteristics
Ash is the inorganic residue remaining after the combustion of
coal. As with sulfur content, ash content varies from coal seam
to coal seam. Ash content is an important characteristic of coal
because it increases transportation costs and electric
generating plants must handle and dispose of ash following
combustion.
Moisture content of coal varies by the type of coal, the region
where it is mined and the location of coal within a seam. In
general, high moisture content decreases the heat value per
pound of coal, thereby increasing the delivered cost per Btu.
Moisture content in coal, as sold, can range from approximately
5% to 30% of the coal's weight.
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COAL RESERVES
"Reserves" are defined by SEC Industry Guide 7 as that
part of a mineral deposit which could be economically and
legally extracted or produced at the time of the reserve
determination. "Proven (Measured) Reserves" are
defined by SEC Industry Guide 7 as reserves for which
(1) quantity is computed from dimensions revealed in
outcrops, trenches, workings or drill holes; grade and/or
quality are computed from the results of detailed sampling and
(2) the sites for inspection, sampling and measurement are
spaced so closely and the geologic character is so well defined
that size, shape, depth and mineral content of reserves are
well-established. "Probable reserves" are defined by
SEC Industry Guide 7 as reserves for which quantity and grade
and/or quality are computed from information similar to that
used for proven (measured) reserves, but the sites for
inspection, sampling, and measurement are farther apart or are
otherwise less adequately spaced. The degree of assurance,
although lower than that for proven (measured) reserves, is
high enough to assume continuity between points of observation.
We estimate that there are approximately 242 million tons
of coal reserves that can be developed by our existing
operations which will allow us to maintain current production
levels for an extended period of time. ICG Natural Resources,
LLC and CoalQuest own and lease all of our reserves that are not
currently assigned to or associated with one of our mining
operations. These reserves contain approximately
645 million tons of mid to high Btu, low and high sulfur
coal located in Kentucky, West Virginia, Maryland, Illinois,
Pennsylvania and Virginia. Our multi-region base and flexible
product line allows us to adjust to changing market conditions
and sustain high sales volume by supplying a wide range of
customers.
Our total coal reserves could support current production levels
for more than 49 years. The following table provides the
"quality" (average Btu content, sulfur content and ash
content per pound) of our coal reserves as of January 1,
2005:
Quality characteristics
(as received)
Recoverable
reserves proven
Total tons
and probable
(in millions
Tons by market
as of 1/1/2005
of tons)
Reserve
Heat
classification
(in millions
life
content
Sulfur
Ash
Mining companies
State
of tons)
(1)
Owned
Leased
(years)
(Btu/lb)
(%)
(%)
Steam
Metallurgical
(4)(5)
Northern Appalachia:
Vindex Energy Corporation
MD
10.64
0.00
10.64
14.2
11,500-
13,000
1.2%-
2.0%
7.0%- 19.0%
7.98
2.66
Patriot Mining Company
WV, PA
1.05
0.71
0.34
1.4
11,700
2.1%
16.2%
1.05
0.00
Spruce Fork Division
WV
48.57
46.70
1.88
19.4
13,000
1.2%
9.0%
1.30
47.27
Philippi Development Division
WV
40.97
32.34
8.63
20.5
13,100
1.4%
8.3%
0.00
40.97
Harrison Division
WV
17.51
0.23
17.28
9.7
12,500
3.2%
12.5%
17.51
0.00
Mount Storm Division
WV, MD
6.01
0.47
5.54
10.0
13,200
1.0%
9.0%
0.00
6.01
Sycamore Group, LLC
WV
1.21
0.17
1.04
2.4
12,500
3.2%
12.0%
1.21
0.00
CoalQuest Development LLC
WV
194.30
194.30
0.00
21.6
13,000
1.3%
9.8%
32.70
161.60
Northern Appalachia Total
320.27
274.92
45.35
61.75
258.52
Central Appalachia:
ICG - Knott Country
KY
6.73
5.81
0.92
5.2
12,700
1.3%
8.4%
6.73
0.00
ICG - Hazard
KY
71.38
0.23
71.15
11.9
12,000
1.6%
11.2%
71.38
0.00
ICG - East Kentucky
KY
2.62
0.00
2.62
2.0
12,400
1.2%
12.2%
2.62
0.00
ICG - Eastern
WV
23.69
7.27
16.42
7.4
12,300
1.1%
12.2%
23.69
0.00
ICG - Natural
    Resources
(2)
WV
44.90
2.20
42.70
NA
12,000
0.8%
12.2%
44.90
0.00
ICG - Natural
    Resources
(3)
KY
4.40
0.00
4.40
NA
12,000
1.1%
12.0%
4.40
0.00
Beckley-Smokeless
    Division
(4)
WV
28.97
1.28
27.70
29.0
13,800
0.7%
4.8%
0.00
28.97
Anker Virginia Mining Company
VA
27.50
0.00
27.50
27.5
14,000
0.6%
4.0%
0.00
27.50
Central Appalachia Total
210.19
16.79
193.71
153.72
56.47
Illinois Basin:
ICG - Illinois
IL
29.63
11.38
18.25
12.9
10,500
3.2%
9.5%
29.63
0.00
ICG - Natural Resources
IL
326.71
309.42
17.29
NA
11,000
3.0%
9.0%
326.71
0.00
Illinois Basin Total
356.34
320.80
35.64
356.34
0.00
Total Reserves
886.81
612.51
274.3
571.81
314.99
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(1)
Recoverable reserves represent the amount of coal reserves
    that can actually be recovered taking into account all mining
    and preparation losses involved in producing a saleable product
    using existing methods under current law. The reserve numbers
    set forth in this table exclude reserves for which we have
    leased our mining rights to third parties. Reserve information
    reflects a moisture factor of approximately 6.0%. This moisture
    factor represents the average moisture present on our delivered
    coal.
(2)
ICG - Natural Resources (Jenny's Creek)
(3)
ICG - Natural Resources (Mount Sterling)
(4)
Beckley Smokeless and Anker Virginia meet historical
    metallurgical coal quality specifications.
(5)
Currently, ICG reports selling coal with ash and sulfur
    contents as high as 10% and 1.5%, respectively into the current
    metallurgical market from the Vindex Energy, Spruce Fork, and
    Phillipi Divisions. Similarly, all production Mount Storm and
    portions of Hillman could be sold on this metallurgical market
    when production begins.
Our reserve estimate is based on geological data assembled and
analyzed by our staff of geologists and engineers. Reserve
estimates are periodically updated to reflect past coal
production, new drilling information and other geologic or
mining data. Acquisitions or sales of coal properties will also
change the reserve base. Changes in mining methods may increase
or decrease the recovery basis for a coal seam as will plant
processing efficiency tests. We maintain reserve information in
secure computerized databases, as well as in hard copy. The
ability to update and/or modify the reserve base is restricted
to a few individuals and the modifications are documented.
Actual reserves may vary substantially from the estimates.
Estimated minimum recoverable reserves are comprised of coal
that is considered to be merchantable and economically
recoverable by using mining practices and techniques prevalent
in the coal industry at the time of the reserve study, based
upon then-current prevailing market prices for coal. We use the
mining method that we believe will be most profitable with
respect to particular reserves. We believe the volume of our
current reserves exceeds the volume of our contractual delivery
requirements. Although the reserves shown in the table above
include a variety of qualities of coal, we presently blend coal
of different qualities to meet contract specifications. See
"Risk factors—Risks relating to our business."
Periodically, we retain outside experts to independently verify
our coal reserve base. The most recent review was completed
during the first quarter of 2005 and covered all of our
reserves. The results verified our reserve estimates, with very
minor adjustments, and included an in-depth review of our
procedures and controls. As of January 1, 2005, Marshall
Miller & Associates, Inc. confirmed our reserve base of
887 million tons on a consolidated basis.
We currently own approximately 69% of our coal reserves, with
the remainder of our coal reserves subject to leases from
third-party landowners. Generally, these leases convey mining
rights to the coal producer in exchange for a percentage of
gross sales in the form of a royalty payment to the lessor,
subject to minimum payments. Leases generally last for the
economic life of the reserves. The average royalties paid by us
for coal reserves from our producing properties was $1.57 per
ton in 2004, representing approximately 3.8% of our coal sales
revenue in 2004. Consistent with industry practice, we conduct
only limited investigations of title to our coal properties
prior to leasing. Title to lands and reserves of the lessors or
grantors and the boundaries of our leased priorities are not
completely verified until we prepare to mine those reserves.
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Coal Resources
Coal resources are coal-bearing bodies that have been
sufficiently sampled and analyzed in trenches, outcrops,
drilling, and underground workings to assume continuity between
sample points, and therefore warrants further exploration stage
work. However, this coal does not qualify as a commercially
viable coal reserve as prescribed by SEC standards until a final
comprehensive evaluation based on unit cost per ton,
recoverability, and other material factors concludes legal and
economic feasibility. Resources may be classified as such by
either limited property control or geologic limitations, or both.
The following table provides the "quality" (average
Btu content, sulfur content and ash content per pound) of our
coal resources as of January 1, 2005:
Quality characteristics
(as received)
Recoverable
Tons by market
resources
Resource
Heat
classification
as of 1/1/2005
life
content
Sulfur
Ash
Mining company
State
(in millions of tons)
(1)
(years)
(Btu/lb)
(%)
(%)
Steam
Metallurgical
(4)
Northern Appalachia:
Patriot Mining Company
WV, PA
1.89
2.5
1.89
0.00
Spruce Fork Division
WV
2.42
1.0
13,000
1.2
%
9.0
%
2.42
0.00
Philippi Development Division
WV
2.40
1.2
13,100
1.4
%
8.3
%
2.40
0.00
Harrison Division
WV
1.28
0.7
12,500
3.2
%
12.5
%
1.28
0.00
CoalQuest Development LLC
WV
37.04
4.1
37.04
0.00
Upshur Property
WV
92.96
46.5
8,000
2.0
%
43.0
%
92.96
0.00
Northern Appalachia Total
137.99
137.99
0.00
Central Appalachia:
ICG – Knott County
KY
0.00
12,700
1.3
%
8.4
%
0.00
0.00
ICG – Hazard
KY
3.00
12,000
1.6
%
11.2
%
3.00
0.00
ICG – East Kentucky
KY
0.00
12,400
1.2
%
12.2
%
0.00
0.00
ICG – Eastern
WV
0.02
12,300
1.1
%
12.2
%
0.02
0.00
ICG – Natural
    Resources
(2)
WV
0.22
12,000
0.8
%
12.2
%
0.22
0.00
ICG – Natural
    Resources
(3)
KY
0.01
12,000
1.1
%
12.0
%
0.01
0.00
Beckley – Smokeless
    Division
(4)
WV
1.88
1.9
13,800
0.7
%
4.8
%
0.00
1.88
Anker Virginia Mining Company
VA
2.57
5.1
13,500
0.6
%
7.4
%
2.57
0.00
Central Appalachia Total
7.70
5.82
1.88
Illinois Basin
ICG – Illinois
IL
38.47
10,500
3.2
%
9.5
%
38.47
0.00
ICG – Natural Resources
IL
522.52
11,000
3.0
%
9.0
%
522.52
0.00
Illinois Basin Total
560.99
560.99
0.00
Total Resources
706.68
704.80
1.88
(1)
Currently, ICG reports selling coal with ash and sulfur
    contents as high as 10% and 1.5%, respectively into the current
    metallurgical market from the Vindex Energy, Spruce Fork, and
    Philippi Divisions. Similarly, all of Mount Storm and portions
    of Hillman can be sold on this metallurgical market.
(2)
ICG – Natural Resources (Jenny's Creek)
(3)
ICG – Natural Resources (Mount Sterling)
(4)
Beckley Smokeless and Anker Virginia meet historical
    metallurgical coal quality specifications.
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OPERATIONS
As of December 31, 2004, we operated a total of 13 surface
and 10 underground coal mines located in Kentucky, Maryland,
West Virginia and Illinois. Historically, approximately 36% of
our production has come from surface mines, and the remaining
production has come from our underground mines. These mining
facilities include 8 preparations plants, each of which receive,
blend, process and ship coal that is produced from one or more
of our 23 active mines. Our underground mines generally consist
of one or more single or dual continuous miner sections which
are made up of the continuous miner, shuttle cars, roof bolters
and various ancillary equipment. Our surface mines are a
combination of mountain top removal, dragline, highwall contour
and cross ridge operations using truck/loader equipment fleets
along with large production tractors. Most of our preparation
plants are modern heavy media plants that generally have both
coarse and fine coal cleaning circuits. We currently own most of
the equipment utilized in our mining operations. We employ
preventive maintenance and rebuild programs to ensure that our
equipment is modern and well maintained. The mobile equipment
utilized at our mining operation is scheduled to be replaced on
an on-going basis with new, more efficient units during the next
five years. Each year we endeavor to replace the oldest units,
thereby maintaining productivity while minimizing capital
expenditures. The following table provides summary information
regarding our principal mining complexes as of December 31,
2004.
Number and
type of mines
Tons
Preparation
Under-
Mining
produced
Mining complex
Location
plant(s)
ground
Surface
Total
method
(a)
Transportation
in 2004
(in thousands)
ICG Eastern, LLC
Cowen, WV
1
0
1
1
MTR-DL-TSL
Rail
2,712.1
ICG Hazard, LLC
Hazard, KY
1
(1)
0
6
6
R&P-CM, HW
Rail
3,978.0
ICG Knott County, LLC
Kite, KY
1
4
0
4
MTR-TSL CM
Rail
1,386.6
ICG East Kentucky, LLC
Pike Co., KY
0
0
1
1
MTR-TSL
Rail
1,576.3
ICG Illinois, LLC
Williamsville, IL
1
1
0
1
R&P-CM
Truck
2,117.6
Vindex Energy Corporation
Garrett Co., MD
1
0
2
2
CRM & CTR
Truck, Rail
(2)
170.7
Patriot Mining Company
Monongalia Co., WV
0
0
3
3
CTR
Barge, Rail
921.3
(3)
Spruce Fork Division
Upshur Co., WV
1
2
0
2
R&P
Rail
1,213.9
Philippi Development Division
Barbour Co., WV
1
(4)
1
0
1
R&P
Rail
255.4
Beckley-Smokeless Division
Raleigh Co., WV
1
0
0
0
R&P
Rail
0.0
(2)
Sycamore Group
Harrison Co., WV
0
2
0
2
R&P
Truck
259.3
(5)(6)
CoalQuest Development LLC
Taylor Co., WV
0
0
0
0
R&P & LW
Rail
0.0
(7)
Juliana Complex
Webster Co., WV
1
0
0
0
R&P & CTR
Rail
0.0
(a)
CRM = Cross Ridge Mining; CTR = Contour Mining;
    R&P = Room and Pillar; LW = Longwall; MTR =
    Mountain Top Removal; DL = Dragline; HW = Highwall;
    CM = Continuous Miner; TSL = Truck and Shovel/
    Loader
(1)
Expected to begin operation in second half of 2005
(2)
Utilizing third-party loadout
(3)
Including waste-fuel
(4)
Currently utilizing one circuit
(5)
Mine permitted but undeveloped
(6)
Represents Anker's 50% share in The Sycamore Group LLC
    joint venture plus the Sycamore No. 2 mine, expected to
    begin production in 2005
(7)
Undeveloped, permit in progress
The following provides a description of the operating
characteristics of the principal mines and reserves of each of
our mining operations.
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MINING OPERATIONS
Northern and Central Appalachia mining operations
Our Northern and Central Appalachian mining facilities are
strategically located across West Virginia, Kentucky, Maryland,
Pennsylvania and Virginia and are used to produce and ship coal
to its customers located primarily in the eastern half of the
United States. We believe that the quality and experience of our
workforce in Northern and Central Appalachia are among the
highest in the coal mining industry. All of our Northern and
Central Appalachia mining operations are union free.
Our mines in Central Appalachia produced 9.7 million tons
of coal in 2004 and our mines in Northern Appalachia produced
2.8 million tons of coal in 2004. The coal produced in 2004
was, on average, 12,207 Btu/lb, 1.2% sulfur and 12.4% ash by
content. This year we estimate that our mines in Central
Appalachia region will produce approximately 10.5 million
tons. This year we estimate that our mines in the Northern
Appalachian region will produce approximately 4.5 million
tons. This high Btu, low sulfur coal is very marketable to major
utility customers throughout the eastern United States.
Shipments to electric utilities, accounted for approximately 78%
of the coal shipped by these mines in 2004, compared to 80% of
shipments in 2003. Within each mining complex, mines have been
developed at strategic locations in proximity to our preparation
plants and rail shipping facilities. The mines located in
Central Appalachia ship the majority of their coal by the
Norfolk Southern and CSX rail lines, although production may
also be delivered by truck or barge, depending on the customer.
ICG Natural Resources, LLC owns two idle river docks along the
Kanawha River from which we could ship coal to our customers.
As of December 31, 2004, these mines had 1,425 employees.
ICG Eastern, LLC
ICG Eastern, LLC operates the Birch River surface mine, located
60 miles east of Charleston, near Cowen in Webster County,
West Virginia. Birch River started operations in 1990 under
Shell Mining Company, was purchased by Zeigler Coal Holding
Company, or "Zeigler," in 1992, and was subsequently
acquired by AEI Resources, Inc. from Zeigler in 1998.
Birch River is extracting coal from five distinct coalbeds:
(i) Freeport; (ii) Upper Kittanning; (iii) Middle
Kittanning; (iv) Upper Clarion and (v) Lower Clarion.
Coal mined from this operation has an average sulfur content of
1.1%, an average ash content of 12.2% and an average Btu content
of 12,300. We estimate that Birch River controls
23.7 million tons of coal reserves.
Approximately 69% of the coal reserves are leased, while
approximately 31% are owned in fee. Most of the leased reserves
are held by four lessors. The leases are retained by annual
minimum payments and by tonnage-based royalty payments. All
leases can be renewed until all mineable and merchantable coal
has been exhausted.
Overburden is removed by a dragline, shovel, front-end loaders,
end dumps and bulldozers. Approximately one-third of the coal
can be marketed run-of-mine, while the other two-thirds is
washed at Birch River's preparation plant. Coal is
transported by conveyor belt from the preparation plant to Birch
River's rail loadout, which is served by CSX. The loadout
is a batch weigh system capable of loading unit trains in less
than four hours.
The preparation plant is rated at 800 raw tons per hour. The
preparation plant is comprised of heavy media vessels, heavy
media cyclones, and spirals. The plant, overland conveyor
system, and rail loadout are in excellent condition.
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ICG Hazard, LLC
ICG Hazard, LLC is currently operating six surface mines, a unit
train loadout (Kentucky River Loading) and other support
facilities in eastern Kentucky, near Hazard. The coal reserves
and operations were acquired in late-1997 and 1998 by AEI
Resources.
ICG Hazard's six surface mines include: (i) County
Line; (ii) Flint Ridge; (iii) Vicco; (iv) Rowdy
Gap; (v) Tip Top; and (vi) Thunder Ridge. The coal
from these mines is being extracted from the Hazard 11,
Hazard 10, Hazard 9, Hazard 8, Hazard 7 and
Hazard 5A seams, and has an average sulfur content of 1.2%,
an average ash content of 12% and an average Btu content of
12,000. Nearly all of the coal is marketed run-of-mine. We
estimate that ICG Hazard controls 71.4 million tons of
coal reserves, plus 3.0 million tons of coal that is
classified as resources. Most of the property has been
adequately explored, but additional core drilling will be
conducted within specified locations to better define the
reserve base.
Approximately 99.7% of ICG Hazard's reserves are
leased, while 0.3% are owned in fee. Most of the leased reserves
are held by seven lessors. In several cases, ICG Hazard has
multiple leases with each lessor. The leases are retained by
annual minimum payments and by tonnage-based royalty payments.
Most leases can be renewed until all mineable and merchantable
coal has been exhausted.
Overburden is removed by front-end loaders, end dumps,
bulldozers and blast casting. Coal is transported from the mines
to the Kentucky River Loading rail loadout by on-highway trucks.
The loadout is served by CSX, and is a batch weigh system
capable of loading 120-car trains in less than three hours. Most
of the coal is transported by rail, but some coal is direct
shipped to the customer by truck from the mine pits.
An existing preparation plant structure is being extensively
upgraded. It will process coal from ICG Hazard's new
Flint Ridge underground mine complex. Flint Ridge will be a room
and pillar mine, producing coal from the Hazard 8 coalbed.
It will utilize continuous miners and shuttle cars. Both the
plant and the underground mine are scheduled to begin operation
in July 2005.
ICG Knott County, LLC
ICG Knott County, LLC operates four underground mines, the
Supreme Energy preparation plant and rail loadout, and other
facilities necessary to support the mining operations in eastern
Kentucky, near Kite. ICG Knott County was acquired by
AEI Resources, Inc. from Zeigler in 1998.
ICG Knott County is producing coal from the Hazard 4 and
the Elkhorn 3 coalbeds. Three mines are operating in the
Hazard 4 coalbed: Calvary, Clean Energy and Elk Hollow. The
Classic mine is operating in the Elkhorn 3 coalbed. The
coal produced from the four mines has an average sulfur content
of 1.3%, an average ash content of 9%, and an average Btu
content of 12,700. We estimate these properties contain
6.7 million tons of coal reserves. Most of the property has
been extensively explored, but additional core drilling will be
conducted within specified locations to better define the
reserve base.
Approximately 86% of ICG Knott County's reserves are
owned in fee, while approximately 14% are leased. The leases are
retained by annual minimum payments and by tonnage-based royalty
payments. The leases can be renewed until all mineable and
merchantable coal has been exhausted.
ICG Knott County's four underground mines are room and
pillar operations, utilizing continuous miners and shuttle cars.
Nearly all of the run-of-mine coal is processed at the Supreme
Energy preparation plant; some of the Hazard 4 run-of-mine
coal is blended with the washed coal.
Nearly all of ICG Knott County's coal is transported
by rail. The loadout is a batch weigh system that is served by
CSX.
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ICG East Kentucky, LLC
ICG East Kentucky, LLC is a surface mining operation located in
Pike County, Kentucky, near Phelps. ICG East Kentucky
currently operates the Blackberry surface mine and the Phelps
Loadout. ICG East Kentucky was acquired by
AEI Resources in the second quarter of 1999.
Blackberry is an area surface mine that produces coal from three
separate coalbeds: (i) Taylor; (ii) Fireclay; and
(iii) Lower Fireclay. All of the coal is sold run-of-mine,
with an average sulfur content of 1.2%, an average ash content
of 12% and an average Btu content of 12,400.
We estimate that the Blackberry mine controls 2.6 million
tons of coal reserves; no additional exploration is required.
After Blackberry is depleted, ICG East Kentucky will begin
mining the Mount Sterling property, which contains an additional
4.4 million tons of coal reserves. Mount Sterling is
located in Martin and Pike Counties, Kentucky near the Tug Fork
River. Although Mount Sterling is expected to be mined by
ICG East Kentucky, the property is held by ICG Natural
Resources, LLC. The leases are retained by annual minimum
payments and by tonnage-based royalty payments. The leases can
be renewed until all mineable and merchantable coal has been
exhausted.
Overburden at the Blackberry mine is removed by front end
loaders, end dumps, bull dozers and blast casting. Coal from the
pits is transported by truck to the Phelps Loadout, which is a
batch weigh system.
Vindex Energy Corporation
Vindex Energy Corporation operates two surface mines, the Island
mine and the Douglas mine, in the Potomac Basin in Garrett
County, Maryland. The reserves at Vindex are leased primarily
from one major landowner. The lease expires in 2010 and is
renewable on a year-by-year basis with a minimum annual holding
cost. Vindex Energy is a cross-ridge mining operation extracting
coal from the Upper Freeport, Middle Kittanning and Upper
Kittanning seams. Both mines are truck-and-shovel/loader mining
operations utilizing dozers, hydraulic excavators, loaders and
trucks. Operations are conducted with relatively new equipment
and exploration and development is conducted on a continual
basis ahead of mining.
Vindex has been operating its mines at full production since the
first quarter 2005, and it is projected that the mines will
produce a combined 654,000 tons in 2005. Approximately 20%
of the raw coal production is screened at the Island Mine for
sales directly to the customers. Such an arrangement increases
our margins by reducing transportation costs to and from
preparation plants, resulting in cost savings. The remainder of
the coal is processed at our 200 TPH heavy media
preparation plant located near Mount Storm, West Virginia, where
the product is shipped to the customer by either truck or rail
using a third-party rail loading facility.
Four new surface mines are under development in the Potomac
Basin in Garrett County, Maryland. Anker anticipates mining to
commence at one of these operations in 2007, an additional two
in 2008 and the last mine producing by 2009. Like the Island and
Douglas mines, these four mines will utilize
truck-and-shovel/loaders and will be extracting coal from the
Bakerstown, Upper Freeport, Mahoning, Upper Kittanning and
Middle Kittanning seams. These future reserves are currently
being explored and permitted for mining.
Patriot Mining Company
Patriot Mining Company consists of three active surface mines
near Morgantown, West Virginia: Crown No. 2 and New Hill
East located in Monongalia County, West Virginia and Keener
located in Green County, Pennsylvania. The majority of the coal
and surface is leased under renewable contracts with small
annual minimum holding costs. Patriot's mines are
extracting coal from the Waynesburg seam using contour mining
methods with dozers, loaders and trucks. As mining progresses,
reserves
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are being acquired and permitted for future operations. The
mining equipment is maintained in good condition.
We have projected that Patriot's three mines will produce
approximately 750,000 tons in 2005. Patriot is planning six
new mines on property currently being acquired, explored and
permitted that will begin phasing into production starting next
year through 2009. These mines will also extract coal from the
Waynesburg seam using contour mining methods with dozers,
loaders and trucks.
Spruce Fork Division— Anker West Virginia Mining
Company
The Spruce Fork Division currently consists of two active
underground mines; Spruce No. 1 and Sago located in Upshur
County, West Virginia, near the town of Buckhannon. The Spruce
No. 1 Mine is extracting coal from the Upper Freeport seam
and the Sago mine is extracting coal from the Middle Kittanning
seam. Nearly all of the reserves in the Spruce Fork Division are
owned by ICG. The Spruce No. 1 Mine opened in 1997 and we
anticipate that its reserves will be depleted sometime during
the third quarter of 2005. The Sago mine, which was originally
opened in 1999 as a contract mine, closed in 2002, and then
reopened as a captive operation in the first quarter of 2004.
Sago is expected to reach full production by the fourth quarter
of 2005.
Both operations utilize the room-and-pillar mining method with
continuous miners and shuttle cars for coal removal from the
face. The Sago mine was re-opened using brand new mining
equipment and infrastructure from the original portal location.
All of the coal extracted from these mines is processed at a
rate of nearly 750 TPH through the nearby Sawmill Run heavy
media preparation plant where coal is then primarily shipped by
CSX rail, although some coal is trucked to local industrial
customers.
We have projected that the Spruce Fork Division will produce
approximately 1.3 million tons of coal in 2005. The
Sago 3 mine, scheduled for production in 2007, is a
replacement for the Spruce No. 1 Mine. The reserves at
Spruce Fork have characteristics that make it marketable to both
steam and metallurgical coal customers.
Sycamore Group
Sycamore Group consists of The Sycamore Group LLC and the
Harrison Division. The Sycamore Group LLC is a joint venture
between ICG and Emily Gibson Coal Company. The joint venture
operates one underground mine, the Sycamore No. 1 mine
(a.k.a. the Fairfax No. 3 Mine), in Harrison County,
West Virginia, approximately ten miles west of Clarksburg, where
coal is extracted from the Pittsburgh seam by room-and-pillar
mining methods with continuous miners and shuttle cars for coal
extraction.
The majority of the coal is leased with an annual minimum
holding cost. It is anticipated that this reserve will be
depleted and the mine closed during the second quarter of 2006.
Operations are conducted utilizing the room and pillar mining
method. Newly rebuilt mining equipment was recently installed to
facilitate the complete extraction of the remaining reserves. We
expect that ICG's 50% share of the 2005 production to be
approximately 210,000 tons, all of which is sold on a raw
basis and shipped to Allegheny Power Service Corporation's
Harrison Power Station by truck.
The Harrison Division consists of the Sycamore 2 Mine,
which is located in Harrison County, West Virginia,
approximately ten miles west of Clarksburg The Sycamore 2
Mine is expected to begin producing coal from the Pittsburgh
seam using room-and-pillar mining methods with continuous miners
and shuttle cars in the second quarter of 2005. The reserve is
primarily leased from one major landowner with an annual minimum
holding cost and an automatic renewal based on an annual minimum
production of 250,000 tons. The coal is being accessed with
a box-cut and will be mined utilizing room and pillar mining
methods with new mining equipment.
The planned annual production is expected to increase from
approximately 430,000 tons in 2005 to over 1.6 million
tons in 2006. The coal produced from Sycamore No. 2 will be
sold on a raw basis
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and shipped to Allegheny Power Service Corporation's
Harrison Power Station by truck under a new life of mine, total
production coal supply agreement.
Philippi Development Division— Anker West Virginia
Mining Company
The Philippi Development Division operates the Sentinel mine, in
Barbour County, West Virginia near the town of Philippi. The
mine was acquired by Anker in 1990 and has been operating ever
since. Historically, coal was extracted from the Lower
Kittanning seam; however, mining is currently conducted in the
Upper Kittanning seam by room-and-pillar mining method with a
new low-seam continuous haulage mining system which was
installed in the fourth quarter of 2004. The current operations
are expected to be supplemented with a second continuous haulage
mining system in the first quarter of 2007.
Coal is fed directly from the mine to a 600 TPH heavy media
preparation plant and loadout facility served by the CSX
railroad. The product can be shipped on steam or metallurgical
markets. The Sentinel Mine is projected to produce approximately
317,000 tons in 2005. Production is expected to increase to
634,000 tons by 2008 with the addition of the second continuous
haulage mining system.
New Appalachian mine developments
Hillman property
The Hillman property, located in Central Appalachia, includes
194 million tons of deep coal reserves of both steam and
metallurgical quality coal in the Lower Kittanning seam covering
approximately 65,000-acres located predominantly in Taylor
County, West Virginia, near Grafton. The reserve extends into
parts of Barbour, Marion, and N. Harrison Counties as well. ICG
owns the Hillman coal reserve in addition to nearly
4,000 acres of surface property to accommodate the
development of three projected mining operations. In addition to
the Lower Kittanning reserves, we also own significant coal
resources in the Kittanning, Freeport, Clarion and Mercer seams
on the Hillman property.
The Hillman reserves are currently being permitted for the
development of three mining operations; two longwall and one
room and pillar. Production from the first complex is projected
to begin in 2007 with a full annual production of 9 million
tons expected from the three mines by 2010.
Big Creek property
Our Big Creek reserve, located in Northern Appalachia, covers
10,000 acres of leased coal lands located north of the town of
Richlands in Tazewell County, Virginia. Total recoverable
reserves are 27.5 million tons in the Jawbone, Greasy Creek
and War Creek seams. The largest coal block is a deep reserve in
the War Creek seam, which is a high-quality metallurgical coal
ranging from low to mid vol. The Big Creek reserve is all leased
from Southern Regional Industrial Reality. Production from the
permitted War Creek Mine is expected to begin in 2007 utilizing
the room and pillar mining method with continuous haulage. The
mine is expected to reach full production of nearly
1 million tons per year by 2008. The coalbed methane at Big
Creek is currently leased to and being produced by Pocahontas
Gas Partnership with an overriding royalty paid to us.
Bay Hill property
The Bay Hill reserve, located in Northern Appalachia, is a
29 million-ton deep reserve of high quality low-vol
metallurgical coal in the Pocahontas No. 3 seam in Raleigh
County west of Beckley, West Virginia. The southwest portion of
the reserve underlies part of the recently closed BayBeck Mine
in the Beckley seam. Most of the 16,800 acre Bay Hill reserve is
leased from three land companies: Western Pocahontas Properties,
Crab Orchard Coal Company and Beaver Coal Company. We have
permitted a portion of the Bay Hill reserve for deep mine
development.
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Upshur property
The Upshur Property, located in Northern Appalachia, is a
88 million tons of resource owned or controlled by us in
the Middle and Lower Kittanning seams. The resource is surface
mineable at a ratio of slightly greater than 2 to 1.
Both Kittanning seams will be mined as a 7,500 Btu fuel by
extracting all of the coal splits and associated partings. The
low product heat content limits the distance over which the fuel
can be transported and sold; however, the low mining cost makes
Upshur an attractive location for an on-site power plant. Some
preliminary research, including air quality monitoring, has been
completed in association with the future construction of a
circulating fluidized bed power plant at Upshur.
Juliana Complex
Mining on the Juliana property, located in Central Appalachia,
in Webster County, WV, began in 1979 and was stopped in
December 1999. Contour and mountain top removal stripping
methods were utilized to produce coal from the Kittanning and
Upper Freeport seams. In addition, a substantial amount of
deep-mined coal was produced from the Middle Kittanning seam. A
500 TPH preparation facility with 100,000 tons of raw and
clean coal storage and a unit-train loadout was used to process
and load coal on the CSX railroad.
Currently at Juliana, there are two Kittanning deep mine permits
and one surface mine permit in place. Permitted deep and surface
coal resources are 1.2 million tons and 1.9 million
tons, respectively. The ratio for the surface reserve is 17.3 to
1 bulk cubic yard per clean ton. The projected clean coal
quality for deep and surface-mined coal combined is
7.5 ash, 0.82% sulfur and 13,100 Btu, on an as
received basis.
Illinois Basin mining operations
ICG Illinois, LLC operates one large underground coal mine, the
Viper mine, in central Illinois. Viper commenced mining
operations in 1982 as a union free operation for Shell Oil
Company. Viper was acquired by Ziegler in 1992 and subsequently
acquired by Horizon in 1998.
The Viper Mine is working the Illinois No. 5 Seam, also
referred to as the Springfield Seam, with all raw coal
production washed at Viper's preparation plant. Coal mined
from this operation has an average sulfur content of 3.2%, an
average ash content of 9.5% and an average Btu content of
10,500. We estimate that Viper controls approximately
29.6 million tons of coal reserves, plus an additional
38.5 million resource tons. Viper has an ongoing
exploration program to accurately assess floor and roof
conditions within the immediate mine plan.
Approximately two-thirds of the coal reserves are leased, while
one-third is owned in fee. The leases are retained by annual
minimum payments and by tonnage-based royalty payments. The
leases can be renewed until all mineable and merchantable coal
has been exhausted.
The Viper mine is a room and pillar operation, utilizing
continuous miners and shuttle cars. ICG Illinois is one of
the lowest cost and highest productivity mines in the Illinois
Basin. All of the raw coal is processed at Viper's
preparation plant. The clean coal is transported to the
customers by on highway trucks. A major rail line is located a
short distance from the plant, giving Viper the option of
constructing a rail loadout.
ICG Illinois ships by independent trucking companies to utility
and industrial customers located in North Central Illinois.
Shipments to electric utilities account for approximately 71% of
coal sales. Currently 1.7 million tons (80%) of
ICG Illinois' 2005 production is under contract. The
City of Springfield Water, Light and Power purchases nearly 50%
of Viper's production and the contract does not expire
until 2020.
The preparation plant is rated at 800 raw tons per hour. It
is comprised of heavy media vessels, heavy media cyclones, and
spirals.
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The underground equipment, infrastructure, and preparation plant
are well maintained. The underground equipment will be replaced
or rebuilt over the next five years.
OTHER OPERATIONS
Coal sales
In addition to the coal we mine, from time to time we also
opportunistically secure coal purchase agreements with other
coal producers to take advantage of differences in market prices.
ICG ADDCAR Systems, LLC
In our highwall mining business, we operate or lease six systems
using our patented ADDCAR highwall mining system and intend to
build additional ADDCAR systems as required. The ADDCAR highwall
mining system is an innovative and efficient mining system. The
system is often deployed at reserves that cannot be economically
mined by other methods.
In a typical ADDCAR highwall mining system, there is a launch
vehicle, continuous miner, conveyor cars, a stacker conveyor,
electric generator, water tanker for cooling and dust
suppression and a wheel loader with forklift attachment.
A five person crew operates the entire ADDCAR highwall mining
system with control of the continuous miner being performed
remotely by one person from the climate-controlled cab located
at the rear of the launch vehicle. Our system utilizes a
navigational package to provide horizontal guidance, which helps
to control rib width and thus roof stability. Also, the system
provides vertical guidance for control out of seam dilutions.
The ADDCAR highwall mining system is also equipped with high
quality video monitors to provide the operator with visual
displays of the mining process from inside each entry being
mined.
The mining cycle begins by aligning the ADDCAR highwall mining
system onto the desired heading and starting the entry. As the
remotely controlled continuous miner penetrates the coal seam,
ADDCAR conveyor cars are added behind it, forming a continuous
cascading conveyor train. This continues until the entry is at
the planned full depths of up to 1,200 to 1,500 feet. After
retraction, the launch vehicle is moved to the next entry,
leaving a support pillar of coal between entries. This process
recovers as much as 65% of the reserves while keeping all
personnel outside the coal seam in a safe working environment. A
wide range of seam heights can be mined with high production in
seams as low as 3.5 feet and as high as 15 feet in a
single pass. If the seam height is greater than 15 feet,
then multi lifts can be mined to create an unlimited entry
height. The navigational features on the ADDCAR highwall mining
system allow for multi lift mining while ensuring that the
designed pillar width is maintained.
During the mining cycle, in addition to the tractive effort
provided by the crawler drive of the continuous miner the ADDCAR
highwall mining system bolsters the cutting capability of the
machine through an additional pumping force provided by
hydraulic cylinders which transmit thrust to the back of the
miner through blocks mounted on the side of the conveyor cars.
This additional energy allows the continuous miner to achieve
maximum cutting and loading rates as it moves forward into the
seam.
We currently have the exclusive North American distribution
rights for the ADDCAR highwall mining system.
Coalbed methane
Through a joint venture, CoalQuest is planning to produce
coalbed methane which is pipeline quality gas that resides in
coal seams. In the eastern United States, conventional natural
gas fields are typically located in various sedimentary
formations at depths ranging from 2,000 to 15,000 feet. We
believe this is the first such development and exploration in
the region. Exploration companies often put their
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capital at risk by searching for gas in commercially exploitable
quantities at these depths. By contrast, gas in coal seams that
we anticipate drilling is typically in formations less than
2,500 feet deep which are usually better defined than
deeper formations. We believe that this contributes to lower
exploration costs than those incurred by producers that operate
in deeper, less defined formations. We have not filed reserve
estimates with any federal agency.
CUSTOMERS AND COAL CONTRACTS
Customers
Our primary customers are investment grade electric utility
companies primarily in the eastern half of the United States.
The majority of our customers purchase coal for terms of one
year or longer, but we also supply coal on a spot basis for some
of our customers. Our three largest customers for the year ended
December 31, 2004 were Georgia Power Company, Carolina
Power & Light Company and Duke Power and we derived
approximately 51% of our pro forma coal revenues from sales
to our five largest customers.
Long-term coal supply agreements
As is customary in the coal industry, we enter into long-term
supply contracts (exceeding one year in duration) with many of
our customers when market conditions are appropriate. These
contracts allow customers to secure a supply for their future
needs and provides us with greater predictability of sales
volume and sales price. For the year ended December 31,
2004, approximately 66% of our sales volume was delivered
pursuant to long-term contracts. We sell the remainder of our
coal through short-term contracts and on the spot market. We
have also entered into certain brokered transactions to purchase
certain amounts of coal to meet our sales commitments. The
purchase coal contracts expire between 2006 and 2010 and provide
us a minimum of approximately 10.7 million tons of coal
through the remaining lives of the contracts.
As a result of the Horizon bankruptcy process, we were able to
renegotiate certain contracts at significantly higher prices
that reflected the current pricing environment and not purchase
unfavorable contracts. However, we do have certain contracts
which are set below current market rates because Anker entered
into these contracts before the recent rise in the coal prices.
As the net costs associated with producing coal have risen, such
as higher energy, transportation and steel prices, the price
adjustments within several of our long-term contracts have not
caught up to the new coal prices. This has resulted in certain
counterparties to these contracts benefiting from below market
prices for our coal.
The terms of our coal supply agreements result from competitive
bidding and extensive negotiations with customers. Consequently,
the terms of these contracts vary significantly by customer,
including price adjustment features, price reopener terms, coal
quality requirements, quantity parameters, permitted sources of
supply, future regulatory changes, extension options, force
majeure provisions and termination and assignment provisions.
Some of our long-term contracts provide for a pre-determined
adjustment to the stipulated base price at times specified in
the agreement or at other periodic intervals to account for
changes due to inflation or deflation. In addition, most of our
contracts contain provisions to adjust the base price due to new
statutes, ordinances or regulations that impact our costs
related to performance of the agreement. Also, some of our
contracts contain provisions that allow for the recovery of
costs impacted by modifications or changes in the
interpretations or application of any applicable government
statutes.
Price reopener provisions are present in most of our long-term
contracts. These price reopener provisions may automatically set
a new price based on prevailing market price or, in some
instances, require the parties to agree on a new price,
sometimes between a specified range of prices. In a limited
number of agreements, failure of the parties to agree on a price
under a price reopener provision can
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lead to termination of the contract. Under some of our
contracts, we have the right to match lower prices offered to
our customers by other suppliers. These price reopener
provisions have enabled us to negotiate higher selling prices in
several contracts over the last several months.
Quality and volumes for the coal are stipulated in coal supply
agreements, and in some instances buyers have the option to vary
annual or monthly volumes. Most of our coal supply agreements
contain provisions requiring us to deliver coal within certain
ranges for specific coal characteristics such as heat content,
sulfur, ash, hardness and ash fusion temperature. Failure to
meet these specifications can result in economic penalties,
suspension or cancellation of shipments or termination of the
contracts. Assuming steady or increasing coal prices over the
near-term, we expect to renew many of our expiring sales
contracts at significantly higher prices.
Transportation/logistics
We ship coal to our customers by rail, truck or barge. We
typically pay the transportation costs for our coal to be
delivered to the barge or rail loadout facility, where the coal
is then loaded for final delivery. Once the coal is loaded in
the barge or railcar, our customer is typically responsible for
the freight costs to the ultimate destination. Transportation
costs vary greatly based on the customer's proximity to the
mine and our proximity to the loadout facilities. We use a
variety of independent companies for our transportation needs
and typically enter into multiple non-contract agreements with
trucking companies throughout the year.
In 2004, approximately 85% of our coal from our Central
Appalachian operations was delivered to our customers by rail on
either the Norfolk Southern or CSX rail lines, with the
remaining 15% delivered by truck. For our Illinois Basin
operations, 100% of our coal was delivered by truck to
customers, generally within an 80 mile radius of our
Illinois mine.
We believe we enjoy good relationships with rail carriers and
barge companies due, in part, to our modern coal-loading
facilities and the experience of our transportation and
distribution employees.
Suppliers
We have historically spent more than $188 million per year
to procure goods and services in support of our business
activities, excluding capital expenditures. Principal
commodities include maintenance and repair parts and services,
electricity, fuel, roof control and support items, explosives,
tires, conveyance structure, ventilation supplies and
lubricants. We use suppliers for a significant portion of our
equipment rebuilds and repairs both on- and off-site, as well as
construction and reclamation activities.
Each of our regional mining operations has developed its own
supplier base consistent with local needs. We have a centralized
sourcing group for major supplier contract negotiation and
administration, for the negotiation and purchase of major
capital goods, and to support the business units. The supplier
base has been relatively stable for many years, but there has
been some consolidation. We are not dependent on any one
supplier in any region. We promote competition between suppliers
and seek to develop relationships with those suppliers whose
focus is on lowering our costs. We seek suppliers who identify
and concentrate on implementing continuous improvement
opportunities within their area of expertise.
Competition
The coal industry is intensely competitive. Our main competitors
are Massey Energy Company, Alpha Natural Resources and
Foundation Coal Holdings. The most important factors on which we
compete are coal price at the mine, coal quality and
characteristics, transportation costs and the reliability of
supply. Demand for coal and the prices that we will be able to
obtain for our coal are closely linked to coal consumption
patterns of the domestic electric generation industry which has
accounted for approximately 92% of domestic coal consumption in
recent years. These coal consumption patterns
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are influenced by factors beyond our control, including the
demand for electricity which is significantly dependent upon
economic activity and summer and winter temperatures in the
United States, government regulation, technological developments
and the location, availability, quality and price of competing
sources of coal, alternative fuels such as natural gas, oil and
nuclear and alternative energy sources such as hydroelectric
power.
Employees
As of December 31, 2004, we had 1,901 employees of which
21% were salaried and 79% were hourly. We believe our
relationship with our employees is good. All of our workforce is
union free.
Legal proceedings
From time to time, we are involved in legal proceedings arising
in the ordinary course of business. We believe we have recorded
adequate reserves for these liabilities and that there is no
individual case or group of related cases pending that is likely
to have a material adverse effect on our financial condition,
results of operations or cash flows. With respect to any claims
relating to Horizon which arose prior to November 12, 2002,
such claims are subject to an automatic stay of the
U.S. Bankruptcy Code. In limited circumstances, the
Bankruptcy Court has lifted the stay but only to the extent of
insurance coverage relating to Horizon. In any event, we believe
all or substantially all of the claims will be resolved in
accordance with Horizon's plan of reorganization.
Equipment and capital expenditures
As of December 31, 2004, our leased equipment was, on
average, 8.5 years old. We believe that a significant
portion our equipment needs to be upgraded in the near-term.
Accordingly, we expect to retire much of our current equipment
and invest approximately $156.4 million in new equipment in
the next two years and $107.9 million for mining
development operations. We believe our capital investment plan
will provide us with a cost-effective fleet of equipment and
enable us to improve production efficiencies. As we take
advantage of planned expansion opportunities from 2007 through
2009, we expect to spend approximately $571.8 million on
capital expenditures which may require external financing.
While we currently operate our mines with a high percentage of
leased equipment due primarily to Horizon's preference for
leasing, we will be purchasing equipment in the future. Current
equipment is leased primarily from Caterpillar Finance,
GE Capital and other leasing companies. Our operating
leases typically have a term of three to five years, with us
having the right to purchase the equipment at the end of the
lease at fair market value.
Reclamation
Reclamation expenses are a significant part of any coal mining
operation. Prior to commencing mining operations, a company is
required to apply for numerous permits in the state where the
mining is to occur. Before a state will approve and issue these
permits, it typically requires the mine operator to present a
reclamation plan which meets regulatory criteria and to secure a
surety bond to guarantee performance of reclamation in an amount
determined under state law. These bonding companies, in turn,
require that we backstop the surety bonds with cash and/or
letters of credit. While bonds are issued against reclamation
liability for a particular permit at a particular site,
collateral posted in support of the bond is not allocated to a
specific bond, but instead is part of a collateral pool
supporting all bonds issued by that particular insurer. Bonds
are released in phases as reclamation is completed in a
particular area.
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Environmental and other regulatory matters
Federal, state and local authorities regulate the U.S. coal
mining industry with respect to matters such as permitting and
licensing requirements, employee health and safety, air quality
standards, water pollution, plant and wildlife protection, the
reclamation and restoration of mining properties after mining
has been completed, the discharge of materials into the
environment, surface subsidence from underground mining, and the
effects of mining on groundwater quality and availability. These
laws and regulations have had and will continue to have a
significant effect on our costs of production and competitive
position. Future legislation, regulations or orders may be
adopted or become effective which may adversely affect our
mining operations, cost structure or the ability of our
customers to use coal. For instance, new legislation,
regulations or orders, as well as future interpretations and
more rigorous enforcement of existing laws, may require
substantial increases in equipment and operating costs to us and
delays, interruptions, or a termination of operations, the
extent of which we cannot predict. Future legislation,
regulations or orders may also cause coal to become a less
attractive fuel source, resulting in a reduction in coal's
share of the market for fuels used to generate electricity.
We endeavor to conduct our mining operations in compliance with
all applicable federal, state and local laws and regulations.
However, due in part to the extensive and comprehensive
regulatory requirements, violations during mining operations
occur from time to time in the industry.
MINING PERMITS AND APPROVALS
Numerous governmental permits or approvals are required for
mining operations. In connection with obtaining these permits
and approvals, we may be required to prepare and present to
federal, state or local authorities data pertaining to the
effect or impact that any proposed production or processing of
coal may have upon the environment. The requirements imposed by
any of these authorities may be costly and time consuming and
may delay commencement or continuation of mining operations.
Regulations also provide that a mining permit or modification
can be delayed, refused or revoked if an officer, director or a
stockholder with a 10% or greater interest in the entity is
affiliated with or is in a position to control another entity
that has outstanding permit violations. Thus, past or ongoing
violations of federal and state mining laws could provide a
basis to revoke existing permits and to deny the issuance of
additional permits.
In order to obtain mining permits and approvals from state
regulatory authorities, mine operators must submit a reclamation
plan for restoring, upon the completion of mining operations,
the mined property to its prior condition, productive use or
other permitted condition. Typically, we submit our necessary
mining permit applications several months before we plan to
begin mining a new area. In our experience, mining permit
approvals generally require 12 to 18 months after initial
submission.
SURFACE MINING CONTROL AND RECLAMATION ACT
The Surface Mining Control and Reclamation Act of 1977, or
SMCRA, which is administered by the Office of Surface Mining
Reclamation and Enforcement, or OSM, establishes mining,
environmental protection and reclamation standards for all
aspects of surface mining as well as many aspects of deep
mining. Mine operators must obtain SMCRA permits and permit
renewals from the OSM or the appropriate state regulatory agency
for authorization of certain mining operations that result in a
disturbance of the surface. If a state regulatory agency adopts
federal mining programs under SMCRA, the state becomes the
regulatory authority. States in which we have active mining
operations have achieved primary control of enforcement through
federal authorization.
SMCRA permit provisions include requirements for coal
prospecting, mine plan development, topsoil removal, storage and
replacement, selective handling of overburden materials, mine
pit backfilling and grading, protection of the hydrologic
balance, subsidence control for underground mines, surface
drainage control, mine drainage and mine discharge control and
treatment and revegetation.
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The mining permit application process is initiated by collecting
baseline data to adequately characterize the pre-mine
environmental condition of the permit area. This work includes
surveys of cultural resources, soils, vegetation, wildlife,
assessment of surface and ground water hydrology, climatology
and wetlands. In conducting this work, we collect geologic data
to define and model the soil and rock structures and coal that
it will mine. We develop mine and reclamation plans by utilizing
this geologic data and incorporating elements of the
environmental data. The mine and reclamation plan incorporates
the provisions of SMCRA, the state programs and the
complementary environmental programs that impact coal mining.
Also included in the permit application are documents defining
ownership and agreements pertaining to coal, minerals, oil and
gas, water rights, rights of way and surface land, and documents
required by the OSM's Applicant Violator System, including
the mining and compliance history of officers, directors and
principal owners of the entity.
Once a permit application is prepared and submitted to the
regulatory agency, it goes through a completeness review and
technical review. Public notice and opportunity for public
comment on a proposed permit is required before a permit can be
issued. Some SMCRA mine permits take over a year to prepare,
depending on the size and complexity of the mine and may take
six months to two years or even longer to be issued. Regulatory
authorities have considerable discretion in the timing of the
permit issuance and the public has rights to comment on and
otherwise engage in the permitting process including through
intervention in the courts.
Before a SMCRA permit is issued, a mine operator must submit a
bond or otherwise secure the performance of reclamation
obligations. The Abandoned Mine Land Fund, which is part of
SMCRA, requires a fee on all coal produced. The proceeds are
used to reclaim mine lands closed or abandoned prior to 1977.
This program is currently set to expire in June 2005, and
Congress is considering various reauthorization proposals.
SMCRA stipulates compliance with many other major environmental
statues, including: the Clean Air Act, the Clean Water Act, the
Resource Conservation and Recovery Act, or RCRA, and the
Comprehensive Environmental Response, Compensation and Liability
Act, or either CERCLA or Superfund.
SURETY BONDS
Federal and state laws require us to obtain surety bonds to
secure payment of certain long-term obligations including mine
closure or reclamation costs, federal and state workers'
compensation costs, coal leases and other miscellaneous
obligations. Many of these bonds are renewable on a yearly basis.
Surety bond costs have increased in recent years while the
market terms of such bonds have generally become more
unfavorable. In addition, the number of companies willing to
issue surety bonds has decreased.
CLEAN AIR ACT
The federal Clean Air Act, and comparable state laws that
regulate air emissions, directly affect coal mining operations,
but have a far greater indirect affect. Direct impacts on coal
mining and processing operations may occur through permitting
requirements and/or emission control requirements relating to
particulate matter, such as fugitive dust or fine particulate
matter measuring 2.5 micrometers in diameter or smaller. The
Clean Air Act indirectly affects coal mining operations by
extensively regulating the air emissions of sulfur dioxide,
nitrogen oxides, mercury and other compounds emitted by
coal-fired electricity generating plants and coke ovens. The
general effect of such extensive regulation of emissions from
coal-fired power plants could be to reduce demand for coal.
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Clean Air Act requirements that may directly or indirectly
affect our operations include the following:
Acid rain
Title IV of the Clean Air Act required a two-phase
reduction of sulfur dioxide emissions by electric utilities.
Phase II became effective in 2000 and extended the
Title IV requirements to all coal-fired power plants with
generating capacity greater than 25 Megawatts. The affected
electricity generators have sought to meet these requirements
by, among other compliance methods, switching to lower sulfur
fuels, installing pollution control devices, reducing
electricity generating levels or purchasing sulfur dioxide
emission allowances. We cannot accurately predict the effect of
these provisions of the Clean Air Act on us in future years. At
this time, we believe that implementation of Phase II has
resulted in an upward pressure on the price of lower sulfur
coals, as coal-fired power plants continue to comply with the
more stringent restrictions of Title IV.
Fine particulate matter and ozone
The Clean Air Act requires the EPA to set standards, referred to
as National Ambient Air Quality Standards, or NAAQS, for certain
pollutants. Areas that are not in compliance (referred to as
"non-attainment areas") with these standards must take
steps to reduce emissions levels. In 1997, the EPA revised the
NAAQS for particulate matter and ozone; although previously
subject to legal challenge, these revisions were subsequently
upheld but implementation was delayed for several years.
For ozone, these changes include replacement of the existing
one-hour average standard with a more stringent eight-hour
average standard. On April 15, 2004, the EPA announced that
counties in 32 states fail to meet the new eight-hour
standard for ozone. States which fail to meet the new standard
will have until June 2007 to develop plans for pollution
control measures that allow them to come into compliance with
the standards. For particulates, the changes include retaining
the existing standard for particulate matter with an aerodynamic
diameter less than or equal to 10 microns, or PM10, and
adding a new standard for fine particulate matter with an
aerodynamic diameter less than or equal to 2.5 microns, or
PM2.5. On December 17, 2004 the EPA announced that regions
in 20 states and the District of Columbia did not achieve
the fine particulate matter standard. Following identification
of non-attainment areas, each individual state will identify the
sources of emissions and develop emission reduction plans. These
plans may be state-specific or regional in scope. Under the
Clean Air Act, individual states have up to twelve years from
the date of designation to secure emissions reductions from
sources contributing to the problem. Meeting the new
PM2.5 standard may require reductions of nitrogen oxide and
sulfur dioxide emissions. Future regulation and enforcement of
these new ozone and PM2.5 standards will affect many power
plants, especially coal-fired plants and all plants in
"nonattainment" areas.
The EPA continues to review these ambient air standards. For
example, EPA is under a court imposed deadline to decide by the
end of 2005 whether to propose a revision to the fine
particulate matter standard. EPA is also considering whether to
revise the ozone standard.
Ozone
Significant additional emissions control expenditures will be
required at coal-fired power plants to meet the current NAAQS
for ozone. Nitrogen oxides, which are a by-product of coal
combustion, can lead to the creation of ozone. Accordingly,
emissions control requirements for new and expanded coal-fired
power plants and industrial boilers will continue to become more
demanding in the years ahead.
NOx SIP Call
The NOx SIP Call program was established by the EPA in October
of 1998 to reduce the transport of ozone on prevailing winds
from the Midwest and South to states in the Northeast, which
said they could not meet federal air quality standards because
of migrating pollution. Under Phase I of the
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program, the EPA is requiring 90,000 tons of nitrogen oxides
reductions from power plants in 22 states east of the
Mississippi River and the District of Columbia beginning in May
2004. Phase II of the rule requires a further reduction of
about 100,000 tons of nitrogen oxides per year by May 1,
2007. Installation of additional control measures, such as
selective catalytic reduction devices, required under the final
rules will make it more costly to operate coal-fired electricity
generating plants, thereby making coal a less attractive fuel.
Clear Skies Initiative
The Bush Administration has proposed new legislation, commonly
referred to as the Clear Skies Initiative, that could require
dramatic reductions in nitrous oxide, sulfur dioxide, and
mercury emissions by power plants through
"cap-and-trade" programs similar to the existing acid
rain regulations and current NOx budget programs. The
proposed bill also authorizes up to $2.5 billion for clean
coal technology demonstration projects. There are mixed views on
whether this legislation will have a net positive or negative
effect. Congress has also considered several competing bills.
Recently, the EPA adopted a set of regulations which are
intended to limit emissions for new and existing power plants in
ways similar to the Clear Skies Initiative. The principle
regulations are the Clean Air Interstate Rule and the Clean Air
Mercury Rule, which were adopted March 15, 2005. The EPA
predicts that these rules will cause coal production to rise in
the Appalachian and Interior coal regions based on EPA's
predictions as to how states and electric utilities will decide
to implement these rules. However, those decisions have not been
made, and it is not possible to predict with certainty what, if
any, impact these rules will have on coal-buying decisions in
the future.
Interstate air quality rule
On March 10, 2005, the EPA adopted new rules for reducing
emissions of sulfur dioxide and nitrogen oxides. This Clean Air
Interstate Rule calls for power plants in 29 eastern states and
the District of Columbia to reduce emission levels of sulfur
dioxide and nitrous oxide. The rule regulates these pollutants
under a cap and trade program similar to the system now in
effect for acid deposition control and to that proposed by the
Clear Skies Initiative. The stringency of the cap may require
many coal-fired sources to install additional pollution control
equipment, such as wet scrubbers. This increased sulfur emission
removal capability caused by the rule could result in decreased
demand for low sulfur coal, potentially driving down prices for
low sulfur coal. Emissions would be permanently capped and could
not increase. The rule seeks to cut sulfur dioxide emissions by
45% in 2010, and by 57% in 2015. The rule is likely to be
subject to judicial challenge, which makes it difficult to
determine its precise impact.
Utility mercury reductions rule
On March 18, 2005, the EPA issued the Clean Air Mercury
Rule to control mercury emissions from power plants. The rule
sets a mandatory, declining cap on the total mercury emissions
allowed from coalfired power plants nationwide. This approach,
which allows emissions trading, seeks to reduce mercury
emissions by nearly 70 percent from current levels once
facilities reach a final mercury cap which takes effect in 2018.
The rule is likely to be subject to judicial challenge, which
makes it difficult to determine its precise impact.
Other proposals for controlling mercury emissions from
coal-fired power plants have been made, such as establishing
regional emission standards. If these or the EPA proposals were
enacted, the mercury content and variability of our coal would
become a factor in future sales.
Carbon dioxide
In February 2003, a number of states notified the EPA that they
planned to sue the agency to force it to set new source
performance standards for utility emissions of carbon dioxide
and to tighten existing standards for sulfur dioxide and
particulate matter for utility emissions. In June 2003,
three of these
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states sued the EPA seeking a court order requiring the EPA to
designate carbon dioxide as a criteria pollutant and to issue a
new NAAQS for carbon dioxide. If these lawsuits result in the
issuance of a court order requiring the EPA to set emission
limitations for carbon dioxide and/or lower emission limitations
for sulfur dioxide and particulate matter, it could reduce the
amount of coal our customers would purchase from us.
Regional haze
The EPA has initiated a regional haze program designed to
protect and to improve visibility at and around national parks,
national wilderness areas and international parks. This program
restricts the construction of new coal-fired power plants whose
operation may impair visibility at and around federally
protected areas. Moreover, this program may require certain
existing coal-fired power plants to install additional control
measures designed to limit haze-causing emissions, such as
sulfur dioxide, nitrogen oxides, volatile organic chemicals and
particulate matter. These limitations could affect the future
market for coal.
CLEAN WATER ACT
The federal Clean Water Act, or CWA, and corresponding state
laws, affect coal mining operations by imposing restrictions of
the discharge of certain pollutants into water and on dredging
and filling wetlands. The CWA establishes in-stream water
quality standards and treatment standards for wastewater
discharge through the National Pollutant Discharge Elimination
System, or NPDES. Regular monitoring, as well as compliance with
reporting requirements and performance standards, are
preconditions for the issuance and renewal of NPDES permits that
govern the discharge of pollutants into water.
Permits under Section 404 of the CWA are required for coal
companies to conduct dredging or filling activities in
jurisdictional waters for the purpose of creating slurry ponds,
water impoundments, refuse areas, valley fills or other mining
activities. Jurisdictional waters typically include ephemeral,
intermittent, and perennial streams and may in certain instances
include man-made conveyances that have a hydrologic connection
to a stream or wetland. Presently, under the Stream Buffer Zone
Rule, valley fills are prohibited from being placed within
100 feet of streams if negative effects on water quality
are expected. OSM has proposed changes to this rule, which would
make exemptions available if mine operators take steps to reduce
the amount of waste and its effect on nearby waters.
In particular, permits under Section 404 of the Clean Water
Act are required for coal companies to conduct dredging or
filling activities in jurisdictional waters for the purpose of
creating slurry ponds, water impoundments, refuse areas, or
valley fills or other mining activities. The Army Corps of
Engineers, or ACOE, is empowered to issue "nationwide"
permits for specific categories of filling activity that are
determined to have minimal environmental adverse effects in
order to save the cost and time of issuing individual permits
under Section 404. Nationwide Permit 21 authorizes the
disposal of dredge-and-fill material from mining activities into
the waters of the United States. On October 23, 2003,
several citizens groups sued ACOE in the U.S. District
Court for the Southern District of West Virginia seeking to
invalidate "nationwide" permits utilized by ACOE and
the coal industry for permitting most in-stream disturbances
associated with coal mining, including excess spoil valley fills
and refuse impoundments. The plaintiffs sought to enjoin the
prospective approval of these nationwide permits and to enjoin
some coal operators from additional use of existing nationwide
permit approvals until they obtain more detailed
"individual" permits. On July 8, 2004, the court
issued an order enjoining the further issuance of Nationwide 21
permits within the Southern District of West Virginia. This
decision is being appealed. Although we had no operations that
were immediately impacted or interrupted, this decision, if more
widely adopted, may require us to convert certain current and
planned applications for Nationwide 21 permits to
applications for individual permits. A similar suit challenging
the validity of Nationwide Permit 21 by ACOE for coal
mining operations in
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Kentucky was filed on January 27, 2005 by a number of
environmental groups,
Kentucky RiverKeeper v.
Rowlette,
in the United States Court for the Eastern
District of Kentucky. The suit seeks, among other things, an
injunction preventing ACOE to authorize pursuant to Nationwide
Permit 21, "further discharges of mining rock, dirt or
coal refuse into valley fills or surface impoundments"
associated with certain specific mining permits, including
permits issued to some of our mines in Kentucky. Granting of
such relief would interfere with the further operation of these
mines.
Total Maximum Daily Load, or TMDL, regulations established a
process by which states designate these stream segments
considered to be impaired (i.e., not meeting present water
quality standards). Industrial dischargers, including coal
mines, will be required to meet new TMDL effluent standards for
these stream segments.
Under Clean Water Act, states must conduct an anti-degradation
review before approving permits for the discharge of pollutants
to waters that have been designated as high quality. A
state's anti-degradation regulations would prohibit the
diminution of water quality in these streams. Several
environmental groups and individuals recently challenged, and in
part successfully, West Virginia's anti-degradation policy.
In general, waters discharged from coal mines to high quality
streams will be required to meet or exceed new "high
quality" standards. This could cause increases in the
costs, time and difficulty associated with obtaining and
complying with NPDES permits, and could aversely affect our coal
production.
MINE SAFETY AND HEALTH
Stringent health and safety standards have been in effect since
Congress enacted the Coal Mine Health and Safety Act of 1969.
The Federal Mine Safety and Health Act of 1977 significantly
expanded the enforcement of safety and health standards and
imposed safety and health standards on all aspects of mining
operations. All of the states in which we operate have state
programs for mine safety and health regulation and enforcement.
Collectively, federal and state safety and health regulation in
the coal mining industry is perhaps the most comprehensive and
pervasive system for protection of employee health and safety
affecting any segment of U.S. industry. While this
regulation has a significant effect on our operating costs, the
Company's U.S. competitors are subject to the same
degree of regulation.
Under the Black Lung Benefits Revenue Act of 1977 and the Black
Lung Benefits Reform Act of 1977, as amended in 1981, each coal
mine operator must secure payment of federal black lung benefits
to claimants who are current and former employees and to a trust
fund for the payment of benefits and medical expenses to
claimants who last worked in the coal industry prior to
July 1, 1973. The trust fund is funded by an excise tax on
production of up to $1.10 per ton for underground coal and
up to $0.55 per ton for surface-mined coal, neither amount
to exceed 4.4% of the gross sales price. The excise tax does not
apply to coal shipped outside the United States. In 2003, we
recorded $10.3 million of expense related to this excise
tax.
RESOURCE CONSERVATION AND RECOVERY ACT
RCRA affects coal mining operations by establishing requirements
for the treatment, storage, and disposal of hazardous wastes.
Certain coal mine wastes, such as overburden and coal cleaning
wastes, are exempted from hazardous waste management.
Subtitle C of RCRA exempted fossil fuel combustion wastes
from hazardous waste regulation until the EPA completed a report
to Congress and, in 1993, made a determination on whether the
wastes should be regulated as hazardous. In the 1993 regulatory
determination, the EPA addressed some high volume-low toxicity
coal combustion wastes generated at electric utility and
independent power producing facilities, such as coal ash.
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Environmental and other regulatory matters
In May 2000, the EPA concluded that coal combustion wastes do
not warrant regulation as hazardous under RCRA and that the
hazardous waste exemption for these wastes. However, the EPA has
determined that national non-hazardous waste regulations under
RCRA Subtitle D are needed for coal combustion wastes
disposed in surface impoundments and landfills and used as
mine-fill. The agency also concluded beneficial uses of these
wastes, other than for mine-filling, pose no significant risk
and no additional national regulations are needed. As long as
this exemption remains in effect, it is not anticipated that
regulation of coal combustion waste will have any material
effect on the amount of coal used by electricity generators.
Most state hazardous waste laws also exempt coal combustion
waste, and instead treat it as either a solid waste or a special
waste. Any costs associated with handling or disposal of coal
combustion wastes would increase our customers' operating
costs and potentially reduce their coal purchases. In addition,
contamination caused by the past disposal of ash can lead to
material liability.
Due to the hazardous waste exemption for coal combustion waste
such as ash, much coal combustion waste is currently put to
beneficial use. For example, in one Pennsylvania mine from which
we have the right to receive coal, the Company has used some ash
as mine fill. The ash used for this purpose is mixed with lime
and serves to help alleviate the potential for acid mine
drainage.
FEDERAL AND STATE SUPERFUND STATUTES
Superfund and similar state laws affect coal mining and hard
rock operations by creating liability for investigation and
remediation in response to releases of hazardous substances into
the environment and for damages to natural resources caused by
such releases. Under Superfund, joint and several liability may
be imposed on waste generators, site owners or operators and
others regardless of fault. In addition, mining operations may
have reporting obligations under these laws.
CLIMATE CHANGE
Although the United States has refused to join the 1992
Framework Convention on Global Climate Change, commonly known as
the Kyoto Protocol, future regulation of greenhouse gas could
occur either pursuant to future U.S. treaty obligations or
pursuant to statutory or regulatory changes under the Clean Air
Act. The Bush Administration has proposed a package of voluntary
emission reductions for greenhouse gases reduction targets which
provide for certain incentives if targets are met. The Climate
Stewardship Act which was recently reintroduced into the Senate,
would require a reduction in carbon dioxide emissions to 2000
levels by 2010 by capping the overall greenhouse gas emissions
from the power, transportation, industrial, and commercial
sectors, and by creating a market for individual companies to
trade pollution credits. Some states, such as Massachusetts,
have already issued regulations regulating greenhouse gas
emissions from large power plants. Increased efforts to control
greenhouse gas emissions, including the future joining of the
Kyoto Protocol, could result in reduced demand for coal if
electric power generators switch to lower carbon sources of
fuel. If the United States were to ratify the Kyoto Protocol,
our nation would be required to reduce greenhouse gas emissions
to 93% of 1990 levels in a series of phased reductions from 2008
to 2012.
COAL INDUSTRY RETIREE HEALTH BENEFIT ACT OF 1992
Unlike many companies in the coal business, we do not have
significant liabilities under the Coal Industry Retiree Health
Benefit Act of 1992 (the "Coal Act"), which
requires the payment of substantial sums to provide lifetime
health benefits to union-represented miners (and their
dependents) who retired before 1992, because liabilities under
the Coal Act that had been imposed on our predecessor or
acquired companies were retained by the sellers and, if
applicable, their parent companies, in the applicable
acquisition agreements. We should not be liable for these
liabilities retained by the sellers unless they and, if
applicable, their parent companies, fail to satisfy their
obligations with respect to Coal Act claims and retained
liabilities covered by the acquisition agreements.
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Environmental and other regulatory matters
ENDANGERED SPECIES ACT
The federal Endangered Species Act and counterpart state
legislation protect species threatened with possible extinction.
Protection of threatened and endangered species may have the
effect of prohibiting or delaying us from obtaining mining
permits and may include restrictions on timber harvesting, road
building and other mining or agricultural activities in areas
containing the affected species or their habitats. A number of
species indigenous to our properties are protected under the
Endangered Species Act. Based on the species that have been
identified to date and the current application of applicable
laws and regulations, however, we do not believe there are any
species protected under the Endangered Species Act that would
materially and adversely affect our ability to mine coal from
our properties in accordance with current mining plans.
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DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the names, ages and positions of
our directors and executive officers:
Name
Age
Position
Wilbur L. Ross, Jr.
67
Non-Executive Chairman and Director
Bennett K. Hatfield
48
President, Chief Executive Officer and Director
William D. Campbell
57
Vice President, Treasurer and Secretary
Roger L. Nicholson
44
Senior Vice President and General Counsel
Samuel R. Kitts
43
Senior Vice President, West Virginia and Maryland Operations
William Scott Perkins
49
Senior Vice President, Kentucky and Illinois Operations
Michael Hardesty
42
Senior Vice President, Sales and Marketing
Oren Eugene Kitts
50
Senior Vice President, Mining Services
Jon R. Bauer
48
Director
Cynthia B. Bezik
52
Director
William J. Catacosinos
74
Director
George R. Desko
61
Director
Marcia Page
44
Director
Wendy L. Teramoto
30
Director
Each executive officer serves at the discretion of our board of
directors and holds office until his or her successor is elected
and qualified or until his or her earlier resignation or
removal. There are no family relationships among any of our
directors or executive officers other than among two of our
executive officers, Samuel R. Kitts and Oren Eugene Kitts, who
are brothers.
Set forth below is certain background information relating to
our directors and executive officers as of April 22, 2005.
Wilbur L. Ross, Jr.— Non-Executive Chairman
Mr. Ross has served as the Non-Executive Chairman of our
board of directors since April 2005 and has served in the same
capacity at ICG, Inc. since October 2004. Mr. Ross is the
Chairman and Chief Executive Officer of WL Ross &
Co. LLC, a merchant banking firm, a position he has held since
April 2000. Mr. Ross is also the Chairman and Chief
Executive Officer of WLR Recovery Fund L.P., WLR Recovery
Fund II L.P., Asia Recovery Fund, Asia Recovery
Fund Co-Investment, Nippon Investment Partners and Absolute
Recovery Hedge Fund. Mr. Ross is also Chairman of
International Textiles Group, Inc. and Nano-Tex, LLC in the
United States. Mr. Ross is a board member of Mittal Steel
Company, N.V. (which recently acquired International Steel
Group, Inc.) in the Netherlands, Insuratex, Ltd. in Bermuda,
Nikko Electric Co. and Ohizumi Manufacturing Company in Japan,
Tong Yang Life Insurance Co. in Korea, and of Syms Corp.,
Clarent Hospital Corp. and News Communications Inc. in the
United States. Mr. Ross is also a member of the Business
Roundtable. Previously, Mr. Ross served as the Executive
Managing Director at Rothschild Inc., an investment banking
firm, from October 1974 to March 2000. Mr. Ross was also
formerly Chairman of the Smithsonian Institution National Board
and currently is a board member of the Japan Society and the
Yale University School of Management. He holds an A.B. from Yale
University and an M.B.A., with distinction, from Harvard
University.
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Bennett K. Hatfield— President, Chief Executive Officer
and Director
Mr. Hatfield has been our President and Chief Executive
Officer since March 2005. Prior to joining us, Mr. Hatfield
served as President, Eastern Operations of Arch Coal, Inc. from
March 2003 until March 2005. Prior to joining Arch Coal, Inc.,
Mr. Hatfield was Executive Vice President of El Paso
Energy's Coastal Coal Company from December 2001 through
February 2003. That assignment was preceded by a lengthy career
with Massey Energy Company where he last served as Executive
Vice President and Chief Operating Officer from June 1998
through December 2001. Mr. Hatfield has a B.S. in mining
engineering from Virginia Polytechnic Institute and University.
William D. Campbell— Vice President, Treasurer and
Secretary
Mr. Campbell has been our Vice President and Treasurer
since March 2005 and our Secretary since April 2005.
Mr. Campbell was a Vice President and Treasurer of ICG,
Inc. since October 2004. Prior to his employment with us,
Mr. Campbell held various positions with our predecessor.
From November 2003 until September 2004, Mr. Campbell was
Horizon's Vice President and Controller and Vice President,
Planning and Budgets from June 2002 until October 2003. From
1998 until June 2002, Mr. Campbell was Assistant
Controller— Operations/ Budget/ Forecasts at AEI Resources,
Inc. Mr. Campbell received his B.S. in accounting from
Brescia College.
Roger L. Nicholson— Senior Vice President and General
Counsel
Mr. Nicholson has been our Senior Vice President and
General Counsel since April 2005. Prior to joining us,
Mr. Nicholson was a member at the law firm of Jackson
Kelly, PLLC from April 2002 to March 2005. His practice focused
on energy and natural resources, mergers and acquisitions and
commercial and mineral real estate. Before joining, Jackson
Kelly, PLLC, Mr. Nicholson served as Vice President,
Secretary and General Counsel of Massey Energy Company. He
earned a B.S. in economics from Georgetown College and a J.D.
from the University of Kentucky.
Samuel R. Kitts— Senior Vice President, West Virginia
and Maryland Operations
Mr. Kitts has been our Senior Vice President, West Virginia
Operations since April 2005. Prior to his employment with us,
Mr. Kitts was the Vice President of Alpha Natural Resources
Services since April 2003 and the President of Brooks Run Mining
Co. from March 2003. Prior to that time, Mr. Kitts was the
President of Omar Mining Co.
William Scott Perkins— Senior Vice President, Kentucky
and Illinois Operations
Mr. Perkins has been our Senior Vice President, Eastern
Operations since April 2005 and held the same positions at ICG,
Inc. since January 2005. Prior to his employment with us,
Mr. Perkins held various positions with our predecessors.
From July 2003 through January 2005, Mr. Perkins was the
Vice President and General Manager of the Evergreen Mining
Company Division of Horizon, the Vice President and General
Manager of Horizon's Kentucky Division— Union Free
Horizon Natural Resources from October 2001 until June 2003 and
the Vice President— Appalachian region Union Free Surface
Operations of AEI Resources from May 1999 until September 2001.
Mr. Perkins received his B.S. in geology from Kansas State
University.
Michael Hardesty— Senior Vice President, Sales and
Marketing
Mr. Hardesty has been our Senior Vice President,
Sales and Marketing since April 2005. Previously,
Mr. Hardesty held various positions with Arch Coal, Inc.
From January 2005 through April 2005, Mr. Hardesty was Vice
President, Commercial Optimization, Vice President, Market
Services from 2002 until 2004 and Director Market Services from
1999 until 2001. Mr. Hardesty received his B.S. in
accounting from University of Kentucky.
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Oren Eugene Kitts— Senior Vice President, Mining
Services
Mr. Kitts has been our Senior Vice President, Mining
Services since April 2005. Prior to his employment with us,
Mr. Kitts was most recently Vice President,
Environmental & Technical Affairs for Eastern
Operations at Arch Coal, Inc. from May 2003 until the present.
Prior to Arch, Mr. Kitts was a partner in Summit
Engineering Company from May 1996 until May 2003 and prior to
that was President of Massey Coal Services. Mr. Kitts
initially worked for Pickands Mather Company as the
environmental engineer at their coal mining operations in
Southern West Virginia and Eastern Kentucky. Mr. Kitts has
a B.S. in civil engineering from West Virginia University.
Jon R. Bauer— Director
Mr. Bauer has served as our Director since April 2005 and
as a Director of ICG, Inc. since October 2004. Since May 1995,
Mr. Bauer has been the managing member and chief investment
officer of Contrarian Capital Management LLC, a multi-strategy
distressed securities money management firm. From July 1986 to
May 1995, he was managing director at Oppenheimer &
Co., Inc. where he founded the High Yield Department.
Mr. Bauer is also a director of Arpeggio Acquisition Corp.
Mr. Bauer received a bachelors degree (with honors) from
Rutgers College and an M.B.A. from Harvard Business School.
Cynthia B. Bezik— Director
Ms. Bezik has been a Director since April 2005 and as a
Director of ICG, Inc. since December 2004. Ms. Bezik has
over twenty-five years of financial management experience.
Ms. Bezik is currently a financial consultant to the
$300 million Senior Secured Noteholders in the contested
WCI Steel bankruptcy proceedings. She was senior Vice
President— Finance and Chief Financial Officer at
Cleveland-Cliffs Inc, from 1997 through 2003. Prior to that, she
was the Treasurer at Cleveland-Cliffs since 1994.
Cleveland-Cliffs Inc., a NYSE-listed company, is a major
supplier to the steel industry. Earlier in her career, she was
on the audit staff of Ernst & Young, LLP, and worked
for AM International, a large manufacturing concern.
Ms. Bezik was a Director and chair of the Audit Committee
of Oxford Automotive, Inc., a privately held, tier-one
automotive supplier, prior to its filing for reorganization in
2004. In addition, she is on the Board of Trustees and the
Executive Committee and serves as Treasurer of the Achievement
Centers for Children, a non-profit organization serving special
needs children in Northeastern Ohio. Ms. Bezik is a CMA
(Certified Management Accountant) and holds an M.B.A. from Case
Western Reserve University.
William J. Catacosinos— Director
Mr. Catacosinos has been a Director since April 2005 and as
a Director of ICG, Inc. since December 2004. Since November
1998, Dr. Catacosinos has served as Managing Partner of
Laurel Hill Capital Partners. He also serves as the Chairman,
President and CEO of TNP Enterprises, Inc., the parent of
Texas-New Mexico Power, an electric utility located in
Fort Worth, Texas. Dr. Catacosinos was Chairman and
Chief Executive Officer of Long Island Lighting Company from
January 1984 to July 1998. Dr. Catacosinos is also a
director of Preservation Sciences, Inc., a company in St.
Petersburg, Florida, that researches, develops and markets
preservatives and preservative technologies for food, beverage
and industrial products. He earned a B.S. degree, an M.B.A. and
a Ph.D. in Economics from New York University.
George R. Desko— Director
Mr. Desko has served as a Director since April 2005, a
Director of ICG, Inc. since October 2004 and from December 2004
to March 2005, he was Interim President, Chief Executive Officer
of ICG Inc. Previously, he was President, Chief Executive
Officer, and Director of Anker Coal Group, Inc. since June 2003
until December 2004. Prior to his employment with Anker,
Mr. Desko served as Anker's Restructuring Consultant
from August 2001 through December 2002. During his tenure with
Anker,
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Mr. Desko managed Anker's day-to-day operations as
well as overseeing its Chapter 11 reorganization.
Mr. Desko has over 40 years experience in the coal
industry holding various positions in engineering and management
with Union Carbide Corporation, Continental Oil Corporation,
United States Steel Corporation, Cedar Coal Company, and New Era
Recourses Inc. Since 1979, Mr. Desko has owned and operated
Desko Enterprises, Inc. (consulting engineering company),
Millers Cove Energy Company, Straight Creek Processing LP, and
most recently Canterbury Coal Company from March 1989 through
July 1998.
Marcia Page— Director
Ms. Page has served as a Director since April 2005 and as a
Director of ICG, Inc. since October 2004. Since May 1994,
Ms. Page has been a Managing Partner of Värde
Partners, Inc., an investment management firm focused on
distressed debt and other event-driven strategies. Prior to
funding Värde, Ms. Page was Vice President of
EBF & Associates. Prior to EBF, she managed
fixed-income portfolios for Cargill Financial Services
Corporation. Ms. Page earned her B.A. (magna cum laude)
from Gustavus Adolphus College and an M.B.A. from the University
of Minnesota.
Wendy L. Teramoto— Director
Ms. Teramoto has been a Director since October 2004 and was
Secretary of ICG, Inc. from October 2004 until April 2005.
Ms. Teramoto is also chairman of the Board of Directors of
Anker and Sole Manager and chief executive officer of CoalQuest.
Ms. Teramoto has been a Vice President at W.L.
Ross & Co. LLC since April 2000. Prior to joining W. L.
Ross & Co., Ms. Teramoto worked at Rothschild
Inc., an investment banking firm. Ms. Teramoto received a
B.S. in accounting and finance from the University of Colorado.
COMPOSITION OF THE BOARD
Our board of directors currently consists of eight directors,
six of whom meet the independence standards of The New York
Stock Exchange. Following this offering, we expect to appoint an
additional director.
Classified board of directors
Our amended and restated certificate of incorporation provides
that our board of directors will be divided into three classes
of directors, as nearly equal in number as possible, serving
staggered terms. Approximately one-third of our board will be
elected each year. At any meeting of stockholders at which
directors are to be elected, the number of directors elected may
not exceed the greatest number of directors then in office in
any class of directors. Under Section 141 of the General
Corporation Law of Delaware, directors serving on a classified
board can only be removed for cause. The provision for our
classified board may be amended, altered or repealed only upon
the affirmative vote of the holders of 80% of our outstanding
voting stock.
The provision for a classified board could prevent a party that
acquires control of a majority of the outstanding voting stock
from obtaining control of our board until the second annual
stockholders meeting following the date the acquiror obtains the
controlling stock interest. The classified board provision could
have the effect of discouraging a potential acquiror from making
a tender offer for our shares or otherwise attempting to obtain
control of us and could increase the likelihood that our
incumbent directors will retain their positions.
We believe that a classified board will help to assure the
continuity and stability of our board and our business
strategies and policies as determined by our board, because a
majority of the directors at any given time will have prior
experience on our board. The classified board provision should
also help to ensure that our board, if confronted with an
unsolicited proposal from a third party that has acquired a
block of our voting stock will have sufficient time to review
the proposal and appropriate alternatives and to seek the best
available result for all stockholders.
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Number of directors; removal; vacancies
Our amended and restated certificate of incorporation and bylaws
provide that the number of directors shall be set by resolution
adopted by the affirmative vote of a majority of the total
number of directors that we would have if there were no
vacancies on our board. This provision regarding the size of our
board may not be amended, altered, changed or repealed in any
respect without the affirmative vote of 80% of our outstanding
voting stock.
Pursuant to our amended and restated certificate of
incorporation, each director will serve until his or her
successor is duly elected and qualified, unless he or she dies,
resigns, retires, becomes disqualified or is removed. Our
amended and restated certificate of incorporation also provides
that, subject to the rights of the holders of any series of
preferred stock, directors may be removed, but only for cause by
the affirmative vote of the holders of at least 80% of our
voting stock.
Our amended and restated certificate of incorporation further
provides that newly created directorships in our board may only
be filled by a resolution approved by a majority of our board,
provided a quorum is present, and any other vacancies in our
board may be filled by a resolution approved by a majority of
our board, even if less than a quorum, or by a sole remaining
director. Any director chosen to fill a newly created
directorship will hold office for a term that will coincide with
the remaining term of that class. For other vacancies, the
chosen director will hold office for the remaining term as that
of his or her predecessor.
COMMITTEES OF THE BOARD OF DIRECTORS
Our board of directors has a standing audit committee,
compensation committee and a nominating and corporate governance
committee.
Audit committee
Our audit committee currently consists of Jon R. Bauer, Cynthia
B. Bezik and William J. Catacosinos, all of whom meet the
relevant New York Stock Exchange independence requirements. In
addition, Cynthia B. Bezik meets The New York Stock Exchange
standard of possessing accounting or related financial
management expertise. The audit committee will oversee the
engagement of independent public accountants, review our annual
financial statements and the scope of annual audits and consider
matters relating to accounting policies and internal controls.
The board of directors has approved and adopted a Code of
Business Conduct and Ethics for all directors, officers and
employees, a copy of which will be available on our website and
upon written request by our stockholders at no cost.
Compensation committee
Our compensation committee currently consists of Cynthia B.
Bezik and Marcia Page, both of whom meet the relevant New York
Stock Exchange requirements. The compensation committee will
review, approve and make recommendations to our board of
directors concerning our compensation practices, policies and
procedures for our executive officers. The compensation
committee's duties will include the administration of our
stock option plans, equity incentive plans and compensation
arrangements for our executives.
Nominating and corporate governance committee
Our nominating and corporate governance committee currently
consists of Jon R. Bauer and William J. Catacosinos,
both of whom meet the relevant New York Stock Exchange
requirements. The duties of the nominating and corporate
governance committee include, among other things, identifying
individuals qualified to become members of our board of
directors, recommending candidates to fill vacancies and
newly-created positions on our board of directors, recommending
whether incumbent directors should be nominated for re-election
to our board of directors and developing and
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recommending corporate governance principles applicable to our
board of directors and our employees. We intend to comply with
the recently enacted New York Stock Exchange corporate
governance rules with respect to nominating and corporate
governance committees once we are listed on The New York Stock
Exchange.
DIRECTORS' COMPENSATION
Members of our board of directors currently are not compensated
for serving on the board of directors other than for travel or
other expenses incurred in connection with their service, nor
are they paid a retainer or additional compensation for
attendance at board or committee meetings. However, we currently
compensate two of our non-employee directors, Cynthia B. Bezik
and William J. Catacosinos, in the amount of $50,000 per
year and $1,600 per meeting and upon completion of this
offering, we will compensate our other non-employee directors in
the same manner.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER
PARTICIPATION
None of our executive officers serves or has served as a member
of the board of directors, compensation committee or other board
committee performing equivalent functions of any entity that has
one or more executive officers serving as one of our directors
or on our compensation committee.
EXECUTIVE COMPENSATION
The following table sets forth information concerning the
compensation of our chief executive officer and our other four
most highly compensated executive officers for the year ended
December 31, 2004.
Summary compensation table
Annual compensation
Other annual
All other
Salary
Bonus
compensation
compensation
Name and principal position
Year
($)
($)
($)
($)
Bennett K. Hatfield, President and
Chief Executive
    Officer
(1)
2004
—
—
—
—
George R. Desko, Chief Executive Officer
(2)
2004
450,000
—
—
—
Coy K. Lane, Senior Vice President of
    Operations
(3)
2004
300,000
—
—
—
William D. Campbell, Vice President and
    Treasurer
(4)
2004
265,000
—
—
—
William Scott Perkins, President— ICG
    Eastern
(5)
2004
200,000
—
—
—
James Ketron, Vice President and General
    Counsel
(6)
2004
190,000
—
—
—
Roger L. Nicholson, Senior Vice President and General
    Counsel
(7)
2004
—
—
—
—
Samuel R. Kitts, Senior Vice President, West Virginia and
    Maryland
    Operations
(8)
2004
—
—
—
—
(1)
Mr. Hatfield became our President and Chief Executive
    Officer in March 2005. For 2005, Mr. Hatfield will receive
    an annual salary of $500,000, and is entitled to certain other
    perquisites. For other information about his compensation, see
    "—Employment agreements" below.
(2)
Mr. Desko was ICG, Inc.'s Interim President and Chief
    Executive Officer from October 2004 until March 2005.
(3)
Mr. Lane was ICG, Inc.'s Senior Vice President of
    Operations until January 2005.
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(4)
Mr. Campbell also became our Secretary in April 2005.
(5)
Mr. Perkins was ICG, Inc.'s Vice President, ICG
    Eastern until January 2005, when he became our Senior Vice
    President, Kentucky and Illinois.
(6)
Mr. Ketron was ICG, Inc.'s Vice President and
    General Counsel until February 2005.
(7)
Mr. Nicholson became our Senior Vice President and General
    Counsel in April 2005. For 2005, Mr. Nicholson will receive
    an annual salary of $260,000.
(8)
Mr. Kitts became our Senior Vice President, West Virginia and
    Maryland Operations in April 2005. For 2005, Mr. Kitts will
    receive an annual salary of $250,000.
Employee benefit plans
There were no individual grants of stock options made during the
year ended December 31, 2004 to any of the named executive
officers. Prior to the effectiveness of the registration
statement of which this prospectus is a part, we expect to adopt
a plan and grant stock options and restricted shares to our
executive officers, including the following
Number of
Securities
Underlying
Restricted
Exercise Price
Name
Options Granted
(1)
Stock
(1)
per Share
William D. Campbell
45,000
45,000
(2)
Michael Hardesty
40,000
40,000
(2)
Bennett K. Hatfield
319,052
275,000
$
10.97
Oren Eugene Kitts
50,000
50,000
(2)
Samuel R. Kitts
50,000
50,000
(2)
Roger L. Nicholson
50,000
50,000
William Scott Perkins
50,000
50,000
(2)
(1)
All option and restricted share grants will be grants 25%
    vested upon grant, with the remaining vesting ratably over three
    years.
(2)
To be priced at the price of the shares of common stock sold
    in this offering.
Employment agreements
We currently have an employment agreement with Bennett K.
Hatfield our President and Chief Executive Officer. We expect to
execute a similar employment agreement with Roger L. Nicholson,
our Vice President and General Counsel.
Bennett K. Hatfield.
On March 14, 2005, we entered
into an employment agreement with Bennett K. Hatfield to serve
as our President, Chief Executive Officer and as a member of our
board of directors. The initial term of Mr. Hatfield's
employment agreement ends on March 31, 2008, unless
extended in one-year increments beginning on March 31,
2007. The employment agreement provides a base salary to
Mr. Hatfield of $500,000 per year, subject to annual
review by the board of directors. In addition, Mr. Hatfield
is entitled to receive an annual bonus based upon the
achievement of certain results measured by us meeting certain
EBITDA targets. For 2005 and 2006, Mr. Hatfield's
bonus will not be less than $500,000 per year. Under the
terms of the employment agreement, Mr. Hatfield will
receive term life insurance in the amount of $3.0 million
for a period of 120 months owned by a designee of
Mr. Hatfield, and will be eligible to participate in
employee benefit plans and programs adopted by us for executive
level employees.
Pursuant to the employment agreement and the expected terms of
our 2005 Management Equity Incentive Compensation Plan,
Mr. Hatfield has been granted (i) $3.5 million of
stock options, which vest 25% on the date of grant and 25%
annually on each March 14, 2006, 2007 and 2008,
(ii) 206,250 restricted shares of common stock, which vest
in three equal installments annually on each March 14,
2006, 2007 and 2008, and (iii) 68,750 shares of common
stock. Should certain events
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occur, such as an underwritten public offering that meets
certain criteria, a "change of control" or the
termination of Mr. Hatfield's employment for
"cause" or for "good reason" (as such terms
are defined in the employment agreement), all of the
unrestricted shares and options will immediately vest and the
options will become immediately exercisable. If
Mr. Hatfield makes a timely election under
Section 83(b) of the Internal Revenue Code to include the
restricted shares in gross income for 2005, we will pay
Mr. Hatfield an income tax gross-up payment to make
Mr. Hatfield whole for the income tax impact of the
restricted and unrestricted shares of common stock received by
Mr. Hatfield.
We may terminate Mr. Hatfield's employment at any time
and for any reason and Mr. Hatfield may resign at any time
and for any reason. If Mr. Hatfield's employment is
terminated by us without "cause" or if
Mr. Hatfield resigns for "good reason" (as such
terms are defined in the employment agreement), we will be
required to pay Mr. Hatfield (i) his accrued but
unpaid salary and bonus compensation through the date of
termination, (ii) the bonus compensation for the year of
termination, prorated to the amount of time actually employed
during such year and (iii) subject to
Mr. Hatfield's compliance with the non-solicitation
provisions, a severance payment of three times base salary and
three times annual bonus compensation (measured using the
previous year's bonus payment), along with coverage under
the Company's welfare benefit programs for a period not to
exceed two years. Such severance compensation will be paid
quarterly over the two year period following the date of
Mr. Hatfield's termination of employment. In the event
that the severance payments or benefits would subject
Mr. Hatfield to an excise tax because such payments or
benefits are deemed to be "excess parachute payments"
within the meaning of Section 280G of the Internal Revenue
Code, then Mr. Hatfield would be entitled to a tax gross-up
payment to restore Mr. Hatfield to the same after-tax
position that he would have been in if the excise tax had not
been imposed.
Under the terms of the employment agreement, Mr. Hatfield
may not disclose any confidential information or data concerning
us or our business during the term of Mr. Hatfield's
employment and thereafter. In addition, during
Mr. Hatfield's term of employment and for a period of
two years following the date Mr. Hatfield ceases to be
employed by us, Mr. Hatfield may neither solicit certain of
our employees to leave our employment nor solicit our customers
or business associates to cease doing business with us.
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Principal stockholders
The following table and accompanying footnotes show information
regarding the beneficial ownership of our common stock before
and after this offering by:
4
each person who is known by us to own beneficially more than 5%
    of our common stock;
4
each member of our board of directors and each of our named
    executive officers; and
4
all members of our board of directors and our executive officers
    as a group.
We have determined beneficial ownership in accordance with the
rules of the Securities and Exchange Commission. We believe that
each stockholder named in the table has sole voting and
dispositive power for the shares shown as beneficially owned by
them.
The number of shares and percentages of beneficial ownership
before the offering set forth below are based on
106,605,999 shares of our common stock issued and
outstanding as of March 31, 2005. The number of shares and
percentages of beneficial ownership after the offering are based
on                      shares
of our common stock to be issued and outstanding immediately
after this offering, including the shares of common stock
expected to be issued in connection with the Anker acquisition.
Shares beneficially
owned after the offering
Assuming
Assuming
Shares beneficially
the underwriters'
the underwriters'
owned
option is
option is
prior to the offering
not exercised
exercised in full
Name and address of
beneficial owner
Number
Percent
Number
Percent
Number
Percent
Värde Coal Inc.
9,868,755
9.26%
Attn: Kathy Ricke
8500 Normandale Lake
Boulevard
Suite 1570
Minneapolis, MN 55347
Contrarian Capital Management LLC
10,822,865
10.15%
Attn: Michael J. Restifo
411 West Putnam Avenue
Suite 225
Greenwich, CT 06830
WLR Recovery Fund II, L.P.
9,804,172
9.20%
Attn: Wendy Teramoto
101 East
    52
nd
Street
19
th
Floor
New York, NY 10022
Shepherd International Coal Holdings Inc.
7,670,349
7.20%
Attn: Colin M. Lancaster
3600 S. Lake Drive
St. Francis, WI 53235
Stark Trading
7,670,350
7.20%
Attn: Colin M. Lancaster
3600 S. Lake Drive
St. Francis, WI 53235
Wilbur L. Ross,
    Jr.
(1)
9,804,172
9.20%
Bennett K.
    Hatfield
(2)
68,750
*
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Principal stockholders
Shares beneficially
owned after the offering
Assuming
Assuming
Shares beneficially
the underwriters'
the underwriters'
owned
option is
option is
prior to the offering
not exercised
exercised in full
Name and address of
beneficial owner
Number
Percent
Number
Percent
Number
Percent
William D.
    Campbell
(2)
22,500
*
Michael
    Hardesty
(2)
20,000
*
Oren Eugene
    Kitts
(2)
25,000
*
Samuel R.
    Kitts
(2)
25,000
*
Roger L.
    Nicholson
(2)
25,000
*
William Scott
    Perkins
(2)
25,000
*
Jon R.
    Bauer
(3)
10,822,865
10.15%
George R. Desko
—
—
Marcia
    Page
(4)
9,868,755
9.26%
All directors and executive officers as a group (13 persons)
(1)(2)(3)(4)
30,972,361
29.1%
*
Less than 1%.
(1)
Represents 9,804,172 shares of common stock held of
    record by WLR Recovery Fund II L.P. Mr. Ross serves as
    a principal of WL Ross & Co. LLC, which manages
    WLR Recovery Fund II L.P. To the extent Mr. Ross is
    deemed to beneficially own these shares as a result of his
    position as a principal of WL Ross & Co. LLC,
    Mr. Ross disclaims beneficial ownership of these shares.
(2)
Represents options to purchase shares of our common stock
    which are currently exercisable.
(3)
Represents 10,822,865 shares of common stock held of
    record by investment management clients of Contrarian Capital
    Management LLC. Mr. Bauer serves as the Managing Member of
    Contrarian Capital Management LLC. To the extent Mr. Bauer
    is deemed to beneficially own these shares as a result of his
    position as the Managing Member of Contrarian Capital Management
    LLC, Mr. Bauer disclaims beneficial ownership of these
    shares.
(4)
Represents 9,868,755 shares of common stock held of
    record by Värde Coal Inc. All of these shares are
    controlled by Värde Partners, Inc., Värde Management,
    Inc. or Värde Management International, Inc., which are
    controlled by Ms. Page, Gregory S. McMillan and George G.
    Hicks. Ms. Page and Messrs. McMillan and Hicks are
    (i) the principals, directors and managing partners of
    Värde Partners, Inc. and (ii) the principals,
    directors and vice president of Värde Management, Inc. and
    Värde Management International, Inc. To the extent
    Ms. Page is deemed to beneficially own these shares as a
    result of her position as a principal director or managing
    partner or vice president of Värde Partners, Inc.
    Värde Management Inc. or Värde Management
    International, Inc., Ms. Page disclaims beneficial
    ownership of these shares.
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Certain relationships and related party transactions
Under the Advisory Services Agreement, dated as of
October 1, 2004 between ICG, Inc. and
WL Ross & Co. LLC, WLR has agreed to provide
advisory services to ICG, Inc. (consisting of consulting and
advisory services in connection with strategic and financial
planning, investment management and administration and other
matters relating to the business and operation of ICG, Inc. of a
type customarily provided by sponsors of U.S. private
equity firms to companies in which they have substantial
investments, including any consulting or advisory services which
the Board of Directors reasonably requests). WLR is to be paid a
quarterly fee of $500,000 and reimbursed for any reasonable out
of pocket expenses (including expenses of third-party advisors
retained by WLR). ICG will assume the Advisory Services
Agreement in connection with the reorganization.
The advisory services agreement is for a term until the earlier
of (i) the entry of a final non-appealable judgment that
WLR is in breach of its obligation under the agreement or in
breach of its duty of loyalty to ICG, Inc. as an equity holder;
(ii) the seventh anniversary of the effective date; or
(iii) the 30th day after receipt by WLR of a termination
payment (as defined in the agreement). ICG, Inc. also has the
right to terminate the agreement upon written notice to WLR
following (i) the 90th day after which WLR and its
affiliated entities cease to own at least 25% of the ICG, Inc.
equity beneficially owned by them on the effective date of the
agreement or (ii) the 30th day after which Wilbur L.
Ross, Jr. is no longer affiliated with or involved in the
business of WLR.
On October 1, 2004, ICG entered into an agreement with
Insuratex, LTD, a wholly owned subsidiary of funds controlled by
WLR, to administer and pay workers' compensation claims
incurred by ICG. ICG paid an initial $2.5 million premium to
fund such claims and will continue to pay monthly installments
of $0.2 million until a total premium of $5.0 million is
paid by ICG. The $5.0 million annual premium is to be adjusted
after the initial 18 months based on actual workers'
compensation loss experienced. We believe that the rates, terms
and provisions contained in this agreement are comparable to
those that we could have obtained through negotiations with an
unrelated party.
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Description of indebtedness
OUR CREDIT FACILITY
In connection with the Horizon asset acquisition in the third
quarter of 2004, our subsidiary, ICG, LLC, entered into a new
credit facility, which, among other things, financed a portion
of the Horizon acquisition and provided working capital for us
and our subsidiaries. Our current amended and restated credit
facility consists of a $110.0 million revolving credit
facility, of which up to a maximum of $60.0 million may be
utilized for letters of credit, and a $175.0 million term
loan facility. The revolving credit facility has a five-year
term and is due on October 1, 2009. The term loan facility
has a six-year term and is due on October 1, 2010. As of
December 31, 2004, we had $175.0 million outstanding
under our credit facility, including $54.4 million of
outstanding and undrawn letters of credit. Borrowings under the
revolving credit facility are subject to our total leverage
ratio and bear interest, at our option, at either LIBOR
(adjusted for statutory reserves) plus a margin ranging from
2.00% to 2.50% per annum or the alternate base rate plus a
margin ranging from 1.00% to 1.50% per annum. Borrowings
under the term loan bear interest, at our option, at either
LIBOR (adjusted for statutory reserves) plus 2.75% per
annum or the alternate base rate plus 1.75% per annum.
Borrowings under our credit facility are secured by
substantially all of our assets and the assets of all of our
subsidiaries, as well as by a pledge of 100% of the stock of our
subsidiaries. In addition, we and each of our other non-borrower
subsidiaries guarantee all of the indebtedness under the credit
facility.
Our credit facility requires certain mandatory prepayments upon
the receipt of the proceeds from certain asset sales, casualty
events, debt or equity offerings, including this offering, and
in the event that we have excess cash flow as determined in
accordance with the credit facility. Our credit facility
requires 50% of the proceeds of this offering (net of any
customary fees, underwriting discounts, commissions and other
costs and expenses) to be applied as a prepayment of the term
loan facility, with such prepayment to be applied, first, to the
next scheduled amortization payment and, second, to the
remaining amortization payments on a pro rata basis.
Our credit facility contains customary affirmative and negative
covenants for senior credit facilities of this type, including,
but not limited to, limitations on the incurrence of
indebtedness, asset dispositions, acquisitions, investments,
dividends and other restricted payments, liens and transactions
with affiliates. Our credit facility also contains the following
financial covenants:
4
a maximum leverage ratio, set at 2.75 to 1.00 from the closing
    date of the credit facility through December 31, 2005 and
    decreasing to 2.50 to 1.00 for the 2006 fiscal year, and 2.25 to
    1.00 from January 1, 2007 through the final maturity date
    of the credit facility;
4
a minimum interest coverage ratio set at 4.00 to 1.00 for each
    of the four consecutive quarters then last ended;
4
a minimum fixed charge coverage ratio, set at 1.00 to 1.00 from
    the closing date of the credit facility through March 31,
    2005, and adjusted as follows: 0.75 to 1.00 from April 1,
    2005 through September 30, 2005, 0.90 to 1.00 from
    October 1, 2005 through December 31, 2005, 1.00 to
    1.00 for the 2006 fiscal year and 1.25 to 1.00 from
    January 1, 2007 through the final maturity date of the
    credit facility; and
4
a limit on capital expenditures from the closing date of the
    credit facility through December 31, 2005 of
    $100.0 million, for the 2006 fiscal year of
    $70.0 million, for the 2007 fiscal year of
    $70.0 million, for the 2008 fiscal year of
    $60.0 million, for the 2009 fiscal year of
    $60.0 million and from January 1, 2010 through the
    final maturity date of the credit facility of $60.0 million.
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Description of indebtedness
Although we have not reached a covenant test period we believe
that ICG, LLC maintained the leverage and interest coverage
ratios specified in, and were in compliance with, the credit
facility as of December 31, 2004.
Our credit facility contains customary events of default,
including, but not limited to, failure to pay principal or
interest, breach of covenants or representations and warranties,
cross-default to other indebtedness, judgment default and
insolvency. If an event of default occurs under the credit
facility, the lenders under the credit facility will be entitled
to take various actions, including demanding payment for all
amounts outstanding thereunder and foreclosing on any collateral.
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Description of capital stock
The following is a description of the material terms of our
amended and restated certificate of incorporation and bylaws as
each is in effect as of the date of this prospectus. We refer
you to our amended and restated certificate of incorporation and
bylaws, copies of which have been filed as exhibits to the
registration statement of which this prospectus forms a part.
COMMON STOCK
As of March 31, 2005, our authorized capital stock
consisted of 2,000,000,000 shares of common stock, par
value $0.01 per share, of
which                      shares
were issued and outstanding immediately prior to this offering,
and 200,000,000 shares of preferred stock, par value
$0.01 per share, of which no shares were issued and
outstanding immediately prior to this offering. Shares of our
common stock were held of record
by                      stockholders.
Immediately following the completion of this offering, we will
have                      shares
of our common stock, and no shares of our preferred stock,
outstanding.
Holders of common stock will be entitled to one vote per share
on all matters submitted to be voted upon by the stockholders.
The holders of our common stock will not have cumulative voting
rights in the election of directors.
Subject to any superior rights of any holders of preferred stock
or any class or series of stock having a preference over the
common stock with respect to payment of dividends, holders of
our common stock will be entitled to such dividends as may be
declared and paid from time to time by our board of directors
out of legally available funds. Our credit facility imposes
restrictions on our ability to declare dividends with respect to
our common stock. For additional information, see "Dividend
policy" below.
In the event of our liquidation, dissolution or winding up, the
holders of common stock will be entitled to receive ratably the
assets available for distribution to the stockholders after
payment of liabilities and any amounts due to the holders of
preferred stock.
The holders of our common stock have no preemptive rights and no
rights to convert or exchange their common stock into any other
securities. There are no redemption or sinking fund provisions
applicable to our common stock. All outstanding shares of our
common stock, including the common stock offered in this
offering, are and will be fully paid and non-assessable.
PREFERRED STOCK
Our amended and restated certificate of incorporation will
authorize our board of directors to, without stockholder
approval, issue up to 200,000,000 shares of preferred stock
in one or more series and to fix the rights, preferences,
privileges and restrictions granted to or imposed upon the
preferred stock, including voting rights, dividend rights,
conversion rights, terms of redemption, liquidation preference,
sinking fund terms, subscription rights and the number of shares
constituting any series or the designation of a series.
Our board of directors can issue preferred stock with voting and
conversion rights that could adversely affect the voting power
of the holders of common stock, without stockholder approval. No
shares of preferred stock are currently outstanding and we have
no present plan to issue any shares of preferred stock.
DIVIDEND POLICY
We may retain any future earnings to support the development and
expansion of our business or make additional payments under our
credit facility and, as a result, we may not pay cash dividends
in the foreseeable future. Our payment of any future dividends
will be at the discretion of our board of directors after taking
into account various factors, including our financial condition,
operating results, cash needs, growth plans and the terms of any
credit agreements that we may be a party to at the
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Description of capital stock
time. Our credit facility limits us from paying any cash
dividends or other payments or distributions with respect to our
capital stock in excess of certain limitations. In addition, the
terms of any future credit agreement may contain similar
restrictions on our ability to pay dividends or making any
distributions or payments with respect to our capital stock.
REGISTRATION RIGHTS
Prior to the consummation of this offering, we expect to grant
our founding stockholders "demand" and
"piggyback" registration rights relating to their
shares of common stock pursuant to a registration rights
agreement. The former Anker and CoalQuest holders will receive
"piggyback" registration rights with respect to the
shares of ICG common stock they are receiving in the Anker
acquisition pursuant to a registration rights agreement to be
entered into at the closing of the Anker acquisition. These
rights are summarized below.
After the completion of this offering, holders
of                      shares
of common stock, or their permitted transferees, will be
entitled to unlimited "piggyback" registration rights.
These rights will entitle the holders to notice of a
registration prior to the filing of a registration statement and
to include, at our expense, their shares of common stock in any
of our registrations of our common stock (other than
registrations we file on Form S-4 or S-8, or any successor
forms thereto, or filed solely in connection with an offering
made solely to our existing stockholders or employees). We and
our underwriters can reduce the number of shares of common stock
requested to be included by holders of "piggyback"
registration rights in view of market conditions.
In addition, WLR or any other founding stockholder or
stockholders representing 30% of all registrable securities or
their permitted transferees will be entitled to
"demand" rights to register all or a portion of their
registrable securities under the Securities Act if the
reasonably anticipated aggregate price to the public of these
shares (net of underwriting discounts and commission) would
exceed $75.0 million. We will also be obligated to
undertake three demand registrations by WLR, one demand
registration by each other individual founding stockholder and
two additional demand registrations by a group of the founding
stockholders representing 30% of the registrable securities. If
at any time we are eligible to register our securities on a
Form S-3 under the Securities Act, holders may specify that
the requested registration be a "shelf registration"
for an offering on a delayed or continuous basis pursuant to
Rule 415 of the Securities Act.
If our stockholders with registration rights cause a large
number of securities to be registered and sold in the public
market, those sales could cause the market price of our common
stock to decline. If we initiate a registration and include
registrable securities as a result of the exercise of
registration rights, the inclusion of registrable securities
could adversely affect our ability to raise capital.
ANTI-TAKEOVER EFFECTS OF CERTAIN PROVISIONS OF OUR AMENDED
AND RESTATED CERTIFICATE OF INCORPORATION AND BYLAWS
Our amended and restated certificate of incorporation and bylaws
contain several provisions that may make it more difficult to
acquire us by means of a tender offer, open market purchase,
proxy fight or otherwise.
These provisions in our amended and restated certificate of
incorporation and bylaws are designed to encourage persons
seeking to acquire control of us to negotiate with our board. We
believe that, as a general rule, our interests and the interests
of our stockholders would be served best if any change in
control results from negotiations with our board based upon
careful consideration of the proposed terms, such as the price
to be paid to stockholders, the form of consideration to be paid
and the anticipated tax effects of the transaction.
These anti-takeover provisions in our amended and restated
certificate of incorporation and bylaws could, however, have the
effect of discouraging a prospective acquiror from making a
tender offer for
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Description of capital stock
our shares or otherwise attempting to obtain control of us. To
the extent that these provisions discourage takeover attempts,
they could deprive stockholders of opportunities to realize
takeover premiums for their shares. Moreover, these provisions
could discourage accumulations of large blocks of common stock,
thus depriving stockholders of any advantages which large
accumulations of stock might provide.
Set forth below is a summary of the relevant provisions of our
amended and restated certificate of incorporation and bylaws and
certain applicable sections of the General Corporation Law of
the State of Delaware. This summary does not purport to be
complete and is subject to, and qualified in its entirety by
reference to, all of the provisions of our amended and restated
certificate of incorporation, our bylaws and sections of the
General Corporation Law of the State of Delaware.
Delaware anti-takeover statute
We are governed by Section 203 of the General Corporation
Law of the State of Delaware. Section 203, subject to
certain exceptions, prohibits a Delaware corporation from
engaging in any business combination with any interested
stockholder for a period of three years following the time that
such stockholder became an interested stockholder, unless:
4
prior to such time, the board of directors of the corporation
    approved either the business combination or the transaction
    which resulted in the stockholder becoming an interested
    stockholder;
4
upon consummation of the transaction that resulted in the
    stockholder becoming an interested stockholder, the interested
    stockholder owned at least 85% of the voting stock of the
    corporation outstanding at the time the transaction commenced,
    excluding specified shares; or
4
at or subsequent to such time, the business combination is
    approved by the board of directors and authorized at an annual
    or special meeting of stockholders, and not by written consent,
    by the affirmative vote of at least
    66
2
/
3
%
    of the outstanding voting stock that is not owned by the
    interested stockholder.
The application of Section 203 may limit the ability of
stockholders to approve a transaction that they may deem to be
in their best interests.
In general, Section 203 defines "business
combination" to include:
4
any merger or consolidation involving the corporation and the
    interested stockholder;
4
any sale, lease, exchange, mortgage, pledge, transfer or other
    disposition of 10% or more of the assets of the corporation to
    or with the interested stockholder;
4
subject to certain exceptions, any transaction which results in
    the issuance or transfer by the corporation of any stock of the
    corporation to the interested stockholder;
4
any transaction involving the corporation which has the effect
    of increasing the proportionate share of the stock of any class
    or series of the corporation beneficially owned by the
    interested stockholder; or
4
the receipt by the interested stockholder of the benefit of any
    loans, advances, guarantees, pledges or other financial benefits
    provided by or through the corporation.
In general, Section 203 defines an "interested
stockholder" as any person that is:
4
the owner of 15% or more of the outstanding voting stock of the
    corporation;
4
an affiliate or associate of the corporation and was the owner
    of 15% or more of the outstanding voting stock of the
    corporation at any time within three years immediately prior to
    the relevant date; and
4
the affiliates and associates of the above.
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Description of capital stock
Under specific circumstances, Section 203 makes it more
difficult for an "interested stockholder" to effect
various business combinations with a corporation for a
three-year period, although the stockholders may, by adopting an
amendment to the corporation's certificate of incorporation
or bylaws, elect not to be governed by this section, effective
twelve months after adoption.
Our amended and restated certificate of incorporation and bylaws
do not exclude us from the restrictions imposed under
Section 203. We anticipate that the provisions of
Section 203 may encourage companies interested in acquiring
us to negotiate in advance with our board of directors since the
stockholder approval requirement would be avoided if a majority
of the directors then in office approve either the business
combination or the transaction that resulted in the stockholder
becoming an interested stockholder.
Stockholder action; special meetings
Our certificate of incorporation provides that stockholder
action can be taken only at an annual or special meeting of
stockholders and cannot be taken by written consent in lieu of a
meeting. Our certificate of incorporation and our bylaws provide
that, except as otherwise required by law, special meetings of
the stockholders can only be called by the chairman of our
board, our chief executive officer, our president or our
secretary at the request of a majority of the number of
directors that we would have if there were no vacancies on our
board. Stockholders are not permitted to call a special meeting
or to require our board to call a special meeting.
Stockholder proposals
At an annual meeting of stockholders, only business that is
properly brought before the meeting will be conducted or
considered. To be properly brought before an annual meeting of
stockholders, business must be specified in the notice of the
meeting (or any supplement to that notice), brought before the
meeting by the presiding officer or by or at the direction of
the majority of the total number of directors that our board
would have if there were no vacancies, or properly requested by
a stockholder to be brought before the meeting.
For business to be properly requested by a stockholder to be
brought before an annual meeting, the stockholder must:
4
be a stockholder of record at the time of the giving of the
    notice for the meeting;
4
be entitled to vote at the meeting; and
4
have given timely written notice of the business to our
    secretary.
To be timely, a stockholder's notice must be delivered to
or mailed and received at our principal executive offices not
less than 60, nor more than 90, calendar days prior to the first
anniversary date on which we first mailed our proxy materials
for the preceding year's annual meeting of stockholders;
provided, however, that if there was no annual meeting in the
preceding year or the date of the annual meeting is advanced
more than 30 calendar days prior to, or delayed by more
than 30 calendar days after the anniversary of the preceding
year's annual meeting, notice by the stockholder to be
timely must be so delivered not later than the close of business
on the later of the 90th calendar day prior to such annual
meeting or the 10th calendar day following the day on which
public disclosure of the date of such meeting is first made. A
stockholder's notice must set forth, as to each matter the
stockholder proposes to bring before the meeting:
4
a description in reasonable detail of the business proposed to
    be brought before the meeting and the reasons for conducting
    such business at the meeting;
4
the name and address of the stockholder proposing such business
    and of the beneficial owner, if any, on whose behalf the
    proposal is made;
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4
the class and series and number of shares that are owned of
    record and beneficially by the stockholder proposing the
    business and by the beneficial owner, if any, on whose behalf
    the proposal is made;
4
a description of all arrangements or understandings among the
    stockholder, the beneficial owner on whose behalf the proposal
    is made, if any, and any other person or persons (including
    their names) in connection with the proposal of such business by
    the stockholders and any material interest of the stockholder in
    such business;
4
whether such stockholder or beneficial owner intends to deliver
    a proxy statement and forms of proxy to holders of at least the
    percentage of shares of our voting stock required to approve
    such proposal; and
4
a representation that the stockholder intends to appear in
    person or by proxy at the annual meeting to bring such business
    before the meeting.
Similarly, at a special meeting of stockholders, only such
business as is properly brought before the meeting will be
conducted or considered. To be properly brought before a special
meeting, business must be specified in the notice of the meeting
(or any supplement to that notice) given by or at the direction
of the chairman of our board, our chief executive officer, our
president or our secretary at the request of a majority of the
number of directors that we would have if there were no
vacancies on our board or, otherwise brought before the meeting
by the presiding officer or by or at the direction of the
majority of the total number of directors that our board would
have if there were no vacancies.
Nomination of candidates for election to our board
Under our bylaws, only persons that are properly nominated will
be eligible for election to be members of our board. To be
properly nominated, a director candidate must be nominated at an
annual meeting of the stockholders by or at the direction of our
board or committee thereof or properly nominated by a
stockholder. To be properly nominated by a stockholder, such
stockholder must have delivered a proxy statement and form of
proxy to the holders of at least the percentage of shares of our
voting stock required to approve such nomination and included in
such materials a timely and proper notice in proper written form
to our secretary.
To be timely, a stockholder's notice must be delivered to
or mailed and received at our principal executive offices not
less than 60 nor more than 90 calendar days prior to the
first anniversary of the date on which we first mailed our proxy
materials for the preceding year's annual meeting of
stockholders. If, however, there was no annual meeting in the
preceding year or the date of the annual meeting is advanced
more than 30 calendar days prior to, or delayed by more
than 30 calendar days after the anniversary of the
preceding year's annual meeting, notice by the stockholder
to be timely must be so delivered not later than the later of
the 90th calendar day prior to such annual meeting or the tenth
calendar day following the day on which public announcement of
the date of such meeting is first made.
To be in proper written form, such stockholder's notice
must include:
4
the name and address of the stockholder giving the notice and of
    the beneficial owner, if any, on whose behalf the nomination is
    made;
4
a representation that the stockholder giving the notice is a
    holder of record of shares of our voting stock entitled to vote
    at such annual meeting and intends to appear in person or by
    proxy at the annual meeting to nominate the person or persons
    specified in the notice;
4
the class and series and number of shares of stock owned
    beneficially and of record by the stockholder giving the notice
    and by the beneficial owner, if any, on whose behalf the
    nomination in made;
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Description of capital stock
4
a description of all arrangements or understandings between or
    among any of:
4
the stockholder giving the notice;
4
the beneficial owner on whose behalf the notice is given;
4
each nominee; and
4
any other person or persons (naming such person or persons)
    pursuant to which the nomination or nominations are to be made
    by the stockholder giving the notice;
4
the name, age, business address, residence address and
    occupation of the nominee proposed by the stockholder;
4
such other information regarding each nominee proposed by the
    stockholder giving the notice as would be required to be
    included in a proxy statement filed pursuant to the proxy rules
    of the SEC had the nominee been nominated, or intended to be
    nominated, by our board;
4
the signed consent of each nominee to serve as a director on our
    board if so elected; and
4
whether such stockholder or beneficial owner intends to deliver
    a proxy statement and form of proxy to holders of at least the
    percentage of shares of our voting stock required to elect such
    nominee or nominees. In addition, a stockholder must also comply
    with all applicable requirements of the Exchange Act and the
    rules and regulations thereunder with respect to matters
    relating to nomination of candidates for directors.
Amendment to our bylaws
Except for certain provisions indicated above, our bylaws may be
amended, altered or repealed by the affirmative vote of the
holders of a majority of our voting stock or by the affirmative
vote of a majority of our board. Certain provisions that require
the affirmative vote of the holders of 80% of our voting stock
may make it more difficult to change our bylaws for the purpose
of gaining control over us.
TRANSFER AGENT AND REGISTRAR
We have appointed Registrar and Transfer Company as the transfer
agent and registrar for our common stock.
LISTING
We will apply to have our common stock listed on The New York
Stock Exchange under the symbol "ICO."
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Shares eligible for future sale
Prior to this offering, there was no public market for our
common stock. Future sales of substantial amounts of our common
stock in the public market, or the perception that these sales
could occur, could adversely affect the price of our common
stock.
Based on the number of shares outstanding as
of                     ,
2005, we will have
approximately                      shares
of our common stock outstanding after the completion of this
offering and after giving effect to the reorganization and the
Anker acquisition
(approximately                      shares
if the underwriters exercise their over-allotment option in
full). Of those shares,
the                      shares
of common stock sold in this offering
(                    shares
if the underwriters exercise their over-allotment option in
full) and
the                      shares
issued to the holders of ICG, Inc.'s common stock in
connection with the reorganization will be freely tradable
without restriction or further registration under the Securities
Act, except that any shares held by our "affiliates,"
as that term is defined under Rule 144 of the Securities
Act, may be sold only in compliance with the limitations
described below. The remaining outstanding shares of common
stock will be deemed "restricted securities" as that
term is defined under Rule 144. Restricted securities may
not be resold except pursuant to an effective registration
statement or an applicable exemption from registration,
including an exemption under Rule 144 or 144(k) under the
Securities Act, which are summarized below.
RULE 144
In general, under Rule 144, as currently in effect, an
affiliate of ours who beneficially owns shares of our common
stock that are not restricted securities, or a person who
beneficially owns for more than one year shares of our common
stock that are restricted securities, may generally sell, within
any three-month period, a number of shares that does not exceed
the greater of:
4
1% of the then-outstanding shares of common stock or
    approximately shares assuming no exercise by the underwriters of
    their option to purchase additional shares; and
4
the average weekly reported volume of trading in the common
    stock on The New York Stock Exchange during the four calendar
    weeks preceding the date on which notice of sale is filed,
    subject to restrictions.
Sales under Rule 144 are also subject to requirements with
respect to manner of sale, notice and the availability of
current public information about us. Generally, a person who was
not our affiliate at any time during the three months before the
sale, and who has beneficially owned shares of our common stock
that are restricted securities for at least two years, may sell
those shares without regard to the volume limitations, manner of
sale provisions, notice requirements or the requirements with
respect to availability of current public information about us.
Rule 144 does not supersede the contractual obligations of
our security holders set forth in the lock-up agreements
described above.
RULE 144(K)
In addition, a person who is not deemed to have been an
affiliate of ours at any time during the 90 days preceding
a sale and who has beneficially owned the shares proposed to be
sold for at least two years, would be entitled to sell those
shares under Rule 144(k) without regard to the manner of
sale, public information, volume limitation or notice
requirements of Rule 144. To the extent that our affiliates
sell their shares, other than pursuant to Rule 144 or a
registration statement, the purchaser's holding period for
the purpose of effecting a sale under Rule 144 commences on
the date of transfer from the affiliate.
RULE 701
Generally, an employee, officer, director or consultant who
purchased shares of our common stock before the effective date
of the registration statement of which this prospectus is a
part, or who holds
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Shares eligible for future sale
options as of that date, pursuant to a written compensatory plan
or contract, may rely on the resale provisions of Rule 701
under the Securities Act. Under Rule 701, these persons who
are not our affiliates may generally sell their eligible
securities, commencing 90 days after the effective date of
the registration statement of which this prospectus is a part,
without having to comply with the public information, holding
period, volume limitation or notice provisions of Rule 144.
These persons who are our affiliates may generally sell their
eligible securities under Rule 701, commencing 90 days
after the effective date of the registration statement of which
this prospectus is a part, without having to comply with
Rule 144's one-year holding period restriction.
Neither Rule 144 nor Rule 701 supersedes the
contractual obligations of our security holders set forth in the
lock-up agreements described above.
SALE OF RESTRICTED SHARES
The                      shares
of our common stock that were outstanding
on                     ,
2005 will become eligible for sale, pursuant to Rule 144 or
Rule 701, without registration approximately as follows:
4
shares
    of common stock will be immediately eligible for sale in the
    public market without restriction;
4
shares
    of common stock will be eligible for sale in the public market
    under Rule 144 or Rule 701, beginning 90 days
    after the effective date of the registration statement of which
    this prospectus is a part, subject to the volume, manner of sale
    and other limitations under those rules; and
4
the
    remaining                      shares
    of common stock will become eligible under Rule 144 for
    sale in the public market from time to time after the effective
    date of the registration statement of which this prospectus is a
    part upon expiration of their respective holding periods.
The above does not take into consideration the effect of the
lock-up agreements described above.
LOCK-UP AGREEMENTS
The holders of
approximately                      shares
of outstanding common stock as of the closing of this offering
and the holders
of                      shares
of common stock underlying options as of the closing of this
offering, including all of our executive officers and directors,
have entered into lock-up agreements pursuant to which they have
generally agreed, subject to certain exceptions, not to offer or
sell any shares of common stock or securities convertible into
or exchangeable or exercisable for shares of common stock for a
period of at least 180 days from the date of this
prospectus without the prior written consent of UBS Securities
LLC. See "Underwriting—No sale of similar
securities."
STOCK OPTIONS
Pursuant to the stock option plan that we intend to adopt prior
to the effectiveness of the registration statement of which this
prospectus is a part, we expect to grant options to members of
senior management to purchase an aggregate
of                      shares
of our common stock. Of the outstanding shares of common stock
to be granted as options,
approximately      %
of                      shares
will, subject to the continued employment of such members of
senior management, vest and become exercisable on
each                     beginning                     and
ending
on                     .
As soon as practicable following this offering, we intend to
file one or more registration statements on Form S-8 under
the Securities Act to register all shares of common stock
subject to outstanding stock options. After expiration of the
applicable contractual resale restrictions, shares covered by
these registration statements will be eligible for sale in the
public markets, other than shares owned by our affiliates, which
may be sold in the public market if they are registered or
qualify for an exemption from registration under Rule 144.
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Certain U.S. federal income and estate tax consequences to
non-U.S. holders
The following is a summary of certain material United States
federal income and estate tax consequences of the purchase,
ownership and disposition of our common stock as of the date
hereof. Except where noted, this summary deals only with common
stock that is held as a capital asset by a non-U.S. holder.
A "non-U.S. holder" means a person (other than a
partnership) that is not for United States federal income tax
purposes any of the following:
4
an individual citizen or resident of the United States;
4
a corporation (or any other entity treated as a corporation for
    United States federal income tax purposes) created or organized
    in or under the laws of the United States, any state thereof or
    the District of Columbia;
4
an estate the income of which is subject to United States
    federal income taxation regardless of its source; or
4
a trust if it (1) is subject to the primary supervision of
    a court within the United States and one or more United States
    persons have the authority to control all substantial decisions
    of the trust or (2) has a valid election in effect under
    applicable United States Treasury regulations to be treated as a
    United States person.
This summary is based upon provisions of the Internal Revenue
Code of 1986, as amended (the "Code"), and
regulations, rulings and judicial decisions as of the date
hereof. Those authorities may be changed, perhaps retroactively,
so as to result in United States federal income and estate tax
consequences different from those summarized below. This summary
does not address all aspects of United States federal income and
estate taxes and does not deal with foreign, state, local or
other tax considerations that may be relevant to
non-U.S. holders in light of their personal circumstances.
In addition, it does not represent a detailed description of the
United States federal income and estate tax consequences
applicable to you if you are subject to special treatment under
the United States federal income tax laws (including if you are
a United States expatriate, "controlled foreign
corporation," "passive foreign investment
company," corporation that accumulates earnings to avoid
United States federal income tax or an investor in a
pass-through entity). A change in law may alter significantly
the tax considerations that we describe in this summary.
If a partnership holds our common stock, the tax treatment of a
partner will generally depend upon the status of the partner and
the activities of the partnership. If you are a partner of a
partnership holding our common stock, you should consult your
tax advisors.
If you are considering the purchase of our common stock, we
recommend that you consult your own tax advisors concerning the
particular United States federal income and estate tax
consequences to you of the ownership of the common stock, as
well as the consequences to you arising under the laws of any
other taxing jurisdiction.
DIVIDENDS
Cash distributions on our common stock will constitute dividends
for U.S. federal income tax purposes to the extent paid
from our current or accumulated earnings and profits, as
determined under U.S. federal income tax principals.
Distributions in excess of our earnings and profits will
constitute a return of capital that is applied against and
reduces the non-U.S. holder's adjusted tax basis in
our common stock. Any remaining excess will be treated as gain
realized on the sale or other disposition of the common stock
and will be treated as described under "— Gain on
Disposition of Common
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Certain U.S. federal income and estate tax consequences
to non-U.S. holders
Stock" below. Dividends paid to a non-U.S. holder of
our common stock generally will be subject to withholding of
United States federal income tax at a 30% rate or such lower
rate as may be specified by an applicable income tax treaty.
However, dividends that are effectively connected with the
conduct of a trade or business by the non-U.S. holder
within the United States are not subject to the withholding tax,
provided certain certification and disclosure requirements are
satisfied. Instead, such dividends are generally subject to
United States federal income tax on a net income basis in the
same manner as if the non-U.S. holder were a United States
person as defined under the Code. Any such effectively connected
dividends received by a foreign corporation may be subject to an
additional "branch profits tax" at a 30% rate or such
lower rate as may be specified by an applicable income tax
treaty.
A non-U.S. holder of our common stock who wishes to claim
the benefit of an applicable treaty rate and avoid backup
withholding, as discussed below, for dividends will be required
to (a) complete Internal Revenue Service Form W-8BEN
(or other applicable form) and certify under penalty of perjury
that such holder is not a United States person as defined under
the Code or (b) if our common stock is held through certain
foreign intermediaries, satisfy the relevant certification
requirements of applicable United States Treasury regulations.
Special certification and other requirements apply to certain
non-U.S. holders that are entities rather than individuals.
A non-U.S. holder of our common stock eligible for a
reduced rate of United States withholding tax pursuant to an
income tax treaty may obtain a refund of any excess amounts
withheld by filing an appropriate claim for refund with the
Internal Revenue Service.
GAIN ON DISPOSITION OF COMMON STOCK
Any gain realized on the disposition of our common stock
generally will not be subject to United States federal income
tax unless:
4
the gain is effectively connected with a trade or business of
    the non-U.S. holder in the United States, and, if required
    by an applicable income tax treaty, is attributable to a United
    States permanent establishment of the non-U.S. holder;
4
the non-U.S. holder is an individual who is present in the
    United States for 183 days or more in the taxable year of
    that disposition, and certain other conditions are met; or
4
we are or have been a "United States real property holding
    corporation" for United States federal income tax purposes.
A non-corporate non-U.S. holder described in the first
bullet point immediately above will be subject to tax on the net
gain derived from the sale under regular graduated United States
federal income tax rates. An individual non-U.S. holder
described in the second bullet point immediately above will be
subject to a flat 30% tax on the gain derived from the sale,
which may be offset by United States source capital losses, even
though the individual is not considered a resident of the United
States. If a non-U.S. holder that is a foreign corporation
falls under the first bullet point immediately above, it will be
subject to tax on its net gain in the same manner as if it were
a United States person as defined under the Code and, in
addition, may be subject to the branch profits tax equal to 30%
of its effectively connected earnings and profits or at such
lower rate as may be specified by an applicable income tax
treaty.
We believe that we are currently a "United States real
property holding corporation" for United States federal
income tax purposes. So long as our common stock continues to be
regularly traded on an established securities market, only a
non-U.S. holder who holds or held (at any time during the
shorter of the five year period preceding the date of
disposition or the holder's holding period) more than 5% of
our common stock will generally be subject to United States
federal income tax on the disposition of our common stock. If a
non-U.S. holder owned directly or indirectly more than 5%
of our common stock at any time during the applicable period,
then any gain recognized by such 5% non-U.S. holder
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Certain U.S. federal income and estate tax consequences
to non-U.S. holders
on the sale or other disposition of our common stock would be
treated as effectively connected with a U.S. trade or
business and would be subject to U.S. federal income tax at
regular graduated U.S. federal income tax rates and in much
the same manner as applicable to U.S. persons. Furthermore,
if our common stock were not considered to be "regularly
traded on an established securities market," then any gain
recognized by a non-U.S. holder on the sale or other
disposition of our common stock would be treated as effectively
connected with a U.S. trade or business and would be
subject to U.S. federal income tax at regular graduated
U.S. federal income tax rates and in much the same manner
as applicable to U.S. persons. In such a case, the
non-U.S. holder could also be subject to certain
withholding taxes imposed on the gross proceeds realized with
respect to the sale or other disposition of our common stock.
FEDERAL ESTATE TAX
Common stock owned or treated as owned by an individual
non-U.S. holder at the time of death will be included in
such holder's gross estate for United States federal estate
tax purposes, unless an applicable estate tax treaty provides
otherwise.
INFORMATION REPORTING AND BACKUP WITHHOLDING
We must report annually to the Internal Revenue Service and to
each non-U.S. holder the amount of dividends paid to such
holder and the tax withheld with respect to such dividends,
regardless of whether withholding was required. Copies of the
information returns reporting such dividends and withholding may
also be made available to the tax authorities in the country in
which the non-U.S. holder resides under the provisions of
an applicable income tax treaty.
A non-U.S. holder will be subject to backup withholding for
dividends paid to such holder unless such holder certifies under
penalty of perjury that it is a non-U.S. holder, and the
payor does not have actual knowledge or reason to know that such
holder is a United States person as defined under the Code, or
such holder otherwise establishes an exemption.
Information reporting and, depending on the circumstances,
backup withholding will apply to the proceeds of a sale or other
disposition (including a redemption) of our common stock within
the United States or conducted through certain United
States-related financial intermediaries, unless the beneficial
owner certifies under penalty of perjury that it is a
non-U.S. holder (and the payor does not have actual
knowledge or reason to know that the beneficial owner is a
United States person as defined under the Code) or such owner
otherwise establishes an exemption.
Backup withholding is not an additional tax. Any amounts
withheld under the backup withholding rules may be allowed as a
refund or a credit against a non-U.S. holder's United
States federal income tax liability provided the required
information is furnished to the Internal Revenue Service.
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Underwriting
We are offering the shares of our common stock described in this
prospectus through the underwriters named below. UBS Securities
LLC and Lehman Brothers Inc. are the representatives of the
underwriters. UBS Securities LLC and Lehman Brothers Inc. are
the joint book-running managers of this offering. We will enter
into an underwriting agreement with the representatives. Subject
to the terms and conditions of the underwriting agreement, each
underwriter will severally agree to purchase the number of
shares of common stock listed next to its name in the following
table.
Underwriters
Number of shares
UBS Securities LLC
Lehman Brothers Inc.
Total
The underwriting agreement provides that the underwriters must
buy all of the shares if they buy any of them. However, the
underwriters will not be required to take or pay for the shares
covered by the underwriters' over-allotment option
described below.
Our common stock is offered subject to a number of conditions,
including:
4
receipt and acceptance of our common stock by the
    underwriters; and
4
the underwriters' right to reject orders in whole or in
    part.
In connection with this offering, certain of the underwriters or
securities dealers may distribute prospectuses electronically.
Sales of the shares made outside the United States may be made
by affiliates of the underwriters.
OVER-ALLOTMENT OPTION
We have granted the underwriters an option to buy up to an
aggregate of additional shares of our common stock. The
underwriters may exercise this option solely for the purpose of
covering over-allotments, if any, made in connection with this
offering. The underwriters have 30 days from the date of
this prospectus to exercise this option. If the underwriters
exercise this option in whole or in part, they will each
purchase additional shares from us approximately in proportion
to the amounts specified in the table above.
COMMISSIONS AND DISCOUNTS
Shares sold by the underwriters to the public will initially be
offered at the public offering price set forth on the cover of
this prospectus. Any shares sold by the underwriters to
securities dealers may be sold at a discount of up to
$           per
share from the public offering price. Any of these securities
dealers may resell any shares purchased from the underwriters to
other brokers or dealers at a discount of up to
$           per
share from the public offering price. If all the shares are not
sold at the public offering price, the representatives may
change the offering price and the other selling terms. Sales of
shares outside of the United States may be made by affiliates of
the underwriters. Upon execution of the underwriting agreement,
the underwriters will be obligated to purchase the shares at the
prices and upon the terms stated therein and, as a result, will
thereafter bear any risk associated with changing the offering
price to the public or other selling terms. The underwriters
have informed us that they do not expect discretionary sales to
exceed 5% of the shares of common stock to be offered.
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Underwriting
The following table shows the per share and total underwriting
discounts and commissions we will pay to the underwriters. These
amounts are shown assuming both no exercised and full exercise
of the underwriters' option to purchase up to an
additional                      shares
from us.
Paid by us
Total
No exercise
Full exercise
No exercise
Full exercise
Per share
$
$
$
$
Total
$
$
$
$
We estimate that the total expenses of this offering payable by
us, not including underwriting discounts and commissions, will
be approximately
$          million.
NO SALES OF SIMILAR SECURITIES
We and each of our directors, executive officers and certain of
our current stockholders have entered into lock-up agreements
with the underwriters. Under these lock-up agreements we and
each of these persons may not, without the prior written consent
of UBS Securities LLC, sell, offer to sell, contract or agree to
sell, hypothecate, hedge, pledge, grant any option to purchase
or otherwise dispose of or agree to dispose of, directly or
indirectly, any of our common stock or any securities
convertible into or exercisable or exchangeable for our common
stock, or warrants or other rights to purchase our common stock.
These restrictions will be in effect for a period of
180 days after the date of this prospectus. These lock-up
agreements are subject to such stockholders' rights to
transfer their shares of common stock as a bona fide gift or to
a trust for the benefit of an immediate family member or to an
affiliate, provided that such done or transferee agrees in
writing to be bound by the terms of the lock- up agreement. At
any time and without public notice, UBS Securities LLC may, in
its sole discretion release some or all of the affected
securities from these lock-up agreements.
INDEMNIFICATION AND CONTRIBUTION
We have agreed to indemnify the underwriters and their
controlling persons against certain liabilities, including
liabilities under the Securities Act. If we are unable to
provide this indemnification, we will contribute to payments the
underwriters and their controlling persons may be required to
make in respect of those liabilities.
NEW YORK STOCK EXCHANGE LISTING
We will apply to have our common stock listed on The New York
Stock Exchange under the symbol "ICO."
PRICE STABILIZATION, SHORT POSITIONS
In connection with this offering, the underwriters may engage in
activities that stabilize, maintain or otherwise affect the
price of our common stock, including:
4
stabilizing transactions;
4
short sales;
4
purchases to cover positions created by short sales;
4
imposition of penalty bids; and
4
syndicate covering transactions.
Stabilizing transactions consist of bids or purchases made for
the purpose of preventing or retarding a decline in the market
price of our common stock while this offering is in progress.
These transactions
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Underwriting
may also include making short sales of our common stock, which
involve the sale by the underwriters of a greater number of
shares of common stock than they are required to purchase in
this offering and purchasing shares of common stock on the open
market to cover positions created by short sales. Short sales
may be "covered short sales," which are short
positions in an amount not greater than the underwriters'
over-allotment option referred to above, or may be "naked
short sales," which are short positions in excess of that
amount.
The underwriters may close out any covered short position either
by exercising their over-allotment option, in whole or in part,
or by purchasing shares in the open market. In making this
determination, the underwriters will consider, among other
things, the price of shares available for purchase in the open
market as compared to the price at which they may purchase
shares through the over-allotment option.
Naked short sales are in excess of the over-allotment option.
The underwriters must close out any naked short position by
purchasing shares in the open market. A naked short position is
more likely to be created if the underwriters are concerned that
there may be downward pressure on the price of the common stock
in the open market that could adversely affect investors who
purchased in this offering.
The underwriters also may impose a penalty bid. This occurs when
a particular underwriter repays to the underwriters a portion of
the underwriting discount received by it because the
representatives have repurchased shares sold by or for the
account of that underwriter in stabilizing or short covering
transactions.
As a result of these activities, the price of our common stock
may be higher than the price that otherwise might exist in the
open market. If these activities are commenced, they may be
discontinued by the underwriters at any time. The underwriters
may carry out these transactions on The New York Stock Exchange,
in the over-the-counter market or otherwise.
DETERMINATION OF OFFERING PRICE
Prior to this offering, there has been no public market for our
common stock, although certain private sales of our shares of
common stock are quoted on the Pink Sheets Electronic Quotation
Service. Our common stock is not listed, traded or quoted on any
other securities exchange. The public offering price for the
shares of common stock being sold in this offering will be
determined by negotiation between us and the representative of
the underwriters. In addition to the recent prices of our common
stock as quoted on the Pink Sheets Electronic Quotation Service,
the principal factors to be considered in determining the public
offering price include:
4
the information set forth in this prospectus and otherwise
    available to the representatives;
4
our history and prospects and the history of, and the prospects
    for, the industry in which we compete;
4
our past and present financial performance and an assessment of
    our management;
4
our prospects for future earnings and the present state of our
    development;
4
the general condition of the securities markets at the time of
    this offering;
4
the recent market prices of, and the demand for, publicly traded
    common stock of generally comparable companies; and
4
other factors deemed relevant by the underwriters and us.
The public offering price determined by negotiation between us
and the representative of the underwriters may differ from the
recent sales prices of our common stock as quoted on the Pink
Sheets Electronic Quotation Service.
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Underwriting
AFFILIATIONS
Certain of the underwriters and their affiliates have in the
past provided and may provide from time to time certain
commercial banking, financial advisory, investment banking and
other services for us which they were and will be entitled to
receive separate fees. The underwriters and their affiliates may
from time to time in the future engage in transactions with us
and perform services for us in the ordinary course of their
business. In particular, UBS Securities LLC and its affiliates
act as agent and are lenders under our senior credit facility
and have received and will continue to receive certain fees for
their services. We believe that the fees and commissions payable
in respect of participation in the credit facilities are
customary for borrowers with credit profiles similar to ours, in
a similar size financing as for borrowers in our industry. In
addition, UBS Securities LLC served as an advisor to us in
connection with the Anker acquisition, for which it received
customary fees for its services. Lehman Brothers Inc. acted as
the financial advisor to the ICG special committee with respect
to the Anker acquisition and received customary fees in
connection with its services. Lehman Brothers Inc. also owns 4.3
million shares of our common stock. The underwriters and their
affiliates may from time to time in the future engage in
transactions with us and perform services for us in the ordinary
course of their business.
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Validity of the shares
The validity of the issuance of the shares of common stock to be
sold in this offering will be passed upon for us by Jones Day,
New York, New York. Latham & Watkins LLP, New York, New
York will act as counsel to the underwriters.
129
Table of Contents
Experts
The combined financial statements of Horizon NR, LLC and certain
subsidiaries ("Combined Companies") as of
September 30, 2004 and December 31, 2003, and for the
period January 1, 2004 to September 30, 2004, the year
ended December 31, 2003, the period May 10, 2002 to
December 31, 2002, and for the period January 1, 2002
to May 9, 2002, included in this prospectus and the related
financial statement schedule included elsewhere in the
registration statement have been audited by Deloitte &
Touche LLP, an independent registered public accounting firm, as
stated in their reports appearing in this prospectus and
elsewhere in the registration statement (which report on the
combined financial statements expresses an unqualified opinion
on the financial statements and includes explanatory paragraphs
referring to (1) fresh start reporting as of May 9,
2002, (2) allocations of certain assets and expense items
applicable to Horizon and subsidiaries, and (3) the
bankruptcy filing of the Combined Companies and the fact the
combined financial statements do not include any adjustments
relating to the recoverability and classification of asset
carrying amounts or the amount and classification of liabilities
that might result should the Combined Companies be unable to
continue as a going concern), and are so included in reliance
upon the reports of such firm given upon their authority as
experts in accounting and auditing.
The consolidated financial statements of ICG, Inc. and
subsidiaries as of December 31, 2004 and for period
October 1, 2004 to December 31, 2004, included in this
prospectus and the related financial statement schedule included
elsewhere the registration statement have been audited by
Deloitte & Touche LLP, an independent registered public
accounting firm, as stated in their reports appearing in this
prospectus and elsewhere in the registration statement, and are
included in reliance upon the reports of such firm given upon
their authority as experts in accounting and auditing.
The consolidated financial statements of Anker Coal Group, Inc.
and subsidiaries as of December 31, 2004 and for the year
ended December 31, 2004, included in this prospectus have
been audited by Deloitte & Touche LLP, an independent
registered public accounting firm, as stated in their report
appearing in this prospectus, and are included in reliance upon
the report of such firm given upon their authority as experts in
accounting and auditing.
The financial statements of CoalQuest Development LLC as of
December 31, 2004 and for the year ended December 31,
2004, included in this prospectus have been audited by
Deloitte & Touche LLP, an independent registered public
accounting firm, as stated in their report appearing in this
prospectus, and are included in reliance upon the report of such
firm given upon their authority as experts in accounting and
auditing.
Experts—coal reserves
The estimates of our proven and probable coal reserves referred
to in this prospectus, to the extent described in this
prospectus, have been prepared by us and reviewed by Marshall
Miller & Associates, Inc.
130
Table of Contents
Where you can find additional information
We have filed with the SEC a registration statement on
Form S-1 under the Securities Act with respect to the
issuance of shares of our common stock being offered by this
prospectus. This prospectus, which forms a part of the
registration statement, does not contain all of the information
set forth in the registration statement. For further information
with respect to us and the shares of our common stock, reference
is made to the registration statement. We are not currently
subject to the informational requirements of the Exchange Act.
As a result of the offering of the shares of our common stock,
we will become subject to the informational requirements of the
Exchange Act, and, in accordance therewith, will file reports
and other information with the SEC. The registration statement,
such reports and other information can be inspected and copied
at the Public Reference Room of the SEC located at
Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington D.C. 20549. Copies of such materials, including
copies of all or any portion of the registration statement, can
be obtained from the Public Reference Room of the SEC at
prescribed rates. You can call the SEC at 1-800-SEC-0330 to
obtain information on the operation of the Public Reference
Room. These materials may also be accessed electronically by
means of the SEC's home page on the Internet
(http://www.sec.gov).
131
Table of Contents
Glossary of selected terms
Ash.
Impurities consisting of iron, alumina and other
incombustible matter that are contained in coal. Since ash
increases the weight of coal, it adds to the cost of handling
and can affect the burning characteristics of coal.
Base load.
The lowest level of power production needs
during a season or year.
Bituminous coal.
A middle rank coal (between
sub-bituminous and anthracite) formed by additional pressure and
heat on lignite. The most common type of coal with moisture
content less than 20% by weight and heating value of 10,500 to
14,000 Btus per pound. It is dense and black and often has
well-defined bands of bright and dull material. It may be
referred to as soft coal.
British thermal unit, or "Btu."
A measure of
the thermal energy required to raise the temperature of one
pound of pure liquid water one degree Fahrenheit at the
temperature at which water has its greatest density
(39 degrees Fahrenheit). On average, coal contains about
22 million Btu per ton.
By-product.
Useful substances made from the gases and
liquids left over when coal is changed into coke.
Central Appalachia.
Coal producing area in eastern
Kentucky, Virginia and southern West Virginia.
Clean Air Act Amendments.
A comprehensive set of
amendments to the federal law governing the nation's air
quality. The Clean Air Act was extensively amended in 1970, 1977
and 1990 to address significant air pollution problems. The 1990
amendments broadened and strengthened the original law to
address specific problems such as acid deposition, urban smog,
hazardous air pollutants, and stratospheric ozone depletion.
Clean coal burning technologies.
A number of innovative,
new technologies designed to use coal in a more efficient and
cost-effective manner while enhancing environmental protection.
Several promising technologies include fluidized-bed combustion,
integrated gasification combined cycle, limestone injection
multi-stage burner, enhanced flue gas desulfurization (or
scrubbing), coal liquefaction, and coal gasification.
Coal Resources.
Coal resources are coal bearing bodies
that have been sufficiently sampled and analyzed, but do not
qualify as a commercially viable coal reserve as prescribed by
SEC rules until a final comprehensive SEC prescribed evaluation
is performed.
Coal seam.
A bed or stratum of coal. Usually applies to a
large deposit.
Coal washing.
The process of separating undesirable
materials from coal based on differences in densities. Pyritic
sulfur, or noncarbonaceous material, is heavier and sinks in
water; coal is lighter and floats.
Coke.
A hard, dry carbon substance produced by heating
coal to a very high temperature in the absence of air. Coke is
used in the manufacture of iron and steel. Its production
results in a number of useful byproducts.
Compliance coal.
Coal which, when burned, emits
1.2 pounds or less of sulfur dioxide per million Btu, as
required by Phase II of the Clean Air Act Acid Rain program.
Continuous miner.
A machine that simultaneously extracts
and loads coal. This is distinguished from a conventional, or
cyclic, unit, which must stop the extraction process for loading
to commence.
Continuous mining.
Any coal mining process which tears
the coal from the face mechanically (see "Face") and
loads continuously, thus eliminating the separate cycles of
cutting, drilling, shooting and loading. This is to be
distinguished from conventional mining, an older process in
which these operations are cyclical.
132
Table of Contents
Glossary of selected terms
Conventional mining.
A deep mining method that includes
inserting explosives in a coal seam, blasting the seam and
removing the coal onto a conveyor or shuttle car.
Deep mine.
An underground coal mine.
Dragline.
A large excavating machine used in the surface
mining process to remove overburden (see
"Overburden"). The dragline has a large bucket
suspended from the end of a huge boom, which may be
275 feet long or larger. The bucket is suspended by cables
and capable of scooping up vast amounts of overburden as it is
pulled across the excavation area. The dragline, which can
"walk" on huge pontoon-like "feet", is one
of the largest land-based machines in the world.
Face.
The exposed area of an underground coalbed from
which coal is extracted.
Fluidized bed combustion.
A process with a high success
rate in removing sulfur from coal during combustion. Crushed
coal and limestone are suspended in the bottom of a boiler by an
upward stream of hot air. The coal is burned in this bubbling,
liquid-like (or fluidized) mixture. Rather than released as
emissions, sulfur from combustion gases combines with the
limestone to form a solid compound recovered with the ash.
Fossil fuel.
Fuel such as coal, crude oil or natural gas,
formed from the fossil remains of organic material.
Gasification.
Any of various processes by which coal is
turned into low, medium or high-Btu gas.
High Btu coal.
Coal which has an average heat content of
12,500 Btus per pound or greater.
Highwall.
The unexcavated face of exposed overburden and
coal in a surface mine or in a face or bank on the uphill side
of a contour mine excavation.
Highwall miner.
A mining system consisting of a remotely
controlled continuous miner that extracts coal and conveys it by
auger, belt, or chain conveyors to the outside. The cut is
typically a rectangular, horizontal cut from a highwall bench,
reaching depths of several hundred feet or deeper.
Illinois Basin.
Coal producing area in Illinois, Indiana
and western Kentucky.
Lignite.
The lowest rank of coal with a high moisture
content of up to 45% by weight and heating value of 6,500 to
8,300 Btus per pound. It is brownish black and tends to
oxidize and disintegrate when exposed to air.
Longwall miner.
A deep mining machine that uses a steel
plow or rotating drum, which is pulled mechanically
back-and-forth across a long face of coal. The loosened coal
falls onto a conveyed for removal from the mine.
Longwall mining.
The most productive underground mining
method in the United States. One of three main underground coal
mining methods currently in use. Employs a steel plow, or
rotation drum, which is pulled mechanically back and forth
across a face of coal that is usually several hundred feet long.
The loosened coal falls onto a conveyor for removal from the
mine.
Low sulfur coal.
Coal which, when burned, emits
1.6 pounds or less of sulfur dioxide per million Btu.
Mid sulfur coal.
Coal which, when burned, emits between
1.6 and 4.5 pounds of sulfur dioxide per million Btu.
Metallurgical coal.
The various grades of coal suitable
for carbonization to make coke for steel manufacture. Also known
as "met" coal, its quality depends on four important
criteria: volatility, which affects coke yield; the level of
impurities including sulfur and ash, which affects coke quality;
composition, which affects coke strength; and basic
characteristics, which affect coke oven safety. Met coal
typically has a particularly high Btu but low ash and sulfur
content.
133
Table of Contents
Glossary of selected terms
Mountaintop mining.
A method of surface mining practiced
in the Appalachian coal fields of the eastern United States.
Mountaintop mining allows the mine operator to completely remove
the layers of dirt and rock covering a coal seam, making the
entire deposit economical for extraction. Although valley
fill—the depositing of rock and dirt from the surface mine
into adjacent valleys—has recently become controversial, it
is a practice that is not unique to the mining industry.
Hundreds of valley fills were constructed throughout the country
during the building of the vital Interstate Highway System.
Mountaintop mining is essential to viability of the modern
Appalachian coal industry.
Nitrogen oxide (NOx).
A gas formed in high temperature
environments such as coal combustion. It is a harmful pollutant
that contributes to acid rain.
Northern Appalachia.
Coal producing area in Maryland,
Ohio, Pennsylvania and northern West Virginia.
Overburden.
Layers of earth and rock covering a coal
seam. In surface mining operations, overburden is removed prior
to coal extraction.
Pillar.
An area of coal left to support the overlying
strata in a mine; sometimes left permanently to support surface
structures.
Powder River Basin.
Coal producing area in northeastern
Wyoming and southeastern Montana. This is the largest known
source of coal reserves and the largest producing region in the
United States.
Preparation plant.
Usually located on a mine site,
although one plant may serve several mines. A preparation plant
is a facility for crushing, sizing and washing coal to prepare
it for use by a particular customer. The washing process has the
added benefit of removing some of the coal's sulfur content.
Probable reserves.
Reserves for which quantity and grade
and/or quality are computed from information similar to that
used for proven reserves, but the sites for inspection, sampling
and measurement are farther apart or are otherwise less
adequately spaced. The degree of assurance, although lower than
that for proven reserves, is high enough to assume continuity
between points of observation.
Proven reserves.
Reserves for which: (a) quantity is
computed from dimensions revealed in outcrops, trenches,
workings or drill holes; grade and/or quality are computed from
the results of detailed sampling; and (b) the sites for
inspection, sampling and measurement are spaced so closely and
the geologic character is so well defined that size, shape,
depth and mineral content of reserves are well-established.
Reclamation.
The process of restoring land and
environmental values to a mining site after the coal or ore is
extracted. Reclamation operations are usually underway where the
resources have already been taken from a mine, even as
production operations are taking place elsewhere at the site.
This process commonly includes recontouring or reshaping the
land to its approximate original appearance, restoring topsoil
and planting native grasses, trees and ground covers. Mining
reclamation is closely regulated by both state and federal law.
Recoverable reserve.
The amount of coal that can be
recovered from the Demonstrated Reserve Base. The recovery
factor for underground mines is about 60.0%, and for surface
mines about 80.0% to 90.0%. Using these percentages, there are
about 275 billion tons of recoverable reserves in the
United States.
Reserve.
That part of a mineral deposit that could be
economically and legally extracted or produced at the time of
the reserve determination.
Roof.
The stratum of rock or other mineral above a coal
seam; the overhead surface of a coal working place.
134
Table of Contents
Glossary of selected terms
Resources.
Concentrations of coal in such forms that
economic extraction is currently or may become feasible.
Room and pillar mining.
A method of underground mining in
which about half of the coal is left in place to support the
roof of the active mining area. Large "pillars" are
left at regular intervals while "rooms" of coal are
extracted.
Scrubber (flue gas desulfurization system).
Any of
several forms of chemical/physical devices which operate to
neutralize sulfur compounds formed during coal combustion. These
devices combine the sulfur in gaseous emissions with other
chemicals to form inert compounds, such as gypsum, that must
then be removed for disposal. Although effective in
substantially reducing sulfur from combustion gases, scrubbers
require about 6% to 7% of a power plant's electrical output
and thousands of gallons of water to operate.
Steam coal.
Coal used by electric power plants and
industrial steam boilers to produce electricity, steam or both.
It generally is lower in Btu heat content and higher in volatile
matter than metallurgical coal.
Sub-bituminous coal.
Dull coal that ranks between lignite
and bituminous coal. Its moisture content is between 20% and 30%
by weight, and its heat content ranges from 7,800 to
9,500 Btus per pound of coal.
Sulfur.
One of the elements present in varying quantities
in coal that contributes to environmental degradation when coal
is burned. Sulfur dioxide is produced as a gaseous by-product of
coal combustion.
Surface mine.
A mine in which the coal lies near the
surface and can be extracted by removing the covering layer of
soil (see "Overburden"). About 60% of total
U.S. coal production comes from surface mines.
Tons.
A "short" or net ton is equal to 2,000
pounds. A "long" or British ton is equal to
2,240 pounds; a "metric" tonne is approximately
2,205 pounds. The short ton is the unit of measure referred
to in this prospectus.
Truck-and-shovel/loader mining.
Similar forms of mining
where large shovels or front-end loaders are used to remove
overburden, which is used to backfill pits after the coal is
removed. Smaller shovels load coal in haul trucks for
transportation to the preparation plant or rail loadout.
Underground mine.
Also known as a deep mine. Usually
located several hundred feet below the earth's surface, an
underground mine's resource is removed mechanically and
transferred by shuttle car or conveyor to the surface. Most
common in the coal industry, underground mines primarily are
located east of the Mississippi River, and account for about
37.4% of total annual U.S. coal production.
Unit train.
A train of 100 or more cars carrying only
coal. A typical unit train can carry at least 10,000 tons of
coal in a single shipment.
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Table of Contents
Index to financial statements
ICG, Inc. and Subsidiaries
Report of Independent Registered Public Accounting Firm
F-2
Consolidated Balance Sheet as of December 31, 2004
F-3
Consolidated Statement of Operations for the period
    October 1, 2004 to December 31, 2004
F-4
Consolidated Statement of Stockholders' Equity for the
    period October 1, 2004 to December 31, 2004
F-5
Consolidated Statements of Cash Flows for the period
    October 1, 2004 to December 31, 2004
F-6
Notes to Consolidated Financial Statements as of
    December 31, 2004 and for the period October 1, 2004
    to December 31, 2004
F-7
Horizon NR, LLC and Certain Subsidiaries
Report of Independent Registered Public Accounting Firm
F-22
Combined Balance Sheets as of September 30, 2004 and
    December 31, 2003
F-24
Combined Statements of Operations for the period January 1,
    2004 to September 30, 2004, the year ended
    December 31, 2003, the period May 10, 2002 to
    December 31, 2002 (reorganized companies) and the period
    January 1, 2002 to May 9, 2002 (predecessor companies)
F-25
Combined Statements of Members' Deficit for the period
    January 1, 2004 to September 30, 2004, the year ended
    December 31, 2003, the period May 10, 2002 to
    December 31, 2002 (reorganized companies) and the period
    January 1, 2002 to May 9, 2002 (predecessor companies)
F-26
Combined Statements of Cash Flows for the period January 1,
    2004 to September 30, 2004, the year ended
    December 31, 2003, the period May 10, 2002 to
    December 31, 2002 (reorganized companies) and the period
    January 1, 2002 to May 9, 2002 (predecessor companies)
F-27
Notes to Combined Financial Statements as of September 30,
    2004, for the period January 1, 2004 to September 30,
    2004, year ended December 31, 2003, the period May 10,
    2002 to December 31, 2002 (reorganized companies) and the
    period January 1, 2002 to May 9, 2002 (predecessor
    companies)
F-28
Anker Coal Group, Inc.
Independent Auditors' Report
F-59
Consolidated Balance Sheet as of December 31, 2004
F-60
Consolidated Statement of Operations for the year ended
    December 31, 2004
F-61
Consolidated Statement of Stockholders' Deficit for the
    year ended December 31, 2004
F-62
Consolidated Statement of Cash Flows for the year ended
    December 31, 2004
F-63
Notes to Consolidated Financial Statements for the year ended
    December 31, 2004
F-64
CoalQuest Development, LLC
Independent Auditors' Report
F-73
Balance Sheet as of December 31, 2004
F-74
Statement of Income for the year ended December 31, 2004
F-75
Statement of Members' Equity for year ended
    December 31, 2004
F-76
Statement of Cash Flows for the year ended December 31, 2004
F-77
Notes to Financial Statements for the year ended
    December 31, 2004
F-78
F-1
Table of Contents
ICG, Inc. and Subsidiaries
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors
ICG, Inc.
We have audited the accompanying consolidated balance sheet of
ICG, Inc. and subsidiaries (the Company) as of December 31,
2004, and the related consolidated statements of operations,
stockholders' equity, and cash flows for the period from
October 1, 2004 through December 31, 2004. These
financial statements are the responsibility of the
Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. The Company is not required to
have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audit included
consideration of internal control over financial reporting as a
basis for designing audit procedures that are appropriate in the
circumstances but not for the purpose of expressing an opinion
on the effectiveness of the Company's internal control over
financial reporting. Accordingly, we express no such opinion. An
audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present
fairly, in all material respects, the financial position of the
Company as of December 31, 2004 and the results of its
operations and its cash flows for the period from
October 1, 2004 through December 31, 2004, in
conformity with accounting principles generally accepted in the
United States of America.
Louisville, Kentucky
April 22, 2005
F-2
Table of Contents
ICG, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEET
December 31, 2004
(in
thousands,
except share
and per
share data)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents
$
23,967
Trade accounts receivable (net of allowance for doubtful
    accounts of $2,669)
40,417
Inventories, net
13,943
Deferred income taxes
2,188
Prepaid insurance
7,142
Prepaid expenses and other
5,899
Total current assets
93,556
PROPERTY, PLANT AND EQUIPMENT, net
157,136
DEBT ISSUANCE COSTS, Net
7,865
ADVANCE ROYALTIES
5,424
GOODWILL
183,946
DEFERRED INCOME TAXES, NON-CURRENT
7,741
OTHER NON-CURRENT ASSETS
4,307
Total assets
$
459,975
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Trade accounts payable
$
21,250
Current portion of long-term debt and capital leases
6,022
Current portion of reclamation and mine closure costs
2,682
Accrued income tax
2,232
Accrued expenses and other
33,854
Total current liabilities
66,040
NON-CURRENT LIABILITIES, less current portion
Long-term debt and capital leases
173,446
Reclamation and mine closure costs
40,616
Long-term employee benefits
18,007
Other non-current liabilities
7,466
Total non-current liabilities
239,535
Total liabilities
305,575
STOCKHOLDERS' EQUITY
Preferred stock-par value $0.0001, 200,000,000 shares
    authorized, none issued
—
Common stock-par value $0.0001, 1,800,000,000 shares authorized,
    106,605,999 issued and outstanding
11
Paid-in capital
150,140
Retained earnings
4,249
Total stockholders' equity
154,400
Total liabilities and stockholders' equity
$
459,975
See notes to consolidated financial statements.
F-3
Table of Contents
ICG, Inc. and Subsidiaries
CONSOLIDATED STATEMENT OF OPERATIONS
Period from
October 1, 2004 to
December 31, 2004
(in thousands,
except share
and per share
data
REVENUES
Coal sales revenues
$
130,463
Freight and handling revenues
880
Other revenues
4,766
Total revenues
136,109
COSTS AND EXPENSES:
Freight and handling costs
880
Cost of coal sales and other revenues
113,707
(exclusive of items shown separately below)
Depreciation, depletion and amortization
7,943
Selling, general and administrative
4,194
(exclusive of depreciation and amortization shown separately
    above)
Gain on sale of assets
(10
)
Total costs and expenses
126,714
Income from operations
9,395
INTEREST AND OTHER INCOME (EXPENSE):
Interest expense
(3,453
)
Other, net
898
Total interest and other income (expense)
(2,555
)
Income before income tax expense
6,840
INCOME TAX EXPENSE
(2,591
)
Net income
$
4,249
Earnings per share:
Basic
0.04
Diluted
0.04
Average common shares outstanding:
Basic
106,605,999
Diluted
106,605,999
See notes to consolidated financial statements.
F-4
Table of Contents
ICG, Inc. and Subsidiaries
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
For the Period October 1, 2004 to
December 31, 2004
Additional
Common
Paid-in
Retained
Stock
Capital
Earnings
Total
(In thousands)
Capital Contribution, October 1, 2004
$
11
$
150,140
$
150,151
Net income for the period
—
—
$
4,249
4,249
Balance—December 31, 2004
$
11
$
150,140
$
4,249
$
154,400
See notes to the consolidated financial statements.
F-5
Table of Contents
ICG, Inc. and Subsidiaries
CONSOLIDATED STATEMENT OF CASH FLOWS
Period from
October 1, 2004 to
December 31, 2004
(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income
$
4,249
Adjustments to reconcile net income to net cash provided by
    (used in) operating activities:
Depreciation, depletion and amortization
7,943
Amortization of finance costs included in interest expense
266
(Gain) on sale of assets
(10
)
Deferred income taxes
359
CHANGES IN ASSETS AND LIABILITIES:
(Increase) decrease in:
Receivables
19,713
Inventories
6,140
Prepaid expenses
(2,030
)
Other assets
(1,308
)
Deferred finance costs
(53
)
Increase (decrease) in:
Accounts payable
(3,815
)
Accrued expenses
(1,527
)
Reclamation and mine closure costs
(591
)
Other liabilities
873
Total adjustments
25,960
Net cash provided by operating activities
30,209
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from the sale of assets
10
Additions to property, plant and equipment and mine development
(5,583
)
Acquisition of Horizon Natural Resources
(323,593
)
Net cash (used in) investing activities
(329,166
)
CASH FLOWS FROM FINANCING ACTIVITIES:
Capital contribution
150,151
Repayments on long-term debt
(2,969
)
Repayments on capital leases
(235
)
Long-term borrowings
175,977
Net cash provided by financing activities
322,924
Net increase in cash and cash equivalents, and cash and cash
    equivalents, end of period
$
23,967
Supplemental information:
Cash paid for interest
$
536
Supplemental disclosure of non-cash items:
Acquisition of Horizon Natural Resources included in accrued
    expenses
$
2,191
See notes to the consolidated financial statements.
F-6
Table of Contents
ICG, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2004 and for the period October 1, 2004 to
December 31, 2004
(Dollars in thousands)
1.
ORGANIZATION
ICG, Inc. and Subsidiaries ("ICG" or
"Company") was formed in 2004 by
WL Ross & Co., LLC, ("WLR"), and other
investors to acquire and operate competitive coal mining
facilities. On September 30, 2004 ICG acquired certain
properties and assets, and assumed certain liabilities, of
Horizon Natural Resources Company ("Horizon") through
Section 363 asset sales of the United States Bankruptcy Court.
Prior to the acquisition, ICG did not have any material assets,
liabilities or results of operations.
ICG has one reportable segment: the extracting, processing and
marketing of steam and metallurgical coal from deep and surface
mines, principally located in Kentucky, West Virginia and
Illinois, for sale to electric utilities and industrial
customers primarily in the eastern United States.
The September 30, 2004 acquisition of certain properties,
assets and liabilities was accounted for as a purchase. The
aggregate purchase price of $325,784 was allocated to the assets
acquired and liabilities assumed based on the respective fair
values as determined partially by an independent
appraisal/valuation. In connection with the acquisition, the
Company is required to make certain payments to Lexington Coal
Company (see note 10).
The following table summarizes the estimated fair values of
assets acquired and liabilities assumed at the date of
acquisition.
At September 30,
2004
Accounts receivable
$
60,130
Inventory
20,083
Prepaids and other
6,508
Property, plant, and equipment, net
159,496
Advance royalties
4,314
Debt issuance costs
8,078
Other assets
12,256
Goodwill
183,896
Accounts payable
(25,065
)
Accrued expenses
(35,422
)
Employee benefits
(17,127
)
Accrued reclamation
(43,889
)
Other long-term liabilities
(7,474
)
Net assets acquired
$
325,784
Funded by:
Capital contribution
$
150,151
Long-term debt
175,633
Total
$
325,784
F-7
Table of Contents
ICG, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS—(CONTINUED)
As of December 31, 2004 and for the period October 1, 2004 to
December 31, 2004
(Dollars in thousands)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND GENERAL
Principles of Consolidation
— The consolidated
financial statements include the accounts of ICG and its
wholly-owned subsidiaries. Significant intercompany transactions
and balances have been eliminated in consolidation.
Company Environment and Risk Factors
— In the
course of business activities the Company is exposed to a number
of risks including: the possibility of the termination or
alteration of coal sales contracts, fluctuating market
conditions of coal (often impacted by the weather) and
transportation/fuel costs, competitive industry and
overcapacity, changing government regulations, unexpected
maintenance and equipment failure, employee benefits cost
control, changes in estimates of proven and probable mineral
interests, labor relations issues, loss of key employees,
satisfactory resolution of technology issues, as well as the
ability to obtain financing, necessary mining permits and
control of adequate recoverable mineral interests. In addition,
adverse weather and geological conditions may increase mining
costs, sometimes substantially.
Cash and Cash Equivalents
— The Company
considers all highly liquid debt instruments with maturities of
three months or less at the time of purchase to be cash
equivalents.
Trade Accounts Receivable and Allowance for Doubtful
Accounts
— Trade accounts receivable are recorded at
the invoiced amount and do not bear interest. The allowance for
doubtful accounts is the Company's best estimate of the
amount of probable credit losses in the Company's existing
accounts receivable. The Company establishes provisions for
losses on accounts receivable when it is probable that all or
part of the outstanding balance will not be collected. The
Company regularly reviews collectibility and establishes or
adjusts the allowance as necessary using the specific
identification method. The Company does not have any off-balance
sheet credit exposure related to its customers.
Inventories
— Inventories are stated at lower
of average cost, determined on a first-in, first-out
("FIFO") basis, or market. Components of inventories
consist of coal and parts and supplies, net of an allowance for
obsolesence (see Note 3). Coal inventories represent coal
contained in stockpiles and exposed in the pit.
Derivative Financial Instruments
— The Company
utilizes derivative financial instruments in the management of
its interest rate exposures. The Company does not use derivative
financial instruments for trading or speculative purposes.
Statement of Financial Accounting Standards ("SFAS")
No. 133,
Accounting for Derivative Instruments and
Hedging Activities,
as amended, establishes accounting and
reporting standards for derivative instruments and hedging
activities, requiring that all derivatives be recognized in the
financial statements as assets or liabilities and that they be
measured at fair value. Changes in fair value are recorded as
adjustments to the assets or liabilities being hedged in
"Other Comprehensive Income," or in current earnings,
depending on whether the derivative is designated and qualifies
for hedge accounting, the type of hedge transaction represented
and the effectiveness of the hedge.
In December 2004, the Company entered into an Interest Rate Cap
Agreement ("Cap Agreement"). The Cap Agreement is for
a notional amount of $88,000. This agreement, at a cap rate of
4.5% per annum, expires December 15, 2006. The Cap
Agreement, included in other noncurrent assets in the
Company's consolidated balance sheet, was written down to
its fair value of approximately $164 as of December 31,
2004. The writedown resulted in a loss of approximately $20 in
the period ended December 31, 2004.
F-8
Table of Contents
ICG, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS—(CONTINUED)
As of December 31, 2004 and for the period October 1, 2004 to
December 31, 2004
(Dollars in thousands)
Advance Royalties
— The Company is required,
under certain royalty lease agreements, to make minimum royalty
payments whether or not mining activity is being performed on
the leased property. These minimum payments may be recoupable
once mining begins on the leased property. The recoupable
minimum royalty payments are capitalized and amortized based on
the units-of-production method at a rate defined in the lease
agreement once mining activities begin. Unamortized deferred
royalty costs are expensed when mining has ceased or a decision
is made not to mine on such property. The Company has recorded
advance royalties of $7,022 ($1,598 included in prepaid expense
and other and $5,424 included in non-current assets) at
December 31, 2004.
Property, Plant and Equipment
— Property,
plant and equipment, including mineral interest and mine
development costs are recorded at cost, which includes
construction overhead and interest, where applicable.
Expenditures for major renewals and betterments are capitalized
while expenditures for maintenance and repairs are expensed as
incurred. Mineral interest costs are depleted using the
units-of-production method, based on estimated recoverable
interest. Mine development costs are amortized using the
units-of-production method, based on estimated recoverable
interest. Other property, plant and equipment is depreciated
using the straight-line method with estimated useful lives
substantially as follows:
Years
Buildings
10 to 45
Mining and other equipment and related facilities
1 to 20
Land improvements
15
Transportation equipment
2 to  7
Furniture and fixtures
3 to 10
Depreciation, depletion and amortization expense for the period
October 1, 2004 to December 31, 2004 was $7,943.
Goodwill
— Goodwill represents the excess of
costs over fair value of net assets of the former Horizon
businesses acquired. Pursuant to SFAS No. 142,
Goodwill and Other Intangible Assets
, goodwill and
intangible assets acquired in a purchase business combination
and determined to have an indefinite useful life are not
amortized, but instead tested for impairment at least annually
in accordance with the provisions of SFAS No. 142. The
Company performs its impairment test in December of each year.
The impairment review in December 2004 supported the carrying
value of goodwill.
Debt Issuance Costs
— Debt issuance costs
reflect fees incurred to obtain financing. Debt issuance costs
are amortized (included in interest expense) using the effective
interest method, over the life of the related debt. Amortization
expense for the period October 1, 2004 to December 31,
2004 was $266.
Restricted Cash
— Restricted cash includes
amounts required by various royalty and reclamation agreements.
Restricted cash of $4,243 at December 31, 2004 is included
in other non-current assets ($3,744) and prepaid expenses and
other ($499).
Coal Mine Reclamation and Mine Closure Costs
—
Future cost requirements for land reclamation are estimated
where surface and deep mining operations have been conducted,
based on the Company's interpretation of the technical
standards of regulations enacted by the U.S. Office of Surface
Mining, as well as state regulations. These costs relate to
reclaiming the pit and support acreage at surface mines and
sealing portals at deep mines. Other costs common to both types
of mining are related to reclaiming refuse and slurry ponds as
well as holding and related termination/exit costs.
F-9
Table of Contents
ICG, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS—(CONTINUED)
As of December 31, 2004 and for the period October 1, 2004 to
December 31, 2004
(Dollars in thousands)
The Company records these reclamation obligations under the
provision of SFAS No. 143,
Accounting for Asset
Retirement Obligations.
SFAS No. 143 addresses
asset retirement obligations that result from the acquisition,
construction or normal operation of long-lived assets. It
requires companies to recognize asset retirement obligations at
fair value when the liability is incurred. Upon initial
recognition of a liability, that cost should be capitalized as
part of the related long-lived asset and allocated to expense
over the useful life of the asset. The asset retirement costs
are recorded in mineral interests.
The Company expenses reclamation performed prior to final mine
closure. The establishment of the end of mine reclamation and
closure liability is based upon permit requirements and requires
significant estimates and assumptions, principally associated
with regulatory requirements, costs and recoverable mineral
interest. Annually, the end of mine reclamation and closure
liability is reviewed and necessary adjustments are made,
including adjustments due to mine plan and permit changes and
revisions to cost and production levels to optimize mining and
reclamation efficiency. The amount of such adjustments is
reflected in the SFAS No. 143 year-end calculation.
Asset Impairments and Accelerated Mine Closing
Accruals
— The Company follows
SFAS No. 144,
Accounting for the Impairment or
Disposal of Long-Lived Assets,
which requires that projected
future cash flows from use and disposition of assets be compared
with the carrying amounts of those assets. When the sum of
projected cash flows is less than the carrying amount,
impairment losses are recognized. In determining such impairment
losses, discounted cash flows are utilized to determine the fair
value of the assets being evaluated. Also, in certain
situations, expected mine lives are shortened because of changes
to planned operations. When that occurs and it is determined
that the mine's underlying costs are not recoverable in the
future, reclamation and mine closing obligations are accelerated
and the mine closing accrual is increased accordingly. To the
extent it is determined asset carrying values will not be
recoverable during a shorter mine life, a provision for such
impairment is recognized.
Income Tax Provision
— The provision for
income taxes includes federal, state and local income taxes
currently payable and deferred taxes arising from temporary
differences between the financial statement and tax basis of
assets and liabilities. Income taxes are recorded under the
liability method. Under this method, deferred income taxes are
recognized for the estimated future tax effects of differences
between the tax basis of assets and liabilities and their
financial reporting amounts as well as net operating loss
carryforwards and tax credits based on enacted tax laws.
Valuation allowances are established when necessary to reduce
deferred tax assets to the amount expected to be realized.
Revenue Recognition
— Most revenues result
from sales under long-term coal contracts with electric
utilities, industrial companies or other coal-related
organizations, primarily in the eastern United States. Revenues
are recognized on coal sales in accordance with the terms of the
sales agreement, which is usually when the coal is shipped to
the customer, and title has passed.
Freight and handling costs paid directly to third-party carriers
and invoiced to coal customers are recorded as freight and
handling costs and freight and handling revenues, respectively.
Other revenues generally consist of equipment and parts sales,
equipment rebuild and maintenance services, coal handling and
processing, royalties, commissions on coal trades, contract
mining and rental income. These revenues are recognized in the
period earned or when the service is completed. Advance payments
received are deferred and recognized in revenue as coal is
shipped or rentals are earned.
F-10
Table of Contents
ICG, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS—(CONTINUED)
As of December 31, 2004 and for the period October 1, 2004 to
December 31, 2004
(Dollars in thousands)
Postretirement Benefits Other Than Pensions
—
As prescribed by SFAS No. 106,
Employers'
Accounting for Postretirement Benefits Other Than Pensions
,
accruals are made, based on annual outside actuarial valuations,
for the expected costs of providing postretirement benefits
other than pensions, which are primarily medical benefits,
during an employee's actual working career.
The Company accounts for health care and life insurance benefits
provided for current and future retired employees and their
dependents by accruing the cost of such benefits over the
service lives of employees. Unrecognized actuarial gains and
losses are amortized over the estimated average remaining
service period for active employees.
Workers' Compensation and Black Lung
Benefits
— The Company is liable under federal and
state laws to pay workers' compensation and pneumoconiosis
(black lung) benefits to eligible employees. The Company
utilizes a combination of a large deductible insurance program,
self-insurance and state workers' compensation fund
participation to secure on-going obligations depending on the
location of the operation. Each of these liabilities are
evaluated annually by outside actuaries.
Management's Use of Estimates
— The
preparation of the consolidated financial statements in
conformity with U.S. generally accepted accounting principles
requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues
and expenses during the reporting period. Significant items
subject to such estimates and assumptions include the allowance
for doubtful accounts; inventories; mineral interest; asset
retirement obligations; employee benefit liabilities; future
cash flows associated with assets; useful lives for
depreciation, depletion and amortization; workers'
compensation claims; postretirement benefits other than
pensions; income taxes; and fair value of financial instruments.
Due to the subjective nature of these estimates, actual results
could differ from those estimates.
Accounting Pronouncements
—In January 2005,
the Financial Accounting Standards Board ("FASB")
issued Statement 123R,
Accounting for Stock Based
Compensation
. FASB Statement 123R supersedes APB
Opinion 25,
Accounting for Stock Issued to
Employees
. This statement establishes standards for
accounting transactions in which an entity exchanges its equity
instruments for goods or services. It also addresses
transactions in which an entity incurs liabilities in exchange
for goods or services that are based on the fair value of the
entity's equity instruments or that may be settled by the
issuance of those equity instruments. FASB 123R is
effective as of the beginning of the first fiscal year beginning
after June 15, 2005. The Company believes adoption of FASB
123R will have no material impact on its financial position,
results of operations, or cash flows.
In December 2003, the FASB issued FASB Interpretation
NO. 46 ("FIN 46-R"),
Consolidation of
Variable Interest Entities—an Interpretation of Accounting
Research Bulletin
(ARB) No. 51 which is effective
for financial statements issued for fiscal years beginning after
December 15, 2003. This Interpretation of Accounting
Research Bulletin No. 51,
Consolidated Financial
Statements
which replaces FASB Interpretation No. 46,
Consolidation of Variable Interest Entities
, addresses
consolidation by business enterprises of variable interest
entities. Management has determined the adoption of
FIN 46-R did not have a material effect on its consolidated
financial statements.
Emerging Issues Task Force ("EITF") Issue 04-02
addresses the issue of whether mineral rights are tangible or
intangible assets. FASB Statement No. 141,
Business
Combinations
, requires the acquirer in
F-11
Table of Contents
ICG, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS—(CONTINUED)
As of December 31, 2004 and for the period October 1, 2004 to
December 31, 2004
(Dollars in thousands)
a business combination to allocate the cost of the acquisition
to the acquired assets and liabilities. At the
March 17—18, 2004 meeting, the EITF reached a
consensus that mineral rights (defined as the legal right to
explore, extract and retain at least a portion of the benefits
from mineral deposits) are tangible assets. As a result of the
EITF's consensus, the FASB issued FASB Staff Position
("FSP") Nos. SFAS No. 141-a and
SFAS No. 142-a, Interaction of FASB Statements
No. 141,
Business Combinations
and No 142,
Goodwill and Other Intangible Assets
, and EITF Issue
No. 04-02,
Whether Mineral Rights Are Tangible or
Intangible Assets
, which amend SFAS Nos. 141
and 142 and results in the classification of mineral rights
as tangible assets. The Company has recorded mineral rights as
tangible assets.
3.     INVENTORIES
As of December 31, 2004 inventories consisted of the
following:
Coal
$
4,443
Parts and supplies, net of a reserve for obsolescence of $3,089
9,500
Total
$
13,943
4.     PROPERTY, PLANT AND
EQUIPMENT
As of December 31, 2004 property, plant and equipment are
summarized by major classification as follows:
Land and land improvements
$
16,798
Mining and other equipment and related facilities
72,590
Mine development and contract costs
16,012
Mineral interests
53,031
Mine development in process
1,373
Construction work in process
5,275
165,079
Less-accumulated depreciation, depletion and amortization
(7,943
)
Net property, plant and equipment
$
157,136
Included in property, plant and equipment is $6,648, as of
December 31, 2004, related to development and construction
projects for which depreciation, depletion and amortization have
not yet commenced. Realization of these projects is reviewed on
a periodic basis.
F-12
Table of Contents
ICG, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS—(CONTINUED)
As of December 31, 2004 and for the period October 1, 2004 to
December 31, 2004
(Dollars in thousands)
5.     ACCRUED EXPENSES AND OTHER
As of December 31, 2004 accrued expenses and other
consisted of the following:
Payroll, bonus and vacation expense
$
16,163
Sales and use tax
143
Severance tax
1,355
Federal reclamation tax
918
Excise/black lung tax
344
Personal property tax
5,080
Franchise tax
58
Other
9,793
Total
$
33,854
6.     DEBT
As of December 31, 2004 debt consisted of the following:
Term Notes
$
175,000
Capital leases (Note 10)
681
Insurance financing and other
3,787
Total
179,468
Less—current portion
6,022
Long-term debt and capital leases
$
173,446
Credit Facility
—At December 31, 2004 the
Company has a Credit Facility consisting of a $110,000 revolving
credit facility, of which up to a maximum of $60,000 may be
utilized for letters of credit, and a $175,000 term loan
facility.
The revolving credit facility has a five-year term and matures
on November 5, 2009. Borrowings bear interest, at the
Company's option, at either LIBOR plus a margin ranging
from 2.00% to 2.50% per annum or the prime rate plus a margin
ranging from 1.00% to 1.50% per annum. As of December 31,
2004, ICG had $55,575 available on this revolving credit
facility, net of $54,425 in letters of credit for insurance,
workers' compensation and reclamation bonds.
The Term Notes mature on November 5, 2010. Principal
payments of $438 per quarter are due from January 10, 2005
through October 10, 2009 and payments of $41,563 per
quarter are due each of the remaining four quarters. The Notes
bear interest, at the Company's option, at either LIBOR
plus 2.75% per annum or the prime rate plus 1.75% per annum. As
of December 31, 2004 the Notes bear interest at 4.99%.
Borrowings under the Credit Facility are secured by
substantially all of the Company's and its subsidiaries
assets, as well as by a pledge of 100% of the stock of all
subsidiaries. In addition, the Company and each of its other
non-borrower subsidiaries guarantee all of the indebtedness
under the Credit Facility.
The Credit Facility requires certain mandatory prepayments upon
the receipt of the proceeds from certain asset sales, casualty
events, debt or equity offerings and in the event that there is
excess cash flow as determined in accordance with the credit
facility. The Credit Facility requires 50% of the
F-13
Table of Contents
ICG, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS—(CONTINUED)
As of December 31, 2004 and for the period October 1, 2004 to
December 31, 2004
(Dollars in thousands)
proceeds of a public offering (net of any underwriting fees,
discounts, commissions and other costs and expenses) to be
applied as a prepayment of the Term Notes.
The Credit Facility contains financial covenants including; a
maximum leverage ratio, a minimum interest coverage ratio, a
minimum fixed charge coverage ratio and a limit on capital
expenditures. The Credit Facility also contains certain other
covenants, including, but not limited to, limitations on the
incurrence of indebtedness, asset dispositions, acquisitions,
investments, dividends and other restricted payments, liens and
transactions with affiliates. At December 31, 2004, the
Company was in compliance with all the above covenants.
Future maturities of the Term Notes are as follows as of
December 31, 2004:
Year ending December 31:
2005
$
1,750
2006
1,750
2007
1,750
2008
1,750
2009
1,750
Thereafter
166,250
Total
$
175,000
7.
ASSET RETIREMENT OBLIGATION
At December 31, 2004 the Company recorded an asset
retirement obligation accrual for reclamation and mine closure
costs totaling $43,298.
The following schedule represents activity in the accrual for
reclamation and mine closure cost obligation.
October 1, 2004 to
December 31, 2004
Liabilities assumed in the acquisition
$
43,889
Expenditures
(1,349
)
Accretion
758
Balance
$
43,298
The accrued reclamation and mine closure cost obligations are
included in the accompanying consolidated balance sheet as
follows:
December 31, 2004
Current portion of reclamation and mine closure costs
$
2,682
Non-current reclamation and mine closure costs
40,616
Total
$
43,298
F-14
Table of Contents
ICG, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS—(CONTINUED)
As of December 31, 2004 and for the period October 1, 2004 to
December 31, 2004
(Dollars in thousands)
8.
INCOME TAXES
The income tax provision for the period October 1, 2004 to
December 31, 2004 is comprised of the following:
October 1, 2004 to
December 31, 2004
Current:
Federal
$
1,901
State
331
2,232
Deferred
359
Total
$
2,591
The following table presents the difference between the actual
tax provision and the amounts obtained by applying the statutory
U.S. federal income tax rate of 35% to income and losses
before income taxes.
October 1, 2004 to
December 31, 2004
Federal provision computed at statutory rate
$
2,394
State income tax provision (net of federal tax benefits and
    apportionment factors) computed at statutory rate
219
Other
(22
)
Total
$
2,591
Significant components of the Company's deferred tax assets
and liabilities as of December 31, 2004 are summarized as
follows:
Deferred Tax Assets:
Accrued employee benefits
$
6,932
Accrued reclamation and closure
16,670
Other
3,720
27,322
Deferred Tax Liabilities:
Property, mineral reserves and mine development costs
16,514
Other
879
17,393
Net deferred tax asset
$
9,929
Classified in balance sheet:
Deferred income taxes—current
$
2,188
Deferred income taxes—non-current
7,741
Total
$
9,929
F-15
Table of Contents
ICG, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS—(CONTINUED)
As of December 31, 2004 and for the period October 1, 2004 to
December 31, 2004
(Dollars in thousands)
9.
EMPLOYEE BENEFITS
Employee benefits at December 31, 2004 are summarized as
follows:
Postretirement benefits
$
8,013
Black lung benefits
9,994
Total
18,007
Less— current portion
—
Long-term portion
$
18,007
Certain employees of the Company, who have completed eight years
of service with the former Horizon companies, will be eligible
to receive postretirement benefits after two years of service
with the Company. Upon reaching the retirement age of 65, in
order to receive a maximum medical life-time benefit of one
hundred thousand dollars per family, eligible retired employees
must pay two hundred and fifty dollars per month per family. The
Company accrues postretirement benefit expense based on
actuarially determined amounts. The amount of postretirement
benefit cost accrued is impacted by various assumptions
(discount rate, health care cost increases, etc.) that the
Company uses in determining its postretirement obligations.
Postretirement benefit expense for the Company totaled $330 for
the period October 1, 2004 to December 31, 2004.
Valuation Date
— All actuarially determined
benefits were determined as of December 31, 2004.
Postretirement Benefits
— The following
postretirement benefit information was prepared for ICG for the
period October 1, 2004 to December 31, 2004.
Other Postretirement
Benefits
December 31, 2004
Changes in Benefit Obligations:
Benefit obligations assumed in the acquisition
$
7,683
Service costs
219
Interest cost
111
Actuarial loss
121
Benefit obligation at end of period
$
8,134
Fair value of plan assets at end of period
$
—
Funded Status of the Plan:
Accumulated obligations less plan assets
$
(8,134
)
Unrecognized actuarial loss
121
Net liability recognized
$
(8,013
)
Weighted Average Assumptions:
Discount rate
5.75%
F-16
Table of Contents
ICG, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS—(CONTINUED)
As of December 31, 2004 and for the period October 1, 2004 to
December 31, 2004
(Dollars in thousands)
October 1, 2004 to
December 31, 2004
Net periodic benefit cost:
Service cost
$
219
Interest cost
111
Benefit cost
$
330
For measurement purposes, a 10% annual rate of increase in the
per capita cost of covered health care benefits was assumed,
gradually decreasing to 5% in 2014 and remaining level
thereafter.
The expense and liability estimates can fluctuate by significant
amounts based upon the assumptions used by the actuaries. As of
December 31, 2004, a one-percentage-point change in assumed
health care cost trend rates would have the following effects:
1-Percentage-
1-Percentage-
Point
Point
Increase
Decrease
Effect on total of service and interest cost components
$
174
$
(156
)
Effect on postretirement benefit obligation
987
(889
)
On December 8, 2003, the President of the United States
signed into law the Medicare Prescription Drug, Improvement and
Modernization Act of 2003 ("the Act"). The Act
introduces a prescription drug benefit under Medicare
("Medicare Part D") as well as a federal subsidy
to sponsors of retiree health care benefit plans that provide a
benefit that is at least actuarially equivalent to Medicare
Part D.
In May 2004, the FASB issued further guidance with the release
of FASB Staff Position No. FAS 106-2,
Accounting and
Disclosure Requirements related to the Medicare Prescription
Drug, Improvement and Modernization Act of 2003
("FSP
106-2"). The effective date of FSP 106-2 is for the
first interim or annual period beginning after June 15,
2004. As of December 31, 2004, the Company is unable to
conclude whether the benefits provided by the plan are
actuarially equivalent to benefits under Part D. Consequently,
the Company has not reduced its other post-employment benefit
obligation for the potential benefit of the Act.
Workers' Compensation and Black Lung
—
The operations of the Company are subject to the federal and
state workers' compensation laws. These laws provide for
the payment of benefits to disabled workers and their
dependents, including lifetime benefits for black lung. The
Company's subsidiary operations are fully insured by either
a large deductible insurance program or state fund for
workers' compensation obligations and self-insured for
black lung obligations.
The Company's actuarially determined liability for
self-insured black lung benefits is based on a 5.75% discount
rate and various other assumptions including incidence of
claims, benefits escalation, terminations and life expectancy.
The annual black lung expense consists of actuarially determined
amounts for self-insured obligations. The estimated amount of
discounted obligations for self-insured black lung claims plus
an estimate for incurred but not reported claims was $9,917 as
of December 31, 2004. The unrecognized projected black lung
benefit obligations (difference between recorded accrual and
projected obligations) at December 31, 2004 was
approximately $77 and is being provided for over the future
service period of current employees. The projected black lung
obligations may vary in a given year based on the timing of
claims filed and changes in actuarial assumptions. The Company
recorded expenses related to black lung of $551 for the period
October 1, 2004 to December 31, 2004.
F-17
Table of Contents
ICG, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS—(CONTINUED)
As of December 31, 2004 and for the period October 1, 2004 to
December 31, 2004
(Dollars in thousands)
401(k) Plans
— The Company sponsors a savings
and retirement plan for substantially all employees. The Company
matches voluntary contributions of participants up to a maximum
contribution of 3% of a participant's salary. The Company
also contributes an additional 3% non-elective contribution for
every employee eligible to participate in the program. The
expense under this plan for the Company was $733 for the period
October 1, 2004 to December 31, 2004.
10.     COMMITMENTS AND
CONTINGENCIES
Guarantees and Financial Instruments with Off-balance
Sheet Risk
— In the normal course of business, the
Company is a party to certain guarantees and financial
instruments with off-balance sheet risk, such as bank letters of
credit and performance or surety bonds. No liabilities related
to these arrangements are reflected in the Company's
consolidated balance sheet. Management does not expect any
material losses to result from these guarantees or off-balance
sheet financial instruments. The amount of bank letters of
credit outstanding as of December 31, 2004 is $54,677,
including $54,425 outstanding under the revolving credit
facility. The Company is in the process of transferring
outstanding surety bonds, related to its reclamation
obligations, applicable to certain of the former Horizon
companies acquired on September 30, 2004.
Coal Sales Contracts and Contingency
—As of
December 31, 2004, the Company had commitments under
thirteen sales contracts to deliver annually scheduled base
quantities of coal to nine customers. The contracts expire from
2005 through 2020 with the Company contracted to supply a
minimum of approximately 48 million tons of coal over the
remaining lives of the contracts (maximum of approximately
10.5 million tons in 2005). The Company also has
commitments to purchase certain amounts of coal to meet its
sales commitments. The purchase coal contracts expire through
2006 and provide the Company a minimum of approximately
5.2 million tons of coal through the remaining lives of the
contracts (approximately 2.6 million tons per year).
Certain of the contracts have sales price adjustment provisions,
subject to certain limitations and adjustments, based on a
variety of factors and indices.
Leases
—The Company leases various mining,
transportation and other equipment under operating and capital
leases. Lease expense for the period October 1, 2004 to
December 31, 2004 was $5,885. Property under capital leases
included in property, plant and equipment in the consolidated
balance sheet at December 31, 2004 was approximately $975,
less accumulated depreciation of approximately $97. Depreciation
of assets under capital leases is included in depreciation
expense.
The Company also leases mineral interests under agreements that
call for royalties to be paid as the coal is mined. Total
royalty expense for the period October 1, 2004 to
December 31, 2004 was approximately $5,119. Certain
agreements require minimum annual royalties to be paid
regardless of
F-18
Table of Contents
ICG, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS—(CONTINUED)
As of December 31, 2004 and for the period October 1, 2004 to
December 31, 2004
(Dollars in thousands)
the amount of coal mined during the year. Certain agreements may
be cancelable at the Company's discretion. Approximate
non-cancelable future minimum lease and royalty payments are as
follows:
Operating
Capital
Royalties
Leases
Leases
Year ended December 31,
2005
$
7,348
$
13,506
$
540
2006
7,348
9,004
172
2007
6,339
3,059
—
2008
6,189
2
2009
6,195
—
Thereafter
29,345
—
Total minimum lease payments
712
Less—amount representing interest
31
Present value of minimum lease payments (Note 6)
681
Less—current portion
485
Total
$
196
Bonding Royalty and Additional
Royalty
—Lexington Coal Company, LLC (LCC) was
organized in part by the founding ICG Stockholders in
conjunction with the acquisition of the former Horizon
companies. LCC was organized to assume certain reclamation
liabilities and assets of Horizon not otherwise being acquired
by ICG or others. There is a limited commonality of ownership of
LCC and ICG. In order to provide support to LCC, ICG provided a
$10,000 letter of credit to support reclamation obligations
(Bonding Royalty) and in addition agreed to pay a .75% royalty
on the gross sales receipts for coal mined and sold by the
former Horizon companies that ICG acquired from Horizon until
the completion by LCC of all reclamation liabilities that LCC
assumed from Horizon (Additional Royalty). On September 30,
2004 the Company prepaid $4,000 of such Additional Royalties,
accounting for the payment as additional purchase consideration.
All such Additional Royalties paid in the future will be
recorded as additional purchase price. For the Bonding Royalty,
ICG is required to pay an additional .75% on gross sales
referred to above, to a fund, controlled by one of its sureties
until all letters of credit issued by such surety for both ICG
and LCC are cash collateralized. As of December 31, 2004,
ICG had accrued approximately $831 under this Bonding Royalty.
Amounts in the fund controlled by the Surety under this Bonding
Royalty will be returned to ICG as reclamation of properties is
performed by LCC or ICG and Surety Bonds are released.
Under the provisions of FIN 46, ICG has determined it does
not hold a significant variable interest in LCC and it is not
the primary beneficiary of LCC.
Legal Matters
—From time to time, the Company
is involved in legal proceedings arising in the ordinary course
of business. In the opinion of management the Company has
recorded adequate reserves for these liabilities and there is no
individual case or group of related cases pending that is likely
to have a material adverse effect on the financial condition,
results of operations or cash flows of the Company.
Commissions
—The Company has various sales and
agency agreements with third parties, whereby the Company pays a
$.05 per ton commission on various coal sales agreements. The
costs are expensed as the coal is delivered. The Company
incurred commission expense of $1 for the period October 1,
2004 to December 31, 2004.
F-19
Table of Contents
ICG, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS—(CONTINUED)
As of December 31, 2004 and for the period October 1, 2004 to
December 31, 2004
(Dollars in thousands)
Environmental Matters
—Based upon current
knowledge, the Company believes it is in material compliance
with environmental laws and regulations as currently
promulgated. However, the exact nature of environmental control
problems, if any, which the Company may encounter in the future
cannot be predicted, primarily because of the increasing number,
complexity and changing character of environmental requirements
that may be enacted by federal and state authorities.
Performance Bonds
—The Company has $54,677,
including $54,425 outstanding under the revolving credit
facility, of letters of credit outstanding, a portion of which
($45,000, including $10,000 to LCC—see bonding royalty
above) provide support to the third parties for their issuance
of surety bonds. In addition, the Company has posted cash
collateral of $4,243 to secure other reclamation and performance
commitments. This cash collateral is included in other
non-current assets on the consolidated balance sheet as of
December 31, 2004. The Company presently has a minimal
amount of outstanding surety bonds with third parties to secure
reclamation and other performance commitments. The Company is in
the process of transferring outstanding surety bonds, related to
its reclamation obligations, applicable to certain of the former
Horizon companies acquired on September 30, 2004. As of
December 31, 2004 the Company has accrued approximately
$251 for premiums related to the surety bonds that will be
transferred.
Contract Mining Agreements
—The Company
performs contract-mining services for various third parties and
utilizes contract miners on some of its operations. Terms of the
agreements generally allow either party to terminate the
agreements on a short-term basis.
ICG, Inc's subsidiary, ICG ADDCAR Systems, LLC (ADDCAR) has
entered into a contract to provide mining services for a period
of five years or until all mineable coal is removed. ADDCAR is
expected to produce and deliver a minimum of 500,000 tons per
year up to a maximum of 1,500,000 tons per year. The guaranteed
monthly contract tonnage shall be mutually agreed upon. Failure
to meet the guaranteed contract tonnage for three consecutive
months may result in termination of the contract. All work under
the contract must be completed no later than March 31, 2008.
ADDCAR entered into a three year contract to provide mining
services for a period of three years or until all mineable coal
is removed. ADDCAR is expected to produce and deliver a minimum
of 50,000 tons of coal per month that has an ash content of less
than fifteen percent. Failure to meet the guaranteed contract
tonnage and ash requirements for three consecutive months may
result in termination of the contract. All work under the
contract must be completed no later than January 15, 2007.
11.     MAJOR CUSTOMERS
The Company had coal sales to the following major customers that
equaled or exceeded 10% of revenues:
December 31,
October 1, 2004 to
2004
December 31,
Total
2004
Receivable
Total
Balance
Revenues
Customer A
$
2,563
$
17,720
Customer B
6,581
19,151
Customer C
5,751
19,759
F-20
Table of Contents
ICG, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS—(CONTINUED)
As of December 31, 2004 and for the period October 1, 2004 to
December 31, 2004
(Dollars in thousands)
12.     FAIR VALUE OF FINANCIAL
INSTRUMENTS
The estimated fair values of the Company's financial
instruments are determined based on relevant market information.
These estimates involve uncertainty and cannot be determined
with precision. The following methods and assumptions were used
to estimate the fair value of each class of financial instrument.
Cash and Cash Equivalents, Trade Accounts Receivable,
Trade Accounts Payable, and Other Current Liabilities:
The carrying amounts approximate the fair value due to
the short maturity of these instruments.
Long-term Debt and Interest Rate Cap:
The fair
value of the term loan facility at December 31, 2004 is
based on the market value of the facility, as the interest rate
is stated at LIBOR plus a margin. The carrying value of the
Company's capital lease obligations and other debt
approximate fair value at December 31, 2004. The fair value
of the Company's interest rate cap was $164 at
December 31, 2004.
13.     RELATED-PARTY TRANSACTIONS
AND BALANCES
Under an Advisory Services Agreement, dated as of
October 1, 2004 between ICG and WLR, WLR has agreed to
provide advisory services to ICG (consisting of consulting and
advisory services in connection with strategic and financial
planning, investment management and administration and other
matters relating to the business and operation of ICG of a type
customarily provided by sponsors of U.S. private equity firms to
companies in which they have substantial investments, including
any consulting or advisory services which the Board of Directors
reasonably requests). WLR is to be paid a quarterly fee of
$500,000 and reimbursed for any reasonable out of pocket
expenses (including expenses of third-party advisors retained by
WLR). The agreement is for a period of seven years; however, it
may be terminated upon the occurrence of certain events.
On October 1, 2004, ICG entered into an agreement with
Insuratex, LTD, a wholly owned subsidiary of funds controlled by
WLR, to administer and pay workers' compensation claims
incurred by ICG. ICG paid an initial $2.5 million premium to
fund such claims and will continue to pay monthly installments
of $0.2 million until a total premium of $5.0 million is
paid by ICG. The $5.0 million annual premium is to be adjusted
after the initial 18 months based on actual workers'
compensation loss experienced.
14.     SUBSEQUENT EVENT
On March 31, 2005, ICG, Inc. entered into business
combination agreements with each of Anker Coal Group, Inc. and
CoalQuest Development LLC pursuant to which each of Anker and
CoalQuest are to become indirect wholly owned subsidiaries of
ICG. Holders of all of the outstanding stock of Anker and the
membership interests in CoalQuest will be issued shares of ICG
common stock with an aggregate value of $275 million, up to
a maximum number of shares equal to 22.5% of the common stock of
ICG outstanding on the date of the agreement. The aggregate
number of common shares to be issued will be based upon the
price of the shares of common stock in a public offering. The
acquisitions are subject to certain closing conditions.
On March 14, 2005, the Company entered into an employment
agreement with its President and Chief Executive Officer
containing provisions for base salary, bonus and grant of stock
options and restricted shares of common stock.
F-21
Table of Contents
Horizon NR, LLC and Certain Subsidiaries
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Members
Horizon NR, LLC and Certain Subsidiaries:
We have audited the accompanying combined balance sheets of
Horizon NR, LLC and Certain Subsidiaries ("Combined
Companies") ("Debtors-in-Possession") as of
September 30, 2004 and December 31, 2003
("Reorganized Companies"), and the related combined
statements of operations, members' deficit and cash flows
for the Period January 1, 2004 to September 30, 2004,
for year ended December 31, 2003, for the period
May 10, 2002 to December 31, 2002 ("Reorganized
Companies"), and for the period January 1, 2002 to
May 9, 2002 ("Predecessor Companies"). The
Combined Companies are wholly owned subsidiaries of Horizon
Natural Resources Company. These financial statements are the
responsibility of the Combined Companies' management. Our
responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit also includes examining,
on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing
the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
As more fully described in Notes 2 to 4 to the combined
financial statements, the combined financial statements reflect
the application of fresh-start reporting as of May 9, 2002
and, therefore, the combined financial statements for periods
after May 9, 2002 are not comparable in all respects to the
combined financial statements for periods prior to such date.
In our opinion, such financial statements present fairly, in all
material respects, the combined financial position of the
Reorganized Companies as of September 30, 2004 and
December 31, 2003 and the combined results of their
operations and their combined cash flows for the period
January 1, 2004 to September 30, 2004, year ended
December 31, 2003 and for the period from May 10, 2002
through December 31, 2002, in conformity with accounting
principles generally accepted in the United States of America.
Further, in our opinion, the financial statements referred to
above present fairly, in all material respects, the combined
results of the Predecessor Companies' operations and their
combined cash flows for the period from January 1, 2002
through May 9, 2002, in conformity with accounting
principles generally accepted in the United States of America.
As described in Note 1 to the combined financial
statements, the accompanying combined financial statements have
been prepared from the separate records maintained by the
Combined Companies and are not necessarily indicative of the
conditions that would have existed or the results of operations
if the Combined Companies has been operated as unaffiliated
entities. Portions of certain assets and expense items represent
allocations made from items applicable to Horizon Natural
Resources Company (Parent) and subsidiaries as a whole.
The accompanying combined financial statements have been
prepared assuming that the Combined Companies will continue as a
going concern, which contemplates continuity of the Combined
Companies' operations and realization of its assets and
payments of its liabilities in the ordinary course of business.
As discussed in Notes 1 and 2 of the combined
financial statements, the Combined Companies have suffered
recurring losses from operations and have a net members'
deficit as of September 30, 2004. The Combined Companies
also have significant debt obligations maturing in October 2004.
Furthermore, during November 2002, the Combined Companies'
Parent and its other subsidiaries, inclusive of the Combined
Companies, filed voluntary petitions for reorganization under
Chapter 11 of the United States Bankruptcy Code. The
accompanying combined financial statements
F-22
Table of Contents
Horizon NR, LLC and Certain Subsidiaries
do not purport to reflect or provide for the consequences of
those bankruptcy proceedings. In particular, such combined
financial statements do not purport to show (a) as to
assets, their realizable value on a liquidation basis or their
availability to satisfy liabilities; (b) as to pre-petition
liabilities, the amounts that may be allowed for claims or
contingencies, or the status and priority thereof; (c) as
to member accounts, the effect of any changes that may be made
in the capitalization of the Combined Companies; or (d) as
to operations, the effect of any changes that may be made in its
business. In addition, as also described in Note 2, the
Combined Companies are in default of various covenants and
provisions, including debt service payments, of its principal
debt instruments (other than its debtor-in-possession financing
facility) which makes such obligations currently due. These
matters raise substantial doubt about the Combined
Companies' ability to continue as a going concern.
Management's plans in regard to these matters are also
described in Notes 1 and 2. The Combined Companies are
currently operating their business as a debtor-in-possession
under the jurisdiction of the United States Bankruptcy Court,
and continuation of the Combined Companies as a going concern is
contingent upon, among other things, the Combined
Companies' ability to comply with all debt covenants under
the existing debtor-in-possession financing agreements, to
generate sufficient cash flow from operations, and to obtain
financing sources to meet its future obligations. If no
reorganization plan is approved or no refinancing of the October
2004 debt obligations is obtained, it is possible that the
Combined Companies' assets may be liquidated. The combined
financial statements do not include any adjustments relating to
the recoverability and classification of asset carrying amounts
or the amount and classification of liabilities that might
result should the Combined Companies be unable to continue as a
going concern.
LOUISVILLE, KENTUCKY
MARCH 25, 2005
F-23
Table of Contents
Horizon NR, LLC and Certain Subsidiaries
COMBINED BALANCE SHEETS
As of September 30, 2004 and
December 31, 2003
Reorganized Companies
September 30,
December 31,
2004
2003
(dollars in thousands)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents
$
—
$
859
Trade accounts receivable (net of allowance for doubtful
    accounts of $5,441 and $7,798, respectively)
46,117
35,658
Inventories, net
17,721
13,479
Deferred income taxes
5,931
6,020
Prepaid insurance
4,668
6,707
Prepaid expenses and other
4,399
10,333
Total current assets
78,836
73,056
PROPERTY, PLANT AND EQUIPMENT, net
276,157
318,552
DEBT ISSUANCE COSTS, Net
1,437
ADVANCE ROYALTIES
10,501
9,976
OTHER NON-CURRENT ASSETS
4,804
4,043
Total assets
$
370,298
$
407,064
LIABILITIES AND MEMBERS' DEFICIT
LIABILITIES NOT SUBJECT TO COMPROMISE:
CURRENT LIABILITIES:
Trade accounts payable
$
29,975
$
36,670
Current portion of long-term debt and capital leases
30,603
62,698
Current portion of reclamation and mine closure costs
1,206
1,206
Accrued expenses and other
27,977
27,872
Total current liabilities
89,761
128,446
NON-CURRENT LIABILITIES, Less current portion
Long-term debt and capital leases
29
315
Reclamation and mine closure costs
22,436
27,443
Deferred income taxes
5,931
6,020
Other non-current liabilities
18,326
18,422
Total non-current liabilities
46,722
52,200
Total liabilities not subject to compromise
136,483
180,646
LIABILITIES SUBJECT TO COMPROMISE
1,272,609
1,170,747
Total liabilities
1,409,092
1,351,393
MEMBERS' DEFICIT:
Paid-In Capital
234,800
234,800
Members' investment (52,802 units authorized)
200
200
Accumulated other comprehensive loss
(3,683
)
(3,683
)
Accumulated deficit
(1,270,111
)
(1,175,646
)
Total members' deficit
(1,038,794
)
(944,329
)
Total liabilities and members' deficit
$
370,298
$
407,064
See notes to combined financial statements.
F-24
Table of Contents
Horizon NR, LLC and Certain Subsidiaries
COMBINED STATEMENTS OF OPERATIONS
For the period January 1, 2004 to September 30,
2004,
the Year Ended December 31, 2003, the period
May 10, 2002 to December 31, 2002
(reorganized companies) and the period January 1, 2002
to May 9, 2002 (predecessor companies)
Reorganized
Predecessor
Companies
Companies
Period from
Period from
Period from
January 1, 2004 to
Year Ended
May 10, 2002 to
January 1, 2002 to
September 30, 2004
December 31, 2003
December 31, 2002
May 9, 2002
(in thousands)
REVENUES (including amounts to related parties of $3,061 in the
    Predecessor period)
Coal Sales revenues
$
346,981
$
441,291
$
264,235
$
136,040
Freight and handling revenues
3,700
8,008
6,032
2,947
Other revenues
22,702
31,771
27,397
21,183
Total revenues
373,383
481,070
297,664
160,170
COSTS AND EXPENSES:
Freight and handling costs
3,700
8,008
6,032
2,947
Cost of coal sales and other revenues (including amounts to
    related parties of $9,116 in the Predecessor period) (exclusive
    of items shown separately below)
306,429
400,652
251,361
114,767
Depreciation, depletion and amortization
27,547
52,254
40,033
32,316
Selling, general and administrative (including amounts to
    related parties of $3 in the Predecessor period) (exclusive of
    depreciation and amortization shown separately above)
8,477
23,350
16,695
9,677
Gain on sale of assets
(226
)
(4,320
)
(39
)
(93
)
Writedowns and special items
10,018
9,100
729,953
8,323
Total costs and expenses
355,945
489,044
1,044,035
167,937
Income (Loss) from operations
17,438
(7,974
)
(746,371
)
(7,767
)
INTEREST AND OTHER INCOME (EXPENSE):
Interest expense
(114,211
)
(145,892
)
(80,405
)
(36,666
)
Reorganization items
727
(52,784
)
(143,663
)
1,567,689
Other, net (including amounts to related parties of $93 in the
    Predecessor period)
1,581
187
1,256
499
Total interest and other income (expense)
(111,903
)
(198,489
)
(222,812
)
1,531,522
NET INCOME (LOSS)
$
(94,465
)
$
(206,463
)
$
(969,183
)
$
1,523,755
See notes to combined financial statements.
F-25
Table of Contents
Horizon NR, LLC and Certain Subsidiaries
COMBINED STATEMENTS OF MEMBERS' DEFICIT
For the Period January 1, 2004 to September 30,
2004,
the Year Ended December 31, 2003, the period
May 10, 2002 to December 31, 2002
(reorganized companies) and the period January 1, 2002
to May 9, 2002 (predecessor companies)
Accumulated
Additional
Other
Members'
Paid-in
Comprehensive
Accumulated
Investment
Capital
Loss
Deficit
Total
(Dollars in thousands)
PREDECESSOR COMPANIES:
Balance—January 1, 2002
$
53
$
163,913
$
(7,720
)
$(878,508
)
$
(722,262
)
January 1, 2002 to May 9, 2002, net income
—
—
—
1,523,755
1,523,755
Fresh-start accounting adjustments
(53
)
71,087
7,720
(645,247
)
(566,493
)
Balance—May 9, 2002 after fresh start adjustments
—
235,000
—
—
235,000
REORGANIZED COMPANIES:
Balance-May 10, 2002
200
234,800
—
—
235,000
May 10, 2002 to December 31, 2002, net loss
—
—
—
(969,183
)
(969,183
)
Minimum Pension Liability Adjustment
(3,824
)
(3,824
)
BALANCE—December 31, 2002
200
234,800
(3,824
)
(969,183
)
(738,007
)
January 1, 2003 to December 31, 2003, net loss
—
—
—
(206,463
)
(206,463
)
Minimum pension liability adjustment
—
—
141
—
141
Balance- December 31, 2003
200
234,800
(3,683
)
(1,175,646
)
(944,329
)
January 1, 2004 to September 30, 2004, net loss
—
—
—
(94,465
)
(94,465
)
BALANCE—September 30, 2004
$
200
$
234,800
$
(3,683
)
$(1,270,111
)
$
(1,038,794
)
See notes to combined financial statements.
F-26
Table of Contents
Horizon NR, LLC and Certain Subsidiaries
COMBINED STATEMENTS OF CASH FLOWS
For the Period January 1, 2004 to September 30, 2004,
Year Ended December 31, 2003 and the period May 10, 2002 to
December 31, 2002
(reorganized companies) and for the period January 1, 2002 to
May 9, 2002 (predecessor companies)
Reorganized Companies
Predecessor Companies
Period from
For the
Period from
January 1, 2004
year ended
May 10, 2002 to
Period from
to September 30,
December 31,
December 31,
January 1, 2002 to
2004
2003
2002
May 9, 2002
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)
$
(94,465
)
$
(206,463
)
$
(969,183
)
$
1,523,755
Adjustments to reconcile net income (loss) to net cash
    provided by (used in) operating activities:
Depreciation, depletion and amortization
27,547
52,254
40,033
32,316
Depreciation — Allocation from Affiliates
127
4,118
4,930
5,723
Amortization of finance costs included in interest expense
1,437
3,698
5,644
5,676
Gain on sale of assets
(226
)
(4,320
)
(39
)
(93
)
Gain on lease buyout
7,736
Fresh start revaluation
(645,824
)
Fresh start adjustments
(801,495
)
Gain on debt extinguishment
(161,584
)
Writedowns and special items
10,018
9,100
729,953
8,323
Provision for doubtful accounts
247
1,656
1,535
6,594
Writeoff of net payables to other Horizon subsidiaries
(1,272
)
(5,432
)
188,282
(264,621
)
Changes in Assets and Liabilities:
(Increase) decrease in:
Receivables
(10,706
)
18,616
(11,419
)
1,050
Inventories
(4,242
)
(273
)
2,806
(37,197
)
Prepaid expenses
7,971
19,374
64,809
(17,032
)
Other assets
(1,287
)
(2,313
)
2,811
10,666
Increase (decrease) in:
Accounts payable
9,754
(4,912
)
24,703
(12,782
)
Accrued expenses
85,520
150,144
32,388
87,079
Reclamation and mine closure costs
(4,007
)
(11,942
)
(31,957
)
(23,060
)
Other liabilities
(95
)
(5,552
)
(8,924
)
(15,690
)
Total adjustments
128,522
224,216
1,045,555
(1,821,951
)
Net cash provided by (used in) operating activities
34,057
17,753
76,372
(298,196
)
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from the sale of assets
4,089
15,388
636
122
Additions to property, plant and equipment and mine development
(6,624
)
(16,937
)
(13,435
)
(10,963
)
Net cash used in investing activities
(2,535
)
(1,549
)
(12,799
)
(10,841
)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments on long-term debt
(4,698
)
(13,729
)
(183,162
)
(304,449
)
Borrowings on long-term debt
50,003
574,700
Net borrowings/(repayments) on debtor-in-possession financing
(27,080
)
(737
)
56,027
Financing costs
(11,238
)
Repayments on capital leases
(603
)
(993
)
(893
)
(2
)
Net cash provided by (used in) financing activities
(32,381
)
(15,459
)
(78,025
)
259,011
Net increase (decrease) in cash and cash equivalents
(859
)
745
(14,452
)
(50,026
)
Cash and cash equivalents, beginning of period
859
114
14,566
64,592
Cash and cash equivalents, end of period
$
0
$
859
$
114
$
14,566
See notes to combined financial statements.
F-27
Table of Contents
Horizon NR, LLC and Certain Subsidiaries
NOTES TO COMBINED FINANCIAL STATEMENTS
As of September 30, 2004, for the period January 1, 2004 to
September 30, 2004,
Year Ended December 31, 2003, the period May 10, 2002 to
December 31, 2002
(reorganized companies) and the period January 1, 2002 to May
9, 2002 (predecessor companies)
(Dollars in thousands)
1.
ORGANIZATION AND BASIS OF PRESENTATION
Horizon NR, LLC ("HNR") is a wholly-owned subsidiary
of Horizon Natural Resources Company. HNR has seventy-five
direct and indirect wholly-owned subsidiaries, seventeen of
which are included in the accompanying combined financial
statements. HNR and the seventeen subsidiaries are referred to
as the "Combined Companies" in the accompanying
combined financial statements and related footnotes. The
seventeen subsidiaries included are: Appalachian Realty Company,
Ayrshire Land Company, Bluegrass Coal Development Company,
Evergreen Mining Company, Fairview Land Company, LLC, Horizon
Natural Resources Sales Company, Leslie Resources, Inc.
(exclusive of Chaives Job), Leslie Resources Management, Inc.,
Sunny Ridge Enterprises, Inc., Sunny Ridge Mining Company, Inc.
(exclusive of Job 10), Turris Coal Company, Ikerd-Bandy
Co., Inc., Shipyard River Coal Terminal Company, Franklin Coal
Sales Company, Kentucky Prince Mining Company, RP Terminal, LLC,
and Mining Technologies, Inc.
Horizon, formerly known as AEI Resources Holding, Inc.
("AEI"), operated a coal mining business through its
subsidiaries in the United States. As discussed in Note 2,
on November 13, 2002 and November 14, 2002, Horizon
filed voluntary petitions for reorganization under
Chapter 11 of the United States Bankruptcy Code (the
"Bankruptcy Code") in the United States Bankruptcy
Court (the "Bankruptcy Court"). Horizon completed its
November 2002 bankruptcy proceedings on September 30, 2004
through the sale or transfer of certain properties, assets and
liabilities to International Coal Group, Inc. ("ICG")
and others. Horizon had previously filed a voluntary petition
for reorganization under the Bankruptcy Code accompanied by a
prepackaged plan of reorganization on February 28, 2002.
Horizon's first bankruptcy Plan of Reorganization became
effective May 9, 2002 (see note 4).
The combined financial statements as of September 30, 2004,
for the period January 1, 2004 to September 30, 2004,
as of December 31, 2003 and for the year then ended, and
the periods May 10, 2002 to December 31, 2002 and
January 1, 2002 to May 9, 2002 are carve-out financial
statements reflecting the operations and financial condition of
the Horizon properties acquired by ICG on September 30,
2004.
Throughout the notes to the combined financial statements, the
term "Predecessor Companies" refers to the Combined
Companies, their operations and their cash flows for the period
from January 1, 2002 through May 9, 2002, while the
term "Reorganized Companies" refers to the Combined
Companies, their operations and their cash flows for periods
thereafter.
These combined financial statements were prepared from the
separate accounts and records maintained by the Combined
Companies and are not necessarily indicative of the conditions
that would have existed or the results of operations if the
Combined Companies had been operated as unaffiliated
F-28
Table of Contents
Horizon NR, LLC and Certain Subsidiaries
NOTES TO COMBINED FINANCIAL STATEMENTS—(CONTINUED)
As of September 30, 2004, for the period January 1, 2004 to
September 30, 2004,
Year Ended December 31, 2003, the period May 10, 2002 to
December 31, 2002
(reorganized companies) and the period January 1, 2002 to May
9, 2002 (predecessor companies)
(Dollars in thousands)
entities. Certain assets and expense items represent allocations
from Horizon. The accounts allocated, amount, and basis of
allocation are:
Horizon Amounts
Account
September 30, 2004
December 31, 2003
Vendor Advances
$
169
$
691
Reclamation Deposits
52,706
54,743
Amounts allocated to
Combined Companies
September 30, 2004
December 31, 2003
Basis of Allocation
Vendor Advances
$
93
$
373
Coal Production Tons
Reclamation Deposits
—
1,343
Premiums Paid
Horizon Amounts
January 1, 2004-
January 1, 2003-
May 10, 2002-
January 1, 2002-
September 30, 2004
December 31, 2003
December 31, 2002
May 9, 2002
Selling, general, and administrative expenses
$
17,100
$
25,000
$
12,541
$
20,285
Amounts allocated to
Combined Companies
January 1, 2004-
January 1, 2003-
May 10, 2002-
January 1, 2002-
September 30, 2004
December 31, 2003
December 31, 2002
May 9, 2002
Basis of Allocation
Selling, general, and administrative expenses
$
9,081
$
9,860
$
4,974
$
8,305
Coal Production Hours
Vendor advances were allocated to the Combined Companies using a
formula based on the ratio of actual coal production tons for
the Combined Companies compared to the actual coal production
tons for Horizon. Reclamation deposits were allocated to the
Combined Companies using a formula based on the ratio of
reclamation premiums paid for the Combined Companies compared to
reclamation premiums paid for Horizon. Selling, general and
administrative expenses were allocated to the Combined Companies
using a formula based on the ratio of budgeted coal production
hours for the Combined Companies compared to the budgeted coal
production hours for Horizon.
The combined financial statements also include the entire amount
owed through the DIP Facility and Senior Secured Notes (see
Note 8) as these borrowings and related accrued interest
were the legal obligations of the Combined Companies.
The Combined Companies' financial statements have been
presented on the basis that they are a going concern, which
contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. The Combined
Companies' recurring losses from operations, the related
bankruptcy filing, the maturity of their debt obligations in
2004 and the Combined Companies' defaults under their
various debt covenants raise substantial doubt about the
Combined Companies' ability to
F-29
Table of Contents
Horizon NR, LLC and Certain Subsidiaries
NOTES TO COMBINED FINANCIAL STATEMENTS—(CONTINUED)
As of September 30, 2004, for the period January 1, 2004 to
September 30, 2004,
Year Ended December 31, 2003, the period May 10, 2002 to
December 31, 2002
(reorganized companies) and the period January 1, 2002 to May
9, 2002 (predecessor companies)
(Dollars in thousands)
continue as a going concern. The combined financial statements
do not include any adjustments relating to the recoverability
and classification of asset carrying amounts or the amount and
classification of liabilities that might result should the
Combined Companies be unable to continue as a going concern.
Realization of the carrying amounts of the Combined
Companies' assets and satisfaction of their liabilities is
dependent upon, among other things, the ability to comply with
their debtor-in-possession financing agreement, the ability to
refinance or extend the 2004 debt obligations and the ability to
generate sufficient cash flows from operations to meet their
obligations. The Combined Companies' operating plan
includes actions they believe will improve operating profits and
cash flows. There can be no assurances that operating profits
and cash flows will be realized in an amount sufficient to fund
obligations or other liquidity needs.
Since filing for protection under the Bankruptcy Code on
November 13, 2002 and November 14, 2002 (see
Note 2), Horizon has operated its business as a
debtor-in-possession subject to the jurisdiction of the
Bankruptcy Court. Accordingly, the combined financial statements
of the Combined Companies have been prepared in accordance with
the American Institute of Certified Public Accountants Statement
of Position 90-7,
Financial Reporting by Entities in
Reorganization Under the Bankruptcy Code
("SOP 90-7") and generally accepted
accounting principles applicable to a going concern, which
assume that assets will be realized and liabilities will be
discharged in the normal course of business.
The Combined Companies operate one segment: the production of
steam coal from surface and deep mines in Kentucky, West
Virginia and Illinois.
Fresh-Start Accounting
— On May 9, 2002,
Horizon emerged from Chapter 11 upon approval of their
Prepackaged Plan of Reorganization (see Note 2). Horizon
has accounted for all transactions related to that
reorganization in accordance with SOP 90-7 (see
Note 2). The adjustments to reflect the Combined
Companies' emergence from bankruptcy have been reflected in
the accompanying combined financial statements. Accordingly, a
vertical black line is shown in the combined statements of
operations and combined statements of cash flows to separate
post-emergence operations from those prior to May 10, 2002,
since they have not been prepared on a comparable basis.
2.
LIQUIDITY AND BANKRUPTCY PROCEEDINGS
Chapter 11 Reorganization
— On
November 13, 2002 and November 14, 2002, Horizon filed
voluntary petitions for reorganization under Chapter 11 of
the Bankruptcy Code. On September 30, 2004, in connection
with the completion of Horizon's bankruptcy proceedings,
ICG acquired certain properties and assets, and assumed certain
liabilities of Horizon through Section 363 asset sales of
the United States Bankruptcy Court.
The Combined Companies reorganization and administrative
expenses (primarily legal and consulting expenses) related to
the Chapter 11 proceedings have been separately identified
in the combined statements of operations as reorganization items.
In accordance with SOP 90-7, the accompanying combined
balance sheets as of September 30, 2004 and
December 31, 2003, segregate liabilities subject to
compromise, such as unsecured claims, from
F-30
Table of Contents
Horizon NR, LLC and Certain Subsidiaries
NOTES TO COMBINED FINANCIAL STATEMENTS—(CONTINUED)
As of September 30, 2004, for the period January 1, 2004 to
September 30, 2004,
Year Ended December 31, 2003, the period May 10, 2002 to
December 31, 2002
(reorganized companies) and the period January 1, 2002 to May
9, 2002 (predecessor companies)
(Dollars in thousands)
liabilities not subject to compromise and liabilities arising
subsequent to filing bankruptcy. Liabilities subject to
compromise for the Combined Companies are set forth below.
September 30,
December 31,
2004
2003
Long-term debt
$
915,304
$
915,304
Accrued postretirement medical benefits
59,578
56,633
Accounts payable and accrued expenses
22,652
23,872
Accrued interest
275,075
174,938
$
1,272,609
$
1,170,747
Horizon had previously filed a voluntary petition for
reorganization under the Bankruptcy Code accompanied by a
prepackaged plan of reorganization on February 28, 2002.
This plan of reorganization became effective May 9, 2002
(see note 4).
3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND GENERAL
Basis of Presentation and Principles of
Combination
—Significant intercompany transactions
and balances have been eliminated in combination. Minority
interests have not been recorded due to insignificance or
deficit equity. Investments in 20% to 50% owned entities are
accounted for under the equity method and are not significant.
Company Environment and Risk Factors
—In the
course of business activities the Combined Companies are exposed
to a number of risks including: the possibility of the
termination or alteration of coal sales contacts, fluctuating
market conditions of coal (often impacted by the weather) and
transportation/fuel costs, competitive industry and
overcapacity, changing government regulations, unexpected
maintenance and equipment failure, employee benefits cost
control, changes in estimates of proven and probable mineral
interest, labor relations issues, loss of key employees,
satisfactory resolution of technology issues, as well as the
ability to obtain financing, necessary mining permits and
control of adequate recoverable mineral interest. In addition,
adverse weather and geological conditions may increase mining
costs, sometimes substantially.
The Combined Companies are also exposed to risks associated with
the bankruptcy proceedings and risks associated with a highly
leveraged organization. Such risks include: increased
vulnerability to adverse economic and industry conditions,
limited ability to fund future working capital, capital
expenditures, business acquisitions or other corporate
requirements, and possible liquidity problems, as well as
financing and credit constraints (see Note 2).
Bankruptcy Accounting
—In preparing the
accompanying combined financial statements, the Combined
Companies applied the provisions of SOP 90-7, which does not
significantly change the application of accounting principles
generally accepted in the United States of America; however, it
does require that the combined financial statements for periods
including and subsequent to filing the Chapter 11 petition
distinguish transactions and events that are directly associated
with the reorganization from the ongoing operations of the
business (see Note 4).
Cash and Cash Equivalents
—The Combined
Companies consider all highly liquid debt instruments with
original maturities of three months or less to be cash
equivalents.
F-31
Table of Contents
Horizon NR, LLC and Certain Subsidiaries
NOTES TO COMBINED FINANCIAL STATEMENTS—(CONTINUED)
As of September 30, 2004, for the period January 1, 2004 to
September 30, 2004,
Year Ended December 31, 2003, the period May 10, 2002 to
December 31, 2002
(reorganized companies) and the period January 1, 2002 to May
9, 2002 (predecessor companies)
(Dollars in thousands)
Trade Accounts Receivable and Allowance for Doubtful
Accounts
—Trade accounts receivable are recorded at
the invoiced amount and do not bear interest. The allowance for
doubtful accounts is the Combined Companies' best estimate
of the amount of probable credit losses in the Combined
Companies' existing accounts receivable. The Combined
Companies establish provisions for losses on accounts receivable
when it is probable that all or part of the outstanding balance
will not be collected. The Combined Companies regularly review
collectibility and establish or adjust the allowance as
necessary using the specific identification method. The Combined
Companies do not have any off-balance sheet credit exposure
related to its customers.
Inventories
—Inventories are stated at lower
of average cost, determined on a first-in, first-out
("FIFO") basis, or market. Components of inventories
consist of coal and parts and supplies, net of allowance for
obsolescence (see Note 5). Coal inventories represent coal
contained in stockpiles and exposed in the pit.
Advance Royalties
—The Combined Companies are
required, under certain royalty lease agreements, to make
minimum royalty payments whether or not mining activity is being
performed on the leased property. These minimum payments may be
recoupable once mining begins on the leased property. The
recoupable minimum royalty payments are capitalized and
amortized based on the units-of-production method at a rate
defined in the lease agreement once mining activities begin.
Unamortized deferred royalty costs are expensed when mining has
ceased or a decision is made not to mine on such property. The
Combined Companies have recorded advance royalties of $12,284
($1,783 in prepaid expense and other and $10,501 included in
non-current assets) at September 30, 2004 and $12,429
($2,453 in prepaid expense and other and $9,976 included in
non-current assets) at December 31, 2003.
Property, Plant and Equipment
—Property, plant
and equipment, including mineral interest and mine development
costs are recorded at cost, which includes construction overhead
and interest, where applicable. Expenditures for major renewals
and betterments are capitalized while expenditures for
maintenance and repairs are expensed as incurred. Mineral
interest costs are depleted using the units-of-production
method, based on estimated recoverable interest. Mine
development costs are amortized using the units-of-production
method, based on estimated recoverable interest. Other property,
plant and equipment is depreciated using the straight-line
method with estimated useful lives substantially as follows:
Years
Buildings
10 to 45
Mining and other equipment and related facilities
1 to 20
Land improvements
15
Transportation equipment
2 to 7
Furniture and fixtures
3 to 10
Depreciation, depletion and amortization expense for property,
plant and equipment for the Combined Companies for the period
January 1, 2004 to September 30, 2004, excluding
depreciation allocated from affiliates, was $27,547 and year
ended 2003 was $52,254. For the period May 10, 2002 to
December 31, 2002 and January 1, 2002 to May 9, 2002
depreciation expense was $40,033 and $32,316 respectively.
F-32
Table of Contents
Horizon NR, LLC and Certain Subsidiaries
NOTES TO COMBINED FINANCIAL STATEMENTS—(CONTINUED)
As of September 30, 2004, for the period January 1, 2004 to
September 30, 2004,
Year Ended December 31, 2003, the period May 10, 2002 to
December 31, 2002
(reorganized companies) and the period January 1, 2002 to May
9, 2002 (predecessor companies)
(Dollars in thousands)
Debt Issuance Costs
—Debt issuance costs
reflect fees incurred to obtain financing. Debt issuance costs
are amortized (included in interest expense) using the effective
interest method, over the life of the related debt. Amortization
expense for the nine months ended September 30, 2004, the
year ended December 31, 2003, the period May 10, 2002
to December 31, 2002 and period January 1, 2002 to
May 9, 2002 was $1,437, $3,698, $11,282 and $5,676
respectively.
Restricted Cash
—Included in other non-current
assets as of September 30, 2004 and December 31, 2003
is restricted cash of $4,361 and $2,597, respectively.
Restricted cash includes amounts required by various royalty and
reclamation agreements. Certain of these agreements have been
disputed by third parties, requiring that cash be paid into an
escrow account until the rightful recipient is determined.
Coal Mine Reclamation and Mine Closure
Costs
—Future cost requirements for land reclamation
are estimated where surface and deep mining operations have been
conducted, based on the Combined Companies' interpretation
of the technical standards of regulations enacted by the U.S.
Office of Surface Mining, as well as state regulations. These
costs relate to reclaiming the pit and support acreage at
surface mines and sealing portals at deep mines. Other costs
common to both types of mining are related to reclaiming refuse
and slurry ponds as well as holding and related termination/exit
costs.
The Combined Companies early adopted Statement of Financial
Accounting Standards ("SFAS") No. 143,
Accounting for Asset Retirement Obligations
as a result
of fresh-start accounting on May 9, 2002.
SFAS No. 143 addresses asset retirement obligations
that result from the acquisition, construction or normal
operation of long-lived assets. It requires companies to
recognize asset retirement obligations at fair value when the
liability is incurred. Upon initial recognition of a liability,
that cost should be capitalized as part of the related
long-lived asset and allocated to expense over the useful life
of the asset. The asset retirement costs are recorded in mineral
interests.
During the Predecessor period, the Combined Companies accrued
the cost of final mine closure and related exit costs over the
estimated useful mining life of the developed property or, if
purchased, at the date of acquisition.
The Combined Companies expense reclamation performed prior to
final mine closure. The establishment of the end of mine
reclamation and closure liability is based upon permit
requirements and requires significant estimates and assumptions,
principally associated with regulatory requirements, costs and
recoverable mineral interest. Annually, the end of mine
reclamation and closure liability is reviewed and necessary
adjustments are made, including adjustments due to mine plan and
permit changes and revisions to cost and production levels to
optimize mining and reclamation efficiency. The amount of such
adjustments is reflected in the SFAS No. 143 year-end
calculation.
Asset Impairments and Accelerated Mine Closing
Accruals
—The Combined Companies follow
SFAS No. 144,
Accounting for the Impairment or
Disposal of Long-Lived Assets
, which requires that projected
future cash flows from use and disposition of assets be compared
with the carrying amounts of those assets. When the sum of
projected cash flows is less than the carrying amount,
impairment losses are recognized. In determining such impairment
losses, discounted cash flows are utilized to determine the fair
value of the assets being evaluated. Also, in certain
situations, expected mine lives
F-33
Table of Contents
Horizon NR, LLC and Certain Subsidiaries
NOTES TO COMBINED FINANCIAL STATEMENTS—(CONTINUED)
As of September 30, 2004, for the period January 1, 2004 to
September 30, 2004,
Year Ended December 31, 2003, the period May 10, 2002 to
December 31, 2002
(reorganized companies) and the period January 1, 2002 to May
9, 2002 (predecessor companies)
(Dollars in thousands)
are shortened because of changes to planned operations. When
that occurs and it is determined that the mine's underlying
costs are not recoverable in the future, reclamation and mine
closing obligations are accelerated and the mine closing accrual
is increased accordingly. To the extent it is determined asset
carrying values will not be recoverable during a shorter mine
life, a provision for such impairment is recognized.
Income Tax Provision
—The provision for income
taxes includes federal, state and local income taxes currently
payable and deferred taxes arising from temporary differences
between the financial statement and tax basis of assets and
liabilities. Income taxes are recorded under the liability
method. Under this method, deferred income taxes are recognized
for the estimated future tax effects of differences between the
tax basis of assets and liabilities and their financial
reporting amounts as well as net operating loss carryforwards
and tax credits based on enacted tax laws. Valuation allowances
are established when necessary to reduce deferred tax assets to
the amount expected to be realized.
The Combined Companies file a consolidated federal income tax
return that includes other subsidiaries of Horizon Natural
Resources Company. Consolidated net operating losses are
allocated to the various subsidiaries in accordance with IRS
regulations and may not reflect actual losses incurred by the
Combined Companies on a stand alone basis.
Revenue Recognition
—Most revenues result from
sales under long-term sales contracts with electric utilities,
industrial companies or other coal-consuming organizations,
primarily in the eastern United States. Revenues are recognized
on coal sales in accordance with the terms of the sales
agreement, which is usually when the coal is shipped to the
customers and title has passed.
Freight and handling costs paid directly to third-party carriers
and invoiced to coal customers are recorded as freight and
handling costs and freight and handling revenues, respectively.
Other revenues generally consist of equipment and parts sales,
equipment rebuild and maintenance services, coal handling and
processing, royalties, commissions on coal trades, contract
mining and rental income. These revenues are recognized in the
period earned or when the service is completed. Advance payments
received are deferred and recognized in revenue as coal is
shipped or rentals are earned.
Postretirement Benefits Other Than
Pensions
—As prescribed by SFAS No. 106,
Employers' Accounting for Postretirement Benefits Other
Than Pensions
, accruals are made, based on annual outside
actuarial valuations, for the expected costs of providing
postretirement benefits other than pensions, which are primarily
medical benefits, during an employee's actual working
career.
The Combined Companies account for health care and life
insurance benefits provided for future retired employees and
their dependents by accruing the cost of such benefits over the
service lives of employees. Unrecognized actuarial gains and
losses are amortized over the estimated average remaining
service period for active employees and over the estimated
average remaining life for retirees.
Workers' Compensation and Black Lung
Benefits
—Certain of the Combined Companies are
liable under federal and state laws to pay workers'
compensation and pneumoconiosis (black lung) benefits to
eligible employees, former employees and their dependents. The
Combined Companies were
F-34
Table of Contents
Horizon NR, LLC and Certain Subsidiaries
NOTES TO COMBINED FINANCIAL STATEMENTS—(CONTINUED)
As of September 30, 2004, for the period January 1, 2004 to
September 30, 2004,
Year Ended December 31, 2003, the period May 10, 2002 to
December 31, 2002
(reorganized companies) and the period January 1, 2002 to May
9, 2002 (predecessor companies)
(Dollars in thousands)
formerly self-insured for significant federal and state
workers' compensation and black lung benefits. The Combined
Companies currently utilize a combination of a large deductible
insurance program, self-insurance and state workers'
compensation fund participation to secure its on-going
obligations depending on the location of the operation. The
Combined Companies accrue for their workers' compensation
and black lung obligations on a present value basis determined
by outside actuaries.
Management's Use of Estimates
—The
preparation of the combined financial statements in conformity
with U.S. generally accepted accounting principles requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses
during the reporting period. Significant items subject to such
estimates and assumptions include the allowance for doubtful
accounts; inventories; mineral interest; asset retirement
obligations; employee benefit liabilities; future cash flows
associated with assets; useful lives for depreciation, depletion
and amortization; workers' compensation claims;
postretirement benefits other than pensions; income taxes; and
fair value of financial instruments. Due to the subjective
nature of these estimates, actual results could differ from
those estimates.
Statements of Cash Flows
—
Supplemental disclosure:
Reorganized Companies
January 1, 2004 to
Year ended
September 30, 2004
December 31, 2003
Cash paid for interest
$
6,814
$
7,797
Income taxes paid (refunded)
(69
)
38
Reorganized Companies
Predecessor Companies
May 10, 2002 to
January 1, 2002 to
December 31, 2002
May 9, 2002
Cash paid for interest
$
20,405
$
150,502
Income taxes paid (refunded)
45
106
Non-cash transactions excluded from the December 31, 2003
Combined Statement of Cash Flows are comprised of a non-cash
settlement involving the exchange of accrued expenses of $1,652
for accounts receivables of $1,652 and prepaid insurance
financing through the issuance of current debt obligations of
$13,927. Non cash transactions excluded from the January 1,
2004 to September 30, 2004, the December 31, 2003, the
May 10, 2002 to December 31, 2002 and the
January 1, 2002 to May 9, 2002 Combined Statements of
Cash Flows are comprised of $0, $205, $3,127 and $0,
respectively, of additions to property, plant and equipment
through the incurrence of capital lease obligations.
Comprehensive Income or Loss
—Under generally
accepted accounting principals other comprehensive income or
loss can include, among other items, foreign currency items,
minimum pension liability adjustments and unrealized gains and
losses on certain investments in debt and equity securities. The
Combined Companies recorded minimum pension liability
adjustments of $0, $141, ($3,824) and $0 in Other Comprehensive
Income (Loss) in members' deficit as of September 30,
2004, December 31, 2003, December 31, 2002 and
May 9, 2002 respectively, to properly record the pension
liability in
F-35
Table of Contents
Horizon NR, LLC and Certain Subsidiaries
NOTES TO COMBINED FINANCIAL STATEMENTS—(CONTINUED)
As of September 30, 2004, for the period January 1, 2004 to
September 30, 2004,
Year Ended December 31, 2003, the period May 10, 2002 to
December 31, 2002
(reorganized companies) and the period January 1, 2002 to May
9, 2002 (predecessor companies)
(Dollars in thousands)
accordance with actuarial calculations. The Combined Companies
had no other items of Other Comprehensive Income (Loss).
4.
FRESH-START ACCOUNTING
On May 9, 2002, Horizon emerged from Chapter 11 upon
approval of their Prepackaged Plan of Reorganization. The
Combined Companies have accounted for all transactions related
to that reorganization in accordance with SOP 90-7. The
adjustments to reflect the emergence from bankruptcy have been
reflected in the accompanying combined financial statements.
Accordingly, a vertical black line is shown in the combined
statements of operations and combined statements of cash flows
to separate post-emergence operations from those prior to
May 10, 2002, since they have not been prepared on a
comparable basis.
As required by SOP 90-7, the provisions of fresh-start
accounting were applied as of May 9, 2002. In adopting
fresh-start accounting, an independent financial advisor was
engaged to assist in the fair value estimate of the reorganized
entity. The valuation model is based on comparable company
analysis and discontinued future cash flows.
The reorganized value of the Combined Companies prior to the
confirmation date was less than the total of all post-petition
liabilities and allowed claims as reflected in the following
summary:
Post-petition liabilities
$
1,281,218
Liabilities subject to compromise
436,255
Total post-petition liabilities and allowed claims
1,717,473
Reorganization value
1,521,320
Excess of liabilities over reorganization value
$
196,153
Liabilities subject to compromise
—The
Predecessor Companies eliminated $436,255 of liabilities subject
to compromise in exchange for equity valued at $235,000. These
liabilities subject to compromise included the following debt
instruments:
Accrued
Debt
Interest
Total
10.5% Senior Notes
$
200,000
$
48,177
$
248,177
11.5% Senior Subordinated Notes
150,000
38,078
188,078
Liabilities Subject to Compromise
$
350,000
$
86,255
$
436,255
The elimination of these liabilities subject to compromise
resulted in recognition of a gain on cancellation of debt
totaling $161,584 (see table below), which has been reflected in
reorganization items in the combined statement of operations of
the Predecessor Companies for the period from January 1,
2002 to May 9, 2002.
The Combined Companies refinanced their old secured bank debt
and repaid its entire outstanding balance, including all
outstanding interest and exit fees. The old secured bank debt
was replaced by three debt instruments: $47,349 draw on the
$250,000 Exit Facility, $475,000 Senior Secured Term Notes and
$450,000 Senior Secured Notes.
F-36
Table of Contents
Horizon NR, LLC and Certain Subsidiaries
NOTES TO COMBINED FINANCIAL STATEMENTS—(CONTINUED)
As of September 30, 2004, for the period January 1, 2004 to
September 30, 2004,
Year Ended December 31, 2003, the period May 10, 2002 to
December 31, 2002
(reorganized companies) and the period January 1, 2002 to May
9, 2002 (predecessor companies)
(Dollars in thousands)
The impact of the debt restructuring entries is reflected below.
Liabilities subject to compromise
$
436,255
Unamortized financing costs associated with retired debt
(39,671
)
396,584
New equity
235,000
Gain on debt extinguishment
$
161,584
Reorganization items reflected in the Predecessor Companies
operations are as follows:
Gain on fresh-start revaluation
$
645,824
Gain on debt extinguishment
161,584
Write off amounts payable to other subsidiaries of Horizon
779,789
Professional fees incurred during bankruptcy proceedings
(19,508
)
Reorganization items
$
1,567,689
F-37
Table of Contents
Horizon NR, LLC and Certain Subsidiaries
NOTES TO COMBINED FINANCIAL STATEMENTS—(CONTINUED)
As of September 30, 2004, for the period January 1, 2004 to
September 30, 2004,
Year Ended December 31, 2003, the period May 10, 2002 to
December 31, 2002
(reorganized companies) and the period January 1, 2002 to May
9, 2002 (predecessor companies)
(Dollars in thousands)
The following reflects the impact of fresh-start accounting on
the balance sheet as of May 9, 2002.
Balance Sheet at May 9, 2002 (Unaudited)
Fresh Start
AEI
Horizon
Predecessor
Debt
Predecessor
Companies
Restructuring
Adjustments
Companies
ASSETS
CURRENT ASSETS:
Cash and cash equivalents
$
14,566
$
—
$
—
$
14,566
Restricted cash
72,712
—
—
72,712
Accounts receivable—net
47,697
—
—
47,697
Inventories
53,109
—
(29,020
)
24,089
Deferred income taxes
25,270
—
17,241
42,511
Prepaid expenses and other
12,949
—
(171
)
12,778
Total current assets
226,303
—
(11,950
)
214,353
PROPERTY, PLANT, AND EQUIPMENT, INCLUDING MINERAL RESERVES, MINE
    DEVELOPMENT AND CONTRACT COSTS—net
427,433
—
(34,187
)
393,246
GOODWILL
—
—
697,063
697,063
NET RECEIVABLE FROM OTHER HORIZON SUBSIDIARIES
191,360
—
—
191,360
DEBT ISSUANCE COSTS—net
50,450
(39,671
)
—
10,779
OTHER NON-CURRENT ASSETS
14,519
—
—
14,519
Total assets
$
910,065
$
(39,671
)
$
650,926
$
1,521,320
LIABILITIES AND MEMBERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable
$
16,876
$
—
$
—
$
16,876
Current portion of long-term debt and capital leases
875,565
(755,933
)
119,632
Accrued expenses and other
194,414
(157,250
)
4,553
41,717
Total current liabilities
1,086,855
(913,183
)
4,553
178,225
NON-CURRENT LIABILITIES, less current portion
Long-term debt and capital leases
19,923
913,183
—
933,106
Employee benefits
57,035
—
—
57,035
Reclamation and mine closure costs
64,703
—
(22,157
)
42,546
Deferred non-current liabilities
25,270
—
17,241
42,511
Other non-current liabilities
27,432
—
5,465
32,897
Liabilities subject to compromise
436,255
(436,255
)
Total liabilities
1,717,473
(436,255
)
5,102
1,286,320
MEMBERS' EQUITY
Accumulated earnings (deficit)
(963,655
)
161,584
802,071
—
Other members' equity (deficit)
156,247
235,000
(156,247
)
235,000
Total liabilities and members' equity (deficit)
$
910,065
$
(39,671
)
$
650,926
$
1,521,320
F-38
Table of Contents
Horizon NR, LLC and Certain Subsidiaries
NOTES TO COMBINED FINANCIAL STATEMENTS—(CONTINUED)
As of September 30, 2004, for the period January 1, 2004 to
September 30, 2004,
Year Ended December 31, 2003, the period May 10, 2002 to
December 31, 2002
(reorganized companies) and the period January 1, 2002 to May
9, 2002 (predecessor companies)
(Dollars in thousands)
The nature of the more significant fresh-start adjustments is
discussed in further detail below:
Inventory
—The inventory adjustments reflect
three items:
4
$1,453 write-up of stockpile inventory to market.
4
Reclassification to development costs of deferred overburden
    ($29,229), where it will be amortized based on the
    units-of-production method.
4
Adjustment to decrease parts and supplies ($1,244) to estimated
    market value.
Deferred income taxes
—Reflects gross up of
current deferred tax asset and long-term deferred tax liability
to reflect fresh-start accounting.
Property, plant and equipment, including mineral interest,
mine development and contract costs, net
—
The following adjustments, among others, were made:
4
The property, plant and equipment were valued at net book value,
    which approximates the fair market value.
4
Mineral interests were decreased $65,178 to reflect an
    independent valuation assessment. The interests were valued on a
    discounted royalty approach, which considered the current net
    royalty value of both leased and owned interest. The relevant
    royalty revenue streams were projected into the future based on
    budgeted production and discounted back to generate the mineral
    reserve value.
4
Development cost was increased $29,229 to reflect the
    reclassification of deferred overburden (see inventory section
    above).
4
Contract costs were decreased $30,105 to reflect the current
    market value of existing sales contracts.
4
Asset retirement costs of $31,867 were recorded to reflect
    adoption of SFAS No. 143 (Note 3).
Goodwill
—The Combined Companies engaged an
independent financial advisor to assist in the fair value
estimate of the reorganized entity prior to the confirmation
date. The amount of reorganized value in excess of the fair
market value of identifiable assets is included in this account.
SFAS No. 142 was applied to test for impairment.
Accrued expenses and other
—Consists primarily
of lease loss reserves of $3,108 recorded to capture future
expected payments on equipment and royalty leases related to
non-productive properties due to change in management of the
Combined Companies. An additional $5,292 is included in
non-current liabilities.
Reclamation and mine closure costs
—Reflects
adoption of SFAS No. 143 (Note 3). The discounting of
future expected mine closure and related exit costs caused a
decrease of $20,838. The Predecessor Companies had followed a
different reclamation policy by which it accrued on an
undiscounted basis for the cost of final mine closure and exit
costs over the estimated useful mining life of the developed
property or, if purchased, at the date of acquisition.
Additionally, $1,319 was reclassified to current accrued
reclamation.
F-39
Table of Contents
Horizon NR, LLC and Certain Subsidiaries
NOTES TO COMBINED FINANCIAL STATEMENTS—(CONTINUED)
As of September 30, 2004, for the period January 1, 2004 to
September 30, 2004,
Year Ended December 31, 2003, the period May 10, 2002 to
December 31, 2002
(reorganized companies) and the period January 1, 2002 to May
9, 2002 (predecessor companies)
(Dollars in thousands)
5.
INVENTORIES
As of September 30, 2004 and December 31, 2003
inventories consisted of the following:
September 30,
December 31,
2004
2003
Coal
$
8,717
$
5,478
Parts and supplies, net of allowance of $2,797 and $2,803
9,004
8,001
$
17,721
$
13,479
6.
PROPERTY, PLANT AND EQUIPMENT
As of September 30, 2004 and December 31, 2003
property, plant and equipment, including mineral interest, mine
development and contract costs, are summarized by major
classification as follows:
September 30,
December 31,
2004
2003
Land and land improvements
$
17,084
$
17,420
Mining and other equipment and related facilities
137,720
144,601
Mine development and contract costs
50,151
44,907
Mineral interests
186,420
202,240
Mine development in process
2,081
4,139
Construction work in process
2,243
2,116
395,699
415,423
Less-accumulated depreciation, depletion and amortization
(119,542
)
(96,871
)
Net property, plant and equipment
$
276,157
$
318,552
Included in property, plant and equipment is $4,324 and $6,255
as of September 30, 2004 and December 31, 2003,
respectively, related to development and construction projects
for which depreciation, depletion and amortization have not yet
commenced. Realization of these projects is reviewed on a
periodic basis.
7.
ACCRUED EXPENSES AND OTHER
As of September 30, 2004 and December 31, 2003 accrued
expenses and other consisted of the following:
September 30,
December 31,
2004
2003
Payroll, bonus and vacation expense
$
15,247
$
13,742
Non-income taxes
7,065
7,369
Deferred revenues
—
747
Other
5,665
6,014
$
27,977
$
27,872
F-40
Table of Contents
Horizon NR, LLC and Certain Subsidiaries
NOTES TO COMBINED FINANCIAL STATEMENTS—(CONTINUED)
As of September 30, 2004, for the period January 1, 2004 to
September 30, 2004,
Year Ended December 31, 2003, the period May 10, 2002 to
December 31, 2002
(reorganized companies) and the period January 1, 2002 to May
9, 2002 (predecessor companies)
(Dollars in thousands)
8.     DEBT
As of September 30, 2004 and December 31, 2003 debt
consisted of the following:
September 30,
December 31,
2004
2003
DIP Facility
$
30,016
$
57,096
Senior Secured Term Notes
465,000
465,000
Senior Secured Notes
450,000
450,000
Capital leases (Note 12)
859
1,463
Other
61
4,758
Total
945,936
978,317
Less—long-term debt subject to compromise
915,304
915,304
Less—current portion of long-term debt and capital leases
    not subject to compromise
30,603
62,698
Long-term debt and capital leases
$
29
$
315
Debtor-In-Possession Facility
—The Debtor in
Possession ("DIP") Facility provides revolving loans
and letters of credit (with a sub-limit on the issuance of
letters of credit) comprised of Tranche A DIP Loans and
Tranche B DIP Letters of Credit and Credit-Linked Deposits
with $125,000 and $150,000 originally available, respectively.
The DIP Facility could have been increased to $350,000 if
certain requirements had been met: (1) an additional
$25,000 draw down capacity under the DIP Facility if the lender
approved Horizon's, including the Combined Companies',
five-year business plan and (2) an additional $50,000 draw
down capacity under the DIP Facility if the lender syndicated a
portion of the DIP Facility. However, these requirements were
not met, and the DIP Facility was not increased. The DIP
Facility agreement was amended as of June 30, 2004, and all
defaults were waived. The maturity date is October 15,
2004. In addition, the maturity date may be extended to
November 15, 2004, based on the sole discretion of the
lender. The DIP Facility has been reduced by proceeds from asset
sales, tax refunds and negotiations with the lender totaling
$79,858. On August 18, 2004, the lender decreased the
Combined Companies' draw down capacity to $195,142.
Loans under the credit agreement bear interest, at the Combined
Companies' option, at either a market base rate plus 4.5%
per year or at a market reserved adjusted Euro-dollar rate plus
5.5% per year. The DIP Facility is collateralized primarily by
capital stock of most of Horizon's subsidiaries, along with
substantially all accounts receivable, inventory, property,
plant and equipment, intangible assets, contract rights and
other personal and real property of Horizon and most of its
subsidiaries, including the Combined Companies. As of
September 30, 2004 and December 31, 2003, the Combined
Companies had $5,805 and $23,320 available on this revolving
credit agreement, respectively, net of $159,851 and $155,688 in
letters of credit, respectively.
F-41
Table of Contents
Horizon NR, LLC and Certain Subsidiaries
NOTES TO COMBINED FINANCIAL STATEMENTS—(CONTINUED)
As of September 30, 2004, for the period January 1, 2004 to
September 30, 2004,
Year Ended December 31, 2003, the period May 10, 2002 to
December 31, 2002
(reorganized companies) and the period January 1, 2002 to May
9, 2002 (predecessor companies)
(Dollars in thousands)
As of September 30, 2004 and December 31, 2003 letters
of credit outstanding consisted of the following:
September 30,
December 31,
2004
2003
Letters of Credit:
Insurance/Workers' compensation/Reclamation bonds
$
159,851
$
155,238
Mineral interests/Royalties
—
450
Total
$
159,851
$
155,688
As of September 30, 2004 and December 31, 2003,
borrowings under the DIP Facility bear interest at variable
rates ranging from 4.625% to 9.5%.
The DIP Facility and senior secured term notes contain customary
covenants including, without limitation, restrictions on
Horizon's, including the Combined Companies', ability
to:
4
Incur additional indebtedness, pay dividends and make other
    restricted payments and investments;
4
Acquire or dispose of assets;
4
Engage in transactions with affiliates;
4
Merge, consolidate, or transfer substantially all of its assets.
Horizon, including the Combined Companies, is also required to
maintain compliance with a minimum trailing consolidated
adjusted EBITDA covenant. Beginning December 2002, Horizon,
including the Combined Companies, was in violation of various
provisions of the DIP Facility. Horizon negotiated a waiver of
these events of default with the administrative agent as of
June 30, 2004.
Senior Secured Notes
—The senior secured term
notes bear interest at a market base rate plus 4.25% per year
and mature on May 8, 2008. Principal payments of $5,000 per
quarter are due on these notes. As of September 30, 2004,
the interest rate is 9% plus an additional 2.0% penalty as
Horizon, including the Combined Companies, is in violation of
certain covenants.
The senior secured notes bear interest at the rate of 11.75% per
annum payable semi-annually on May 15 and November 15
of each year with a final maturity date of May 8, 2009. As
of September 30, 2004 the interest rate is 11.75% plus an
additional 2.0% penalty as Horizon, including the Combined
Companies, is in violation of certain covenants.
The senior secured notes contain covenants similar to those of
the DIP Facility. As of September 30, 2004, Horizon,
including the Combined Companies, was in violation of various
financial and other covenants regarding the senior secured term
notes and senior secured notes including the non-payment of
principal and interest payments due giving rise to an Event of
Default. During the default period, Horizon, including the
Combined Companies, must pay or accrue an additional interest of
2.0% per year to the holders of such notes. The entire balance
of the senior secured notes is classified as liabilities subject
to compromise in the accompanying financial statements.
F-42
Table of Contents
Horizon NR, LLC and Certain Subsidiaries
NOTES TO COMBINED FINANCIAL STATEMENTS—(CONTINUED)
As of September 30, 2004, for the period January 1, 2004 to
September 30, 2004,
Year Ended December 31, 2003, the period May 10, 2002 to
December 31, 2002
(reorganized companies) and the period January 1, 2002 to May
9, 2002 (predecessor companies)
(Dollars in thousands)
Interest
—Accrued interest at
September 30, 2004 and December 31, 2003 is $277,651
and $175,631 ($275,075 and $174,938 included in liabilities
subject to compromise), respectively. Horizon, including the
Combined Companies, has not made various interest payments due
as scheduled. However, accruals of amounts due are reflected in
the accompanying financial statements.
9.     ASSET RETIREMENT
OBLIGATION
At September 30, 2004 and December 31, 2003 the
Combined Companies recorded asset retirement obligation accruals
for mine reclamation and closure costs totaling $23,642 and
$28,649, respectively.
The following schedule represents activity in the accrued
reclamation and closure cost obligation.
Reorganized Companies
January 1, 2004 to
September 30, 2004
Beginning Balance
1/1/2004
28,649
Expenditures
1/1/2004-9/30/2004
(9,092
)
Accretion
1/1/2004-9/30/2004
3,399
Allocation from other Horizon Subsidiaries
1/1/2004-9/30/2004
686
Ending Balance
$
23,642
Reorganized Companies
Year Ended
May 10, 2002 to
December 31, 2003
December 31, 2002
Beginning Balance
1/1/2003
$
35,765
5/9/2002
$
90,973
SFAS No. 143 adoption
(48,071
)
Liability for new mining locations
1/1/2003-12/31/2003
228
Expenditures
1/1/2003-12/31/2003
(9,478
)
5/10/2002-12/31/2002
(11,033
)
Accretion
1/1/2003-12/31/2003
4,986
5/10/2002-12/31/2002
3,232
Allocation (to)/from other Horizon Subsidiaries
1/1/2003-12/31/2003
(2,852
)
5/10/2002-12/31/2002
664
Ending Balance
$
28,649
$
35,765
F-43
Table of Contents
Horizon NR, LLC and Certain Subsidiaries
NOTES TO COMBINED FINANCIAL STATEMENTS—(CONTINUED)
As of September 30, 2004, for the period January 1, 2004 to
September 30, 2004,
Year Ended December 31, 2003, the period May 10, 2002 to
December 31, 2002
(reorganized companies) and the period January 1, 2002 to May
9, 2002 (predecessor companies)
(Dollars in thousands)
The accrued reclamation and closure cost obligations are
included in the accompanying consolidated balance sheets as
follows:
September 30,
December 31,
2004
2003
Current portion of reclamation and mine closure costs
$
1,206
$
1,206
Non-current reclamation and mine closure costs
22,436
27,443
$
23,642
$
28,649
10.     INCOME TAXES
Because of the Combined Companies' continuing losses, no
provision (benefit) for income taxes has been recorded in any
period presented.
F-44
Table of Contents
Horizon NR, LLC and Certain Subsidiaries
NOTES TO COMBINED FINANCIAL STATEMENTS—(CONTINUED)
As of September 30, 2004, for the period January 1, 2004 to
September 30, 2004,
Year Ended December 31, 2003, the period May 10, 2002 to
December 31, 2002
(reorganized companies) and the period January 1, 2002 to May
9, 2002 (predecessor companies)
(Dollars in thousands)
The following table presents the difference between the actual
tax provision (benefit) and the amounts obtained by
applying the statutory U.S. federal income tax rate of 35% to
income and losses before income taxes.
Reorganized Companies
January 1, 2004 to
January 1, 2003 to
September 30, 2004
December 31, 2003
Federal provision (benefit) computed at statutory rate
$
(33,063
)
$
(72,263
)
State income tax provision (benefit) (net of federal tax
    benefits and apportionment factors) computed at statutory rate
(4,043
)
(8,837
)
Valuation allowance
37,608
85,741
Nondeductible items
285
(3,592
)
Other
(787
)
(1,049
)
$
—
$
—
Reorganized
Predecessor
Companies
Companies
May 10, 2002 to
January 1, 2002 to
December 31, 2002
May 9, 2002
Federal provision (benefit) computed at statutory rate
$
(339,214
)
$
533,314
State income tax provision (benefit) (net of federal tax
    benefits and apportionment factors) computed at statutory rate
(41,481
)
65,217
Valuation allowance
49,930
(2,881
)
Excess of purchase price over net assets acquired
524,533
(524,533
)
Gain on extinguishment of debt
(79,053
)
Nondeductible items
(191,862
)
9,297
Other
(1,906
)
(1,361
)
$
—
$
—
F-45
Table of Contents
Horizon NR, LLC and Certain Subsidiaries
NOTES TO COMBINED FINANCIAL STATEMENTS—(CONTINUED)
As of September 30, 2004, for the period January 1, 2004 to
September 30, 2004,
Year Ended December 31, 2003, the period May 10, 2002 to
December 31, 2002
(reorganized companies) and the period January 1, 2002 to May
9, 2002 (predecessor companies)
(Dollars in thousands)
Significant components of the Combined Companies' deferred
tax assets and liabilities as of September 30, 2004 and
December 31, 2003 are summarized as follows:
September 30,
December 31,
2004
2003
Deferred Tax Assets:
Accrued employee benefits
$
23,361
$
30,677
Accrued reclamation and closure
9,270
11,194
Reserve for losses
10,534
11,437
Net operating loss carryforwards
160,855
135,317
Other
6,241
6,972
210,261
195,597
Valuation allowance
(145,628
)
(116,436
)
64,633
79,161
Deferred Tax Liabilities:
Property, mineral reserves and mine development costs
64,538
78,943
Other
95
218
64,633
79,161
Net deferred tax liability
$
—
$
—
Classified in balance sheet:
Other current assets
$
5,931
$
6,020
Non-current liabilities
$
5,931
$
6,020
In connection with fresh-start accounting, the Combined
Companies' assets and liabilities were recorded at their
respective fair values. Deferred tax assets and liabilities were
then recognized for the differences between fair values and tax
basis. In addition, deferred tax assets were recognized for
future tax benefits of net operating loss carryforwards
("NOLs") and other tax attributes. A valuation
allowance has been provided for deferred tax assets because the
Combined Companies' believe it was more likely than not
that the deferred tax assets will not be realized.
In connection with the Plan of Reorganization effective
May 9, 2002, the Combined Companies realized a gain from
the cancellation of certain indebtedness ("COI"). This
gain was not taxable since the gain resulted from the
reorganization under the Bankruptcy Code. However, the Combined
Companies were required, as of the beginning of its 2003 taxable
year, to reduce their NOLs in an amount equal to such COI income.
Prior to October 1, 2004 The Combined Companies filed a
consolidated federal income tax return that included other
subsidiaries of Horizon Natural Resources Company. Consolidated
net operating losses were allocated to the various subsidiaries
in accordance with IRS regulations and may not reflect actual
losses incurred by the Combined Companies on a stand alone basis.
Based on such allocations and the reductions discussed above, at
December 31, 2003 the Combined Companies had NOLs and
alternative minimum tax (AMT) NOLs. Upon the sale to ICG
effective September 30, 2004, these NOLs are no longer
available due to a change in control.
F-46
Table of Contents
Horizon NR, LLC and Certain Subsidiaries
NOTES TO COMBINED FINANCIAL STATEMENTS—(CONTINUED)
As of September 30, 2004, for the period January 1, 2004 to
September 30, 2004,
Year Ended December 31, 2003, the period May 10, 2002 to
December 31, 2002
(reorganized companies) and the period January 1, 2002 to May
9, 2002 (predecessor companies)
(Dollars in thousands)
Included in the valuation allowance at September 30, 2004,
December 31, 2003, and 2002 is $1,444, $1,444 and $1,500,
respectively, related to the deferred tax asset recognized by
the recording of the additional minimum pension liability in
other comprehensive loss (OCL) for the period from
May 10, 2002 to December 31, 2002. Pursuant to
SFAS No. 109, if the tax asset that results from
recording pension liability through equity is fully reserved
with a valuation allowance, there is no net income tax expense
or benefit to be allocated to the OCL component of equity.
11.     EMPLOYEE BENEFITS
Certain employees of the Combined Companies were eligible to
participate in defined benefit pension plans sponsored by
Horizon and receive other postretirement benefits. On
December 2, 2003, the Board of Directors of Horizon
approved the termination of the Horizon NR, LLC Employee Pension
Plan ("Horizon Pension Plan"). Effective
March 31, 2004, an employee who was not a participant in
the Plan on March 31, 2004, could not become a participant
in the Horizon Pension Plan. No employee should accrue any
additional pension credited service or days of service for any
period after March 31, 2004. Effective March 31, 2004
Horizon froze all future accrual of benefits under the Horizon
pension plan. On June 25, 2004 the Pension Benefit Guaranty
Corporation announced that it would assume responsibility for
the pensions of more than 4,800 Horizon employees. Accordingly,
pension and other postretirement benefit information as of
September 30, 2004 and for the period January 1, 2004
to September 30, 2004 for these carve-out financial
statements is not applicable.
Employee benefits at September 30, 2004 and
December 31, 2003 are summarized as follows:
September 30,
December 31,
2004
2003
Postretirement benefits
$
11,083
$
10,104
Workers' compensation benefits
10,315
9,666
Black lung benefits
21,540
20,618
Pension benefits
16,640
16,245
Total
$
59,578
56,633
Less—current portion
—
Less—liabilities subject to compromise (Note 2)
59,578
56,633
Long-term portion
$
—
$
—
Benefits under the plans were generally related to an
employees' length of service and salary. Horizon allocated
pension expense and other postretirement benefit expense to the
Combined Companies based on actuarially determined amounts. The
amount of pension cost and other postretirement benefit cost
allocated to the Combined Companies was impacted by various
assumptions (discount rate, rate of return on plan assets, etc.)
that Horizon used in determining its pension and other
postretirement obligations. Pension expense allocated to the
Combined Companies totaled $388 for the period January 1,
2004 to September 30, 2004, $2,013 for the year ended
December 31, 2003, $3,235 for the period May 10, 2002
to December 31, 2002 and $508 for the period
January 1, 2002 to May 9, 2002. Other postretirement
benefit expense allocated to the Combined Companies totaled
$1,450 for the period January 1, 2004 to September 30,
2004, $1,513 for the year ended December 31, 2003,
F-47
Table of Contents
Horizon NR, LLC and Certain Subsidiaries
NOTES TO COMBINED FINANCIAL STATEMENTS—(CONTINUED)
As of September 30, 2004, for the period January 1, 2004 to
September 30, 2004,
Year Ended December 31, 2003, the period May 10, 2002 to
December 31, 2002
(reorganized companies) and the period January 1, 2002 to May
9, 2002 (predecessor companies)
(Dollars in thousands)
$1,024 for the period May 10, 2002 to December 31,
2002 and $583 for the period January 1, 2002 to
May 10, 2002.
Valuation Date
—All actuarially determined
benefits were determined as of December 31, 2003.
Pension and Other Postretirement Benefits
—The
following pension and other postretirement benefit information
was prepared for Horizon and its seventy-six subsidiaries for
the year ended December 31, 2003.
In conjunction with certain 1998 and 1999 acquisitions, Horizon
acquired, or agreed to put in place, benefit plans providing
pension benefits to certain employees and postretirement
healthcare and life insurance to eligible employees, including
union employees.
During 1998, Horizon acquired a non-contributory defined benefit
pension plan covering all salaried and non-union employees of an
acquired company. Effective January 1, 1999, Horizon
amended and restated this plan to cover all salaried and
non-union employees of Horizon, including the employees of the
Combined Companies. Benefits are generally based on the
employee's years of service and compensation during each
year of employment. Horizon's funding policy is to make the
minimum payment required by the Employee Retirement Income
Security Act of 1974 ("ERISA").
F-48
Table of Contents
Horizon NR, LLC and Certain Subsidiaries
NOTES TO COMBINED FINANCIAL STATEMENTS—(CONTINUED)
As of September 30, 2004, for the period January 1, 2004 to
September 30, 2004,
Year Ended December 31, 2003, the period May 10, 2002 to
December 31, 2002
(reorganized companies) and the period January 1, 2002 to May
9, 2002 (predecessor companies)
(Dollars in thousands)
Summaries of the changes in the benefit obligations, plan assets
(consisting principally of common stocks, U.S. government and
corporate obligations and cash equivalents) and funded status of
the plan for 2003 are as follows:
Pension
Benefits
December 31,
2003
Changes in Benefit Obligations:
Benefit obligations at beginning of period
$
92,594
Service costs
2,999
Interest cost
6,098
Actuarial loss
4,708
Benefits paid
(18,511
)
Benefit obligation at end of period
$
87,888
Change in Plan Assets:
Fair value of plan assets at beginning of period
$
49,693
Actual return on plan assets
7,537
Employer contributions
3,272
Benefits paid
(18,511
)
Fair value of plan assets at end of period
$
41,991
Funded Status of the Plan:
Accumulated obligations less plan assets
$
(45,897
)
Unrecognized actuarial loss
15,247
Unrecognized prior service cost
(508
)
Additional minimum pension liability
(10,660
)
Net liability recognized
$
(41,818
)
Weighted Average Assumptions:
Discount rate
6.25
%
Expected return on plan assets
8.50
%
Rate of compensation increase
4.00
%
F-49
Table of Contents
Horizon NR, LLC and Certain Subsidiaries
NOTES TO COMBINED FINANCIAL STATEMENTS—(CONTINUED)
As of September 30, 2004, for the period January 1, 2004 to
September 30, 2004,
Year Ended December 31, 2003, the period May 10, 2002 to
December 31, 2002
(reorganized companies) and the period January 1, 2002 to May
9, 2002 (predecessor companies)
(Dollars in thousands)
The expected long-term rate of return on pension plan assets is
based on long-term historical return information and future
estimates of long-term investment returns for the target asset
allocation of investments that comprise plan assets.
Other
Postretirement
Benefits
December 31,
2003
Changes in Benefit Obligations:
Benefit obligations at beginning of period
$
501,061
Service costs
6,251
Interest cost
42,278
Actuarial loss
79,142
Benefits paid
(33,975
)
Benefit obligation at end of period
$
594,757
Change in Plan Assets:
Fair value of plan assets at beginning of period
$
—
Actual return on plan assets
—
Employer contributions
33,975
Benefits paid
(33,975
)
Fair value of plan assets at end of period
$
—
Funded Status of the Plan:
Accumulated obligations less plan assets
$
(594,757
)
Unrecognized actuarial loss
142,494
Unrecognized prior service cost
—
Additional minimum pension liability
—
Net liability recognized
$
(452,263
)
Weighted Average Assumptions:
Discount rate
6.50
%
Expected return on plan assets
N/A
Rate of compensation increase
N/A
Amounts recognized in the Combined Companies' statements of
financial position consist of:
Other
Pension
Postretirement
Benefits
Benefits
December 31,
December 31,
2003
2003
Accrued benefit cost included in liabilities subject to
    compromise
$
(16,245
)
$
(10,104
)
Intangible assets
5
—
Accumulated other comprehensive income
3,683
—
Net amount recognized
$
(12,557
)
$
(10,104
)
F-50
Table of Contents
Horizon NR, LLC and Certain Subsidiaries
NOTES TO COMBINED FINANCIAL STATEMENTS—(CONTINUED)
As of September 30, 2004, for the period January 1, 2004 to
September 30, 2004,
Year Ended December 31, 2003, the period May 10, 2002 to
December 31, 2002
(reorganized companies) and the period January 1, 2002 to May
9, 2002 (predecessor companies)
(Dollars in thousands)
Net periodic benefit costs of Horizon and all of its
subsidiaries, including the Combined Companies were as follows:
Pension Benefits
Reorganized
Predecessor
Companies
Companies
January 1, 2003
May 10, 2002 to
January 1, 2002
December 31, 2003
December 31, 2002
to May 9, 2002
Net periodic benefit cost:
Service cost
$
2,999
$
2,145
$
1,173
Interest cost
6,098
4,213
2,303
Settlement charge
2,184
3,821
0
Expected return on assets
(5,468
)
(4,812
)
(2,631
)
Amortization of:
Prior service cost
(72
)
(47
)
(26
)
Actuarial loss
21
222
122
Benefit cost
$
5,762
$
5,542
$
941
Other Postretirement Benefits
Reorganized
Predecessor
Companies
Companies
January 1, 2003
May 10, 2002 to
January 1, 2002
December 31, 2003
December 31, 2002
to May 9, 2002
Net periodic benefit cost:
Service cost
$
6,251
$
4,253
$
1,758
Interest cost
42,278
20,132
11,004
Amortization of—Actuarial (gain) loss
897
(566
)
(310
)
Benefit cost
$
49,426
$
23,819
$
12,452
For measurement purposes, a 10% annual rate of increase in the
per capita cost of covered health care benefits was assumed,
gradually decreasing to 5% in 2010 and remaining level
thereafter.
Net periodic benefit cost is determined using the assumptions as
of the beginning of the year, and the funded status is
determined using the assumptions as of the end of the year.
The projected benefit obligations, accumulated benefit
obligations and fair value of plan assets for the Horizon
pension plans with accumulated benefit obligations in excess of
plan assets were $87,888, $83,809 and $41,991 as of
December 31, 2003, respectively.
The expense and liability estimates can fluctuate by significant
amounts based upon the assumptions used by the actuaries. As of
December 31, 2003, a one-percentage-point change in assumed
health care
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Horizon NR, LLC and Certain Subsidiaries
NOTES TO COMBINED FINANCIAL STATEMENTS—(CONTINUED)
As of September 30, 2004, for the period January 1, 2004 to
September 30, 2004,
Year Ended December 31, 2003, the period May 10, 2002 to
December 31, 2002
(reorganized companies) and the period January 1, 2002 to May
9, 2002 (predecessor companies)
(Dollars in thousands)
cost trend rates would have the following effects on the amounts
presented previously for the Horizon postretirement benefit plan:
1-Percentage-
1-Percentage-
Point
Point
Increase
Decrease
Effect on total of service and interest cost components
$
6,300
$
(5,200
)
Effect on postretirement benefit obligation
81,300
(67,300
)
Plan Assets
—Horizon's pension plan
weighted-average asset allocations at December 31, 2003 by
asset category are as follows:
Asset Category
2003
Mutual funds
49
%
Cash Equivalents
51
Total
100
%
Workers' Compensation and Black Lung
—The
operations of the Combined Companies are subject to federal and
state workers' compensation laws. These laws provide for
the payment of benefits to disabled workers and their
dependents, including lifetime benefits for black lung. The
Combined Companies' subsidiary operations are either fully
insured or self-insured for their workers' compensation and
black lung obligations.
The Combined Companies actuarially determined liability for
self-insured workers' compensation and black lung benefits
was based on a 6.75% discount rate and various other assumptions
including incidence of claims, benefits escalation, terminations
and life expectancy. The annual black lung expense consisted of
actuarially determined amounts for self-insured obligations. The
estimated amount of the Combined Companies' discounted
obligations for self-insured workers' compensation and
black lung claims plus an estimate for incurred but not reported
claims was $32,847 as of December 31, 2003. The
unrecognized projected black lung benefit obligations
(difference between recorded accrual and projected obligations)
at December 31, 2003 was approximately $2,563 and was to be
provided for over the future service period of current employees
as of December 31, 2003. The projected black lung
obligations may vary in a given year based on the timing of
claims filed and changes in actuarial assumptions. The Combined
Companies recorded expenses related to self-insured
workers' compensation and black lung of $1,512 for the
period January 1, 2004 to September 30, 2004, $2,806
for the year ended December 31, 2003, $1,563 for the period
May 10, 2002 to December 31, 2002 and $1,065 for the
period January 1, 2002 to May 9, 2002.
401(k) Plan
—The Combined Companies sponsor
savings and retirement plans for substantially all employees.
The plans match voluntary contributions of participants up to a
maximum contribution based upon a percentage of a
participant's salary with an additional matching
contribution possible at the Combined Companies'
discretion. The expense under these plans for the Combined
Companies was $2,488, $1,897, $1,196 and $543 for the period
January 1, 2004 through September 30, 2004, year ended
December 31, 2003, and for the period May 10, 2002 to
December 31, 2002 and January 1, 2002 to May 9,
2002, respectively.
F-52
Table of Contents
Horizon NR, LLC and Certain Subsidiaries
NOTES TO COMBINED FINANCIAL STATEMENTS—(CONTINUED)
As of September 30, 2004, for the period January 1, 2004 to
September 30, 2004,
Year Ended December 31, 2003, the period May 10, 2002 to
December 31, 2002
(reorganized companies) and the period January 1, 2002 to May
9, 2002 (predecessor companies)
(Dollars in thousands)
12.     COMMITMENTS AND
CONTINGENCIES
Coal Sales Contracts and Contingency
—As of
September 30, 2004, the Combined Companies had commitments
under eighteen sales contracts to deliver annually scheduled
base quantities of coal to fifteen customers. The contracts
expire from 2004 through 2020 with the Combined Companies
contracted to supply a minimum of approximately 64 million
tons of coal over the remaining lives of the contracts (maximum
of approximately 16 million tons in 2004). The Combined
Companies also has commitments to purchase certain amounts of
coal to meet its sales commitments. The purchase coal contracts
expire through 2006 and provide the Combined Companies a minimum
of approximately 5.9 million tons of coal through the
remaining lives of the contracts (approximately 2.6 million
tons per year). Certain of the contracts have sales price
adjustment provisions, subject to certain limitations and
adjustments, based on a variety of factors and indices.
Leases
—The Combined Companies lease various
mining, transportation and other equipment under operating and
capital leases. Lease expense for the period January 1,
2004 to September 30, 2004, year ended December 31,
2003, and for the period May 10, 2002 to December 31,
2002, and January 1, 2002 to May 9, 2002 was $17,711,
$23,302, $13,429, and $7,093, respectively. Property under
capital leases included in property, plant and equipment in the
combined balance sheets at September 30, 2004 and
December 31, 2003 was approximately $2,905 and $3,010, less
accumulated depreciation of approximately $2,208 and $1,619,
respectively. Depreciation of assets under capital leases is
included in depreciation expense.
The Combined Companies also lease mineral interest under
agreements that call for royalties to be paid as the coal is
mined. Total royalty expense for the period January 1, 2004
through September 30, 2004, the year ended
December 31, 2004, and for the periods May 10, 2002 to
December 31, 2002 and January 1, 2002 to May 9,
2002 was approximately $13,854, $16,726, $6,698, and $10,574,
respectively.
Legal Matters
—From time to time, the Combined
Companies are involved in legal proceedings arising in the
ordinary course of business. In the opinion of management the
Combined Companies have recorded adequate reserves for these
liabilities and there is no individual case or group of related
cases pending that is likely to have a material adverse effect
on the financial condition, results of operations or cash flows
of the Combined Companies. With respect to any claims relating
to Horizon which arose prior to November 12, 2002, such
claims are subject to an automatic stay of the U.S. Bankruptcy
Code. In limited circumstances, the Bankruptcy Court has lifted
the stay but only to the extent of insurance coverage relating
to Horizon.
Commissions
—The Combined Companies have
various sales and agency agreements with third parties, whereby
they pay a $.10—$2.75 per ton commission on various coal
sales agreements. The costs are expensed as the coal is
delivered. The Combined Companies incurred commission expense of
$303 for the period January 1, 2004 to September 30,
2004, $1,706 for the year ended December 31, 2003 and
$1,408 and $653 for the periods May 10, 2002 to
December 31, 2002 and January 1, 2002 to May 9,
2002, respectively.
Environmental Matters
—Based upon current
knowledge, the Combined Companies believe they are in material
compliance with environmental laws and regulations as currently
promulgated. However, the exact nature of environmental control
problems, if any, which the Combined Companies may
F-53
Table of Contents
Horizon NR, LLC and Certain Subsidiaries
NOTES TO COMBINED FINANCIAL STATEMENTS—(CONTINUED)
As of September 30, 2004, for the period January 1, 2004 to
September 30, 2004,
Year Ended December 31, 2003, the period May 10, 2002 to
December 31, 2002
(reorganized companies) and the period January 1, 2002 to May
9, 2002 (predecessor companies)
(Dollars in thousands)
encounter in the future cannot be predicted, primarily because
of the increasing number, complexity and changing character of
environmental requirements that may be enacted by federal and
state authorities.
Contract Mining Agreements
—The Combined
Companies perform contract-mining services for various third
parties and utilize contract miners on some of its operations.
Terms of the agreements generally allow either party to
terminate the agreements on a short-term basis.
In October 2002, Horizon NR, LLC's subsidiary, Mining
Technologies, Inc. (MTI), entered into a five year contract for
work beginning in April 2003 to provide mining services for a
period of five years or until all mineable coal is removed. MTI
is expected to produce and deliver a minimum of 500,000 tons per
year up to a maximum of 1,500,000 tons per year. The guaranteed
monthly contract tonnage shall be mutually agreed upon. Failure
to meet the guaranteed contract tonnage for three consecutive
months may result in termination of the contract. All work under
the contract must be completed no later than March 31, 2008.
In December 2003, MTI entered into a three year contract for
work beginning in January 2004 to provide mining services for a
period of three years or until all mineable coal is removed. MTI
is expected to produce and deliver a minimum of 50,000 tons of
coal per month that has an ash content of less than fifteen
percent. Failure to meet the guaranteed contract tonnage and ash
requirements for three consecutive months may result in
termination of the contract. All work under the contract must be
completed no later than January 15, 2007.
On February 1, 2004 MTI and Lauren Land agreed to the
assumption and amendment of three highwall mining system lease
agreements between them. The three leases ran for various
remaining terms ranging from 2004 to 2009. Subject to Bankruptcy
Court approval, the agreement called for MTI to assume and amend
the leases by accepting prepayment of all rentals due or to
become due during the current term, plus extensions, of the
three leases, and to grant to Lauren an option to purchase any
or all of the leased systems for the price of $200,000 each. As
of February 1, 2004 Lauren's lease payment obligations
for all three leases totaled $9,500,000. Bankruptcy Court
approval was received and the transaction closed on
June 18, 2004.
F-54
Table of Contents
Horizon NR, LLC and Certain Subsidiaries
NOTES TO COMBINED FINANCIAL STATEMENTS—(CONTINUED)
As of September 30, 2004, for the period January 1, 2004 to
September 30, 2004,
Year Ended December 31, 2003, the period May 10, 2002 to
December 31, 2002
(reorganized companies) and the period January 1, 2002 to May
9, 2002 (predecessor companies)
(Dollars in thousands)
13.     MAJOR CUSTOMERS
The Company and Predecessor Companies have coal sales to the
following major customers that in any period equaled or exceeded
10% of revenues:
2004
2003
September 30,
January 1, 2004 to
December 31,
January 1, 2003 to
2004
September 30,
2003
December 31,
Total
2004
Total
2003
Receivable
Total
Receivable
Total
Balance
Revenues
Balance
Revenues
Customer A
$
4,105
$
44,788
$
1,342
$
119,817
Customer B
8,187
58,712
224
89,459
Customer C
11,499
36,244
3,233
42,317
2002
May 10, 2002 to
January 1, 2002 to
December 31,
May 9,
2002
2002
Total
Total
Revenues
Revenues
Customer A
$
58,566
$
34,209
Customer B
48,033
24,584
Customer C
18,235
5,543
F-55
Table of Contents
Horizon NR, LLC and Certain Subsidiaries
NOTES TO COMBINED FINANCIAL STATEMENTS—(CONTINUED)
As of September 30, 2004, for the period January 1, 2004 to
September 30, 2004,
Year Ended December 31, 2003, the period May 10, 2002 to
December 31, 2002
(reorganized companies) and the period January 1, 2002 to May
9, 2002 (predecessor companies)
(Dollars in thousands)
14.     WRITEDOWNS AND OTHER
ITEMS
Reorganized Companies
January 1, 2004 to
Year Ended
May 10, 2002 to
September 30, 2004
December 31, 2003
December 31, 2002
Goodwill impairment
$
—
$
—
$
697,063
Sale of mineral rights, equipment and impairment of operating
    assets
10,018
6,416
32,890
Inventory writedown and other
—
2,684
—
Total
$
10,018
$
9,100
$
729,953
Predecessor
Companies
January 1, 2002 to
May 9, 2002
Impairment of operating assets
$
8,323
Total
$
8,323
After the petition date, the Combined Companies identified
certain non-core assets to be sold to generate cash flow. The
decision was based on the relative value of these assets to the
Combined Companies and the applicability of them to the long
term mine plan. During the period of January 1, 2004 to
September 30, 2004 a $13,327 loss was recognized on the
sale of mineral interests, a $7,736 gain on lease buyout, a
lease on retirement of highwall mining system of $6,168 and
other items.
SFAS No. 144 addresses the applicable accounting when
companies are unable to generate sufficient cash flows to
recover the carrying amount of its fixed assets, mineral
interest, contract costs, development costs and long-term
advance royalties. As a result of applying
SFAS No. 144 for the year ending December 31,
2003, the Combined Companies wrote down assets aggregating
$6,416. These losses resulted from deteriorating market
conditions, poor mining conditions and a change in mine plans.
For the year ended December 31, 2003, the Combined
Companies wrote down parts inventory of $2,677 as a result of
the annual physical inventory at a subsidiary warehouse and
incurred other writedowns of $7.
As of December 31, 2002, the Combined Companies wrote off
their goodwill value as a result of the application of
SFAS No. 142. Under SFAS No. 142, if the
carrying amount of the goodwill exceeds the fair value of that
goodwill, an impairment loss is recognized in an amount equal to
the excess. The Combined Companies used a discounted cash flow
approach to estimate the fair value of its assets. Upon
completing the calculation, it was determined that after
covering the Combined Companies' identifiable assets
carrying amounts, there was no excess value remaining to cover
the goodwill value. The impairment resulted from the conditions
leading to Horizon's November 13, 2002 Chapter 11
filing.
F-56
Table of Contents
Horizon NR, LLC and Certain Subsidiaries
NOTES TO COMBINED FINANCIAL STATEMENTS—(CONTINUED)
As of September 30, 2004, for the period January 1, 2004 to
September 30, 2004,
Year Ended December 31, 2003, the period May 10, 2002 to
December 31, 2002
(reorganized companies) and the period January 1, 2002 to May
9, 2002 (predecessor companies)
(Dollars in thousands)
After the Petition Date, the Combined Companies identified one
under performing mine (Blue Springs Job 21) at which
operations were closed. The Combined Companies based its
decision to close this operation on various factors, including
minable reserve depletion, operating costs, productivity, and
whether this particular property fit within their long term
business plan. The Combined Companies also idled a significant
amount of equipment which it has identified either for sale to
third parties (if owned) or for rejection (if leased).
During the period January 1, 2002 to May 9, 2002, the
Combined Companies identified certain idle properties that had
excess asset values and also closed certain of its mines.
Impairment charges were recorded to reduce these assets to
recoverable values at the idled properties and closed mines of
$8,323.
15.     REORGANIZATION ITEMS
Reorganized Companies
January 1, 2004 to
Year Ended
May 10, 2002 to
September 30, 2004
December 31, 2003
December 31, 2002
Bankruptcy related reorganization expenses, including
    professional services fees and labor costs
$
(12,471
)
$
(23,064
)
$
(4,075
)
Write-offs of payables to/ receivables from other Horizon
    subsidiaries
13,198
(29,720
)
(139,588
)
Total
$
727
$
(52,784
)
$
(143,663
)
Predecessor Companies
January 1, 2002 to
May 9, 2002
Gain on Fresh Start Valuation
$
645,824
Gain on Debt Extinguishment
161,584
Bankruptcy related reorganization expenses, including
    professional services fees and labor costs
(19,508
)
Write-offs of payables to/ receivables from other Horizon
    subsidiaries
779,789
Total
$
1,567,689
16.     FAIR VALUE OF FINANCIAL
INSTRUMENTS
The book values of cash and cash equivalents, accounts
receivable and accounts payable are considered to be
representative of their respective fair values because of the
immediate short-term maturity of these financial instruments.
Given the Combined Companies' current liquidity status (see
Notes 2 and 8), the fair value of the senior secured term
notes and senior secured notes could not be determined or
estimated. The carrying value of the Combined Companies'
other debt instruments approximates fair value.
F-57
Table of Contents
Horizon NR, LLC and Certain Subsidiaries
NOTES TO COMBINED FINANCIAL STATEMENTS—(CONTINUED)
As of September 30, 2004, for the period January 1, 2004 to
September 30, 2004,
Year Ended December 31, 2003, the period May 10, 2002 to
December 31, 2002
(reorganized companies) and the period January 1, 2002 to May
9, 2002 (predecessor companies)
(Dollars in thousands)
17.     RELATED-PARTY TRANSACTIONS
AND BALANCES
Prior to May 10, 2002, the Combined Companies dealt with
certain companies or individuals which were related parties
either by having stockholders in common or because they were
controlled by stockholders/ officers of Horizon, including the
Combined Companies, or by relatives of stockholders/ officers of
Horizon. For the period May 10, 2002 to September 30,
2004, the Combined Companies had no related-party transactions.
In addition to related-party transactions and balances described
elsewhere, the following related-party transactions and balances
are summarized and approximated as follows below:
January 1, 2002
through
May 9, 2002
Revenues, costs and expenses:
Coal sales
$
2,537
Equipment rental and repair income
524
Administrative and miscellaneous income
93
Trucking expense
885
Repair, maintenance & other mining costs
6,818
Equipment rental cost
1,413
Administrative and miscellaneous expense
3
F-58
Table of Contents
Anker Coal Group, Inc. and Subsidiaries
INDEPENDENT AUDITORS' REPORT
To the Boards of Directors and Stockholders
Anker Coal Group, Inc. and Subsidiaries
Morgantown, West Virginia
We have audited the accompanying consolidated balance sheet of
Anker Coal Group, Inc. and Subsidiaries (Company), as of
December 31, 2004, and the related consolidated statements
of operations, stockholders' deficit, and cash flows for
the year then ended. These financial statements are the
responsibility of the Company's management. Our
responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with auditing standards
generally accepted in the United States of America. Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes consideration
of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the Company's internal control over
financial reporting. Accordingly, we express no such opinion. An
audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present
fairly, in all material respects, the financial position of the
Company as of December 31, 2004, and the results of its
operations and its cash flows for the year then ended in
conformity with accounting principles generally accepted in the
United States of America.
Louisville, Kentucky
April 22, 2005
F-59
Table of Contents
Anker Coal Group, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEET
December 31,
2004
ASSETS
CURRENT ASSETS:
Cash and cash equivalents
$
1,165,559
Accounts receivable — trade, net of allowance of
    $1,194,985
9,050,468
Accounts receivable — other
2,311,255
Coal and supply inventory
4,026,612
Prepaid expenses and other
1,457,087
Total current assets
18,010,981
PROPERTY, PLANT AND EQUIPMENT, net
54,122,751
NOTES RECEIVABLE, net of allowance of $795,797
500,000
ADVANCE ROYALTIES
3,439,379
OTHER NON-CURRENT ASSETS:
Bonds and deposits
2,583,082
Investment in joint venture
434,322
Other
4,280,186
Total other non-current assets
7,297,590
TOTAL
$
83,370,701
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable
$
10,281,124
Accrued expenses
8,253,453
Reclamation — current portion
105,413
Current portion of long-term debt
10,369,801
Total current liabilities
29,009,791
LONG-TERM DEBT
14,178,642
OTHER NON-CURRENT LIABILITIES:
Reclamation
25,168,633
Deferred gain on sale-leaseback
8,832,792
Other
4,783,509
Total other non-current liabilities
38,784,934
Total liabilities
81,973,367
STOCKHOLDERS' DEFICIT:
Common stock, no par value, 1,000,000 shares authorized and
    issued
—
Paid-in capital
145,588,000
Accumulated deficit
(144,190,666
)
Total stockholders' deficit
1,397,334
Total liabilities and stockholders' equity
$
83,370,701
See notes to consolidated financial statements.
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Anker Coal Group, Inc. and Subsidiaries
CONSOLIDATED STATEMENT OF OPERATIONS
For the year ended
December 31,
2004
REVENUES:
Coal revenue
$
146,675,714
Freight and handling
11,415,952
Waste and blended fuel revenue
6,228,786
Total revenues
164,320,452
COSTS AND EXPENSES:
Cost of coal sold
145,985,163
Freight and handling costs
11,415,952
Depreciation, depletion and amortization
9,754,467
Selling, general and administrative
4,585,793
Total costs and expenses
171,741,375
OPERATING LOSS
(7,420,923
)
OTHER INCOME (EXPENSE):
Interest income
181,164
Interest expense
(1,485,481
)
Other, net
5,528,267
Total other income (expense)
4,223,950
Net loss
$
(3,196,973
)
See notes to consolidated financial statements.
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Anker Coal Group, Inc. and Subsidiaries
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
For the year ended December 31, 2004
Accumulated
Paid-in capital
deficit
Total
Balances at January 1, 2004, as previously reported
$
145,588,000
$
(141,925,000
)
$
3,663,000
Prior period adjustment: reduce income taxes payable recorded in
    previous year (Note 13)
—
931,307
931,307
As adjusted
145,588,000
(140,993,693
)
4,594,307
Net loss
—
(3,196,973
)
(3,196,973
)
Balances at December 31, 2004
$
145,588,000
$
(144,190,666
)
$
1,397,334
See notes to consolidated financial statements.
F-62
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Anker Coal Group, Inc. and Subsidiaries
CONSOLIDATED STATEMENT OF CASH FLOWS
For the Year Ended
December 31,
2004
OPERATING ACTIVITIES:
Net loss
$
(3,196,973
)
Adjustments to reconcile net loss to net cash provided by
    operating activities:
Depreciation, depletion and amortization
9,754,467
Gain on sales of property, plant and equipment
105,805
Equity in loss of joint venture
26,929
Changes in assets and liabilities:
Accounts receivable— trade
(1,608,549
)
Accounts receivable— other
(1,299,892
)
Coal and supply inventory
(2,023,272
)
Other current assets and other assets
(568,336
)
Advance royalties
(1,616,922
)
Accounts payable
5,339,644
Accrued expenses
2,086,921
Other non-current liabilities
3,149,579
Net cash provided by operating activities
10,149,401
INVESTING ACTIVITIES:
Expenditures for purchases of property, plant and equipment
(27,238,311
)
Proceeds from sales of property, plant and equipment
151,750
Net cash used in investing activities
(27,086,561
)
FINANCING ACTIVITIES:
Principal payments on debt
(165,521,844
)
Proceeds from debt
179,659,834
Proceeds from notes receivable
787,979
Net cash provided by financing activities
14,925,969
Net decrease in cash and cash equivalents
(2,011,191
)
Cash and cash equivalents, beginning of year
3,176,750
Cash and cash equivalents, end of year
$
1,165,559
Cash paid during the year for interest
$
703,417
See notes to consolidated financial statements.
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Table of Contents
Anker Coal Group, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the year ended December 31, 2004
1.
DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING
    POLICIES
Description of business
—Anker Coal Group,
Inc. and Subsidiaries (the "Company") was formed in
August 1996 under the laws of the State of Delaware. The Company
was organized in order to effect a recapitalization of its
predecessor, Anker Group, Inc., which had been engaged in the
production of coal since 1975. The operations of the Company and
its subsidiaries, which are principally located in West Virginia
and Maryland, consist of mining and selling coal from mineral
rights that it owns and/or leases, as well as brokering coal
from other producers.
On October 29, 2002, the Company filed petitions under
Chapter 11 of the United States Bankruptcy Code (the
"Code"). On July 29, 2003, the Company's
Plan of Reorganization (the "Plan") was approved and
the Company emerged from bankruptcy with the approval of the
exit financing on October 10, 2003.
Principles of consolidation
—The consolidated
financial statements include the accounts of Anker Coal Group,
Inc. and its wholly and majority-owned subsidiaries. All
material intercompany accounts and transactions have been
eliminated in consolidation.
Company environment and risk factors
—In the
course of business activities the Company is exposed to a number
of risks including: the possibility of the termination or
alteration of coal sales contracts, fluctuating market
conditions of coal (often impacted by the weather) and
transportation/fuel costs, competitive industry and
overcapacity, changing government regulations, unexpected
maintenance and equipment failure, employee benefits cost
control, changes in estimates of proven and probable coal
reserves, labor relations issues, loss of key employees,
satisfactory resolution of technology issues, as well as the
ability to obtain financing, necessary mining permits and
control of adequate recoverable mineral reserves. In addition,
adverse weather and geological conditions may increase mining
costs, sometimes substantially.
Cash equivalents
—The Company classifies
highly liquid investments with original maturities of three
months or less at the time of purchase as cash equivalents.
Trade accounts receivable and allowance for doubtful
accounts
—Trade accounts receivable are recorded at
the invoiced amount and do not bear interest. The allowance for
doubtful accounts is the Company's best estimate of the
amount of probable credit losses in the Company's existing
accounts receivable. The Company establishes provisions for
losses on accounts receivable when it is probable that all or
part of the outstanding balance will not be collected. The
Company regularly reviews collectibility and establishes or
adjusts the allowance as necessary using the specific
identification method. Losses are charged off against the
allowance. The Company does not have any off-balance sheet
credit exposure related to its customers.
Coal and supply inventory
—Coal inventory is
stated at the lower of average cost, determined on a first in,
first out (FIFO) basis, or market and amounted to
approximately $3,672,000 as of December 31, 2004. Supply
inventories are stated at the lower of average cost or market
and amounted to approximately $354,000 as of December 31,
2004.
Property, plant and equipment
—Property, plant
and equipment, including mineral reserves and mine development
costs are recorded at cost, which includes construction overhead
and interest, where applicable. Expenditures for major renewals
and betterments are capitalized while expenditures for
maintenance and repairs are expensed as incurred. Mineral
reserves are depleted using the units-of-production method,
based on estimated recoverable reserves. Mine development costs
are amortized using the units-of-production method, based on
estimated recoverable reserves. Other property, plant
F-64
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Anker Coal Group, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS—(CONTINUED)
For the year ended December 31, 2004
and equipment is depreciated using the straight-line method with
estimated useful lives substantially as follows:
Years
Buildings and improvements
10 to 30
Machinery and equipment
3 to 15
Vehicles
3 to  5
Furniture and fixtures
3 to 10
Advance royalties
—The Company is required,
under certain royalty lease agreements, to make minimum royalty
payments whether or not mining activity is being performed on
the leased property. These minimum payments may be recoupable
once mining begins on the leased property. The recoupable
minimum royalty payments are capitalized and the deferred costs
amortized based on the units-of-production method at a rate
defined in the lease agreement once mining activities begin, or
the deferred costs are expensed when mining has ceased or a
decision is made not to mine on such property.
Investment in joint venture
—The investment in
joint venture, accounted for on the equity method, represents
the Company's 50% ownership in a venture with an unrelated
party to mine coal on a specific property. The Company's
share of earnings of the joint venture of approximately $26,000
are included in other income.
Coal mine reclamation and mine closure
costs
—Future cost requirements for reclamation of
land are estimated where surface and deep mining operations have
been conducted, based on the Company's interpretation of
the technical standards of regulations enacted by the
U.S. Office of Surface Mining, as well as state
regulations. These costs relate to reclaiming the pit and
support acreage at surface mines and sealing portals at deep
mines. Other costs common to both types of mining are related to
reclaiming refuse and slurry ponds as well as holding and
related termination/exit costs.
The Company records these reclamation obligations under the
provision of Statement of Financial Accounting Standards
("SFAS") No. 143,
Accounting for Asset
Retirement Obligations
. SFAS No. 143 addresses
asset retirement obligations that result from the acquisition,
construction or normal operation of long-lived assets. It
requires companies to recognize asset retirement obligations at
fair value when the liability is incurred. Upon initial
recognition of a liability, that cost should be capitalized as
part of the related long-lived asset and allocated to expense
over the useful life of the asset. The asset retirement costs
are recorded in mineral reserves.
The Company expenses contemporaneous reclamation which is
performed prior to final mine closure. The establishment of the
end of mine reclamation and closure liability is based upon
permit requirements and requires significant estimates and
assumptions, principally associated with regulatory
requirements, costs and recoverable coal reserves. Annually, the
end of mine reclamation and closure liability is reviewed and
necessary adjustments are made, including mine plan and permit
changes and revisions to cost and production levels to optimize
mining and reclamation efficiency. The amount of such
adjustments is reflected in the
SFAS No. 143 year-end calculation. When a mine
life is shortened due to a change in the mine plan, mine closing
obligations are accelerated and the related accrual is increased
accordingly.
Income tax provision
—The provision for income
taxes includes federal, state and local income taxes currently
payable and those deferred because of temporary differences
between the financial statement and tax basis of assets and
liabilities. Income taxes are recorded under the liability
method. Under this
F-65
Table of Contents
Anker Coal Group, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS—(CONTINUED)
For the year ended December 31, 2004
method, deferred income taxes are recognized for the estimated
future tax effects of differences between the tax basis of
assets and liabilities and their financial reporting amounts as
well as net operating loss carryforwards and tax credits based
on enacted tax laws. Valuation allowances are established when
necessary to reduce deferred tax assets to the amount expected
to be realized.
Revenue recognition
—Coal revenue includes
sales to customers of company-produced coal and coal purchased
from third parties. The Company recognizes revenue from the sale
of company-produced coal and brokered coal at the time title
passes to the customer, which is either upon shipment or upon
customer receipt of coal, based on contractual terms. Freight
and handling billed to customers is included in revenues. Waste
and blended fuel revenue is generated from shipments of waste
fuel and blended fuel, and is recognized as revenue as shipments
are made.
Asset impairments and accelerated mine closing
accruals
—The Company follows
SFAS No. 144,
Accounting for the Impairment or
Disposal of Long-Lived Assets
, which requires that projected
future cash flows from use and disposition of assets be compared
with the carrying amounts of those assets. When the sum of
projected cash flows is less than the carrying amount,
impairment losses are recognized. In determining such impairment
losses, discounted cash flows are utilized to determine the fair
value of the assets being evaluated.
Workers' compensation and black lung
benefits
—The Company is liable under federal and
state laws to pay workers' compensation and pneumoconiosis
(black lung) benefits to eligible employees, former employees
and their dependents. The Company utilizes a state workers'
compensation and black lung fund to secure on-going obligations.
Management's use of estimates
—The
preparation of the consolidated financial statements in
conformity with U.S. generally accepted accounting
principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues
and expenses during the reporting period. Significant items
subject to such estimates and assumptions include the allowance
for doubtful accounts; inventories; mineral reserves; asset
retirement obligations; future cash flows associated with
assets; useful lives for depreciation, depletion and
amortization; and income taxes. Due to the subjective nature of
these estimates, actual results could differ from those
estimates.
F-66
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Anker Coal Group, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS—(CONTINUED)
For the year ended December 31, 2004
2.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following at
December 31, 2004:
Land
$
4,127,202
Buildings and improvements
19,233,942
Mine development
37,623,860
Machinery and equipment
56,830,387
Vehicles
579,096
Furniture and fixtures
3,451,851
Construction in progress
2,631,545
Mineral rights
9,567,906
Total property, plant and equipment
134,045,789
Less accumulated depreciation, depletion and amortization
79,923,038
Property, plant and equipment, net
$
54,122,751
3.
LONG-TERM DEBT
Long-term debt consists of the following at December 31,
2004:
Senior notes, interest at 10%
$
7,000,000
Note payable, interest at 8%
1,592,622
Related party note payable, interest at 8%
7,580,834
Related party revolving credit line, interest at 8%
4,500,000
Equipment notes (fixed rates ranging from 4% to 7.643%)
3,874,987
Total
24,548,443
Less: current portion
10,369,801
Total long-term debt
$
14,178,642
The senior notes represent amounts that mature in October 2013
with quarterly principal payments of $350,000 beginning in
October 2008 and interest payable upon maturity. The senior
notes are collateralized by substantially all of the
Company's assets.
The note payable is for workers' compensation premiums due
the state of West Virginia. Interest is fixed at 8%. The note is
due in January 2005. The note payable is collateralized by
substantially all of the Company's assets.
The related party note payable is a multi-draw loan with due
dates ranging from February 2007 to November 2007. Each draw is
fixed at 8% interest. The notes are collateralized by
substantially all of the Company's assets.
The related party revolving credit line bears interest at 8%
annually. The revolving credit line matures on January 31,
2005. The credit line is collateralized by substantially all of
the Company's assets.
The equipment notes have maturities ranging from April 2005 to
November 2009 and are collateralized by mining equipment with a
net book value of approximately $4,405,000.
F-67
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Anker Coal Group, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS—(CONTINUED)
For the year ended December 31, 2004
At December 31, 2004, maturities of long-term debt are as
follows:
Year ending December 31
2005
$
10,369,801
2006
3,890,154
2007
2,212,180
2008
981,119
2009
1,822,478
Thereafter
5,272,711
Total
$
24,548,443
4.
DEFERRED GAIN ON SALE-LEASEBACK
On December 29, 2003, the Company sold specific coal
reserves to CoalQuest Development LLC (CoalQuest), a related
party under common control, for $19,000,000. The Company
subsequently leased back specific coal properties and mining
rights that represented approximately 8% of the coal reserves
sold to CoalQuest. The initial lease term is for five years and
will automatically renew for additional one-year terms until all
coal has been removed. The Company has the option to terminate
the lease by providing written notice 90 days prior to the
expiration of the then current term. The lease requires a
tonnage royalty of the greater of $1.25 per ton or 4% of the
average gross sales price with a 2,000,000 ton annual minimum.
For the coal reserves leased back, a deferred gain of $9,200,000
was recorded. The gain is being amortized over the lease term
under the units-of-production method.
5.
OTHER INCOME, net
Other income, net consists of the following at December 31,
2004:
Ash revenue
$
1,637,798
Commissions revenue
1,434,934
Miscellaneous revenue
1,676,140
Royalty revenue
779,395
Total
$
5,528,267
6.
LEASES
The Company leases office space under an operating lease. Lease
expense related to this lease for the year ended
December 31, 2004 was approximately $228,000. The lease
requires minimum annual payments of $240,000 through January
2006.
The Company leases coal reserves under agreements that call for
royalties to be paid as the coal is mined. Total royalty
expense, including related party expense discussed in
Note 4, for the year ended December 31, 2004 was
approximately $4,322,000. Certain agreements require minimum
annual royalties to be paid regardless of the amount of coal
mined during the year. Certain agreements may be cancelable at
the Company's discretion.
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Anker Coal Group, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS—(CONTINUED)
For the year ended December 31, 2004
Approximate non-cancelable future minimum royalty payments as of
December 31, 2004, are as follows:
Total
2005
$1,218,620
2006
1,176,476
2007
824,583
2008
818,567
2009
813,534
Thereafter
813,118
Total
$5,664,898
7.
INCOME TAXES
The Company files a consolidated federal income tax return. The
income tax provision (benefit) for the year ended
December 31, 2004 is composed of the following:
Current
$
—
Deferred
(1,038,328
)
Valuation allowance
1,038,328
Total
$
—
The following table presents the difference between the actual
tax provision (benefit) and the amounts obtained by applying the
statutory U.S. federal income tax rate of 35% to the income
and losses before income taxes.
December 31,
2004
Federal provision (benefit) computed at statutory rate
$
(1,118,941
)
State income tax provision (benefit) (net of federal tax
    benefits and apportionment factors) computed at statutory rate
(159,849
)
Valuation allowance
1,038,328
Nondeductible items
141,456
Other
99,006
$
—
F-69
Table of Contents
Anker Coal Group, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS—(CONTINUED)
For the year ended December 31, 2004
Significant components of the Company's deferred tax assets
and liabilities as of December 31, 2004 are summarized as
follows:
December 31,
2004
Deferred Tax Assets:
Accrued employee benefits
$
2,347,632
Accrued reclamation and closure
9,725,829
Deferred income
3,365,676
Other
451,984
15,891,121
Valuation allowance
(2,622,294
)
Total deferred tax assets
13,268,827
Deferred Tax Liabilities:
Property, mineral reserves and mine development costs
$
13,268,827
Net deferred tax asset/liability
$
—
Classified in balance sheet:
Other current assets
$
241,052
Non-current liabilities
$
241,052
A valuation allowance has been provided for deferred tax assets
because the Company believes it is more likely than not that the
deferred tax assets will not be realized.
In connection with the emergence from bankruptcy on
October 10, 2003 the Company realized a gain from the
cancellation of certain indebtedness (COI) of approximately
$92,000,000. This gain will not be taxable since the gain
resulted from the reorganization under the Bankruptcy Code.
However, the Company is required, as of the beginning of its
2004 taxable year, to reduce certain tax attributes including
NOL and capital loss carryforwards, credits, and tax basis in
assets in an amount not to exceed such COI income.
As a result of this requirement the Company's NOLs for
regular tax and alternative minimum tax have been eliminated and
capital loss carryforwards and alternative minimum tax credit
carryforwards have also been eliminated. In addition the Company
reduced the tax basis in its assets by approximately $38,000,000.
8.
BENEFIT PLAN
The Company has a contributory defined contribution retirement
plan covering all employees who meet certain eligibility
requirements. The plan provides for employer contributions
representing 5% of compensation. The Company's
contributions amounted to approximately $703,000 for the year
ended December 31, 2004.
The Company also has a 401(k) savings plan for all employees who
meet eligibility requirements. The plan provides for mandatory
employer contributions to match 100% of the first 3% of employee
contributions and 50% of the next 2% of employee contributions.
Thus, the Company's contribution could be as much as 4% of
each participant's compensation, subject to statutory
limits. In addition,
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Table of Contents
Anker Coal Group, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS—(CONTINUED)
For the year ended December 31, 2004
the Company may make discretionary contributions of 1% of
employee compensation. The Company's contributions amounted
to approximately $326,000 for the year ended December 31,
2004.
9.
RELATED PARTY
As of and for the year ended December 31, 2004, the Company
had the following balances and transactions with CoalQuest:
Advance royalties
$
1,038,960
Accounts payable
$
70,345
Accrued expenses
$
1,168,384
Royalty expense
$
1,769,324
10.
COMMITMENTS AND CONTINGENCIES
Coal Sales Contracts and Contingency
—As of
December 31, 2004, the Company had commitments under five
sales contracts that extend past 2005 to deliver annually
scheduled base quantities of coal to four customers. The
contracts expire from 2005 through 2020 with the Company
contracted to supply a minimum of approximately 22 million
tons of coal over the remaining lives of the contracts (maximum
of approximately 3.4 million tons in 2005). The Company
also has commitments to purchase certain amounts of coal to meet
its sales commitments. The purchase coal contracts expire
through 2010 and provide the Company a minimum of approximately
3.6 million tons of coal through the remaining lives of the
contracts (approximately .6 million tons per year). Certain
of the contracts have sales price adjustment provisions, subject
to certain limitations and adjustments, based on a variety of
factors and indices.
Legal Matters
—The Company is named as
defendant in various actions in the ordinary course of business.
These actions generally involve disputes related to contract
performance and property rights. Management is defending these
matters vigorously. Management believes the ultimate disposition
of these matters will not have a material adverse effect upon
the financial position or results of operations of the Company.
Environmental Matters
—Based upon current
knowledge, the Company believes it is in material compliance
with environmental laws and regulations as currently
promulgated. However, the exact nature of environmental control
problems, if any, which the Company may encounter in the future
cannot be predicted, primarily because of the increasing number,
complexity and changing character of environmental requirements
that may be enacted by federal and state authorities.
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Anker Coal Group, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS—(CONTINUED)
For the year ended December 31, 2004
11.
MAJOR CUSTOMERS
The Company had coal sales to the following major customers that
in any period equaled or exceeded 10% of revenues:
2004
Total
receivable
Total
balance
revenues
Customer A
$3,253,195
$31,377,653
Customer B
488,537
25,146,998
Customer C
3,037,820
24,324,298
Customer D
563,485
17,734,949
12.
SUBSEQUENT EVENT
On March 31, 2005, the Company entered into an agreement to
become a wholly-owned subsidiary of another company. The
agreement will be affected through issuance of shares of common
stock and is subject to certain closing conditions.
13.
PRIOR PERIOD ADJUSTMENT
The accumulated deficit of $141,925,000 previously reported at
December 31, 2003 has been adjusted to reflect the
reduction of $931,307 of income taxes payable incorrectly
recorded in the previous year.
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CoalQuest Development LLC
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
CoalQuest Development LLC
New York, New York
We have audited the accompanying balance sheet of CoalQuest
Development LLC (Company) as of December 31, 2004, and the
related statements of income, members' equity, and cash
flows for the year then ended. These financial statements are
the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with auditing standards
generally accepted in the United States of America. Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes consideration
of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the Company's internal control over
financial reporting. Accordingly, we express no such opinion. An
audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all
material respects, the financial position of the Company as of
December 31, 2004, and the results of its operations and
its cash flows for the year then ended in conformity with
accounting principles generally accepted in the United States of
America.
Louisville, Kentucky
April 22, 2005
F-73
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CoalQuest Development LLC
BALANCE SHEET
December 31,
2004
ASSETS
CURRENT ASSETS:
Cash and cash equivalents
$
1,818,883
Royalties receivable
1,238,729
Prepaid expense
15,150
Total current assets
3,072,762
Mineral interests, net
18,920,896
TOTAL
$
21,993,658
LIABILITIES AND MEMBERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses
$
546,082
Interest payable
535,200
Total current liabilities
1,081,282
NOTES PAYABLE
16,250,000
DEFERRED ROYALTY INCOME
1,038,960
Total liabilities
18,370,242
MEMBERS' EQUITY:
Paid-in capital
3,250,000
Retained earnings
373,416
Total members' equity
3,623,416
Total liabilities and members' equity
$
21,993,658
See notes to financial statements.
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Table of Contents
CoalQuest Development LLC
STATEMENT OF INCOME
For the Year Ended
December 31,
2004
ROYALTY INCOME
$
1,769,324
OPERATING EXPENSES
449,112
OPERATING INCOME
1,320,212
OTHER INCOME (EXPENSE):
Interest income
7,934
Interest expense
(535,200
)
Other income
132,607
Total other income (expense)
(394,659
)
Net income
$
925,553
See notes to financial statements.
F-75
Table of Contents
CoalQuest Development LLC
STATEMENT OF MEMBERS' EQUITY
For the year ended December 31, 2004
Retained
Paid-in
earnings
capital
(deficit)
Total
Balance at January 1, 2004
$
8,450,890
$
(174,491
)
$
8,276,399
Capital contribution
1,592,243
—
1,592,243
Net income
—
925,553
925,553
Distributions
(6,793,133
)
(377,646
)
(7,170,779
)
Balance at December 31, 2004
$
3,250,000
$
373,416
$
3,623,416
See notes to financial statements.
F-76
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CoalQuest Development LLC
STATEMENT OF CASH FLOWS
For the year ended
December 31,
2004
OPERATING ACTIVITIES:
Net income
$
925,553
Adjustments to reconcile net income to net cash provided by
    operating activities:
Depletion
79,104
Changes in assets and liabilities:
Royalties receivable
(199,769
)
Prepaid expense
(15,150
)
Accounts payable and accrued expenses
(6,835
)
Interest payable
535,200
Net cash provided by operating activities
1,318,103
FINANCING ACTIVITIES:
Principal payments on debt
(11,049,110
)
Proceeds from debt
16,250,000
Capital contribution
1,592,243
Distributions of capital
(6,793,133
)
Net cash provided by financing activities
0
Net increase in cash and cash equivalents
1,318,103
Cash and cash equivalents, beginning of year
500,780
Cash and cash equivalents, end of year
$
1,818,883
Supplemental disclosure of non-cash items:
Dividends declared included in accounts payable and accrued
    expenses
$
377,646
Deferred royalty income included in royalties receivable
$
1,038,960
See notes to financial statements.
F-77
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CoalQuest Development LLC
NOTES TO FINANCIAL STATEMENTS
For the year ended December 31, 2004
1.
DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING
    POLICIES
Description of business
— CoalQuest
Development LLC (the "Company") was formed in
December 2003 under the laws of the State of Delaware. The
Company is a property holding company which holds and leases
land consisting of coal reserves. The Company is under common
control with a related party which is the Company's only
customer.
Cash equivalents
— The Company classifies
highly liquid investments with original maturities of three
months or less at the time of purchase as cash equivalents.
Royalties receivable
— Royalties receivable
are recorded at the invoiced amount and do not bear interest.
The Company establishes provisions for losses when it is
probable that all or part of the outstanding balance will not be
collected. The Company does not have any off-balance sheet
credit exposure related to its customers.
Mineral interests
— Mineral interests are
recorded at the cost purchased from a related party. These
reserves are depleted to the estimated land value using the
units-of-production method, based on estimated recoverable
reserves.
Coal mine reclamation and mine closure costs
—
Future cost requirements for reclamation of land owned by the
Company where surface and deep mining operations have been
conducted are the responsibility of the Company's related
party customer as set out in the lease agreement.
Income taxes
— The Company is a limited
liability corporation for federal and state income tax purposes.
Accordingly, the members report the Company's taxable
income or loss on their individual tax returns.
Deferred Royalty Income
— The
Company's related party customer has a minimum royalty
tonnage requirement of 2,000,000 tons per year. Any tons short
of the annual minimum can be recouped in the subsequent five
years. The Company records the difference between tons actually
mined and the minimum tonnage requirement as a deferred royalty
and will amortize the deferred amounts into income when the
related party customer exceeds the minimum tonnage requirement.
Revenue recognition
— Royalty income includes
contractual obligations of the related party customer to pay for
the right to mine coal on Company owned property.
Management's use of estimates
— The
preparation of financial statements in conformity with
accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues
and expenses during the reporting period. Significant items
subject to such estimates and assumptions include the allowance
for doubtful accounts, mineral reserves, future cash flows
associated with assets, and useful lives for depletion. Due to
the subjective nature of these estimates, actual results could
differ from those estimates.
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CoalQuest Development LLC
2.
MINERAL INTERESTS
Mineral interests consisted of the following at
December 31, 2004:
Mineral interests
$
19,000,000
Less accumulated depletion
79,104
Mineral interests, net
$
18,920,896
3.
NOTES PAYABLE
Notes payable consists of notes payable to members of
$16,250,000 at December 31, 2004. Interest is fixed at
3.49%. The notes are due on January 29, 2009 and require
semi-annual interest payments.
4.
SUBSEQUENT EVENT
On March 31, 2005, the Company entered into an agreement to
become a wholly-owned subsidiary of another company. The
agreement will be affected through issuance of shares of common
stock and is subject to certain closing conditions.
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[Back cover graphics to be filed by amendment]
Table of Contents
Table of Contents
Part II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13.  Other expenses of issuance and
distribution.
The following table sets forth the costs and expenses payable in
connection with the distribution of the securities being
registered. All amounts are estimated except the Securities and
Exchange Commission registration fee.
Securities and Exchange Commission Registration Fee
$
29,425
NYSE Listing Fees
*
Printing and Engraving Expenses
*
Blue Sky Fees and Expenses
*
Legal Fees and Expenses
*
Accounting Fees and Expenses
*
Registrar and Transfer Agent Fees
*
NASD Filing Fee
$
25,500
Miscellaneous Expenses
*
Total
$
*
*
To be filed by amendment.
Item 14.  Indemnification of directors and
officers.
As permitted by Section 102 of the Delaware General
Corporation Law, or the DGCL, our amended and restated
certificate of incorporation will include a provision that
eliminates the personal liability of our directors for monetary
damages for breach of fiduciary duty as a director.
Our amended and restated certificate of incorporation and bylaws
will also provide that:
4
we must indemnify our directors and officers to the fullest
    extent permitted by Delaware law;
4
we may advance expenses, as incurred, to our directors and
    executive officers in connection with a legal proceeding to the
    fullest extent permitted by Delaware Law; and
4
we may indemnify our other employees and agents to the same
    extent that we indemnified our officers and directors, unless
    otherwise determined by our board of directors.
Pursuant to Section 145(a) of the DGCL, we may indemnify
any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or
proceeding (other than an action by or in the right of the
corporation) by reason of the fact that the person is or was a
director, officer, agent or employee of our company or is or was
serving at our request as a director, officer, agent, or
employee of another corporation, partnership, joint venture,
trust or other enterprise, against expenses, including
attorneys' fees, judgment, fines and amounts paid in
settlement actually and reasonably incurred by the person in
connection with such action, suit or proceeding. Pursuant to
Section 145(b) of the DGCL, the power to indemnify also
applies to actions brought by or in the right of the corporation
as well, but only to the extent of defense expenses (including
attorneys' fees) actually and reasonably incurred by the
person in connection with the defense or settlement of such
action or suit. Pursuant to Section 145(b), we shall not
indemnify any person in respect of any claim, issue or matter as
to which such person shall have been adjudged to be liable to us
unless and only to the extent that the Court of Chancery or the
court in which such action or suit was brought
II- 1
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Part II
shall determine upon application that, despite the adjudication
of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for
such expenses which the Court of Chancery or such other court
shall deem proper. The power to indemnify under
Sections 145(a) and (b) of the DGCL applies
(i) if such person is successful on the merits or otherwise
in defense of any action, suit or proceeding, or (ii) if
such person acted in good faith and in a manner he reasonably
believed to be in the best interest, or not opposed to the best
interest, of the corporation, and with respect to any criminal
action or proceeding, had no reasonable cause to believe his
conduct was unlawful.
Section 174 of the DGCL provides, among other things, that
a director, who willfully or negligently approves of an unlawful
payment of dividends or an unlawful stock purchase or
redemption, may be held liable for such actions. A director who
was either absent when the unlawful actions were approved or
dissented at the time, may avoid liability by causing his or her
dissent to such actions to be entered in the books containing
the minutes of the meetings of the board of directors at the
time such action occurred or immediately after such absent
director receives notice of the unlawful acts.
The indemnification provisions contained in our amended and
restated certificate of incorporation and bylaws will not be
exclusive of any other rights to which a person may be entitled
by law, agreement, vote of stockholders or disinterested
directors or otherwise. In addition, we will maintain insurance
on behalf of our directors and executive officers insuring them
against any liability asserted against them in their capacities
as directors or officers or arising out of such status.
Item 15.     Recent sales of
unregistered securities.
On March 31, 2005, in connection with our initial
formation, we issued 100 shares of common stock to ICG,
Inc. pursuant to Section 4(2) of the Securities Act as a
private placement.
Item 16.     Exhibits and
Financial Statement Schedules.
(a)     Exhibits
Exhibit
no.
Description of exhibit
1.1*
Form of Underwriting Agreement
2.1*
Business Combination Agreement among International Coal Group,
    Inc., ICG Holdco, Inc., ICG Merger Sub, Inc., Anker Merger Sub,
    Inc. and Anker Coal Group, Inc., dated as of March 31, 2005
2.2*
Business Combination Agreement among International Coal Group,
    Inc., ICG Holdco, Inc., CoalQuest merger Sub LLC, CoalQuest
    Development LLC and the members of CoalQuest Development LLC
    dated as of March 31, 2005
3.1
Amended and Restated Certificate of Incorporation of
    International Coal Group, Inc.
3.2
Amended and Restated By-laws of International Coal Group, Inc.
4.1*
Form of certificate of International Coal Group, Inc. common
    stock
4.3*
Registration Rights Agreement by and between International Coal
    Group, Inc., WLR Recovery Fund II, L.P, Contrarian Capital
    Management LLC, Värde Partners, Inc., Greenlight Capital,
    Inc., and Stark Trading, Sheperd International Coal Holdings Inc.
4.4*
Form of Registration Rights Agreement between International Coal
    Group, Inc. and certain former Anker stockholders and CoalQuest
    members
5.1*
Opinion of Jones Day
II- 2
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Part II
Exhibit
no.
Description of exhibit
10.1
Amended and Restated Credit Agreement dated as of
    November 5, 2004 among ICG, LLC, as Borrower, International
    Coal Group Inc., the guarantors party thereto, UBS Securities
    LLC, as Arranger, Bookmanager and Syndication Agent, General
    Electric Capital Corporation, as Documentation Agent, UBS AG,
    Stamford Branch, as Issuing Bank, Administrative Agent and
    Collateral Agent, and UBS Loan Finance, LLC, as Swingline
    Lender
10.2
First Amendment, dated as of November 30, 2004, to the
    Amended and Restated Credit Agreement dated as of
    November 5, 2004 among ICG, LLC, as Borrower, International
    Coal Group Inc., the guarantors party thereto, UBS Securities
    LLC, as Arranger, Bookmanager and Syndication Agent, General
    Electric Capital Corporation, as Documentation Agent, UBS AG,
    Stamford Branch, as Issuing Bank, Administrative Agent and
    Collateral Agent, and UBS Loan Finance, LLC, as Swingline
    Lender
10.3
Security Agreement dated as of September 30, 2004 among
    ICG, LLC and the guarantors party thereto and UBS AG, Stamford
    Branch, as Collateral Agent
10.4
Advisory Services Agreement effective as of October 1, 2004
    between International Coal Group, LLC and W.L. Ross &
    Co. LLC
10.5
Employment Agreement dated March 14, 2005 by and between
    Bennett K. Hatfield and International Coal Group, Inc.
10.6*
Coal Lease between Kycoga Company, LLC, lessor, and ICG Hazard,
    LLC, lessee, of Flint Ridge Surface Mine
10.7*
Fee Lease between Leo and Josephine Goff, et al., lessor,
    and ICG Hazard, LLC, lessee, of Flint Ridge Surface Mine
10.8*
Coal Lease between Ark Land Company, lessor, and ICG Hazard,
    LLC, lessee, of Flint Ridge Surface Mine
10.9*
Fee Lease between Kentucky Union Company, lessor, and ICG
    Hazard, LLC, lessee, of Flint Ridge Surface Mine
10.10*
Fee Lease between Kentucky Union Company, lessor, and ICG
    Hazard, LLC, lessee, of Flint Ridge Surface Mine
10.11*
Fee Lease between Pocahontas Development Corp., lessor, and ICG
    East Kentucky, LLC, lessee, of Blackberry Creek Surface Mine
10.12*
Coal Lease between N&G Holdings Company, lessor, and ICG
    Hazard, LLC, lessee, of Vicco Surface Mine
10.13*
Coal Lease between Louise Hall et al., lessor, and ICG
    Knott County, LLC, lessee, of Classic Underground
    Surface Mine
10.14*
Coal Lease between Mary L. Jones, et al., lessor, and ICG
    Illinois, LLC, lessee, of Viper Mine
10.15*
Coal Lease between Charles E. Lynch, Jr., lessor, and ICG
    Illinois, LLC, lessee, of Viper Mine
10.16*
Coal Lease between Robert A. Williamson, lessor, and ICG
    Illinois, LLC, lessee, of Viper Mine
10.17*
Coal Lease between Knight-Ink Heirs, lessor, and ICG Eastern,
    LLC, lessee, of Birch River Mine
10.18*
Surface Lease between Beckwith Lumber Company, lessor, and ICG
    Eastern, LLC, lessee, of Birch River Mine
10.19*
Surface Lease between NGDH Land, et al., lessor, and ICG
    Eastern, LLC, lessee, of Birch River Mine
10.20*
Coal Lease between NGDH Land, et al., lessor, and ICG
    Eastern, LLC, lessee, of Birch River Mine
II- 3
Table of Contents
Part II
Exhibit
no.
Description of exhibit
10.21*
Fee Lease between M-B, LLC, lessor, and ICG Eastern, LLC,
    lessee, of Birch River Mine
10.22*
Coal Lease between Kycoga Company, LLC, lessor, and ICG Hazard,
    LLC, lessee, of County Line Mine
10.23*
Coal Lease between Edward Clemons Revocable Trust, lessor, and
    ICG Hazard, LLC, lessee, of County Line Mine
10.24*
Surface Lease between Mountain Properties, Inc., lessor, and ICG
    Hazard, LLC, lessee, of County Line Mine
10.25*
Coal Lease between Peter Dassler, lessor, and ICG Hazard, LLC,
    lessee, of County Line Mine
10.26*
Fee Lease between CSTL, LLC, lessor, and ICG Hazard, LLC,
    lessee, of County Line and Rowdy Gap Mines
10.27*
Fee Lease between Kentucky River Properties, LLC, lessor, and
    ICG Hazard, LLC, lessee, of County Line and Thunder Ridge
    Mines
10.28*
Coal Lease between Ed Ross Chaney, et al., lessor, and ICG
    Hazard, LLC, lessee, of East Mac & Nellie Mine
10.29*
Fee Lease between Victor Holliday, et al., lessor, and ICG
    Hazard, LLC, lessee, of East Mac & Nellie Mine
10.30*
Fee Lease between Kentucky River Properties, LLC, lessor, and
    ICG Hazard, LLC, lessee, of East Mac & Nellie Mine
10.31*
Fee Lease between Rex McDaniel, et. al, lessor, and ICG Natural
    Resources, LLC, lessee, of East Mac & Nellie Mine
10.32*
Fee Lease between Kentucky River Properties, LLC, lessor, and
    ICG Hazard, LLC, lessee, of Rowdy Gap and Thuder Ridge Mines
10.33*
Coal Lease between Kycoga Company, LLC, lessor, and ICG Natural
    Resources, LLC, lessee, of Kentucky Prince Mine
10.34*
Sublease between Spruce Pine Land Company, lessor, and ICG
    Natural Resources, LLC, lessee, of Kentucky Prince Mine
10.35*
Lease between Allegany Coal and Land Company, lessor, and
    Patriot Mining Company, Inc., lessee, of Allegany County,
    Maryland Mine
10.36*
Lease between The Crab Orchard Coal and Land Company, lessor,
    and Anker West Virginia Mining Company, Beckley Smokeless
    Division, lessee, of Bay Hill Mine
10.37*
Lease between Beaver Coal Corporation, lessor, and Anker West
    Virginia Mining Company, Beckley Smokeless Division, of Bay Hill
    Mine
10.38*
Lease between Douglas Coal Company, lessor, and Patriot Mining
    Company, Inc., lessee, of Island and Douglas Mine
10.39*
Lease between Southern Region Industrial Realty, Inc., lessor,
    and Anker Virginia Mining Company, Inc., lessee, of War Creek
    Mine
10.40*
Sublease between Reserve Coal Properties, sublessors, and
    Patriot Mining Company, sublessee, of Sycamore 2 Mine
10.41*
Sublease between Appalachian Environmental, LLC, sublessor, and
    Anker West Virginia Mining Company, sublessee, of Upper
    Kittaning seam of coal at Sentinel Mine
10.42*
Lease between Appalachian Environmental, LLC, lessor, and Anker
    West Virginia Mining Company, lessee, of Upper Kittaning seam of
    coal at Sentinel Mine
II- 4
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Part II
Exhibit
no.
Description of exhibit
10.43*
Amended and Restated Agreement for Sale and Purchase of Coal
    dated July 1, 1996, between Carolina Power & Light
    Company and Mountaineer Coal Development Company, d/b/a
    Marrowbone Development Company and ICG, LLC, amended by:
(a) Letter Agreement dated and effective July 19, 1996
(b) Letter Agreement dated and effective July 19, 1996
(c) Amendment 1 dated July 29, 1998, effective
    January 1, 1998
(d) Amendment 2 dated April 19, 1999, effective
    January 1, 1999
(e) Letter Agreement dated and effective March 25, 2002
(f) Letter Agreement dated October 14, 2002, effective
    October 15, 2002
(g) Letter Agreement dated and effective July 28, 2003
(h) Amendment No. 3 dated July 28, 2003,
    effective January 1, 2003
10.44*
Agreement for Purchase and Sales of Coal dated April 10,
    2003 and effective January 1, 2004, between Georgia Power
    Company and ICG Hazard, LLC
10.45*
Contract for Sale and Purchase of Coal dated July 1, 1980,
    between City of Springfield, Illinois and Shell Oil Company,
    amended by:
(a) Letter dated October 16, 1980, assigning Shell Oil
    Company's rights and obligations under the contract to
    Turris Coal Company
(b) Letter Agreement dated November 13, 1982,
    effective January 1, 1983
(c) Amendment dated March 4, 1986, effective
    January 1, 1986
(d) Letter Agreement dated and effective March 4, 1986
(e) Second Amendment dated April 22, 1986, effective
    January 1, 1986
(f) Modification dated and effective June 8, 1987
(g) Modification dated and effective November 4, 1988
(h) Amendment dated and effective January 1, 1989
(i) Letter Agreement dated and effective November 4,
    1991
(j) Letter Agreement dated and effective November 27,
    1991
(k) Amendment dated March 20, 1992, effective
    January 1, 1992
(l) Amendment dated March 21, 1995, effective
    January 1, 1995
(m) Letter Agreement dated and effective August 28,
    1996
(n) Amendment dated May 10, 1996, effective
    May 1, 1996
(o) Amendment dated August 20, 1998, effective
    January 1, 1998
(p) Amendment dated May 30, 2001, effective
    January 1, 2001
(q) Letter dated October 8, 2004 assigning to ICG
    Illinois, LLC
10.46*
Coal Supply Agreement, dated as of April 1, 1992, between
    Anker Energy and Logan Generating Company (formerly Keystone
    Energy Service Company, L.P.), amended by
(a) First Amendment, effective as of September 1, 1995
(b) Second Amendment, effected as of March 15, 2002
11.1
Statement regarding computation of per share earnings
21.1
List of Subsidiaries
23.1*
Consent of Jones Day (included as part of its opinion filed as
    Exhibit 5.1 hereto)
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Part II
Exhibit
no.
Description of exhibit
23.2
Consent of Deloitte & Touche, LLP
23.3
Consent of Marshall Miller & Associates, Inc.
24.1
Power of Attorney
*
To be filed by amendment
(b) Financial Statement Schedules
Page
Schedule II — Valuation and Qualifying Accounts
II-9
Schedules other than that noted above are omitted because of an
absence of other conditions under which they are required or
because the information required to be disclosed is presented in
the financial statements or notes thereto.
II- 6
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Part II
Report of independent registered public accounting firm
To the Board of Directors of
International Coal Group, Inc.
We have audited the consolidated financial statements of ICG,
Inc. and subsidiaries (the "Company") as of
December 31, 2004 and for period October 1, 2004 to
December 31, 2004, and have issued our report thereon dated
April 22, 2005 (included elsewhere in this Registration
Statement). Our audit also included the financial statement
schedule listed in Item 16(b) of this Registration
Statement. This financial statement schedule is the
responsibility of the Company's management. Our
responsibility is to express an opinion based on our audit. In
our opinion, the financial statement schedule, when considered
in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set
forth therein.
DELOITTE & TOUCHE LLP
Louisville, Kentucky
April 22, 2005
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Part II
Report of independent registered public accounting firm
To the Board of Directors of
Horizon NR, LLC and Certain Subsidiaries
We have audited the combined financial statements of
Horizon NR, LLC and Certain Subsidiaries ("Combined
Companies") as of September 30, 2004 and
December 31, 2003 ("Reorganized Companies") and
for the period January 1, 2004 to September 30, 2004,
the year ended December 31, 2003, the period May 10,
2002 to December 31, 2002 ("Reorganized
Companies"), and for the period January 1, 2002 to
May 9, 2002 ("Predecessor Companies"), and have
issued our report thereon dated March 25, 2005 (included
elsewhere in this Registration Statement). Our audits also
included the financial statement schedule listed in
Item 16(b) of this Registration Statement. This financial
statement schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion based on
our audits. In our opinion, such financial statement schedule,
when considered in relation to the basic financial statements
taken as a whole, presents fairly in all material respects the
information set forth therein.
DELOITTE & TOUCHE LLP
Louisville, Kentucky
March 25, 2005
II- 8
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Part II
Schedule II — Valuation and Qualifying
Accounts
Balance at
Charged to
Other
beginning of
revenue, costs
additions
Balance at
Description
period
or expenses
(deductions)
end of period
Period from October 1, 2004 to December 31, 2004
    (ICG, Inc. period) :
Allowance for doubtful accounts
2,669
(1)
2,669
Reserve for inventory obsolescence
74
3,015
(1)
3,089
Reserve for loss— Advance Royalties
(8
)
3,110
(1)
3,102
Period ended September 30, 2004 (Predecessor
    Horizon):
Allowance for doubtful accounts
7,798
(2,357
)
5,441
Reserve for inventory obsolescence
2,803
(6
)
2,797
Allowance for doubtful Notes
2,422
(442
)
1,980
Reserve for loss— Advance Royalties
1,000
1,000
Year ended December 31, 2003 (Predecessor Horizon):
Allowance for doubtful accounts
9,453
(1,655
)
7,798
Reserve for inventory obsolescence
2,485
318
2,803
Allowance for doubtful Notes
2,451
(29
)
2,422
Reserve for loss— Advance Royalties
1,000
1,000
Period from May 10, 2002 to December 31, 2002 (Predecessor
    Horizon):
Allowance for doubtful accounts
7,918
6
1,529
(3)
9,453
Reserve for inventory obsolescence
2,485
2,485
Reserve for loss— Advance Royalties
1,000
1,000
Allowance for doubtful Notes
2,451
2,451
Period from January 1, 2002 to May 9, 2002 (Predecessor
    AEI):
Allowance for doubtful accounts
1,324
6,594
7,918
Reserve for inventory obsolescence
1,241
1,244
(1)
2,485
Reserve for loss— Advance Royalties
1,000
1,000
Allowance for doubtful Notes
1,980
471
(2)
2,451
(1)
Reflects opening balance sheet adjustments.
(2)
Reflects reclass of excise tax attributable to export
    sales.
(3)
Reflects anticipated non-collection of balloon payment
    related to a lease agreement.
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Part II
Item 17.     Undertakings.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended, or the Securities Act, may
be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion
of the Securities Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is,
therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment
by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant
will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Securities Act and will be governed by the final
adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) It will provide to the underwriter at the closing
    specified in the underwriting agreements, certificates in such
    denominations and registered in such names as required by the
    underwriter to permit prompt delivery to each purchaser.
(2) For purposes of determining any liability under the
    Securities Act, the information omitted from the form of
    prospectus filed as part of this registration statement in
    reliance upon Rule 430A and contained in a form of
    prospectus filed by the registrant pursuant to
    Rule 424(b)(1) or (4) or 497(h) under the Securities
    Act shall be deemed to be part of this registration statement as
    of the time it was declared effective.
(3) For purposes of determining any liability under the
    Securities Act, each post-effective amendment that contains a
    form of prospectus shall be deemed to be a new registration
    statement relating to the securities offering therein, and the
    offering of such securities at that time shall be deemed to be
    the initial
bona fide
offering thereof.
II- 10
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Signatures
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this amendment to the registration
statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the city of Ashland, State of
Kentucky, on April 28, 2005.
International Coal Group, Inc.
By:
/s/
Bennett K. Hatfield
Name: Bennett K. Hatfield
Title:
President, Chief Executive Officer and Director
Pursuant to the requirements of the Securities Act of 1933, this
amendment to the registration statement has been signed by the
following persons in the capacities indicated on April 27, 2005.
Signature
Title
Date
/s/
Bennett K. Hatfield
Bennett
    K. Hatfield
President, Chief Executive Officer and Director (Principal
    Executive Officer)
April 28, 2005
/s/
William D. Campbell
William
    D. Campbell
Vice President, Treasurer and Secretary (Principal Financial and
    Accounting Officer)
April 28, 2005
*
Wilbur
    L. Ross, Jr.
Non-Executive Chairman and Director
April 28, 2005
*
Jon
    R. Bauer
Director
April 28, 2005
*
Cynthia
    B. Bezik
Director
April 28, 2005
*
William
    J. Catacosinos
Director
April 28, 2005
*
George
    R. Desko
Director
April 28, 2005
*
Marcia
    Page
Director
April 28, 2005
*
Wendy
    L. Teramoto
Director
April 28, 2005
*    The undersigned, pursuant to a power
of attorney, executed by each of the officers and directors
above and filed with the SEC herewith, by signing his name
hereto, does hereby sign and deliver this Registration Statement
on behalf of the persons noted above in the capacities
indicated.
By:
/s/
William D. Campbell
Name: William D. Campbell
Title:
Vice President, Treasurer and Secretary
II- 11
Table of Contents
Exhibit index
1.1*
Form of Underwriting Agreement
2.1*
Business Combination Agreement among International Coal Group,
    Inc., ICG Holdco, Inc., ICG Merger Sub, Inc., Anker Merger Sub,
    Inc. and Anker Coal Group, Inc., dated as of March 31, 2005
2.2*
Business Combination Agreement among International Coal Group,
    Inc., ICG Holdco, Inc., CoalQuest merger Sub LLC, CoalQuest
    Development LLC and the members of CoalQuest Development LLC
    dated as of March 31, 2005
3.1
Amended and Restated Certificate of Incorporation of
    International Coal Group, Inc.
3.2
Amended and Restated By-laws of International Coal Group, Inc.
4.1*
Form of certificate of International Coal Group, Inc. common
    stock
4.3*
Registration Rights Agreement by and between International Coal
    Group, Inc., WLR Recovery Fund II, L.P, Contrarian Capital
    Management LLC, Värde Partners, Inc., Greenlight Capital,
    Inc., and Stark Trading, Sheperd International Coal Holdings Inc.
4.4*
Form of Registration Rights Agreement between International Coal
    Group, Inc. and certain former Anker stockholders and CoalQuest
    members
5.1*
Opinion of Jones Day
10.1
Amended and Restated Credit Agreement dated as of
    November 5, 2004 among ICG, LLC, as Borrower, International
    Coal Group Inc., the guarantors party thereto, UBS Securities
    LLC, as Arranger, Bookmanager and Syndication Agent, General
    Electric Capital Corporation, as Documentation Agent, UBS AG,
    Stamford Branch, as Issuing Bank, Administrative Agent and
    Collateral Agent, and UBS Loan Finance, LLC, as Swingline
    Lender
10.2
First Amendment, dated as of November 30, 2004, to the
    Amended and Restated Credit Agreement dated as of
    November 5, 2004 among ICG, LLC, as Borrower, International
    Coal Group Inc., the guarantors party thereto, UBS Securities
    LLC, as Arranger, Bookmanager and Syndication Agent, General
    Electric Capital Corporation, as Documentation Agent, UBS AG,
    Stamford Branch, as Issuing Bank, Administrative Agent and
    Collateral Agent, and UBS Loan Finance, LLC, as Swingline
    Lender
10.3
Security Agreement dated as of September 30, 2004 among
    ICG, LLC and the guarantors party thereto and UBS AG, Stamford
    Branch, as Collateral Agent
10.4
Advisory Services Agreement effective as of October 1, 2004
    between International Coal Group, LLC and W.L. Ross &
    Co. LLC
10.5
Employment Agreement dated March 14, 2005 by and between
    Bennett K. Hatfield and International Coal Group, Inc.
10.6*
Coal Lease between Kycoga Company, LLC, lessor, and ICG Hazard,
    LLC, lessee, of Flint Ridge Surface Mine
10.7*
Fee Lease between Leo and Josephine Goff, et al., lessor,
    and ICG Hazard, LLC, lessee, of Flint Ridge Surface Mine
10.8*
Coal Lease between Ark Land Company, lessor, and ICG Hazard,
    LLC, lessee, of Flint Ridge Surface Mine
10.9*
Fee Lease between Kentucky Union Company, lessor, and ICG
    Hazard, LLC, lessee, of Flint Ridge Surface Mine
10.10*
Fee Lease between Kentucky Union Company, lessor, and ICG
    Hazard, LLC, lessee, of Flint Ridge Surface Mine
Table of Contents
Exhibit index
10.11*
Fee Lease between Pocahontas Development Corp., lessor, and ICG
    East Kentucky, LLC, lessee, of Blackberry Creek Surface Mine
10.12*
Coal Lease between N&G Holdings Company, lessor, and ICG
    Hazard, LLC, lessee, of Vicco Surface Mine
10.13*
Coal Lease between Louise Hall et al., lessor, and ICG
    Knott County, LLC, lessee, of Classic Underground
    Surface Mine
10.14*
Coal Lease between Mary L. Jones, et al., lessor, and ICG
    Illinois, LLC, lessee, of Viper Mine
10.15*
Coal Lease between Charles E. Lynch, Jr., lessor, and ICG
    Illinois, LLC, lessee, of Viper Mine
10.16*
Coal Lease between Robert A. Williamson, lessor, and ICG
    Illinois, LLC, lessee, of Viper Mine
10.17*
Coal Lease between Knight-Ink Heirs, lessor, and ICG Eastern,
    LLC, lessee, of Birch River Mine
10.18*
Surface Lease between Beckwith Lumber Company, lessor, and ICG
    Eastern, LLC, lessee, of Birch River Mine
10.19*
Surface Lease between NGDH Land, et al., lessor, and ICG
    Eastern, LLC, lessee, of Birch River Mine
10.20*
Coal Lease between NGDH Land, et al., lessor, and ICG
    Eastern, LLC, lessee, of Birch River Mine
10.21*
Fee Lease between M-B, LLC, lessor, and ICG Eastern, LLC,
    lessee, of Birch River Mine
10.22*
Coal Lease between Kycoga Company, LLC, lessor, and ICG Hazard,
    LLC, lessee, of County Line Mine
10.23*
Coal Lease between Edward Clemons Revocable Trust, lessor, and
    ICG Hazard, LLC, lessee, of County Line Mine
10.24*
Surface Lease between Mountain Properties, Inc., lessor, and ICG
    Hazard, LLC, lessee, of County Line Mine
10.25*
Coal Lease between Peter Dassler, lessor, and ICG Hazard, LLC,
    lessee, of County Line Mine
10.26*
Fee Lease between CSTL, LLC, lessor, and ICG Hazard, LLC,
    lessee, of County Line and Rowdy Gap Mines
10.27*
Fee Lease between Kentucky River Properties, LLC, lessor, and
    ICG Hazard, LLC, lessee, of County Line and Thunder Ridge Mines
10.28*
Coal Lease between Ed Ross Chaney, et al., lessor, and ICG
    Hazard, LLC, lessee, of East Mac & Nellie Mine
10.29*
Fee Lease between Victor Holliday, et al., lessor, and ICG
    Hazard, LLC, lessee, of East Mac & Nellie Mine
10.30*
Fee Lease between Kentucky River Properties, LLC, lessor, and
    ICG Hazard, LLC, lessee, of East Mac & Nellie Mine
10.31*
Fee Lease between Rex McDaniel, et. al, lessor, and ICG Natural
    Resources, LLC, lessee, of East Mac & Nellie Mine
10.32*
Fee Lease between Kentucky River Properties, LLC, lessor, and
    ICG Hazard, LLC, lessee, of Rowdy Gap and Thunder Ridge Mines
10.33*
Coal Lease between Kycoga Company, LLC, lessor, and ICG Natural
    Resources, LLC, lessee, of Kentucky Prince Mine
10.34*
Sublease between Spruce Pine Land Company, lessor, and ICG
    Natural Resources, LLC, lessee, of Kentucky Prince Mine
Table of Contents
Exhibit index
10.35*
Lease between Allegany Coal and Land Company, lessor, and
    Patriot Mining Company, Inc., lessee, of Allegany County,
    Maryland Mine
10.36*
Lease between The Crab Orchard Coal and Land Company, lessor,
    and Anker West Virginia Mining Company, Beckley Smokeless
    Division, lessee, of Bay Hill Mine
10.37*
Lease between Beaver Coal Corporation, lessor, and Anker West
    Virginia Mining Company, Beckley Smokeless Division, of Bay Hill
    Mine
10.38*
Lease between Douglas Coal Company, lessor, and Patriot Mining
    Company, Inc., lessee, of Island and Douglas Mine
10.39*
Lease between Southern Region Industrial Realty, Inc., lessor,
    and Anker Virginia Mining Company, Inc., lessee, of War Creek
    Mine
10.40*
Sublease between Reserve Coal Properties, sublessors, and
    Patriot Mining Company, sublessee, of Sycamore 2 Mine
10.41*
Sublease between Appalachian Environmental, LLC, sublessor, and
    Anker West Virginia Mining Company, sublessee, of Upper
    Kittaning seam of coal at Sentinel Mine
10.42*
Lease between Appalachian Environmental, LLC, lessor, and Anker
    West Virginia Mining Company, lessee, of Upper Kittaning seam of
    coal at Sentinel Mine
10.43*
Amended and Restated Agreement for Sale and Purchase of Coal
    dated July 1, 1996, between Carolina Power & Light
    Company and Mountaineer Coal Development Company, d/b/a
    Marrowbone Development Company and ICG, LLC, amended by:
(a) Letter Agreement dated and effective July 19, 1996
(b) Letter Agreement dated and effective July 19, 1996
(c) Amendment 1 dated July 29, 1998, effective
    January 1, 1998
(d) Amendment 2 dated April 19, 1999, effective
    January 1, 1999
(e) Letter Agreement dated and effective March 25, 2002
(f) Letter Agreement dated October 14, 2002, effective
    October 15, 2002
(g) Letter Agreement dated and effective July 28, 2003
(h) Amendment No. 3 dated July 28, 2003,
    effective January 1, 2003
10.44*
Agreement for Purchase and Sales of Coal dated April 10,
    2003 and effective January 1, 2004, between Georgia Power
    Company and ICG Hazard, LLC
Table of Contents
Exhibit index
10.45*
Contract for Sale and Purchase of Coal dated July 1, 1980,
    between City of Springfield, Illinois and Shell Oil Company,
    amended by:
(a) Letter dated October 16, 1980, assigning Shell Oil
    Company's rights and obligations under the contract to
    Turris Coal Company
(b) Letter Agreement dated November 13, 1982,
    effective January 1, 1983
(c) Amendment dated March 4, 1986, effective
    January 1, 1986
(d) Letter Agreement dated and effective March 4, 1986
(e) Second Amendment dated April 22, 1986, effective
    January 1, 1986
(f) Modification dated and effective June 8, 1987
(g) Modification dated and effective November 4, 1988
(h) Amendment dated and effective January 1, 1989
(i) Letter Agreement dated and effective November 4,
    1991
(j) Letter Agreement dated and effective November 27,
    1991
(k) Amendment dated March 20, 1992, effective
    January 1, 1992
(l) Amendment dated March 21, 1995, effective
    January 1, 1995
(m) Letter Agreement dated and effective August 28,
    1996
(n) Amendment dated May 10, 1996, effective
    May 1, 1996
(o) Amendment dated August 20, 1998, effective
    January 1, 1998
(p) Amendment dated May 30, 2001, effective
    January 1, 2001
(q) Letter dated October 8, 2004 assigning to ICG
    Illinois, LLC
10.46*
Coal Supply Agreement, dated as of April 1, 1992, between
    Anker Energy and Logan Generating Company (formerly Keystone
    Energy Service Company, L.P.), amended by
(a) First Amendment, effective as of September 1, 1995
(b) Second Amendment, effected as of March 15, 2002
11.1
Statement regarding computation of per share earnings
21.1
List of Subsidiaries
23.1*
Consent of Jones Day (included as part of its opinion filed as
    Exhibit 5.1 hereto)
23.2
Consent of Deloitte & Touche, LLP
23.3
Consent of Marshall Miller & Associates, Inc.
24.1
Power of Attorney
*
To be filed by amendment