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<TITLE>FORM S-1</TITLE>
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<DIV align="center">
 <B><FONT size="2">As filed with the Securities and Exchange
Commission on December&nbsp;6, 2004</FONT></B>
</DIV>

<DIV align="right">
<B><FONT size="2">Registration
No.&nbsp;333-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B>
</DIV>

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<HR size="4" noshade color="#000000" style="margin-top: -5px">
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<B><FONT size="4">SECURITIES AND EXCHANGE COMMISSION</FONT></B>

<DIV align="center">
<B>Washington,&nbsp;D.C. 20549</B>
</DIV>

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<B><FONT size="5">Form S-1</FONT></B>

<DIV align="center">
<B>REGISTRATION STATEMENT</B>
</DIV>

<DIV align="center">
<B>UNDER</B>
</DIV>

<DIV align="center">
<B>THE SECURITIES ACT OF 1933</B>
</DIV>

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<B><FONT size="6">Alpha Natural Resources, Inc.</FONT></B>

<DIV align="center">
<I><FONT size="2">(Exact Name of Registrant as Specified in its
Charter)</FONT></I>
</DIV>

<P align="center">
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<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="32%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="30%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="32%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="center" valign="top">
    <B><FONT size="2">Delaware</FONT></B></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <B><FONT size="2">1222</FONT></B></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <B><FONT size="2">02-0733940</FONT></B></TD>
</TR>

<TR>
    <TD align="center" valign="top">
    <I><FONT size="2">(State of Incorporation)</FONT></I></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <I><FONT size="2">(Primary Standard Industrial<BR>
    Classification Code Number)</FONT></I></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <I><FONT size="2">(I.R.S. Employer Identification No.)</FONT></I></TD>
</TR>

</TABLE>
</CENTER>

<P align="center">
<HR size="1" width="30%" align="center" noshade>

<P align="center">
<B><FONT size="2">406 West Main Street</FONT></B>

<DIV align="center">
<B><FONT size="2">Abingdon, VA 24210</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">(276)&nbsp;619-4410</FONT></B>
</DIV>

<DIV align="center">
<I><FONT size="2">(Address, including zip code, and telephone
number, including area code, of registrant&#146;s principal
executive offices)</FONT></I>
</DIV>

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<HR size="1" width="30%" align="center" noshade>

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<B><FONT size="2">Vaughn R. Groves,&nbsp;Esq.</FONT></B>

<DIV align="center">
<B><FONT size="2">Vice President and General Counsel</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">Alpha Natural Resources, Inc.</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">406 West Main Street</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">Abingdon, VA 24210</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">(276)&nbsp;619-4410</FONT></B>
</DIV>

<DIV align="center">
<I><FONT size="2">(Name, address, including zip code, and
telephone number, including area code, of agent for
service)</FONT></I>
</DIV>

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<HR size="1" width="30%" align="center" noshade>

<P align="center">
<B><I><FONT size="2">With Copies to:</FONT></I></B>

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<TR>
    <TD width="32%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="31%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="31%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="center" valign="top">
    <B><FONT size="2">James L. Palenchar, Esq.<BR>
    Polly S. Swartzfager, Esq.<BR>
    Bartlit Beck Herman Palenchar&nbsp;&#38; Scott LLP<BR>
    1899 Wynkoop Street, 8th Floor<BR>
    Denver, CO 80202<BR>
    Ph: (303)&nbsp;592-3100<BR>
    Fax: (303)&nbsp;592-3140</FONT></B></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <B><FONT size="2">Peter M. Labonski,&nbsp;Esq.<BR>
    Latham&nbsp;&#38; Watkins LLP<BR>
    885 Third Avenue, Suite&nbsp;1000<BR>
    New York, New York 10022-4802<BR>
    Ph: (212)&nbsp;906-1200<BR>
    Fax: (212)&nbsp;751-4864</FONT></B></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <B><FONT size="2">Edward P. Tolley&nbsp;III,&nbsp;Esq.<BR>
    Joshua Ford Bonnie,&nbsp;Esq.<BR>
    Simpson Thacher&nbsp;&#38; Bartlett LLP<BR>
    425 Lexington Avenue<BR>
    New York, New York 10017-3954<BR>
    Ph: (212)&nbsp;455-2000<BR>
    Fax: (212)&nbsp;455-2502</FONT></B></TD>
</TR>

</TABLE>
</CENTER>

<P align="center">
<HR size="1" width="30%" align="center" noshade>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">Approximate date of commencement of proposed
sale to the public:</FONT></B><FONT size="2"> As soon as
practicable after this Registration Statement is declared
effective.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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;<FONT face="wingdings">&#111;</FONT>
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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;<FONT face="wingdings">&#111;</FONT>
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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;<FONT face="wingdings">&#111;</FONT>
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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;<FONT face="wingdings">&#111;</FONT>
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">If delivery of the prospectus is expected to be
made pursuant to Rule&nbsp;434, check the following
box.&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">&#111;</FONT>
</FONT>

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<HR size="1" width="30%" align="center" noshade>

<P align="center">
<B><FONT size="2">CALCULATION OF REGISTRATION FEE</FONT></B>

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<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="35%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="28%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="31%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="5"></TD>
</TR>

<TR>
    <TD colspan="5" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="5" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Title of Each Class of</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Proposed Maximum Aggregate</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Amount of</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Securities to be Registered</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Offering Price(1)(2)</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Registration Fee</FONT></B></TD>
</TR>

<TR>
    <TD colspan="5"></TD>
</TR>

<TR>
    <TD colspan="5" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Common stock, par value $0.01&nbsp;per share
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="bottom">
    <FONT size="2">$250,000,000
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="bottom">
    <FONT size="2">$31,675
    </FONT></TD>
</TR>

<TR>
    <TD colspan="5" align="left"><HR size="1" noshade></TD>

</TR>

<TR>
    <TD colspan="5" align="left"><HR size="1" noshade></TD>

</TR>

</TABLE>
</CENTER>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Estimated solely for the purpose of calculating
    the registration fee under Rule&nbsp;457(o) of the Securities
    Act of 1933.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

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

</TABLE>

<P align="center">
<HR size="1" width="30%" align="center" noshade>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">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.</FONT></B>

<P align="left">
<HR size="1" noshade color="#000000" style="margin-top: -2px">

<DIV align="left">
<HR size="4" noshade color="#000000" style="margin-top: -10px">
</DIV>
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<TABLE width="100%" border="1" cellpadding="5"><TR><TD>
<B><FONT size="2" color="#C13828">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 jurisdiction
where the offer or sale is not permitted.</FONT><FONT size="2">
<BR>
</FONT></B>
</TD></TR></TABLE>

<P align="center">
<B><FONT size="2" color="#C13828">SUBJECT TO COMPLETION, DATED
DECEMBER&nbsp;6, 2004</FONT></B>

<P align="left">
<B><FONT size="2">PROSPECTUS</FONT></B>

<P align="center">
<B><FONT size="4">Shares</FONT></B>

<P align="center">
<IMG src="y02933y0293306.gif" alt="(Alpha LOGO)">

<P align="center">
<B><FONT size="4">Alpha Natural Resources, Inc.</FONT></B>

<DIV align="center">
<B><FONT size="4">Common Stock</FONT></B>
</DIV>

<P align="center">
<HR size="1" width="26%" align="center" noshade>

<P align="left">
<FONT size="2">This is the initial public offering of shares of
common stock of Alpha Natural Resources, Inc. All of
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 are being sold by us. We intend to use all of
the net proceeds from the sale of the shares in this offering to
repay indebtedness to certain of our existing stockholders.
</FONT>

<P align="left">
<FONT size="2">Prior to this offering, there has been no public
market for our common stock. We currently estimate that the
initial public offering price per share will be between
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;and
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.
We intend to apply to list the common stock on the New York
Stock Exchange under the symbol &#147;ANR.&#148;
</FONT>

<P align="left">
<FONT size="2">The underwriters have the option for a period of
30&nbsp;days after the date of this prospectus 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
of common stock from us at the initial public offering price
less the underwriting discount to cover over-allotments. We
intend to use the net proceeds we receive from any shares sold
pursuant to the underwriters&#146; over-allotment option to make
distributions to our existing stockholders.
</FONT>

<P align="left">
<B>Investing in our common stock involves risks. See &#147;Risk
Factors&#148; beginning on page&nbsp;12.</B>

<P align="left">
<B><FONT size="2">Neither the Securities and Exchange Commission
nor any other regulatory body has approved or disapproved these
securities or passed upon the accuracy or adequacy of this
prospectus. Any representation to the contrary is a criminal
offense.</FONT></B>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="54%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Proceeds,</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">before</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Initial public</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">expenses, to</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">offering</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Underwriting</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Alpha Natural</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">price</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">discount</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Resources, Inc.</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Per Share
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
<FONT size="2">The underwriters expect to deliver the shares to
purchasers on or
about &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2005.
</FONT>

<P align="center">
<HR size="1" width="26%" align="center" noshade>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD align="left"><B><FONT size="5">Morgan Stanley</FONT></B></TD>
    <TD align="right"><B><FONT size="5">Citigroup</FONT></B></TD>
</TR>

</TABLE>

<P align="center">
<B><FONT size="5">UBS Investment Bank</FONT></B>

<P align="center">
<FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2005.
</FONT>
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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<IMG src="y02933z0293301.gif" alt="(MAP)">
</DIV>

<DIV>&nbsp;</DIV>
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="center">
<B><FONT size="2">TABLE OF CONTENTS</FONT></B>

<CENTER>
<TABLE width="60%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="90%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Page</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&nbsp;<A HREF='#101'>Prospectus Summary</A>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&nbsp;<A HREF='#102'>Risk Factors</A>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&nbsp;<A HREF='#103'>Special Note&nbsp;Regarding
    Forward-Looking Statements</A>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">30</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&nbsp;<A HREF='#104'>Market and Industry Data and
    Forecasts</A>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">31</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&nbsp;<A HREF='#105'>Use of Proceeds</A>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">32</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&nbsp;<A HREF='#106'>Dividend Policy</A>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">32</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&nbsp;<A HREF='#107'>Capitalization</A>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">33</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&nbsp;<A HREF='#108'>Dilution</A>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">34</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&nbsp;<A HREF='#109'>Internal Restructuring</A>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">36</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&nbsp;<A HREF='#110'>Unaudited Pro Forma
    Financial Information</A>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">38</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&nbsp;<A HREF='#111'>Selected Historical
    Financial Data</A>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">47</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&nbsp;<A HREF='#112'>Management&#146;s Discussion
    and Analysis of Financial Condition and Results of Operations</A>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">49</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&nbsp;<A HREF='#113'>The Coal Industry</A>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">66</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&nbsp;<A HREF='#114'>Business</A>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">73</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&nbsp;<A HREF='#115'>Environmental and Other
    Regulatory Matters</A>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">84</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&nbsp;<A HREF='#116'>Management</A>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">91</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&nbsp;<A HREF='#117'>Principal Stockholders</A>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">101</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&nbsp;<A HREF='#118'>Certain Relationships and
    Related Party Transactions</A>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">103</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&nbsp;<A HREF='#119'>Description of
    Indebtedness</A>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">111</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&nbsp;<A HREF='#120'>Description of Capital
    Stock</A>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">115</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&nbsp;<A HREF='#121'>Shares Eligible for Future
    Sale</A>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">119</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&nbsp;<A HREF='#122'>Material U.S.&nbsp;Federal
    Income and Estate Tax Consequences to Non-U.S.&nbsp;Holders</A>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">122</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&nbsp;<A HREF='#123'>Underwriting</A>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">125</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&nbsp;<A HREF='#124'>Validity of the Shares</A>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">128</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&nbsp;<A HREF='#125'>Experts&#151; Independent
    Registered Public Accounting Firm</A>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">128</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&nbsp;<A HREF='#126'>Experts&#151; Coal
    Reserves</A>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">129</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&nbsp;<A HREF='#127'>Where You Can Find
    Additional Information</A>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">129</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&nbsp;<A HREF='#128'>Index to Financial
    Statements</A>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">F-1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center">
<HR size="1" width="30%" align="center" noshade>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">You should rely only on the information
contained in this prospectus. We have not authorized anyone to
provide you with information different from that contained in
this prospectus. We are not making an offer to sell, and are not
seeking offers to buy, shares of our common stock in any
jurisdiction where offers and sales are not permitted. The
information contained in this prospectus is current only as of
the date on the front of this prospectus, regardless of the time
of delivery of this prospectus or of any sale of our common
stock.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">No action is being taken in any jurisdiction
outside the United States to permit a public offering of the
common stock or possession or distribution of this prospectus in
that jurisdiction. Persons who come into possession of this
prospectus in jurisdictions outside the United States are
required to inform themselves about and to observe any
restrictions as to this offering and the distribution of this
prospectus applicable to those jurisdictions.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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), all
dealers that effect transactions in these securities, whether or
not participating in this offering, may be required to deliver a
prospectus. This 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.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Unless indicated otherwise, the information
included in this prospectus assumes no exercise by the
underwriters of their over-allotment option to purchase up
to &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;additional
shares from us and that the shares to be sold in this offering
are sold at
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share, which is the midpoint of the range indicated on the front
cover of this prospectus.
</FONT>

<P align="center"><FONT size="2">i
</FONT>

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<DIV style="width: 100%; border: 1px solid black; padding: 12px;">

<DIV align="left">
<A name='101'></A>
</DIV>

<!-- link1 "PROSPECTUS SUMMARY" -->

<P align="center">
<B><FONT size="2">PROSPECTUS SUMMARY</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">This summary does not contain all of the
information you should consider in making your investment
decision. Before investing in our common stock, you should
carefully read this entire document, including our combined
historical and pro forma financial statements and accompanying
notes included elsewhere in this prospectus. You should also
carefully consider, among other things, the matters discussed
under &#147;Risk Factors&#148; and &#147;Management&#146;s
Discussion and Analysis of Financial Condition and Results of
Operations.&#148;</FONT></I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Unless the context otherwise indicates, as
used in this prospectus, the terms &#147;Alpha,&#148;
&#147;we,&#148; &#147;our,&#148; &#147;us&#148; and similar
terms refer to: (1)&nbsp;our Predecessor with respect to periods
on and prior to December&nbsp;13, 2002, (2)&nbsp;ANR
Fund&nbsp;IX Holdings, L.P. and Alpha NR&nbsp;Holding, Inc. and
subsidiaries on a combined basis with respect to periods from
and after December&nbsp;14, 2002 until the completion of our
Internal Restructuring as defined and described below under
&#147;Internal Restructuring&#148; and (3)&nbsp;Alpha Natural
Resources, Inc. and its consolidated subsidiaries with respect
to periods from and after the completion of our Internal
Restructuring. References to our &#147;Predecessor&#148; refer
to the majority of the Virginia coal operations of Pittston Coal
Company, a subsidiary of The Brink&#146;s Company, that we
acquired on December&nbsp;13, 2002. In this prospectus, we use
the term &#147;ANR Holdings&#148; to refer to ANR&nbsp;Holdings,
LLC, our top tier holding company prior to the completion of our
Internal Restructuring, and the phrase &#147;existing
stockholders&#148; to refer to the members of ANR&nbsp;Holdings
who will receive shares of our common stock pursuant to our
Internal Restructuring.</FONT></I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">References to pro forma financial and other
pro forma information reflect (1)&nbsp;for balance sheet data,
the consummation of our Internal Restructuring as if it had
occurred on September&nbsp;30, 2004 and (2)&nbsp;for statement
of operations and other data, the consummation of our 2003
Acquisitions and 2004 Financings as defined and described below
under &#147;&#151;Summary Historical and Pro Forma Financial
Data,&#148; and our Internal Restructuring, in each case as if
these events had occurred on January&nbsp;1, 2003. See
&#147;Unaudited Pro Forma Financial Information.&#148;</FONT></I>

<P align="center">
<B><FONT size="2">Alpha Natural Resources</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We are a leading Central Appalachian coal
producer that also has significant operations in Northern
Appalachia. Our reserve base primarily consists of high Btu, low
sulfur steam coal that is currently in high demand in
U.S.&nbsp;coal markets and metallurgical coal that is currently
in high demand in both U.S. and international coal markets. We
produce, process and sell steam and metallurgical coal from
eight regional business units supported by 44 active underground
mines, 20 active surface mines and 11 preparation plants located
throughout Virginia, West Virginia, Kentucky, Pennsylvania and
Colorado. We are also actively involved in the purchase and
resale of coal mined by others, the majority of which we blend
with coal produced from our mines, allowing us to realize a
higher overall margin for the blended product than we would be
able to achieve selling these coals separately.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Steam coal, which is primarily purchased by large
utilities and industrial customers as fuel for electricity
generation, accounted for approximately 63% of our coal sales
volume in the first nine months of 2004 and 73% of our 2003
pro&nbsp;forma coal sales volume. The majority of our steam coal
sales volume in the first nine months of 2004 and during 2003
consisted of high Btu (above 12,500 Btu content per pound), low
sulfur (sulfur content of 1.5% or less) coal, which typically
sells at a premium to lower-Btu, higher-sulfur steam coal.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Metallurgical coal, which is used primarily to
make coke, a key component in the steel making process,
accounted for approximately 37% of our coal sales volume in the
first nine months of 2004 and 27% of our 2003 pro forma coal
sales volume. Metallurgical coal generally sells at a premium
over steam coal because of its higher quality and its value in
the steelmaking process as the raw material for coke. Under
current market conditions, we are able to market a significant
portion of our higher quality steam coal as metallurgical coal.
The majority of our international coal sales in the first nine
months of 2004 and on a pro forma basis in 2003 consisted of
metallurgical coal.
</FONT>
</DIV>

<P align="center"><FONT size="2">1
</FONT>

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<DIV style="width: 100%; border: 1px solid black; padding: 12px;">

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">During the first nine months of 2004, on a pro
forma basis, we sold a total of 19.4&nbsp;million tons of steam
and metallurgical coal and generated revenues of
$937.1&nbsp;million, EBITDA of $96.7&nbsp;million and net income
of $29.4&nbsp;million. We define and reconcile EBITDA, and
explain its importance, in note (1)&nbsp;under
&#147;&#151;Summary Historical and Pro Forma Financial
Data.&#148; On a pro forma basis in 2003 we sold a total of
25.3&nbsp;million tons of steam and metallurgical coal and
generated revenues of $902.8&nbsp;million, EBITDA of
$68.2&nbsp;million and net income of $0.6&nbsp;million. Our coal
sales during the first nine months of 2004 and on a pro forma
basis during 2003 included 5.4&nbsp;million tons and
6.1&nbsp;million tons, respectively, of purchased coal, of which
approximately 81% and 83%, respectively, was blended with coal
produced from our mines prior to resale. Measured by tons sold,
approximately 32% of our 2004 coal sales for the nine months
ended September&nbsp;30, 2004 and 20% of our 2003 pro forma coal
sales were made outside the United States, primarily in Canada
and several counties in Europe and, beginning in 2004, also in
Asia.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As of October&nbsp;15, 2004, we owned or leased
514.4&nbsp;million tons of proven and probable coal reserves. Of
our total proven and probable reserves, approximately 89% are
low sulfur reserves, with approximately 58% having sulfur
content below 1.0%. Approximately 94% of our total proven and
probable reserves have a high Btu content. We believe that our
total proven and probable reserves will support current
production levels for more than 25&nbsp;years.
</FONT>

<P align="left">
<B><FONT size="2">Competitive Strengths</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We believe that the combination of the following
competitive strengths distinguishes us from our competitors.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">We provide a comprehensive range of steam
and metallurgical coal products that are in high
demand.</FONT></I></B><FONT size="2"> Our reserve base enables
us to provide customers with coal products that are in high
demand&#151; including high Btu, low sulfur steam coal, and low,
medium and high volatile metallurgical coal. Steam coal
customers value high Btu coal because it fuels electricity
generation more efficiently than lower energy content coal. In
addition, the demand for clean burning, low sulfur coal has
grown significantly since the implementation of sulfur emission
restrictions mandated by the Clean Air Act. Metallurgical coal
customers require precise coal characteristics to meet their
coke production specifications and generally value low volatile
metallurgical coal more highly than other categories of
metallurgical coal. We believe that we are the only significant
North American producer of all three categories of metallurgical
coal&#151; low, medium and high volatile metallurgical
coal&#151; and that we produced or processed on a pro forma
basis approximately 30% of the low volatile metallurgical coal
consumed in the United States and Canada in 2003.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Our flexible mining operations and
diversified asset base allow us to manage costs while
capitalizing on market
opportunities.</FONT></I></B><FONT size="2"> Our 64 active
mines, 11 preparation plants and eight regional business units
are supported by flexible and cost-effective use of our mining
equipment and personnel. Our underground mines use the room and
pillar mining method with continuous mining equipment, and our
surface mines principally use trucks, loaders and dozers. This
equipment is interchangeable and can be redirected easily at a
relatively low cost, providing us more flexibility to respond to
changing geologic, operating and market conditions. The
diversity of our portfolio of mines and preparation plants
allows us to move resources between existing or new operations
to pursue the most attractive market opportunities available to
us. This diversity also limits our mine concentration risk, as
the mine that produced the greatest amount of our coal
contributed only approximately 10% of our production during the
first nine months of 2004.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Our ability to provide customized product
offerings creates valuable market opportunities, strengthens our
customer relationships and improves
profitability.</FONT></I></B><FONT size="2"> We have a
&#147;customer-focused&#148; marketing strategy that, combined
with our comprehensive range of coal product offerings and
established marketing network, enables us to customize our coal
deliveries to a customer&#146;s precise needs and
specifications. The products we sell to our customers will often
be a blend of internally produced coal and coal we have
purchased from third parties, in contrast to the more
traditional approach of only offering coal produced from captive
mines. Our blending capabilities give us a competitive advantage
in product source and composition. We use spot market coal to
optimize the mix delivered to our customers and to maximize the
profitability of
</FONT>
</DIV>

<P align="center"><FONT size="2">2
</FONT>

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<DIV style="width: 100%; border: 1px solid black; padding: 12px;">

<DIV align="left">
<FONT size="2">each of our contracts. We believe our commitment
to providing high quality coal products designed to our
customers&#146; specifications enables us to maintain strong
customer relationships while maximizing the value of our coal
reserves.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Our primary operating focus is the
Appalachian region, the region with the most producer-favorable
coal supply and demand dynamics in the United
States.</FONT></I></B><FONT size="2"> Our operations are focused
on Central and Northern Appalachia, which accounted for 70% and
27%, respectively, of the coal produced from our mines during
the first nine months of 2004. The Appalachian region has
produced declining supplies of coal in recent years while
regional demand, already the highest in the United States based
on tons consumed, is expected to increase due to growth in
regional demand for electricity. We believe these trends in
Appalachian coal supply and demand, the high quality of
Appalachian coal and the lower transportation costs that result
from the proximity of Appalachian producers and customers create
favorable pricing dynamics that provide us with an advantage
over producers from other regions. According to Platts Research
and Consulting (&#147;Platts&#148;), year-over-year reference
prices as of November&nbsp;29, 2004 for Central and Northern
Appalachian coal were 83% and 98% higher, respectively, while
they were 13% lower for Powder River Basin coal.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Our Central Appalachian mining expertise
provides us with significant regional growth
opportunities.</FONT></I></B><FONT size="2"> Our focus on the
Appalachian region has allowed us to develop expertise in
efficiently mining Central Appalachian reserves. Furthermore, we
have developed both a good understanding of the region&#146;s
transportation infrastructure and a favorable reputation with
the region&#146;s property owners, coal industry operators and
employee base. Together, these factors allow us to capitalize on
regional growth opportunities that we believe our larger
competitors with less regional expertise are unable or unwilling
to pursue.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Our comparatively low amount of long-term
reclamation and employee-related liabilities provides us with
financial flexibility.</FONT></I></B><FONT size="2"> We believe
that our annual expenses for long-term reclamation liabilities
and for employee-related liabilities, such as workers&#146;
compensation, black lung, post-retirement and pension
liabilities, are among the lowest of the publicly-traded
U.S.&nbsp;coal producers, providing us with increased financial
flexibility. As of September&nbsp;30, 2004, we had total accrued
reclamation liabilities of $40.6&nbsp;million, self-insured
workers&#146; compensation liabilities of $5.3&nbsp;million and
post-retirement obligations of $13.5&nbsp;million, and we had no
pension liabilities and minimal black lung liabilities. In
addition, because over 90% of our approximately 2,500 employees
are employed by our subsidiaries on a union-free basis and
approximately 95% of our pro forma coal production during the
first nine months of 2004 and in 2003 was produced from mines
operated by union-free employees, we are better able to minimize
the types of employee-related liabilities commonly associated
with union-represented mines.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Our safety record and work practices allow
us to keep our costs competitive.</FONT></I></B><FONT size="2">
Mine safety is a critical component to controlling costs and
retaining skilled employees. Historically, our operations have
had a lower incident rate (as measured by the U.S.&nbsp;Mine
Safety and Health Administration) than the average incident rate
for underground coal mining operations located in similar areas
of Central and Northern Appalachia. Alpha and its Predecessor
and acquired companies have also received more than 30 safety
awards over the last three years, including the prestigious
Sentinels of Safety and Holmes Safety awards, which have been
awarded to several of our mines.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Our management team has extensive coal
industry experience and has successfully integrated a number of
acquisitions.</FONT></I></B><FONT size="2"> Our senior
executives have, on average, more than 20&nbsp;years of
experience in the coal industry, largely in the Appalachian
region, and they have substantial experience in increasing
productivity, reducing costs, implementing our marketing
strategy and coal blending capabilities, improving safety, and
developing and maintaining strong customer and employee
relationships. In addition to their operating strengths, the
majority of our senior executives have significant experience in
identifying, acquiring and integrating coal companies into
existing organizations.
</FONT>
</DIV>

<P align="center"><FONT size="2">3
</FONT>

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<P align="left">
<B><FONT size="2">Business Strategy</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We believe that we are well-positioned to enhance
stockholder value by continuing to implement our strategy, which
consists of the following key components:
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Achieve premium pricing and optimum
efficiency in contract
fulfillment.</FONT></I></B><FONT size="2"> We intend to continue
to use our diversified operating strategy, coal blending
capabilities, market knowledge and strong marketing organization
to identify and capitalize on opportunities to generate premium
pricing for our coal and to achieve optimum efficiency in
fulfillment of coal contracts. As of November&nbsp;10, 2004, we
had contracts to sell 93% of our planned production for 2005 and
44% of our planned production for 2006, which we believe
provides us with significant price certainty in the short-term
while maintaining uncommitted planned production that allows us
to take an opportunistic approach to selling our coal.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Maximize profitability of our mining
operations.</FONT></I></B><FONT size="2"> We continuously
reassess our reserves, mines and processing and loading
facilities in an effort to determine the optimum operating
configuration that maximizes our profitability, efficient use of
operating assets and return on invested capital. We intend to
continue to optimize the profitability of our mining operations
through a series of initiatives that include:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">increasing production levels where we determine
    that such increased production can be profitably achieved;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">leveraging our product offerings, blending
    capabilities and marketing organization to realize higher
    margins from our sales;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">deploying our resources against the most
    profitable opportunities available in our asset portfolio;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">consolidating regional operations and increasing
    the utilization of our existing preparation plants and loading
    facilities;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">maintaining our focus on safety and implementing
    safety measures designed to keep our workforce injury
    free;&nbsp;and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">using centralized procurement to negotiate with
    major vendors to provide materials and supplies at lower overall
    cost.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Pursue strategic value-creating
acquisitions.</FONT></I></B><FONT size="2"> We have successfully
acquired and integrated businesses into our operations, and we
intend to continue to expand our business and coal reserves
through acquisitions of attractive, strategically positioned
assets. Although we intend to concentrate our efforts in
Appalachia, where we believe there remain attractive acquisition
opportunities, we will continue to evaluate opportunities in
other regions that meet our acquisition criteria. We employ what
we believe is a disciplined acquisition strategy focused on
acquiring coal and coal-related operations and assets at
attractive valuations. Some of the factors that we consider in
evaluating an acquisition candidate include:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">the candidate&#146;s historical and projected
    financial performance;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">the quality and quantity of the candidate&#146;s
    coal reserves, coal processing facilities and other coal
    production assets;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">the extent to which the geographic location of
    the candidate&#146;s coal reserves, processing facilities, and
    access to transportation links and customers provides
    synergistic opportunities with our existing operations and
    assets;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">the existing liabilities of the candidate, and
    whether the acquisition can be completed in a manner that limits
    our assumption of the candidate&#146;s long-term liabilities;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">in situations where we retain existing
    management, the management&#146;s experience and relationship
    with the local community;&nbsp;and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">the experience, terms of employment and union
    status of the candidate&#146;s employees and the terms of the
    candidate&#146;s contracts with third-party mine and processing
    facility operators.
    </FONT></TD>
</TR>

</TABLE>
</DIV>

<P align="center"><FONT size="2">4
</FONT>

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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Continue to maintain a strong safety, labor
relations and environmental
record.</FONT></I></B><FONT size="2"> One of our core values is
protecting the health and welfare of our employees by designing
and implementing high safety standards in the workplace.
Similarly, we aim to adhere to high standards in protecting and
preserving the environment in which we operate. Historically, we
have maintained a superior safety record compared to the
industry averages for similarly situated operations as measured
by the U.S.&nbsp;Mine Safety and Health Administration, and we
plan to continue to maintain our strong safety record in the
coal industry. There have been no material work stoppages at any
of our facilities since we were formed in 2002 or at any of our
Predecessor or acquired facilities in the past 10&nbsp;years. We
aim to preserve the positive relationship we have developed with
our employees. Furthermore, we intend to continue to adhere to
strict environmental and reclamation compliance standards. For
example, in August 2004 we began implementing an environmental
best practices system across all of our subsidiaries&#146;
operations that involves the development of specific
environmental policies and programs, advanced training of our
environmental staff and management, and periodic assessments to
measure the level of our environmental awareness and compliance.
</FONT>

<P align="center">
<B><FONT size="2">Risks Related to our Business and
Strategy</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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. For additional risks relating to our business and
this offering, see &#147;Risk Factors&#148; beginning on
page&nbsp;12 of this prospectus.
</FONT>

<P align="center">
<B><FONT size="2">Coal Market Outlook</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">stronger industrial demand following a recovery
    in the U.S.&nbsp;manufacturing sector, evidenced by the most
    recent estimate of 3.9% real GDP growth in the third quarter of
    2004, as reported by the Bureau of Economic Analysis;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">relatively low customer stockpiles, estimated by
    the U.S.&nbsp;Energy Information Administration
    (&#147;EIA&#148;) to be approximately 114&nbsp;million tons at
    the end of August 2004, down 13% from the same period in the
    prior year;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">declining coal production in Central Appalachia,
    including a decline of 0.6% in Central Appalachian coal
    production volume during the first three quarters of 2004 as
    compared to the same period in 2003;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">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;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">high current and forward prices for natural gas
    and oil, the primary fuels for electricity generation, with spot
    prices as of November&nbsp;29, 2004 for natural gas and heating
    oil at $6.86&nbsp;per million Btu and $1.43&nbsp;per gallon,
    respectively, as reported by Bloomberg L.P.;&nbsp;and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">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.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">U.S.&nbsp;spot steam coal prices have steadily
increased since mid-2003, particularly for coals sourced in the
eastern United States. The table below describes the percentage
increase in year-over-year average reference prices for coal as
of November&nbsp;29, 2004, according to Platts, in the regions
where we produce
</FONT>
</DIV>

<P align="center"><FONT size="2">5
</FONT>

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<DIV style="width: 100%; border: 1px solid black; padding: 12px;">

<DIV align="left">
<FONT size="2">our coal, and the percentage of our produced and
processed coal sales during the first nine months of 2004 by
region:
</FONT>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="47%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="13%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="12%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Percentage of Produced and</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Increase in Average</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Processed Coal Sales in First</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Reference Prices</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Nine Months of 2004</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Central Appalachia
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">83</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">71</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Northern Appalachia
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">98</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">27</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Colorado
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">60</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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, which
operated at an estimated 71% of capacity in 2003, according to
Platts. If existing U.S.&nbsp;coal fueled plants operate at
estimated potential utilization rates of 85%, we believe they
would consume approximately 200&nbsp;million additional tons of
coal per year, which represents an increase of approximately 18%
over current coal consumption.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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
(&#147;NETL&#148;), an arm of the U.S.&nbsp;Department of Energy
(the &#147;DOE&#148;), projects that 74,000&nbsp;megawatts of
new coal-fired electric generation capacity will be constructed
in the United States by 2025. The NETL has identified 94
coal-fired plants, representing 62,000&nbsp;megawatts of
electric generation capacity, that have been proposed and are
currently in various stages of development. The DOE projects
that 58 of these proposed coal-fired plants, representing
38,000&nbsp;megawatts of electric generation capacity, will be
completed and will begin consuming coal to produce electricity
by the end of 2010.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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. Pricing for
U.S.&nbsp;metallurgical coal has also been supported by reduced
production at several U.S.&nbsp;metallurgical coal mines in
2003. 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, and Asia-Pacific Rim consumption of metallurgical coal
continues to strain supply. For example, BHP Billiton, a major
Australian producer, reported average price settlement increases
of 28% for annually-priced metallurgical coal sales contracts in
2004 as compared to 2003, and Fording Canadian Coal Trust, a
major Canadian producer, reported increases in metallurgical
coal sales prices in the third quarter of 2004 of 22% over the
same period in 2003. The tightening supply of metallurgical coal
in global markets has been due in part to recent supply
disruptions in Australia, the world&#146;s largest coal
exporter, and the decision by China, the world&#146;s second
largest coal exporter, to restrict its metallurgical coal
exports in order to satisfy domestic demand. Additionally, the
recent weakness of the U.S.&nbsp;dollar has made
U.S.&nbsp;metallurgical coal more competitive in international
markets. The table below describes average sale prices,
according to Platts, for low volatile metallurgical coal at the
Hampton Roads, Virginia export terminals, through which we ship
the great majority of our metallurgical coal exports and which
collectively constitute the highest volume export facility for
U.S. metallurgical coal production, and the percentage increase
in prices year-over-year:
</FONT>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="54%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Average Sale Prices</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Per Ton for Low</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Volatile Metallurgical</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Coal at Hampton Roads,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Virginia Export</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Terminals</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Percentage Increase</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2004</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">from 2003 to 2004</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">October&nbsp;6, 2003 and October&nbsp;4, 2004
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">52.00</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">135.00</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">163</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">July&nbsp;7, 2003 and July&nbsp;5, 2004
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">50.45</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">125.00</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">168</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">March&nbsp;31, 2003 and April&nbsp;5, 2004
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">51.20</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">135.00</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">161</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

</TABLE>
</CENTER>
</DIV>

<P align="center"><FONT size="2">6
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="width: 100%; border: 1px solid black; padding: 12px;">

<P align="center">
<B><FONT size="2">Internal Restructuring</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Immediately prior to the effectiveness of the
registration statement of which this prospectus is a part, we
will complete a series of internal restructuring transactions,
which we refer to collectively as our &#147;Internal
Restructuring,&#148; for the purpose of transitioning from an
organizational structure in which our top-tier holding company
is a limited liability company to a structure in which our
top-tier holding company is a corporation. Our current top-tier
holding company is ANR Holdings. Following the Internal
Restructuring, the current members of ANR Holdings will be
stockholders of our new top-tier holding company, Alpha Natural
Resources, Inc., which is issuing shares of its common stock to
the public in this offering. See &#147;Internal
Restructuring.&#148;
</FONT>
</DIV>

<P align="center"><FONT size="2">7
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="width: 100%; border: 1px solid black; padding: 12px;">

<P align="center">
<B><FONT size="2">The Offering</FONT></B>

<DIV>&nbsp;</DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

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

<TR>
    <TD valign="top">
    <FONT size="2">Shares of common stock offered by us:
    </FONT></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <FONT size="2">Shares of common stock outstanding after this
    offering(1)
    </FONT></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <FONT size="2">Use of proceeds
    </FONT></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">We estimate that our net proceeds from the sale
    of the shares in this offering will be approximately
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.
    We intend to use all these net proceeds to repay promissory
    notes that we will issue to certain of our existing stockholders
    as part of our Internal Restructuring. We refer to these
    promissory notes as the &#147;Restructuring Notes.&#148; We
    intend to use the net proceeds from any shares sold pursuant to
    the underwriters&#146; over-allotment option to make
    distributions to our existing stockholders. See &#147;Use of
    Proceeds&#148; and &#147;Internal Restructuring.&#148;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <FONT size="2">Proposed New York Stock Exchange symbol
    </FONT></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">ANR.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<HR size="1" width="18%" align="left" noshade>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(1)</FONT></TD>
    <TD align="left">
    <FONT size="2">Shares outstanding
    includes &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    that will be distributed to our existing stockholders to the
    extent the underwriters do not exercise their over-allotment
    option to purchase additional shares from us. See &#147;Dividend
    Policy.&#148;
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<FONT size="2">Shares outstanding
excludes &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock reserved for issuance under the Alpha Coal
Management Amended and Restated Long-Term Incentive Plan, under
which options to
purchase &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 at a weighted average exercise price of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;will
be outstanding as of the effectiveness of the registration
statement of which this prospectus is a part,
and &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock reserved for issuance under the Alpha Natural
Resources, Inc. Long-Term Incentive Plan, under which options to
purchase &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 at an exercise price equal to the initial public
offering price will be granted to certain key employees upon
consummation of this offering.
</FONT>

<P align="center">
<B><FONT size="2">Additional Information</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our principal executive offices are located at
406&nbsp;West Main Street, Abingdon, Virginia 24210 and our
telephone number is (276)&nbsp;619-4410.
</FONT>

<P align="center">
<B><FONT size="2">Risk Factors</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Investing in our common stock involves
substantial risks. You should carefully consider the information
in the &#147;Risk Factors&#148; section and all other
information included in this prospectus before investing in our
common stock.
</FONT>
</DIV>

<P align="center"><FONT size="2">8
</FONT>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="width: 100%; border: 1px solid black; padding: 12px;">

<P align="center">
<B><FONT size="2">Summary Historical and Pro Forma Financial
Data</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Alpha Natural Resources, Inc. was incorporated on
November&nbsp;29, 2004 and has not engaged in any business or
other activities except in connection with its formation and the
Internal Restructuring. The following summary historical
financial data as of December&nbsp;31, 2002 and 2003 and
September&nbsp;30, 2004, for the period from December&nbsp;14,
2002 through December&nbsp;31, 2002, for the year ended
December&nbsp;31, 2003 and for the nine months ended
September&nbsp;30, 2004, have been derived from the combined
financial statements of ANR Fund&nbsp;IX Holdings, L.P. and
Alpha NR&nbsp;Holding, Inc. and subsidiaries (the owners of a
majority of the membership interests of ANR Holdings prior to
the Internal Restructuring), and the related notes, included
elsewhere in this prospectus, which have been audited by KPMG
LLP (&#147;KPMG&#148;), an independent registered public
accounting firm. The summary historical financial data for the
nine months ended September&nbsp;30, 2003 have been derived from
the unaudited combined financial statements of ANR Fund&nbsp;IX
Holdings, L.P. and Alpha NR Holding, Inc. and subsidiaries, and
the related notes, included elsewhere in this prospectus. In the
opinion of management, the financial data for the nine months
ended September&nbsp;30, 2003 and 2004 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 summary historical financial
data for the year ended December&nbsp;31, 2001 and the period
from January&nbsp;1, 2002 through December&nbsp;13, 2002
(together, the &#147;Predecessor Periods&#148;) have been
derived from our Predecessor&#146;s combined financial
statements and the related notes, included elsewhere in this
prospectus, which have been audited by KPMG.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On December&nbsp;13, 2002, we acquired a majority
of the Virginia coal operations of Pittston Coal Company, a
subsidiary of The Brink&#146;s Company. The Predecessor Periods
reflect the historical basis of accounting of these operations
and the periods from and after December&nbsp;14, 2002 reflect
the effects of purchase accounting for the acquisition of these
operations. Accordingly, the results of operations for the
Predecessor Periods are not comparable to the results of
operations for the periods from and after December&nbsp;14,
2002. On January&nbsp;31, 2003, we acquired Coastal Coal
Company, LLC (&#147;Coastal Coal Company&#148;), and the results
of operations of Coastal Coal Company are included in our
historical results of operations for periods from and after
February&nbsp;1, 2003. In addition, on March&nbsp;11, 2003, we
acquired the U.S.&nbsp;coal production and marketing assets of
American Metals&nbsp;&#38; Coal International, Inc.
(&#147;AMCI&#148;), and the results of operations of this
business are included in our historical results of operations
for periods from and after March&nbsp;12, 2003. We refer to the
U.S. coal production and marketing assets we acquired from AMCI
as &#147;U.S. AMCI&#148;. Further, on November&nbsp;17, 2003, we
acquired Mears Enterprises, Inc. and affiliated entities
(collectively, &#147;Mears&#148;), and the results of operations
of Mears are included in our historical results of operations
for periods from and after November&nbsp;18, 2003. Our financial
results reflect the effects of purchase accounting for the
acquisitions of Coastal Coal Company, U.S.&nbsp;AMCI and Mears,
which we refer to, collectively, as the &#147;2003
Acquisitions.&#148; On May&nbsp;18, 2004, our subsidiaries,
Alpha Natural Resources, LLC and Alpha Natural Resources Capital
Corp., issued $175.0&nbsp;million principal amount of
10%&nbsp;senior notes due 2012, and on May&nbsp;28, 2004, Alpha
Natural Resources, LLC entered into a new $175.0&nbsp;million
credit facility (together referred to as the &#147;2004
Financings&#148;). We refer to the 2003 Acquisitions, the 2004
Financings and the Internal Restructuring, collectively, as the
&#147;Prior Transactions.&#148;
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The summary pro forma balance sheet data as of
September&nbsp;30, 2004 give pro forma effect to the Internal
Restructuring as if it had occurred on September&nbsp;30, 2004,
as further adjusted to give effect to this offering and the
intended application of the net proceeds therefrom. The summary
pro forma statements of operations data for the year ended
December&nbsp;31, 2003 and for the nine months ended
September&nbsp;30, 2004 give pro forma effect to all of the
Prior Transactions as if they were completed on January&nbsp;1,
2003. The summary pro forma financial data are for informational
purposes only and should not be considered indicative of actual
results that would have been achieved had these events actually
been consummated on the dates indicated and do not purport to
indicate results of operations as of any future date or for any
future period.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following data should be read in conjunction
with &#147;Unaudited Pro Forma Financial Information,&#148;
&#147;Selected Historical Financial Data,&#148;
&#147;Management&#146;s Discussion and Analysis of Financial
Condition and Results of Operations,&#148; &#147;Internal
Restructuring&#148; and our combined financial statements, and
the related notes, included elsewhere in this prospectus.
</FONT>
</DIV>

<P align="center"><FONT size="2">9
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="width: 100%; border: 1px solid black; padding: 12px;">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="9%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="15"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="15" align="center" nowrap><B><FONT size="1">ANR Fund&nbsp;IX Holdings, L.P. and</FONT></B></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Predecessor</FONT></B></TD>
    <TD></TD>
    <TD colspan="15" align="center" nowrap><B><FONT size="1">Alpha NR Holding, Inc. and Subsidiaries</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Alpha Natural Resources, Inc.</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="15" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="15"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Pro Forma</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Period</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Period</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Nine Months</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Nine Months</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Pro Forma</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Nine Months</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Year Ended</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">January 1 to</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December 14 to</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Year Ended</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Ended</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Ended</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Year Ended</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Ended</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;13,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">September&nbsp;30,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">September&nbsp;30,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">September&nbsp;30,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2004</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2004</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">(unaudited)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">(unaudited)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">(unaudited)</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="31"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="31" align="center" nowrap><B><FONT size="1">(in thousands, except per share and per ton data)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="1">Statement of Operations Data:</FONT></B></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Revenues:
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Coal revenues
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">227,237</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">154,715</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">6,260</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">701,262</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">504,660</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">808,655</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">808,798</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">808,655</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Freight and handling revenues
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">25,808</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">17,001</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">1,009</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">73,800</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">49,803</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">106,291</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">75,713</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">106,291</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Other revenues
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">8,472</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">6,031</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">101</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">17,504</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">11,244</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">22,117</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">18,255</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">22,117</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Total revenues
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">261,517</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">177,747</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">7,370</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">792,566</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">565,707</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">937,063</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">902,766</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">937,063</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Costs and expenses:
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Cost of coal sales
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">219,545</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">158,924</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">6,268</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">632,979</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">450,731</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">677,100</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">713,503</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">677,100</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Freight and handling costs
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">25,808</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">17,001</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">1,009</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">73,800</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">49,803</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">106,291</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">75,713</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">106,291</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Cost of other revenues
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">8,156</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">7,973</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">120</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">16,750</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">11,532</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">16,943</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">16,750</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">16,943</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Depreciation, depletion and amortization
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">7,866</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">6,814</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">274</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">36,054</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">25,806</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">39,352</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">45,951</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">39,352</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Asset impairment charge
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">5,100</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">5,100</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Selling, general and administrative expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">9,370</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">8,797</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">471</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">21,949</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">16,697</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">35,786</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">29,389</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">35,786</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Costs to exit business
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">3,500</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">25,274</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Total costs and expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">274,245</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">224,783</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">8,142</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">781,532</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">554,569</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">880,572</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">881,306</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">880,572</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Refund of federal black lung excise tax
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">16,213</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">2,049</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Gain on sale of fixed assets, net
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">342</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">342</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Other operating income, net
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">94</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">1,430</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Income (loss) from operations
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">3,579</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(43,557</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(772</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">11,034</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">11,138</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">56,833</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">21,460</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">56,833</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Other income (expense):
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Interest expense
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(35</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(203</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(7,848</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(5,964</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(14,497</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(22,355</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(17,100</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Interest income
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">1,993</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">2,072</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">6</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">103</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">91</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">331</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">422</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">331</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Miscellaneous income
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">1,250</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">575</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">451</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">527</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">799</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">527</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Total other income (expense), net
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">3,243</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">2,037</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(197</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(7,170</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(5,422</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(13,639</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(21,134</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(16,242</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Income (loss) before income taxes and minority
    interest
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">6,822</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(41,520</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(969</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">3,864</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">5,716</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">43,194</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">326</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">40,591</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Income tax expense (benefit)
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(1,497</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(17,198</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(334</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">668</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">988</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">4,732</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(321</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">11,176</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Minority interest
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">934</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">1,750</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">19,562</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Net income (loss)
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">8,319</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(24,322</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(635</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">2,262</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">2,978</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">18,900</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">647</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">29,415</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="1">Statement of Cash Flows Data:</FONT></B></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Net cash provided by (used in) operations:
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Operating activities
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">10,655</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(13,816</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(295</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">54,104</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">38,149</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">99,247</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Investing activities
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(9,203</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(22,054</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(38,893</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(100,072</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(61,133</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(67,235</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Financing activities
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(1,462</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">35,783</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">47,632</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">48,770</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">33,569</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(27,447</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Capital expenditures
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">10,218</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">21,866</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">960</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">27,719</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">27,130</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">52,984</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="1">Other Financial Data:</FONT></B></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">EBITDA(1)(2)
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">68,210</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">96,712</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="1">Operating Data:</FONT></B></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Tons sold
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">6,975</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">4,283</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">186</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">21,930</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">15,778</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">19,424</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">25,329</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">19,424</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Tons produced
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">6,248</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">4,508</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">87</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">17,532</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">12,867</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">14,193</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">20,442</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">14,193</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Average coal sales realization (per&nbsp;ton)
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">32.58</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">36.12</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">33.66</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">31.98</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">31.99</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">41.63</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">31.93</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">41.63</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>
</DIV>

<P align="center"><FONT size="2">10
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="width: 100%; border: 1px solid black; padding: 12px;">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="29%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="11"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Alpha Natural</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">ANR Fund IX Holdings, L.P. and</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Resources, Inc.</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">Alpha NR&nbsp;Holding, Inc. and</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Predecessor</FONT></B></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">Subsidiaries</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Pro Forma</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">as Adjusted</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">As of</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">As of</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">As of December&nbsp;31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">As of</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">as of</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;13,</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">September&nbsp;30,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">September&nbsp;30,</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2004</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2004</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center"><B><FONT size="1">(unaudited)</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">(in thousands)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Balance sheet data:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cash and cash equivalents
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">175</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">88</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,444</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,246</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15,811</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15,811</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">139,467</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">156,328</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">108,442</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">379,336</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">457,823</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Notes payable and long-term debt, including
    current portion
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25,743</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">84,964</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">185,617</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">185,617</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Stockholders&#146; equity and partners&#146;
    capital (deficit)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(136,593</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(132,997</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">23,384</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">86,367</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">44,885</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left">
<HR size="1" width="15%" align="left" noshade>
</DIV>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">EBITDA, a measure used by management to measure
    operating performance, is defined as net income plus interest
    expense, income tax expense (benefit) and depreciation,
    depletion and amortization, less interest income. We have
    presented EBITDA because our management believes that it is
    frequently used by securities analysts, investors and other
    interested parties in the evaluation of companies in our
    industry, some of which present EBITDA when reporting their
    results. We regularly evaluate our performance as compared to
    other companies in our industry that have different financing
    and capital structures and/or tax rates by using EBITDA. We
    believe that EBITDA allows for meaningful company-to-company
    performance comparisons by adjusting for factors such as
    interest expense, depreciation, depletion, amortization and
    taxes, which often vary from company to company. In addition, we
    use EBITDA in evaluating acquisition targets. EBITDA is not a
    recognized term under GAAP and does not purport to be an
    alternative to net income, operating income or any other
    performance measures derived in accordance with GAAP or an
    alternative to cash flow from operating activities as a measure
    of operating liquidity. Because not all companies use identical
    calculations, this presentation of EBITDA may not be comparable
    to other similarly titled measures of other companies.
    Additionally, EBITDA is not intended to be a measure of free
    cash flow for management&#146;s discretionary use, as it does
    not reflect certain cash requirements such as tax payments,
    interest payments and other debt service requirements. The
    amounts presented for EBITDA differ from the amounts calculated
    under the definition of EBITDA used in our debt covenants. The
    definition of EBITDA used in our debt covenants is further
    adjusted for certain cash and non-cash charges and is used to
    determine compliance with financial covenants and our ability to
    engage in certain activities such as incurring additional debt
    and making certain payments. Adjusted EBITDA as it is used and
    defined in our debt covenants is described and reconciled to net
    income (loss) in &#147;Management&#146;s Discussion and Analysis
    of Financial Condition and Results of Operations&#151; Liquidity
    and Capital Resources&#151; Analysis of Material Debt
    Covenants.&#148;
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<FONT size="2">EBITDA is calculated and reconciled to net income
in the table below:
</FONT>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="59%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Alpha Natural</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Resources, Inc.</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Pro Forma</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Pro Forma Nine</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Year Ended</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Months Ended</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">September&nbsp;30,</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2004</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">(unaudited)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">(unaudited)</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">(in thousands)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">647</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">29,415</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Interest expense
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">22,355</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">17,100</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Interest income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(422</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(331</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Income tax expense (benefit)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(321</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,176</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Depreciation, depletion and amortization
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">45,951</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">39,352</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">EBITDA
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">68,210</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">96,712</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">EDITDA was impacted by the following unusual
    items of expense:
    </FONT></TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="59%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Alpha Natural</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Resources, Inc.</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Pro Forma</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Pro Forma Nine</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Year Ended</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Months Ended</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">September&nbsp;30,</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2004</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">(unaudited)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">(unaudited)</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">(in thousands)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Adjustment to cost of coal sold for write-up of
    inventory in purchase accounting
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,694</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Charges for transition services
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,034</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Discontinued compensation expense on acquired
    companies
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,865</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Asset impairment charge
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,100</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD><FONT size="2">(2)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">We have not presented EBITDA for the Predecessor
    Periods or for periods with significant minority interest
    because management does not believe such presentation would be
    meaningful.
    </FONT></TD>
</TR>

</TABLE>
</DIV>

<P align="center"><FONT size="2">11
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<FONT size="2"> <A name='102'></A>
</FONT>
</DIV>

<!-- link1 "RISK FACTORS" -->

<P align="center">
<B><FONT size="2">RISK FACTORS</FONT></B>

<P align="left">
<I><FONT size="2">An investment in our common stock involves
risks. You should carefully consider the risks described below
as well as the other information contained in this prospectus
before investing in our common stock.</FONT></I>

<P align="left">
<B><FONT size="2">Risks Relating to Our Business</FONT></B>

<P align="left">
<B><FONT size="2">A substantial or extended decline in coal
prices could reduce our revenues and the value of our coal
reserves.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">the supply of and demand for domestic and foreign
    coal;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">the demand for electricity;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">domestic and foreign demand for steel and the
    continued financial viability of the domestic and/or foreign
    steel industry;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">the proximity to, capacity of, and cost of
    transportation facilities;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">domestic and foreign governmental regulations and
    taxes;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">air emission standards for coal-fired power
    plants;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">regulatory, administrative, and judicial
    decisions;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">the price and availability of alternative fuels,
    including the effects of technological developments;&nbsp;and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">the effect of worldwide energy conservation
    measures.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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.
</FONT>

<P align="left">
<B><FONT size="2">Our coal mining production is subject to
operating risks that could result in higher operating expenses
and/or reduced revenues.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">our inability to acquire, maintain or renew
    necessary permits or mining or surface rights;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">changes or variations in geologic conditions,
    such as the thickness of the coal deposits and the amount of
    rock embedded in or overlying the coal deposit;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">failure of reserve estimates to prove correct;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">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;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">mining and processing equipment failures and
    unexpected maintenance problems;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">interruptions due to transportation delays;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">adverse weather and natural disasters, such as
    heavy rains and flooding;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">accidental mine water discharges;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">the unavailability of qualified labor;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">strikes and other labor-related interruptions;
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">12
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<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">increased or unexpected reclamation costs;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">the unavailability of required equipment of the
    type and size needed to meet production expectations;&nbsp;and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">unexpected mine safety accidents, including fires
    and explosions.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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 to production of coal by us or
third parties who supply us with coal could adversely affect our
business and revenues.
</FONT>

<P align="left">
<B><FONT size="2">Any change in coal consumption patterns by
steel producers or 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.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Steam coal accounted for approximately 63% of our
coal sales volume in the first nine months of 2004 and 73% of
our 2003 pro forma coal sales volume. The majority of our sales
of steam coal in both periods were to U.S. and Canadian electric
power generators. Domestic electric power generation accounted
for approximately 92% of all U.S.&nbsp;coal consumption in 2003,
according to the EIA. The amount of coal consumed for U.S. and
Canadian 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 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 they are cheaper to construct
than coal-fired plants and because natural gas is a cleaner
burning fuel. 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 power
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.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We produce metallurgical coal that is used in
both the U.S. and foreign steel industries. Metallurgical coal
represented approximately 37% of our coal sales volume in the
first nine months of 2004 and 27% of our 2003 pro forma coal
sales volume. In recent years, U.S.&nbsp;steel producers have
experienced a substantial decline in the prices received for
their products, due at least in part to a heavy volume of
foreign steel imported into the United States. Although prices
for some U.S.&nbsp;steel products increased moderately after the
Bush administration imposed steel import tariffs and quotas in
March 2002, those tariffs and quotas were lifted in December
2003. Any deterioration in conditions in the U.S.&nbsp;steel
industry would reduce the demand for our metallurgical coal and
impact the collectibility of our accounts receivable from
U.S.&nbsp;steel industry customers. In addition, the
U.S.&nbsp;steel industry increasingly relies on electric arc
furnaces or pulverized coal processes to make steel. These
processes do not use coke. If this trend continues, the amount
of metallurgical coal that we sell and the prices that we
receive for it could decrease, thereby reducing our revenues and
adversely impacting our earnings and the value of our coal
reserves.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Portions of our coal reserves possess quality
characteristics that enable us to market them as either
metallurgical coal or high quality steam coal, depending on the
prevailing conditions in the metallurgical and steam coal
markets. Under current market conditions, we are able to market
a significant portion of our higher quality steam coal as
metallurgical coal. A decline in the metallurgical market
relative to the steam market could result in coal being switched
from the metallurgical market to the steam market. Since
metallurgical coal is generally priced higher than steam coal,
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 we are unable to sell metallurgical coal to the steel
market, these mines may not be economically viable and may be
</FONT>

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<FONT size="2">subject to closure. Such closures would lead to
additional reclamation costs as well as reduced revenue and
profitability.
</FONT>
</DIV>

<P align="left">
<B><FONT size="2">Our business will be adversely affected if we
are unable to develop or acquire additional coal reserves that
are economically recoverable.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our profitability depends substantially on our
ability to mine coal reserves possessing geological
characteristics that can be cost-effectively mined and processed
by us. We have not yet applied for the permits required or
developed the mines necessary to mine all of our reserves.
Permits are becoming increasingly more difficult and expensive
to obtain and the review process continues to lengthen.
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.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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. If we are unable to replace or increase our coal
reserves on acceptable terms, our production and revenues will
decline as our reserves are depleted. 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
acquire additional coal reserves through acquisitions in the
future also could be limited by restrictions under our existing
or future debt agreements, competition from other coal companies
for attractive properties, or the lack of suitable acquisition
candidates.
</FONT>

<P align="left">
<B><FONT size="2">Defects in title of any leasehold interests in
our properties could limit our ability to mine these properties
or result in significant unanticipated costs.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We conduct a significant part of our mining
operations on properties that we lease. Title to most of our
leased properties and mineral rights is not thoroughly verified
until a permit to mine the property is obtained, and in some
cases title with respect to leased properties is not verified at
all. Our right to mine some of our reserves may be materially
adversely affected by defects in title or boundaries. 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, which could adversely
affect our profitability.
</FONT>

<P align="left">
<B><FONT size="2">Acquisitions that we may undertake involve a
number of inherent risks, any of which could cause us not to
realize the anticipated benefits.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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 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:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">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;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">the potential loss of key customers, management
    and employees of an acquired business;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">the ability to achieve identified operating and
    financial synergies anticipated to result from an acquisition;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">problems that could arise from the integration of
    the acquired business;&nbsp;and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">unanticipated changes in business, industry or
    general economic conditions that affect the assumptions
    underlying our rationale for pursuing the acquisition.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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
</FONT>

<P align="center"><FONT size="2">14
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<FONT size="2">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.
</FONT>
</DIV>

<P align="left">
<B><FONT size="2">The inability of the sellers of our
Predecessor and acquired companies to fulfill their
indemnification obligations to us under our acquisition
agreements could increase our liabilities and adversely affect
our results of operations and financial position.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In the acquisition agreements we entered into
with the sellers of our Predecessor and acquired companies, the
respective sellers and, in some of our acquisitions, their
parent companies, agreed to retain responsibility for and
indemnify us against damages resulting from certain third party
claims or other liabilities, such as workers&#146; compensation
liabilities, black lung liabilities, post-retirement medical
liabilities and certain environmental or mine safety
liabilities. The failure of any seller and, if applicable, its
parent company, to satisfy their obligations with respect to
claims and retained liabilities covered by the acquisition
agreements could have an adverse effect on our results of
operations and financial position if claimants successfully
assert that we are liable for those claims and/or retained
liabilities. The obligations of the sellers and, in some
instances, their parent companies, to indemnify us with respect
to their retained liabilities will continue for a substantial
period of time, and in some cases indefinitely. The
sellers&#146; indemnification obligations with respect to
breaches of their representations and warranties in the
acquisition agreements will terminate upon expiration of the
applicable indemnification period (generally 18-24&nbsp;months
from the acquisition date for most representations and
warranties, and five years from the acquisition date for
environmental representations and warranties), are subject to
deductible amounts and will not cover damages in excess of the
applicable coverage limit. The assertion of third party claims
after the expiration of the applicable indemnification period or
in excess of the applicable coverage limit, or the failure of
any seller to satisfy its indemnification obligations with
respect to breaches of its representations and warranties, could
have an adverse effect on our results of operations and
financial position. See &#147;&#151;If our assumptions regarding
our likely future expenses related to benefits for non-active
employees are incorrect, then expenditures for these benefits
could be materially higher than we have predicted.&#148;
</FONT>

<P align="left">
<B><FONT size="2">The loss of, or significant reduction in,
purchases by our largest customers could adversely affect our
revenues and profitability.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our largest customer during the first nine months
of 2004 accounted for approximately 11% of our coal revenues
during the period, and our largest customer during 2003
accounted for approximately 8% of our 2003 pro forma coal
revenues. We derived 44% of our coal revenues for the nine
months ended September&nbsp;30, 2004 and 51% of our pro forma
2003 coal revenues from sales to our ten largest customers.
These customers may not continue to purchase coal from us under
our current coal supply agreements, or at all. If 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
revenues and profitability could suffer materially.
</FONT>

<P align="left">
<B><FONT size="2">Changes in purchasing patterns in the coal
industry may make it difficult for us to extend existing supply
contracts or enter into new long-term supply contracts with
customers, which could adversely affect the capability and
profitability of our operations.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We sell a significant portion of our coal under
long-term coal supply agreements, which are contracts with a
term greater than 12&nbsp;months. The execution of a
satisfactory long-term coal supply agreement is frequently the
basis on which we undertake the development of coal reserves
required to be supplied under the contract. For the nine months
ended September&nbsp;30, 2004 and, on a pro forma basis, for the
year ended December&nbsp;31, 2003, we believe that approximately
70% and 52%, respectively, of our sales volume was sold under
long-term coal supply agreements. At September&nbsp;30, 2004,
our long-term coal supply agreements had remaining terms ranging
from one to six years and an average remaining term of
approximately two years. When our current contracts with
customers expire or are otherwise renegotiated, our customers
may decide to purchase fewer tons of coal than in the past or on
different terms, including
</FONT>

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</FONT>

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<FONT size="2">pricing terms less favorable to us. For
additional information relating to these contracts, see
&#147;Business&#151; Marketing, Sales and Customer
Contracts.&#148;
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As electric utilities continue to adjust to
frequently changing regulations, including the Acid Rain
regulations of the Clean Air Act, the proposed Utility Mercury
Reductions Rule, the proposed Clean Air Interstate Rule and the
possible deregulation of their industry, they are becoming
increasingly less willing to enter into long-term coal supply
contracts and instead are purchasing higher percentages of coal
under short-term supply contracts. The industry shift away from
long-term supply contracts 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. The prices we receive in the spot market may be
less than the contractual price an electric utility is willing
to pay for a committed supply. Furthermore, spot market prices
tend to be more volatile than contractual prices, which could
result in decreased revenues.
</FONT>

<P align="left">
<B><FONT size="2">Certain provisions in our long-term supply
contracts may reduce the protection these contracts provide us
during adverse economic conditions or may result in economic
penalties upon our failure to meet specifications.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Price adjustment, &#147;price reopener&#148; and
other similar provisions in long-term supply contracts may
reduce the protection from short-term coal price volatility
traditionally provided by these contracts. Price reopener
provisions are particularly common in international
metallurgical coal sales contracts. Some of our coal supply
contracts contain provisions that allow for the price to be
renegotiated at periodic intervals. 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 pre-set &#147;floor&#148; and
&#147;ceiling.&#148; 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
renegotiation leading to a significantly lower contract price
could result in decreased revenues. Accordingly, supply
contracts with terms of one year or more may provide only
limited protection during adverse market conditions.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Coal supply agreements also typically contain
force majeure provisions allowing temporary suspension of
performance by us or the customer 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,
grindability and ash fusion temperature. Failure to meet these
specifications could result in economic penalties, including
price adjustments, the rejection of deliveries or termination of
the contracts. Moreover, some of these agreements permit the
customer to terminate the contract if transportation costs,
which our customers typically bear, increase substantially. In
addition, some of these contracts allow our customers to
terminate their contracts in the event of changes in regulations
affecting our industry that increase the price of coal beyond
specified limits.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Due to the risks mentioned above with respect to
long-term supply contracts, we may not achieve the revenue or
profit we expect to achieve from these sales commitments.
</FONT>

<P align="left">
<B><FONT size="2">Disruption in supplies of coal produced by
contractors and other third parties could temporarily impair our
ability to fill customers&#146; orders or increase our
costs.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition to marketing coal that is produced by
our subsidiaries&#146; employees, we utilize contractors to
operate some of our mines. Operational difficulties at
contractor-operated mines, changes in demand for contract miners
from other coal producers, and other factors beyond our control
could affect the availability, pricing, and quality of coal
produced for us by contractors. To meet customer specifications
and increase efficiency in fulfillment of coal contracts, we
also purchase and resell coal produced by third parties from
their controlled reserves. The majority of the coal that we
purchase from third parties is blended with coal produced from
our mines prior to resale and we also process (which includes
washing, crushing or blending coal at one of our preparation
plants or loading facilities) a portion of the coal that we
purchase from third parties prior to resale. We sold
5.4&nbsp;million and 6.1&nbsp;million tons, respectively, of
</FONT>

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<FONT size="2">coal purchased from third parties during the
first nine months of 2004 and on a pro forma basis in 2003,
representing 28% and 24%, respectively, of our total sales
during the respective periods. Of our tons sold during the first
nine months of 2004 and on a pro forma basis in 2003, we believe
that approximately 23% and 20%, respectively, consisted of coal
purchased from third parties that we blended with coal produced
from our mines prior to resale, and approximately 3% and 6%,
respectively, consisted of coal purchased from third parties
that we processed before resale. The availability of specified
qualities of this third party coal may decrease and prices may
increase as a result of, among other things, changes in overall
coal supply and demand levels, consolidation in the coal
industry and new laws or regulations. Disruption in our supply
of contractor-produced coal and 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 contractor-produced coal or third party coal could
increase our costs and therefore lower our earnings.
</FONT>
</DIV>

<P align="left">
<B><FONT size="2">Competition within the coal industry may
adversely affect our ability to sell coal, and excess production
capacity in the industry could put downward pressure on coal
prices.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We compete with numerous other coal producers in
various regions of the United States for domestic and
international sales. During the mid-1970s and early 1980s,
increased demand for coal attracted new investors to the coal
industry, spurred the development of new mines and resulted in
additional production capacity throughout the industry, all of
which led to increased competition and lower coal prices. Recent
increases in coal prices could encourage the development of
expanded capacity by new or existing coal producers. Any
resulting overcapacity could reduce coal prices and therefore
reduce our revenues.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Coal with lower production costs shipped east
from western coal mines and from offshore sources has resulted
in increased competition for coal sales in the Appalachian
region. This competition could result in a decrease in our
market share in this region and a decrease in our revenues.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Demand for our low sulfur coal and the prices
that we can obtain for it are also affected by, among other
things, the price of emissions allowances. Decreases in the
prices of these emissions allowances could make low sulfur coal
less attractive to our customers. In addition, more widespread
installation by electric utilities of technology that reduces
sulfur emissions (which could be accelerated by increases in the
prices of emissions allowances), may make high sulfur coal more
competitive with our low sulfur coal. This competition could
adversely affect our business and results of operations.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We also compete in international markets against
coal produced in other countries. Measured by tons sold, exports
accounted for approximately 32% of our sales in the first nine
months of 2004 and 20% of our 2003 pro forma sales. 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, 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. For example, if the value of the
U.S.&nbsp;dollar were to rise against other currencies in the
future, our coal would become relatively more expensive and less
competitive in international markets, which could reduce our
foreign sales and negatively impact our revenues and net income.
In addition, if the amount of coal exported from the United
States 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.
</FONT>

<P align="left">
<B><FONT size="2">Fluctuations in transportation costs and the
availability or reliability of transportation could affect the
demand for our coal or temporarily impair our ability to supply
coal to our customers.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Transportation costs represent a significant
portion of the total cost of coal for our customers. 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
</FONT>

<P align="center"><FONT size="2">17
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<FONT size="2">shipments, terrain and labor issues all 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. Historically, high
coal transportation rates from the western coal producing areas
into Central Appalachian markets limited the use of western coal
in those markets. More recently, however, lower rail rates from
the western coal producing areas to markets served by eastern
U.S.&nbsp;producers have created major competitive challenges
for eastern producers. This increased competition could have a
material adverse effect on our business, financial condition and
results of operations.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We depend upon railroads, trucks, beltlines,
ocean vessels and barges to deliver coal to our customers.
Disruption 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, resulting in
decreased shipments. Decreased performance levels over longer
periods of time could cause our customers to look to other
sources for their coal needs, negatively affecting our revenues
and profitability.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In 2003, 78.8% of our pro forma produced and
processed coal volume was transported from the preparation plant
to the customer by rail. If there are disruptions of the
transportation services provided by the railroad companies we
use and we are unable to find alternative transportation
providers to ship our coal, our business could be adversely
affected.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have investments in mines, loading facilities,
and ports that in most cases are serviced by a single rail
carrier. Our operations that are serviced by a single rail
carrier are particularly at risk to disruptions in the
transportation services provided by that rail carrier, due to
the difficulty in arranging alternative transportation. If a
single rail carrier servicing our operations does not provide
sufficient capacity, revenue from these operations and our
return on investment could be adversely impacted.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The states of West Virginia and Kentucky have
recently increased enforcement of weight limits on coal trucks
on their public roads. It is possible that other states in which
our coal is transported by truck could undertake similar actions
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 on a profit-making basis and could therefore
adversely affect revenues and earnings.
</FONT>

<P align="left">
<B><FONT size="2">We face numerous uncertainties in estimating
our recoverable coal reserves, and inaccuracies in our estimates
could result in decreased profitability from lower than expected
revenues or higher than expected costs.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Forecasts of our future performance are based on,
among other things, estimates of our recoverable coal reserves.
We base our estimates of reserve information on engineering,
economic and geological data assembled and analyzed by our
internal engineers and which is periodically reviewed by third
party consultants. There are numerous uncertainties inherent in
estimating the 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, any one of which may, if incorrect, result in an
estimate that varies considerably from actual results. These
factors and assumptions include:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">future coal prices, operating costs, capital
    expenditures, severance and excise taxes, royalties and
    development and reclamation costs;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">future mining technology improvements;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">the effects of regulation by governmental
    agencies;&nbsp;and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">geologic and mining conditions, which may not be
    fully identified by available exploration data and may differ
    from our experiences in areas we currently mine.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As a result, actual coal tonnage recovered from
identified reserve areas or properties, and costs associated
with our mining operations, may vary from estimates. Any
inaccuracy in our estimates related
</FONT>

<P align="center"><FONT size="2">18
</FONT>

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<DIV align="left">
<FONT size="2">to our reserves could result in decreased
profitability from lower than expected revenues or higher than
expected costs.
</FONT>
</DIV>

<P align="left">
<B><FONT size="2">Mining in Central and Northern Appalachia is
more complex and involves more regulatory constraints than
mining in other areas of the United States, which could affect
the mining operations and cost structures of these
areas.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The geological characteristics of Central and
Northern 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 other
regions, 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 our
customers&#146; ability to use coal produced by, our mines in
Central and Northern Appalachia.
</FONT>

<P align="left">
<B><FONT size="2">Our work force could become increasingly
unionized in the future, which could adversely affect the
stability of our production and reduce our
profitability.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Approximately 95% of our coal production in the
first nine months of 2004 and our 2003 pro forma coal production
came from mines operated by union-free employees. As of
September&nbsp;30, 2004, over 90% of our subsidiaries&#146;
approximately 2,500 employees are union-free. However, our
subsidiaries&#146; employees have the right at any time under
the National Labor Relations Act to form or affiliate with a
union. Any further unionization of our subsidiaries&#146;
employees, or the employees of third party contractors who mine
coal for us, could adversely affect the stability of our
production and reduce our profitability.
</FONT>

<P align="left">
<B><FONT size="2">Our unionized work force could strike in the
future, which could disrupt production and shipments of our coal
and increase costs.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">A negotiated wage agreement between one of our
subsidiaries and the United Mine Workers of America
(&#147;UMWA&#148;) covering 117&nbsp;employees has expired, and
a successor agreement is currently being renegotiated for these
affected employees. That same subsidiary has another negotiated
wage agreement with the UMWA covering 77&nbsp;employees that
will expire in March 2005. Two of our other subsidiaries have
negotiated wage agreements with the UMWA covering an aggregate
of 30&nbsp;employees that will expire in December 2006. Some or
all of the affected employees at each location could strike,
which would adversely affect our productivity, increase our
costs, and disrupt shipments of coal to our customers.
</FONT>

<P align="left">
<B><FONT size="2">Our ability to collect payments from our
customers could be impaired if their creditworthiness
deteriorates.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our ability to receive payment for coal sold and
delivered depends on the continued creditworthiness of our
customers. During the first nine months of 2004 and in 2003, we
had $298,000 and $68,000, respectively, of bad debt expense. 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.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have contracts to supply coal to energy
trading and brokering companies under which those companies sell
coal to end users. During 2003, the creditworthiness of the
energy trading and brokering companies with which we do business
declined, increasing the risk that we may not be able to collect
payment for all coal sold and delivered to or on behalf of these
energy trading and brokering companies.
</FONT>

<P align="center"><FONT size="2">19
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<P align="left">
<B><FONT size="2">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.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The coal mining industry is subject to
increasingly strict regulation by federal, state and local
authorities with respect to matters such as:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">employee health and safety;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">mandated benefits for retired coal miners;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">mine permitting and licensing requirements;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">reclamation and restoration of mining properties
    after mining is completed;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">air quality standards;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">water pollution;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">plant and wildlife protection;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">the discharge of materials into the environment;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">surface subsidence from underground
    mining;&nbsp;and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">the effects of mining on groundwater quality and
    availability.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The costs, liabilities and requirements
associated with these 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. 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;
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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.
</FONT>

<P align="left">
<B><FONT size="2">Extensive environmental regulations affect our
customers and could reduce the demand for coal as a fuel source
and cause our sales to decline.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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 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.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Various new and proposed laws and regulations may
require further reductions in emissions from coal-fired
utilities. For example, under the proposed Interstate Air
Quality Rule (now known as the Clean Air Interstate Rule) issued
in January 2004, the U.S.&nbsp;Environmental Protection Agency
(the &#147;EPA&#148;) would further regulate sulfur dioxide and
nitrogen oxides from coal-fired power plants. Among other
things, this proposed rule seeks to cut regional sulfur dioxide
emissions by approximately 40% below 2002 levels in 2010, and by
approximately 70% below 2002 levels in 2015. The stringency of
this cap may require many
</FONT>

<P align="center"><FONT size="2">20
</FONT>

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<DIV align="left">
<FONT size="2">coal-fired sources to install additional
pollution control equipment, such as wet scrubbers, to comply.
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 addition, under the Clean Air Act, coal-fired power plants
will be required to control hazardous air pollution emissions by
no later than 2009, which likely will require significant new
investment in pollution-control devices by power plant
operators. Further, in January 2004, the EPA proposed the
Utility Mercury Reductions Rule for controlling 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 standards and
future standards could have the effect of making coal-fired
plants unprofitable, 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.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">There have been several proposals in Congress,
including the Clear Skies Initiative, that are designed to
further reduce emissions of sulfur dioxide, nitrogen oxides and
mercury from power 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.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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. In November
2004, Russia ratified the Kyoto Protocol to the 1992 Framework
Convention on Global Climate Change (the &#147;Protocol&#148;),
which establishes a binding set of emission targets for
greenhouse gases. With Russia&#146;s accedence, the Protocol now
has sufficient support and will become binding on all those
countries that have ratified it on February&nbsp;16, 2005. Four
industrialized nations have refused to ratify the 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 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. Canada, which
accounted for 5.9% of our sales volume in the first nine months
of 2004 and 8.3% of our pro forma sales volume in 2003, ratified
the Protocol in 2002. Under the Protocol, Canada will be
required to cut greenhouse gas emissions to 6% below 1990 levels
in a series of phased reductions from 2008 to 2012, either in
direct reductions in emissions or by obtaining credits through
the Protocol&#146;s market mechanisms. This could result in
reduced demand for coal by Canadian electric power generators.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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
reduction targets 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 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.
</FONT>

<P align="center"><FONT size="2">21
</FONT>

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<P align="left">
<B><FONT size="2">Our operations may impact the environment or
cause exposure to hazardous substances, and our properties may
have environmental contamination, which could result in material
liabilities to us.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our operations currently use hazardous materials
and generate limited quantities of hazardous wastes from time to
time. Our Predecessor and acquired companies also utilized
certain hazardous materials and generated similar wastes. 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 for the investigation and clean up
of soil, surface water, groundwater, and other media. Such
claims may arise, for example, out of current or former
conditions at sites that we own or operate currently, as well as
at sites that we or our Predecessor and acquired companies 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 contamination or
other damages, or even for the entire share. We have not been
subject to claims arising out of contamination at our
facilities, but may incur such liabilities in the future.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We maintain extensive coal slurry impoundments at
a number of our mines. Such impoundments are subject to
extensive 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. 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.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">These and other similar unforeseen impacts that
our operations may have on the environment, as well as exposures
to hazardous substances or wastes associated with our
operations, could result in costs and liabilities that could
materially and adversely affect us.
</FONT>

<P align="left">
<B><FONT size="2">We may be unable to obtain and renew permits
necessary for our operations, which would reduce our production,
cash flow and profitability.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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, valley
fills or other mining activities. The Army Corps of Engineers
(the &#147;COE&#148;) 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
the COE in the U.S.&nbsp;District Court for the Southern
District of West Virginia seeking to invalidate
&#147;nationwide&#148; permits utilized by the COE 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
</FONT>

<P align="center"><FONT size="2">22
</FONT>

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<DIV align="left">
<FONT size="2">&#147;individual&#148; permits. On July&nbsp;8,
2004, the court issued an order enjoining the further issuance
of Nationwide&nbsp;21 permits within the Southern District of
West Virginia. Although we had no operations that were
immediately impacted or interrupted, this decision may require
us to convert certain current and planned applications for
Nationwide&nbsp;21 permits to applications for individual
permits.
</FONT>
</DIV>

<P align="left">
<B><FONT size="2">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.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our current operations consist primarily of the
assets of our Predecessor and the other operations 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, 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, 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,
segregation of duties, timely reconciliation of accounts, review
of transactions and 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 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.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We will incur incremental costs 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.
</FONT>

<P align="left">
<B><FONT size="2">Our ability to operate our company effectively
could be impaired if we fail to attract and retain key
personnel.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our ability to operate our business and implement
our strategies depends, in part, on the efforts of our executive
officers and other key employees. In addition, our future
success will depend on, among other factors, our ability to
attract and retain other qualified personnel. The loss of the
services of any of our executive officers or other key employees
or the inability to attract or retain other qualified personnel
in the future could have a material adverse effect on our
business or business prospects.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have entered into employment agreements with
two of our executive officers&#151; Michael&nbsp;J. Quillen, our
Chief Executive Officer, and D.&nbsp;Scott Kroh, one of our
Executive Vice Presidents. Each of our other executive officers
are employed on an at-will basis. Unless extended, our
employment agreements with Messrs.&nbsp;Quillen and Kroh
terminate on March&nbsp;11, 2006 and 2005, respectively. When
the terms of these agreements expire, we may not be able to
renew or extend these employment agreements on terms acceptable
to us.
</FONT>

<P align="left">
<B><FONT size="2">Our significant indebtedness could harm our
business by limiting our available cash and our access to
additional capital and could force us to sell material assets or
take other actions to attempt to reduce our
indebtedness.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We are a highly leveraged company. Our financial
performance could be affected by our significant indebtedness.
At September&nbsp;30, 2004, we had approximately
$185.6&nbsp;million of indebtedness outstanding.
</FONT>

<P align="center"><FONT size="2">23
</FONT>

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<DIV align="left">
<FONT size="2">In addition, under our credit facility we had
$50.4&nbsp;million of letters of credit outstanding and
additional borrowings available under the revolving portion of
our credit facility of $120.6&nbsp;million. On a pro forma basis
giving effect to the Prior Transactions, this offering and the
application of the proceeds from this offering as described
under &#147;Use of Proceeds&#148; as if they had occurred on
September&nbsp;30, 2004, our ratio of total indebtedness to
stockholders&#146; equity at September&nbsp;30, 2004 would have
been &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;to 1. We may also incur
additional indebtedness in the future.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">This level of indebtedness could have important
consequences to our business. For example, it could:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">increase our vulnerability to general adverse
    economic and industry conditions;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">make it more difficult to self-insure and obtain
    surety bonds or letters of credit;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">limit our ability to enter into new long-term
    sales contracts;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">make it more difficult for us to pay interest and
    satisfy our debt obligations;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">require us to dedicate a substantial portion of
    our cash flow from operations to payments on our indebtedness,
    thereby reducing the availability of our cash flow to fund
    working capital, capital expenditures, acquisitions and other
    general corporate activities;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">limit our ability to obtain additional financing
    to fund future working capital, capital expenditures, research
    and development, debt service requirements or other general
    corporate requirements;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">limit our flexibility in planning for, or
    reacting to, changes in our business and in the coal industry;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">place us at a competitive disadvantage compared
    to less leveraged competitors;&nbsp;and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">limit our ability to borrow additional funds.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">If our cash flows and capital resources are
insufficient to fund our debt service obligations or our
requirements under our other long term liabilities, we may be
forced to sell assets, seek additional capital or seek to
restructure or refinance our indebtedness. These alternative
measures may not be successful and may not permit us to meet our
scheduled debt service obligations or our requirements under our
other long term liabilities. In the absence of such operating
results and resources, we could face substantial liquidity
problems and might be required to sell material assets or
operations to attempt to meet our debt service and other
obligations. Our credit facility and the indenture under which
our senior notes were issued restrict our ability to sell assets
and use the proceeds from the sales. We may not be able to
consummate those sales or to obtain the proceeds which we could
realize from them and these proceeds may not be adequate to meet
any debt service obligations then due. Furthermore,
substantially all of our material assets secure our indebtedness
under our credit facility.
</FONT>

<P align="left">
<B><FONT size="2">Despite our current leverage, we may still be
able to incur substantially more debt. This could further
exacerbate the risks associated with our significant
indebtedness.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We may be able to incur substantial additional
indebtedness in the future. The terms of our credit facility and
the indenture governing our senior notes do not prohibit us from
doing so. Our credit facility provides for a revolving line of
credit of up to $125.0&nbsp;million, of which
$120.6&nbsp;million was available as of September&nbsp;30, 2004.
If new debt is added to our current debt levels, the related
risks that we now face could increase.
</FONT>

<P align="left">
<B><FONT size="2">The covenants in our credit facility and the
indenture governing our senior notes impose restrictions that
may limit our operating and financial flexibility.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our credit facility and the indenture governing
our senior notes contain a number of significant restrictions
and covenants that limit our ability and our subsidiaries&#146;
ability to, among other things, incur additional indebtedness or
enter into sale and leaseback transactions, pay dividends, make
redemptions and repurchases of certain capital stock, make loans
and investments, create liens, engage in transactions with
affiliates and merge or consolidate with other companies or sell
substantially all of our assets.
</FONT>

<P align="center"><FONT size="2">24
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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">These covenants could adversely affect our
ability to finance our future operations or capital needs or to
execute preferred business strategies. In addition, if we
violate these covenants and are unable to obtain waivers from
our lenders, our debt under these agreements would be in default
and could be accelerated by our lenders. 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.
</FONT>

<P align="left">
<B><FONT size="2">Failure to obtain or renew surety bonds 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.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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
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:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">lack of availability, higher expense or
    unfavorable market terms of new bonds;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">restrictions on availability of collateral for
    current and future third-party surety bond issuers under the
    terms of our credit facility or the indenture governing our
    senior notes;&nbsp;and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">the exercise by third-party surety bond issuers
    of their right to refuse to renew the surety.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<B><FONT size="2">Failure to maintain capacity for required
letters of credit could limit our available borrowing capacity
under our credit facility, limit our ability to obtain or renew
surety bonds and negatively impact our ability to obtain
additional financing to fund future working capital, capital
expenditure or other general corporate requirements.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">At September&nbsp;30, 2004, we had
$50.5&nbsp;million of letters of credit in place, of which
$50.0&nbsp;million serve as collateral for reclamation surety
bonds and $0.5&nbsp;million secure miscellaneous obligations.
Our credit facility provides for commitments of up to
$175.0&nbsp;million, consisting of a funded letter of credit
facility of up to $50.0&nbsp;million and a $125.0&nbsp;million
revolving credit facility, of which $50.0&nbsp;million can be
used to issue additional letters of credit. As of
September&nbsp;30, 2004, our entire $50.0&nbsp;million funded
letter of credit facility has been committed and we have an
additional $0.4&nbsp;million of letters of credit outstanding
under the revolving credit facility and $0.1&nbsp;million
supported by a cash deposit. Obligations secured by letters of
credit may increase in the future. Any such increase would limit
our available borrowing capacity under the revolving credit
facility and could negatively impact our ability to obtain
additional financing to fund future working capital, capital
expenditure or other general corporate requirements. Moreover,
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.
</FONT>

<P align="left">
<B><FONT size="2">If our assumptions regarding our likely future
expenses related to benefits for non-active employees are
incorrect, then expenditures for these benefits could be
materially higher than we have predicted.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">At the times that we acquired the assets of our
Predecessor and acquired companies, the Predecessor and acquired
operations were subject to long-term liabilities under a variety
of benefit plans and other arrangements with active and inactive
employees. We assumed a portion of these long-term obligations.
The current and non-current accrued portions of these long-term
obligations, as reflected in our combined financial statements
as of September&nbsp;30, 2004, included $13.5&nbsp;million of
post-retirement obligations and $5.3&nbsp;million of
self-insured workers&#146; compensation obligations, and our
accumulated post-retirement benefit
</FONT>

<P align="center"><FONT size="2">25
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<DIV align="left">
<FONT size="2">obligation at September&nbsp;30, 2004 is
$40.5&nbsp;million. These obligations have been estimated based
on assumptions that are described in the notes to our combined
financial statements included elsewhere in this prospectus.
However, if our assumptions are incorrect, we could be required
to expend greater amounts than anticipated.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Several states in which we operate consider
changes in workers&#146; compensation laws from time to time,
which, if enacted, could adversely affect us. In addition, if
any of the sellers from whom we acquired our operations fail to
satisfy their indemnification obligations to us with respect to
post-retirement claims and retained liabilities, then we could
be required to expend greater amounts than anticipated. See
&#147;&#151;The inability of the sellers of our Predecessor and
acquired companies to fulfill their indemnification obligations
to us under our acquisition agreements could increase our
liabilities and adversely affect our results of
operations.&#148; Moreover, under certain acquisition
agreements, we agreed to permit responsibility for black lung
claims related to the sellers&#146; former employees who are
employed by us for less than one year after the acquisition to
be determined in accordance with law (rather than specifically
assigned to one party or the other in the agreements). We
believe that the sellers remain liable as a matter of law for
black lung benefits for their former employees who work for us
for less than one year; however, an adverse ruling on this issue
could increase our exposure to black lung benefit liabilities.
</FONT>

<P align="left">
<B><FONT size="2">A shortage of skilled labor in the Appalachian
region could pose a risk to achieving improved labor
productivity and competitive costs and could adversely affect
our profitability.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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
recent years, a shortage of trained coal miners in the
Appalachian region has caused us to operate certain units
without full staff, which decreases our productivity and
increases our costs. If the shortage of experienced labor
continues or worsens, it could have an adverse impact on our
labor productivity and costs and our ability to expand
production in the event there is an increase in the demand for
our coal, which could adversely affect our profitability.
</FONT>

<P align="left">
<B><FONT size="2">Demand for our coal changes seasonally and
could have an adverse effect on the timing of our cash flows and
our ability to service our existing and future
indebtedness.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our business is seasonal, with operating results
varying from quarter to quarter. We have historically
experienced lower sales during winter months primarily due to
the freezing of lakes that we use to transport coal to some of
our customers. As a result, our first quarter cash flow and
profits have been, and may continue to be, negatively impacted.
Lower than expected sales by us during this period could have a
material adverse effect on the timing of our cash flows and
therefore our ability to service our obligations with respect to
our existing and future indebtedness.
</FONT>

<P align="left">
<B><FONT size="2">We may record a net loss for the fiscal
quarter
ending &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2005 as a result of the issuance of shares of our common stock
to members of our management as part of our Internal
Restructuring.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As part of our Internal Restructuring, our
executive officers and certain other key employees will receive
shares of our common stock in exchange for their interest in ANR
Holdings. As a result, we will record compensation expense and
deferred compensation equal to the fair value of the shares
issued of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.
We will record
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;of
compensation expense at the time of this offering equal to the
vested portion of the shares issued. The remaining
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;of
compensation will be recorded as deferred stock based
compensation and amortized over the two-year vesting period of
the unvested shares. As a result of this non-cash compensation
expense, we expect that our operating expenses for the quarter
ending &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2005 will be higher than in prior periods and that we may record
a net loss for this quarter. In addition, the amortization of
the deferred stock-based compensation over the two-year vesting
period will result in a non-cash amortization expense in these
future periods, thereby reducing our earnings in those periods.
</FONT>

<P align="center"><FONT size="2">26
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<P align="left">
<B><FONT size="2">Our Sponsors may have significant influence on
our company, including control over decisions that require the
approval of our stockholders, whether or not these decisions are
believed by our other stockholders to be in their own best
interest.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">After the consummation of this offering, First
Reserve Fund&nbsp;IX, L.P. and ANR Fund&nbsp;IX Holdings, L.P.
(the &#147;First Reserve Stockholders&#148; and, together with
First Reserve Corporation and its affiliates, &#147;First
Reserve&#148;) and persons affiliated with AMCI will
beneficially own approximately &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;%
of our common stock, or
approximately &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;% of our
common stock if the underwriters exercise their over-allotment
option in full. As a result, First Reserve and AMCI and its
affiliates will continue to have the ability to prevent any
transaction that requires the approval of stockholders
regardless of whether or not other stockholders believe that any
such transaction is in their own best interests. We refer to
First Reserve and to AMCI and its affiliates, collectively, as
our &#147;Sponsors.&#148;
</FONT>

<P align="left">
<B><FONT size="2">Our Sponsors may have conflicts of interest
with us or you in the future.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our Sponsors are in the business of making
investments in companies and may from time to time acquire and
hold interests in businesses that compete directly or indirectly
with us, including, for example, our Sponsors&#146; combined
56.8%&nbsp;ownership interest in Foundation Coal Holdings, Inc.
These other investments may create competing financial demands
on our Sponsors, potential conflicts of interest and require
efforts consistent with applicable law to keep the other
businesses separate from our operations. Our Sponsors may also
pursue acquisition opportunities that may be complementary to
our business, and as a result, those acquisition opportunities
may not be available to us. Additionally, our amended and
restated certificate of incorporation will provide that our
Sponsors may compete with us. Their designees on our board of
directors will not be required to offer corporate opportunities
to us and may take any such opportunities for themselves, other
than any opportunities offered to the designees solely in their
capacity as one of our directors. See &#147;Description of
Capital Stock&nbsp;&#151; Corporate Opportunities.&#148; So long
as our Sponsors continue to own a significant amount of our
equity, even if such amount is less than 50%, they will continue
to be able to strongly influence or effectively control our
decisions. For example, our Sponsors could cause us to make
acquisitions that increase our amount of indebtedness or sell
revenue-generating assets.
</FONT>

<P align="left">
<B><FONT size="2">Our status as a &#147;controlled company&#148;
under the New York Stock Exchange rules exempts us from certain
New York Stock Exchange corporate governance standards and you
will not have the same protections afforded to stockholders of
companies that are subject to all of the New York Stock Exchange
corporate governance requirements.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Upon completion of the offering, our Sponsors as
a group will continue to control a majority of our outstanding
common stock. As a result, we are a &#147;controlled
company&#148; within the meaning of the New York Stock Exchange
corporate governance standards. Under the New York Stock
Exchange rules, a company of which more than 50% of the voting
power is held by another company is a &#147;controlled
company&#148; and may elect not to comply with certain New York
Stock Exchange corporate governance requirements, including
(1)&nbsp;the requirement that a majority of the board of
directors consist of independent directors, (2)&nbsp;the
requirement that the nominating committee be composed entirely
of independent directors with a written charter addressing the
committee&#146;s purpose and responsibilities, (3)&nbsp;the
requirement that the compensation committee be composed entirely
of independent directors with a written charter addressing the
committee&#146;s purpose and responsibilities, and (4)&nbsp;the
requirement for an annual performance evaluation of the
nominating and corporate governance and compensation committees.
Following this offering, we intend to avail ourselves of these
exemptions. As a result, we may not have a majority of
independent directors and our nominating and compensation
committees may not consist entirely of independent directors.
Accordingly, you may not have the same protections afforded to
stockholders of companies that are subject to all of the New
York Stock Exchange corporate governance requirements.
</FONT>

<P align="center"><FONT size="2">27
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<P align="left">
<B><FONT size="2">Terrorist attacks and threats, escalation of
military activity in response to such attacks or acts of war may
negatively affect our business, financial condition and results
of operations.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Terrorist attacks and threats, escalation of
military activity in response to such attacks or acts of war may
negatively affect our business, financial condition, and results
of operations. Our business is affected by general economic
conditions, fluctuations in consumer confidence and spending,
and market liquidity, which can decline as a result of numerous
factors outside of our control, such as terrorist attacks and
acts of war. Future terrorist attacks against U.S.&nbsp;targets,
rumors or threats of war, actual conflicts involving the United
States or its allies, or military or trade disruptions affecting
our customers may materially adversely affect our operations and
those of our customers. As a result, there could be delays or
losses in transportation and deliveries of coal to our
customers, decreased sales of our coal and extension of time for
payment of accounts receivable from our customers. Strategic
targets such as energy-related assets may be at greater risk of
future terrorist attacks than other targets in the United
States. In addition, disruption or significant increases in
energy prices could result in government-imposed price controls.
It is possible that any of these occurrences, or a combination
of them, could have a material adverse effect on our business,
financial condition and results of operations.
</FONT>

<P align="left">
<B><FONT size="2">Risks Related to this Offering</FONT></B>

<P align="left">
<B><FONT size="2">There is no existing market for our common
stock, and if one does not develop, you may not have adequate
liquidity.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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 a trading market
on the New York Stock Exchange or otherwise or how liquid that
market might become. The initial public offering price for the
shares will be determined by negotiations between us and the
representatives of the underwriters and may not be indicative of
prices that will prevail in the open market following this
offering.
</FONT>

<P align="left">
<B><FONT size="2">Future sales of our shares could depress the
market price of our common stock.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The market price of our common stock could
decline as a result of sales of a large number of shares of
common stock in the market after the offering or the perception
that such sales could occur. These sales, or the possibility
that these sales may occur, also might make it more difficult
for us to sell equity securities in the future at a time and at
a price that we deem appropriate. See &#147;Shares Eligible for
Future Sale.&#148;
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Alpha Natural Resources, Inc. and its directors,
executive officers and existing stockholders have agreed with
the underwriters not to sell, dispose of or hedge any of their
common stock or securities convertible into or exchangeable for
shares of our common stock, subject to specified exceptions,
during the period from the date of this prospectus continuing
through the date that is 180&nbsp;days after the date of this
prospectus, except with the prior written consent of Morgan
Stanley&nbsp;&#38; Co. Incorporated and Citigroup Global Markets
Inc.
</FONT>

<P align="left">
<B><FONT size="2">Because all of the proceeds from this offering
will be used to repay the Restructuring Notes, none of the
proceeds will be used to further invest in our
business.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We estimate that the net proceeds from the sale
by us of the shares of common stock being offered hereby, after
deducting underwriting discounts and estimated offering
expenses, will be approximately
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million, assuming an
initial public offering price per share of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(the
midpoint of the price range on the cover of this prospectus).
All of this amount will be used to repay in full the
Restructuring Notes. See &#147;Internal Restructuring.&#148;
Accordingly, none of the proceeds will be available to further
invest in and grow our business.
</FONT>

<P align="center"><FONT size="2">28
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<P align="left">
<B><FONT size="2">The market price of our common stock may be
volatile, which could cause the value of your investment to
decline.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Securities markets worldwide experience
significant price and volume fluctuations. This market
volatility, as well as general economic, market or potential
conditions, could reduce market price of our common stock in
spite of our operating performance. In addition, our operating
results could be below the expectations of public market
analysts and investors, and in response, the market price of our
common stock could decrease significantly. You may be unable to
resell your shares of our common stock at or above the initial
public offering price.
</FONT>

<P align="left">
<B><FONT size="2">The book value of shares of common stock
purchased in the offering will be immediately diluted.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Investors who purchase common stock in the
offering will suffer immediate dilution of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share in the pro forma net tangible book value per share. We
also have outstanding stock options granted to members of
management entitling them to purchase our common stock with
exercise prices that are below the estimated initial public
offering price of the common stock. To the extent that these
options are exercised, there will be further dilution.
</FONT>

<P align="left">
<B><FONT size="2">Provisions in our certificate of incorporation
and bylaws may discourage a takeover attempt even if doing so
might be beneficial to our stockholders.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Provisions contained in our certificate of
incorporation and bylaws could impose impediments to the ability
of a third party to acquire us even if a change of control would
be beneficial to our existing shareholders. Provisions of our
certificate of incorporation and bylaws impose various
procedural and other requirements, which could make it more
difficult for stockholders to effect certain corporate actions.
For example, our certificate of incorporation authorizes our
board of directors to determine the rights, preferences,
privileges and restrictions of unissued series of preferred
stock, without any vote or action by our stockholders. Thus, our
board of directors can authorize and issue shares of preferred
stock with voting or conversion rights that could adversely
affect the voting or other rights of holders of our common
stock. These rights may have the effect of delaying or deterring
a change of control of our company, and could limit the price
that certain investors might be willing to pay in the future for
shares of our common stock. See &#147;Description of Capital
Stock.&#148;
</FONT>

<P align="center"><FONT size="2">29
</FONT>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<A name='103'></A>
</DIV>

<!-- link1 "SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS" -->

<P align="center">
<B><FONT size="2">SPECIAL NOTE&nbsp;REGARDING FORWARD-LOOKING
STATEMENTS</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">This prospectus contains forward-looking
statements that are not statements of historical fact and may
involve a number of risks and uncertainties. These statements
relate to analyses and other information that are based on
forecasts of future results and estimates of amounts not yet
determinable. These statements may also relate to our future
prospects, developments and business strategies.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We do not undertake any responsibility to release
publicly any revisions to these forward-looking statements to
take into account events or circumstances that occur after the
date of this prospectus. Additionally, we do not undertake any
responsibility to update you on the occurrence of any
unanticipated events which may cause actual results to differ
from those expressed or implied by the forward-looking
statements contained in this prospectus.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following factors are among those that may
cause actual results to differ materially from our
forward-looking statements:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">market demand for coal, electricity and steel;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">future economic or capital market conditions;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">weather conditions or catastrophic
    weather-related damage;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">our production capabilities;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">the consummation of financing, acquisition or
    disposition transactions and the effect thereof on our business;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">our plans and objectives for future operations
    and expansion or consolidation;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">our relationships with, and other conditions
    affecting, our customers;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">timing of reductions in customer coal inventories;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">long-term coal supply arrangements;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">inherent risks of coal mining beyond our control;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">environmental laws, including those directly
    affecting our coal mining and production, and those affecting
    our customers&#146; coal usage;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">competition in coal markets;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">railroad and other transportation performance and
    costs;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">our assumptions concerning economically
    recoverable coal reserve estimates;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">employee workforce factors;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">regulatory and court decisions;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">future legislation and changes in regulations,
    governmental policies or taxes;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">changes in post-retirement benefit obligations;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">our liquidity, results of operations and
    financial condition;&nbsp;and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">other factors, including those discussed in
    &#147;Risk Factors.&#148;
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">30
</FONT>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<A name='104'></A>
</DIV>

<!-- link1 "MARKET AND INDUSTRY DATA AND FORECASTS" -->

<P align="center">
<B><FONT size="2">MARKET AND INDUSTRY DATA AND
FORECASTS</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In this prospectus, we refer to publicly
available information regarding the coal industry in the United
States and internationally from the World Coal Institute, the
U.S.&nbsp;Department of Energy, the National Energy Technology
Laboratory, the U.S.&nbsp;Energy Information Administration,
Platts Research and Consulting, the International Iron and Steel
Institute, Bloomberg L.P., the Bureau of Economic Analysis and
BP Statistical Review. 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.
</FONT>

<P align="center"><FONT size="2">31
</FONT>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<A name='105'></A>
</DIV>

<!-- link1 "USE OF PROCEEDS" -->

<P align="center">
<B><FONT size="2">USE OF PROCEEDS</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We estimate that we will receive net proceeds of
approximately
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million
from the sale of shares in this offering after deducting
underwriting discounts and estimated offering expenses.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We intend to use the net proceeds from this
offering to repay in full the Restructuring Notes we will issue
to our Sponsors and Madison Capital Funding LLC in connection
with the Internal Restructuring. The Restructuring Notes will
bear interest at a rate equal to the short-term applicable
federal rate (AFR) for federal income tax purposes, which is
currently &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;%&nbsp;per
annum. The Restructuring Notes and accrued interest thereon will
be repayable upon demand in an aggregate amount equal to the
estimated net proceeds from this offering. See &#147;Internal
Restructuring.&#148; If the underwriters exercise their
over-allotment option, we intend to use the net proceeds to make
distributions to our existing stockholders.
</FONT>

<DIV align="left">
<A name='106'></A>
</DIV>

<!-- link1 "DIVIDEND POLICY" -->

<P align="center">
<B><FONT size="2">DIVIDEND POLICY</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In connection with our Internal Restructuring, we
will agree to make the following three types of distributions.
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="2%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149; &nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">We will assume the obligation of ANR Holdings to
    make distributions to our Sponsors (the &#147;Sponsor
    Distributions&#148;) in the aggregate amount of approximately
    $10.5&nbsp;million, representing certain tax consequences and
    tax attributes conveyed as a result of the Internal
    Restructuring. The Sponsor Distributions will be payable in cash
    or, to the extent we are not permitted by the terms of our
    credit facility or the indenture governing our senior notes to
    pay the Sponsor Distributions in cash, in shares of our common
    stock.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149; &nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">We will agree to make a distribution to our
    existing stockholders in an aggregate amount equal to the net
    proceeds, if any, we receive upon an exercise by the
    underwriters of their over-allotment option.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149; &nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">We will agree to make a distribution of shares of
    our common stock to our existing stockholders in an aggregate
    amount equal to the number of additional shares the underwriters
    have the option to purchase minus the actual number of shares
    the underwriters purchase from us pursuant to their
    over-allotment option.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<FONT size="2">For additional information regarding our Internal
Restructuring, see &#147;Internal Restructuring.&#148;
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Any future decision to declare and pay cash
dividends following this offering will be made at the discretion
of our board of directors and will depend on, among other things
(1)&nbsp;our results of operations and the amount of our surplus
available to be distributed, (2)&nbsp;dividend availability and
restrictions under our credit facility and indenture,
(3)&nbsp;the dividend rate being paid by comparable companies in
the coal industry, (4)&nbsp;our liquidity needs and financial
condition and (5)&nbsp;other factors that our board of directors
may deem relevant. Currently, the terms of our credit facility
and our senior notes restrict our ability to pay dividends to
our stockholders. See &#147;Risk Factors&#151; The covenants in
our credit facility and the indenture governing our senior notes
impose restrictions that may limit our operating and financial
flexibility.&#148;
</FONT>

<P align="center"><FONT size="2">32
</FONT>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<A name='107'></A>
</DIV>

<!-- link1 "CAPITALIZATION" -->

<P align="center">
<B><FONT size="2">CAPITALIZATION</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table sets forth our cash and cash
equivalents and capitalization as of September&nbsp;30, 2004
(1)&nbsp;on an actual basis for ANR Fund&nbsp;IX Holdings, L.P.
and Alpha NR Holding, Inc. and subsidiaries combined,
(2)&nbsp;on a pro forma basis for Alpha Natural Resources, Inc.,
giving effect to the Internal Restructuring and (3)&nbsp;on a
pro forma, as adjusted basis for Alpha Natural Resources, Inc.,
as adjusted to reflect:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">the sale by us
    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 at an assumed initial public
    offering price of
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
    the mid-point of the estimated price range shown on the cover
    page of this prospectus, after deducting underwriting discounts
    and estimated offering expenses of
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;;
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">the application of the estimated net proceeds of
    this offering to repay the Restructuring Notes, as described
    under &#147;Use of Proceeds&#148;; and
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">the distribution
    of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    of common stock to our existing stockholders that we will make
    to the extent the underwriters do not exercise their
    over-allotment option as described under &#147;Dividend
    Policy.&#148;
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">You should read the information in this table in
conjunction with &#147;Unaudited Pro Forma Financial
Information,&#148; &#147;Internal Restructuring,&#148;
&#147;Management&#146;s Discussion and Analysis of Financial
Condition and Results of Operations&#148; and our combined
financial statements included elsewhere in this prospectus.
</FONT>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="57%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">As of September&nbsp;30, 2004</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Pro Forma,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Actual</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Pro Forma</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">as Adjusted</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">($ in millions)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Cash and cash equivalents</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Debt:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Revolving credit facility<SUP>(1)</SUP>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Notes payable to affiliates<SUP>(2)</SUP>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other debt<SUP>(3)</SUP>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">10%&nbsp;senior notes due 2012
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">175.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">175.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">175.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total debt
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">185.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">185.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Stockholders&#146; Equity and Partners&#146;
    Capital:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Alpha Natural Resources, Inc.:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Preferred stock&#151; par value
    $0.01, &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    authorized, no shares issued
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Common stock&#151; par value
    $0.01, &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    authorized, &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    issued pro forma
    and &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares issued
    pro&nbsp;forma as adjusted
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Additional paid-in capital
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Deferred stock-based compensation
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><SUP><FONT size="2">(4</FONT></SUP></TD>
    <TD align="left" valign="bottom" nowrap><SUP><FONT size="2">)</FONT></SUP></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accumulated deficit
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><SUP><FONT size="2">(5</FONT></SUP></TD>
    <TD align="left" valign="bottom" nowrap><SUP><FONT size="2">)</FONT></SUP></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Alpha NR Holding, Inc.:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Preferred stock&#151; par value $0.01,
    1,000&nbsp;shares authorized, no shares issued
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Common stock&#151; par value $0.01,
    1,000&nbsp;shares authorized, 100&nbsp;shares issued
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Additional paid-in capital
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">22.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Deficit capital account
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Retained earnings
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">17.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total stockholders&#146; equity
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">34.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">ANR Fund&nbsp;IX Holdings, L.P.:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Partners&#146; capital
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total stockholder&#146;s equity and
    partners&#146; capital
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">39.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Total capitalization</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">230.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left">
<HR size="1" width="18%" align="left" noshade>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">The credit facility provides for a funded letter
    of credit facility of $50.0&nbsp;million and a revolving credit
    facility of up to $125.0&nbsp;million (under which
    $50.0&nbsp;million is available for additional letters of
    credit). As of September&nbsp;30, 2004, we had $4.0&nbsp;million
    of indebtedness and $50.4&nbsp;million of letters of credit
    outstanding under the credit facilities, resulting in
    availability under the revolving credit facility of
    $120.6&nbsp;million.
    </FONT></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(2)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Represents the Restructuring Notes. All of the
    net proceeds from this offering will be used to repay the
    Restructuring Notes in full.
    </FONT></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(3)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Includes $2.2&nbsp;million of capital lease
    obligations.
    </FONT></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(4)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Reflects the issuance of unvested shares of
    common stock to members of our management in connection with the
    Internal Restructuring.
    </FONT></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(5)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Reflects the effect on accumulated deficit of the
    non-cash compensation expense associated with the issuance of
    certain vested shares of common stock to members of our
    management in connection with the Internal Restructuring.
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">33
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<A name='108'></A>
</DIV>

<!-- link1 "DILUTION" -->

<P align="center">
<B><FONT size="2">DILUTION</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Dilution is the amount by which the offering
price paid by the purchasers of the common stock to be sold in
this offering will exceed the net tangible book value per share
of common stock after the offering. The net tangible book value
per share presented below is equal to the amount of our total
tangible assets (total assets less intangible assets) less total
liabilities as of September&nbsp;30, 2004, divided by the number
of shares of our common stock that would have been held by our
existing stockholders as of September&nbsp;30, 2004, had the
Internal Restructuring been completed and had we effected the
distribution
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 to our existing stockholders that we will make
if and to the extent the underwriters do not exercise their
over-allotment option as described under &#147;Dividend
Policy.&#148; On a pro&nbsp;forma basis, after giving effect to
(1)&nbsp;the Internal Restructuring and (2)&nbsp;the sale by us
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock in this offering at an assumed initial public
offering price of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share, the mid-point of the price range on the cover of this
prospectus, after deducting underwriting discounts and estimated
offering expenses and the application of the estimated net
proceeds of this offering as described under &#147;Use of
Proceeds,&#148; our pro forma net tangible book value as of
September&nbsp;30, 2004 would have been
$&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. This represents an immediate increase in
net tangible book value (or a decrease in net tangible book
deficit) of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share to the 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.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table illustrates this dilution on
a per share basis:
</FONT>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="72%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Assumed initial public offering price per share
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Pro forma net tangible book value per share as of
    September&nbsp;30, 2004
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Increase in net tangible book value per share
    attributable to new investors
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Pro forma net tangible book value per share after
    giving effect to the offering
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Dilution in net tangible book value per share to
    new investors
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We will reduce the number of shares that we will
issue to our existing stockholders in the stock distribution
described above by the number of shares sold to the
underwriters, if any, pursuant to their over-allotment option.
We will also make a cash distribution to our existing
stockholders equal to the net proceeds we receive from the sale
of our shares in the over-allotment option. Accordingly, our pro
forma net tangible book value will not be affected by the
underwriters&#146; exercise of their over-allotment option.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table summarizes, on a
pro&nbsp;forma basis as of September&nbsp;30, 2004 after giving
effect to the transactions described above, the total 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 purchasing shares
in this offering:
</FONT>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="35%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Shares Purchased</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Total Consideration</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Average Price</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Number</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Percent</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Amount</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Percent</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Per Share</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Existing stockholders(1)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">New investors
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left">
<HR size="1" width="15%" align="left" noshade>
</DIV>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Total consideration and average price per share
    paid by existing stockholders does not give effect to
    (1)&nbsp;the $110.0&nbsp;million distribution made to holders of
    common membership interests of ANR&nbsp;Holdings in
    May&nbsp;2004 using proceeds from the senior notes offering or
    (2)&nbsp;the repayment of the Restructuring Notes using the net
    proceeds from this offering. If the table were adjusted to give
    effect to these payments, total consideration for shares of
    existing stockholders would be
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
    with an average share price of
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">34
</FONT>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The table and calculations above assume no
exercise of outstanding options. After giving effect to the
Internal Restructuring, there will
be &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 reserved for issuance upon exercise of
outstanding options at a weighted average exercise price per
share of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.
The earliest date upon which the options will vest and become
exercisable is November&nbsp;10, 2005. We also plan to issue
additional options to
purchase &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 initial public offering price to
certain of our key employees upon consummation of this offering.
There could be further dilution to investors in the event we are
required to make the Sponsor Distributions in shares of our
common stock. See &#147;Management&#151; Long-Term Incentive
Plans,&#148; &#147;Shares Eligible For Future Sale&#151; Stock
Options&#148; and &#147;Internal Restructuring.&#148;
</FONT>

<P align="center"><FONT size="2">35
</FONT>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<A name='109'></A>
</DIV>

<!-- link1 "INTERNAL RESTRUCTURING" -->

<P align="center">
<B><FONT size="2">INTERNAL RESTRUCTURING</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have been controlled by the First Reserve
Stockholders through their combined ownership of 54.7% of the
common membership interests of our current top-tier holding
company, ANR Holdings. Immediately prior to the effectiveness of
the registration statement of which this prospectus is a part,
we will complete a series of transactions for the purpose of
transitioning from an organizational structure in which our
top-tier holding company is a limited liability company to a
structure in which our top-tier holding company is a
corporation, which we refer to collectively as our
&#147;Internal Restructuring&#148;. Following the Internal
Restructuring, the current members of ANR Holdings will be
stockholders of our new top-tier holding company Alpha Natural
Resources, Inc., which is issuing shares of its common stock to
the public in this offering. The principal Internal
Restructuring transactions, to be effected pursuant to the terms
of our Internal Restructuring Agreement, are summarized below:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">Alpha Coal Management, LLC (&#147;Alpha Coal
    Management&#148;), the entity through which our executive
    officers and certain other key employees hold their interests in
    ANR Holdings prior to the Internal Restructuring, will be
    dissolved and liquidated, after which (1)&nbsp;the interests in
    ANR Holdings previously held by Alpha Coal Management will be
    distributed to and held directly by these officers and employees
    and (2)&nbsp;outstanding options granted by Alpha Coal
    Management to certain of our executive officers and other key
    employees under the Alpha Coal Management 2004 Long-Term
    Incentive Plan will automatically convert into options to
    purchase up
    to &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 a weighted average exercise price of
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
    and we will assume the obligations of Alpha Coal Management
    under that plan.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">ANR Holdings will declare distributions
    (&#147;the Sponsor Distributions&#148;) to (1)&nbsp;affiliates
    of AMCI in an aggregate amount of $6.0&nbsp;million,
    representing the approximate incremental tax resulting from the
    recognition of additional tax liability resulting from the
    Internal Restructuring and (2)&nbsp;First Reserve Fund&nbsp;IX,
    L.P. in an aggregate amount of approximately $4.5&nbsp;million,
    representing the approximate value of tax attributes conveyed as
    a result of the Internal Restructuring. The Sponsor
    Distributions to AMCI will be paid in five equal installments on
    the dates for which estimated income tax payments are due in
    each of April 2005, June 2005, September 2005, January 2006 and
    April 2006. The Sponsor Distributions to First Reserve
    Fund&nbsp;IX, L.P. will be paid in three installments on
    December&nbsp;15, 2007, 2008 and 2009. In connection with the
    Internal Restructuring, we will assume the obligations of ANR
    Holdings to make the Sponsor Distributions. The Sponsor
    Distributions will be payable in cash or, to the extent we are
    not permitted by the terms of our credit facility or the
    indenture governing our senior notes to pay the Sponsor
    Distributions in cash, in shares of our common stock.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">First Reserve Fund&nbsp;IX, L.P., the direct
    parent of Alpha NR Holding, Inc., will contribute all of the
    outstanding common stock of Alpha NR Holding, Inc. to us in
    exchange for shares of our common stock and Restructuring Notes
    in an aggregate principal amount of
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">Affiliates of AMCI and other members of ANR
    Holdings (excluding Alpha NR Holding, Inc. and the members of
    our management who are the successors to Alpha Coal Management)
    will contribute all of their membership interests in ANR
    Holdings to us in exchange for shares of our common stock and
    Restructuring Notes in an aggregate principal amount of
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">The officers and employees who are the members of
    Alpha Coal Management will contribute all of their interests in
    ANR Holdings to us in exchange for shares of our common stock.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">We will agree to make a pro rata distribution to
    our existing stockholders in an aggregate amount equal to the
    net proceeds, if any, we receive upon an exercise by the
    underwriters of their over-allotment option.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">We will agree to make a pro rata distribution of
    shares of our common stock to our existing stockholders in an
    aggregate amount equal to the number of additional shares the
    underwriters have the option to purchase, minus the actual
    number of shares the underwriters purchase from us pursuant to
    their over- allotment option.
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">36
</FONT>
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">We and our Sponsors will amend certain of the
    post-closing arrangements we entered into as part of our
    acquisition of U.S. AMCI.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">On the closing date of this offering, we will use
    the net proceeds from this offering to repay the Restructuring
    Notes in full. The aggregate principal amount of the
    Restructuring Notes and accrued interest thereon will be equal
    to the estimated net proceeds from this offering.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">Following the closing of this offering, we intend
    to contribute the membership interests in ANR Holdings we hold
    to Alpha NR Holding, Inc. and another of our indirect
    wholly-owned subsidiaries.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following diagram depicts our corporate
structure following the completion of the Internal Restructuring
transactions described above and this offering:
</FONT>

<P align="center">
<IMG src="y02933y0293308.gif" alt="FLOW CHART">

<P align="center"><FONT size="2">37
</FONT>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<A name='110'></A>
</DIV>

<!-- link1 "UNAUDITED PRO FORMA FINANCIAL INFORMATION" -->

<P align="center">
<B><FONT size="2">UNAUDITED PRO FORMA FINANCIAL
INFORMATION</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following unaudited pro forma financial
information has been derived by application of pro forma
adjustments to the historical combined financial statements of
ANR Fund&nbsp;IX Holdings, L.P. and Alpha NR Holding, Inc. and
subsidiaries included elsewhere in this prospectus.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The unaudited pro forma balance sheet as of
September&nbsp;30, 2004 gives effect to the Internal
Restructuring as if it had occurred on September&nbsp;30, 2004.
See &#147;Internal Restructuring.&#148; The unaudited pro forma
statements of operations for the year ended December&nbsp;31,
2003 and the nine months ended September&nbsp;30, 2004 give
effect to:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">our acquisitions of Coastal Coal Company, U.S.
    AMCI and Mears, which we refer to collectively as the &#147;2003
    Acquisitions,&#148; as if these acquisitions were completed on
    January&nbsp;1, 2003;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">the issuance of $175.0&nbsp;million principal
    amount of 10% senior notes due 2012 by our subsidiary Alpha
    Natural Resources, LLC and entry into a $175.0&nbsp;million
    credit facility, which we refer to together as the &#147;2004
    Financings,&#148; as if we had issued the senior notes and
    entered into the credit facility on January&nbsp;1, 2003; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">the Internal Restructuring, as if it had occurred
    on January&nbsp;1, 2003.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<FONT size="2">The pro forma adjustments, which are based upon
available information and upon assumptions that management
believes to be reasonable, are described in the accompanying
notes.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The unaudited pro forma financial information
does not give effect to this offering or our use of the proceeds
from this offering. In addition, the unaudited pro forma
financial information does not reflect the issuance to our
executive officers and certain other key employees of shares of
our common stock in exchange for their interest in
ANR&nbsp;Holdings as part of our Internal Restructuring. We will
record compensation expense and deferred compensation equal to
the fair value of the shares issued of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.
We will record
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;compensation
expense at the time of this offering equal to the vested portion
of the shares issued. The remaining
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;will
be recorded as deferred stock based compensation and amortized
over the two-year vesting period of the unvested shares.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The unaudited pro forma financial information is
for informational purposes only, 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 be indicative of results of
operations or financial position as of any future date or for
any future period. The pro forma financial information should be
read in conjunction with &#147;Selected Historical Financial
Data,&#148; &#147;Management&#146;s Discussion and Analysis of
Financial Condition and Results of Operations,&#148;
&#147;Internal Restructuring,&#148; and our combined financial
statements and the related notes included elsewhere in this
prospectus.
</FONT>

<P align="center"><FONT size="2">38
</FONT>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="center">
<B><FONT size="2">Alpha Natural Resources, Inc.</FONT></B>

<DIV align="center">
<B><FONT size="2">Unaudited Pro Forma Balance Sheet
Data</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">September&nbsp;30, 2004</FONT></B>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="54%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Internal</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Restructuring</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Pro Forma</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Historical</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Adjustments</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Pro Forma</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">(in thousands)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="15" align="left" valign="top">
    <B><FONT size="2">Assets</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Current assets:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cash and cash equivalents
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15,811</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15,811</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Trade accounts receivable, net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">97,475</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">97,475</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Notes and other receivables
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,765</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,765</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Inventories
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">52,684</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">52,684</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Due from affiliate
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">323</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">323</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Deferred income taxes
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,046</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,046</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Prepaid expenses and other current assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,778</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,778</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total current assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">186,882</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">186,882</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Property, plant, and equipment, net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">217,055</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">217,055</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Goodwill
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">18,641</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">18,641</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other intangibles, net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,551</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,551</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Deferred income taxes
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom" nowrap>&nbsp;<SUP><FONT size="2">(6)</FONT></SUP></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">33,694</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">33,694</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">457,823</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="15"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="15" align="left" valign="top">
    <B><FONT size="2">Liabilities and Stockholders&#146; Equity and
    Partners&#146; Capital</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Current liabilities:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Current portion of long-term debt
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,723</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,723</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Note payable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,638</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,638</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Bank overdraft
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,250</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,250</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Notes payable to affiliates
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom" nowrap>&nbsp;<SUP><FONT size="2">(1)</FONT></SUP></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Trade accounts payable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">60,803</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">60,803</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accrued expenses and other current liabilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">64,617</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">64,617</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total current liabilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">136,031</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Long-term debt, net of current portion
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">181,256</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">181,256</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Workers&#146; compensation benefits
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,934</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,934</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Postretirement medical benefits
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">13,490</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">13,490</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Asset retirement obligation
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">33,933</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">33,933</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Deferred gains on sales of property interests
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,536</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,536</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Deferred income taxes
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,828</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom" nowrap>&nbsp;<SUP><FONT size="2">(6)</FONT></SUP></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other liabilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,009</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,500</FONT></TD>
    <TD align="left" valign="bottom" nowrap>&nbsp; <SUP><FONT size="2">(2)</FONT></SUP></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15,509</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total liabilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">384,017</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Minority interest
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">28,921</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(28,921</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)<SUP>(5)</SUP></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Stockholders&#146; Equity and Partners&#146;
    Capital:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Alpha Natural Resources, Inc.:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Preferred stock&#151;$0.01 par
    value, &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    authorized, no shares issued
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Common stock&#151;$0.01 par
    value, &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    authorized, &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    issued pro forma
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom" nowrap>&nbsp;<SUP><FONT size="2">(3)</FONT></SUP></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Additional paid-in capital
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Alpha NR Holding, Inc.:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Preferred stock&#151;par value $0.01,
    1,000&nbsp;shares authorized, none issued
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Common stock&#151;par value $0.01,
    1,000&nbsp;shares authorized, 100&nbsp;shares issued and
    outstanding
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Additional paid-in capital
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">22,153</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom" nowrap>&nbsp;<SUP><FONT size="2">(1)</FONT></SUP></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom" nowrap>&nbsp;<SUP><FONT size="2">(6)</FONT></SUP></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">28,921</FONT></TD>
    <TD align="left" valign="bottom" nowrap>&nbsp; <SUP><FONT size="2">(5)</FONT></SUP></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,981</FONT></TD>
    <TD align="left" valign="bottom" nowrap>&nbsp;<SUP><FONT size="2">(4)</FONT></SUP></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(10,500</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)<SUP>(2)</SUP></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Deficit capital account
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom" nowrap>&nbsp;<SUP><FONT size="2">(1)</FONT></SUP></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Retained earnings
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">17,751</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom" nowrap>&nbsp;<SUP><FONT size="2">(1)</FONT></SUP></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total stockholders&#146; equity
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">39,904</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">ANR Fund&nbsp;IX Holdings, L.P.:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Partners&#146; capital
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,981</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(4,981</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)<SUP>(4)</SUP></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total stockholders&#146; equity and
    partners&#146; capital
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">44,885</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total liabilities and stockholders&#146; equity
    and partners&#146; capital
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">457,823</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">
<I><FONT size="2">See accompanying notes to unaudited pro forma
balance sheet.</FONT></I>

<P align="center"><FONT size="2">39
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="center">
<B><FONT size="2">Alpha Natural Resources, Inc.</FONT></B>

<DIV align="center">
<B><FONT size="2">Notes to Unaudited Pro Forma Balance
Sheet</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">September&nbsp;30, 2004</FONT></B>
</DIV>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Reflects the Restructuring Notes. The aggregate
    principal amount of the Restructuring Notes and accrued interest
    thereon will be equal to the net proceeds from this offering.
    All of the net proceeds from this offering will be used to repay
    the Restructuring Notes in full. See &#147;Internal
    Restructuring.&#148;
    </FONT></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(2)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Reflects the aggregate amount of Sponsor
    Distributions payable in connection with the Internal
    Restructuring. The distributions to AMCI, in the aggregate
    amount of $6.0&nbsp;million, will be paid in five equal
    installments in each of April 2005, June 2005, September 2005,
    January 2006 and April 2006. The distributions to First Reserve
    Fund&nbsp;IX, L.P. will be in an aggregate amount equal to
    $4.5&nbsp;million, and will be payable in three installments on
    December&nbsp;15, 2007, 2008 and 2009, respectively. The Sponsor
    Distributions are payable in cash or, to the extent we are not
    permitted by the terms of our credit facility or the indenture
    governing our senior notes to pay the Sponsor Distributions in
    cash, in shares of our common stock.
    </FONT></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(3)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Reflects the exchange of all of the common shares
    of Alpha NR Holding, Inc., which are held by First Reserve
    Fund&nbsp;IX, L.P., for shares of common stock of Alpha Natural
    Resources, Inc. in connection with the Internal Restructuring.
    </FONT></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(4)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Reflects the exchange of ANR Fund&nbsp;IX
    Holdings, L.P.&#146;s interest in ANR Holdings, LLC for shares
    of common stock of Alpha Natural Resources, Inc. in connection
    with the Internal Restructuring.
    </FONT></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(5)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Reflects the acquisition of the minority interest
    in ANR&nbsp;Holdings, LLC in exchange for shares of common stock
    of Alpha Natural Resources, Inc. in connection with the Internal
    Restructuring. The acquisition of the minority interest in
    ANR&nbsp;Holdings, LLC was accounted for at predecessor cost
    since a change in ownership has not taken place.
    </FONT></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(6)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Represents the increase in deferred tax asset
    (estimated at
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million) recognized
    upon consummation of the Internal Restructuring related to the
    excess of the tax basis of our investment in ANR Holdings, LLC
    over the financial statement carrying amount upon consumation of
    the Internal Restructuring.
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">40
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="center">
<B><FONT size="2">Alpha Natural Resources, Inc.</FONT></B>

<DIV align="center">
<B><FONT size="2">Unaudited Pro Forma Statement of Operations
Data</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">For the Nine Months Ended September&nbsp;30,
2004</FONT></B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="53%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2004</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Financings</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">and Internal</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Restructuring</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Pro Forma</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Historical<SUP>(1)</SUP></FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Adjustments</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Pro&nbsp;Forma</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">(in thousands)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total revenues
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">937,063</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">937,063</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Operating expenses<SUP>(2)</SUP>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">800,334</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">800,334</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Depreciation, depletion and amortization
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">39,352</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">39,352</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Asset impairment charge
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,100</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,100</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Selling, general and administrative expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">35,786</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">35,786</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Gain on sale of fixed assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">342</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">342</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Income from operations
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">56,833</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">56,833</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Interest expense
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(14,497</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,603</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)<SUP>(3)</SUP></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(17,100</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Interest income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">331</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">331</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Miscellaneous income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">527</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">527</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Income tax expense
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(4,732</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(6,444</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)<SUP>(4)</SUP></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(11,176</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Minority interest
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(19,562</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">19,562</FONT></TD>
    <TD align="left" valign="bottom" nowrap><SUP><FONT size="2">(5)</FONT></SUP></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">18,900</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,515</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">29,415</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">
<I><FONT size="2">See accompanying notes to unaudited
pro&nbsp;forma statement of operations data.</FONT></I>

<P align="center"><FONT size="2">41
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="center">
<B><FONT size="2">Alpha Natural Resources, Inc.</FONT></B>

<DIV align="center">
<B><FONT size="2">Notes to Unaudited Pro Forma Statement of
Operations Data</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">For the Nine Months Ended September&nbsp;30,
2004</FONT></B>
</DIV>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Reflects the combined results of operations of
    ANR Fund&nbsp;IX Holdings, L.P. and Alpha NR&nbsp;Holding, Inc.
    and subsidiaries for the nine months ended September&nbsp;30,
    2004.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(2)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Operating expenses include cost of coal sales,
    freight and handling costs, and cost of other revenues.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(3)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Represents pro&nbsp;forma interest expense
    resulting from our 2004 Financings as shown in the table below:
    </FONT></TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="78%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">(in thousands)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Note payable<SUP>(a)</SUP>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">214</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Equipment financing<SUP>(b)</SUP>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">80</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Senior notes<SUP>(c)</SUP>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">13,125</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Funded revolver<SUP>(d)</SUP>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">833</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Letter of credit fees<SUP>(e)</SUP>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,172</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Commitment fees<SUP>(f)</SUP>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">371</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total cash interest expense
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15,795</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Amortization of deferred financing
    costs<SUP>(g)</SUP>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,305</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total pro&nbsp;forma interest expense
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">17,100</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Less historical interest expense
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(14,497</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Adjustment to interest expense
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,603</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">
<HR size="1" width="15%" align="left" noshade>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="92%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">(a)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Reflects pro forma interest expense at a fixed
    rate of 3.55% on an estimated average balance of
    $8.7&nbsp;million.
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">(b)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Reflects pro forma interest expense at a fixed
    rate of 4.79% on an estimated average balance of
    $0.9&nbsp;million.
    </FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">(c)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Reflects pro forma interest expense on our senior
    notes at a fixed rate of 10%.
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">(d)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Reflects pro forma interest expense at an assumed
    LIBOR rate of 1.52% plus an applicable margin of 2.75% on an
    estimated average balance of $26.0&nbsp;million.
    </FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">(e)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Reflects fees at the fixed rate of 3.1% on
    $50.0&nbsp;million of letters of credit outstanding under our
    funded letter of credit facility.
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">(f)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Reflects commitment fees of 0.50% on an estimated
    $99.0&nbsp;million average available balance.
    </FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">(g)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Reflects deferred financing costs of
    $11.7&nbsp;million amortized over approximately 7&nbsp;years.
    </FONT></TD>
</TR>

</TABLE>
</CENTER>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD><FONT size="2">(4)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Reflects the tax effect of the pro forma
    adjustments calculated at the estimated combined federal and
    state statutory rate of 38%.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(5)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Reflects the elimination of the minority interest
    as a result of our Internal Restructuring.
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">42
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="center">
<B><FONT size="2">Alpha Natural Resources, Inc.</FONT></B>

<P align="center">
<B><FONT size="2">Unaudited Pro Forma Statement of Operations
Data</FONT></B>

<DIV align="center">
<B><FONT size="2">For the Year Ended December&nbsp;31,
2003</FONT></B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="29%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="11"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2004 Financings</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">Pro Forma</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">and Internal</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Restructuring</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Coastal</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">U.S.</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Acquisitions</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Pro Forma</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Historical</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Coal<SUP>(1)</SUP></FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">AMCI<SUP>(2)</SUP></FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Mears<SUP>(3)</SUP></FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Pro Forma</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Adjustments</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Pro Forma</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="27"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="27" align="center" nowrap><B><FONT size="1">(in thousands)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Total revenues
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">792,566</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">21,759</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">42,612</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">45,829</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">902,766</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">902,766</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Operating expenses<SUP>(4)</SUP>
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">723,529</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">17,914</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">39,043</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">25,480</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">805,966</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">805,966</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Depreciation, depletion and amortization
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">36,054</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">888</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">2,223</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">6,786</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">45,951</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">45,951</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Selling, general and administrative expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">21,949</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">1,093</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">2,515</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">3,832</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">29,389</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">29,389</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Income (loss) from operations
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">11,034</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">1,864</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(1,169</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">9,731</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">21,460</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">21,460</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Interest expense
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(7,848</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(202</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(721</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(1,119</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(9,890</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(12,465</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)<SUP>(5)</SUP></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(22,355</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Interest income
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">103</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">124</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">195</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">422</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">422</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Miscellaneous income (expense), net
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">575</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(15</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(208</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">447</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">799</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">799</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Income tax (expense) benefit
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(668</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(397</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">475</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(2,229</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(2,819</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">3,140</FONT></TD>
    <TD align="left" valign="bottom" nowrap><SUP><FONT size="1">(6)</FONT></SUP></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">321</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Minority interest
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(934</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(603</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">723</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(3,389</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(4,203</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">4,203</FONT></TD>
    <TD align="left" valign="bottom" nowrap><SUP><FONT size="1">(7)</FONT></SUP></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Net income (loss)
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">2,262</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">647</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(776</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">3,636</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">5,769</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(5,122</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">647</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">
<I><FONT size="2">See accompanying notes to unaudited pro forma
statement of operations data.</FONT></I>

<P align="center"><FONT size="2">43
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="center">
<B><FONT size="2">Alpha Natural Resources, Inc.</FONT></B>

<P align="center">
<B><FONT size="2">Notes to Unaudited Pro Forma Statement of
Operations Data</FONT></B>

<DIV align="center">
<B><FONT size="2">For the Year Ended December&nbsp;31,
2003</FONT></B>
</DIV>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">The pro forma results of operations include the
    period from January&nbsp;1, 2003 through the consummation of the
    Coastal Coal acquisition on January&nbsp;31, 2003.
    </FONT></TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="50%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Coastal Coal</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Pro Forma</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Coastal Coal</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Historical<SUP>(a)</SUP></FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Adjustments</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Pro Forma</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">(in thousands)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total revenues
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">21,759</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">21,759</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Operating expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">18,159</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(245</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)<SUP>(b)</SUP></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">17,914</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Depreciation, depletion and amortization
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,151</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(263</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)<SUP>(c)</SUP></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">888</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Selling, general and administrative expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,093</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,093</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Income from operations
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,356</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">508</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,864</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Interest expense
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(80</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(122</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)<SUP>(d)</SUP></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(202</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Miscellaneous income (expense)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(15</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(15</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Income tax expense
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(397</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)<SUP>(e)</SUP></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(397</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Minority interest
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(603</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)<SUP>(f)</SUP></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(603</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,261</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(614</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">647</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <HR size="1" width="21%" align="left" noshade></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="3%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(a)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Reflects the historical results of operations
    from January&nbsp;1, 2003, through the consummation of the
    Coastal Coal acquisition on January&nbsp;31, 2003.
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(b)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Reflects the adjustment to operating expenses to
    eliminate the expense relating to employee post-retirement
    benefit plan obligations that were not assumed in the
    acquisition.
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(c)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">The pro forma adjustment to depreciation,
    depletion and amortization is based on the portion of the
    acquisition cost allocated to long-lived assets.
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(d)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Reflects pro forma interest expense associated
    with the debt incurred in connection with the transaction.
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(e)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Reflects the tax effect of the pro forma
    adjustments calculated at the estimated combined federal and
    state statutory rate of 38%.
    </FONT></TD>
</TR>

</TABLE>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="3%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(f)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Reflects pro forma minority interest for the
    period from January&nbsp;1, 2003 to January&nbsp;31, 2003.
    </FONT></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD><FONT size="2">(2)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">The pro&nbsp;forma results of operations include
    the period from January&nbsp;1, 2003 through the consummation of
    the U.S.&nbsp;AMCI acquisition on March&nbsp;11, 2003.
    </FONT></TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="52%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">U.S.&nbsp;AMCI</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Pro Forma</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">U.S.&nbsp;AMCI</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Historical<SUP>(a)</SUP></FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Adjustments</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Pro Forma</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">(in thousands)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total revenues
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">43,614</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,002</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">) <SUP>(b)</SUP></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">42,612</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Operating expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">40,274</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,231</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">) <SUP>(b)(c)</SUP></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">39,043</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Depreciation, depletion and amortization
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,792</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">431</FONT></TD>
    <TD align="left" valign="bottom" nowrap><SUP><FONT size="2">(d)</FONT></SUP></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,223</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Selling, general and administrative expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,515</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,515</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Loss from operations
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(967</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(202</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,169</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Interest expense
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(342</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(379</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)<SUP>(e)</SUP></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(721</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Interest income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">124</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">124</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Miscellaneous income (expense)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(208</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(208</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Income tax benefit
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">475</FONT></TD>
    <TD align="left" valign="bottom" nowrap><SUP><FONT size="2">(f)</FONT></SUP></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">475</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Minority interest
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">723</FONT></TD>
    <TD align="left" valign="bottom" nowrap><SUP><FONT size="2">(g)</FONT></SUP></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">723</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net loss
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,393</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(617</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(776</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <HR size="1" width="21%" align="left" noshade></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="3%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(a)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Reflects the historical results of operations
    from January&nbsp;1, 2003, through the consummation of the
    U.S.&nbsp;AMCI acquisition on March&nbsp;11, 2003.
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">44
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="3%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(b)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Reflects the adjustment to operating expenses to
    eliminate the sales and purchases between AMCI and us prior to
    the acquisition.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(c)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Reflects the adjustment to operating expenses to
    eliminate expenses relating to obligations for post-retirement
    medical costs not assumed in the acquisition.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(d)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">The pro forma adjustment to depreciation,
    depletion and amortization is based on the portion of the
    acquisition cost allocated to long-lived assets.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(e)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Reflects pro forma interest expense associated
    with the debt incurred in connection with the transaction.
    </FONT></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="3%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(f)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Reflects the tax effect of the pro&nbsp;forma
    adjustments calculated at the estimated combined federal and
    state statutory rate of 38%.
    </FONT></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="3%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(g)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Reflects pro forma minority interest for the
    period from January&nbsp;1, 2003 to March&nbsp;11, 2003.
    </FONT></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD><FONT size="2">(3)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">The pro&nbsp;forma results of operations include
    the period from January&nbsp;1, 2003 through the consummation of
    the Mears acquisition on November&nbsp;17, 2003.
    </FONT></TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="53%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Mears</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Pro Forma</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Mears</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Historical<SUP>(a)</SUP></FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Adjustments</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Pro Forma</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">(in thousands)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total revenues
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">45,829</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">45,829</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Operating expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25,480</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25,480</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Depreciation, depletion and amortization
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">872</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,914</FONT></TD>
    <TD align="left" valign="bottom" nowrap><SUP><FONT size="2">(b)</FONT></SUP></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,786</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Selling, general and administrative expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,832</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,832</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Income (loss) from operations
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15,645</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(5,914</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,731</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Interest expense
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(22</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,097</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">) <SUP>(c)</SUP></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,119</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Interest income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">195</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">195</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Miscellaneous income (expense)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">447</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">447</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Income tax expense
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,229</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">) <SUP>(d)</SUP></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,229</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Minority interest
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(3,389</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">) <SUP>(e)</SUP></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(3,389</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16,265</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(12,629</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,636</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <HR size="1" width="21%" align="left" noshade></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="3%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(a)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Reflects the historical results of operations
    from January&nbsp;1, 2003, through the consummation of the Mears
    acquisition on November&nbsp;17, 2003.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(b)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">The pro forma adjustment to depreciation,
    depletion and amortization is based on the portion of the
    acquisition cost allocated to long-lived assets.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(c)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Reflects pro forma interest expense associated
    with the debt incurred in connection with the transaction.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(d)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Reflects the tax effect of the pro forma
    adjustments calculated at the estimated combined federal and
    state statutory rate of 38%.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(e)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Reflects pro&nbsp;forma minority interest for the
    period from January&nbsp;1, 2003 to November&nbsp;17, 2003.
    </FONT></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD><FONT size="2">(4)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Operating costs and expenses include cost of coal
    sales, freight and handling costs, and cost of other revenues.
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">45
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD><FONT size="2">(5)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Represents pro forma interest expense resulting
    from our 2004 Financings as shown in the table below:
    </FONT></TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="78%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">(in thousands)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Note payable<SUP>(a)</SUP>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">227</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Equipment financing<SUP>(b)</SUP>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">87</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Senior notes<SUP>(c)</SUP>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">17,500</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Funded revolver<SUP>(d)</SUP>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">800</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Letter of credit fees<SUP>(e)</SUP>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,462</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Commitment fees<SUP>(f)</SUP>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">539</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total cash interest expense
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">20,615</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Amortization of deferred loan costs<SUP>(g)</SUP>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,740</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total pro forma interest expense
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">22,355</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Less 2003 Acquisition pro forma interest expense
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(9,890</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Adjustment to interest expense
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12,465</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <HR size="1" width="21%" align="left" noshade></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(a)&nbsp;Reflects pro forma interest expense at a
    fixed rate of 3.55% on an estimated average balance of
    $7.2&nbsp;million.
    </FONT></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="2%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(b)</FONT></TD>
    <TD align="left">
    <FONT size="2">Reflects pro forma interest expense at a fixed
    rate of 4.79% on an estimated average balance of
    $2.8&nbsp;million.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(c)</FONT></TD>
    <TD align="left">
    <FONT size="2">Reflects pro forma interest on our senior note at
    a fixed rate of 10%.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(d)</FONT></TD>
    <TD align="left">
    <FONT size="2">Reflects pro forma interest expense at an assumed
    LIBOR rate of 1.25% plus an applicable margin of 2.75% on an
    estimated average balance of $20.0&nbsp;million.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(e)</FONT></TD>
    <TD align="left">
    <FONT size="2">Reflects fees at the fixed rate of 3.1% on
    $47.0&nbsp;million of letters of credit outstanding.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(f)</FONT></TD>
    <TD align="left">
    <FONT size="2">Reflects commitment fees of 0.50% on an estimated
    $105.0&nbsp;million average available balance under our
    revolving line of credit.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(g)</FONT></TD>
    <TD align="left">
    <FONT size="2">Reflects deferred financing costs of
    $11.7&nbsp;million amortized over approximately 82&nbsp;months.
    </FONT></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD><FONT size="2">(6)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Reflects the tax effect of the pro forma
    adjustments calculated at the estimated combined federal and
    state statutory rate of 38%.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(7)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Reflects the elimination of the minority interest
    as a result of our Internal Restructuring.
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">46
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<A name='111'></A>
</DIV>

<!-- link1 "SELECTED HISTORICAL FINANCIAL DATA" -->

<P align="center">
<B><FONT size="2">SELECTED HISTORICAL FINANCIAL DATA</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The selected historical financial data as of
December&nbsp;31, 2002 and 2003 and September&nbsp;30, 2004, for
the period from December&nbsp;14, 2002 through December&nbsp;31,
2002, for the year ended December&nbsp;31, 2003 and for the nine
months ended September&nbsp;30, 2004, have been derived from the
combined financial statements of ANR Fund&nbsp;IX Holdings, L.P.
and Alpha NR Holding, Inc. and subsidiaries and the related
notes, included elsewhere in this prospectus, which have been
audited by KPMG. The summary historical financial data for the
nine months ended September&nbsp;30, 2003 have been derived from
the unaudited combined financial statements of ANR Fund&nbsp;IX
Holdings, L.P. and Alpha NR Holding, Inc. and subsidiaries, and
the related notes, included elsewhere in this prospectus. In the
opinion of management, the financial data for the nine months
ended September&nbsp;30, 2003 and 2004 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 selected historical
financial data for the Predecessor Periods have been derived
from our Predecessor&#146;s combined financial statements
included elsewhere in this prospectus, which have been audited
by KPMG. The selected historical financial data as of December
2000 and 2001, and for the year ended December&nbsp;31, 2000
have been derived from our Predecessor&#146;s audited combined
financial statements not included in this prospectus. The
selected historical financial data as of and for the year ended
December&nbsp;31, 1999 have been derived from our
Predecessor&#146;s unaudited combined financial statements. The
following data should be read in conjunction with
&#147;Unaudited Pro Forma Financial Information,&#148;
&#147;Management&#146;s Discussion and Analysis of Financial
Condition and Results of Operations&#148; and our
Predecessor&#146;s financial statements and the related notes
included elsewhere in this prospectus.
</FONT>

<P align="center"><FONT size="2">47
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="10%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="15"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="15"></TD>
    <TD></TD>
    <TD colspan="15" align="center" nowrap><B><FONT size="1">ANR Fund&nbsp;IX Holdings, L.P. and</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="15" align="center" nowrap><B><FONT size="1">Predecessor</FONT></B></TD>
    <TD></TD>
    <TD colspan="15" align="center" nowrap><B><FONT size="1">Alpha NR Holding, Inc. and Subsidiaries</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="15" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="15" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="11"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">January&nbsp;1,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;14,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Nine Month</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Nine Month</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Year Ended</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Year Ended</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Year Ended</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002 to</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002 to</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Year Ended</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Period Ended</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Period Ended</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;13,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">September&nbsp;30,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">September&nbsp;30,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">1999</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2004</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">(unaudited)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">(unaudited)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="31"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="31" align="center" nowrap><B><FONT size="1">(in thousands, except per share data)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="1">Statement of Operations Data:</FONT></B></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Revenues:
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Coal revenues
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">231,264</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">226,653</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">227,237</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">154,715</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">6,260</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">701,262</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">504,660</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">808,655</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Freight and handling revenues
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">33,910</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">25,470</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">25,808</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">17,001</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">1,009</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">73,800</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">49,803</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">106,291</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Other revenues
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">5,601</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">8,472</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">6,031</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">101</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">17,504</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">11,244</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">22,117</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Total revenues
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">265,174</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">257,724</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">261,517</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">177,747</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">7,370</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">792,566</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">565,707</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">937,063</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Costs and expenses:
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Cost of coal sales
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">201,537</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">224,230</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">219,545</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">158,924</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">6,268</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">632,979</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">450,731</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">677,100</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Freight and handling costs
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">33,910</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">25,470</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">25,808</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">17,001</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">1,009</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">73,800</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">49,803</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">106,291</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Costs of other revenues
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">4,721</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">8,156</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">7,973</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">120</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">16,750</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">11,532</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">16,943</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Depreciation, depletion and amortization
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">12,910</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">7,890</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">7,866</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">6,814</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">274</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">36,054</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">25,806</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">39,352</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Asset impairment charge
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">5,100</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Selling, general and administrative expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">7,399</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">8,543</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">9,370</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">8,797</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">471</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">21,949</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">16,697</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">35,786</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Costs to exit business
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">26,937</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">3,500</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">25,274</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Total costs and expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">255,756</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">297,791</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">274,245</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">224,783</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">8,142</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">781,532</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">554,569</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">880,572</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Refund of federal black lung excise tax
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">16,213</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">2,049</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Gain on sale of fixed assets, net
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">342</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Other operating income, net
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">1,337</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">57</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">94</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">1,430</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Income (loss) from operations
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">10,755</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(40,010</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">3,579</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(43,557</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(772</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">11,034</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">11,138</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">56,833</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Other income (expense):
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Interest expense
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(35</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(203</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(7,848</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(5,964</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(14,497</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Interest income
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">785</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">2,263</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">1,993</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">2,072</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">6</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">103</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">91</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">331</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Miscellaneous income
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">4,215</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">1,250</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">575</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">451</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">527</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Total other income (expense), net
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">785</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">6,478</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">3,243</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">2,037</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(197</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(7,170</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(5,422</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(13,639</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Income (loss) before income taxes
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">11,540</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(33,532</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">6,822</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(41,520</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(969</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">3,864</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">5,716</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">43,194</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Income tax expense (benefit)
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(13,545</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(1,497</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(17,198</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(334</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">668</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">988</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">4,732</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Minority interest
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">934</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">1,750</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">19,562</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Net income (loss)
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">11,540</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(19,987</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">8,319</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(24,322</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(635</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">2,262</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">2,978</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">18,900</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="1">Statement of cash flows data:</FONT></B></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Net cash provided by (used in):
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Operating&nbsp;activities
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">20,659</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">10,655</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(13,816</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(295</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">54,104</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">38,149</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">99,247</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Investing activities
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(8,564</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(9,203</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(22,054</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(38,893</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(100,072</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(61,133</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(67,235</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Financing activities
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(12,106</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(1,462</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">35,783</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">47,632</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">48,770</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">33,569</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(27,447</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Capital expenditures
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">6,120</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">9,127</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">10,218</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">21,866</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">960</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">27,719</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">27,130</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">52,984</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="20%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="15"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">ANR Fund&nbsp;IX Holdings, L.P. and</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="15" align="center" nowrap><B><FONT size="1">Predecessor</FONT></B></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">Alpha NR Holding, Inc. and Subsidiaries</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="15" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">As of&nbsp;December&nbsp;31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">As of</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">As of&nbsp;December&nbsp;31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">As of</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;13,</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">September&nbsp;30,</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">1999</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2004</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Balance sheet data:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cash and cash equivalents
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">185</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">175</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">88</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,444</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,246</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15,811</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">130,608</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">139,467</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">156,328</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">108,442</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">379,336</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">457,823</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Notes payable and long- term debt, including
    current portion
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25,743</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">84,964</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">185,617</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Stockholder&#146;s equity and partners capital
    (deficit)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(142,067</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(136,593</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(132,997</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">23,384</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">86,367</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">44,885</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">48
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<A name='112'></A>
</DIV>

<!-- link1 "MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" -->

<P align="center">
<B><FONT size="2">MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF
FINANCIAL</FONT></B>

<DIV align="center">
<B><FONT size="2">CONDITION AND RESULTS OF OPERATIONS</FONT></B>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">You should read the following discussion and
analysis in conjunction with our combined financial statements
and related notes, our &#147;Unaudited Pro Forma Financial
Information,&#148; and our &#147;Selected Historical Financial
Data&#148; included elsewhere in this prospectus. The historical
financial information discussed below is for ANR Fund&nbsp;IX
Holdings, L.P. and Alpha NR&nbsp;Holding, Inc. and subsidiaries,
which prior to the completion of our Internal Restructuring are
the owners of a majority of the membership interests of
ANR&nbsp;Holdings, our top-tier holding company prior to our
Internal Restructuring. References to pro forma financial and
other pro forma information, unless otherwise indicated, reflect
(1)&nbsp;for balance sheet data, the consummation of the
Internal Restructuring as if it had occurred on
September&nbsp;30, 2004, and (2)&nbsp;for statement of
operations and other data, the Prior Transactions as if they had
occurred on January&nbsp;1, 2003.
</FONT>

<P align="left">
<B><FONT size="2">Overview</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We produce, process and sell steam and
metallurgical coal from eight regional business units, which, as
of September&nbsp;30, 2004, are supported by 44&nbsp;active
underground mines, 20&nbsp;active surface mines and
11&nbsp;preparation plants located throughout Virginia, West
Virginia, Kentucky, Pennsylvania and Colorado. As of
October&nbsp;15, 2004, we controlled 514.4&nbsp;million tons of
proven and probable coal reserves. More than 98% of our coal
reserves are located in Central and Northern Appalachia.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We primarily generate revenues from the sale of
steam and metallurgical coal. Metallurgical coal generally sells
at a premium over steam coal because of its higher quality and
its value in the steelmaking process as the raw material for
coke. For the first nine months of 2004, sales of steam coal
accounted for approximately 63% and sales of metallurgical coal
accounted for approximately 37% of our coal sales volume. Our
sales of steam coal were made primarily to large utilities and
industrial customers in the Eastern region of the United States,
and our sales of metallurgical coal were made primarily to steel
companies in the Northeastern and Midwestern regions of the
United States and in several countries in Europe and Asia.
Measured by tons sold, approximately 32% of our coal sales
during the first nine months of 2004 were made outside the
United States, primarily in Canada and several countries in
Europe and Asia.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition to selling coal produced from our
mines, we also sell steam and metallurgical coal produced by
others, some of which we blend and/or process prior to resale.
We blend the majority of the coal we purchase from third parties
by mixing it with coal produced from our mines, which provides
us with a higher overall margin for the blended coal product
than we would otherwise be able to achieve selling these coals
separately. We consider purchased coal to be processed by us if
we wash, crush or blend it at one of our preparation plants or
loading facilities prior to resale.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition, we generate other revenues from
equipment repair and sales income, rentals, royalties,
commissions, coal handling, terminal and processing fees, and
coal analysis 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.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our business is seasonal, with operating results
varying from quarter to quarter. We generally experience lower
sales and hence build coal inventory during the winter months
primarily due to the freezing of lakes that we use to transport
coal to some of our customers.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our primary expenses are wages and benefits,
repair and maintenance expenditures, cost of purchased coal,
royalties, freight and handling costs, and taxes incurred in
selling our coal. Historically, our cost of coal sales per ton
are lower for sales of our produced and processed coal than for
sales of purchased coal that we do not process prior to resale.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Predecessor and 2003
Acquisitions.</FONT></I><FONT size="2"> On December&nbsp;13,
2002, we acquired our Predecessor, the majority of the Virginia
coal operations of Pittston Coal Company, from The Brink&#146;s
Company (formerly
</FONT>

<P align="center"><FONT size="2">49
</FONT>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<FONT size="2">known as The Pittston Company), for
$62.9&nbsp;million. We paid $37.2&nbsp;million in cash at
closing which included transaction costs of $1.2&nbsp;million,
with the remaining purchase price represented by
$25.7&nbsp;million of seller financing. We accounted for this
acquisition under the purchase method of accounting with the
total consideration allocated to the fair value of assets
acquired and liabilities assumed. The allocation resulted in a
write-down from fair value of certain assets of the Predecessor,
primarily property and equipment and mineral rights. Our
combined historical results of operations for the Predecessor
Periods reflect the historical basis of accounting of these
Virginia coal operations by our Predecessor, and the periods
from and after December&nbsp;14, 2002 reflect purchase
accounting adjustments.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On January&nbsp;31, 2003, we acquired Coastal
Coal Company for $67.8&nbsp;million. We paid $44.2&nbsp;million
in cash at closing which included transaction costs of
$2.5&nbsp;million, with the remaining purchase price represented
by $23.6&nbsp;million of seller financing. We accounted for this
acquisition under the purchase method of accounting with the
total consideration allocated to the fair value of assets
acquired and liabilities assumed. The allocation resulted in a
write-down from fair value of certain assets, primarily property
and equipment and mineral rights. The results of operations of
Coastal Coal Company are included in our historical results of
operations for periods from and after February&nbsp;1, 2003. In
connection with our acquisition of the Coastal Coal Company, we
acquired an overriding royalty interest in certain properties
located in Virginia and West Virginia owned by El&nbsp;Paso
CPG&nbsp;Company for $11.0&nbsp;million in cash. Effective
February&nbsp;1, 2003, we sold the overriding royalty interest
to Natural Resource Partners, L.P. (&#147;NRP&#148;) for
$11.8&nbsp;million in cash. Effective April&nbsp;1, 2003, we
also sold substantially all of our fee-owned Virginia mineral
properties to NRP for approximately $53.6&nbsp;million in cash
in a sale/leaseback transaction.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On March&nbsp;11, 2003, we acquired
U.S.&nbsp;AMCI for $121.3&nbsp;million. Including transaction
costs of $4.4&nbsp;million, we paid $52.3&nbsp;million in cash
at closing, with the remaining $69.0&nbsp;million provided in
the form of a 44% membership interest in ANR&nbsp;Holdings. We
accounted for this acquisition under the purchase method of
accounting with the total consideration allocated to the fair
value of assets acquired and liabilities assumed, including
$17.1&nbsp;million to goodwill. The results of operations of
U.S.&nbsp;AMCI are included in our historical results of
operations for periods from and after March&nbsp;12, 2003.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On November&nbsp;17, 2003, we acquired the assets
of Mears for $38.0&nbsp;million in cash, including transaction
costs of $0.1&nbsp;million. We accounted for this acquisition
under the purchase method of accounting with the total
consideration allocated to the fair value of assets acquired and
liabilities assumed. The results of operations of Mears are
included in our historical results of operations for periods
from and after November&nbsp;18, 2003.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Internal Restructuring and Offering.
</FONT></I><FONT size="2">Immediately prior to the effectiveness
of the registration statement of which this prospectus is a
part, we will complete a series of transactions in connection
with our Internal Restructuring for the purpose of transitioning
our top-tier holding company from a limited liability company to
a corporation. See &#147;Internal Restructuring.&#148; As a
result of this offering and our Internal Restructuring, we will
incur additional expenses that we have not incurred in the past,
including expenses associated with compliance with corporate
governance and periodic financial reporting requirements for
public companies. Moreover, all of our income will be subject to
income tax.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As part of our Internal Restructuring, our
executive officers and certain other key employees will receive
shares of our common stock in exchange for their interest in ANR
Holdings. As a result, we will record compensation expense and
deferred compensation equal to the fair value of the shares
issued of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.
We will record
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;of
compensation expense at the time of this offering equal to the
vested portion of the shares issued. The remaining
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;of
compensation will be recorded as deferred stock-based
compensation and amortized over the two-year vesting period of
the unvested shares. As a result of this non-cash compensation
expense, we expect that our operating expenses for the quarter
ending &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2005 will be higher than in prior periods and that we may record
a net loss for this quarter. In addition, the amortization of
the deferred stock-based compensation over the two-year vesting
period will result in a non-cash amortization expense in these
future periods, thereby reducing our earnings in those periods.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Coal Pricing Trends and Uncertainties.
</FONT></I><FONT size="2">During the first nine months of 2004,
prices for our coal increased significantly due to a combination
of conditions in the United States and internationally,
</FONT>

<P align="center"><FONT size="2">50
</FONT>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<FONT size="2">including an improving U.S.&nbsp;economy,
relatively low customer stockpiles, capacity constraints of
U.S.&nbsp;nuclear-powered electricity generators, high current
and forward prices for natural gas and oil, and increased
international demand for U.S.&nbsp;coal. This strong coal
pricing environment has contributed to our growth in revenues
and net income during the nine months ended September&nbsp;30,
2004. There is uncertainty as to whether and for how long this
strong coal pricing environment will continue. We are also
experiencing increased costs for purchased coal which have risen
with coal prices generally, and increased operating costs for
steel equipment and employee wages and salaries.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The U.S.&nbsp;dollar has weakened over the last
two years, which has made U.S.&nbsp;coal relatively less
expensive and therefore more competitive in foreign markets. We
believe that the weakening of the U.S.&nbsp;dollar has enabled
us to export more metallurgical coal at higher prices than would
otherwise have been the case during 2003 and the first nine
months of 2004, and this trend has contributed to our growth in
revenues and income during those periods. There is uncertainty
as to whether and for how long the dollar will continue to
weaken against foreign currencies, and we believe that a
strengthening of the U.S.&nbsp;dollar would adversely affect our
exports.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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;
</FONT>

<P align="left">
<B><FONT size="2">Results of Operations</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">For purposes of the following discussion and
analysis of our operating results, the revenues and costs and
expenses of ANR Fund&nbsp;IX Holdings, L.P. and Alpha
NR&nbsp;Holding, Inc. and subsidiaries for the period from
December&nbsp;14, 2002 through December&nbsp;31, 2002 have been
combined with the revenues and costs and expenses of our
Predecessor for the period from January&nbsp;1, 2002 through
December&nbsp;13, 2002. Our operating results from and after
December&nbsp;14, 2002, including our recorded depreciation,
depletion and amortization expense, are not comparable to the
Predecessor Periods as a result of the application of purchase
accounting. The combining of the Predecessor and successor
accounting periods in the year ended December&nbsp;31, 2002 is
not permitted by U.S. generally accepted accounting principles.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The 2003 Acquisitions also affect comparability
with the Predecessor Periods and, therefore, the results of
operations for the Predecessor Periods are not comparable to the
results of operations for the periods from and after
December&nbsp;14, 2002. In addition, the results of operations
for the nine months ended September&nbsp;30, 2004 are not
directly comparable to the same period in 2003 due to the 2003
Acquisitions. Our business consists of one reportable
segment&#151; the extracting, processing and marketing of coal.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Nine Months Ended September&nbsp;30, 2004
    Compared to Nine Months Ended September&nbsp;30,
    2003</FONT></I></B></TD>
</TR>

</TABLE>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Revenues</FONT></I></TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="55%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Nine Months Ended</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Increase</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">September&nbsp;30,</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">(Decrease)</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2004</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">$ or Tons</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">%</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="15"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="15" align="center" nowrap><B><FONT size="1">(in thousands, except per ton data)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Coal revenues
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">504,660</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">808,655</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">303,995</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">60%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Freight and handling revenues
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">49,803</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">106,291</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">56,488</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">113%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other revenues
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,244</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">22,117</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,873</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">97%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total revenues
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">565,707</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">937,063</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">371,356</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">66%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Tons sold
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15,778</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">19,424</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,646</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">23%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Coal sales realization per ton sold
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">31.99</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">41.63</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9.64</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">30%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Coal Revenues. </FONT></I><FONT size="2">Coal
revenues increased in the first nine months of 2004 by
$304.0&nbsp;million or 60%, to $808.7&nbsp;million, as compared
to the first nine months of 2003. This increase was due
primarily to the
</FONT>

<P align="center"><FONT size="2">51
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<FONT size="2">$9.64&nbsp;per ton increase in the average sales
price of our coal and to additional tons sold 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 and to our ability to take advantage of the
exceptionally high metallurgical coal sale prices by processing
and marketing as metallurgical coal some coal qualities that
would traditionally have been marketed as steam coal.
Approximately 63% and 37% of our tons sold in the first nine
months of 2004 were steam coal and metallurgical coal,
respectively, as compared to 71% and 29% during the same period
in 2003. Our tons sold in the first nine months of 2004
increased by 3.6&nbsp;million, or 23%, to 19.4&nbsp;million,
primarily due to the effect of our 2003 Acquisitions.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Freight and Handling
Revenues.</FONT></I><FONT size="2"> Freight and handling
revenues increased to $106.3&nbsp;million for the period ended
September&nbsp;30, 2004, an increase of $56.5&nbsp;million
compared to the period ended September&nbsp;30, 2003 due to
increased export shipments.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Other Revenues.</FONT></I><FONT size="2">
Other revenues increased for the first nine months of 2004 by
$10.9&nbsp;million, or 97%, to $22.1&nbsp;million, as compared
to the first nine months of 2003 primarily due to higher
equipment sales, coal handling and processing fees, and sales
commissions, partially offset by reduced trucking revenue. Other
revenues for the first nine months of 2004 include a gain of
$1.2&nbsp;million on the satisfaction of an obligation to
reclaim certain properties retained by the seller in the
Pittston acquisition.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Costs and Expenses</FONT></I></TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="57%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Nine Months Ended</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Increase</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">September&nbsp;30,</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">(Decrease)</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2004</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">$</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">%</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="15"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="15" align="center" nowrap><B><FONT size="1">(in thousands, except per ton data)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cost of coal sales
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">450,731</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">677,100</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">226,369</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">50%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Freight and handling costs
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">49,803</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">106,291</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">56,488</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">113%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cost of other revenues
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,532</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16,943</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,411</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">47%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Depreciation, depletion and amortization
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25,806</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">39,352</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">13,546</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">52%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Asset impairment charge
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,100</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,100</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Selling, general and administrative expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16,697</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">35,786</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">19,089</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">114%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total costs and expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">554,569</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">880,572</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">326,003</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">59%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cost of coal sales per ton sold
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">28.57</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">34.86</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6.29</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">22%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Cost of Coal Sales.
</FONT></I><FONT size="2">In the first nine months of 2004, our
cost of coal sales increased $226.4&nbsp;million, or 50%, to
$677.1&nbsp;million compared to the first nine months of 2003.
The increase in our cost of coal sold was principally the result
of our 2003 Acquisitions. Our cost of coal sales also increased
as a result of increased prices for steel-related mine supplies
and contract mining services, higher prices for purchased coal,
and increased variable sales-related costs, such as royalties
and severance taxes. The average cost per ton sold increased 22%
from $28.57&nbsp;per ton in the first nine months of 2003 to
$34.86&nbsp;per ton in the first nine months of 2004. Our cost
of coal sales as a percentage of coal revenues decreased from
89% in the first nine months of 2003 to 84% in the first nine
months of 2004. For the nine months ended September&nbsp;30,
2004 our average cost per ton for our produced or processed coal
sales was $31.96 and our average cost per ton for coal that we
purchased from third parties and resold without processing was
$43.79.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Freight and Handling Costs.
</FONT></I><FONT size="2">Freight and handling costs increased
$56.5&nbsp;million to $106.3&nbsp;million during the first nine
months of 2004 as compared to the first nine months of 2003,
mainly due to increased export shipments where we initially pay
the freight and handling cost and are then reimbursed by the
customer.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Cost of Other Revenues.
</FONT></I><FONT size="2">Cost of other revenues increased
$5.4&nbsp;million, or 47%, to $16.9&nbsp;million for the first
nine months of 2004 as compared to the first nine months of 2003
due to a higher volume of equipment sales and higher processing
and handling fees as a result of increased volumes.
</FONT>

<P align="center"><FONT size="2">52
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Depreciation, Depletion and Amortization.
</FONT></I><FONT size="2">Depreciation, depletion, and
amortization increased $13.5&nbsp;million, or 52%, to
$39.4&nbsp;million for the first nine months of 2004 as compared
to the first nine months of 2003 due to capital additions during
the first nine months of 2004, as well as the impact of the 2003
Acquisitions. Depreciation, depletion and amortization per ton
increased from $1.64&nbsp;per ton in the first nine months of
2003 to $2.03&nbsp;per ton in the first nine months of 2004
principally due to 2004 capital additions.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Asset Impairment Charge.
</FONT></I><FONT size="2">We own National King Coal, LLC (a
mining company) and Gallup Transportation and Transloading
Company, LLC (a trucking company) (collectively
&#147;NKC&#148;). Since the acquisition of NKC, it has incurred
cumulative losses of $2.8&nbsp;million. While NKC has not
experienced sales revenue growth comparable to our other
operations, it has been affected by many of the same cost
increases. As a result, we were required to assess the recovery
of the carrying value of the NKC assets. Based upon that
analysis it was determined that the assets of NKC were impaired.
An impairment charge of $5.1&nbsp;million was recorded in
September 2004 to reduce the carrying value of the assets of NKC
to their estimated fair value. A discounted present value cash
flow model was used to determine fair value.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Selling, General and Administrative Expenses.
</FONT></I><FONT size="2">Selling, general and administrative
expenses increased $19.1&nbsp;million, or 114%, to
$35.8&nbsp;million in the first nine months of 2004 compared to
the same period in 2003. The increase is attributed to higher
staffing levels and resulting payroll costs, incentive bonus
payments and accruals, a contract buyout of $3.1&nbsp;million,
and professional fees incurred in documenting, assessing, and
improving our controls and procedures in anticipation of the
requirements of the Sarbanes-Oxley Act once we are a public
company. Our selling, general and administrative expenses as a
percentage of total revenues increased from 3.0% in the first
nine months of 2003 to 3.8% in the first nine months of 2004.
</FONT>

<P align="left">
<I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest
Expense</FONT></I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Interest expense increased $8.5&nbsp;million to
$14.5&nbsp;million during the first nine months of 2004 compared
to the same period in 2003. The increase was mainly due to the
additional interest expense of $6.4&nbsp;million related to our
10%&nbsp;senior notes issued in May 2004 and the write-off of
deferred financing costs in the amount of $2.8&nbsp;million
related to our previous credit facility.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Interest Income</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Interest income increased from $0.1&nbsp;million
to $0.3&nbsp;million as a result of interest received on notes
receivable issued in the first nine months of 2004.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Income Tax Expense</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Income tax expense increased $3.7&nbsp;million to
$4.7&nbsp;million for the nine months ended September&nbsp;30,
2004 as compared to the nine months ended September&nbsp;30,
2003. Our effective tax rates for the nine months ended
September&nbsp;30, 2004 and 2003 were 11.0% and 17.3%,
respectively. The effective tax rates are lower than the
statutory tax rate since we are not subject to tax with respect
to the portion of our income before taxes which is attributable
to ANR Fund IX Holdings, L.P.&#146;s portion of our earnings and
the minority interest&#146;s share in the earnings of ANR
Holdings. In addition, our taxable income is reduced by
percentage depletion allowances which reduce our effective tax
rate. These reductions in our effective tax rates are offset by
(or reduced by) the effect of increases (decreases) in our
valuation allowance for deferred tax assets of
$(0.2)&nbsp;million and $0.8&nbsp;million recorded in the nine
months ended September&nbsp;30, 2004 and 2003, respectively.
</FONT>

<P align="center"><FONT size="2">53
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Year Ended December&nbsp;31, 2003 Compared
    to Year Ended December&nbsp;31, 2002</FONT></I></B></TD>
</TR>

</TABLE>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Revenues</FONT></I></TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="56%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Year Ended</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Increase</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">(Decrease)</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002*</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">$ or Tons</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">%</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="15"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="15" align="center" nowrap><B><FONT size="1">(in thousands, except per ton data)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Coal revenues
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">160,975</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">701,262</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">540,287</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">336</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Freight and handling revenues
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">18,010</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">73,800</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">55,790</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">310</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other revenues
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,132</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">17,504</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,372</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">185</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total revenues
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">185,117</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">792,566</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">607,449</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">328</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Tons sold
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,469</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">21,930</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">17,461</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">391</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Coal sales realization per ton sold
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">36.02</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">31.98</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(4.04</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(11</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)%</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
<HR size="1" width="15%" align="left" noshade>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">*&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Reflects the combination of the Predecessor and
    successor accounting periods in the year ended December&nbsp;31,
    2002.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Coal Revenues. </FONT></I><FONT size="2">Coal
revenues increased $540.3&nbsp;million, or 336%, to
$701.3&nbsp;million for the year ended December&nbsp;31, 2003,
from $161.0&nbsp;million for the year ended December&nbsp;31,
2002. The increase was primarily due to the 2003 Acquisitions,
partially offset by a reduction in the average sales price per
ton. Tons sold increased from 4.5&nbsp;million tons in 2002 to
21.9&nbsp;million tons in 2003. The 2003 Acquisitions accounted
for 16.0&nbsp;million of the 17.5&nbsp;million ton increase in
coals sales from 2002 to 2003. Our average sales price per ton
decreased 11% from $36.02&nbsp;per ton in 2002 to
$31.98&nbsp;per ton in 2003, mainly due to our lower percentage
of metallurgical coal sales in 2003 as compared to sales of our
Predecessor in 2002. Approximately 71% and 29% of our tons sold
in the 2003 were steam coal and metallurgical coal,
respectively, as compared to 45% and 55% during 2002.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Freight and Handling
Revenues.</FONT></I><FONT size="2"> Freight and handling
revenues increased $55.8&nbsp;million from $18.0&nbsp;million in
2002 primarily due to increased volumes resulting from the 2003
Acquisitions.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Other Revenues.</FONT></I><FONT size="2">
Other revenues, principally sales commissions, equipment repair
and sales, and coal handling, terminalling and processing fees
increased $11.4&nbsp;million to $17.5 for 2003, mainly due to
the 2003 Acquisitions and increased volume in equipment repair
and sales. Other revenues for 2002 include only equipment repair
and sales income.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Costs and Expenses</FONT></I></TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="59%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Year Ended</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Increase</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">(Decrease)</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002*</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">$</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">%</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="15"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="15" align="center" nowrap><B><FONT size="1">(in thousands, except per ton data)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cost of coal sales
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">165,192</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">632,979</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">467,787</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">283</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Freight and handling costs
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">18,010</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">73,800</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">55,790</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">310</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cost of other revenues
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,093</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16,750</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,657</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">107</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Depreciation, depletion and amortization
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,088</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">36,054</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">28,966</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">409</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Selling, general and administrative expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,268</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">21,949</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12,681</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">137</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Costs to exit business
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25,274</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(25,274</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total costs and expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">232,925</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">781,532</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">548,607</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">236</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cost of coal sales per ton sold
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">36.96</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">28.86</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(8.10</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(22</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)%</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
<HR size="1" width="15%" align="left" noshade>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">*&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Reflects the combination of the Predecessor and
    successor accounting periods in the year ended December&nbsp;31,
    2002.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Cost of Coal Sales.</FONT></I><FONT size="2">
Our cost of coal sales increased $467.8&nbsp;million, or 283%,
to $633.0&nbsp;million for the year ended December&nbsp;31,
2003, from $165.2&nbsp;million for the year ended
December&nbsp;31, 2002. The
</FONT>

<P align="center"><FONT size="2">54
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<FONT size="2">increase in our cost of coal sold was primarily
the result of our 2003 Acquisitions. The 2003 Acquisitions
accounted for 93% of the 12.9&nbsp;million ton increase in our
produced and processed coal sales for 2003. The average cost per
ton sold decreased 22% from $36.96&nbsp;per ton in 2002 to
$28.86&nbsp;per ton in 2003 as a result of increased production,
which reduced our fixed costs per ton, as well as lower costs of
coal produced from mines acquired in the 2003 Acquisitions. Our
cost of coal sales as a percentage of coal revenues decreased
from 103% in 2002 to 90% in 2003.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Freight and Handling Costs.
</FONT></I><FONT size="2">Freight and handling costs increased
$55.8&nbsp;million to $73.8&nbsp;million for the year ended
December&nbsp;31, 2003 as compared to the prior period,
primarily due to increased sales volumes resulting from the 2003
Acquisitions.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Cost of Other Revenues.
</FONT></I><FONT size="2">Cost of other revenues increased
$8.7&nbsp;million, or 107%, to $16.8&nbsp;million for 2003 as
compared to 2002 as a result of the 2003 Acquisitions, in which
we acquired trucking and coal processing operations, as the cost
for 2002 includes only those related to equipment repair and
sales income.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Depreciation, Depletion and
Amortization.</FONT></I><FONT size="2"> Depreciation, depletion
and amortization expense for the year ended December&nbsp;31,
2003 was $36.1&nbsp;million, an increase of $29.0&nbsp;million
from the prior year. The increase in expense is attributable to
the 2003 Acquisitions, as depreciation, depletion and
amortization expense per ton showed only a slight increase from
$1.59&nbsp;per ton in 2002 to $1.64&nbsp;per ton in 2003.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Selling, General and Administrative
Expenses.</FONT></I><FONT size="2"> Selling, general and
administrative expenses increased by $12.7&nbsp;million to
$21.9&nbsp;million, but decreased from $2.07&nbsp;per ton sold
to $1.00&nbsp;per ton sold from 2002 to 2003, primarily due to a
significant increase in tons sold, partially offset by
additional expenses associated with transition services provided
by the selling companies. Our selling, general and
administrative expenses as a percentage of total revenues
decreased from 5.0% in 2002 to 2.8% in 2003.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Costs to Exit
Business.</FONT></I><FONT size="2"> For the year ended
December&nbsp;31, 2002, our Predecessor recorded a charge of
$25.3&nbsp;million for a pension plan early withdrawal penalty.
The early withdrawal penalty was incurred when our Predecessor
withdrew from a multi-employer pension plan when we purchased
their operations.
</FONT>

<P align="left">
<I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest
Expense</FONT></I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Interest expense increased to $7.8&nbsp;million
for the year ended December&nbsp;31, 2003 from less than
$0.1&nbsp;million for the period from January&nbsp;1, 2002 to
December&nbsp;13, 2002. The increase is due to interest on loans
to finance the 2003 Acquisitions.
</FONT>

<P align="left">
<I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest
Income</FONT></I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Interest income decreased from $2.1&nbsp;million
for the period from January&nbsp;1 to December&nbsp;13, 2002 to
$0.1&nbsp;million in 2003. Interest income for the period from
January&nbsp;1, 2002 to December&nbsp;13, 2002 was attributable
to interest earned on Virginia tax credits and an employee
benefit trust. We did not acquire the assets of the employee
benefit trust or the receivable for the Virginia tax credits.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Income Tax Expense (Benefit)</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Income taxes increased $17.9&nbsp;million from a
benefit of $17.2&nbsp;million for the period from
January&nbsp;1, 2002 to December&nbsp;13, 2002 to an expense of
$0.7&nbsp;million for the year ended December&nbsp;31, 2003.
This increase in income taxes was attributable primarily to the
increase in pre-tax income. The effective tax rate for the
period from January&nbsp;1, 2002 to December&nbsp;13, 2002 and
for the year ended December&nbsp;31, 2003 was 41.4% and 17.3%,
respectively. In 2003, tax was not provided on ANR Fund IX
Holdings, L.P.&#146;s portion of our earnings and the minority
interest owners&#146; share in the earnings of ANR Holdings. In
addition, in periods when a pre-tax loss is reported, percentage
depletion increases the effective tax rate (increases the tax
benefit) whereas in periods when pre-tax income is reported,
percentage depletion decreases the effective tax rate (decreases
the tax expense).
</FONT>

<P align="center"><FONT size="2">55
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Year Ended December&nbsp;31, 2002 Compared
    to Year Ended December&nbsp;31, 2001</FONT></I></B></TD>
</TR>

</TABLE>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Revenues</FONT></I></TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="56%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Year Ended</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Increase</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">(Decrease)</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002*</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">$ or Tons</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">%</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="15"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="15" align="center" nowrap><B><FONT size="1">(in thousands, except per ton data)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Coal revenues
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">227,237</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">160,975</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(66,262</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(29</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)%</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Freight and handling revenues
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25,808</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">18,010</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(7,798</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(30</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other revenues
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,472</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,132</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,340</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(28</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)%</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total revenues
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">261,517</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">185,117</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(76,400</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(29</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)%</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Tons sold
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,975</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,469</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,506</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(36</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)%</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Coal sales realization per ton sold
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">32.58</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">36.02</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3.44</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
<HR size="1" width="15%" align="left" noshade>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">*&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Reflects the combination of the Predecessor and
    successor accounting periods in the year ended December&nbsp;31,
    2002.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Coal Revenues.</FONT></I><FONT size="2"> Coal
revenues for the year ended December&nbsp;31, 2002 decreased
$66.3&nbsp;million, to $161.0&nbsp;million, a 29% decrease from
the prior year. The decrease in revenue is primarily due to a
decrease in tons sold of 2.5&nbsp;million tons, partially offset
by an increase in the average selling price of $3.44&nbsp;per
ton, from $32.58&nbsp;per ton in 2001 to $36.02&nbsp;per ton in
2002. Approximately 45% and 55% of our tons sold in the 2002
were steam coal and metallurgical coal, respectively, as
compared to 58% and 42% during 2001.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Freight and Handling
Revenues.</FONT></I><FONT size="2"> Freight and handling
revenues decreased $7.8&nbsp;million, or 30%, from
$25.8&nbsp;million in 2001 primarily due to the decrease in tons
sold.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Other Revenues.</FONT></I><FONT size="2">
Other revenues decreased by 28% due to a decrease in equipment
repair revenues.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Costs and Expenses</FONT></I></TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="57%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Year Ended</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Increase</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">(Decrease)</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002*</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">$</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">%</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="15"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="15" align="center" nowrap><B><FONT size="1">(in thousands, except per ton data)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cost of coal sales
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">219,545</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">165,192</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(54,353</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(25</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)%</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Freight and handling costs
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25,808</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">18,010</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(7,798</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(30</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cost of other revenues
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,156</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,093</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(63</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)%</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Depreciation, depletion and amortization
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,866</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,088</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(778</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(10</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Selling, general and administrative expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,370</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,268</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(102</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)%</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Costs to exit business
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,500</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25,274</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">21,774</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">622</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total costs and expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">274,245</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">232,925</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(41,320</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(15</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)%</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cost of coal sales per ton sold
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">31.48</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">36.96</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5.48</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">17</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
<HR size="1" width="15%" align="left" noshade>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">*&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Reflects the combination of the Predecessor and
    successor accounting periods in the year ended December&nbsp;31,
    2002.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Cost of Coal Sales.</FONT></I><FONT size="2">
Cost of coal sales for the year ended December&nbsp;31, 2002
decreased $54.4&nbsp;million, to $165.2&nbsp;million, a 25%
decrease from the prior year, due to a decrease in tons of coal
purchased and a decrease in tons of coal produced. Average cost
per ton increased by $5.48, from $31.48&nbsp;per ton in 2001 to
$36.96&nbsp;per ton in 2002, due to decreased production which
increased fixed costs per ton. Our cost of coal sales as a
percentage of coal revenues increased from 97% in 2001 to 103%
in 2002 as the increase in our cost per ton in 2002 exceeded the
increase in our revenue per ton.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Freight and Handling
Costs.</FONT></I><FONT size="2"> Freight and handling costs
decreased $7.8&nbsp;million to $18.0&nbsp;million primarily due
to a decrease in export sales volumes.
</FONT>

<P align="center"><FONT size="2">56
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Cost of Other
Revenues.</FONT></I><FONT size="2"> Cost of other revenues
remained flat from 2001 to 2002. A decrease in costs related to
decreased repairs and maintenance revenues was offset by a
litigation settlement recorded in 2002.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Depreciation, Depletion and
Amortization.</FONT></I><FONT size="2"> Depreciation, depletion
and amortization expense reported for the year ended
December&nbsp;31, 2002 was $7.1&nbsp;million, a
$0.8&nbsp;million decrease from the prior year. Depreciation,
depletion&nbsp;and amortization expense per ton increased from
$1.13&nbsp;per ton in 2001 to $1.59&nbsp;per ton in 2002 due to
the decrease in sales volume which increased the per ton amount
of depreciation expense.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Selling, General and Administrative
Expenses.</FONT></I><FONT size="2"> Selling, general and
administrative expenses decreased $0.1&nbsp;million for the year
ended December&nbsp;31, 2002 to $9.3&nbsp;million. Selling,
general and administrative expenses as a percentage of total
revenues increased from 3.6% in 2001 to 5.0% in 2002 because of
the decrease in tons sold in 2002, while staffing levels and
overhead costs were relatively unchanged from 2001.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Costs to Exit
Business.</FONT></I><FONT size="2"> This expense increased
$21.8&nbsp;million for the year ended December&nbsp;31, 2002 to
$25.3&nbsp;million due to the recognition of a
$25.3&nbsp;million multi-employer pension plan early withdrawal
penalty in 2002. The early withdrawal penalty was incurred when
our Predecessor withdrew from a multi-employer pension plan when
we purchased its operations. The expense of $3.5&nbsp;million in
2001 relates primarily to an early multi-employer pension plan
withdrawal penalty expected to be incurred when our Predecessor
decided to exit the coal business.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Interest Income</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Interest income increased $0.1&nbsp;million for
the period ended December&nbsp;13, 2002 to $2.1&nbsp;million.
Interest income in both periods was attributable to interest
earned on Virginia coal tax credits and an employee benefit
trust of our Predecessor.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Income Tax Benefit</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">For the period from January&nbsp;1, 2002 to
December&nbsp;13, 2002, our Predecessor reported an income tax
benefit of $17.2&nbsp;million on a loss before income taxes of
$41.5&nbsp;million compared to an income tax benefit of
$1.5&nbsp;million on income before taxes of $6.8&nbsp;million in
the prior year. The decrease in income taxes was attributable
primarily to the decrease in pre-tax income. The difference in
the effective tax rate results primarily from the benefits of
percentage depletion and an adjustment resulting from a
favorable appeal in 2002.
</FONT>

<P align="left">
<B><FONT size="2">Liquidity and Capital Resources</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our primary liquidity and capital resource
requirements are to finance the cost of our coal production and
purchases, to make capital expenditures, and to service our debt
and reclamation obligations. Historically we have made
significant distributions to our equity holders, and in
connection with our Internal Restructuring we have agreed to pay
the Sponsor Distributions totaling $10.5&nbsp;million in cash
or, to the extent we are not permitted by the terms of our
credit facility or the indenture governing our senior notes to
pay the Sponsor Distributions in cash, in shares of our common
stock. Our primary sources of liquidity are cash flow from sales
of our produced and purchased coal, other income and borrowings
under our senior credit facility.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">At September&nbsp;30, 2004, our available
liquidity was $136.4&nbsp;million, including cash of
$15.8&nbsp;million and $120.6&nbsp;million available under our
credit facility. Total debt represented 72% of our total
capitalization at September&nbsp;30, 2004.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We currently project cash capital spending for
the fourth quarter of 2004 of $20&nbsp;million to
$25&nbsp;million. These budgeted expenditures are to be used to
develop new mines and replace or add equipment. We believe that
cash generated from our operations and borrowings under our
credit facility
</FONT>

<P align="center"><FONT size="2">57
</FONT>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<FONT size="2">will be sufficient to meet our working capital
requirements, anticipated capital expenditures and debt service
requirements for at least the next twelve months.
</FONT>
</DIV>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Cash Flows</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Cash provided by operating activities was
$99.2&nbsp;million for the first nine months of 2004, an
increase of $61.1&nbsp;million from the same period in 2003.
Cash provided by operations for the first nine months of 2004
benefitted from the effects of our 2003 Acquisitions and the
strength of the coal markets during the period. This increase is
attributable to an increase in net income of $15.9&nbsp;million
for the first nine months of 2004 over the same period last
year, an increase in non-cash charges included in net income of
$43.3&nbsp;million and the effects of a $1.9&nbsp;million
reduction in net operating assets and liabilities.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Net cash used in investing activities was
$67.2&nbsp;million during the first nine months of 2004,
$6.1&nbsp;million more than the first nine months of 2003.
Capital expenditures increased $25.9&nbsp;million, to
$53.0&nbsp;million during the first nine months of 2004. The
increase in capital expenditures was primarily due to the
replacement of equipment, new mine development and upgrades to a
preparation plant. In the second quarter of 2003, we sold our
interest in certain coal properties acquired in the purchase of
our Predecessor, and a royalty interest acquired in our Coastal
Coal Company acquisition for an aggregate of $65.2&nbsp;million.
We also paid $95.8&nbsp;million for the Coastal Coal Company and
U.S.&nbsp;AMCI acquisitions in the first nine months of 2003. As
part of a coal supply agreement, we loaned an unrelated coal
supplier $10.0&nbsp;million in June&nbsp;2004 at a variable rate
to be repaid in installments over a two-year period beginning in
August&nbsp;2004. The loan is secured by the assets of the
debtor and personally guaranteed by the debtor&#146;s owner. The
related coal supply agreement with the debtor should provide us
with approximately 40,000&nbsp;tons of coal per month through
March of 2006. In September 2004, we also acquired an equity
interest for $3.3&nbsp;million in a company which is developing
a mining property in Venezuela.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Net cash used in financing activities during the
nine months ended September&nbsp;30, 2004 was $27.4&nbsp;million
compared with net cash provided by financing activities of
$33.6&nbsp;million in the prior period. Net cash provided by
financing activities included the net proceeds of
$171.5&nbsp;million received as a result of the issuance of our
$175&nbsp;million 10%&nbsp;senior notes in May&nbsp;2004.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Net cash used in financing activities included
distributions made to our equity owners of $115.6&nbsp;million
during the first nine months of 2004 and $10.6&nbsp;million paid
for debt issuance costs. We received $15.2&nbsp;million for
common stock issued and we received advances from affiliates of
$20.0&nbsp;million during the nine month period ended
September&nbsp;30, 2003.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our operations provided us cash of
$54.1&nbsp;million for the year ended December&nbsp;31, 2003,
while the operations of our Predecessor used cash of
$13.8&nbsp;million. Our net income increased $26.6&nbsp;million
to $2.3&nbsp;million when compared to our Predecessor&#146;s net
loss of $24.3&nbsp;million. Our non-cash charges increased by
$40.0&nbsp;million mainly due to increased depreciation,
depletion and amortization charges associated with the 2003
Acquisitions. Net changes in operating assets and liabilities
increased our operating cash flow by $12.6&nbsp;million in 2003
while net changes in operating assets and liabilities increased
cash flow from operations by $11.3&nbsp;million for the period
from January&nbsp;1, 2002 to December&nbsp;13, 2002.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our Predecessor&#146;s cash provided by
operations decreased from the year ended December&nbsp;31, 2001
to the period from January 1, 2002 to December&nbsp;13, 2002 by
$24.5&nbsp;million mainly due to the effect of black lung tax
refunds received in 2001 and payments made in the period from
January&nbsp;1, 2002 to December&nbsp;13, 2002 to exit the coal
business.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Net cash used in investing activities was
$100.1&nbsp;million for the year ended December&nbsp;31, 2003.
Cash used in investing activities includes $133.8&nbsp;million
for the acquisitions of Coastal Coal Company, U.S.&nbsp;AMCI,
and Mears and capital expenditures of $27.7&nbsp;million. The
2003 period includes proceeds of $65.2&nbsp;million received
from the sales of coal reserves and mineral interests acquired
in the Pittston and Coastal Coal Company acquisitions. The
investing activities of our Predecessor in 2002 and 2001
consisted primarily of capital expenditures.
</FONT>

<P align="center"><FONT size="2">58
</FONT>

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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Net cash provided by financing activities was
$48.8&nbsp;million and $35.8&nbsp;million for the year ended
December&nbsp;31, 2003 and the period from January&nbsp;1, 2002
to December&nbsp;13, 2002, respectively. In 2003, we entered
into a credit facility which provided for a $45.0&nbsp;million
term loan and a $75.0&nbsp;million revolving credit line.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Proceeds from borrowings under this credit
facility were $58.5&nbsp;million in 2003. Repayments of notes
payable and long-term debt totaled $45.7&nbsp;million. We
received $15.2&nbsp;million for common stock issued and we
received advances from affiliates of $20.0&nbsp;million during
the year ended December&nbsp;31, 2003. Cash provided by
financing activities of our Predecessor in the period from
January&nbsp;1, 2002 to December&nbsp;13, 2002 consisted of
advances from affiliates. Cash used by financing activities was
$1.5&nbsp;million for the year ended December&nbsp;31, 2001
representing net repayments of notes payable.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Credit Facility and Long-term Debt</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As of September&nbsp;30, 2004, our total
long-term indebtedness, including capital lease obligations,
consisted of the following (in thousands):
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="75%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">September&nbsp;30,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2004</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">10%&nbsp;senior notes due 2012
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">175,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Revolving credit facility
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">4.84% term notes
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,759</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Capital lease obligation
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,160</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">60</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total long-term debt
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">182,979</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Less current portion
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,723</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Long-term debt, net of current portion
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">181,256</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On May&nbsp;18, 2004, our subsidiaries Alpha
Natural Resources, LLC and Alpha Natural Resources Capital Corp.
issued $175.0&nbsp;million of 10%&nbsp;senior notes due June
2012 in a private placement offering under Rule&nbsp;144A of the
Securities Act of 1933, resulting in net proceeds of
approximately $171.5&nbsp;million after fees and other offering
costs. The senior notes are unsecured but are guaranteed fully
and unconditionally on a joint and several basis by all of Alpha
Natural Resources, LLC&#146;s wholly-owned domestic restricted
subsidiaries. Interest is payable semi-annually in June and
December.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On May&nbsp;28, 2004, Alpha Natural Resources,
LLC entered into a credit facility with a group of lending
institutions. The credit facility provides for a revolving line
of credit of up to $125.0&nbsp;million and a funded letter of
credit facility of up to $50.0&nbsp;million. As of
September&nbsp;30, 2004, $4.0&nbsp;million principal amount in
borrowings and letters of credit totaling $0.4&nbsp;million were
outstanding under the revolving line of credit, leaving
$120.6&nbsp;million available for borrowing on the line of
credit. As of September&nbsp;30, 2004, the funded letter of
credit facility was fully utilized at $50.0&nbsp;million at an
annual fee of 3.1% of the outstanding amount. Amounts drawn
under the revolver 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 revolver was 4.57% as of September&nbsp;30, 2004. The
principal balance of the revolving credit note is due in May
2009. ANR Holdings and each of the subsidiaries of Alpha Natural
Resources, LLC have guaranteed Alpha Natural Resources
LLC&#146;s obligations under the revolving credit facility. The
obligations of ANR Holdings, Alpha Natural Resources, LLC and
its subsidiaries under the credit facility are collateralized by
the assets of the subsidiaries of those entities. We must pay an
annual commitment fee up to a maximum of &nbsp;1/2 of 1% of the
unused portion of the commitment. We were in compliance with our
debt covenants under the credit facility as of
September&nbsp;30, 2004.
</FONT>

<P align="center"><FONT size="2">59
</FONT>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The credit facility and the indenture governing
the senior notes each impose 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 meet or exceed certain interest coverage ratios and must
not exceed certain leverage ratios.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">At September&nbsp;30, 2004, we had
$50.5&nbsp;million in letters of credit outstanding, of which
$50.0&nbsp;million are supported by our $50.0&nbsp;million
funded letter of credit facility, $0.4&nbsp;million is supported
by the revolving line of credit under our credit facility and
$0.1&nbsp;million is supported by a cash deposit. We have a
contingent liability for these letters of credit.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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.
</FONT>

<P align="left">
<B><FONT size="2">Analysis of Material Debt Covenants</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We were in compliance with all covenants under
our credit facility and the indenture governing our senior notes
as of September&nbsp;30, 2004.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The financial covenants in our credit facility
require, among other things, that:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">Alpha Natural Resources, LLC must maintain a
    leverage ratio, defined as the ratio of total debt to adjusted
    EBITDA (as defined in the credit agreement), of less than 3.85
    at September&nbsp;30, 2004, declining to 3.75 at
    December&nbsp;31, 2004, 3.50 at March&nbsp;31 and June&nbsp;30,
    2005, 3.25 at September&nbsp;30 and December&nbsp;31, 2005, 3.15
    at March&nbsp;31, June&nbsp;30, September&nbsp;30 and
    December&nbsp;31, 2006 and 3.00 at March&nbsp;31, 2007 (and
    thereafter), respectively, with adjusted EBITDA being computed
    using the most recent four quarters;&nbsp;and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">Alpha Natural Resources, LLC must maintain an
    interest coverage ratio, defined as the ratio of adjusted EBITDA
    (as defined in the credit agreement), to cash interest expense
    (defined as the sum of cash interest expense plus cash letter of
    credit fees and commissions), of greater than 2.50 at
    September&nbsp;30, 2004 and at each quarter end thereafter.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Based upon adjusted EBITDA (as defined in the
credit agreement), Alpha Natural Resources, LLC&#146;s leverage
ratio and interest coverage ratio for the twelve months ended
September&nbsp;30, 2004 were 1.5&nbsp;(maximum of&nbsp;3.85) and
6.1&nbsp;(minimum of&nbsp;2.50), respectively.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Adjusted EBITDA, as defined in the credit
agreement, is used to determine compliance with many of the
covenants under the credit facility. The breach of covenants in
the credit facility that are tied to ratios based on adjusted
EBITDA could result in a default under the credit facility and
the lenders could elect to declare all amounts borrowed due and
payable. Any acceleration would also result in a default under
our indenture.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Because the covenants in our credit facility
relate to Alpha Natural Resources, LLC, EBITDA as presented in
the table below reflects adjustments for minority interest
necessary to reconcile our net
</FONT>

<P align="center"><FONT size="2">60
</FONT>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<FONT size="2">income to Alpha Natural Resources, LLC&#146;s
EBITDA. Adjusted EBITDA is defined as EBITDA further adjusted to
exclude non-recurring items, non-cash items and other
adjustments permitted in calculating covenant compliance under
our credit facility, as shown in the table below. We believe
that the inclusion of supplementary adjustments to EBITDA
applied in presenting adjusted EBITDA is appropriate to provide
additional information to investors to demonstrate compliance
with our financial covenants.
</FONT>
</DIV>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="26%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Three</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Three</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Twelve</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Three Months</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Months</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Months</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Months</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Ended</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Ended</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Three Months</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Ended</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Ended</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">March&nbsp;31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Ended June&nbsp;30,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">September&nbsp;30,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">September&nbsp;30,</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2004</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2004</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2004</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2004</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">(In thousands)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12,088</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,342</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Minority interest<SUP>(1)</SUP>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12,872</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,688</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Interest expense, net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,711</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,449</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Income tax expense
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,022</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,335</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Depreciation, depletion and amortization expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">13,111</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14,312</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">EBITDA
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">47,804</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">32,126</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Asset impairment charge <SUP>(2)</SUP>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,100</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Adjusted EBITDA
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">19,000<SUP>(3</SUP></FONT></TD>
    <TD align="left" valign="bottom" nowrap><SUP><FONT size="2">)</FONT></SUP></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16,800 <SUP>(3</SUP></FONT></TD>
    <TD align="left" valign="bottom" nowrap><SUP><FONT size="2">)</FONT></SUP></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">47,804</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">37,226</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">120,830</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Leverage ratio<SUP>(4)</SUP>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.5</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">x</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Interest coverage ratio <SUP>(5)</SUP>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6.1</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">x</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
<HR size="1" width="15%" align="left" noshade>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Because our credit facility and our senior notes
    are issued by our subsidiaries, we are required to adjust our
    EBITDA for our minority interest which does not exist at the
    subsidiary level.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(2)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">We are required to adjust EBITDA under our credit
    facility for the asset impairment charge related to our NKC
    operations.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(3)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Our credit facility deems adjusted EBITDA to be
    equal to $19.0 million for the three months ended
    December&nbsp;31, 2003, and $16.8&nbsp;million for the three
    months ended March&nbsp;31, 2004.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(4)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Leverage ratio is defined in our credit facility
    as total debt divided by adjusted EBITDA.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(5)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Interest coverage ratio is defined in our credit
    facility as adjusted EBITDA divided by cash interest expense.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<B><FONT size="2">Contractual Obligations</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">At September&nbsp;30, 2004, we had contractual
commitments for equipment purchases of $21.8&nbsp;million and a
contractual commitment for improvements to a preparation plant
for which the remaining payment was $0.7&nbsp;million. The
following is a summary of our significant contractual
obligations as of September&nbsp;30, 2004 (in thousands):
</FONT>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="38%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2004</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2005-2006</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2007-2008</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">After 2008</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Total</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Long-term debt and capital leases <SUP>(1)</SUP>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">470</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,414</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">816</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">179,279</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">182,979</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Equipment purchases and plant improvements
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">732</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">21,800</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">22,532</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Operating leases
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,127</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,353</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,109</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">338</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12,927</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Minimum royalties
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,643</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">17,743</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15,503</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">32,309</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">67,198</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Coal purchases
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">113,560</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">296,264</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,020</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">419,844</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">117,532</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">346,574</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">29,448</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">211,926</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">705,480</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">
<HR size="1" width="18%" align="left" noshade>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Long-term debt and capital leases include
    principal amounts due in the years shown. Interest payable on
    these obligations, assuming a rate of 4.57% on our variable rate
    loan, would be approximately $4.5 million in 2004, $35.8 million
    in 2005 to 2006, $35.5 million in 2007 to 2008, and $59.8
    million after 2008.
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">61
</FONT>
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Borrowings under our credit facility will be
subject to mandatory prepayment (1)&nbsp;with 100% of the net
cash proceeds received from asset sales or other dispositions of
property by ANR Holdings and its subsidiaries (including
insurance and other condemnation proceedings), subject to
certain exceptions and reinvestment provisions, (2)&nbsp;with
100% of the net cash proceeds received by ANR Holdings and its
subsidiaries from the issuance of debt securities or other
incurrence of debt, excluding certain indebtedness, and
(3)&nbsp;50% (or 25%, if our leverage ratio is less than or
equal to 2.00 to 1.00 but greater than 1.00, or 0% if our
leverage ratio is less than or equal to 1.00) of the net cash
proceeds of equity issuances of ANR Holdings and its
subsidiaries.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Additionally, we have long-term liabilities
relating to mine reclamation and end-of-mine closure costs, and
all of our operating and management-services subsidiaries have
long-term liabilities relating to retiree health care
(post-retirement benefits).
</FONT>

<P align="left">
<B><FONT size="2">Off-Balance Sheet Arrangements</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We use surety bonds to secure our reclamation
obligations. As of September&nbsp;30, 2004, we had outstanding
surety bonds with third parties for post-mining reclamation
totaling $89.0&nbsp;million plus $7.8&nbsp;million for
miscellaneous purposes. 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 obligations with
letters of credit, cash deposits or other suitable forms of
collateral.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We maintained letters of credit as of
September&nbsp;30, 2004 totaling $50.5&nbsp;million to secure
reclamation and other obligations.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In connection with our acquisition of Coastal
Coal Company, the seller, El&nbsp;Paso CGP&nbsp;Company, has
agreed to retain and indemnify us for all workers&#146;
compensation and black lung claims incurred prior to the
acquisition date of January&nbsp;31, 2003. The majority of this
liability relates to claims in the state of West Virginia. If
El&nbsp;Paso CGP&nbsp;Company fails to honor its agreement with
us, then we would be liable for the payment of those claims,
which are estimated to be approximately $5.4&nbsp;million as of
September&nbsp;30, 2004 based on reported cash reserves. El Paso
CGP&nbsp;Company has posted a bond with the state of West
Virginia for approximately $3.7&nbsp;million; therefore, our
exposure is approximately $1.7&nbsp;million for these reported
claims.
</FONT>

<P align="left">
<B><FONT size="2">Critical Accounting Estimates and
Assumptions</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our discussion and analysis of our financial
condition, results of operations, liquidity and capital
resources is based upon our combined financial statements, which
have been prepared in accordance with U.S.&nbsp;generally
accepted accounting principles (&#147;GAAP&#148;). GAAP require
that we make estimates and judgments that affect the reported
amounts of assets, liabilities, revenues and expenses, and
related disclosure of contingent assets and liabilities. On an
ongoing basis, we evaluate our estimates. We base our estimates
on historical experience and on various other assumptions that
we believe are reasonable under the circumstances, the results
of which form the basis for making judgments about the carrying
values of assets and liabilities that are not readily apparent
from other sources. Actual results may differ from these
estimates.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Reclamation.</FONT></I><FONT size="2"> 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
</FONT>

<P align="center"><FONT size="2">62
</FONT>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<FONT size="2">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:
</FONT>
</DIV>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <I><FONT size="2">Discount Rate.</FONT></I><FONT size="2">
    SFAS&nbsp;No.&nbsp;143 required 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.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <I><FONT size="2">Third-Party Margin.</FONT></I><FONT size="2">
    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.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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 September&nbsp;30, 2004, we had recorded asset
retirement obligation liabilities of $40.6&nbsp;million,
including amounts reported as current. While the precise amount
of these future costs cannot be determined with certainty, as of
September&nbsp;30, 2004, we estimate that the aggregate
undiscounted cost of final mine closure is approximately
$60.4&nbsp;million.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Coal Reserves. </FONT></I><FONT size="2">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. Some of the factors and assumptions that
impact economically recoverable reserve estimates include:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">geological conditions;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">historical production from the area compared with
    production from other producing areas;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">the assumed effects of regulations and taxes by
    governmental agencies;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">assumptions governing future prices;&nbsp;and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">future operating costs.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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.
</FONT>

<P align="center"><FONT size="2">63
</FONT>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Postretirement Medical Benefits.
</FONT></I><FONT size="2">Three of our subsidiaries have
long-term liabilities for postretirement benefit cost
obligations. Detailed information related to these liabilities
is included in the notes to our combined financial statements
included elsewhere in this prospectus. Liabilities for
postretirement benefit costs 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 postretirement benefit
costs. 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
postretirement benefits other than pensions was 6.25% for the
nine months ended September&nbsp;30, 2004 and 6.75 for the year
ended December&nbsp;31, 2003. 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 we incur could differ materially
from our current estimates. Moreover, regulatory changes could
increase our requirement to satisfy these or additional
obligations.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Effective July&nbsp;1, 2004, we began offering
postretirement medical benefits to active, union-free employees
that will pay benefits equal to $20&nbsp;per month per year of
service for pre-65&nbsp;year-old retirees, and $9&nbsp;per month
per year of service for post-65-year old retirees. This new plan
resulted in prior service cost of $27.1&nbsp;million which will
be amortized over the remaining service lives of the union-free
employees. This amortization of prior service cost is expected
to be approximately $2.8&nbsp;million per year.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Workers&#146; Compensation.
</FONT></I><FONT size="2">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 a self-insurance program,
participation 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.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Coal Workers&#146; Pneumoconiosis.
</FONT></I><FONT size="2">We are responsible under various
federal statutes, including the Coal Mine Health and Safety Act
of 1969, 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.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Income Taxes.</FONT></I><FONT size="2"> 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.
</FONT>

<P align="center"><FONT size="2">64
</FONT>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="left">
<B><FONT size="2">Quantitative and Qualitative Disclosures About
Market Risk</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition to risks inherent in operations, we
are exposed to market risks. The following discussion provides
additional detail regarding our exposure to the risks of
changing coal prices, interest rates and customer credit.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We are exposed to market price risk in the normal
course of selling coal. As of November&nbsp;10, 2004,
approximately 7% and 56% of our estimated 2005 and 2006 tonnage,
respectively, was uncommitted. We are entering into fixed price
and index price long-term contracts to help lessen our market
price risk.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">All of our borrowings under the revolving credit
facility are at a variable rate, so we are exposed to rising
interest rates in the United States. A one percentage point
increase in interest rates would result in an annualized
increase to interest expense of less than $0.1&nbsp;million
based on our variable rate borrowings as of September&nbsp;30,
2004.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our concentration of credit risk is substantially
with electric utilities, producers of steel and foreign
customers. Our policy is to independently evaluate a
customer&#146;s creditworthiness prior to entering into
transactions and to constantly monitor the credit extended.
</FONT>

<P align="left">
<B><FONT size="2">Discussion of Seasonality Impacts on
Operations</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our sales to certain customers are curtailed
during the winter months due to weather conditions. During those
months, our operations build coal inventory that negatively
impacts our profits and cash flow in the first quarter.
</FONT>

<P align="center"><FONT size="2">65
</FONT>
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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<A name='113'></A>
</DIV>

<!-- link1 "THE COAL INDUSTRY" -->

<P align="center">
<B><FONT size="2">THE COAL INDUSTRY</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Coal is a major contributor to the world energy
supply. In 2003, coal represented approximately 26% of the
world&#146;s primary energy consumption and was also the fastest
growing energy source in the world, according to BP Statistical
Review. The primary use for coal is to fuel electric power
generation. In 2003, coal generated 53% of the electricity
produced in the United States, according to the EIA.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The United States is the second largest coal
producer in the world, exceeded only by China, according to BP
Statistical Review. Other leading coal producers include
Australia, India, South Africa and Russia. According to BP
Statistical Review, the United States is the largest holder of
coal reserves in the world, with over 250&nbsp;years of supply
at current production rates. U.S.&nbsp;coal reserves are more
plentiful than oil or natural gas, with coal representing more
than 95% of the nation&#146;s fossil fuel reserves on a
Btu-comparable basis according to data collected by BP
Statistical Review.
</FONT>

<P align="left">
<B><FONT size="2">U.S.&nbsp;Coal Production Regions</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">According to the EIA, U.S.&nbsp;coal production
has increased by 79% during the last 30&nbsp;years. In 2003,
total U.S.&nbsp;coal production, according to the EIA, was
1.07&nbsp;billion tons. The Powder River Basin accounted for 37%
of the total volume of U.S.&nbsp;coal production in 2003, with
Central Appalachia accounting for 21%, the Midwest accounting
for 14%, the West (other than the Powder River Basin) accounting
for 14%, Northern Appalachia accounting for 12% and Southern
Appalachia accounting for 2%, according to Platts. Almost all of
our coal production comes from the Central and Northern
Appalachian regions.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Central Appalachia, including eastern Kentucky,
Virginia and southern West Virginia, is the second largest coal
producing region in the United States (21% of 2003 production).
Coal 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 2003, according
to Platts, the Central Appalachian region experienced a decline
in production from 263&nbsp;million tons to 228&nbsp;million
tons, or a 13% decline, primarily as a result of the depletion
of economically attractive reserves, permitting issues and
increasing costs of production, which was partially offset by
production increases in Southern West Virginia due to the
expansion of more economically attractive surface mines. Platts
estimates that Central Appalachian operators marketed
approximately 67% of their 2003 coal sales to electric
generators, principally in the southeastern U.S., with the
remainder serving steel producers in the U.S. and
internationally. Central Appalachia is the primary source of
U.S.&nbsp;coal exports. We operate or have the right to receive
production from 42 mines in this region producing primarily high
Btu, low sulfur steam and metallurgical coal.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Northern Appalachia, including Maryland, Ohio,
Pennsylvania and northern West Virginia, is the other major coal
producing region in the eastern U.S.&nbsp;(12% of 2003
U.S.&nbsp;production). Coal from this region generally has a
high heat content of between 12,000 and 14,000 Btus per pound
with typical sulfur content ranging from 1.0% to 4.5%. From 2000
to 2003, according to Platts, the Northern Appalachian region
experienced a decline in production from 140&nbsp;million tons
to 126&nbsp;million tons, or a 10% decline, primarily as a
result of production problems at longwall mining operations in
southern Pennsylvania and northern West Virginia. Northern
Appalachian operators market the vast majority of their coal to
electric generators. Despite its sulfur content, which is
considered medium sulfur coal, coal from Northern Appalachia is
generally considered attractive to electricity generators
because of its high average heat content of approximately 13,000
Btus per pound. We operate or have the right to receive
production from 21 mines in this region producing primarily
steam and metallurgical coal with a sulfur content of greater
than 1.5% that has an average heat content of approximately
12,350 Btus per pound.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Four Corners, including southeastern
Colorado, northwestern New Mexico, northeastern Arizona and
southwestern Utah, is a minor producing region in the western
U.S.&nbsp;Coal from this region generally has a low heat content
of between 9,000 and 10,000 Btus per pound and a low sulfur
content ranging from 0.75% to 1.0%. Four Corners operators
market the majority of their coal to electric generators,
principally in the Four Corners region, and industrial
customers. We operate one mine in this region producing low
sulfur steam coal for industrial customers that has an average
heat content greater than 12,500 Btus per pound.
</FONT>

<P align="center"><FONT size="2">66
</FONT>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We do not currently operate any mines in the
Powder River Basin, the Midwest region or Southern Appalachia.
</FONT>

<P align="left">
<B><FONT size="2">Demand for U.S.&nbsp;Coal Production</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Coal produced in the United States is primarily
consumed domestically 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. 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 terminals. The
breakdown of 2003 U.S.&nbsp;coal consumption by end user, as
estimated by the EIA, is as follows:
</FONT>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="69%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">End Use</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Tons</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">% of Total</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">(In millions)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Electrical generation
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,000.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">88</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Industrial, residential&nbsp;&#38; commercial
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">65.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Steel making
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">24.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total domestic<SUP>(1)</SUP>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,090.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">96</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Exports
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">43.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,133.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">100</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left">
<HR size="1" width="15%" align="left" noshade>
</DIV>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Includes consumption of 25.0&nbsp;million tons of
    coal imported into the United States in 2003.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As reflected in the above table, the dominant use
for coal in the United States is for electricity generation.
Coal used as fuel to generate electricity and for use by
industrial consumers is commonly referred to as &#147;steam
coal,&#148; and it accounted for approximately 63% of our coal
sales volume during the first nine months of 2004. Coal has long
been favored as an electricity generating fuel by regulated
utilities because of its low cost compared to other fuels. The
largest cost component in electricity generation is fuel. This
fuel cost is typically lower for coal than competing
hydrocarbon-based fuels such as oil and natural gas on a
Btu-comparable basis. Platts has recently estimated the average
total production costs of electricity, using coal and competing
generation alternatives in the first five months of 2004 as
follows:
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="85%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Cost per</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Megawatt</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Electrical Generation Type</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Hour</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Natural Gas
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">57.48</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Oil
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">51.35</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Coal
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">18.30</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Nuclear
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">17.01</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Hydroelectric
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5.35</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">67
</FONT>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">According to Platts, excluding hydroelectric
plants, 21 of the 25 lowest operating cost utility power plants
in the United States during 2003 were primarily fueled by coal.
Factors other than fuel cost that influence each utility&#146;s
choice of the type of electricity generation include, among
others, facility construction cost, access to fuel
transportation infrastructure and environmental restrictions.
The breakdown of U.S.&nbsp;electricity generation by fuel source
in 2003, according to EIA, is as follows:
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="80%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">% of Total</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Electricity</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">Electricity Generation Source</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Generation</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Coal
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">53</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Nuclear
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">21</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Natural Gas
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Hydro
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Oil and Other
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">100</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Platts 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 &#147;base load&#148; requirements, which are the
minimum amounts of electric power delivered or required over a
given period of time at a steady rate, 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.
Based on estimates compiled by the EIA, coal consumption is
expected to grow 1.7%&nbsp;per year until 2025.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The other major market for our coal is the steel
industry. The type of coal used in steel making is referred to
as &#147;metallurgical coal,&#148; and it accounted for
approximately 37% of our coal sales volume during the first nine
months of 2004. When making steel in an integrated steel mill,
two of the key raw ingredients are iron ore and coke. Coke is
the substance formed when metallurgical coal is heated in a
coking oven to a very high temperature in the absence of air. In
the blast furnace of an integrated steel mill, coke is primarily
used to (i)&nbsp;generate the heat required to convert iron ore
into molten iron; (ii)&nbsp;generate the reducing gas necessary
to chemically convert iron oxides into hot metal; and
(iii)&nbsp;create a permeable bed to allow the molten iron to
drip down and the reducing gases to rise up. Generally, 1.5 tons
of metallurgical coal produces approximately 1 ton of coke,
which in turn is needed to produce approximately 2 tons of steel.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Blast furnaces are designed to use specific
grades of cokes, and as a result, coking ovens are designed to
use metallurgical coals with specific qualities. Metallurgical
coal 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 can alternatively be used by utilities as fuel for
electricity generation. Consequently, metallurgical coal
producers have the opportunity to select the market that
provides maximum revenue. The premium price offered for
metallurgical coal by steel makers for its coke-making
attributes is typically higher than the price offered by utility
coal buyers that typically value only the heat and sulfur
content of steam coal. U.S.&nbsp;metallurgical coal reserves are
predominately concentrated in the Central Appalachian region.
The EIA estimates that the Central Appalachian region supplied
77% of U.S.&nbsp;export metallurgical coal during 2003.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In the first nine months of 2004, approximately
3.4% of our coal sales were made to industrial consumers, all of
which was steam coal. Industrial users of coal typically
purchase high Btu products with the same type of quality focus
as utility coal buyers. The primary goal is to maximize heat
content, with other specifications like ash content, sulfur
content, and size varying considerably among different
customers. Because most industrial coal consumers use
considerably less tonnage than electric generating stations,
they typically prefer to purchase coal that is screened and
sized to specifications that streamline
</FONT>

<P align="center"><FONT size="2">68
</FONT>

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<DIV align="left">
<FONT size="2">coal handling processes. Due to the more
stringent size and quality specifications, industrial customers
often pay a premium above utility coal pricing.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Coal produced in the United States that is
shipped for North American consumption is typically sold at the
mine loading facility with transportation costs being borne by
the purchaser. Offshore export shipments are normally sold at
the ship-loading terminal, with the producer paying for the
transportation costs to the port and the purchaser paying the
ocean freight.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">While delivery to coal consumers often involves
more than one mode of transportation, according to the EIA,
approximately two-thirds of U.S.&nbsp;coal production is shipped
via railroads. In addition, coal is also shipped via trucks,
barges, overland conveyors, and ocean vessels loaded at export
terminals.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The United States ranked sixth among worldwide
exporters of coal in 2002, according to estimates by the World
Coal Institute. Australia was the largest exporter, with other
major exporters including China, Indonesia, South Africa, and
Russia. According to the EIA, the United States continues to be
a swing supplier of coal in the world market. The EIA&#146;s
most recent estimates indicate that U.S.&nbsp;exports in 2003
decreased by over 40% since 1994 as a result of increased
international competition, the U.S.&nbsp;dollar&#146;s strength
over time in comparison to foreign currencies and the depletion
of reserves in regions of the United States that have
traditionally sold into the export market. According to the EIA,
the United States exported 43&nbsp;million tons of coal in 2003,
of which 49% was used for electricity generation and 51% was
used for steel making. U.S.&nbsp;coal exports were shipped to
more than 25 countries in 2003. According to the EIA, the
largest purchaser of both exported steam coal and exported
metallurgical coal from the United States in 2003 was Canada,
which imported 17&nbsp;million tons, or 82%, of total steam coal
exports and 4&nbsp;million tons, or 16%, of total metallurgical
coal exports.
</FONT>

<P align="left">
<B><FONT size="2">Industry Trends</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In recent years, the U.S.&nbsp;coal industry has
experienced several significant trends including:
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Growth in Coal Consumption.
</FONT></I></B><FONT size="2">According to the EIA, from 1990 to
2003 coal consumption in the United States increased from
904&nbsp;million tons to 1,090&nbsp;million tons, or 21%. The
largest driver of increased coal consumption during this period
was increased demand for electricity, as electricity production
by domestic electric power producers increased 27% and coal
consumption by electric power producers increased 28%. As coal
remains one of the lowest cost fuel sources for domestic
electric power producers, we believe coal consumption should
continue to expand as demand for electricity continues to
increase.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Increased Utilization of Excess Capacity at
Existing Coal-Fired Power Plants.</FONT></I></B><FONT size="2">
We believe that existing coal-fired plants will supply much of
the near-term projected increase in the demand for electricity
because they possess excess capacity that can be utilized at low
incremental costs. In 2003, the estimated average utilization of
the existing coal-fired power plant fleet was 71%, significantly
below the estimated potential utilization rate of 85%. If
U.S.&nbsp;coal fueled plants operate at utilization rates of
85%, we believe they would consume approximately
200&nbsp;million additional tons of coal per year, which
represents an increase of approximately 18% over current coal
consumption. In comparison, in 2003, the average utilization of
the existing nuclear-fired power plant fleet was estimated by
Platts to be 89%.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Construction of New Coal-Fired Power
Plants. </FONT></I></B><FONT size="2">The NETL projects that
74,000 megawatts of new coal-fired electric generation capacity
will be constructed by 2025. The NETL has identified 94
coal-fired plants, representing 62,000 megawatts of electric
generation capacity, which have been proposed and are currently
in various stages of development. The DOE projects that 58 of
these proposed coal-fired plants, representing 38,000 megawatts
of electric generation capacity, will be completed and begin
consuming coal to produce electricity by the end of 2010.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Industry Consolidation.
</FONT></I></B><FONT size="2">The U.S.&nbsp;coal industry has
experienced significant consolidation over the last
15&nbsp;years. In 2003, the five largest coal producers
controlled over 47% of coal produced in the United States,
compared to just 35% in 1995 and 22% in 1990, according to
Platts. Weaker coal prices in the late 1990s forced many smaller
operators to sell or shut down their operations. In addition, a
number of large
</FONT>

<P align="center"><FONT size="2">69
</FONT>

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<DIV align="left">
<FONT size="2">international oil and gas companies decided to
exit the domestic coal industry. Despite increased
consolidation, the industry still remains relatively fragmented
with more than 675 coal producers in the United States in 2003,
according to Platts.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Increasingly Stringent Air Quality Laws.
</FONT></I></B><FONT size="2">The coal industry has witnessed a
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&#146;s Acid Rain regulations 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 tightened
these sulfur dioxide restrictions further to 1.2 pounds of
sulfur dioxide per million Btu. Sulfur dioxide and other
emissions may be restricted even further by some currently
proposed laws and regulations. Currently, electric power
generators operating coal-fired plants can comply with these
requirements by:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">burning lower sulfur coal, either exclusively or
    mixed with higher sulfur coal;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">installing pollution control devices, such as
    scrubbers, that reduce the emissions from high sulfur coal;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">reducing electricity generating levels;&nbsp;or
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">purchasing or trading emission credits to allow
    them to comply with the sulfur dioxide emission compliance
    requirements.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Additional current and proposed air emission
requirements are discussed in &#147;Environmental and Other
Regulatory Matters.&#148;
</FONT>

<P align="left">
<B><FONT size="2">Recent Coal Market Conditions</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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 each of
our coal production markets. We believe that the current strong
fundamentals in the U.S.&nbsp;coal industry result primarily
from:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">stronger industrial demand following a recovery
    in the U.S.&nbsp;manufacturing sector, evidenced by the most
    recent estimate of 3.9% real GDP growth in the third quarter of
    2004, as reported by the Bureau of Economic Analysis;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">relatively low customer stockpiles, estimated by
    the U.S.&nbsp;Energy Information Administration
    (&#147;EIA&#148;) to be approximately 114&nbsp;million tons at
    the end of August 2004, down 13% from the same period in the
    prior year;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">declining coal production in Central Appalachia,
    including a decline of 0.6% in Central Appalachian coal
    production volume during the first three quarters of 2004 as
    compared to the same period in 2003;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">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;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">high current and forward prices for natural gas
    and oil, the primary fuels for electricity generation, with spot
    prices as of November&nbsp;29, 2004 for natural gas and heating
    oil at $6.86&nbsp;per million Btu and $1.43&nbsp;per gallon,
    respectively, as reported by Bloomberg L.P.;&nbsp;and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">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.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Steam Coal
Pricing.</FONT></I></B><FONT size="2"> U.S.&nbsp;spot steam coal
prices have experienced significant volatility over the past few
years. Starting in late 2000 and continuing through mid-2001,
U.S.&nbsp;spot steam coal prices began to rise as a result of
reduced supply, higher demand from utility and industrial
consumers, and rising natural gas and oil prices. Beginning in
the middle of 2001, U.S.&nbsp;spot steam coal prices declined
due to the weakening domestic economy, higher utility consumer
inventories and increases in supply as the coal
</FONT>

<P align="center"><FONT size="2">70
</FONT>

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<DIV align="left">
<FONT size="2">production market reacted to the stronger prices
during the late 2000/early 2001 period. Spot prices for
U.S.&nbsp;steam coal remained relatively low through the end of
2001 and during all of 2002.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">U.S.&nbsp;spot steam coal prices have steadily
increased since mid-2003, particularly for coals sourced in the
eastern United States. The table below describes the percentage
increase in year-over-year average reference prices for coal as
of November&nbsp;29, 2004, according to Platts, in the regions
where we produce our coal, and the percentage of our produced
and processed coal sales during the first nine months of 2004 by
region:
</FONT>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="49%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="12%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="11%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Percentage of Produced and</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Increase in Average</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Processed Coal Sales in</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Reference Prices</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">First Nine Months of 2004</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Central Appalachia
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">83</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">71</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Northern Appalachia
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">98</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">27</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Colorado
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">60</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following chart sets forth historical steam
coal prices in various U.S.&nbsp;markets computed on an average
monthly basis for the period from January&nbsp;1, 1999 to
November&nbsp;29, 2004.
</FONT>

<P align="left">
<IMG src="y02933y0293307.gif" alt="(LINE GRAPH)">

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Metallurgical Coal Pricing.
</FONT></I></B><FONT size="2">Metallurgical coal prices in both
the domestic and seaborne export markets have increased
significantly over the past two years due to tight supply and
strong global steel production. The price increase in the
U.S.&nbsp;metallurgical coal market is due in part to improved
stability in the U.S.&nbsp;steel industry, which has increased
domestic demand for metallurgical coal. The
U.S.&nbsp;flat-rolled steel industry has experienced several
mergers and acquisitions involving a number of companies
emerging from, and assets sold out of, Chapter&nbsp;11
bankruptcy protection. Many of the companies or assets
previously in Chapter&nbsp;11 have reduced or eliminated certain
of their costs and obligations associated with their steel
operations, including environmental, employee and retiree
benefit and other obligations. This reduction in industry
liabilities, together with the recent weakening of the
U.S.&nbsp;dollar, has helped U.S.&nbsp;steel companies become
more competitive with foreign steel producers. The price
increase in the U.S.&nbsp;metallurgical coal market has also
been supported by tightening supply, due to operating
disruptions that have reduced production at several
U.S.&nbsp;metallurgical coal mines.
</FONT>

<P align="center"><FONT size="2">71
</FONT>
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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Prices for U.S.&nbsp;metallurgical coal in
foreign markets have been supported by significant increases in
demand for metallurgical coal by foreign steel producers, driven
by higher steel production in Asia and the Pacific Rim,
particularly in China. According to the International Iron and
Steel Institute, Chinese steel consumption increased 25% in
2003. Additionally, the recent weakness of the U.S.&nbsp;dollar
has made U.S.&nbsp;metallurgical coal more competitive in
international markets. Increased prices have also been supported
by circumstances affecting the coal export industry in China and
Australia, the world&#146;s two largest coal exporters. In
Australia, the world&#146;s largest coal exporter, metallurgical
coal exports have been reduced by operating disruptions at
certain Australian metallurgical coal mines and capacity
constraints at major Australian shipping ports. China&#146;s
contribution to the world metallurgical coal export market has
been reduced by restrictions on its metallurgical coal exports
announced in late 2003 in order to satisfy domestic demand.
Asia-Pacific Rim consumption of metallurgical coal continues to
strain supply, with an Australian producer reporting average
price settlement increases of 28% for annually-priced
metallurgical coal sales contracts in 2004 as compared to 2003,
and a Canadian producer reporting increases in metallurgical
coal sales prices in the third quarter of 2004 of 22% over the
same period in 2003. The table below describes average sale
prices, according to Platts, for low volatile metallurgical coal
at the Hampton Roads, Virginia export terminals, through which
we ship the great majority of our metallurgical coal exports and
which collectively constitute the highest volume export facility
for U.S. metallurgical coal production, and the percentage
increase in prices year-over-year:
</FONT>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="54%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Average Sale Prices</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Per Ton for Low</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Volatile Metallurgical</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Coal at Hampton Roads,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Virginia Export</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Terminals</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Percentage Increase</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2004</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">from 2003 to 2004</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">October&nbsp;6, 2003 and October&nbsp;4, 2004
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">52.00</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">135.00</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">163</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">July&nbsp;7, 2003 and July&nbsp;5, 2004
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">50.45</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">125.00</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">168</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">March&nbsp;31, 2003 and April&nbsp;5, 2004
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">51.20</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">135.00</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">161</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">72
</FONT>

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<DIV align="left">
<A name='114'></A>
</DIV>

<!-- link1 "BUSINESS" -->

<P align="center">
<B><FONT size="2">BUSINESS</FONT></B>

<P align="left">
<B><FONT size="2">Overview</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We are a leading Central Appalachian coal
producer that also has significant operations in Northern
Appalachia. Our reserve base primarily consists of high Btu, low
sulfur steam coal that is currently in high demand in
U.S.&nbsp;coal markets and metallurgical coal that is currently
in high demand in both U.S. and international coal markets. We
produce, process and sell steam and metallurgical coal from
eight regional business units supported by 44 active underground
mines, 20 active surface mines and 11 preparation plants located
throughout Virginia, West Virginia, Kentucky, Pennsylvania and
Colorado. We are also actively involved in the purchase and
resale of coal mined by others, the majority of which we blend
with coal produced from our mines, allowing us to realize a
higher overall margin for the blended product than we would be
able to achieve selling these coals separately.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Steam coal, which is primarily purchased by large
utilities and industrial customers as fuel for electricity
generation, accounted for approximately 63% of our coal sales
volume in the first nine months of 2004 and 73% of our 2003 pro
forma coal sales volume. Metallurgical coal, which is used
primarily to make coke, a key component in the steel making
process, accounted for approximately 37% of our coal sales
volume in the first nine months of 2004 and 27% of our 2003 pro
forma coal sales volume.
</FONT>

<P align="left">
<B><FONT size="2">History</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On December&nbsp;13, 2002, the First Reserve
Stockholders, who together then owned 100% of the membership
interests of ANR Holdings, acquired the majority of the Virginia
coal operations of our Predecessor through wholly owned
subsidiaries of ANR Holdings for $62.9&nbsp;million.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On January&nbsp;31, 2003, wholly owned
subsidiaries of ANR Holdings acquired Coastal Coal Company for
$67.8&nbsp;million, and on March&nbsp;11, 2003, ANR Holdings and
its subsidiaries acquired the U.S.&nbsp;coal production and
marketing operations of AMCI for $121.3&nbsp;million. Of the
consideration for the U.S.&nbsp;AMCI acquisition,
$69.0&nbsp;million was provided in the form of an approximate
44% membership interest in ANR Holdings issued to the owners of
AMCI, which together with issuances of an approximate 1%
membership interest to Madison Capital Funding&nbsp;LLC and
Alpha Coal Management reduced the First Reserve
Stockholders&#146; ownership interest in ANR Holdings to
approximately 55%. On November&nbsp;17, 2003, we acquired the
assets of Mears for $38.00&nbsp;million.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On April&nbsp;1, 2004, we acquired substantially
all of the assets of Moravian Run Reclamation Co., Inc. for five
thousand dollars in cash and the assumption by us of certain
liabilities, including four active surface mines and two
additional surface mines under development, operating in close
proximity to and serving many of the same customers as our
AMFIRE business unit located in Pennsylvania. On May&nbsp;10,
2004, we acquired a coal preparation plant and railroad loading
facility located in Portage, Pennsylvania and related equipment
and coal inventory from Cooney Bros. Coal Company for
$2.5&nbsp;million in cash and an adjacent coal refuse disposal
site from a Cooney family trust for $0.3&nbsp;million in cash.
On October&nbsp;13, 2004, our AMFIRE business unit entered into
a coal mining lease with Pristine Resources, Inc., a subsidiary
of International Steel Group Inc., for the right to deep mine a
substantial area of the Upper Freeport Seam in Pennsylvania.
</FONT>

<P align="left">
<B><FONT size="2">Competitive Strengths</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We believe that the combination of the following
competitive strengths distinguishes us from our competitors.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">We provide a comprehensive range of steam
and metallurgical coal products that are in high
demand.</FONT></I></B><FONT size="2"> Our reserve base enables
us to provide customers with coal products that are in high
demand&#151; including high Btu, low sulfur steam coal, and low,
medium and high volatile metallurgical coal. Steam coal
customers value high Btu coal because it fuels electricity
generation more efficiently than lower energy content coal. In
addition, the demand for clean burning, low sulfur coal has
grown significantly since the
</FONT>

<P align="center"><FONT size="2">73
</FONT>

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<DIV align="left">
<FONT size="2">implementation of sulfur emission restrictions
mandated by the Clean Air Act. Metallurgical coal customers
require precise coal characteristics to meet their coke
production specifications and generally value low volatile
metallurgical coal more highly than other categories of
metallurgical coal. We believe that we are the only significant
North American producer of all three categories of metallurgical
coal&#151; low, medium and high volatile metallurgical
coal&#151; and that we produced or processed on a pro forma
basis approximately 30% of the low volatile metallurgical coal
consumed in the United States and Canada in 2003.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Our flexible mining operations and
diversified asset base allow us to manage costs while
capitalizing on market
opportunities.</FONT></I></B><FONT size="2"> Our 64&nbsp;active
mines, 11 preparation plants and eight regional business units
are supported by flexible and cost-effective use of our mining
equipment and personnel. Our underground mines use the room and
pillar mining method with continuous mining equipment, and our
surface mines principally use trucks, loaders and dozers. This
equipment is interchangeable and can be redirected easily at a
relatively low cost, providing us more flexibility to respond to
changing geologic, operating and market conditions. The
diversity of our portfolio of mines and preparation plants
allows us to move resources between existing or new operations
to pursue the most attractive market opportunities available to
us. This diversity also limits our mine concentration risk, as
the mine that produced the greatest amount of our coal
contributed only approximately 10% of our production during the
first nine months of 2004.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Our ability to provide customized product
offerings creates valuable market opportunities, strengthens our
customer relationships and improves
profitability.</FONT></I></B><FONT size="2"> We have a
&#147;customer-focused&#148; marketing strategy that, combined
with our comprehensive range of coal product offerings and
established marketing network, enables us to customize our coal
deliveries to a customer&#146;s precise needs and
specifications. The products we sell to our customers will often
be a blend of internally produced coal and coal we have
purchased from third parties, in contrast to the more
traditional approach of only offering coal produced from captive
mines. Our blending capabilities give us a competitive advantage
in product source and composition. We use spot market coal to
optimize the mix delivered to our customers and to maximize the
profitability of each of our contracts. We believe our
commitment to providing high quality coal products designed to
our customers&#146; specifications enables us to maintain strong
customer relationships while maximizing the value of our coal
reserves.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Our primary operating focus is the
Appalachian region, the region with the most producer-favorable
coal supply and demand dynamics in the United
States.</FONT></I></B><FONT size="2"> Our operations are focused
on Central and Northern Appalachia, which accounted for 70% and
27%, respectively, of the coal produced from our mines during
the first nine months of 2004. The Appalachian region has
produced declining supplies of coal in recent years while
regional demand, already the highest in the United States based
on tons consumed, is expected to increase due to growth in
regional demand for electricity. We believe these trends in
Appalachian coal supply and demand, the high quality of
Appalachian coal and the lower transportation costs that result
from the proximity of Appalachian producers and customers create
favorable pricing dynamics that provide us with an advantage
over producers from other regions. According to Platts,
year-over-year reference prices at November&nbsp;29, 2004 for
Central and Northern Appalachian coal were 83% and 48% higher,
respectively, while they were 13% lower for Powder River Basin
coal.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Our Central Appalachian mining expertise
provides us with significant regional growth
opportunities.</FONT></I></B><FONT size="2"> Our focus on the
Appalachian region has allowed us to develop expertise in
efficiently mining Central Appalachian reserves. Furthermore, we
have developed both a good understanding of the region&#146;s
transportation infrastructure and a favorable reputation with
the region&#146;s property owners, coal industry operators and
employee base. Together, these factors allow us to capitalize on
regional growth opportunities that we believe our larger
competitors with less regional expertise are unable or unwilling
to pursue.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Our comparatively low amount of long-term
reclamation and employee-related liabilities provides us with
financial flexibility.</FONT></I></B><FONT size="2"> We believe
that our annual expenses for long-term reclamation and
employee-related liabilities, such as workers&#146;
compensation, black lung, post-retirement and pension
liabilities, is among the lowest of the publicly-traded
U.S.&nbsp;coal producers, providing us with increased financial
</FONT>

<P align="center"><FONT size="2">74
</FONT>

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<DIV align="left">
<FONT size="2">flexibility. As of September&nbsp;30, 2004, we
had total accrued reclamation liabilities of $40.6&nbsp;million,
self-insured workers&#146; compensation liabilities of
$5.3&nbsp;million and post-retirement obligations of
$13.5&nbsp;million, and we had no pension liabilities and
minimal black lung liabilities. In addition, because over 90% of
our approximately 2,500 employees are employed by our
subsidiaries on a union-free basis and approximately 95% of our
pro forma coal production during the first nine months of 2004
and in 2003 was produced from mines operated by union-free
employees, we are better able to minimize the types of
employee-related liabilities commonly associated with
union-represented mines.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Our safety record and work practices allow
us to keep our costs competitive.</FONT></I></B><FONT size="2">
Mine safety is a critical component to controlling costs and
retaining skilled employees. Historically, our operations have
had a lower incident rate (as measured by the U.S.&nbsp;Mine
Safety and Health Administration) than the average incident rate
for underground coal mining operations located in similar areas
of Central and Northern Appalachia. Alpha and its Predecessor
and acquired companies have also received more than 30 safety
awards over the last three years, including the prestigious
Sentinels of Safety and Holmes Safety Awards, which have been
awarded to several of our mines.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Our management team has extensive coal
industry experience and has successfully integrated a number of
acquisitions.</FONT></I></B><FONT size="2"> Our senior
executives have, on average, more than 20&nbsp;years of
experience in the coal industry, largely in the Appalachian
region, and they have substantial experience in increasing
productivity, reducing costs, implementing our marketing
strategy and coal blending capabilities, improving safety, and
developing and maintaining strong customer and employee
relationships. In addition to their operating strengths, the
majority of our senior executives have significant experience in
identifying, acquiring and integrating coal companies into
existing organizations.
</FONT>

<P align="left">
<B><FONT size="2">Business Strategy</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We believe that we are well-positioned to enhance
stockholder value by continuing to implement our strategy, which
consists of the following key components:
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Achieve premium pricing and optimum
efficiency in contract
fulfillment.</FONT></I></B><FONT size="2"> We intend to continue
to use our diversified operating strategy, coal blending
capabilities, market knowledge and strong marketing organization
to identify and capitalize on opportunities to generate premium
pricing for our coal and to achieve optimum efficiency in
fulfillment of coal contracts. As of November&nbsp;10, 2004, we
had contracts to sell 93% of our planned production for 2005 and
44% of our planned production for 2006, which we believe
provides us with significant price certainty in the short-term
while maintaining uncommitted planned production that allows us
to take an opportunistic approach to selling our coal.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Maximize profitability of our mining
operations. </FONT></I></B><FONT size="2">We continuously
reassess our reserves, mines and processing and loading
facilities in an effort to determine the optimum operating
configuration that maximizes our profitability, efficient use of
operating assets and return on invested capital. We intend to
continue to optimize the profitability of our mining operations
through a series of initiatives that include:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">increasing production levels where we determine
    that such increased production can be profitably achieved;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">leveraging our product offerings, blending
    capabilities and marketing organization to realize higher
    margins from our sales;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">deploying our resources against the most
    profitable opportunities available in our asset portfolio;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">consolidating regional operations and increasing
    the utilization of our existing preparation plants and loading
    facilities;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">maintaining our focus on safety and implementing
    safety measures designed to keep our workforce injury
    free;&nbsp;and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">utilizing centralized procurement to negotiate
    with major vendors to provide materials and supplies at lower
    overall cost.
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">75
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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Pursue strategic value-creating
acquisitions. </FONT></I></B><FONT size="2">We have successfully
acquired and integrated businesses into our operations, and we
intend to continue to expand our business and coal reserves
through acquisitions of attractive, strategically positioned
assets. Although we intend to concentrate our efforts in
Appalachia, where we believe there remain attractive acquisition
opportunities, we will continue to evaluate opportunities in
other regions that meet our acquisition criteria. We employ what
we believe is a disciplined acquisition strategy focused on
acquiring coal and coal-related operations and assets at
attractive valuations. Some of the factors that we consider in
evaluating an acquisition candidate include:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">the candidate&#146;s historical and projected
    financial performance;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">the quality and quantity of the candidate&#146;s
    coal reserves, coal processing facilities and other coal
    production assets;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">the extent to which the geographic location of
    the candidate&#146;s coal reserves, processing facilities, and
    access to transportation links and customers provides
    synergistic opportunities with our existing operations and
    assets;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">the existing liabilities of the candidate, and
    whether the acquisition can be completed in a manner that limits
    our assumption of the candidate&#146;s long-term liabilities;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">in situations where we retain existing
    management, the management&#146;s experience and relationship
    with the local community;&nbsp;and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">the experience, terms of employment and union
    status of the candidate&#146;s employees and the terms of the
    candidate&#146;s contracts with third-party mine and processing
    facility operators.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Continue to maintain a strong safety, labor
relations and environmental
record.</FONT></I></B><FONT size="2"> One of our core values is
protecting the health and welfare of our employees by designing
and implementing high safety standards in the workplace.
Similarly, we aim to adhere to high standards in protecting and
preserving the environment in which we operate. Historically, we
have maintained a superior safety record compared to the
industry averages for similarly situated operations as measured
by the U.S.&nbsp;Mine Safety and Health Administration, and we
plan to continue to maintain our strong safety record in the
coal industry. There have been no material work stoppages at any
of our facilities since we were formed in 2002 or at any of our
Predecessor or acquired facilities in the past 10&nbsp;years. We
aim to preserve the positive relationship we have developed with
our employees. Furthermore, we intend to continue to adhere to
strict environmental and reclamation compliance standards. For
example, in August 2004 we began implementing an environmental
best practices system across all of our subsidiaries&#146;
operations that involves the development of specific
environmental policies and programs, advanced training of our
environmental staff and management, and periodic assessments to
measure the level of our environmental awareness and compliance.
</FONT>

<P align="left">
<B><FONT size="2">Mining Methods</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We produce coal using two mining methods:
underground room and pillar mining using continuous mining
equipment, and surface mining, which are explained as follows:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <B><I><FONT size="2">Underground Mining.
    </FONT></I></B><FONT size="2">Underground mines in the United
    States are typically operated using one of two different
    methods: room and pillar mining or longwall mining. In 2003,
    approximately 81% of our pro forma produced and processed coal
    volume came from underground mining operations using the room
    and pillar method with continuous mining equipment. In room and
    pillar mining, rooms are cut into the coal bed 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
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">76
</FONT>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">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 thin seams, and 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;3.5 tons per employee per hour, according
    to the EIA.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">The other underground mining method commonly used
    in the United States is the longwall mining method, which we do
    not currently use at any of our mines. 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. Our Central Appalachian reserves often
    include non-contiguous seams of coal that can be extracted at a
    lower cost using continuous mining as opposed to the more
    capital intensive longwall method.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <B><I><FONT size="2">Surface Mining.
    </FONT></I></B><FONT size="2">Surface mining is used when coal
    is found close to the surface. In 2003, approximately 19% of our
    pro forma 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 90% or
    more. Productivity depends on equipment, geological composition
    and mining ratios and averages&nbsp;4.8 tons per employee per
    hour in eastern regions of the United States, according to the
    EIA.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<B><FONT size="2">Mining Operations</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We currently have eight regional business units,
including two in Virginia, three in West Virginia, one in
Pennsylvania, one in Kentucky and one in Colorado. As of
September&nbsp;30, 2004, these business units include 11
preparation plants, each of which receive, blend, process and
ship coal that is produced from one or more of our 64 active
mines (some of which are operated by third parties under
contracts with us), using two mining methods, underground room
and pillar and surface mining. During the first nine months of
2004 and in 2003, most of our preparation plants also processed
coal that we purchased from third party producers before
reselling it to our customers. Within each regional business
unit, mines have been developed at strategic locations in close
proximity to our preparation plants and rail shipping
facilities, with the exception of the National King Coal mine in
Colorado, which does not have access to a preparation plant due
to water restrictions, and therefore ships products raw. Coal is
transported from our regional business units to customers by
means of railroads, trucks, barge lines and ocean-going vessels
from terminal facilities. The following table provides location
and summary information regarding our eight
</FONT>

<P align="center"><FONT size="2">77
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<FONT size="2">regional business units and the preparation
plants and active mines associated with these business units as
of September&nbsp;30, 2004:
</FONT>
</DIV>

<P align="center">
<B><FONT size="2">Regional Business Units</FONT></B>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="21%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="9%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="9%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="11"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Production of</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">Number and Type of</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Saleable Tons</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">Mines as of</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">(in 000&#146;s)<SUP>(1)</SUP></FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">September&nbsp;30, 2004</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Pro</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">First Nine</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Preparation plant(s) as of</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Under-</FONT></B></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Forma</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Months of</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Regional Business Unit</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Location</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">September&nbsp;30, 2004</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">ground</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Surface</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Total</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Railroad</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2004</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Paramont
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">Virginia</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">Toms Creek</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">10</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">4</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">14</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">NS</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">6,186</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">4,456</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Dickenson-Russell
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">Virginia</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">McClure River and Moss&nbsp;#3</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">7</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">1</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">8</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="center" valign="bottom" nowrap><FONT size="1">CSX, NS</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">2,018</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">1,500</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Kingwood
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">West Virginia</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">Whitetail</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">1</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">0</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">1</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">CSX</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">2,409</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">1,516</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Brooks Run
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">West Virginia</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">Erbacon</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">3</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">0</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">3</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">CSX</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">2,274</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">1,541</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Welch
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">West Virginia</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">Litwar, Kepler and Herndon</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">13</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">0</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">13</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">NS</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">2,712</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">1,867</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">AMFIRE
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">Pennsylvania</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">Clymer and Portage</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">6</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">14</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">20</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">NS</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">2,914</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">2,524</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Enterprise
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">Kentucky</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">Roxana</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">3</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">1</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">4</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">CSX</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">1,536</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">1,114</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">National King Coal
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">Colorado</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">N/A</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">1</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">0</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">1</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">BN,UP</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">393</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">346</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">Totals</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">44</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">20</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">64</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">20,442</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">14,864</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
<HR size="1" width="15%" align="left" noshade>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Includes coal purchased from third party
    producers that was processed at our subsidiaries&#146;
    preparation plants in 2003 and the first nine months of 2004.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<FONT size="2">CSX = CSX Railroad
</FONT>

<DIV align="left">
<FONT size="2">NS = Norfolk Southern Railroad
</FONT>
</DIV>

<DIV align="left">
<FONT size="2">BN = Burlington Northern Santa&nbsp;Fe Railroad
</FONT>
</DIV>

<DIV align="left">
<FONT size="2">UP = Union Pacific Railroad
</FONT>
</DIV>

<P align="left">
<B><FONT size="2">Coal Characteristics</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In general, coal of all geological compositions
is characterized by end use as either steam coal or
metallurgical coal. Heat value, sulfur and ash content, and
volatility in the case of metallurgical coal, are the most
important variables in the profitable marketing and
transportation of coal. These characteristics determine the best
end use of a particular type of coal. We mine, process, market
and transport bituminous coal, characteristics of which are
described below.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Heat Value.
</FONT></I></B><FONT size="2">The heat value of coal is commonly
measured in British thermal units, or &#147;Btus.&#148; A Btu is
the amount of heat needed to raise the temperature of one pound
of water by one degree Fahrenheit. All of our coal is bituminous
coal, a &#147;soft&#148; black coal with a heat content that
ranges from 9,500 to 15,000 Btus per pound. This coal is located
primarily in Appalachia, Arizona, the Midwest, Colorado and Utah
and is the type most commonly used for electric power generation
in the United States. Bituminous coal is also used for
metallurgical and industrial steam purposes. Of our
514.4&nbsp;million tons of proven and probable reserves,
approximately 94% has a heat content above 12,500 Btus per pound.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Sulfur Content.
</FONT></I></B><FONT size="2">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. Low sulfur coals are coals which include a sulfur content
of 1.5% or less. Demand for low sulfur coal has increased, and
is expected to continue to increase, as generators of
electricity strive to reduce sulfur dioxide emissions to comply
with increasingly stringent emission standards in environmental
laws and regulations. Approximately 89% of our proven and
probable reserves are low sulfur coal.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">High sulfur coal can be burned in plants equipped
with sulfur-reduction technology, such as scrubbers, which can
reduce sulfur dioxide emissions by 50% 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, allowing the user to emit a predetermined amount of
sulfur dioxide. Some older coal-fired plants have been
retrofitted with scrubbers, although most have shifted to lower
sulfur coals as their principal
</FONT>

<P align="center"><FONT size="2">78
</FONT>

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<DIV align="left">
<FONT size="2">strategy for complying with Phase&nbsp;II of the
Clean Air Act&#146;s Acid Rain regulations. We expect that any
new coal-fired generation plant built in the United States will
use clean coal-burning technology.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Ash&nbsp;&#38; Moisture Content.
</FONT></I></B><FONT size="2">Ash is the inorganic residue
remaining after the combustion of coal. As with sulfur content,
ash content varies from seam to seam. Ash content is an
important characteristic of coal because electric generating
plants must handle and dispose of ash following combustion. The
absence of ash is also important to the process by which
metallurgical coal is transformed into coke for use in steel
production. 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
and increases the weight of the coal, thereby making it more
expensive to transport. Moisture content in coal, as sold, can
range from approximately 5% to 30% of the coal&#146;s weight.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Volatility.
</FONT></I></B><FONT size="2">Volatile matter is the percentage
of coal that turns to gases when it is transformed into coke.
The volatility of metallurgical coal determines the percentage
of feed coal that actually becomes coke, known as coke yield.
The lower the volatile matter, the higher the coke yield.
Volatile matter is measured on a dry mineral matter-free-basis.
On this basis, metallurgical coal is typically classified as low
volatile coal (14-22%), medium volatile coal (22-31%) or high
volatile coal (31% or greater). All other metallurgical
characteristics being equal, low volatile metallurgical coal is
the most highly valued type of metallurgical coal. We produce
all three types of metallurgical coal, and we estimate that, on
a pro forma basis, we produced or processed approximately 30% of
the low volatile metallurgical coal consumed by U.S. and
Canadian integrated steel companies and merchant coke producers
in 2003.
</FONT>

<P align="left">
<B><FONT size="2">Coal Reserves</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">&#147;Reserves&#148; are defined by SEC Industry
Guide&nbsp;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&nbsp;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&nbsp;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)&nbsp;reserves, is high enough to assume continuity
between points of observation.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In August 2004, we asked Marshall
Miller&nbsp;&#38; Associates, Inc. (&#147;MM&#38;A&#148;) to
prepare a detailed study of our reserves based on all of our
geologic information, including our updated drilling and mining
data. The coal reserve study conducted by MM&#38;A was planned
and performed to obtain reasonable assurance of our proven and
probable reserves. In connection with the study, MM&#38;A
prepared reserve maps and had certified professional geologists
develop estimates based on data supplied by us and using
standards accepted by government and industry.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">After reviewing the maps and information we
supplied, MM&#38;A prepared an independent mapping and estimate
of our demonstrated reserves using methodology outlined in
U.S.&nbsp;Geological Survey Circular&nbsp;891. MM&#38;A in
conjunction with our internal engineers and geologists developed
reserve estimation criteria to assure that the basic geologic
characteristics of the reserves (e.g., minimum coal thickness
and wash recovery, interval between deep mineable seams,
mineable area tonnage for economic extraction, etc.) are in
reasonable conformity with present and recent mine operation
capabilities on our various properties.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">MM&#38;A completed their report in November 2004.
As a result of this report, we increased our reserve estimate
from 326.5&nbsp;million tons as of January&nbsp;1, 2004 to
514.4&nbsp;million tons as of October&nbsp;15, 2004.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We expect to periodically update our reserve
estimates to reflect past coal production, new drilling
information and other geological or mining data, and
acquisitions or sales of coal properties. We also
</FONT>

<P align="center"><FONT size="2">79
</FONT>

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<DIV align="left">
<FONT size="2">expect to periodically retain outside experts to
independently verify our coal reserve base. In updating
estimates of our reserves, we expect to categorize coal tonnages
according to coal quality, mining method, permit status,
mineability and location relative to existing mines and
infrastructure. Further scrutiny will be applied using
geological criteria and other factors related to profitable
extraction of the coal. These criteria include seam height, roof
and floor conditions, yield and marketability.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As with most coal-producing companies in
Appalachia, the majority of our coal reserves are subject to
leases from third-party landowners. 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. A small portion of our reserve
holdings are owned and require no royalty or per-ton payment to
other parties. The average royalties paid by us for coal
reserves from our producing properties was $3.51 per ton in the
first nine months of 2004 and $1.75 per ton for 2003,
representing approximately 4% of our coal sales revenue during
the first nine months of 2004 and during 2003.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our total proven and probable reserves will
support current production levels for more than 25&nbsp;years.
The following table provides the &#147;quality&#148; (sulfur
content and average Btu content per pound) of our coal reserves
as of October&nbsp;15, 2004.
</FONT>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="22%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="11"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Recoverable</FONT></B></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">Sulfur Content</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Average Btu</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Reserves Proven&nbsp;&#38;</FONT></B></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">(in millions of tons)</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">(in millions of tons)</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Probable<SUP>(1)</SUP></FONT></B></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Regional Business Unit</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">State</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">(in millions of tons)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">&#60;1%</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">1.0%-1.5%</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">&#62;1.5%</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">&#62;12,500</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">&#60;12,500</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Paramont/ Alpha Land and Reserves<SUP>(2)</SUP>
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="1">Virginia
    </FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">155.9</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">111.4</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">32.2</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">12.3</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">154.4</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">1.5</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Dickenson-Russell
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="1">Virginia
    </FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">33.2</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">33.2</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">0</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">0</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">33.2</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">0</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Kingwood
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="1">West Virginia
    </FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">31.8</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">0</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">19.1</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">12.7</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">31.8</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">0</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Brooks Run
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="1">West Virginia
    </FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">26.2</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">7.9</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">18.3</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">0</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">10.8</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">15.4</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Welch
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="1">West Virginia
    </FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">96.0</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">96.0</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">0</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">0</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">96.0</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">0</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">AMFIRE
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="1">Pennsylvania
    </FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">94.4</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">14.2</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">49.4</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">30.8</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">84.7</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">9.7</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Enterprise
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="1">Kentucky
    </FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">66.6</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">26.5</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">38.5</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">1.6</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">64.3</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">2.3</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">National King Coal
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="1">Colorado
    </FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">10.3</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">9.2</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">1.1</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">0</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">10.3</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">0</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Totals
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">514.4</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">298.4</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">158.6</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">57.4</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">485.6</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">28.8</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Percentages
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">58</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">%</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">31</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">%</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">11</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">%</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">94</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">%</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">6</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">%</FONT></TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left">
<HR size="1" width="15%" align="left" noshade>
</DIV>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Recoverable reserves represent the amount of
    proven and probable reserves that can actually be recovered from
    the reserve base 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 the
    table exclude reserves for which we have leased our mining
    rights to third parties. Reserve information reflects a moisture
    factor of 6.5%. This moisture factor represents the average
    moisture present on our delivered coal.
    </FONT></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(2)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Includes proven and probable reserves in the
    state of Virginia controlled by our subsidiary Alpha Land and
    Reserves, LLC as of October&nbsp;15, 2004. Alpha Land and
    Reserves, LLC subleases a portion of the mining rights to its
    proven probable reserves in the state of Virginia to our
    subsidiary Paramont Coal Company Virginia, LLC.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<B><FONT size="2">Marketing, Sales and Customer
Contracts</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our marketing and sales force, which is
principally based in Latrobe, Pennsylvania, included an
aggregate of 26 employees as of September&nbsp;30, 2004, and
consists of sales managers, distribution/ traffic managers and
administrative personnel. In addition to selling coal produced
in our eight regional business units, we are also actively
involved in the purchase and resale of coal mined by others, the
majority of which we blend with coal produced from our mines. We
have coal supply commitments with a wide range of electric
utilities, steel manufacturers, industrial customers and energy
traders and brokers. Our overall sales philosophy is to focus
first on the customer&#146;s individual needs and
specifications, as opposed to simply selling our production
inventory. By offering coal of both steam and metallurgical
grades blended to provide specific qualities of heat content,
sulfur and ash and other characteristics relevant to our
customers, we are able to serve a diverse customer base. This
diversity allows us to adjust to changing
</FONT>

<P align="center"><FONT size="2">80
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<FONT size="2">market conditions and provides us with the
ability to sustain high sales volumes and sales prices for our
coal. Many of our larger customers are well-established public
utilities who have been customers of ours or our Predecessor and
acquired companies for decades.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">For the nine months ended September&nbsp;30,
2004, we sold a total of 19.4&nbsp;million tons of coal,
including 5.4&nbsp;million tons of purchased coal. Approximately
4.4&nbsp;million tons of our purchased coal sales in the first
nine months of 2004 were blended prior to resale, meaning the
coal was mixed with coal produced from our mines prior to
resale, which generally allows us to realize a higher overall
margin for the blended product than we would be able to achieve
selling these coals separately. Approximately 0.7&nbsp;million
tons of our purchased coal sales in the first nine months of
2004 were processed by us, meaning we washed, crushed or blended
the coal at one of our preparation plants or loading facilities
prior to resale. For the year ended December&nbsp;31, 2003, we
sold a total of 25.3&nbsp;million tons of coal on a pro forma
basis, including 6.1&nbsp;million tons of purchased coal, of
which 5.0&nbsp;million tons were blended with coal produced from
our mines and 1.6&nbsp;million tons were processed at our
preparation plants prior to resale. The breakdown of tons sold
by market served for the first nine months of 2004 and on a pro
forma basis for 2003 is set forth in the table below:
</FONT>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="41%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="15"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="15" align="center" nowrap><B><FONT size="1">Percentage of Coal Sales</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="15" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Steam Coal</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Metallurgical</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Utilities</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Industrial</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Total Steam</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Coal</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Nine Months Ended September&nbsp;30, 2004
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">59.2</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3.4</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">62.6</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">37.4</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Pro Forma 2003
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">68.4</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4.8</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">73.2</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">26.8</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We sold coal to over 100&nbsp;different customers
in the first nine months of 2004 and over 140&nbsp;customers on
a pro forma basis during 2003. Our top ten customers in the
first nine months of 2004 and on a pro forma basis in 2003
accounted for 44% and 51%, respectively, of our coal revenues
during those periods. Export shipments (including Canada)
represented approximately 32% of coal sales for the first nine
months of 2004 and 20% of 2003 pro forma coal sales and (in each
case, measured by tons sold). Our export shipments during the
first nine months of 2004 and during 2003 on a pro forma basis
serviced customers in 18 and 12 countries, respectively, across
North America, Europe, South America, Asia and Africa. During
the first nine months of 2004, Japan was our largest export
market, with sales to Japan accounting for 19% of our export
volume and 6% of our total overall sales. On a pro forma basis
in 2003, Canada was our largest export market, with sales to
Canada accounting for 42% of our export volume and 8.3% of our
overall sales volume. All of our sales are made in
U.S.&nbsp;dollars, which reduces foreign currency risk. Our
sales are subject to seasonal fluctuation, with sales to certain
customers being curtailed during the winter months due to the
freezing of lakes that we use to transport coal to those
customers.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As is customary in the coal industry, when market
conditions are appropriate and particularly in the steam coal
market, we enter into long-term contracts (exceeding one year in
duration) with many of our customers. These arrangements allow
customers to secure a supply for their future needs and provide
us with greater predictability of sales volume and sales prices.
Almost all of our contracts to supply steam coal are long-term.
During 2003, most of our contracts to supply metallurgical coal
were entered into on a one-year rolling basis or on a current
market or spot basis. However, due to current market conditions,
the majority of the metallurgical coal sales contracts we have
entered into during the first nine months of 2004 have been
long-term contracts. For the year ended December&nbsp;31, 2003,
approximately 65% and 18% of our pro forma steam and
metallurgical coal sales volume, respectively, was delivered
pursuant to long-term contracts.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As of November&nbsp;10, 2004, we had contracts to
sell 93% of planned 2005 production, including sales commitments
for approximately 19.8&nbsp;million tons, of which
12.3&nbsp;million tons are steam coal and 7.5&nbsp;million tons
are metallurgical coal, and contracts to sell 44% of planned
2006 production, including sales commitments for approximately
9.9&nbsp;million tons, of which 6.7&nbsp;million tons are steam
coal and 3.2&nbsp;million tons are metallurgical coal. As of
November&nbsp;10, 2004, we had commitments to
purchase&nbsp;3.5&nbsp;million tons of coal during 2005 and
1.0&nbsp;million tons in 2006.
</FONT>

<P align="center"><FONT size="2">81
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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The terms of our contracts result from bidding
and negotiations with customers. Consequently, the terms of
these contracts typically vary significantly in many respects,
including price adjustment features, provisions permitting
renegotiation or modification of coal sale prices, coal quality
requirements, quantity parameters, flexibility and adjustment
mechanisms, permitted sources of supply, treatment of
environmental constraints, options to extend and force majeure,
suspension, termination and assignment provisions, and
provisions regarding the allocation between the parties of the
cost of complying with future governmental regulations.
</FONT>

<P align="left">
<B><FONT size="2">Distribution</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We employ transportation specialists who
negotiate freight and terminal agreements with various
providers, including railroads, trucks, barge lines, and
terminal facilities. Transportation specialists also coordinate
with customers, mining facilities and transportation providers
to establish shipping schedules that meet the customer&#146;s
needs. Our coal sales of 19.4&nbsp;million tons during the first
nine months of 2004 and our 2003 pro forma sales of
25.3&nbsp;million tons were loaded from our 11&nbsp;preparation
plants and in certain cases directly from our mines and, in the
case of purchased coal, in some cases directly from mines and
preparation plants operated by third parties or from an export
terminal. Virtually all of our coal is transported from the mine
to our preparation plants by truck or rail, and then from the
preparation plant to the customer by railroad or truck. Rail
shipments constituted 78.8% of total pro forma shipments of
captive produced and processed coal volume from the preparation
plant to the customer in 2003, with 39.3% loaded on CSX trains,
38.2% loaded on Norfolk Southern trains and 1.3% loaded on
Burlington Northern trains. Although our National King Coal mine
has access to Union Pacific trains, none of our coal was shipped
on Union Pacific trains during 2003 and during the first nine
months of 2004. The balance was shipped from our preparation
plants or loadout facilities via truck. In 2003, 10.2% of our
pro forma coal sales was ultimately delivered to customers
through transport on the Great Lakes, 10.8% was moved through
the Norfolk Southern export facility at Norfolk, Virginia, 0.5%
was moved through the coal export terminal at Newport News,
Virginia operated by Dominion Terminal Associates, and 0.1% was
moved through the export terminal at Baltimore, Maryland. We own
a 32.5% interest in the coal export terminal at Newport News,
Virginia operated by Dominion Terminal Associates. See
&#147;&#151; Other Related Operations.&#148;
</FONT>

<P align="left">
<B><FONT size="2">Competition</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">With respect to our U.S.&nbsp;customers, we
compete with numerous coal producers in the Appalachian region
and with a large number of western coal producers in the markets
that we serve. Competition from coal with lower production costs
shipped east from western coal mines has resulted in increased
competition for coal sales in the Appalachian region. We face
limited competition from imports for our domestic customers. In
2003, only two percent of total U.S.&nbsp;coal consumption was
imported. Excess industry capacity, which has occurred in the
past, tends to result in reduced prices for our coal. The most
important factors on which we compete are coal price at the
mine, coal quality and characteristics, transportation costs
from the mine to the customer 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 91% of domestic coal consumption over the last
five years. These coal consumption patterns are influenced by
factors beyond our control, including the demand for
electricity, which is significantly dependent upon summer and
winter temperatures in the United States, environmental and
other government regulations, technological developments and 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. Demand for our low
sulfur coal and the prices that we will be able to obtain for it
will also be affected by the price and availability of high
sulfur coal, which can be marketed in tandem with emissions
allowances in order to meet Clean Air Act requirements.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Demand for our metallurgical coal and the prices
that we will be able to obtain for metallurgical coal will
depend to a large extent on the demand for U.S. and
international steel, which is influenced by factors
</FONT>

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<FONT size="2">beyond our control, including overall economic
activity and the availability and relative cost of substitute
materials. In the export metallurgical market, we largely
compete with producers from Australia, South Africa, Canada,
Russia and other international producers of metallurgical coal.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition to competition for coal sales in the
United States and internationally, we compete with other coal
producers, particularly in the Appalachian region, for the
services of experienced coal industry employees at all levels of
our mining operations.
</FONT>

<P align="left">
<B><FONT size="2">Other Related Operations</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have other related operations and activities
in addition to our normal coal production and sales business,
including:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <B><I><FONT size="2">Maxxim Rebuild Company.
    </FONT></I></B><FONT size="2">We own Maxxim Rebuild Company,
    LLC, a mining equipment company with facilities in Kentucky and
    Virginia. This business largely consists of repairing equipment
    used in surface mining and to support preparation plant
    operations. Maxxim Rebuild had revenues of $14.2&nbsp;million
    and $12.8&nbsp;million for the nine months ended
    September&nbsp;30, 2004 and, on a pro forma basis, the year
    ended December&nbsp;31, 2003, respectively, of which 27% and
    39%, respectively, was generated by services provided to our
    other subsidiaries.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <B><I><FONT size="2">Dominion Terminal Associates.
    </FONT></I></B><FONT size="2">Through our subsidiary Alpha
    Terminal Company, LLC, we hold a 32.5% interest in Dominion
    Terminal Associates, a 22&nbsp;million-ton annual capacity coal
    export terminal located in Newport News, Virginia. The terminal,
    constructed in 1982, provides the advantages of state of the art
    unloading/transloading equipment with ground storage capability,
    providing producers with the ability to custom blend export
    products without disrupting mining operations. We make periodic
    cash payments in respect of the terminal for operating expenses,
    which are offset by payments we receive for transportation
    incentive payments and for renting our unused storage space in
    the terminal to third parties. Our cash payments for expenses
    for the terminal in the nine month period ended
    September&nbsp;30, 2004 and in 2003 were $2.1&nbsp;million and
    $2.3&nbsp;million, respectively, partially offset by payments
    received of $1.4&nbsp;million and $1.0&nbsp;million during the
    respective periods. The terminal is held in a partnership with
    subsidiaries of three other companies, Dominion Energy (20%),
    Arch Coal (17.5%) and Peabody Energy (30%).
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <B><I><FONT size="2">Miscellaneous.</FONT></I></B><FONT size="2">
    We also engage in the sale of certain non-strategic assets such
    as timber, gas and oil rights as well as the sale of
    non-strategic surface properties and reserves.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<B><FONT size="2">Employee and Labor Relations</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Approximately 95% of our coal production in the
first nine months of 2004 and our 2003 pro forma coal production
came from mines operated by union-free employees, and as of
September&nbsp;30, 2004, over 90% of our subsidiaries&#146;
approximately 2,500&nbsp;employees were union-free. We believe
our employee relations are good and there have been no material
work stoppages at any of our subsidiaries&#146; properties in
the past ten years.
</FONT>

<P align="left">
<B><FONT size="2">Legal Proceedings</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">From time to time, we are involved in litigation
and administrative proceedings which arise in the ordinary
course of our business. Management does not believe that any of
the litigation or proceedings in which we are currently
involved, either individually or in the aggregate, are likely to
have a material adverse effect on our business, financial
condition, operating results or cash flows.
</FONT>

<P align="center"><FONT size="2">83
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</DIV>

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<P align="center">
<B><FONT size="2">ENVIRONMENTAL AND OTHER REGULATORY
MATTERS</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Federal, state and local authorities regulate the
U.S.&nbsp;coal mining industry with respect to matters such as
employee health and safety, permitting and licensing
requirements, 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 regulations and legislation have
had, and will continue to have, a significant effect on our
production costs and our competitive position. Future
legislation, regulations or orders, as well as future
interpretations and more rigorous enforcement of existing laws,
regulations or orders, 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. We intend to respond to these regulatory requirements
at the appropriate time by implementing necessary modifications
to facilities or operating procedures. Future legislation,
regulations or orders may also cause coal to become a less
attractive fuel source, thereby reducing coal&#146;s share of
the market for fuels used to generate electricity. As a result,
future legislation, regulations or orders may adversely affect
our mining operations, cost structure or the ability of our
customers to use coal.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We endeavor to conduct our mining operations in
compliance with all applicable federal, state, and local laws
and regulations. However, because of extensive and comprehensive
regulatory requirements, violations occur from time to time.
None of the violations or the monetary penalties assessed upon
us since our inception in 2002 have been material. Nonetheless,
we expect that future liability under or compliance with
environmental and safety requirements could have a material
effect on our operations or competitive position. Under some
circumstances, substantial fines and penalties, including
revocation or suspension of mining permits, may be imposed under
the laws described below. Monetary sanctions and, in severe
circumstances, criminal sanctions may be imposed for failure to
comply with these laws.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As of September&nbsp;30, 2004, we had accrued
$40.6&nbsp;million for reclamation liabilities and mine
closures, including $6.7&nbsp;million of current liabilities.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Mining Permits and Approvals.
</FONT></I></B><FONT size="2">Numerous governmental permits or
approvals are required for mining operations. When we apply for
these permits and approvals, we may be required to present data
to federal, state or local authorities 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.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In order to obtain mining permits and approvals
from state regulatory authorities, mine operators, including us,
must submit a reclamation plan for restoring, upon the
completion of mining operations, the mined property to its prior
or better condition, productive use or other permitted
condition. Typically, we submit our necessary permit
applications several months, or even years, before we plan to
begin mining a new area. In our experience, permits generally
are approved several months after a completed application is
submitted. In the past, we have generally obtained our mining
permits without significant delay. However, we cannot be sure
that we will not experience difficulty in obtaining mining
permits in the future.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Surface Mining Control and Reclamation Act.
</FONT></I></B><FONT size="2">The Surface Mining Control and
Reclamation Act of 1977 (&#147;SMCRA&#148;), which is
administered by the Office of Surface Mining Reclamation and
Enforcement (&#147;OSM&#148;), 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 applicable state agency. Where state regulatory agencies
have adopted federal mining programs under SMCRA, the state
becomes the regulatory authority. States in
</FONT>

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<FONT size="2">which we have active mining operations have
achieved primary control of enforcement through federal
authorization.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">SMCRA permit provisions include a complex set of
requirements which include: 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
re-vegetation.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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 and historical 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 we will mine. We develop mining
and reclamation plans by utilizing this geologic data and
incorporating elements of the environmental data. The mining and
reclamation plan incorporates the provisions of SMCRA, the state
programs, and the complementary environmental programs that
affect 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 of the OSM&#146;s Applicant
Violator System, including the mining and compliance history of
officers, directors and principal owners of the entity.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Once a permit application is prepared and
submitted to the regulatory agency, it goes through a
completeness review and technical review. Public notice of the
proposed permit is given that also provides for a comment period
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 and other
agencies have rights to comment on and otherwise engage in the
permitting process, including through intervention in the courts.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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
SMCRA&#146;s adoption in 1977. The current fee is $0.35&nbsp;per
ton on surface-mined coal and $0.15&nbsp;per ton on deep-mined
coal, but tax rate revisions are currently pending.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">SMCRA stipulates compliance with many other major
environmental statutes, including: the Clean Air Act; Clean
Water Act; Resource Conservation and Recovery Act
(&#147;RCRA&#148;) and Comprehensive Environmental Response,
Compensation and Liability Act (&#147;CERCLA&#148; or
&#147;Superfund&#148;).
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Surety Bonds.
</FONT></I></B><FONT size="2">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. Surety bond costs have increased in
recent years while the market terms of surety bonds have
generally become more unfavorable. In addition, the number of
companies willing to issue surety bonds has decreased. We have a
committed bonding facility with Travelers Casualty and Surety
Company of America, pursuant to which it has agreed, subject to
certain conditions, to issue surety bonds on our behalf in a
maximum amount of $125.0&nbsp;million. As of September&nbsp;30,
2004, we have posted an aggregate of $89.0&nbsp;million in
reclamation bonds and $7.8&nbsp;million of other types of bonds
under this facility.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Clean Air Act.
</FONT></I></B><FONT size="2">The Clean Air Act and comparable
state laws that regulate air emissions affect coal mining
operations both directly and indirectly. Direct impacts on coal
mining and processing operations may occur through Clean Air Act
permitting requirements and/or emission control requirements
relating to particulate matter, such as fugitive dust, including
future regulation of 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
</FONT>

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<FONT size="2">emitted by coal-fired electricity generating
plants. The general effect of this extensive regulation of
emissions from coal-fired power plants could be to reduce demand
for coal.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Clean Air Act requirements that may directly or
indirectly affect our operations include the following:
</FONT>
<P>

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    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <I><FONT size="2">Acid Rain.</FONT></I><FONT size="2">
    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 applies to all
    coal-fired power plants generating 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 IV.
    </FONT></TD>
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    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <I><FONT size="2">Fine Particulate Matter and
    Ozone.</FONT></I><FONT size="2"> The Clean Air Act requires the
    EPA to set standards, referred to as National Ambient Air
    Quality Standards (&#147;NAAQS&#148;), 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. 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 that 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 (&#147;PM10&#148;),
    and adding a new standard for fine particulate matter with an
    aerodynamic diameter less than or equal to 2.5 microns
    (&#147;PM2.5&#148;). State fine particulate non-attainment
    designations were due on February&nbsp;15, 2004, and
    18&nbsp;states and the District of Columbia recommended counties
    to be classified as non-attainment areas. The EPA has indicated
    it will propose the implementation rule in late 2004 and
    finalize it in early 2005. 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
    &#147;non-attainment&#148; areas.
    </FONT></TD>
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    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <I><FONT size="2">Ozone.</FONT></I><FONT size="2"> 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.
    </FONT></TD>
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    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <I><FONT size="2">NOx SIP Call.</FONT></I><FONT size="2"> 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 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 program, which became effective June&nbsp;21, 2004, 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.
    </FONT></TD>
</TR>

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    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <I><FONT size="2">Clear Skies
    Initiative.</FONT></I><FONT size="2"> 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 budget programs.
    Congress has also considered several competing bills. It is
    currently not possible to predict what, if any, new regulatory
    requirements will ultimately evolve out of this initiative and
    no action is anticipated until sometime in 2005.
    </FONT></TD>
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    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <I><FONT size="2">Clean Air Interstate
    Rule.</FONT></I><FONT size="2"> On January&nbsp;30, 2004, the
    EPA proposed new rules for reducing emissions of sulfur dioxide,
    nitrogen oxides, and mercury. The proposed 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 proposal suggests that states regulate
    power plants 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, to comply. This
    increased sulfur emission removal capability caused by the
    proposed 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 proposed rule would cut regional sulfur dioxide emissions by
    50% in 2010, and by approximately 67% in 2015. The comment
    deadline on the rule closed on June&nbsp;29, 2004, and the EPA
    has announced plans to finalize this rule by the end of 2004.
    </FONT></TD>
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    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <I><FONT size="2">Utility Mercury Reductions
    Rule.</FONT></I><FONT size="2"> On January&nbsp;30, 2004, the
    EPA also proposed the Utility Mercury Reductions Rule for
    controlling mercury emissions from power plants. The proposal
    seeks comments on two approaches for reducing the estimated 48
    tons of mercury currently emitted each year by coal-fired power
    plants in the United States. The comment period ended on
    June&nbsp;29, 2004. One approach would require coal-fired power
    plants to install pollution controls known as &#147;maximum
    achievable control technologies,&#148; or &#147;MACT&#148; under
    section&nbsp;112 of the Clean Air Act. If implemented in its
    current form, this proposal would reduce nationwide emissions of
    mercury by 14&nbsp;tons (29&nbsp;percent) by the end of 2007.
    The second approach would set a mandatory, declining cap on the
    total mercury emissions allowed from coal-fired power plants
    nationwide. This approach, which allows emissions trading, would
    reduce mercury emissions by nearly 70&nbsp;percent from current
    levels once facilities reach a final mercury cap which takes
    effect in 2018. The final rule has been delayed until
    March&nbsp;15, 2005, due to issues raised as a result of
    numerous public comments submitted to the EPA regarding the rule.
    </FONT></TD>
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    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
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    <I><FONT size="2">Carbon Dioxide.</FONT></I><FONT size="2"> 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 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.
    To date, no decision has been rendered in this case, although
    both sides have submitted arguments to the court.
    </FONT></TD>
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    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <I><FONT size="2">Regional Emissions
    Trading:</FONT></I><FONT size="2"> Eleven Northeast and
    Mid-Atlantic states are working cooperatively to develop a
    regional cap and trade program that would initially cover carbon
    dioxide emissions from power plants in the region. The states
    intend to develop a model rule by April 2005. There are a number
    of uncertainties regarding this initiative, including the
    applicable baseline of emissions to be permitted, initial
    allocations, required emissions reductions, availability of
    offsets, the extent to which states will adopt the program,
    whether it will be linked with programs in other states or in
    Canadian provinces, and the timing for implementation of the
    program. There can be no assurance at this time that a carbon
    dioxide cap and trade program, if
    </FONT></TD>
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    <FONT size="2">implemented by the states where our customers
    operate, will not affect the future market for coal in this
    region.
    </FONT></TD>
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    <TD><FONT size="2"> &#149;</FONT></TD>
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    <I><FONT size="2">Regional Haze.</FONT></I><FONT size="2"> 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.
    </FONT></TD>
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</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Clean Water Act.
</FONT></I></B><FONT size="2">The Clean Water Act of 1972 (the
&#147;CWA&#148;) and corresponding state laws affect coal mining
operations by imposing restrictions on 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 (&#147;NPDES&#148;).
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.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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, mining disturbances are prohibited
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.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Army Corps of Engineers (the &#147;COE&#148;)
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 the COE in the U.S.&nbsp;District
Court for the Southern District of West Virginia seeking to
invalidate &#147;nationwide&#148; permits utilized by the COE
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&nbsp;21 permits and rescinded certain listed permits
where construction of valley fills and surface impoundments had
not commenced. On August&nbsp;13, 2004, the court extended the
ruling to all Nationwide&nbsp;21 permits within the Southern
District of West Virginia. Although Alpha had no operations that
were immediately impacted or interrupted, this decision may
require us to convert certain current and planned applications
for Nationwide&nbsp;21 permits to applications for individual
permits.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Total Maximum Daily Load (&#147;TMDL&#148;)
regulations established a process by which states designate
stream segments as impaired (not meeting present water quality
standards). Industrial dischargers, including coal mines, will
be required to meet new TMDL effluent standards for these stream
segments. Some of our operations currently discharge effluents
into stream segments that have been designated as impaired. The
adoption of new TMDL related effluent limitations for our coal
mines could require more costly water treatment and could
adversely affect our coal production.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Under the CWA, 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
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<FONT size="2">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.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Mine Safety and Health.
</FONT></I></B><FONT size="2">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, our U.S.&nbsp;competitors are
subject to the same degree of regulation.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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
deep-mined 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 $12.56&nbsp;million of expense
related to this excise tax.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Coal Industry Retiree Health Benefit Act of
1992. </FONT></I></B><FONT size="2">Unlike many companies in the
coal business, we do not have any liability under the Coal
Industry Retiree Health Benefit Act of 1992 (the &#147;Coal
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. See
&#147;Risk Factors&#151; The inability of the sellers of our
Predecessor and acquired companies to fulfill their
indemnification obligations to us under our acquisition
agreements could increase our liabilities and adversely affect
our results of operations and financial position.&#148;
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Endangered Species Act.
</FONT></I></B><FONT size="2">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.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Resource Conservation and Recovery Act.
</FONT></I></B><FONT size="2">The 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.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Subtitle&nbsp;C of RCRA exempted fossil fuel
combustion wastes from hazardous waste regulation until the EPA
completed a report to Congress and made a determination on
whether the wastes should be regulated as hazardous. In a 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. In
May 2000, the EPA concluded that coal combustion wastes do not
warrant regulation as hazardous under RCRA. The EPA is retaining
the hazardous waste exemption for these wastes. However, the EPA
has determined that national non-hazardous waste regulations
under RCRA Subtitle&nbsp;D
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<FONT size="2">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
hazardous wastes would increase our customers&#146; operating
costs and potentially reduce their ability to purchase coal. In
addition, contamination caused by the past disposal of ash can
lead to material liability.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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,
we have used some ash as mine fill. The ash we use for this
purpose is mixed with lime and serves to help alleviate the
potential for acid mine drainage.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Federal and State Superfund Statutes.
</FONT></I></B><FONT size="2">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. Under Superfund, joint and several
liabilities may be imposed on waste generators, site owners or
operators and others regardless of fault. In addition, mining
operations may have reporting obligations under the Emergency
Planning and Community Right to Know Act and the Superfund
Amendments and Reauthorization Act.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Climate Change.
</FONT></I></B><FONT size="2">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. In
November 2004, Russia ratified the Kyoto Protocol to the 1992
Framework Convention on Global Climate Change (the
&#147;Protocol&#148;), which establishes a binding set of
emission targets for greenhouse gases. With Russia&#146;s
accedence, the Protocol now has sufficient support and will
become binding on all those countries that have ratified it on
February&nbsp;16, 2005. Four industrialized nations have refused
to ratify the 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 Protocol our
nation would be required to reduce greenhouse gas emissions to
93% of 1990 levels from 2008 to 2012. Canada, which accounted
for 5.9% of our sales volume in the first nine months of 2004
and 8.3% of our pro forma sales volume in 2003, ratified the
Protocol in 2002. Under the Protocol, Canada will be required to
cut greenhouse gas emissions to 6% below 1990 levels in 2008 to
2012, either in direct reductions in emissions or by obtaining
credits through the Protocol&#146;s market mechanisms. This
could result in reduced demand for coal by Canadian electric
power generators.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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
reduction targets 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 Protocol by the U.S., could result in
reduced demand for coal.
</FONT>

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<B><FONT size="2">MANAGEMENT</FONT></B>

<P align="left">
<B><FONT size="2">Directors and Executive Officers</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table sets forth the names, ages
and titles of our directors and executive officers.
</FONT>

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    <TD width="48%"><FONT size="2">&nbsp;</FONT></TD>
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    <TD align="center" nowrap><B><FONT size="1">Name</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Age</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Position</FONT></B></TD>
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    <TD align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Michael J. Quillen
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">56</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">President, Chief Executive Officer and Director
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Kevin S. Crutchfield
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">43</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Executive Vice President
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">D. Scott Kroh
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">54</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Executive Vice President
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">David C. Stuebe
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">64</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Vice President and Chief Financial Officer
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Michael D. Brown
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">43</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Vice President
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Vaughn R. Groves
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">48</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Vice President and General Counsel
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">E. Linn Draper,&nbsp;Jr.&nbsp;</FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">62</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Director
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">John W. Fox,&nbsp;Jr.&nbsp;</FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">57</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Director
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Alex T. Krueger
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">30</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Director
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Fritz R. Kundrun
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">68</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Director
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">William E. Macaulay
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">59</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Director
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Hans J. Mende
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">60</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Director and Chairman of the Board
    </FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Each 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.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Set forth below is a description of the
background of the persons named above.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Michael J. Quillen</FONT></I><FONT size="2">
has served as our President and Chief Executive Officer and a
member of our board of directors since our formation in November
2004. Mr.&nbsp;Quillen joined the Alpha management team as
President and the sole manager of Alpha Natural Resources, LLC,
our top-tier operating subsidiary, in August 2002, and has
served as Chief Executive Officer of Alpha Natural Resources,
LLC since January 2003. He has also served as the President and
a member of the board of directors of ANR Holdings since
December 2002, and as the Chief Executive Officer of ANR
Holdings since March 2003. From September 1998 to December 2002,
Mr.&nbsp;Quillen was Executive Vice President&#151; Operations
of AMCI. While at AMCI, he was also responsible for the
development of AMCI&#146;s Australian properties.
Mr.&nbsp;Quillen has over 30&nbsp;years of experience in the
coal industry starting as an engineer. He has held senior
executive positions in the coal industry throughout his career,
including as Vice President&#151; Operations of Pittston Coal
Company, President of Pittston Coal Sales Company, Vice
President of AMVEST Corporation, Vice President&#151; Operations
of NERCO Coal Corporation, President and Chief Executive Officer
of Addington, Inc. and Manager of Mid-Vol Leasing, Inc.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Kevin S. Crutchfield</FONT></I><FONT size="2">
has served as our Executive Vice President since our formation
in November 2004. Mr.&nbsp;Crutchfield joined the Alpha
management team as the Executive Vice President of Alpha Natural
Resources, LLC and Vice President of ANR&nbsp;Holdings in March
2003, and has served as the Executive Vice President of
ANR&nbsp;Holdings since November 2003. From June 2001 through
January 2003, he was President of Coastal Coal Company and Vice
President of El&nbsp;Paso Corporation. Prior to joining
El&nbsp;Paso, he served as President of AMVEST Corporation, a
coal and gas producer and provider of related products and
services, and held executive positions at AEI&nbsp;Resources,
Inc., most recently as President and Chief Executive Officer.
Before joining AEI&nbsp;Resources, Inc., he served as the
Chairman, President and Chief Executive Officer of Cyprus
Australia Coal Company and held executive operating management
positions with Cyprus in the U.S.&nbsp;before being relocated to
Sydney, Australia in 1997. He worked for Pittston Coal Company
in various operating and executive management positions from
1986 to 1995 serving most recently as Vice President Operations
prior to joining Cyprus Amax Coal Company.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">D. Scott Kroh</FONT></I><FONT size="2"> has
served as our Executive Vice President since our formation in
November 2004. Mr.&nbsp;Kroh joined the Alpha management team as
the Executive Vice President of Alpha Natural
</FONT>

<P align="center"><FONT size="2">91
</FONT>

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<DIV align="left">
<FONT size="2">Resources, LLC in March 2003, and has also served
as the Executive Vice President of ANR Holdings since November
2003. From June 1989 through February 2003 he served as
President of Tanoma Energy&#146;s sales and mining company, an
AMCI affiliate located in Latrobe, Pennsylvania. Mr.&nbsp;Kroh
also served as Vice President of AMCI Export from January 1992
until February 2003. Prior to founding Tanoma Energy he served
as Vice President of Sales for Amerikohl Mining Company of
Butler, Pennsylvania from 1980 until May 1989. Mr.&nbsp;Kroh
began his career in the coal business in 1978 as a salesman for
Ringgold Mining Company of Kittanning, Pennsylvania.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">David C. Stuebe</FONT></I><FONT size="2"> has
served as our Vice President and Chief Financial Officer since
our formation in November 2004. Mr.&nbsp;Stuebe joined the Alpha
management team as the Vice President and Chief Financial
Officer of Alpha Natural Resources, LLC in October 2003, and has
also served as the Vice President and Chief Financial Officer of
ANR Holdings since November 2003. Mr.&nbsp;Stuebe served from
March 2000 to July 2003 as Senior Vice President-Finance and
Administration of Hearth and Home Technologies, Inc., a
wholly-owned subsidiary of HON INDUSTRIES Inc., a leading
manufacturer of office systems and hearth products, and from
October 1994 to March 2000 as Vice President and Chief Financial
Officer of the parent, HON INDUSTRIES Inc. Prior to joining HON,
he served as President, Chief Executive Officer and Director of
United Recycling Industries, Inc., a metals broker, precious
metals recycler and non-ferrous metals producer from 1990 to
1994, as President, Chief Executive Officer and Director of Auto
Specialties Manufacturing, Inc., a manufacturer of O.E.M. truck
and construction equipment components from 1988 to 1990, and as
Chairman, President and Chief Executive and Chief Financial
Officer of MSL Industries, Inc., a manufacturer and distributor
of fasteners, tubing, roll-form shapes, electric motors,
components for electric utilities and missile components from
1981 to 1987. Mr.&nbsp;Stuebe&#146;s business background also
includes significant general and financial management positions
with Carpetland U.S.A. and the Scholl Products Group of
Schering-Plough, as well as 13&nbsp;years of audit experience
with an international public accounting firm.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Michael D. Brown </FONT></I><FONT size="2">has
served as our Vice President since our formation in November
2004. Mr.&nbsp;Brown joined the Alpha management team as Vice
President of Alpha Natural Resources, LLC in March 2003, and has
also served as Vice President of ANR Holdings since November
2003. From 2000 through March 2003, he served as Vice
President&#151; Development and Technical Resources for Pittston
Coal Company. Prior to this he served as Pittston&#146;s Group
Vice President of Metallurgical Operations, which included all
Pittston properties acquired by Alpha. Mr.&nbsp;Brown served in
numerous other executive and financial positions within Pittston
Coal Company including a two year period as the chief operating
officer for Pittston&#146;s affiliated gas and timber companies.
Mr.&nbsp;Brown was affiliated with Pittston Coal from June 1984
until his employment at Alpha.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Vaughn R. Groves </FONT></I><FONT size="2">has
served as our Vice President and General Counsel since our
formation in November 2004. Mr.&nbsp;Groves joined the Alpha
management team as the Vice President and General Counsel of
Alpha Natural Resources, LLC in October 2003, and has also
served as the Vice President and General Counsel of ANR Holdings
since November 2003. Prior to that time, he served as Vice
President and General Counsel of Pittston Coal Company from 1996
until joining Alpha, and as Associate General Counsel of
Pittston Coal Company from 1991 until 1996. Before joining
Pittston Coal, he was associated with the law firm of Jackson
Kelly PLLC, one of the leading mineral law firms in the
Appalachian region. He is also a mining engineer and before
obtaining his law degree, he worked as an underground section
foreman, construction foreman and mining engineer for Monterey
Coal Company.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">E. Linn
Draper,&nbsp;Jr.</FONT></I><FONT size="2"> has been a member of
our board of directors since our formation in November 2004 and
a member of the board of directors of ANR Holdings since August
2004. Mr.&nbsp;Draper joined American Electric Power (AEP), an
electric utility company, as President in 1992, and served as
the Chairman, President and Chief Executive Officer of AEP from
1993 until his retirement in April 2004. Prior to joining AEP,
Mr.&nbsp;Draper worked for Gulf States Utility Company, an
electric utility company, from 1979 to 1992, serving as the
company&#146;s Chairman of the Board, President and Chairman
from 1987 to 1992. He serves as a director of Sprint, a
telecommunications company, and Temple Inland, a holding company
with subsidiaries operating in the corrugated packaging, forest
products and financial services sectors. Mr.&nbsp;Draper is also
a non-executive chairman of NorthWestern Corporation, an
electric utility.
</FONT>

<P align="center"><FONT size="2">92
</FONT>

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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">John W.
Fox,&nbsp;Jr.</FONT></I><FONT size="2"> has been a member of our
board of directors since our formation in November 2004 and a
member of the board of directors of ANR Holdings since August
2004. Mr.&nbsp;Fox served as Senior Vice President, Coal
Services for Norfolk Southern Company, a railroad operator, from
April 2001 until his retirement in November 2003, and as Senior
Vice President Coal Marketing from December 1999 to April 2001.
Mr.&nbsp;Fox began his career with a predecessor of Norfolk
Western Railroad Company in 1969.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Alex T. Krueger </FONT></I><FONT size="2">has
been a member of our board of directors since our formation in
November 2004 and a member of the board of directors of ANR
Holdings since March 2003. He joined First Reserve Corporation,
a private equity firm, in 1999 and is currently a director of
First Reserve Corporation focused on investment efforts in the
coal and energy infrastructure sectors. Mr.&nbsp;Krueger also
serves on the board of GP Natural Resource Partners LLC, the
general partner of NRP, our largest landlord in 2003 based on
lease and royalty payments, as well as the board of Foundation
Coal Holdings, Inc., a coal company. Prior to joining First
Reserve, Mr.&nbsp;Krueger worked in the Energy Group of
Donaldson, Lukfin&nbsp;&#38; Jenrette.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Fritz R. Kundrun </FONT></I><FONT size="2">has
been a member of our board of directors since our formation in
November 2004 and a member of the board of directors of ANR
Holdings since March 2003. Mr.&nbsp;Kundrun is currently
Chairman and Chief Executive Officer of AMCI, a mining and
marketing company, positions he has held since he co-founded
AMCI in 1986. Prior to founding AMCI, Mr.&nbsp;Kundrun was
employed for 26&nbsp;years by the Thyssen Group, one of the
largest German multinational companies with interests in steel
making and general heavy industrial production. There he served
as Executive Vice President of Thyssen, Inc., and President of
Thyssen Carbometal where his responsibilities included
overseeing the international trading activities of Thyssen in
the Western Hemisphere, Asia and certain markets in Europe. He
also served as Thyssen&#146;s chief delegate in Pakistan, Iran
and Iraq.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">William E. Macaulay
</FONT></I><FONT size="2">has been a member of our board of
directors since our formation in November 2004 and a member of
the board of directors of ANR Holdings since March 2003. He is
the Chairman and Chief Executive Officer of First Reserve
Corporation, a private equity firm, which he joined in 1983.
Mr.&nbsp;Macaulay serves as Chairman of Pride International,
Inc., a contract drilling and related services company,
Dresser-Rand Group, Inc., a supplier of rotating equipment
solutions to the energy industry and Foundation Coal Holdings,
Inc., a coal company. He also serves as a director of Dresser,
Inc., an equipment and services company serving the energy
industry and of Weatherford International, Inc. and National
Oilwell, Inc., both of which are oilfield service companies.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Hans J. Mende </FONT></I><FONT size="2">has
been Chairman of our board of directors since our formation in
November 2004. He joined the board of directors of
ANR&nbsp;Holdings in March 2003, and has served as Chairman of
the board of directors of ANR&nbsp;Holdings since June 2003. He
is currently President and Chief Operating Officer of AMCI, a
mining and marketing company, positions he has held since he
co-founded AMCI in 1986. Prior to founding AMCI, Mr.&nbsp;Mende
was employed by the Thyssen Group in various senior executive
positions. At the time of his departure from Thyssen Group,
Mr.&nbsp;Mende was President of its international trading
company. Mr.&nbsp;Mende also serves on the board of Foundation
Coal Holdings, Inc., a coal company.
</FONT>

<P align="left">
<B><FONT size="2">Board of Directors</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our board of directors currently consists of
seven members. All of our directors serve one-year terms, with
all directors elected each year. Our board has reviewed the
independence of the members of our board, in accordance with the
guidelines set out in our Corporate Governance Guidelines and
Section&nbsp;303A of the Listed Company Manual of the New York
Stock Exchange and has affirmatively determined that
Messrs.&nbsp;Draper and Fox are independent as so defined. We
expect to add an additional independent director within
12&nbsp;months after the date of this offering. Based on the
fact that our Sponsors, First Reserve and entities affiliated
with AMCI, will constitute a group holding more than 50% of our
voting power following this offering, our board of directors has
determined that we are a &#147;controlled&#148; company, as
defined in Section&nbsp;303A, and therefore eligible for
exemptions from certain provisions of the NYSE rules, including
the requirements that we have a majority of independent
directors and nominating/corporate governance and compensation
committees composed entirely of independent
</FONT>

<P align="center"><FONT size="2">93
</FONT>

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<DIV align="left">
<FONT size="2">directors. We have elected to take advantage of
these exemptions. In the event that we cease to be a controlled
company within the meaning of the NYSE rules, we will be
required to comply with these provisions after the specified
transition periods.
</FONT>
</DIV>

<P align="left">
<B><FONT size="2">Committees of the Board of Directors After
this Offering</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">After this offering, our board of directors will
have an audit, compensation and executive, governance and
nominating committee.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Audit Committee.</FONT></I><FONT size="2">
After this offering, our audit committee is expected to consist
of Messrs.&nbsp;Draper, Krueger and Kundrun, with
Mr.&nbsp;Krueger serving as chairman. Mr.&nbsp;Draper will be
our audit committee &#147;financial expert&#148; as that term is
defined in Item&nbsp;401(h) of Regulation&nbsp;S-K. Of these
individuals, only Mr.&nbsp;Draper currently qualifies as an
&#147;independent&#148; member of the audit committee as defined
in the SEC&#146;s rules setting forth independence requirements
for public company audit committees. We are required by SEC
rules to have an audit committee composed of a majority of
independent directors within 90&nbsp;days of the date of the
effectiveness of the registration statement of which this
prospectus is a part, and an audit committee composed entirely
of independent directors within one year from that date. We
intend to comply with these requirements regarding the
independence of our audit committee.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The audit committee will provide assistance to
our board of directors in monitoring the reliability and
integrity of our accounting policies and financial statements,
overseeing our compliance with legal and regulatory requirements
and reviewing the independence, qualifications and performance
of our independent auditor. The audit committee will also be
responsible for (1)&nbsp;the appointment, compensation, and
oversight of our independent auditor, (2)&nbsp;approving the
overall scope of the audit and approving any non-audit services
to be performed by the independent auditor, (3)&nbsp;annually
reviewing a report by the independent auditor describing the
firm&#146;s internal quality control procedures, any material
issues raised by the most recent internal quality control
review, or peer review, of the auditing firm, and all
relationships between us and the independent auditor,
(4)&nbsp;discussing the annual audited and quarterly financial
statements with management and the independent auditor,
(5)&nbsp;discussing the company&#146;s press releases, as well
as financial information and earnings guidance provided to
analysts and rating agencies, (6)&nbsp;reviewing and discussing
risk assessment and risk management policies as well as
procedures management has established to monitor compliance with
our Code of Business Ethics, (7)&nbsp;meeting periodically, but
separately, with the independent auditor, internal auditors and
management, (8)&nbsp;reviewing with the independent auditor any
audit problems or difficulties and management&#146;s response,
(9)&nbsp;preparing an audit committee report as required by the
SEC to be included in our annual proxy statement,
(10)&nbsp;establishing policies regarding the company&#146;s
hiring of employees or former employees of the independent
auditor, (11)&nbsp;annually reviewing and reassessing the
adequacy of audit committee&#146;s written charter and
recommending any proposed changes to the board of directors,
(12)&nbsp;reporting regularly to the full board of directors,
(13)&nbsp;conducting an annual performance evaluation of the
audit committee, and (14)&nbsp;handling other matters that are
specifically delegated to the audit committee by the board of
directors from time to time. Prior to consummation of this
offering, the audit committee will approve the Code of Business
Ethics for all directors, officers and employees.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Compensation
Committee.</FONT></I><FONT size="2"> After this offering, we
expect that the members of the compensation committee will be
Messrs.&nbsp;Draper, Fox, Krueger and Mende, with
Mr.&nbsp;Krueger serving as chairman of the committee. The
compensation committee will be responsible for
(1)&nbsp;reviewing and approving the compensation, including
salary, bonuses and benefits, of our chief executive officer and
other executive officers, (2)&nbsp;reviewing and approving
corporate goals and objectives relevant to the compensation of
executive officers and evaluating their performance in light of
these goals and objectives, (3)&nbsp;reviewing and recommending
to the board of directors executive compensation policies and
practices for our and our subsidiaries&#146; executive officers
generally, (4)&nbsp;reviewing director compensation and
recommending any proposed changes the board of directors,
(5)&nbsp;reviewing and recommending to the board of directors
any employment contract or similar agreement for any executive
officer, (6)&nbsp;reviewing and consulting with the chief
executive officer regarding matters of key personnel selection,
(7)&nbsp;reviewing and making recommendations to the board of
directors with respect to incentive compensation plans and
equity-based
</FONT>

<P align="center"><FONT size="2">94
</FONT>
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<DIV align="left">
<FONT size="2">plans, and administering the plans,
(8)&nbsp;monitoring compliance with applicable laws relating to
compensation of executive officers, (9)&nbsp;producing a
compensation committee report on executive compensation as
required by the SEC to be included in the company&#146;s annual
proxy statement or annual report on Form&nbsp;10-K filed with
the SEC, (10)&nbsp;reporting regularly to the full board of
directors, (11)&nbsp;conducting an annual performance evaluation
of the compensation committee, and (12)&nbsp;handling other
matters that are specifically delegated to the compensation
committee by the board of directors from time to time.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Executive, Governance and Nominating
Committee.</FONT></I><FONT size="2"> After this offering, we
expect that our executive, governance and nominating committee
will consist of Messrs.&nbsp;Krueger, Mende and Quillen,
with &nbsp;serving as chairman of the committee. The executive,
governance and nominating committee will assist the board of
directors in identifying individuals qualified to become
executive officers and board members and recommend nominees for
election to the board of directors and its committees. The
executive, governance and nominating committee will also be
responsible for (1)&nbsp;developing and recommending governance
policies and procedures to the board of directors,
(2)&nbsp;reviewing conflicts of interest that may affect
directors, (3)&nbsp;monitoring our compliance with corporate
governance practices and policies, (4)&nbsp;leading the board of
directors in its annual review of the board&#146;s performance,
and (5)&nbsp;acting on behalf of the board of directors from
time to time between regularly scheduled meetings.
</FONT>

<P align="left">
<B><FONT size="2">Compensation of Our Directors</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Directors who are also full-time officers or
employees of our company or officers or employees of our
Sponsors will receive no additional compensation for serving as
directors. All other directors will receive (1)&nbsp;$30,000 as
an annual retainer, (2)&nbsp;a $2,000 per-meeting fee for
attendance at board meetings, (3)&nbsp;a $2,000 per-meeting fee
for in-person attendance at committee meetings and a $1,000
per-meeting fee for telephonic attendance at committee meetings
and (4)&nbsp;a $10,000 annual retainer for service as the
chairman of the audit committee and a $2,000 annual retainer for
service as the chairman of any other board committee. Each of
our directors is entitled to be reimbursed for reasonable
out-of-pocket expenses incurred in connection with attendance at
board of directors meetings or any committee thereof, and
customary directors&#146; indemnification. We are considering
adopting a restricted stock program for our directors as well.
</FONT>

<P align="center"><FONT size="2">95
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="left">
<B><FONT size="2">Executive Compensation</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following summary compensation table sets
forth information concerning the compensation by us of Michael
J. Quillen, our Chief Executive Officer and President, and our
other four most highly compensated executive officers in 2003.
</FONT>

<P align="center">
<B><FONT size="2">Summary Compensation Table</FONT></B>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="43%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="10%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="10%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="15"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="15" align="center" nowrap><B><FONT size="1">Annual Compensation</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="15" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">All Other</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">Name and Principal Position</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Year</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Salary($)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Bonus($)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Compensation ($)<SUP>(1)</SUP></FONT></B></TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Michael J. Quillen
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2003</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">420,468</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">115,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">17,742</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Chief Executive Officer and
    President<SUP>(2)</SUP>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2002</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Kevin Crutchfield
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2003</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">311,295</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">100,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">144,522</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Executive Vice President<SUP>(3)</SUP>
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2002</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">D. Scott Kroh
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2003</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">287,332</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">100,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,503</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Executive Vice President <SUP>(3)</SUP>
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2002</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Michael D. Brown
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2003</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">169,091</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">100,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,224</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Vice President<SUP>(3)</SUP>
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2002</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">David C. Stuebe
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2003</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">84,620</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">30,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">28,375</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Vice President and Chief Financial
    Officer<SUP>(3)</SUP>
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2002</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left">
<HR size="1" width="15%" align="left" noshade>
</DIV>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Amounts shown in this column represent our
    contributions under our 401(k) Plan and (a)&nbsp;in the case of
    Mr.&nbsp;Crutchfield, $126,495 of relocation expenses reimbursed
    by us and tax gross-up payments paid by us in connection with
    the expense reimbursement and (b)&nbsp;in the case of
    Mr.&nbsp;Stuebe, $25,836 of relocation expenses reimbursed by us.
    </FONT></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(2)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Mr.&nbsp;Quillen did not receive any compensation
    from us during 2002.
    </FONT></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(3)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Messrs.&nbsp;Crutchfield, Kroh, Brown and Stuebe
    joined us on varying dates in 2003 and the respective
    compensation is reported only from the start date to year end.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<B><FONT size="2">Compensation Committee Interlocks and Insider
Participation</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Mr.&nbsp;Krueger, a member of our compensation
committee, is a director of First Reserve Corporation.
Affiliates of First Reserve Corporation have engaged in certain
transactions with us and our subsidiaries since our inception,
as described more fully in &#147;Certain Relationships and
Related Party Transactions.&#148; Mr.&nbsp;Krueger also serves
on the board of GP Natural Resource Partners LLC, the general
partner of NRP, our largest landlord in 2003 based on lease and
royalty payments.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Mr.&nbsp;Mende, a member of our compensation
committee, is affiliated with AMCI. AMCI is one of our Sponsors,
and AMCI and certain entities affiliated with AMCI have engaged
in certain transactions with us and our subsidiaries since our
acquisition of U.S.&nbsp;AMCI, as described more fully in
&#147;Certain Relationships and Related Party Transactions.&#148;
</FONT>

<P align="left">
<B><FONT size="2">Employment Agreements</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Michael J. Quillen.</FONT></I><FONT size="2">
On January&nbsp;1, 2003, Alpha Natural Resources, LLC entered
into an employment agreement with Michael J. Quillen to serve as
our Chief Executive Officer. On December&nbsp;31, 2003, this
agreement was assigned to our indirect wholly-owned subsidiary,
Alpha Natural Resources Services, LLC (&#147;Alpha
Services&#148;). Pursuant to the employment agreement,
Mr.&nbsp;Quillen receives a base salary of $420,000&nbsp;per
annum, subject to any increase as determined by the compensation
committee of our board of directors. In addition,
Mr.&nbsp;Quillen is entitled to receive an annual bonus ranging
between 50% and 200% of his then current base salary, based upon
achievement of certain performance and other goals, a portion of
which Mr.&nbsp;Quillen waived with regard to 2003.
Mr.&nbsp;Quillen is also entitled to participate in our benefit
plans.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The initial term of Mr.&nbsp;Quillen&#146;s
employment agreement, as amended, ends on March&nbsp;11, 2006,
and the agreement renews for successive annual terms unless
terminated by Mr.&nbsp;Quillen or us in advance of
</FONT>

<P align="center"><FONT size="2">96
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<FONT size="2">the end of the initial term or any renewal term.
Alpha Services may terminate Mr.&nbsp;Quillen&#146;s employment
at any time and for any reason and Mr.&nbsp;Quillen may resign
at any time and for any reason. Under his employment agreement,
Mr.&nbsp;Quillen agreed to certain non-competition provisions.
In consideration for this non-competition agreement, Alpha
Services has agreed to make payments to Mr.&nbsp;Quillen
following the termination of his employment. If
Mr.&nbsp;Quillen&#146;s employment is terminated without cause,
or Mr.&nbsp;Quillen resigns for &#147;employee cause&#148; (as
defined in the agreement), Alpha Services will be required to
pay Mr.&nbsp;Quillen his earned but unpaid salary through the
date of termination, and to continue to pay his then current
base salary for the following twelve months. In addition,
Mr.&nbsp;Quillen would be entitled to receive any bonuses
payable for prior years, plus the pro rata bonus payable for the
current year, at the same time as bonuses are paid to similarly
situated employees. Pursuant to the employment agreement, a
resignation by Mr.&nbsp;Quillen &#147;for employee cause&#148;
includes, among others, (i)&nbsp;a substantial diminution of his
status or responsibilities, and (ii)&nbsp;his resignation during
the period beginning three months, and ending nine months
following the liquidation or sale by First Reserve of more than
75% of its ownership in ANR Holdings and affiliates.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">D.&nbsp;Scott Kroh.</FONT></I><FONT size="2">
On January&nbsp;1, 2003, Alpha Natural Resources, LLC also
entered into an employment agreement with D. Scott Kroh to serve
as our Executive Vice President. On December&nbsp;31, 2003, this
agreement was assigned to our wholly-owned subsidiary, Alpha
Coal Sales Co., LLC (&#147;Alpha Coal Sales&#148;). Pursuant to
the employment agreement, Mr.&nbsp;Kroh receives a base salary
of $360,000&nbsp;per annum, subject to any increase as
determined by the compensation committee of our board of
directors. In addition, Mr.&nbsp;Kroh is entitled to receive an
annual bonus ranging between 50% and 200% of his then current
base salary, based upon achievement of certain performance and
other goals, a portion of which Mr.&nbsp;Kroh waived with regard
to 2003. Mr.&nbsp;Kroh is also entitled to participate in our
benefit plans.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The initial term of Mr.&nbsp;Kroh&#146;s
employment agreement, as amended, ends on March&nbsp;11, 2005,
and the agreement renews for successive annual terms unless
terminated by Mr.&nbsp;Kroh or us in advance of the end of the
initial term or any renewal term. Alpha Coal Sales may terminate
Mr.&nbsp;Kroh&#146;s employment at any time and for any reason
and Mr.&nbsp;Kroh may resign at any time and for any reason.
Under his employment agreement, Mr.&nbsp;Kroh agreed to certain
non-competition provisions. In consideration for this
non-competition agreement, Alpha Coal Sales has agreed to make
payments to Mr.&nbsp;Kroh following the termination of his
employment. If Mr.&nbsp;Kroh&#146;s employment is terminated
without cause, or Mr.&nbsp;Kroh resigns for &#147;employee
cause&#148; (as defined in the agreement), Alpha Coal Sales will
be required to pay Mr.&nbsp;Kroh his earned but unpaid salary
through the date of termination, and to continue to pay his then
current base salary for the following twelve months. In
addition, Mr.&nbsp;Kroh would be entitled to receive any bonuses
payable for prior years, plus the pro rata bonus payable for the
current year, at the same time as bonuses are paid to similarly
situated employees. Pursuant to the employment agreement, a
resignation by Mr.&nbsp;Kroh &#147;for employee cause&#148;
includes, among others, (i)&nbsp;a substantial diminution of his
status or responsibilities, and (ii)&nbsp;his resignation during
the period beginning three months and ending nine months
following the liquidation or sale by First Reserve of more than
75% of its ownership in ANR Holdings and affiliates.
</FONT>

<P align="left">
<B><FONT size="2">Incentive Cash Bonus Plan</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In connection with our Internal Restructuring,
our board of directors will adopt, and our stockholders will
approve, our Annual Incentive Bonus Plan (the &#147;Bonus
Plan&#148;) which was originally adopted by ANR Holdings in
November 2004. The Bonus Plan is a performance-based incentive
bonus plan under which our designated executive officers and key
employees are eligible to receive cash bonus payments with
respect to a specific performance period (for example, our
fiscal year). Bonuses of up to 200% of a participant&#146;s base
salary are payable under the Bonus Plan upon the achievement of
certain pre-established performance goals. Performance goals
include operational goals such as safety, productivity, other
strategic objectives and individual performance goals, plus
financial measures. Financial measures that form the basis for
performance goals may include any of the following with respect
to us or any of our subsidiaries, divisions or business units:
earnings, operating earnings, earnings per share, operating
earnings per share, earnings before interest taxes depreciation
and amortization, revenues, stockholders&#146; equity, return on
</FONT>

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<DIV align="left">
<FONT size="2">equity, return on assets, return on invested
capital, economic value added, operating margins, cash flow,
total stockholder return, expenses, dept-to-capital ratio or
market share.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Bonus Plan is intended to provide an
incentive for business performance, reward contributions towards
goals consistent with our business strategy and enable us to
attract and retain highly qualified executive officers and key
employees. The Bonus Plan will generally be administered by our
compensation committee, whose determination on all matters
relating to the Bonus Plan will be final and binding. Each year,
the compensation committee will select the eligible participants
in the Bonus Plan, establish the performance goals for that year
for a participant or group of participants, determine target
incentive bonuses for the participants and certify that the
performance goals have been met with respect to the given
performance period. The compensation committee or our board of
directors may amend, suspend or terminate the Bonus Plan at any
time in its sole discretion.
</FONT>

<P align="left">
<B><FONT size="2">Management Stock</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Pursuant to the Internal Restructuring, a portion
of the shares that each management member of Alpha Coal
Management receives in respect of Alpha Coal Management&#146;s
interest in ANR Holdings, or 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,
will initially be unvested, and will vest over time dependent on
the executive&#146;s continued employment with us. The
stockholder agreement that the existing stockholders will enter
into will provide that an executive holding unvested shares
whose employment is terminated by us for cause, as defined in
the stockholder agreement, or who voluntarily terminates his
employment will forfeit all of the unvested shares if the
termination is prior to December&nbsp;31, 2005 and one half of
the unvested shares if the termination is after
December&nbsp;31, 2005 and prior to December&nbsp;31, 2006. The
stockholder agreement will also provide that an executive
holding unvested shares whose employment is terminated by us
without cause, or due to retirement, death or disability, will
become vested upon termination in a percentage of the total
shares initially subject to vesting equal to the number of full
calendar months then elapsed since December&nbsp;31, 2004
divided by 24. The stockholder agreement will further provide
that vesting of all unvested shares will accelerate upon a
change of control, as defined in the stockholder agreement.
</FONT>

<P align="left">
<B><FONT size="2">Long-Term Incentive Plans</FONT></B>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Alpha Coal Management Amended and Restated
    Long-Term Incentive Plan</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In November 2004, the board of directors of Alpha
Coal Management adopted, and its members approved, the Alpha
Coal Management LLC 2004 Long-Term Incentive Plan (the
&#147;Alpha Coal Management Long-Term Incentive Plan&#148;) to
provide equity incentive compensation to those key employees and
others who make significant contributions to the strategic and
long-term performance objectives and growth of Alpha. On
November&nbsp;10, 2004, Alpha Coal Management granted options to
purchase&nbsp;800,000&nbsp;units of Alpha Coal Management to 22
members of Alpha&#146;s management team under the Alpha Coal
Management Long-Term Incentive Plan. These options vest over a
period of five years (with accelerated vesting upon a change of
control) and have a term of ten years. In connection with this
grant of options, Alpha Coal Management entered into a letter
agreement with ANR Holdings pursuant to which ANR Holdings
agreed to issue to Alpha Coal Management additional membership
interests representing common sharing ratios in an aggregate
amount equal to 1% upon exercise of awards granted by Alpha Coal
Management under the Alpha Coal Management Long-Term Incentive
Plan. Pursuant to the terms of the Internal Restructuring
Agreement, this Plan will be amended and restated, the
outstanding options to purchase units of Alpha Coal Management
will automatically be converted into options to purchase shares
of our common stock and we will assume the obligations of Alpha
Coal Management pursuant to this Plan. At such time, there will
be outstanding under the Plan options to purchase an aggregate
of shares of our common stock (the maximum number of shares
currently available for awards under the Plan) at a weighted
average exercise price of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share. No additional options or other awards will be granted
under the Plan. The number of shares of our common stock
reserved pursuant to the Plan will be subject, at the discretion
of our board of directors (or the committee if so
</FONT>

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<DIV align="left">
<FONT size="2">empowered), to adjustment as a result of stock
splits, stock dividends and similar changes in our common stock.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Following our assumption of the Alpha Coal
Management Long-Term Incentive Plan in connection with the
Internal Restructuring, the Plan will be administered on the
same basis and subject to the same regulation as our Long-Term
Incentive Plan as described under &#147;Alpha Natural Resources,
Inc. Long-Term Incentive Plan.&#148;
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Alpha Natural Resources, Inc. Long-Term
    Incentive Plan</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In connection with the Internal Restructuring, we
expect to adopt the Alpha Natural Resources, Inc. Long-Term
Incentive Plan (the &#147;Long-Term Incentive Plan&#148;). The
principal purpose of the Long-Term Incentive Plan is to attract,
motivate, reward and retain selected employees, consultants and
directors through the granting of stock-based compensation
awards. The Long-Term Incentive Plan will provide for a variety
of awards, including non-qualified stock options, incentive
stock options (within the meaning of Section&nbsp;422 of the
Code), stock appreciation rights, restricted stock awards,
dividend equivalents, performance-based awards and other
stock-based awards.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Administration.</FONT></I><FONT size="2"> The
Long-Term Incentive Plan is expected to be administered by our
board of directors, unless and until the board delegates
administration to the compensation committee or other applicable
committee of the board. The board or the committee may delegate
administration of the plan to one or more of Alpha&#146;s
officers. The board of directors or the committee, if so
empowered, has the power to interpret the Long-Term Incentive
Plan and to adopt rules for the administration, interpretation
and application of the plan according to its terms.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Grant of Awards; Shares Available for
Awards.</FONT></I><FONT size="2"> Certain employees, consultants
and directors are eligible to be granted awards under the plan.
The board of directors, or the committee if so empowered, will
determine who will receive awards under the plan, as well as the
form of the awards, the number of shares underlying the awards,
and the terms and conditions of the awards consistent with the
terms of the plan.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The total numbers of shares of our common stock
initially available for issuance or delivery under our Long-Term
Incentive Plan will be shares. We intend to grant certain of our
officers and key employees options 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 at the initial public offering price upon
consummation of this offering. The number of shares of our
common stock issued or reserved pursuant to the Long-Term
Incentive Plan will be subject, at the discretion of the board
of directors (or the committee if so empowered), to adjustment
as a result of stock splits, stock dividends and similar changes
in our common stock.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Stock Options.</FONT></I><FONT size="2"> The
Long-Term Incentive Plan will permit the board of directors, or
the committee if so empowered, to grant participants incentive
stock options, which qualify for special tax treatment in the
United States, as well as non-qualified stock options. The
board, or the committee if so empowered, will establish the
duration of each option at the time it is granted, with a
maximum ten-year duration for incentive stock options, and may
also establish vesting and performance requirements that must be
met prior to the exercise of options.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Stock option grants may include provisions that
permit the option holder to exercise all or part of the
holder&#146;s vested options, or to satisfy withholding tax
liabilities, by tendering shares of common stock already owned
by the option holder for at least six months (or another period
consistent with the applicable accounting rules) with a fair
market value equal to the exercise price.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Stock Appreciation
Rights.</FONT></I><FONT size="2"> The board of directors, or the
committee if so empowered, may also grant stock appreciation
rights, either alone or in tandem with underlying stock options
or other awards, which will be exercisable upon the occurrence
of certain contingent events. Stock appreciation rights entitle
the holder upon exercise to receive an amount in any combination
of cash, shares of our common stock (as determined by the
committee) equal in value to the excess of the fair market value
of the shares covered by the right over the grant price, or
other securities or property of Alpha.
</FONT>

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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Other Equity Awards.</FONT></I><FONT size="2">
In addition to stock options, the board of directors, or the
committee if so empowered, may also grant to certain employees,
consultants and directors shares of restricted stock, restricted
stock rights, dividend equivalents, performance-based awards or
other stock-based awards, with terms and conditions as the board
of directors (or, if applicable, the committee) may, pursuant to
the terms of the Long-Term Incentive Plan, establish.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Change-in-Control
Provisions.</FONT></I><FONT size="2"> In connection with the
grant of an award, the board of directors, or if so empowered
the committee, may provide that, in the event of a change in
control, any outstanding awards that are unexercisable or
otherwise unvested will become fully vested and immediately
exercisable. In addition, the committee may, in its sole
discretion, provide for the termination of an award upon the
consummation of the change in control and the payment of a cash
amount in exchange for the cancellation of an award, and/or the
issuance of substitute awards that will substantially preserve
the otherwise applicable terms of any affected award.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Amendment and
Termination.</FONT></I><FONT size="2"> Our board of directors,
or the committee if so empowered, may adopt, amend and rescind
rules relating to the administration of the Long-Term Incentive
Plan, and amend, suspend or terminate the Long-Term Incentive
Plan, <I>provided </I>that no amendment will be made that
adversely affects in a material manner any rights of the holder
of any award without the holder&#146;s consent. We have
attempted to structure the Long-Term Incentive Plan so that
remuneration attributable to stock options and other awards will
not be subject to a deduction limitation contained in
Section&nbsp;162(m) of the Code. However, we generally will be
required to obtain approval of our stockholders (1)&nbsp;to
increase the number of shares of our common stock that may be
issued under the Long-Term Incentive Plan, (2)&nbsp;to extend
the limit on the period during which options may be granted, or
(3)&nbsp;to the extent required by applicable law, rule or
regulation (including New York Stock Exchange rules).
</FONT>

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<DIV align="left">
<FONT size="2"> <A name='117'></A>
</FONT>
</DIV>

<!-- link1 "PRINCIPAL STOCKHOLDERS" -->

<P align="center">
<B><FONT size="2">PRINCIPAL STOCKHOLDERS</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table and accompanying footnotes
show information regarding the beneficial ownership of our
common stock before and after this offering, for:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">each person who is known by us to own
    beneficially more than 5% of our common stock;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">each member of our board of directors and each of
    our named executive officers;&nbsp;and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">all members of our board of directors and our
    executive officers as a group.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The number of shares outstanding and percentage
of beneficial ownership before the offering set forth below is
based on the number of shares of our common stock to be issued
and outstanding immediately prior to the effectiveness of the
registration statement of which this prospectus is a part, after
giving effect to our Internal Restructuring. The number of
shares and percentage of beneficial ownership after the offering
set forth below is based on shares of our common stock to be
issued and outstanding immediately after this offering.
</FONT>

<CENTER>
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<TR>
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    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="15"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="15" align="center" nowrap><B><FONT size="1">Shares Beneficially Owned</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="15" align="center" nowrap><B><FONT size="1">After this Offering</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="15" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Assuming the</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Assuming the</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Underwriters&#146;</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Underwriters&#146;</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Shares Beneficially</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Over-allotment</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Over-allotment</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Owned Prior to</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Option is</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Option is</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">this Offering</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Not Exercised</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Exercised in Full</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Name and Address of</FONT></B></TD>
    <TD></TD>
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    <TD></TD>
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    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Beneficial Owner<SUP>(1)</SUP></FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Number</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Percent</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Number</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Percent</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Number</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Percent</FONT></B></TD>
</TR>

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</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">First Reserve GP IX, Inc.<SUP>(2)</SUP>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
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    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">First Reserve Fund&nbsp;IX, L.P.<SUP>(2)</SUP>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
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    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">ANR Fund&nbsp;IX Holdings, L.P.<SUP>(2)</SUP>
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    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Fritz R. Kundrun<SUP>(3)</SUP>
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    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Hans J. Mende<SUP>(3)</SUP>
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    <FONT size="2">Tanoma Energy, Inc.<SUP>(4)</SUP>
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    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Michael J. Quillen<SUP>(5)</SUP>
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    <FONT size="2">Kevin S. Crutchfield<SUP>(6)</SUP>
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    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">D. Scott Kroh<SUP>(7)</SUP>
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    <FONT size="2">Michael D. Brown<SUP>(8)</SUP>
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    <FONT size="2">David C. Stuebe<SUP>(9)</SUP>
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    <FONT size="2">E. Linn Draper, Jr.<SUP>(10)</SUP>
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    <FONT size="2">John W. Fox, Jr.<SUP>(10)</SUP>
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    <FONT size="2">Alex T. Krueger<SUP>(11)</SUP>
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    <FONT size="2">William E. Macaulay<SUP>(11)</SUP>
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    <FONT size="2">All executive officers and directors as a group
    (11&nbsp;persons)
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    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">The shares of our common stock beneficially owned
    are reported on the basis of regulations of the SEC governing
    the determination of beneficial ownership of securities. Under
    the rules of the SEC, a person is deemed to be a
    &#147;beneficial owner&#148; of a security if that person has or
    shares voting power, which includes the power to vote or direct
    the voting of such security, or investment power, which includes
    the power to dispose of or to direct the disposition of such
    security. A person is also deemed to be a beneficial owner of
    any securities of which that person has a right to acquire
    beneficial ownership within 60&nbsp;days. Securities that can be
    so acquired are deemed to be outstanding for purposes of
    computing such person&#146;s ownership percentage, but not for
    purposes of computing any other person&#146;s percentage. Under
    these rules, more than one person may be deemed beneficial owner
    of the same securities and a person may be deemed to be a
    beneficial owner of securities as to which such person has no
    economic interest. Except as otherwise indicated in these
    footnotes, each of the beneficial owners has, to our knowledge,
    sole voting and investment power with respect to the indicated
    shares of common stock. In accordance with the beneficial
    ownership rules of the SEC, the table does not reflect
    (1)&nbsp;an aggregate
    of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    of common stock reserved for issuance upon the exercise of
    outstanding options under the Alpha Coal Management Amended and
    Restated Long-Term Incentive Plan that we will assume in
    connection with the Internal Restructuring and (2)&nbsp;an
    aggregate of shares of
    </FONT></TD>
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    <FONT size="2">common stock reserved for issuance under our
    Long-Term Incentive Plan, of which an aggregate
    of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    of our common stock will be subject to outstanding options under
    our Long-Term Incentive Plan upon completion of this offering.
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    <TD>&nbsp;</TD>
    <TD><FONT size="2">(2)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">The shares of our common stock shown for First
    Reserve GP&nbsp;IX, Inc. consist of shares beneficially owned by
    First Reserve Fund&nbsp;IX, L.P. and by ANR Fund&nbsp;IX
    Holdings, L.P. First Reserve GP&nbsp;IX, L.P. is the general
    partner of each of First Reserve Fund&nbsp;IX, L.P. and ANR
    Fund&nbsp;IX Holdings, L.P. First Reserve GP&nbsp;IX, Inc. is
    the general partner of First Reserve GP&nbsp;IX, L.P. The
    address of First Reserve GP&nbsp;IX, Inc., First Reserve
    GP&nbsp;IX, L.P. First Reserve Fund&nbsp;IX, L.P. and ANR
    Fund&nbsp;IX Holdings, L.P. is One Lafayette Place, Greenwich,
    CT&nbsp;06830.
    </FONT></TD>
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    <TD>&nbsp;</TD>
    <TD><FONT size="2">(3)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Reflects beneficial ownership through shared
    voting and investment power over shares of our common stock held
    by the following entities affiliated with the owners of AMCI:
    Beta Resources, LLC, Creekside Energy Development Company,
    Dunamis Resources, Inc., I-22 Processing, Inc., Laurel Energy,
    L.P., Laurel Resources, L.P., Madison Mining Company LLC,
    Newhall Pocahontas Energy, Inc., Redbank, Inc., REI, Inc., RRD,
    Inc., SCM, Inc., Still Run Coal Company, Inc., Tanoma Energy,
    Inc., and Vollow Resources LLC. The address for each of the
    above entities and Messrs.&nbsp;Mende and Kundrun is
    c/o&nbsp;American Metals&nbsp;&#38; Coal International, Inc.,
    475&nbsp;Steamboat Road, 2nd&nbsp;Floor, Greenwich,
    CT&nbsp;06830, Attention: Hans J. Mende, President.
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(4)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">The address for Tanoma Energy, Inc. is
    c/o&nbsp;American Metals&nbsp;&#38; Coal International, Inc.,
    475&nbsp;Steamboat Road, 2nd&nbsp;Floor, Greenwich,
    CT&nbsp;06830, Attention: Hans J. Mende, President.
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(5)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Includes beneficial ownership
    of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;unvested
    shares as described under &#147;Management&#151; Management
    Stock.&#148; The address for Mr.&nbsp;Quillen is c/o&nbsp;Alpha
    Natural Resources, Inc., 406&nbsp;West Main Street, Abingdon,
    Virginia&nbsp;24210.
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(6)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Includes beneficial ownership
    of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;unvested
    shares as described under &#147;Management&#151; Management
    Stock.&#148; The address for Mr.&nbsp;Crutchfield is
    c/o&nbsp;Alpha Natural Resources, Inc., 406&nbsp;West Main
    Street, Abingdon, Virginia&nbsp;24210.
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(7)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Includes beneficial ownership
    of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;unvested
    shares as described under &#147;Management&#151; Management
    Stock.&#148; Also includes beneficial ownership of one-third of
    the shares of common stock held directly by each of Dunamis
    Resources, Inc., I-22 Processing, Inc., Madison Mining Company
    LLC and Tanoma Energy, Inc. and 44.3% of the shares held
    directly by each of Laurel Energy, L.P. and Laurel Resources,
    L.P. through Mr.&nbsp;Kroh&#146;s investment power over these
    shares. Mr.&nbsp;Kroh disclaims beneficial ownership of all
    other shares of common stock held by the entities listed in the
    previous sentence. The address for Mr.&nbsp;Kroh is
    c/o&nbsp;Alpha Natural Resources, Inc., 406&nbsp;West Main
    Street, Abingdon, Virginia&nbsp;24210.
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(8)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Includes beneficial ownership
    of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;unvested
    shares as described under &#147;Management&#151; Management
    Stock.&#148; The address for Mr.&nbsp;Brown is c/o&nbsp;Alpha
    Natural Resources, Inc., 406&nbsp;West Main Street, Abingdon,
    Virginia&nbsp;24210.
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(9)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Includes beneficial ownership
    of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;unvested
    shares as described under &#147;Management&#151; Management
    Stock.&#148; The address for Mr.&nbsp;Stuebe is c/o&nbsp;Alpha
    Natural Resources, Inc., 406&nbsp;West Main Street, Abingdon,
    Virginia&nbsp;24210.
    </FONT></TD>
</TR>

</TABLE>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD><FONT size="2">(10)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">The address for Messrs.&nbsp;Draper and Fox is
    c/o Alpha Natural Resources, Inc., 406&nbsp;West Main Street,
    Abingdon, Virginia 24210.
    </FONT></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(11)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Mr.&nbsp;Krueger is an executive officer of First
    Reserve G.P.&nbsp;IX, Inc. and disclaims beneficial ownership of
    any shares owned by such entity or its affiliates.
    Mr.&nbsp;Macaulay is the Chief Executive Officer and a member of
    the board of directors of First Reserve Corporation and
    disclaims beneficial ownership of any shares owned by such
    entity or its affiliates. The address of Messrs.&nbsp;Krueger
    and Macaulay is c/o First Reserve Corporation, One Lafayette
    Place, Greenwich, CT 06830.
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">102
</FONT>

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<DIV align="left">
<A name='118'></A>
</DIV>

<!-- link1 "CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS" -->

<P align="center">
<B><FONT size="2">CERTAIN RELATIONSHIPS AND RELATED PARTY
TRANSACTIONS</FONT></B>

<P align="left">
<B><FONT size="2">Transactions Prior to 2003
Acquisitions</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In connection with the formation of Alpha NR
Holding, Inc. (formerly named Alpha Natural Resources, Inc.) in
April 2002, the formation of Alpha Natural Resources, LLC in
August 2002, and the formation of ANR Holdings and our
acquisition of our Predecessor in December 2002, we entered into
the following transactions with First Reserve:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">Alpha NR Holding, Inc. issued 100&nbsp;shares of
    its common stock, representing all of the issued and outstanding
    capital stock of the company, to First Reserve Fund&nbsp;IX,
    L.P. for $100.00 in April, 2002;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">Alpha Natural Resources, LLC issued one
    membership unit, representing all of its then-outstanding
    membership interests, to Alpha NR Holding, Inc. for $1,000.00 in
    August 2002;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">ANR Holdings issued all of its membership
    interests to Alpha NR Holding, Inc. and ANR Fund&nbsp;IX
    Holdings, L.P. for an aggregate of $24.0&nbsp;million in cash
    and the single outstanding membership interest in Alpha Natural
    Resources, LLC;&nbsp;and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">First Reserve loaned an aggregate of
    $24.0&nbsp;million in cash to Alpha NR Holding, Inc., Alpha
    Natural Resources, LLC and ANR Holdings during 2002, for which
    First Reserve was paid an aggregate of $0.3&nbsp;million in
    fees; we recorded interest expense in connection with these
    loans of $0.1&nbsp;million during 2002.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<B><FONT size="2">Transactions in Connection with 2003
Acquisitions</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In connection with our acquisition of
U.S.&nbsp;AMCI, ANR Holdings entered into a contribution
agreement with certain affiliates of AMCI (the &#147;AMCI
Parties&#148;) and First Reserve, pursuant to which the AMCI
Parties agreed to contribute certain assets to, and to cause the
merger of certain AMCI-affiliated entities with, certain
subsidiaries of Alpha Natural Resources, LLC, in exchange for:
(i)&nbsp;the assumption by subsidiaries of Alpha Natural
Resources, LLC of certain liabilities, (ii)&nbsp;the payment of
an aggregate of $52.9&nbsp;million in cash to certain of the
AMCI Parties and (iii)&nbsp;the issuance to certain of the AMCI
Parties of common membership interests constituting 44.3473% of
the common sharing ratios, and preferred membership interests
constituting 44.4903% of the preferred sharing ratios, of ANR
Holdings. Hans J. Mende and Fritz R. Kundrun, who are members of
our board of directors, and D. Scott Kroh, our executive vice
president, control the AMCI Parties. The AMCI Parties, First
Reserve and ANR Holdings agreed in the contribution agreement to
indemnify each other in connection with the representations,
warranties and covenants made in the contribution agreement.
These indemnification arrangements permit, under certain
circumstances, the transfer by certain of the AMCI Parties to
First Reserve of membership interests in ANR Holdings (shares of
our common stock after giving effect to the Internal
Restructuring) to compensate for indemnified losses. In
connection with the consummation of the transactions
contemplated by the contribution agreement, the following
agreements were entered into by Alpha Natural Resources, LLC
and/or its subsidiaries:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">Various subsidiaries of Alpha Natural Resources,
    LLC entered into and received certain agreements and instruments
    with and from the AMCI Parties to effect the conveyance to those
    subsidiaries of the assets and companies constituting
    U.S.&nbsp;AMCI;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">In connection with the assumption by certain of
    the subsidiaries of Alpha Natural Resources, LLC of contracts
    between certain AMCI Parties and third parties, Alpha Natural
    Resources, LLC entered into certain agreements under which Alpha
    Natural Resources, LLC guaranteed to the third parties its
    subsidiaries&#146; performance of their obligations under the
    assumed contracts;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">Alpha Natural Resources, LLC entered into a
    cooperation agreement with the AMCI Parties, pursuant to which
    Alpha Natural Resources, LLC and the AMCI Parties established
    certain administrative procedures with regard to their
    respective obligations under the contribution agreement relating
    to certain retained liabilities and assets of the AMCI Parties;
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">103
</FONT>

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<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">First Reserve entered into an escrow agreement
    with K-M Investment Corporation (&#147;K-M&#148;), a company
    owned by Messrs.&nbsp;Mende and Kundrun, and National City Bank
    of Pennsylvania, as escrow agent, relating to the deposit into
    escrow of $2.8&nbsp;million of cash for purposes of satisfying
    certain indemnification and other obligations of K-M under the
    Contribution Agreement, which escrow agreement will be
    terminated in connection with the Internal
    Restructuring;&nbsp;and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">First Reserve, the AMCI Parties, Alpha Coal
    Management and Madison Capital Funding LLC entered into a member
    agreement with ANR Holdings in order to, among other things,
    (i)&nbsp;set forth certain understandings with respect to the
    election of directors and specified actions by ANR Holdings
    requiring board or member consent, (ii)&nbsp;provide demand
    registration rights to First Reserve and the AMCI Parties and
    piggyback registration rights to all members of ANR Holdings,
    and (iii)&nbsp;provide First Reserve the right to purchase from
    certain AMCI Parties additional ANR Holdings membership
    interests having a fair market value of up to $7.5&nbsp;million,
    at a purchase price equal to 75% of the fair market value, in
    the event payments are required to be made under the escrow
    agreement to satisfy K-M&#146;s indemnification obligations
    under the contribution agreement to discharge certain retiree
    medical liabilities retained by the AMCI Parties. This right to
    purchase will be terminated in connection with the Internal
    Restructuring.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In conjunction with our acquisition of
U.S.&nbsp;AMCI, First Reserve entered into a pledge agreement
with certain affiliates of AMCI pursuant to which these persons
pledged to First Reserve all of their membership interests in
ANR Holdings to secure their obligation under the contribution
agreement to discharge certain retiree medical liabilities
retained by the AMCI Parties. This pledge agreement will be
terminated in connection with the Internal Restructuring.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In conjunction with our acquisition of
U.S.&nbsp;AMCI, ANR Holdings agreed with the AMCI Parties to
operate Solomons Mining Company (&#147;Solomons&#148;), one of
the companies included in U.S.&nbsp;AMCI, for the account of the
AMCI Parties until the time Solomons could be sold, and the AMCI
parties agreed to indemnify ANR Holdings and certain of its
related parties for all liabilities associated with the
operation of Solomons. ANR Holdings also agreed that, upon the
disposition of Solomons, it would pay to the AMCI Parties the
sum of $5.0&nbsp;million in cash, plus the net proceeds of the
sale of Solomons, plus the cumulative profits or less the
cumulative operating losses of Solomons from the date of our
acquisition of U.S.&nbsp;AMCI to the date of sale of Solomons,
less the actual costs incurred by ANR Holdings in managing
Solomons. On September&nbsp;2, 2003, substantially all of the
assets of Solomons were transferred to the lessor of
Solomons&#146; mining properties in Kentucky in connection with
the settlement of a lease dispute with the lessor. At that time,
ANR Holdings, First Reserve and the AMCI Parties agreed that
Solomons would advance to the lessor for the account of the AMCI
Parties an aggregate of $3.1&nbsp;million in cash in
installments, by applying a portion of the funds available to
fund Solomons&#146; operating losses and a portion of the tax
distributions that ANR Holdings would otherwise have made to the
AMCI parties under the ANR Holdings company agreement. The AMCI
Parties also agreed to provide an additional $1.0&nbsp;million
to be used by ANR Holdings to pay expenses, obligations and
liabilities incurred in satisfying the reclamation and other
liabilities related to Solomons. This agreement, also provides
that should the AMCI Parties fail to perform any of their
payment obligations agreed to on September&nbsp;2, 2003, then
First Reserve would have the right (but not the obligation) to
purchase membership interests in ANR Holdings held by the AMCI
Parties having a fair market value, as of March&nbsp;11, 2003,
equal to the payment the AMCI Parties failed to make. This right
to purchase will be terminated in connection with the Internal
Restructuring.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As part of the arrangement to operate Solomons
for the account of the AMCI Parties, a subsidiary of Alpha
Natural Resources, LLC entered into an agreement to purchase
from a third party and for the account of the AMCI Parties
350,000 tons of coal at various times from April 2004 through
November 2005 (the &#147;Coal Supply Agreement&#148;). On
April&nbsp;22, 2004, ANR Holdings, First Reserve and the AMCI
Parties entered into an agreement (the &#147;April 2004
Agreement&#148;), under which Alpha Natural Resources, LLC will
take the coal to be delivered under the Coal Supply Agreement
and will pay to the AMCI Parties the difference (the &#147;Net
Proceeds&#148;) between the agreed fair market value of the coal
as of the date of the April 2004 Agreement ($54.50&nbsp;per
ton), and the price to be paid to the third party under the
</FONT>

<P align="center"><FONT size="2">104
</FONT>

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<DIV align="left">
<FONT size="2">Coal Supply Agreement ($34.50&nbsp;per ton). We
will withhold up to 40% of the net proceeds (up to
$2.3&nbsp;million) to fund Solomons&#146; reclamation
obligations under the settlement agreement referred to above and
any other Solomons&#146; liabilities for which the AMCI Parties
agreed to provide indemnification. With the exception of
reclamation obligations and any future claims by the lessor
referred to above, the amounts withheld will be ANR
Holdings&#146; exclusive recourse against the AMCI Parties for
this indemnification. The AMCI Parties will not be obligated to
fund certain of the payments that could otherwise be due to ANR
Holdings under the September&nbsp;2, 2003 agreement with ANR
Holdings and First Reserve for so long as the third party under
the Coal Supply Agreement performs its obligations under the
Coal Supply Agreement according to its terms.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Effective upon the contribution of U.S.&nbsp;AMCI
to us, K-M entered into an agreement with Michael J. Quillen, a
member of our board of directors and our President and Chief
Executive Officer, under which K-M has paid or will pay
Mr.&nbsp;Quillen compensation deferred from his prior employment
with U.S.&nbsp;AMCI in the amounts of $194,000 paid in 2003,
$250,000 to be paid in 2004 and $250,000 to be paid in 2005. K-M
and Mr.&nbsp;Quillen entered into this agreement in part to
recognize Mr.&nbsp;Quillen&#146;s efforts in connection with the
contribution of U.S.&nbsp;AMCI.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Effective upon the contribution of U.S.&nbsp;AMCI
to us, in order to recognize Mr. Quillen&#146;s efforts in
connection with the development and growth of U.S. AMCI over the
previous five years and the contribution of U.S. AMCI to us,
Messrs.&nbsp;Mende and Kundrun and Mr.&nbsp;D. Scott Kroh, our
Executive Vice President, who were and are the owners of certain
of the AMCI Parties (the &#147;AMCI Owners&#148;) that held
approximately 44% of the membership interests of ANR Holdings
(the &#147;AMCI Member Interests&#148;) entered into an
agreement, as amended, with Mr.&nbsp;Quillen under which the
AMCI Owners will compensate Mr.&nbsp;Quillen upon:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(a)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the sale, transfer, assignment or disposition of
    any AMCI Member Interests not otherwise covered in (b) through
    (d) below,
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(b)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">our consolidation or merger with a third party,
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(c)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the sale of all or substantially all of our
    assets to a party or parties that are not affiliated with us,
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(d)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the sale of the AMCI Member Interests, in whole
    or in part, pursuant to a registration under the Securities Act
    of 1933; or
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(e)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the repayment of certain indebtedness to the AMCI
    Owners in connection with our Internal Restructuring as
    described under &#147;Use of Proceeds.&#148;
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The contemplated payment is to equal 5% of the
net amount, if any, by which the value of the consideration
received by the AMCI Owners in any transaction exceeds the
agreed upon value of the AMCI Member Interests at the time of
the U.S.&nbsp;AMCI acquisition less all prior distributions and
is estimated to be
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
based upon the midpoint of the price range on the cover of this
prospectus. Mr.&nbsp;Quillen will be obligated to reimburse the
AMCI Owners 5% of certain of their expenses associated with the
transaction for which Mr.&nbsp;Quillen is paid. The agreement
terminates on the earlier to occur of March&nbsp;11, 2010 and
one year after the date Mr.&nbsp;Quillen ceases to be an officer
or employee of ANR Holdings or any of its subsidiary or
affiliated companies. In the event that not all of the AMCI
Member Interests have been transferred in one or more
transactions of the type listed above by March&nbsp;11, 2010,
the AMCI Owners have agreed to pay Mr.&nbsp;Quillen
consideration equal to 5% of the amount by which the agreed or
appraised fair market value of the AMCI Member Interests on that
date exceeds the agreed upon value referred to above.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On March&nbsp;11, 2003, in connection with the
acquisition of U.S.&nbsp;AMCI, ANR Holdings entered into an
agreement with AMCI under which AMCI granted ANR Holdings a
right of first negotiation as well as a right of first refusal
with respect to the sale of all or a portion of the assets or
equity (each, an &#147;Interest&#148;) of AMCI&#146;s wholly
owned subsidiary, AMCI Export Corporation, an export trading
company (&#147;AMCI Export&#148;). These rights expired on
September&nbsp;11, 2004.
</FONT>

<P align="center"><FONT size="2">105
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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On March&nbsp;11, 2003, in connection with the
acquisition of U.S.&nbsp;AMCI, ANR Holdings entered into an
agreement (the &#147;PEV Agreement&#148;) with Ernie&nbsp;L.
Thrasher, Mr.&nbsp;Mende, Mr.&nbsp;Kundrun and Mr.&nbsp;Kroh
(each, a &#147;PEV Seller&#148;), and K-M to purchase from the
PEV Sellers all (but not less than all) the outstanding
membership interests of Provincial Energy Venture Limited, LLC,
a company that owns and operates an ocean going port in Nova
Scotia (&#147;PEV&#148;). The aggregate purchase price payable
by ANR Holdings upon exercise of this option is
$2.0&nbsp;million plus the aggregate amount of capital
investments made in PEV after the date of the agreement and
prior to the date ANR Holdings provides notice of its exercise
of the option. The purchase price is payable in ANR
Holdings&#146; membership interests (shares of our common stock
after giving effect to the Internal Restructuring) having an
equivalent fair market value. In addition, if the PEV Sellers
receive and propose to accept an offer from a third party to
purchase their PEV membership interests, they must first provide
notice and a copy of the offer to ANR Holdings, whereupon ANR
Holdings will have a right of first refusal. ANR Holdings&#146;
option expires on the earlier of (w)&nbsp;March&nbsp;11, 2005,
(x)&nbsp;the 90th day following receipt by ANR Holdings of a
compliance notice and related legal opinion (as described
below), (y)&nbsp;the date on which ANR Holdings acquires the PEV
membership interests through exercise of its right of first
refusal, and (z)&nbsp;the date on which ANR Holdings notifies
the PEV Sellers that it is not electing to exercise its right of
first refusal (provided the PEV Sellers sell their membership
interests on the same terms within 120&nbsp;days thereafter).
The notice described in clause&nbsp;(x) above is to be delivered
to ANR Holdings upon receipt by the PEV Sellers of a legal
opinion from a Nova Scotian official to the effect that the
Government of the Province of Nova Scotia is legally obligated
to satisfy certain environmental clean up and other obligations
for the benefit of PEV. ANR Holdings&#146; right of first
refusal expires on March&nbsp;11, 2008. We will succeed to the
rights and become subject to the obligations of ANR Holdings
under the PEV Agreement in connection with our Internal
Restructuring.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In conjunction with the AMCI transaction, Alpha
paid $35.0&nbsp;million for the working capital of
U.S.&nbsp;AMCI, as defined in the contribution agreement,
subject to an audit. Pursuant to a letter agreement dated
September&nbsp;13, 2004, ANR Holdings, First Reserve and the
AMCI Parties agreed that the net working capital actually
acquired was approximately $34.1&nbsp;million and the AMCI
Parties paid the difference of $0.9&nbsp;million to ANR
Holdings. The parties further agreed that the AMCI Parties would
be entitled to any refund of, and obligated to make any payment
of, all federal black lung excise taxes of the companies
contributed by the AMCI Parties to ANR Holdings, but only
insofar as the taxes related to pre-closing or straddle periods
ending on or prior to the closing date of the U.S.&nbsp;AMCI
acquisition.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In connection with our acquisition of the Coastal
Coal Company, we acquired an overriding royalty interest in
certain properties located in Virginia and West Virginia owned
by El&nbsp;Paso&nbsp;CPG Company for $11.0&nbsp;million in cash.
Effective February&nbsp;1, 2003, we sold the overriding royalty
interest to affiliates of Natural Resource Partners, L.P.
(&#147;NRP&#148;) for approximately $11.9&nbsp;million in cash.
Effective April&nbsp;1, 2003, we also sold substantially all our
fee-owned Virginia mineral properties to NRP for
$53.6&nbsp;million in cash in a sale/ leaseback transaction. NRP
is our largest landlord based on the aggregate of
$13.7&nbsp;million and $11.9&nbsp;million that we paid it in
lease and royalty payments for the nine months ended
September&nbsp;30, 2004 and the year ended December&nbsp;31,
2003, respectively. In an unrelated transaction, in December
2003, Alex Krueger, a member of our board of directors, was
appointed as a member of the board of directors of GP Natural
Resource Partners, LLC, the general partner of NRP, and First
Reserve became a substantial equity owner of NRP. We believe the
production and minimum royalty rates contained in our leases
with NRP are consistent with current market royalty rates.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">During 2003, we reimbursed AMCI $2.0&nbsp;million
in transaction costs related to the acquisitions of our
Predecessor and Coastal Coal Company.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As of December&nbsp;31, 2002, we had notes
payable in the amount of approximately $24.0&nbsp;million
payable to First Reserve. The notes, along with other notes,
were converted to contributed capital in 2003. We incurred
interest expense on the related party notes of $2.6&nbsp;million
and $144,000 during 2003 and 2002, respectively.
</FONT>

<P align="center"><FONT size="2">106
</FONT>

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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On November&nbsp;17, 2003, we issued
14%&nbsp;senior subordinated notes in an aggregate principal
amount of $30.0&nbsp;million to First Reserve Fund&nbsp;IX, L.P.
and Alpha NR Holding, Inc., to fund the purchase price of the
Mears acquisition. We repaid all outstanding principal and
interest on these notes during December 2003.
</FONT>

<P align="left">
<B><FONT size="2">Investment in Excelven Pty Ltd</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In August 2004, Alpha Natural Resources, LLC,
together with AMCI, entered into a subscription deed with
Excelven Pty Ltd, pursuant to which Alpha Natural Resources, LLC
agreed to acquire a 24.5% interest in Excelven for a purchase
price of $5.0&nbsp;million in cash, and AMCI agreed to acquire a
24.5% interest in Excelven for a purchase price of
$5.0&nbsp;million in cash, for an aggregate investment by Alpha
Natural Resources, LLC and AMCI of a 49% interest in Excelven
for an aggregate purchase price of $10.0&nbsp;million. Excelven,
through its subsidiaries, owns the rights to the Las Carmelitas
mining venture in Venezuela and the related Palmarejo export
port facility on Lake Maracaibo in Venezuela. Each of Alpha
Natural Resources, LLC and AMCI funded $3.25&nbsp;million of
their respective subscription obligations in September 2004. The
Las Carmelitas mine, which is not yet in operation, is currently
expected to produce approximately two million tons of low sulfur
thermal coal per year over a 15-year mine life. The project is
currently in the developmental stage, with preliminary
governmental mining and environmental approvals having been
obtained. Final governmental approval of the project, which is
subject to the submission of a detailed mine plan, is currently
expected in 2005 with mining to commence in 2007. Alpha Natural
Resources, LLC and AMCI are also in preliminary negotiations
with Excelven to provide promotion, marketing, sales and
distribution services to Excelven for all coal extracted from
the Las Carmelitas mine.
</FONT>

<P align="left">
<B><FONT size="2">Distributions to Members of ANR Holdings and
Our Stockholders</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Since its formation in December 2002, ANR
Holdings has made periodic distributions to its members,
including First Reserve, entities affiliated with AMCI, and
Alpha Coal Management, on dates and in amounts calculated in
accordance with its governing documents, sufficient to enable
the members to pay their estimated income tax liability
associated with their holdings in ANR Holdings. The amounts of
these distributions totaled $5.3&nbsp;million in 2003 and
$14.0&nbsp;million during the first nine months of 2004.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On May&nbsp;28, 2004, in connection with the
closing under our credit agreement and the receipt by Alpha
Natural Resources, LLC of the proceeds from the sale of its
senior notes, ANR&nbsp;Holdings distributed an aggregate of
$110.0&nbsp;million to its members, including First Reserve,
entities affiliated with AMCI, and Alpha Coal Management, in
proportion to their common sharing ratios in ANR&nbsp;Holdings.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In connection with our Internal Restructuring,
ANR Holdings will agree to make the Sponsor Distributions to
First Reserve Fund&nbsp;IX,&nbsp;L.P. and entities affiliated
with AMCI, in an aggregate amount of approximately
$10.5&nbsp;million. The distributions to affiliates of AMCI will
be in the amount of $6.0&nbsp;million, representing the
approximate incremental tax resulting from the recognition of
additional tax liability resulting from the Internal
Restructuring. The Sponsor Distributions to AMCI will be paid in
five equal installments on the dates for which estimated income
tax payments are due in each of April 2005, June 2005, September
2005, January 2006 and April 2006. The distributions to First
Reserve Fund&nbsp;IX, L.P. will be in an aggregate amount equal
to approximately $4.5&nbsp;million, the approximate value of
certain tax attributes conveyed as a result of the Internal
Restructuring, and will be payable in installments of
$2.1&nbsp;million, $2.1&nbsp;million and $0.2&nbsp;million on
December&nbsp;15, 2007, 2008 and 2009, respectively. Pursuant to
the terms of the Internal Restructuring Agreement, we will
assume ANR&nbsp;Holdings&#146; obligations with respect to the
Sponsor Distributions, which will be payable, at our option, in
cash or shares of our common stock.
</FONT>

<P align="left">
<B><FONT size="2">Transactions in Connection with Internal
Restructuring</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Immediately prior to the effectiveness of the
registration statement of which this prospectus is a part, we
will complete a series of transactions in connection with our
Internal Restructuring. The principal
</FONT>

<P align="center"><FONT size="2">107
</FONT>
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<DIV align="left">
<FONT size="2">Internal Restructuring transactions, to be
effective pursuant to the terms of our Internal Restructuring
Agreement, are summarized below:
</FONT>
</DIV>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">Alpha Coal Management, LLC, the entity through
    which our executive officers and certain other key employees
    hold their interests in ANR Holdings prior to the Internal
    Restructuring, will be dissolved and liquidated, after which
    (1)&nbsp;the interests in ANR Holdings previously held by Alpha
    Coal Management will be distributed to and held directly by
    these officers and employees and (2)&nbsp;outstanding options
    granted by Alpha Coal Management to certain of our executive
    officers and other key employees under the Alpha Coal Management
    2004 Long-Term Incentive Plan will automatically convert into
    options to purchase up
    to &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    of our common stock at a weighted average exercise price of
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;and
    we will assume the obligations of Alpha Coal Management under
    that plan.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">ANR Holdings will declare the Sponsor
    Distributions described above and, in connection with the
    Internal Restructuring, we will assume the obligations of ANR
    Holdings to make the Sponsor Distributions. The Sponsor
    Distributions will be payable in cash or, to the extent we are
    not permitted by the terms of our credit facility or the
    indenture governing our senior notes to pay the Sponsor
    Distributions in cash, in shares of our common stock.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">First Reserve Fund&nbsp;IX, L.P., the direct
    parent of Alpha NR Holding, Inc., will contribute all of the
    outstanding common stock of Alpha NR Holding, Inc. to us in
    exchange for shares of our common stock and a promissory note to
    be issued by us in a principal amount of
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">Affiliates of AMCI and other members of ANR
    Holdings (excluding Alpha NR Holding, Inc. and the members of
    our management who are the successors to Alpha Coal Management)
    will contribute all of their membership interests in ANR
    Holdings to us in exchange for shares of our common stock and
    promissory notes to be issued by us in an aggregate principal
    amount of
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">The officers and employees who are the members of
    Alpha Coal Management will contribute all of their interests in
    ANR Holdings to us in exchange for shares of our common stock.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">We will declare a pro rata distribution to our
    existing stockholders in an aggregate amount equal to the net
    proceeds, if any, we receive upon an exercise by the
    underwriters of that option to purchase additional shares. We
    will also declare a pro rata distribution to our existing
    stockholders of shares of our common stock in an aggregate
    amount equal to (x)&nbsp;the number of additional shares the
    underwriters have the option to purchase minus (y)&nbsp;the
    actual number of shares the underwriters purchase from us
    pursuant to their over-allotment option.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">On the closing date of this offering, we will use
    the net proceeds from this offering to repay the Restructuring
    Notes in full. The aggregate principal amount of the promissory
    notes and accrued interest thereon will be equal to the
    estimated net proceeds from this offering.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">Following the closing of this offering, we intend
    to contribute the membership interests in ANR Holdings we
    directly hold to Alpha NR Holding, Inc. and another of our
    wholly-owned subsidiaries.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As part of the Internal Restructuring, we and our
Sponsors will amend certain of the post-closing arrangements
that are part of our acquisition of U.S.&nbsp;AMCI. Affiliates
of AMCI will post for our benefit a letter of credit or other
financial instrument satisfactory to us that will provide, for a
period of ten&nbsp;years, financial assurances supporting the
obligations of the AMCI parties to indemnify us under the
contribution agreement for the acquisition of U.S.&nbsp;AMCI in
respect of certain retiree medical liabilities. The letter of
credit or other financial instrument shall initially be in the
amount of $6.8&nbsp;million, declining to $3.8&nbsp;million in
the sixth and seventh years, and further declining to
$1.8&nbsp;million in the eighth through tenth years. The escrow
and pledge agreements with the AMCI Parties and all of the First
Reserve purchase right arrangements described in
&#147;&#151;&nbsp;Transactions in Connection with 2003
Acquisitions&#148; will be terminated.
</FONT>

<P align="center"><FONT size="2">108
</FONT>
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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The transactions described above will be effected
pursuant to an Internal Restructuring Agreement to be dated as
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2005 among us, ANR Holdings and its members, and Alpha Coal
Management and its members. The Internal Restructuring Agreement
will be approved by our Board of Directors and the Boards of
Directors of ANR Holdings, Alpha Coal Management and the
governing bodies of the other parties to the agreement prior to
the consummation of the Internal Reorganization. Prior to such
time, our board of directors will also approve the issuances of
shares of our common stock pursuant to the terms of the
agreement.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Consummation of the transactions contemplated in
the Internal Restructuring Agreement is a condition to the
closing of this offering. The closing under the Internal
Restructuring is conditioned upon, among others, (1)&nbsp;the
approval of our lenders to amend our credit facility to permit
the Internal Restructuring, including the Sponsor Distributions,
(2)&nbsp;the expiration or termination of any applicable waiting
period under The Hart-Scott-Rodino Antitrust&nbsp;Improvements
Act of 1976, and (3)&nbsp;the absence of any law, regulation,
injunction or order prohibiting the consummation of the Internal
Restructuring.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Internal Restructuring Agreement will provide
that each ANR Holdings member (including the management members)
who will receive shares of our common stock as a result of the
Internal Restructuring has agreed to release us and our past,
present and future affiliates from any and all claims such
member may have against ANR Holdings relating to events
occurring prior to the closing. We, in turn, will agree to
indemnify the members of ANR Holdings (including the management
members) with respect to any action which may be brought against
any member by reason of the fact that the member was a member,
managing member, executive committee member or officer of ANR
Holdings prior to the closing of the Internal Restructuring,
other than with respect to any acts committed in bad faith or
that were the result of active and deliberate dishonesty or from
which the member gained financial profit or another advantage to
which the member was not legally entitled.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Internal Restructuring Agreement also will
require First Reserve Fund&nbsp;IX, L.P. to indemnify us against
certain pre-closing liabilities, including tax liabilities,
associated with Alpha NR Holding, Inc. in an amount not to
exceed $15.0&nbsp;million for the first two years following
consummation of the agreement, at which time the amount for
which First Reserve will be obligated to indemnify will decline
to $10.0&nbsp;million for two additional years.
</FONT>

<P align="left">
<B><FONT size="2">Stockholder Agreement</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We plan to enter into a stockholder agreement
with the First Reserve Stockholders, the AMCI Parties, Madison
Capital Funding LLC and our management stockholders that will
become effective upon consummation of the Internal Restructuring
and replace the current member agreement among these parties and
ANR Holdings.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Election of
Directors.</FONT></I><FONT size="2"> The stockholder agreement
will provide that our board of directors will consist of seven
members upon consummation of this offering. The board may be
subsequently expanded to include additional independent
directors as may be required by the rules of any exchange on
which shares of our common stock are traded. Each of the First
Reserve Stockholders and the AMCI Parties will designate two
nominees for election&nbsp;(initially, Messrs.&nbsp;Macaulay and
Krueger, as to the First Reserve Stockholders, and
Messrs.&nbsp;Kundrun and Mende as to the AMCI Parties). Our
board of directors will designate as directors our chief
executive officer (Mr.&nbsp;Quillen) and two other nominees who
must be &#147;independent&#148; as that term is defined by the
NYSE rules (initially Messrs.&nbsp;Draper and Fox), but the
independent nominees must be reasonably acceptable to both the
First Reserve Stockholders and the AMCI Parties. If at any time,
either the First Reserve Stockholders or the AMCI Parties and
their affiliates as a group beneficially own less than 5% of the
outstanding shares of our common stock, then the applicable
Sponsor will no longer be entitled to designate directors
pursuant to the stockholder agreement.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Registration Rights.</FONT></I><FONT size="2">
The stockholder agreement will provide that each of the First
Reserve Stockholders and the AMCI Parties will have the right in
certain circumstances after consummation of this offering to
require us to register their shares of common stock in
connection with a public offering and sale. In addition, in
connection with other registered offerings by us, existing
holders of shares of our
</FONT>

<P align="center"><FONT size="2">109
</FONT>

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<DIV align="left">
<FONT size="2">common stock will have the ability to exercise
certain piggyback registration rights with respect to the shares.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Other.</FONT></I><FONT size="2"> The
stockholder agreement also will contain certain limitations on
the transfers of our shares of common stock held by our existing
stockholders and the vesting provisions related to our
management&#146;s unvested shares described under
&#147;Management Compensation&#151; Management Stock.&#148;
</FONT>

<P align="left">
<B><FONT size="2">Other Transactions</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Mr.&nbsp;Kroh is a 50% owner of Robindale Energy
Services, Inc. (and its subsidiary) (&#147;Robindale&#148;),
which is engaged in the business of waste coal sales and related
businesses in Pennsylvania. From time to time, Robindale has
sold and purchased and may in the future sell or purchase waste
coal and related products to the operations of our AMFIRE
regional business unit in Pennsylvania. During 2003 and the nine
months ended September&nbsp;30, 2004, our subsidiaries Alpha
Coal Sales and AMFIRE Mining, LLC paid an aggregate of $172,000
and $485,000, respectively, to Robindale as payment for trucking
services and waste coal. During the first nine months of 2004,
we had sales of $165,000 to Robindale. We have agreed that
Mr.&nbsp;Kroh&#146;s continued relationship with Robindale will
not cause a breach of his employment agreement with us, and
Mr.&nbsp;Kroh has agreed that he will not participate in any
decisions to enter into any transactions that might be proposed
between Robindale and Alpha.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Three of Alpha&#146;s subsidiaries lease office
space in Latrobe Pennsylvania from the KMKT Partnership, which
is 25% owned by Mr.&nbsp;Kroh. This arrangement is currently on
a month to month basis with rental payments accrued at
$12,000&nbsp;per month. Negotiations are ongoing as to a term
lease for the office space; as yet, no agreement has been
finalized.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In connection with the hiring in October 2003 of
David Stuebe, our Vice President and Chief Financial Officer, we
extended to Mr.&nbsp;Stuebe a $100,000 relocation loan bearing
interest at a rate of 6%. Mr.&nbsp;Stuebe repaid all outstanding
principal and interest on this loan on March&nbsp;31, 2004. In
connection with the hiring in February 2003 of Kevin
Crutchfield, our Executive Vice President, we extended to
Mr.&nbsp;Crutchfield a $79,600 relocation loan bearing interest
at a rate of 6.25%. Mr.&nbsp;Crutchfield repaid all outstanding
principal and interest on this loan during 2003.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On October&nbsp;26, 2004, one of our subsidiaries
contracted in the ordinary course of our business to purchase an
aggregate of 500,000 tons of coal from subsidiaries of
Foundation Coal Holdings, Inc. (&#147;Foundation&#148;), with an
option to purchase up to 25,000 tons more upon agreement of the
parties. The coal is deliverable in monthly installments during
the period from January, 2005 through March, 2006.
Messrs.&nbsp;Mende, Krueger and Macaulay are members of our
board of directors who also serve as directors of Foundation.
First Reserve and AMCI beneficially own an aggregate combined of
56.8% of the outstanding shares of Foundation&#146;s common
stock.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">During 2003 and during the first nine months of
2004, we purchased and sold coal from entities affiliated with
AMCI in the ordinary course of our business in transactions
valued at approximately $14.8&nbsp;million and
$53.9&nbsp;million, respectively. We are obligated to deliver
300,000 firm tons and 200,000 optional tons of coal during April
of 2005 through March 2006 to AMCI Metall&nbsp;&#38; Kohle AG, a
company owned by Mr.&nbsp;Mende and Mr.&nbsp;Kundrun, under an
arrangement whereby we sell coal to AMCI Metall&nbsp;&#38; Kohle
AG at a price that is $1.00&nbsp;per metric ton less than the
price at which AMCI Metall&nbsp;&#38; Kohle&nbsp;AG resells the
coal to an international customer. Other than this arrangement
with AMCI Metall&nbsp;&#38; Kohle&nbsp;AG for coal shipped
during April 2005 through March 2006, since our acquisition of
U.S.&nbsp;AMCI we have not paid or agreed to pay any commission
or fee to Mr.&nbsp;Mende or Mr.&nbsp;Kundrun or any entities
affiliated with AMCI in connection with our coal transactions
with entities affiliated with AMCI.
</FONT>

<P align="center"><FONT size="2">110
</FONT>

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<DIV align="left">
<A name='119'></A>
</DIV>

<!-- link1 "DESCRIPTION OF INDEBTEDNESS" -->

<P align="center">
<B><FONT size="2">DESCRIPTION OF INDEBTEDNESS</FONT></B>

<P align="left">
<B><FONT size="2">Senior Secured Credit Facility</FONT></B>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">General</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In May 2004, Alpha Natural Resources, LLC, as the
borrower, and ANR Holdings, as parent guarantor, entered into a
senior secured credit facility with Citicorp North America,
Inc., as administrative agent, Citigroup Global Markets Inc. as
joint lead arranger, Credit Suisse First Boston as syndication
agent and joint lead arranger and UBS Securities LLC, as
documentation agent and joint lead arranger, and each lender
party thereto. The credit facility provides for
$175.0&nbsp;million in senior secured financing, consisting of a
$125.0&nbsp;million revolving credit facility and a funded
letter of credit facility of up to $50.0&nbsp;million. The
revolving credit facility includes $20.0&nbsp;million of
availability for borrowings on same-day notice, referred to as
swingline loans. The revolving credit facility commitment will
terminate in May&nbsp;2009. In connection with this offering,
the credit facility will be amended to permit this offering and
the transactions contemplated by our Internal Restructuring.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As of September&nbsp;30, 2004, we had
$4.0&nbsp;million of indebtedness and $50.4&nbsp;million of
letters of credit outstanding under our credit facility,
resulting in availability of $120.6&nbsp;million.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Interest Rate and Fees</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">All borrowings under our credit facility bear
interest, at our option, at either: (A)&nbsp;an &#147;alternate
base rate&#148; equal to, for any day, the higher of:
(i)&nbsp;0.50%&nbsp;per year above the overnight federal funds
effective rate, as published by the Board of Governors of the
Federal Reserve System, as in effect from time to time; and
(ii)&nbsp;the annual rate of interest in effect for that day
announced by the administrative agent as its &#147;base
rate&#148; <I>plus </I>a rate dependent on our leverage ratio,
ranging from 2.00% to 1.25%&nbsp;per year, or (B)&nbsp;a
&#147;LIBO rate&#148; expected to be equal to the rate (adjusted
for statutory reserve requirements for eurocurrency liabilities)
at which eurodollar deposits for the relevant interest period
(which will be one, two, three or six months, as selected by us)
are offered in the interbank eurodollar market, as determined by
the administrative agent, <I>plus </I>a rate dependent on our
leverage ratio, ranging from 3.00% to 2.25%&nbsp;per year. The
rates that depend on our leverage ratio range from the high rate
specified if the ratio is greater than or equal to 3.00 to 1.0
to the low rate specified if the ratio is less than 1.50 to 1.0.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition to paying interest on outstanding
principal under the revolving credit facility, we are required
to pay a usage-dependent commitment fee on the available unused
commitment under the revolving credit facility. The fee is equal
to: (a)&nbsp;0.25%&nbsp;per year, in the event that the usage of
the revolving credit facility is at least 66.67%,
(b)&nbsp;0.375%&nbsp;per year, in the event that the usage of
the revolving credit facility is at least 33.33% but less than
66.67%, and (c)&nbsp;0.50%&nbsp;per year, in the event that the
usage of the revolving credit facility is less then 33.33%. For
purposes of calculating the commitment fee, swingline loans will
not be considered usage of the revolving credit facility. The
fee accrues quarterly.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We are also required to pay a letter of credit
fee calculated at a rate equal to the spread over the &#147;LIBO
rate&#148; under the credit facility per annum of the face
amount of each letter of credit and a fronting fee equal to a
percentage per annum, to be agreed with the issuing bank, of the
face amount of each letter of credit. In addition, we will pay
customary transaction charges in connection with any letters of
credit.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Prepayments</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We are required to prepay borrowings under our
credit facility: (1)&nbsp;with 100% of the net cash proceeds
received by us from asset sales or other dispositions of
property (including insurance and other condemnation
proceedings), subject to certain exceptions and reinvestment
provisions, (2)&nbsp;with 100% of the net cash proceeds received
by us from the issuance of debt securities or other incurrences
of debt, excluding the senior notes of Alpha Natural Resources,
LLC and certain other indebtedness, and (3)&nbsp;50% (or 25%, if
our leverage ratio is less than or equal to 2.00 to 1.00 but
greater than 1.00 to 1.00, or 0% if
</FONT>

<P align="center"><FONT size="2">111
</FONT>

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<DIV align="left">
<FONT size="2">our leverage ratio is less than or equal to 1.00
to 1.00) of the net cash proceeds of our equity issuances other
than this offering.
</FONT>
</DIV>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Guarantee and Security</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our obligations under our credit facility are
secured by a lien on the material assets of ANR Holdings and
Alpha Natural Resources,&nbsp;LLC and its domestic subsidiaries,
including: (1)&nbsp;a pledge by ANR Holdings of its membership
interests in Alpha Natural Resources,&nbsp;LLC, (2)&nbsp;a
pledge by Alpha Natural Resources,&nbsp;LLC and its direct and
indirect domestic subsidiaries of all of the capital stock (or
other ownership interests) of their respective domestic
subsidiaries and&nbsp;65% of the capital stock of any of their
first-tier foreign subsidiaries, (3)&nbsp;material coal
reserves, mineral rights, leasehold interests and other material
real property and all related as-extracted collateral of ANR
Holdings and Alpha Natural Resources, LLC and its domestic
subsidiaries, (4)&nbsp;coal supply agreements and other material
contracts to which ANR Holdings and Alpha Natural Resources, LLC
and its domestic subsidiaries are a party and
(5)&nbsp;substantially all of the other personal property of ANR
Holdings and Alpha Natural Resources, LLC and its direct and
indirect subsidiaries, subject to certain exceptions in cases
where the cost of obtaining the liens exceeds the benefits
thereof. In addition, indebtedness under our credit facility is
guaranteed by ANR Holdings and the domestic subsidiaries of
Alpha Natural Resources, LLC.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Certain Covenants and Events of
    Default</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our credit facility contains a number of
covenants that restrict, among other things and subject to
certain exceptions, our ability to:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">incur debt;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">grant liens;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">enter into agreements with negative pledge
    clauses;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">provide guarantees in respect of obligations of
    any other person;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">pay dividends and make other distributions;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">make loans;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">investments, advances and acquisitions;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">sell our assets;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">make redemptions and repurchases of capital stock;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">make capital expenditures;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">prepay, redeem or repurchase debt;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">liquidate or dissolve;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">engage in mergers or consolidations;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">engage in affiliate transactions;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">change our business;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">change our fiscal year;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">amend certain debt and other material agreements;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">issue and sell capital stock of subsidiaries;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">engage in sale and leaseback
    transactions;&nbsp;and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">declare distributions from subsidiaries.
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">112
</FONT>

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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The credit facility also includes customary
affirmative covenants and events of default. In addition, the
credit facility requires us to maintain the following financial
covenants:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">we must maintain a leverage ratio, defined as the
    ratio of total debt to EBITDA (as defined in the credit
    agreement);
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">we must maintain an interest coverage ratio,
    defined as the ratio of EBITDA (as defined in the credit
    agreement), to cash interest expense (defined as the sum of cash
    interest expense plus cash letter of credit fees and
    commissions);&nbsp;and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">a limitation on our capital expenditures.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<B><FONT size="2">10%&nbsp;Senior Notes due 2012</FONT></B>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">General</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In May 2004, Alpha Natural Resources, LLC and its
wholly owned subsidiary Alpha Natural Resources Capital Corp.
(the&nbsp;&#147;Issuers&#148;) issued $175.0&nbsp;million
aggregate principal amount of 10%&nbsp;senior notes due
June&nbsp;1, 2012. The Issuers issued the senior notes in
transactions exempt from or not subject to registration under
the Securities Act, pursuant to Rule&nbsp;144A and
Regulation&nbsp;S under the Securities Act. Interest on the
senior notes accrues at the rate of 10%&nbsp;per annum and is
payable semi-annually on June&nbsp;1 and December&nbsp;1.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Ranking</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The senior notes are the Issuers&#146; senior
unsecured obligations and rank equally in right of payment to
all of the Issuers&#146; existing and future senior unsecured
indebtedness; rank senior in right of payment to any future
senior subordinated indebtedness and subordinated indebtedness
of the Issuers; and are effectively subordinated in right of
payment to the Issuers&#146; secured indebtedness (including
obligations under our credit facility) to the extent of the
value of the assets securing the indebtedness, and all
obligations of each of the Issuers&#146; future subsidiaries
that are not guarantors.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Subsidiary Guarantees</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Issuers&#146; obligations under the senior
notes are jointly and severally guaranteed on a senior unsecured
basis by all of Alpha Natural Resources, LLC&#146;s existing and
future domestic restricted subsidiaries.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Optional Redemption</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Issuers may redeem any of the senior notes at
any time on or after June&nbsp;1, 2008, in whole or in part, in
cash at the redemption prices described in the indenture
governing the senior notes, plus accrued and unpaid interest to
the date of redemption. In addition, on or before June&nbsp;1,
2007, the Issuers may redeem up to 35% of the aggregate
principal amount of senior notes at a redemption price equal to
110% of the principal amount of senior notes with the net
proceeds of certain underwritten equity offerings. The Issuers
may make that redemption only if it occurs within 180&nbsp;days
of the consummation of the underwritten equity offering and if,
after the redemption, at least&nbsp;65% of the aggregate
principal amount of senior notes remains outstanding. The
Issuers&#146; may redeem any of the senior notes at any time
before June&nbsp;1, 2008 in cash at 100% of the principal amount
plus accrued and unpaid interest to the date of redemption and a
make-whole premium.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Change of Control</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Upon a change of control, we may be required to
make an offer to purchase each holder&#146;s senior notes at a
price equal to 101% of the principal amount thereof, plus
accrued and unpaid interest, if any, to the date of purchase.
</FONT>

<P align="center"><FONT size="2">113
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<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Covenants</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The indenture governing the senior notes contains
covenants that, among other things, limit our ability and the
ability of our restricted subsidiaries to:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">incur additional indebtedness;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">pay dividends on or make other distributions or
    repurchase the capital stock of the Issuers or their restricted
    subsidiaries;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">make certain investments;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">enter into certain types of transactions with
    affiliates;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">create or permit to exist any limit on the
    ability of the Issuers&#146; restricted subsidiaries to pay
    dividends or make other payments to the Issuers or their
    restricted subsidiaries, other than pursuant to the credit
    facility and the senior notes indenture;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">use assets as security in other
    transactions;&nbsp;and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">sell certain assets or merge with or into other
    companies.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">These limitations are subject to a number of
important qualifications and exceptions as described in the
indenture governing the senior notes.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Events of Default</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The indenture governing the senior notes also
provides for events of default which, if any of them occurs,
would permit or require the principal of and accrued interest on
the senior notes to become or to be declared due and payable. As
of September&nbsp;30, 2004, we were in compliance in all
material respects with all covenants and provisions contained
under the indenture governing the senior notes.
</FONT>

<P align="left">
<B><FONT size="2">Surety Bonds</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Federal and state laws require surety bonds to
secure our obligations to reclaim lands disturbed for mining, to
pay federal and state workers&#146; compensation and to satisfy
other miscellaneous obligations. The amount of these bonds
varies constantly, depending upon the amount of acreage
disturbed and the degree to which each property has been
reclaimed. Under federal law, partial bond release is provided
as mined lands (1)&nbsp;are backfilled and graded to approximate
original contour, (2)&nbsp;are re-vegetated and (3)&nbsp;achieve
pre-mining vegetative productivity levels on a sustained basis
for a period of five to 10&nbsp;years.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have a committed bonding facility with
Travelers Casualty and Surety Company of America, pursuant to
which Travelers has agreed, subject to certain conditions, to
issue certain surety bonds on behalf of us and our subsidiaries
in a maximum amount of $125.0&nbsp;million. The bonding facility
is supported by letters of credit in an amount up to 50% of the
aggregate bond liability. As of September&nbsp;30, 2004, we had
outstanding surety bonds with Travelers totaling
$89.0&nbsp;million for post-mining reclamation and
$7.8&nbsp;million for miscellaneous purposes, with no
self-bonding obligations.
</FONT>

<P align="center"><FONT size="2">114
</FONT>

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<DIV align="left">
<A name='120'></A>
</DIV>

<!-- link1 "DESCRIPTION OF CAPITAL STOCK" -->

<P align="center">
<B><FONT size="2">DESCRIPTION OF CAPITAL STOCK</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">The following is a description of the material
terms of our restated certificate of incorporation and amended
and restated bylaws as each will be in effect as of the closing
of this offering. We refer you to our restated certificate of
incorporation and amended and restated bylaws, copies of which
will be filed as exhibits to the registration statement of which
this prospectus forms a part.</FONT></I>

<P align="left">
<B><FONT size="2">Authorized Capitalization</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our authorized capital stock consists of
(i)&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
will be issued and outstanding immediately prior to the
effectiveness of the registration statement of which this
prospectus is a part and prior to the consummation of this
offering, and (ii)&nbsp;shares of preferred stock, par value
$0.01&nbsp;per share, of which no shares will be issued and
outstanding. Immediately following the completion of this
offering, there are expected to
be &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, shares of common stock if the underwriters
exercise in full their option to purchase additional shares, and
no shares of preferred stock, outstanding.
</FONT>

<P align="left">
<B><FONT size="2">Common Stock</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Voting Rights.</FONT></I><FONT size="2">
Holders of common stock are entitled to one vote per share on
all matters to be voted upon by the stockholders. The holders of
common stock do not have cumulative voting rights in the
election of directors.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Dividend Rights.</FONT></I><FONT size="2">
Subject to applicable law and rights, if any, of the holders of
any outstanding series of preferred stock or any class or series
of stock having a preference over the common stock with respect
to the payment of dividends, dividends may be declared and paid
on the common stock from time to time and in amounts as our
board of directors may determine. Our credit facility and the
indenture governing our senior notes impose restrictions on our
ability to declare dividends with respect to our common stock.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Liquidation Rights.</FONT></I><FONT size="2">
Upon any dissolution, liquidation or winding up, subject to any
rights of any outstanding series of preferred stock or any class
or series of stock having a preference over the common stock
with respect to the distribution of assets, our remaining assets
and funds will be distributed ratably to the holders of common
stock.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Other Matters.</FONT></I><FONT size="2"> The
common stock has no preemptive or conversion rights and is not
subject to further calls or assessment by us. There are no
redemption or sinking fund provisions applicable to the common
stock. All outstanding shares of our common stock, including the
common stock offered in this offering, are fully paid and
non-assessable.
</FONT>

<P align="left">
<B><FONT size="2">Preferred Stock</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our restated certificate of incorporation
authorizes our board of directors to establish one or more
series of preferred stock and to determine, with respect to any
series of preferred stock, the terms and rights of that series,
including:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">the designation of the series;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">the number of shares of the series, which our
    board may, except where otherwise provided in the preferred
    stock designation, increase or decrease, but not below the
    number of shares then outstanding;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">whether dividends, if any, will be cumulative or
    non-cumulative and the dividend rate of the series;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">the dates at which dividends, if any, will be
    payable;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">the redemption rights and price or prices, if
    any, for shares of the series;
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">115
</FONT>

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<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">the terms and amounts of any sinking fund
    provided for the purchase or redemption of shares of the series;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">the amounts payable on shares of the series in
    the event of any voluntary or involuntary liquidation,
    dissolution or winding-up of the affairs of our company;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">whether the shares of the series will be
    convertible into shares of any other class or series, or any
    other security, of our company or any other corporation, and, if
    so, the specification of the other class or series or other
    security, the conversion price or prices or rate or rates, any
    rate adjustments, the date or dates as of which the shares will
    be convertible and all other terms and conditions upon which the
    conversion may be made;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">restrictions on the issuance of shares of the
    same series or of any other class or series;&nbsp;and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">the voting rights, if any, of the holders of the
    series.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<B><FONT size="2">Anti-takeover Effects of Certain Provisions of
Our Amended and Restated Certificate of Incorporation and
Bylaws</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Certain provisions of our restated certificate of
incorporation and amended and restated bylaws, which are
summarized in the following paragraphs, may have an
anti-takeover effect and may delay, defer or prevent a tender
offer or takeover attempt that a stockholder might consider in
its best interest, including those attempts that might result in
a premium over the market price for the shares held by
stockholders.
</FONT>

<P align="left">
<B><FONT size="2">Removal of Directors; Vacancies</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our amended and restated bylaws provide that
directors may be removed with or without cause upon the
affirmative vote of holders of at least a majority of the shares
of stock entitled to vote generally in the election of
directors, voting together as a single class. In addition, our
amended and restated bylaws also provide that except as
otherwise provided in the stockholders agreement, any vacancies
on our board of directors and newly created directorships will
be filled only by the affirmative vote of a majority of the
remaining directors, although less than a quorum.
</FONT>

<P align="left">
<B><FONT size="2">No Cumulative Voting</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The DGCL provides that stockholders are not
entitled to the right to cumulate votes in the election of
directors unless our restated certificate of incorporation
provides otherwise. Our restated certificate of incorporation
prohibits cumulative voting.
</FONT>

<P align="left">
<B><FONT size="2">Calling of Special Meetings of
Stockholders</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our amended and restated bylaws provide that
special meetings of our stockholders may be called only by the
chairman of our board, our President or by resolution of our
board of directors and shall be called by our President or
Secretary upon the written request of at least 10% in interest
of the stockholders entitled to vote at the meeting.
</FONT>

<P align="left">
<B><FONT size="2">Stockholder Action by Written
Consent</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our amended and restated bylaws permit
stockholder action by written consent.
</FONT>

<P align="left">
<B><FONT size="2">Advance Notice Requirements for Stockholder
Proposals and Director Nominations</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our amended and restated bylaws provide that
stockholders seeking to nominate candidates for election as
directors or to bring business before an annual meeting of
stockholders must provide timely notice of their proposal in
writing to the corporate secretary.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Generally, to be timely, a stockholder&#146;s
notice must be received at our principal executive offices not
less than 90&nbsp;days nor more than 120&nbsp;days prior to the
first anniversary date of the date on which the
</FONT>

<P align="center"><FONT size="2">116
</FONT>

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<DIV align="left">
<FONT size="2">company first mailed its proxy materials for the
previous year&#146;s annual meeting. Our amended and restated
bylaws also specify requirements as to the form and content of a
stockholder&#146;s notice. These provisions may impede
stockholders&#146; ability to bring matters before an annual
meeting of stockholders or make nominations for directors at an
annual meeting of stockholders.
</FONT>
</DIV>

<P align="left">
<B><FONT size="2">Amendments to Our Amended and Restated
Bylaws</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our restated certificate of incorporation grants
our board of directors the authority to amend and repeal our
bylaws without a stockholder vote in any manner not inconsistent
with the laws of the State of Delaware.
</FONT>

<P align="left">
<B><FONT size="2">Limitations on Liability and Indemnification
of Officers and Directors</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The DGCL authorizes corporations to limit or
eliminate the personal liability of directors to corporations
and their stockholders for monetary damages for breaches of
directors&#146; fiduciary duties. Our restated certificate of
incorporation includes a provision that eliminates the personal
liability of directors for monetary damages for actions taken as
a director, except for liability:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">for breach of duty of loyalty;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">for acts or omissions not in good faith or
    involving intentional misconduct or knowing violation of law;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">under Section&nbsp;174 of the DGCL (unlawful
    dividends);&nbsp;or
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">for transactions from which the director derived
    improper personal benefit.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our restated certificate of incorporation and
amended and restated bylaws provide that we must indemnify our
directors and officers to the fullest extent authorized by the
DGCL. We are also expressly authorized to carry directors&#146;
and officers&#146; insurance providing indemnification for our
directors, officers, employees and agents for some liabilities.
We believe that these indemnification provisions and insurance
are useful to attract and retain qualified directors and
executive officers.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The limitation of liability and indemnification
provisions in our restated certificate of incorporation and
amended and restated bylaws may discourage stockholders from
bringing a lawsuit against directors for breach of their
fiduciary duty. These provisions may also have the effect of
reducing the likelihood of derivative litigation against
directors and officers, even though a derivative action, if
successful, might otherwise benefit us and our stockholders. In
addition, your investment may be adversely affected to the
extent we pay the costs of settlement and damage awards against
directors and officers pursuant to these indemnification
provisions.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">There is currently no pending material litigation
or proceeding involving any of our directors, officers,
employees or agents for which indemnification is sought.
</FONT>

<P align="left">
<B><FONT size="2">Corporate Opportunities</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our restated certificate of incorporation will
provide for the allocation of certain corporate opportunities
between us, on the one hand, and the First Reserve Stockholders,
the AMCI Parties, and their affiliates, on the other hand.
Specifically:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">None of the First Reserve Stockholders, the AMCI
    Parties, or the funds or other entities controlled by them (each
    a &#147;Control Stockholder,&#148; and collectively, the
    &#147;Control Stockholders&#148;) or any director, officer,
    member, partner, stockholder or employee of a Control
    Stockholder (each a &#147;Specified Party&#148;) will have any
    duty to refrain from engaging directly or indirectly in the same
    or similar business activities or lines of business as we do.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">Except as noted below, we renounce any interest
    or expectancy that we may have in any potential transaction
    which may be a corporate opportunity for any Control Stockholder
    or Specified Party, as applicable, on the one hand, and us, on
    the other hand, and therefore, none of the Control
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">117
</FONT>

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<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD align="left">
    <FONT size="2">Stockholders or Specified Parties will have any
    duty to communicate or offer any such corporate opportunity to
    us, and will be entitled to pursue or acquire such opportunity
    for itself, and we will have no right in or to any such
    opportunity. Notwithstanding the prior sentence, we are not
    renouncing any interest or expectancy in any such corporate
    opportunity that is offered to any Control Stockholder or
    Specified Party that is also one of our directors, officers, or
    employees, if (i)&nbsp;such opportunity is expressly offered to
    such Control Stockholder or Specified Party solely in, and as a
    direct result of, his or her capacity as our director, officer
    or employee; (ii)&nbsp;we would be permitted to undertake the
    opportunity under our amended and restated certificate of
    incorporation, and (iii)&nbsp;we have sufficient financial
    resources and are in a line of business to undertake the
    opportunity.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<B><FONT size="2">Delaware Anti-Takeover Statute</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have opted out of Section&nbsp;203 of the
DGCL. Subject to specified exceptions, Section&nbsp;203
prohibits a publicly held Delaware corporation from engaging in
a &#147;business combination&#148; with an &#147;interested
stockholder&#148; for a period of three years after the date of
the transaction in which the person became an interested
stockholder. &#147;Business combinations&#148; include mergers,
asset sales and other transactions resulting in a financial
benefit to the &#147;interested stockholder.&#148; Subject to
various exceptions, an &#147;interested stockholder&#148; is a
person who together with his or her affiliates and associates,
owns, or within three years did own, 15% or more of the
corporation&#146;s outstanding voting stock. These restrictions
generally prohibit or delay the accomplishment of mergers or
other takeover or change-in-control attempts.
</FONT>

<P align="left">
<B><FONT size="2">Transfer Agent and Registrar</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;is
the transfer agent and registrar for our common stock.
</FONT>

<P align="left">
<B><FONT size="2">Listing</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We intend to apply to list our common stock on
the New York Stock Exchange under the symbol &#147;ANR.&#148;
</FONT>

<P align="left">
<B><FONT size="2">Authorized but Unissued Capital
Stock</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The DGCL does not require stockholder approval
for any issuance of authorized shares. However, the listing
requirements of the New York Stock Exchange, which would apply
so long as our common stock is listed on the New York Stock
Exchange, require stockholder approval of certain issuances
equal to or exceeding 20% of the then-outstanding voting power
or then outstanding number of shares of common stock. These
additional shares may be used for a variety of corporate
purposes, including future public offerings, to raise additional
capital or to facilitate acquisitions.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">One of the effects of the existence of unissued
and unreserved common stock may be to enable our board of
directors to issue shares to persons friendly to current
management, which issuance could render more difficult or
discourage an attempt to obtain control of our company by means
of a merger, tender offer, proxy contest or otherwise, and
thereby protect the continuity of our management and possibly
deprive the stockholders of opportunities to sell their shares
of common stock at prices higher than prevailing market prices.
</FONT>

<P align="center"><FONT size="2">118
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<DIV align="left">
<FONT size="2"> <A name='121'></A>
</FONT>
</DIV>

<!-- link1 "SHARES ELIGIBLE FOR FUTURE SALE" -->

<P align="center">
<B><FONT size="2">SHARES ELIGIBLE FOR FUTURE SALE</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Prior to this offering, there has not been any
public market for our common stock, and we cannot predict what
effect, if any, market sales of shares of common stock or the
availability of shares of common stock for sale will have on the
market price of our common stock. Nevertheless, sales of
substantial amounts of common stock in the public market, or the
perception that such sales could occur, could materially and
adversely affect the market price of our common stock and could
impair our future ability to raise capital through the sale of
our equity or equity-related securities at a time and price that
we deem appropriate.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Upon the closing of this offering, we will have
outstanding an aggregate of
approximately &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million
shares of common stock. Of the outstanding shares, the shares
sold in this offering 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 be sold in the
public market only if registered or if they qualify for an
exemption from registration under Rule&nbsp;144 or 144(k) under
the Securities Act, which are summarized below.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Subject to the lock-up agreements described below
and the provisions of Rules&nbsp;144 and 144(k), additional
shares of our common stock will be available for sale in the
public market under exemptions from registration requirements as
follows:
</FONT>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="27%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="70%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Number of Shares</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Date</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">After &nbsp;&nbsp;&nbsp;days from the date of
    this prospectus (subject to volume limitations and other
    conditions under Rule&nbsp;144)
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">At various times
    after &nbsp;&nbsp;&nbsp;&nbsp;days from the date of this
    prospectus (Rule&nbsp;144(k))
    </FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
<B><FONT size="2">Rule&nbsp;144</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In general, under Rule&nbsp;144 as currently in
effect, a person (or persons whose shares are required to be
aggregated), including an affiliate, who has beneficially owned
shares of our common stock for at least one year is entitled to
sell in any three-month period a number of shares that does not
exceed the greater of:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">1% of the then-outstanding shares of common stock
    or approximately million shares assuming no exercise by the
    underwriters of their option to purchase additional
    shares;&nbsp;and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">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.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Sales under Rule&nbsp;144 are also subject to
manner of sale provisions and notice requirements and to the
availability of current public information about us.
</FONT>

<P align="left">
<B><FONT size="2">Rule&nbsp;144(k)</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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.
</FONT>

<P align="center"><FONT size="2">119
</FONT>

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<P align="left">
<B><FONT size="2">Lock-Up Agreements</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We, our stockholders existing prior to this
offering and our directors and executive officers have agreed
with the underwriters not to sell, dispose of or hedge any of
their common stock or securities convertible into or
exchangeable for shares of common stock during the period,
subject to certain exceptions, from the date of this prospectus
continuing through the date 180&nbsp;days after the date of this
prospectus, except with the prior written consent of Morgan
Stanley&nbsp;&#38; Co. Incorporated and Citigroup Global Markets
Inc.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The restrictions described in the previous
sentence do not apply to:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">the issuance of shares of common stock in
    connection with the Internal Restructuring;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">the sale of shares of common stock to the
    underwriters pursuant to this offering;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">the issuance by us of shares of common stock
    pursuant to the exercise of an option, warrant or similar
    security;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">the grant of options or stock under our benefit
    plans;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">transactions by any person other than us relating
    to shares of our common stock acquired in open market
    transactions after completion of this offering;&nbsp;or
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">the issuance of common stock in connection with
    the acquisition of, or joint venture with, another company.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Certain of our executive officers have advised us
that they intend to sell shares of our common stock over a
period of time, subject to the foregoing restrictions. We
anticipate that these sales will be effected under trading plans
in accordance with Rule&nbsp;10b5-1 under the Securities
Exchange Act of 1934.
</FONT>

<P align="left">
<B><FONT size="2">Registration Rights</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In connection with the Internal Restructuring,
current members of ANR Holdings will become stockholders of
Alpha Natural Resources, Inc. and will enter into a stockholder
agreement with Alpha Natural Resources, Inc. The stockholder
agreement will provide that existing holders of 10% or more of
the outstanding shares of our common stock, including the First
Reserve Stockholders and the AMCI Parties, will have the right
in certain circumstances after we have registered a class of our
equity securities to require us to register their shares of
common stock in connection with a public offering and sale. In
addition, in connection with other registered offerings by us,
existing holders of shares of our common stock will have the
ability to exercise certain piggyback registration rights with
respect to such shares.
</FONT>

<P align="left">
<B><FONT size="2">Stock Options</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In accordance with the terms of the Alpha Coal
Management Long-Term Incentive Plan and our Internal
Restructuring Agreement, the options held by our executive
officers and key employees in Alpha Coal Management will be
automatically converted in connection with the Internal
Restructuring into options to purchase our common stock having
substantially the same vesting, expiration and other terms, and
we will assume the obligations of Alpha Coal Management under
the Alpha Coal Management Long-Term Incentive Plan. Immediately
prior to the effectiveness of the registration statement of
which this prospectus is a part, there will be outstanding under
the Alpha Coal Management Long-Term Incentive Plan options to
purchase an aggregate
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of our common stock (the maximum number of shares currently
available for awards under the plan) at a weighted average
exercise price of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share. These options will vest over a period of five years and
expire on November&nbsp;10, 2014.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We may also grant options to purchase shares of
our common stock under our Long Term Incentive Plan. The total
numbers of shares of our common stock initially available for
issuance or delivery under our Long-Term Incentive Plan will
be &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares.
Upon consummation of this offering, we will grant options to
members of senior management and key employees under our Long
Term Incentive Plan to
</FONT>

<P align="center"><FONT size="2">120
</FONT>

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<DIV align="left">
<FONT size="2">purchase an aggregate 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 at an exercise price equal to the price per
share at which shares are sold to the public in this offering.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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 and otherwise
reserved for issuance under the Alpha Coal Management Long-term
Incentive Plan and the Long Term Incentive Plan, and to register
the resale of our common stock issued to members of our
management as part of the Internal Restructuring. 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.
</FONT>

<P align="center"><FONT size="2">121
</FONT>

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<DIV align="left">
<FONT size="2"> <A name='122'></A>
</FONT>
</DIV>

<!-- link1 "MATERIAL U.S. FEDERAL INCOME AND ESTATE TAX CONSEQUENCES TO NON-U.S. HOLDERS" -->

<P align="center">
<B><FONT size="2">MATERIAL U.S.&nbsp;FEDERAL INCOME AND ESTATE
TAX CONSEQUENCES</FONT></B>

<DIV align="center">
<B><FONT size="2">TO NON-U.S.&nbsp;HOLDERS</FONT></B>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following is a summary of certain 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. 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:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">an individual citizen or resident of the United
    States;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">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;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">an estate the income of which is subject to
    United States federal income taxation regardless of its
    source;&nbsp;or
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">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.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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; or corporation that
accumulates earnings to avoid United States federal income tax).
A change in law may alter significantly the tax considerations
that we describe in this summary.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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.
</FONT>

<P align="left">
<B><FONT size="2">Dividends</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In the event that we pay dividends, 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 (and, where a
tax treaty applies, are attributable to a United States
permanent establishment of the non-U.S.&nbsp;holder) are not
subject to the withholding tax, provided certain certification
and disclosure requirements are satisfied. Instead, such
dividends are 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.
</FONT>

<P align="center"><FONT size="2">122
</FONT>

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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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.
</FONT>

<P align="left">
<B><FONT size="2">Gain on Disposition of Common Stock</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Any gain realized on the disposition of our
common stock generally will not be subject to United States
federal income tax unless:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">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;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">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
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">we are or have been a &#147;United States real
    property holding corporation&#148; for United States federal
    income tax purposes.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">An individual 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 generally 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.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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 is
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 be subject to United States federal income
tax on the disposition of our common stock.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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 or our common stock was 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.
</FONT>

<P align="left">
<B><FONT size="2">Federal Estate Tax</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Common stock held 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.
</FONT>

<P align="center"><FONT size="2">123
</FONT>

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<P align="left">
<B><FONT size="2">Information Reporting and Backup
Withholding</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Information reporting and, depending on the
circumstances, backup withholding will apply to the proceeds of
a sale 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.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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.
</FONT>

<P align="center"><FONT size="2">124
</FONT>

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<DIV align="left">
<A name='123'></A>
</DIV>

<!-- link1 "UNDERWRITING" -->

<P align="center">
<B><FONT size="2">UNDERWRITING</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Alpha Natural Resources, Inc. and the
underwriters named below have entered into an underwriting
agreement with respect to the shares being offered. Subject to
certain conditions, each underwriter has severally agreed to
purchase the number of shares indicated in the following table.
Morgan Stanley&nbsp;&#38; Co. Incorporated and Citigroup Global
Markets Inc. are acting as joint book-running managers and
representatives of the underwriters.
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="73%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">Underwriters</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Number of Shares</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Morgan Stanley&nbsp;&#38; Co. Incorporated
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Citigroup Global Markets Inc.
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">UBS Securities LLC
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="6"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The underwriters are committed to take and pay
for all of the shares of common stock being offered, if any are
taken, other than the shares of common stock covered by the
option described below unless and until this option is exercised.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">If the underwriters sell more shares of common
stock than the total number set forth in the table above, the
underwriters have an option to buy 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 common stock from Alpha Natural Resources, Inc. They may
exercise that option for 30&nbsp;days. If any shares of common
stock are purchased pursuant to this option, the underwriters
will severally purchase shares of common stock in approximately
the same proportion as set forth in the table above.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table shows the per share and total
underwriting discount to be paid to the underwriters by Alpha
Natural Resources, Inc. Such amounts are shown assuming both no
exercise and full exercise of the underwriters&#146;
over-allotment option to
purchase &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;additional
shares of common stock from us.
</FONT>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="66%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Paid by Alpha Natural Resources, Inc.</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">No Exercise</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Full Exercise</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Per Share
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Shares of common stock sold by the underwriters
to the public will initially be offered at the initial public
offering price set forth on the cover of this prospectus. Any
shares of common stock 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 initial public offering price. Any such
securities dealers may resell any shares of common stock
purchased from the underwriters to certain 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 initial public offering price. If all the shares
of common stock are not sold at the initial public offering
price, the representatives may change the offering price and the
other selling terms.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Alpha Natural Resources, Inc. and its directors,
executive officers and stockholders existing prior to this
offering have agreed with the underwriters not to sell, dispose
of or hedge any of their common stock or securities convertible
into or exchangeable for shares of common stock, subject to
certain exceptions, during the period from the date of this
prospectus continuing through the date that is 180&nbsp;days
after the date of this prospectus, except with the prior written
consent of Morgan Stanley&nbsp;&#38; Co. Incorporated and
Citigroup Global Markets Inc.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Prior to this offering, there has been no public
market for the common stock. The initial public offering price
was determined by negotiations between us and the
representatives of the underwriters. Among the factors
considered in determining the initial public offering price were
our future prospects and those of our industry in general, our
sales, earnings and certain other financial and operating
information in recent periods, and the price-earnings ratios,
price-book value ratios, market prices of securities and certain
financial and operating information of companies engaged in
activities similar to ours.
</FONT>

<P align="center"><FONT size="2">125
</FONT>
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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We intend to list our common stock on the New
York Stock Exchange under the symbol &#147;ANR.&#148; In order
to meet one of the requirements for listing the common stock on
the New York Stock Exchange, the underwriters have undertaken to
sell lots of 100 or more shares of common stock to a minimum of
2,000 beneficial holders.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In connection with the offering, the underwriters
may purchase and sell shares of common stock in the open market.
These transactions may include short sales, stabilizing
transactions and purchases to cover positions created by short
sales. Short sales involve the sale by the underwriters of a
greater number of shares of common stock than they are required
to purchase in the offering. &#147;Covered&#148; short sales are
sales made in an amount not greater than the underwriters&#146;
option to purchase additional shares of common stock from Alpha
Natural Resources, Inc. The underwriters may close out any
covered short position by either exercising their option to
purchase additional shares of common stock or purchasing shares
of common stock in the open market. In determining the source of
shares to close out the covered short position, 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 additional shares of common stock
pursuant to the option granted to them. &#147;Naked&#148; short
sales are any sales in excess of such option. The underwriters
must close out any naked short position by purchasing shares of
common stock 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 after pricing that could adversely affect
investors who purchase in the offering. Stabilizing transactions
consist of various bids for or purchases of common stock made by
the underwriters in the open market prior to the completion of
the offering.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The underwriters may also 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 of common
stock sold by or for the account of such underwriter in
stabilizing or short covering transactions.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Purchases to cover a short position and
stabilizing transactions may have the effect of preventing or
retarding a decline in the market price of Alpha Natural
Resources, Inc.&#146;s stock, and together with the imposition
of the penalty bid, may stabilize, maintain or otherwise affect
the market price of the common stock. As a result, the price of
the 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 at any time. These
transactions may be effected on the New York Stock Exchange, in
the over-the-counter market or otherwise.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Each underwriter has represented, warranted and
agreed that: (i)&nbsp;it has not offered or sold and, prior to
the expiry of a period of six months from the closing of the
offering, will not offer or sell any shares of common stock to
persons in the United Kingdom except to persons whose ordinary
activities involve them in acquiring, holding, managing or
disposing of investments (as principal or agent) for the
purposes of their businesses or otherwise in circumstances which
have not resulted and will not result in an offer to the public
in the United Kingdom within the meaning of the Public Offers of
Securities Regulations 1995; (ii)&nbsp;it has only communicated
or caused to be communicated and will only communicate or cause
to be communicated any invitation or inducement to engage in
investment activity (within the meaning of section&nbsp;21 of
the Financial Services and Markets Act 2000 (&#147;FSMA&#148;))
received by it in connection with the issue or sale of any
shares in circumstances in which section&nbsp;21(1) of the FSMA
does not apply to Alpha Natural Resources, Inc.; and
(iii)&nbsp;it has complied and will comply with all applicable
provisions of the FSMA with respect to anything done by it in
relation to the shares in, from or otherwise involving the
United Kingdom.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The shares may not be offered or sold,
transferred or delivered, as part of their initial distribution
or at any time thereafter, directly or indirectly, to any
individual or legal entity in the Netherlands other than to
individuals or legal entities who or which trade or invest in
securities in the conduct of their profession or trade, which
includes banks, securities intermediaries, insurance companies,
pension funds, other
</FONT>

<P align="center"><FONT size="2">126
</FONT>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<FONT size="2">institutional investors and commercial
enterprises which, as an ancillary activity, regularly trade or
invest in securities.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The underwriters do not expect sales to
discretionary accounts to exceed five percent of the total
number of shares of common stock offered.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Alpha Natural Resources, Inc. estimates that the
total expenses of the offering, excluding underwriting discounts
and commissions, will be approximately
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Alpha Natural Resources, Inc. has agreed to
indemnify the several underwriters against certain liabilities,
including liabilities under the Securities Act of 1933 or to
contribute to payments the underwriters may be required to make
because of any of these liabilities.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">At our request, the underwriters have
reserved &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;shares
of common stock to be issued by us and offered by this
prospectus for sale, at the initial public offering price, to
directors, officers, employees, business associates and related
persons of Alpha Natural Resources, Inc. The number of shares of
common stock available for sale to the general public will be
reduced to the extent these individuals purchase the reserved
shares. Any reserved shares that are not so purchased will be
offered by the underwriters to the general public on the same
basis as the other shares offered by this prospectus.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The underwriters and their affiliates have from
time to time provided, and expect to provide in the future,
investment banking, commercial banking and other financial
services to us and our affiliates for which they have received
and may continue to receive customary fees and commissions.
Morgan Stanley&nbsp;&#38; Co. Incorporated, Citigroup Global
Markets Inc. and UBS Securities LLC were initial purchasers in
connection with the offering of our subsidiaries&#146;, Alpha
Natural Resources, LLC and Alpha Natural Resources Capital Corp,
10%&nbsp;senior notes due 2012. UBS Securities LLC and Citigroup
Global Markets Inc. were also joint-lead arrangers of Alpha
Natural Resources, LLC&#146;s credit facility. In addition, UBS
Securities LLC and Citicorp North America, Inc., an affiliate of
Citigroup Global Markets Inc., are lenders under the credit
facility and act as the documentation agent and the
administrative agent, respectively, under the credit facility.
Morgan Stanley Senior Funding, Inc. and UBS Loan&nbsp;Finance
LLC, affiliates of Morgan Stanley&nbsp;&#38; Co. Incorporated
and UBS Securities, LLC, respectively, and Citicorp North
America, Inc., are also lenders under the credit facility. An
affiliate of Morgan Stanley &#38; Co. Incorporated holds less
than a one percent interest in First Reserve Fund&nbsp;IX, L.P.,
one of the First Reserve Stockholders.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">A prospectus in electronic format may be made
available on the websites maintained by one or more of the
underwriters. The representatives may agree to allocate a number
of shares to underwriters for sale to their online brokerage
account holders. The representatives will allocate shares to
underwriters that may make Internet distributions on the same
basis as other allocations. In addition, shares may be sold by
the underwriters to securities dealers who resell shares to
online brokerage account holders.
</FONT>

<P align="center"><FONT size="2">127
</FONT>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<A name='124'></A>
</DIV>

<!-- link1 "VALIDITY OF THE SHARES" -->

<P align="center">
<B><FONT size="2">VALIDITY OF THE SHARES</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The validity of the issuance of the shares of
common stock to be sold in this offering will be passed upon for
us by Bartlit Beck Herman Palenchar&nbsp;&#38; Scott LLP,
Denver, Colorado. Certain matters of New&nbsp;York law will be
passed upon for us by Simpson Thacher&nbsp;&#38; Bartlett LLP,
New York, New York. Latham&nbsp;&#38; Watkins LLP, New York, New
York will act as counsel to the underwriters.
</FONT>

<DIV align="left">
<A name='125'></A>
</DIV>

<!-- link1 "EXPERTS--INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM" -->

<P align="center">
<B><FONT size="2">EXPERTS&#151;INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The combined financial statements of ANR
Fund&nbsp;IX Holdings, L.P. and Alpha NR Holding, Inc. and
subsidiaries (the &#147;Company&#148; or &#147;Successor&#148;)
as of September&nbsp;30, 2004, and December&nbsp;31, 2003 and
2002, and for the nine months ended September&nbsp;30, 2004, the
year ended December&nbsp;31, 2003 and the period from
December&nbsp;14, 2002 to December&nbsp;31, 2002 (the
&#147;Successor Periods&#148;), and the combined financial
statements for the period from January&nbsp;1, 2002 to
December&nbsp;13, 2002 and the year ended December&nbsp;31, 2001
(&#147;Predecessor Periods&#148;), have been included herein and
in the registration statement of which this prospectus forms a
part in reliance upon the report of KPMG LLP, independent
registered public accounting firm, appearing elsewhere herein,
and upon the authority of said firm as experts in accounting and
auditing. The audit report covering the combined financial
statements contains an explanatory paragraph that states that
effective December&nbsp;13, 2002, the Company acquired the
majority of the Virginia coal operations of Pittston Coal
Company, a subsidiary of The Brink&#146;s Company (formerly
known as The Pittston Company), in a business combination
accounted for as a purchase. As a result of the acquisition, the
combined financial information for the period after the
acquisition is presented on a different cost basis than that for
the periods before the acquisition and, therefore, is not
comparable.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The consolidated financial statements of Coastal
Coal Company, LLC and subsidiary as of December&nbsp;31, 2002,
and for the period from January&nbsp;1, 2003 to January&nbsp;31,
2003 and the year ended December&nbsp;31, 2002, have been
included herein and in the registration statement of which this
prospectus forms a part in reliance upon the report of KPMG LLP,
independent accountants, appearing elsewhere herein, and upon
the authority of said firm as experts in accounting and
auditing. The audit report covering the consolidated financial
statements refers to the adoption by Coastal Coal Company, LLC
and subsidiary of the provisions of FASB Statement No.&nbsp;143,
<I>Accounting for Asset Retirement Obligations</I>, effective
January&nbsp;1, 2003.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The combined financial statements of the North
American Division of American Metals and Coal International,
Inc. and Affiliates as of December&nbsp;31, 2002, and for the
period from January&nbsp;1, 2003 to March&nbsp;11, 2003 and the
year ended December&nbsp;31, 2002, have been included herein and
in the registration statement of which this prospectus forms a
part in reliance upon the report of KPMG LLP, independent
accountants, appearing elsewhere herein, and upon the authority
of said firm as experts in accounting and auditing. The audit
report covering the combined financial statements refers to the
adoption by the North American Division of American Metals and
Coal International, Inc. and Affiliates of the provisions of
FASB Statement No.&nbsp;143, <I>Accounting for Asset Retirement
Obligations</I>, effective January&nbsp;1, 2003.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The combined financial statements of The Combined
Pennsylvania Entities of Mears Enterprises, Inc. as of
December&nbsp;31, 2002 and 2001, and for the period from
January&nbsp;1, 2003 to November&nbsp;17, 2003 and the years
ended December&nbsp;31, 2002 and 2001, have been included herein
and in the registration statement of which this prospectus forms
a part in reliance upon the report of KPMG LLP, independent
accountants, appearing elsewhere herein, and upon the authority
of said firm as experts in accounting and auditing. The audit
report covering the combined financial statements refers to the
adoption by The Combined Pennsylvania Entities of Mears
Enterprises, Inc. of the provisions of FASB Statement
No.&nbsp;143, <I>Accounting for Asset Retirement
Obligations</I>, effective January&nbsp;1, 2003.
</FONT>

<P align="center"><FONT size="2">128
</FONT>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<A name='126'></A>
</DIV>

<!-- link1 "EXPERTS--COAL RESERVES" -->

<P align="center">
<B><FONT size="2">EXPERTS&#151;COAL RESERVES</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The information appearing in this prospectus
concerning estimates of our proven and probable coal reserves
was prepared by Marshall Miller&nbsp;&#38; Associates, Inc. and
has been included herein upon the authority of this firm as an
expert.
</FONT>

<DIV align="left">
<A name='127'></A>
</DIV>

<!-- link1 "WHERE YOU CAN FIND ADDITIONAL INFORMATION" -->

<P align="center">
<B><FONT size="2">WHERE YOU CAN FIND ADDITIONAL
INFORMATION</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have filed with the Securities and Exchange
Commission (the &#147;SEC&#148;) 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 hereby.
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 Securities Exchange Act of
1934 (the &#147;Exchange Act&#148;). 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 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. Such materials may also be accessed
electronically by means of the SEC&#146;s home page on the
Internet (http://www.sec.gov).
</FONT>

<P align="center"><FONT size="2">129
</FONT>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<A name='128'></A>
</DIV>

<!-- link1 "INDEX TO FINANCIAL STATEMENTS" -->

<P align="center">
<B><FONT size="2">INDEX TO FINANCIAL STATEMENTS</FONT></B>

<CENTER>
<TABLE width="60%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="88%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">ANR Fund&nbsp;IX Holdings, L.P. and Alpha NR
    Holding, Inc. and Subsidiaries</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Report of Independent Registered Public
    Accounting Firm
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">F-2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Combined Balance Sheets, September&nbsp;30, 2004
    and December&nbsp;31, 2003 and 2002
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">F-3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Combined Statements of Operations, nine months
    ended September&nbsp;30, 2004 and 2003 (unaudited), year ended
    December&nbsp;31, 2003 and period from December&nbsp;14, 2002 to
    December&nbsp;31, 2002 (Successor Periods), and period from
    January&nbsp;1, 2002 to December&nbsp;13, 2002 and year ended
    December&nbsp;31, 2001 (Predecessor Periods)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">F-4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Combined Statements of Stockholder&#146;s Equity
    and Partners&#146; Capital, nine months ended September&nbsp;30,
    2004 and year ended December&nbsp;31, 2003 and period from
    December&nbsp;14, 2002 to December&nbsp;31, 2002 (Successor
    Periods), and period from January&nbsp;1, 2002 to
    December&nbsp;13, 2002 and year ended December&nbsp;31, 2001
    (Predecessor Periods)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">F-5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Combined Statements of Cash Flows, nine months
    ended September&nbsp;30, 2004 and 2003 (unaudited), year ended
    December&nbsp;31, 2003 and period from December&nbsp;14, 2002 to
    December&nbsp;31, 2002 (Successor Periods), and period from
    January&nbsp;1, 2002 to December&nbsp;13, 2002 and year ended
    December&nbsp;31, 2001 (Predecessor Periods)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">F-6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Notes to Combined Financial Statements
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">F-8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Coastal Coal Company, LLC and
    Subsidiary</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Independent Auditors&#146; Report
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">F-46</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Consolidated Balance Sheet, December&nbsp;31, 2002
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">F-47</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Consolidated Statements of Operations, period
    from January&nbsp;1, 2003 to January&nbsp;31, 2003 and year
    ended December&nbsp;31, 2002
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">F-48</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Consolidated Statements of Changes in
    Members&#146; Equity and Comprehensive Income (Loss), period
    from January&nbsp;1, 2003 to January&nbsp;31, 2003 and year
    ended December&nbsp;31, 2002
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">F-49</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Consolidated Statements of Cash Flows, period
    from January&nbsp;1, 2003 to January&nbsp;31, 2003 and year
    ended December&nbsp;31, 2002
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">F-50</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Notes to Consolidated Financial Statements
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">F-51</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">North American Division of American Metals and
    Coal International, Inc. and Affiliates</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Independent Auditors&#146; Report
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">F-62</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Combined Balance Sheet, December&nbsp;31, 2002
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">F-63</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Combined Statements of Operations, period from
    January&nbsp;1, 2003 to March&nbsp;11, 2003 and year ended
    December&nbsp;31, 2002
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">F-64</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Combined Statements of Stockholders&#146; Equity
    and Partners&#146; Capital, period from January&nbsp;1, 2003 to
    March&nbsp;11, 2003 and year ended December&nbsp;31, 2002
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">F-65</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Combined Statements of Cash Flows, period from
    January&nbsp;1, 2003 to March&nbsp;11, 2003 and year ended
    December&nbsp;31, 2002
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">F-66</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Notes to Combined Financial Statements
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">F-67</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">The Combined Pennsylvania Entities of Mears
    Enterprises, Inc.</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Independent Auditors&#146; Report
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">F-82</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Combined Balance Sheets, December&nbsp;31, 2002
    and 2001
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">F-83</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Combined Statements of Income, period from
    January&nbsp;1, 2003 to November&nbsp;17, 2003 and years ended
    December&nbsp;31, 2002 and 2001
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">F-84</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Combined Statements of Stockholders&#146; Equity
    and Partners&#146; Capital, period from January&nbsp;1, 2003 to
    November&nbsp;17, 2003 and years ended December&nbsp;31, 2002
    and 2001
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">F-85</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Combined Statements of Cash Flows, period from
    January&nbsp;1, 2003 to November&nbsp;17, 2003 and years ended
    December&nbsp;31, 2002 and 2001
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">F-86</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Notes to Combined Financial Statements
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">F-87</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">F-1
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="center">
<B><FONT size="2">REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM</FONT></B>

<P align="left">
<FONT size="2">The Board of Directors
</FONT>

<DIV align="left">
<FONT size="2">ANR Holdings, LLC:
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have audited the accompanying combined balance
sheets of ANR Fund IX Holdings, L.P. and Alpha NR Holding, Inc.
and subsidiaries (the Company or Successor) as of
September&nbsp;30, 2004, and December&nbsp;31, 2003 and 2002,
and the related combined statements of operations,
stockholder&#146;s equity and partners&#146; capital, and cash
flows for the nine months ended September&nbsp;30, 2004, the
year ended December&nbsp;31, 2003, and the period from
December&nbsp;14, 2002 to December&nbsp;31, 2002 (Successor
Periods), and the combined statements of operations,
shareholder&#146;s equity, and cash flows for the period from
January&nbsp;1, 2002 to December&nbsp;13, 2002, and the year
ended December&nbsp;31, 2001 (Predecessor Periods). These
combined financial statements are the responsibility of the
Company&#146;s management. Our responsibility is to express an
opinion on these combined financial statements based on our
audits.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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 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.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In our opinion, the aforementioned Successor
combined financial statements present fairly, in all material
respects, the financial position of ANR Fund&nbsp;IX Holdings,
L.P. and Alpha NR Holding, Inc. and subsidiaries as of
September&nbsp;30, 2004, and December&nbsp;31, 2003 and 2002,
and the results of their operations and their cash flows for the
Successor Periods, in conformity with U.S. generally accepted
accounting principles. Further, in our opinion, the
aforementioned Predecessor combined financial statements present
fairly, in all material respects, the results of their
operations and their cash flows for the Predecessor Periods, in
conformity with U.S. generally accepted accounting principles.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As discussed in note&nbsp;1 to the combined
financial statements, effective December&nbsp;13, 2002, the
Company acquired the majority of the Virginia coal operations of
Pittston Coal Company, a subsidiary of The Brink&#146;s Company
(formerly known as The Pittston Company), in a business
combination accounted for as a purchase. As a result of the
acquisition, the combined financial information for the periods
after the acquisition is presented on a different cost basis
than that for the periods before the acquisition and, therefore,
is not comparable.
</FONT>

<P align="left">
<FONT size="2">/s/ KPMG LLP
</FONT>

<P align="left">
<FONT size="2">KPMG LLP
</FONT>

<P align="left">
<FONT size="2">Roanoke, Virginia
</FONT>

<DIV align="left">
<FONT size="2">November&nbsp;19, 2004
</FONT>
</DIV>

<P align="center"><FONT size="2">F-2
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="center">
<B><FONT size="2">ANR FUND IX HOLDINGS, L.P. AND ALPHA NR
HOLDING, INC. AND SUBSIDIARIES</FONT></B>

<P align="left">
<A name='302'></A>

<!-- link1 "COMBINED BALANCE SHEETS" -->

<DIV align="center">
<B><FONT size="2">COMBINED BALANCE SHEETS</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">(In thousands, except share and per share
data)</FONT></B>
</DIV>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="54%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">September&nbsp;30,</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2004</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="15" align="center" valign="top">
    <B><FONT size="2">Assets</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Current assets:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cash and cash equivalents
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15,811</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,246</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,444</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Trade accounts receivable, net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">97,475</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">70,205</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,467</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Notes and other receivables
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,765</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,742</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Inventories
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">52,684</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">33,113</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16,558</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Due from affiliate
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">323</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,770</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Deferred income taxes
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,046</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">489</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Prepaid expenses and other current assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,778</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">19,256</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">428</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total current assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">186,882</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">142,821</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">32,897</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Property, plant, and equipment, net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">217,055</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">198,147</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">69,898</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Goodwill
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">18,641</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">17,121</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other intangibles, net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,551</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,896</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,966</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Deferred income taxes
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">334</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">33,694</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">18,351</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,347</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">457,823</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">379,336</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">108,442</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="15"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="15" align="center" valign="top">
    <B><FONT size="2">Liabilities and Stockholder&#146;s Equity and
    Partners&#146; Capital</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Current liabilities:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Current portion of long-term debt
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,723</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">13,329</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,243</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Note payable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,638</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14,425</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Notes payable to affiliate
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">23,953</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Bank overdraft
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,250</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,854</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Trade accounts payable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">60,803</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">41,357</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,223</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accrued expenses and other current liabilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">64,617</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">35,142</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,701</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total current liabilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">136,031</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">110,107</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">45,120</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Long-term debt, net of current portion
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">181,256</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">57,210</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14,500</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Workers&#146; compensation benefits
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,934</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,660</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Postretirement medical benefits
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">13,490</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,662</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,951</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Asset retirement obligation
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">33,933</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">32,607</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">13,945</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Deferred gains on sales of property interests
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,536</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,934</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Deferred income taxes
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,828</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">823</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other liabilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,009</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,486</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,542</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total liabilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">384,017</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">226,489</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">85,058</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Minority interest
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">28,921</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">66,480</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="15"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Stockholder&#146;s Equity and Partners&#146;
    Capital:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="15"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Alpha NR Holding, Inc.:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Preferred stock&#151; par value $0.01,
    1,000&nbsp;shares authorized, none issued
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Common stock&#151; par value $0.01,
    1,000&nbsp;shares authorized, 100&nbsp;shares issued and
    outstanding
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Additional paid-in capital
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">22,153</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">75,710</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">21,384</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Retained earnings (accumulated deficit)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">17,751</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,442</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(529</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total Alpha NR Holding, Inc. stockholder&#146;s
    equity
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">39,904</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">77,152</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">20,855</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">ANR Fund&nbsp;IX Holdings, L.P.:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Partners&#146; capital
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,981</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,215</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,529</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total stockholder&#146;s equity and
    partners&#146; capital
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">44,885</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">86,367</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">23,384</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total liabilities and stockholder&#146;s equity
    and partners&#146; capital
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">457,823</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">379,336</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">108,442</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">
<I><FONT size="2">See accompanying notes to combined financial
statements.</FONT></I>

<P align="center"><FONT size="2">F-3
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="center">
<B><FONT size="2">ANR FUND IX HOLDINGS, L.P. AND ALPHA NR
HOLDING, INC. AND SUBSIDIARIES</FONT></B>

<DIV align="left">
<A name='303'></A>
</DIV>

<!-- link1 "COMBINED STATEMENTS OF OPERATIONS (In thousands)" -->

<P align="center">
<B><FONT size="2">COMBINED STATEMENTS OF OPERATIONS</FONT></B>

<DIV align="center">
<B><FONT size="2">(In thousands)</FONT></B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="21%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="15"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="15" align="center" nowrap><B><FONT size="1">Company</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Predecessor</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="15" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Period from</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Period from</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Nine Months Ended</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;14,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">January&nbsp;1,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">September&nbsp;30,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Year Ended</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002 to</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002 to</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Year Ended</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;13,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2004</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">(unaudited)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Revenues:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Coal revenues
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">808,655</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">504,660</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">701,262</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,260</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">154,715</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">227,237</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Freight and handling revenues
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">106,291</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">49,803</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">73,800</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,009</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">17,001</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25,808</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other revenues
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">22,117</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,244</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">17,504</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">101</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,031</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,472</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total revenues
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">937,063</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">565,707</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">792,566</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,370</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">177,747</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">261,517</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Costs and expenses:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cost of coal sales
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">677,100</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">450,731</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">632,979</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,268</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">158,924</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">219,545</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Freight and handling costs
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">106,291</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">49,803</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">73,800</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,009</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">17,001</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25,808</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cost of other revenues
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16,943</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,532</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16,750</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">120</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,973</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,156</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Depreciation, depletion and amortization
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">39,352</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25,806</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">36,054</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">274</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,814</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,866</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Asset impairment charge
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,100</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Selling, general and administrative expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">35,786</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16,697</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">21,949</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">471</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,797</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,370</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Costs to exit business
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25,274</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,500</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total costs and expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">880,572</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">554,569</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">781,532</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,142</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">224,783</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">274,245</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Refund of federal black lung excise tax
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,049</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16,213</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Gain on sale of fixed assets, net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">342</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other operating income, net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,430</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">94</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Income (loss) from operations
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">56,833</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,138</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,034</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(772</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(43,557</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,579</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other income (expense):
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Interest expense
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(14,497</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(5,964</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(7,848</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(203</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(35</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Interest income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">331</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">91</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">103</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,072</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,993</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Miscellaneous income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">527</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">451</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">575</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,250</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total other income (expense), net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(13,639</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(5,422</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(7,170</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(197</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,037</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,243</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Income (loss) before income taxes and minority
    interest
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">43,194</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,716</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,864</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(969</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(41,520</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,822</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Income tax expense (benefit)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,732</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">988</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">668</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(334</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(17,198</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,497</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Income (loss) before minority interest
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">38,462</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,728</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,196</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(635</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(24,322</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,319</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Minority interest
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">19,562</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,750</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">934</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net income (loss)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">18,900</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,978</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,262</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(635</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(24,322</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,319</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">
<I><FONT size="2">See accompanying notes to combined financial
statements.</FONT></I>

<P align="center"><FONT size="2">F-4
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="center">
<B><FONT size="2">ANR FUND IX HOLDINGS, L.P. AND ALPHA NR
HOLDING, INC. AND SUBSIDIARIES</FONT></B>

<DIV align="left">
<A name='304'></A>
</DIV>

<!-- link1 "COMBINED STATEMENTS OF STOCKHOLDER&#146;S EQUITY AND PARTNERS&#146; CAPITAL (In thousands)" -->

<P align="center">
<B><FONT size="2">COMBINED STATEMENTS OF STOCKHOLDER&#146;S
EQUITY AND PARTNERS&#146; CAPITAL</FONT></B>

<DIV align="center">
<B><FONT size="2">(In thousands)</FONT></B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="27%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Retained</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Net</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Deferred</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Earnings</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Receivables</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Taxes</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Capital</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">(Accumulated</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Company</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">from</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Receivable</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">Predecessor</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Contributions</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Deficit)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Equity</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Affiliates</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">from Parent</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Total</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Balances, December&nbsp;31, 2000
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">51,034</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(124,525</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(68,576</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(142,067</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,319</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,319</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Capital contribution
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">151,956</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(151,956</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Affiliate transactions, net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,893</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">41</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,852</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Balances, December&nbsp;31, 2001
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">211,313</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(279,374</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(68,532</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(136,593</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net loss
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(24,322</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(24,322</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Capital contribution
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">329,964</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(329,964</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Affiliate transactions, net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">35,937</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">35,937</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Deferred taxes receivable from parent
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(8,023</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(8,023</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Balances, December&nbsp;13, 2002
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">516,955</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(573,401</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(76,551</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(132,997</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="center">
<HR size="1" width="100%" align="center" noshade>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="27%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Total</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Retained</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Total Alpha</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Stockholder&#146;s</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Additional</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Earnings</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">NR&nbsp;Holding, Inc.</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Equity and</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Common</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Paid-In</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">(Accumulated</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Stockholder&#146;s</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Partners&#146;</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Partners&#146;</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">Company</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Stock</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Capital</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Deficit)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Equity</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Capital</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Capital</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Balances, December&nbsp;14, 2002
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net loss
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(529</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(529</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(106</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(635</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Contributed capital
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,635</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,635</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Issuance of common stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">21,384</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">21,384</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">21,384</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Balances, December&nbsp;31, 2002
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">21,384</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(529</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">20,855</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,529</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">23,384</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,971</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,971</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">291</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,262</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Contributed capital
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15,153</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15,153</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,868</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">17,021</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Notes payable to affiliate contributed to capital
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">39,173</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">39,173</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,827</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">44,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Noncash distribution of Virginia Tax Credit
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(300</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(300</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Balances, December&nbsp;31, 2003
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">75,710</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,442</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">77,152</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,215</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">86,367</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16,309</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16,309</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,591</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">18,900</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Noncash distribution of Virginia Tax Credit
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(225</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(225</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Distributions
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(53,557</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(53,557</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(6,600</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(60,157</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Balances, September&nbsp;30, 2004
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">22,153</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">17,751</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">39,904</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,981</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">44,885</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">
<I><FONT size="2">See accompanying notes to combined financial
statements.</FONT></I>

<P align="center"><FONT size="2">F-5
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="center">
<B><FONT size="2">ANR FUND IX HOLDINGS, L.P. AND ALPHA NR
HOLDING, INC. AND SUBSIDIARIES</FONT></B>

<P align="center">
<B><FONT size="2">COMBINED STATEMENTS OF CASH FLOWS</FONT></B>

<DIV align="center">
<B><FONT size="2">(In thousands)</FONT></B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="20%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="5"></TD>
    <TD></TD>
    <TD colspan="15"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="5"></TD>
    <TD></TD>
    <TD colspan="15" align="center" nowrap><B><FONT size="1">Company</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Predecessor</FONT></B></TD>
</TR>

<TR>
    <TD colspan="5"></TD>
    <TD></TD>
    <TD colspan="15" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="5"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Period from</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Period from</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="5"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Nine Months Ended</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;14,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">January&nbsp;1,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="5"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">September&nbsp;30,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Year Ended</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002 to</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002 to</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Year Ended</FONT></B></TD>
</TR>

<TR>
    <TD colspan="5"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;13,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="5"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2004</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
</TR>

<TR>
    <TD colspan="5"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="5"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">(unaudited)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="5" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Operating activities:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net income (loss)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">18,900</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,978</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,262</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(635</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(24,322</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,319</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Adjustments to reconcile net income (loss) to net
    cash provided by (used in) operating activities:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Depreciation, depletion and amortization
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">39,352</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25,806</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">36,054</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">274</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,814</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,866</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Amortization and write-off of debt issuance costs
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,039</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">892</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,276</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">59</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Minority interest
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">19,562</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,750</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">934</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accretion of asset retirement obligation
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,902</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,563</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,699</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">57</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Virginia tax credit
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,930</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,414</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,879</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Bad debt provision
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">298</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">45</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">68</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,296</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net pension credit
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(928</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,640</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Loss on settlement of asset retirement obligation
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">636</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Asset impairment charge
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,100</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Write-off of advance royalties
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,099</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Amortization of deferred gains on sales of
    property interests
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(690</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(412</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(618</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Gain on sale of fixed assets, net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(342</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Deferred income taxes
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,448</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">988</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">668</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(334</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(8,023</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">41</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other, net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(795</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Changes in operating assets and liabilities:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Trade accounts receivable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(27,568</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(32,102</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(21,056</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(7,472</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,244</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,561</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Notes and other receivables
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(183</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(959</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,358</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Inventories
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(19,841</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,736</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">13,014</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">549</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Prepaid expenses and other current assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,478</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(5,478</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">793</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(138</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(5,418</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(3,405</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,497</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,455</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(5,485</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,850</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,328</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Trade accounts payable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">18,534</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">23,077</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12,234</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,057</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(3,925</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,257</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accrued expenses and other current liabilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">26,341</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">20,348</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16,392</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,706</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(15,115</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(473</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Workers&#146; compensation benefits
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,274</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,681</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,660</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,879</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,140</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Postretirement medical benefits
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,828</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">727</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,236</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">36</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,710</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">845</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Asset retirement obligation expenditures
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,495</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,308</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,252</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,270</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,466</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other liabilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(4,314</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,538</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,458</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25,081</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,203</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net cash provided by (used in) operating
    activities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">99,247</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">38,149</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">54,104</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(295</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(13,816</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,655</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">F-6
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">ANR FUND IX HOLDINGS, L.P. AND ALPHA NR
HOLDING, INC. AND SUBSIDIARIES</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">COMBINED STATEMENTS OF CASH FLOWS&#151;
(Continued)</FONT></B>

<DIV align="center">
<B><FONT size="2">(In thousands)</FONT></B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="26%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="15"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="15" align="center" nowrap><B><FONT size="1">Company</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Predecessor</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="15" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Period from</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Period from</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Nine Months Ended</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;14,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">January&nbsp;1,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">September&nbsp;30,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Year Ended</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002 to</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002 to</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Year Ended</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;13,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2004</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">(unaudited)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Investing activities:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Capital expenditures
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(52,984</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(27,130</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(27,719</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(960</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(21,866</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(10,218</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Proceeds from disposition of property, plant, and
    equipment
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">595</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">65,174</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">65,174</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">76</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">403</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Purchase of net assets of acquired companies
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,891</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(95,780</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(133,757</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(37,202</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Purchase of equity investment
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(3,250</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Issuance of note receivable to coal supplier, net
    of collections of $675
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(9,325</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Deferred acquisition costs
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(731</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Decrease (increase) in due from affiliate
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">620</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(3,397</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(3,770</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other, net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(264</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">612</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net cash used in investing activities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(67,235</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(61,133</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(100,072</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(38,893</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(22,054</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(9,203</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Financing activities:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net repayments of notes payable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(11,787</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(13,878</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(15,600</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,920</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Proceeds from issuance of long-term debt
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">175,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">38,518</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">58,518</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Repayments on long-term debt
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(64,920</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(28,956</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(30,054</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Increase in bank overdraft
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">396</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,807</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,854</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Debt issuance costs
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(10,563</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(3,563</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(4,454</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(340</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Deferred offering costs
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(670</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(727</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Advances from affiliates
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">20,047</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">20,047</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">23,953</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">35,783</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Capital contributions
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,118</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,118</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,635</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Issuance of common stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15,153</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15,153</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">21,384</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Distributions to owners
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(60,157</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Distributions to minority interest
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(55,416</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,007</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(3,085</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">458</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net cash provided by (used in) financing
    activities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(27,447</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">33,569</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">48,770</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">47,632</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">35,783</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,462</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net increase (decrease) in cash and cash
    equivalents
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,565</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,585</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,802</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,444</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(87</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(10</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cash and cash equivalents at beginning of period
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,246</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,444</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,444</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">175</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">185</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cash and cash equivalents at end of period
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15,811</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">19,029</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,246</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,444</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">88</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">175</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">
<I><FONT size="2">See accompanying notes to combined financial
statements.</FONT></I>

<P align="center"><FONT size="2">F-7
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">ANR FUND IX HOLDINGS, L.P. AND ALPHA NR
HOLDING, INC. AND SUBSIDIARIES</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">COMBINED STATEMENTS OF CASH FLOWS&#151;
(Continued)</FONT></B>

<DIV align="center">
<B><FONT size="2">(In thousands)</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">ANR FUND IX HOLDINGS, L.P. AND ALPHA NR
HOLDING, INC. AND SUBSIDIARIES</FONT></B>

<P align="left">
<A name='324'></A>

<!-- link1 "NOTES TO COMBINED FINANCIAL STATEMENTS" -->

<DIV align="center">
<B><FONT size="2">NOTES TO COMBINED FINANCIAL
STATEMENTS</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">Information for the Nine Months Ended
September&nbsp;30, 2003 is Unaudited</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">(In thousands, except percentages and share
and per share data)</FONT></B>
</DIV>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">(1)</FONT></B></TD>
    <TD>
    <B><FONT size="2">Business and Basis of Presentation</FONT></B></TD>
</TR>

</TABLE>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Organization and Business</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">ANR Fund&nbsp;IX Holdings, L.P. and Alpha NR
Holding, Inc., formerly named Alpha Natural Resources, Inc.,
(together, the FR Affiliates) are entities under the common
control of First Reserve Fund&nbsp;IX, L.P. and were formed in
2002 to acquire coal mining assets in the Appalachian region of
the United States. In December 2002, ANR Fund&nbsp;IX Holdings,
L.P. and Alpha NR Holding, Inc. formed ANR Holdings, LLC (ANR
Holdings) and acquired membership interests of approximately 11%
and 89%, respectively. ANR Holdings is the parent of Alpha
Natural Resources, LLC (Alpha) and the latter entity and its
subsidiaries acquired our Predecessor, the majority of the
Virginia coal operations of Pittston Coal Company, a subsidiary
of The Brink&#146;s Company (formerly known as The Pittston
Company), on December&nbsp;13, 2002 (described in note&nbsp;20).
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The acquisition of Coastal Coal Company
(described in note&nbsp;20)&nbsp;was completed on
January&nbsp;31, 2003 by subsidiaries of ANR Holdings. The
acquisition of U.S.&nbsp;AMCI (described in note&nbsp;20) was
completed on March&nbsp;11, 2003. Concurrent with the
acquisition of U.S. AMCI, ANR Holdings issued additional
membership interests in the aggregate amount of 45.3% to the
former owners of U.S.&nbsp;AMCI, Madison Capital Funding, LLC
and members of management in exchange for the net assets of
U.S.&nbsp;AMCI and cash. After completion of this transaction,
the FR Affiliates owned 54.7% of ANR Holdings.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The acquisition of Mears Enterprises, Inc. and
affiliated entities (described in note&nbsp;20) was completed on
November&nbsp;17, 2003.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The financial statements for the period from
December&nbsp;14, 2002 to December&nbsp;31, 2002, the year ended
December&nbsp;31, 2003 and the nine month periods ended
September&nbsp;30, 2004 and 2003 are presented on a combined
basis. The entities included in the combined financial
statements, except our Predecessor, are collectively referred to
as &#147;the Company&#148;.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company and its operating subsidiaries are
engaged in the business of extracting, processing and marketing
coal from deep and surface mines, principally located in the
Eastern and Southeastern regions of the United States, for sale
to utility and steel companies in the United States and in
international markets.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Operating Subsidiaries of Alpha Natural
    Resources, LLC:</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Companies with coal reserves and/or production
facilities:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">Paramont Coal Company Virginia, LLC
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">Dickenson-Russell Coal Company, LLC
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">Alpha Terminal Company, LLC
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">Alpha Land and Reserves, LLC
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">AMFIRE, LLC and Subsidiaries
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">McDowell Wyoming Coal Company, LLC and
    Subsidiaries
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Companies providing administrative, sales and
other services:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">Alpha Coal Sales Co., LLC
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">Alpha Natural Resources Capital Corp.
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">F-8
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">ANR FUND IX HOLDINGS, L.P. AND ALPHA NR
HOLDING, INC. AND SUBSIDIARIES</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</FONT></B>

<DIV align="center">
<B><FONT size="2">Information for the Nine Months Ended
September&nbsp;30, 2003 is Unaudited</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">(In thousands, except percentages and share
and per share data)</FONT></B>
</DIV>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">Alpha Natural Resources Services, LLC
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">Maxxim Rebuild Co., LLC
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">Maxxim Shared Services, LLC
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">Alpha Energy Global Marketing, LLC
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Holding companies:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">Maxxim Carbon Resources, LLC
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">Esperanza Coal Co., LLC
    </FONT></TD>
</TR>

</TABLE>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Principles of Combination</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The accompanying combined financial statements
include the accounts of the Company described above. All
significant intercompany accounts and transactions have been
eliminated.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Predecessor</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Prior to December&nbsp;13, 2002, the Company had
no operations. On December&nbsp;13, 2002, the Company acquired
the majority of the Virginia coal operations of Pittston Coal
Company (the Combined Virginia Entity or Predecessor) through a
number of asset acquisitions by the Company&#146;s subsidiaries.
The Combined Virginia Entity is considered the Predecessor to
the Company. As such, the historical financial statements of the
Combined Virginia Entity are included in the accompanying
combined financial statements, including the combined statements
of operations, cash flows, and shareholders&#146; equity, for
the period from January&nbsp;1, 2002 to December&nbsp;13, 2002
and for the year ended December&nbsp;31, 2001 (the
&#147;Predecessor combined financial statements&#148;). The
Predecessor combined financial statements are not necessarily
indicative of the future financial position or results of
operations of the Company.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Predecessor&#146;s combined financial
statements have not been adjusted to give effect to the
acquisition. For this reason, the combined financial statements
of the Company after the acquisition are not comparable to the
Predecessor&#146;s combined financial statements prior to the
acquisition.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">The Company</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The accompanying combined balance sheets as of
September&nbsp;30, 2004 and December&nbsp;31, 2003 and 2002, and
the combined statements of operations, cash flows, and
stockholder&#146;s equity and partners&#146; capital for the
nine months ended September&nbsp;30, 2004 and 2003, the year
ended December&nbsp;31, 2003 and the period from
December&nbsp;14, 2002 to December&nbsp;31, 2002, reflect the
combined financial position, results of operations and cash
flows of the Company from the date of acquisition of the
Predecessor. See also note&nbsp;20.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Unaudited Interim Financial
    Information</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The accompanying unaudited interim financial
statements for the nine months ended September&nbsp;30, 2003
have been prepared in accordance with U.S.&nbsp;generally
accepted accounting principles for interim financial
information. The combined statements of operations and cash
flows for the nine months ended September&nbsp;30, 2003 are
unaudited but include all adjustments (consisting of normal
recurring adjustments) which the Company considers necessary for
a fair presentation of the operating results and cash flows for
the period presented. The results of operations for any interim
period are not necessarily indicative of the results to be
expected for the full year.
</FONT>

<P align="center"><FONT size="2">F-9
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">ANR FUND IX HOLDINGS, L.P. AND ALPHA NR
HOLDING, INC. AND SUBSIDIARIES</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</FONT></B>

<DIV align="center">
<B><FONT size="2">Information for the Nine Months Ended
September&nbsp;30, 2003 is Unaudited</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">(In thousands, except percentages and share
and per share data)</FONT></B>
</DIV>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">(2)</FONT></B></TD>
    <TD>
    <B><FONT size="2">Summary of Significant Accounting Policies and
    Practices</FONT></B></TD>
</TR>

</TABLE>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B><I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)</FONT></I></B></TD>
    <TD>
    <B><I><FONT size="2">Cash and Cash Equivalents</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Cash and cash equivalents consist of cash and
highly liquid, short-term investments. Cash and cash equivalents
are stated at cost, which approximates fair market value. For
purposes of the combined statements of cash flows, the Company
considers all highly liquid debt instruments with original
maturities of three months or less to be cash equivalents.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B><I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)</FONT></I></B></TD>
    <TD>
    <B><I><FONT size="2">Trade Accounts Receivable and Allowance for
    Doubtful Accounts</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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. Account balances are charged off against
the allowance after all means of collection have been exhausted
and the potential for recovery is considered remote. The Company
does not have any off-balance-sheet credit exposure related to
its customers.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The changes in the allowance for doubtful
accounts were as follows:
</FONT>

<CENTER>
<TABLE width="60%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="90%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Bad debt provision
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Balance as of December&nbsp;31, 2002
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Bad debt provision
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">68</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Balance as of December&nbsp;31, 2003
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">73</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Bad debt provision
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">298</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Bad debt write-offs
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(114</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Balance as of September&nbsp;30, 2004
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">257</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B><I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)</FONT></I></B></TD>
    <TD>
    <B><I><FONT size="2">Inventories</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Coal inventories are stated at the lower of cost
or market. The cost of coal inventories is determined based on
average cost of production, which includes all costs incurred to
extract, transport and process the coal. Coal is classified as
inventory at the point in time the coal is extracted from the
mine and weighed at a loading facility.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Material and supplies inventories are valued at
average cost, less an allowance for obsolete and surplus items.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B><I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)</FONT></I></B></TD>
    <TD>
    <B><I><FONT size="2">Property, Plant, and
    Equipment</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Costs for mineral properties, mineral rights, and
mine development incurred to expand capacity of operating mines
or to develop new mines are capitalized and charged to
operations on the units-of-production method over the estimated
proven and probable reserve tons. Mine development costs include
costs incurred for site preparation and development of the mines
during the development stage. Mobile mining equipment and other
fixed assets are stated at cost and depreciated on a
straight-line basis over estimated useful lives ranging from 2
to 20&nbsp;years. Leasehold improvements are amortized, using
the straight-line method, over their estimated useful lives or
the term of the lease, whichever is shorter. Major
</FONT>

<P align="center"><FONT size="2">F-10
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">ANR FUND IX HOLDINGS, L.P. AND ALPHA NR
HOLDING, INC. AND SUBSIDIARIES</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</FONT></B>

<DIV align="center">
<B><FONT size="2">Information for the Nine Months Ended
September&nbsp;30, 2003 is Unaudited</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">(In thousands, except percentages and share
and per share data)</FONT></B>
</DIV>

<P align="left">
<FONT size="2">repairs and betterments that significantly extend
original useful lives or improve productivity are capitalized
and depreciated over the period benefited. Maintenance and
repairs are expensed as incurred.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B><I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)</FONT></I></B></TD>
    <TD>
    <B><I><FONT size="2">Impairment of Long-Lived
    Assets</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In accordance with SFAS&nbsp;No.&nbsp;144,
<I>Accounting for the Impairment or Disposal of Long-lived
Assets</I>, long-lived assets, such as property, plant,
equipment, and purchased intangibles subject to amortization,
are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may
not be recoverable. Recoverability of assets to be held and used
is measured by a comparison of the carrying amount of an asset
to estimated undiscounted future cash flows expected to be
generated by the asset. If the carrying amount of an asset
exceeds its estimated future cash flows, an impairment charge is
recognized by the amount by which the carrying amount of the
asset exceeds the fair value of the asset. Assets to be disposed
of would be separately presented in the balance sheet and
reported at the lower of the carrying amount or fair value less
costs to sell, and would no longer be depreciated. The assets
and liabilities of a disposal group classified as held for sale
would be presented separately in the appropriate asset and
liability sections of the balance sheet.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B><I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)</FONT></I></B></TD>
    <TD>
    <B><I><FONT size="2">Goodwill and Other Intangible
    Assets</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Goodwill represents the excess of costs over fair
value of net assets of 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 August of each year. SFAS&nbsp;No.&nbsp;142 also
requires that intangible assets with estimable useful lives be
amortized over their respective estimated useful lives to their
estimated residual values, and reviewed for impairment in
accordance with SFAS&nbsp;No.&nbsp;144. The impairment review in
August 2004 supported the carrying value of goodwill.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B><I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)</FONT></I></B></TD>
    <TD>
    <B><I><FONT size="2">Health Insurance Programs</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company is principally self-insured for costs
of health and medical claims. The Company utilizes commercial
insurance to cover specific claims in excess of $250.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B><I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h)</FONT></I></B></TD>
    <TD>
    <B><I><FONT size="2">Income Taxes</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company and the Predecessor account for
income taxes in accordance with SFAS&nbsp;No.&nbsp;109,
<I>Accounting for Income Taxes</I>, which requires recognition
of deferred tax assets and liabilities for the expected future
tax consequences of events that have been included in the
financial statements or tax returns. Under this method, deferred
tax assets and liabilities are determined based on the
difference between the financial statement and tax bases of
assets and liabilities using enacted tax rates in effect for the
year in which those items are expected to reverse.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD><B><I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)</FONT></I></B></TD>
    <TD>
    <B><I><FONT size="2">Asset Retirement Obligation</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Minimum standards for mine reclamation have been
established by various regulatory agencies and dictate the
reclamation requirements at the Company&#146;s operations. The
Company records these reclamation obligations under the
provisions of SFAS&nbsp;No.&nbsp;143, <I>Accounting for Asset
Retirement Obligations</I>. SFAS&nbsp;No.&nbsp;143 requires the
fair value of a liability for an asset retirement obligation to
be recognized in the period in which the legal obligation
associated with the retirement of the long-lived asset is
incurred. When the liability is initially recorded, the offset
is capitalized by increasing the carrying
</FONT>

<P align="center"><FONT size="2">F-11
</FONT>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">ANR FUND IX HOLDINGS, L.P. AND ALPHA NR
HOLDING, INC. AND SUBSIDIARIES</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</FONT></B>

<DIV align="center">
<B><FONT size="2">Information for the Nine Months Ended
September&nbsp;30, 2003 is Unaudited</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">(In thousands, except percentages and share
and per share data)</FONT></B>
</DIV>

<P align="left">
<FONT size="2">amount of the related long-lived asset. Over
time, the liability is accreted to its present value each
period, and the capitalized cost is depreciated over the useful
life of the related asset. To settle the liability, the
obligation is paid, and to the extent there is a difference
between the liability and the amount of cash paid, a gain or
loss upon settlement is recorded. The Company annually reviews
its estimated future cash flows for its asset retirement
obligation.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In connection with the business acquisitions
described in note&nbsp;20, the Company recorded the fair value
of the reclamation liabilities assumed as part of the
acquisitions in accordance with SFAS&nbsp;No.&nbsp;143.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Predecessor charged expenditures relating to
environmental regulatory requirements and reclamation costs
undertaken during mine operations against earnings as incurred.
Estimated site restoration and post-closure reclamation costs
were charged against earnings using the units-of-production
method over the expected economic life of each mine. Accrued
reclamation costs were subject to review by our
Predecessor&#146;s management on a regular basis and were
revised when appropriate for changes in future estimated costs
and/or regulatory requirements.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD><B><I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j)</FONT></I></B></TD>
    <TD>
    <B><I><FONT size="2">Royalties</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Lease rights to coal lands are often acquired in
exchange for royalty payments. Advance mining royalties are
advance payments made to lessors under terms of mineral lease
agreements that are recoupable against future production. These
advance payments are deferred and charged to operations as the
coal reserves are mined. In instances where advance payments are
not expected to be offset against future production royalties,
no asset is recognized and the scheduled future minimum payments
are expensed and recognized as liabilities.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B><I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(k)</FONT></I></B></TD>
    <TD>
    <B><I><FONT size="2">Revenue Recognition</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company recognizes revenue on coal sales when
title passes to the customer in accordance with the terms of the
sales agreement, which generally occurs when the coal is loaded
into transport carriers at the mine for shipment to the
customer. Revenue from international coal sales is recorded at
the time coal is loaded onto the shipping vessel. In the event
that new contracts are negotiated with a customer and shipments
commence before the old contract is complete, the Company
recognizes as revenue the lower of the cumulative amount billed
or an amount based on the weighted average price of the new and
old contracts applied to the tons sold.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Freight and handling costs paid to third-party
carriers and invoiced to coal customers are recorded as freight
and handling costs and freight and handling revenues,
respectively.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Other revenues generally consist of equipment and
parts sales, equipment rebuild and maintenance services, coal
handling and processing, trucking services for unrelated
parties, royalties, commissions on coal trades, and rental
income. These revenues are recognized in the period earned or
when the service is completed.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD><B><I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(l)</FONT></I></B></TD>
    <TD>
    <B><I><FONT size="2">Deferred Financing Costs</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In connection with obtaining financing, the
Company incurred deferred financing costs totaling $10,563,
$3,563, $4,454, and $340 during the nine months ended
September&nbsp;30, 2004 and 2003, the year ended
December&nbsp;31, 2003, and the period from December&nbsp;14,
2002 to December&nbsp;31, 2002, respectively. These financing
costs have been deferred and are included in other assets in the
accompanying combined balance sheets. Also see note&nbsp;12.
These deferred financing costs are being amortized to interest
expense using the straight-line method over the life of the
related indebtedness or credit facility. Amortization
</FONT>

<P align="center"><FONT size="2">F-12
</FONT>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">ANR FUND IX HOLDINGS, L.P. AND ALPHA NR
HOLDING, INC. AND SUBSIDIARIES</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</FONT></B>

<DIV align="center">
<B><FONT size="2">Information for the Nine Months Ended
September&nbsp;30, 2003 is Unaudited</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">(In thousands, except percentages and share
and per share data)</FONT></B>
</DIV>

<P align="left">
<FONT size="2">expense for the nine months ended
September&nbsp;30, 2004 and 2003, the year ended
December&nbsp;31, 2003, and the period from December&nbsp;14,
2002 to December&nbsp;31, 2002 totaled $4,039, $892, $1,276, and
$59, respectively. Due to the termination of a prior credit
facility, amortization expense for the nine months ended
September&nbsp;30, 2004 includes a $2,819 write-off of deferred
financing costs.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B><I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(m)</FONT></I></B></TD>
    <TD>
    <B><I><FONT size="2">Virginia Coalfield Employment Enhancement
    Tax Credit</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">For tax years 1996 through 2007, Virginia
companies with an economic interest in coal earn tax credits
based upon tons sold, seam thickness, and employment levels. The
maximum credit earned equals $0.40&nbsp;per ton for surface
mined coal and $1.00 or $2.00&nbsp;per ton for deep mined coal
depending on seam thickness. Credits allowable are reduced from
the maximum amounts if employment levels are not maintained from
the previous year, and no credit is allowed for coal sold to
Virginia utilities. Currently, the cash benefit of the credit is
realized three years after being earned and either offsets taxes
imposed by Virginia at 100% or is refundable by the state at 85%
of the face value to the extent taxes are not owed. The Company
records the present value of the portion of the credit that is
refundable as a reduction of operating costs as it is earned.
The Company records the portion of the credit that is allocated
to Alpha NR Holding, Inc. as an other asset. The Company records
the portion of the credit that is allocated to ANR Fund&nbsp;IX
Holdings, L.P. and minority interest owners as noncash
distributions.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B><I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(n)</FONT></I></B></TD>
    <TD>
    <B><I><FONT size="2">Workers&#146; Compensation and
    Pneumoconiosis (Black Lung) Benefits</FONT></I></B></TD>
</TR>

</TABLE>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Workers&#146; Compensation</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company is self-insured for workers&#146;
compensation claims at certain of its operations in West
Virginia. Workers&#146; compensation at all other locations in
West Virginia is insured through the West Virginia state
insurance program. Workers&#146; compensation claims at
locations in all other states where the Company operates are
covered by a third party insurance provider.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The liabilities for workers&#146; compensation
claims that are self-insured are estimates of the ultimate
losses incurred based on the Company&#146;s experience, and
include a provision for incurred but not reported losses.
Adjustments to the probable ultimate liabilities are made
annually based on an actuarial study and adjustments to the
liability are recorded based on the results of these studies.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Black Lung Benefits</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company is required by federal and state
statutes to provide benefits to employees for awards related to
black lung. These claims are covered by a third party insurance
provider in all locations where the Company operates with the
exception of West Virginia. The Company is self-insured for
state black lung related claims at certain locations in West
Virginia.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The liabilities for state black lung related
claims in West Virginia that are self-insured are estimates of
the ultimate losses incurred based on the Company&#146;s
experience, and include a provision for incurred but not
reported losses. Estimates of the liabilities are made annually
based on an actuarial study and adjustments to the liability are
recorded based on the results of these studies.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company did not assume any responsibility for
workers&#146; compensation or black lung claims incurred by any
of its subsidiaries prior to their acquisition. Also see
note&nbsp;20.
</FONT>

<P align="center"><FONT size="2">F-13
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">ANR FUND IX HOLDINGS, L.P. AND ALPHA NR
HOLDING, INC. AND SUBSIDIARIES</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</FONT></B>

<DIV align="center">
<B><FONT size="2">Information for the Nine Months Ended
September&nbsp;30, 2003 is Unaudited</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">(In thousands, except percentages and share
and per share data)</FONT></B>
</DIV>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B><I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(o)</FONT></I></B></TD>
    <TD>
    <B><I><FONT size="2">Postretirement Benefits Other Than
    Pensions</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company accounts for health care and life
insurance benefits provided for current and certain 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.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B><I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(p)</FONT></I></B></TD>
    <TD>
    <B><I><FONT size="2">Equity Investments</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The accompanying combined financial statements
include the accounts of the Company and its majority owned
subsidiaries. Investments in unconsolidated subsidiaries
representing ownership of at least 20% but less than 50% are
accounted for under the equity method. Under the equity method
of accounting, the Company&#146;s proportionate share of the
investment company&#146;s income is included in the
Company&#146;s net income or loss with a corresponding increase
or decrease in the carrying value of the investment.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B><I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(q)</FONT></I></B></TD>
    <TD>
    <B><I><FONT size="2">Use of Estimates</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The preparation of the combined 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; 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.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">(3)</FONT></B></TD>
    <TD>
    <B><FONT size="2">Notes and Other Receivables</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Notes and other receivables consisted of the
following:
</FONT>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="59%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">September&nbsp;30,</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2004</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Notes receivable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,283</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">577</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other receivables
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,482</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,165</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total notes and other receivable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,765</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,742</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As part of a coal purchase agreement, the Company
loaned an unrelated coal supplier $10,000 on June&nbsp;10, 2004
at a variable interest rate to be repaid in installments over a
two-year period beginning in August 2004. The loan is secured by
the assets of the company and personally guaranteed by the
company&#146;s owner. As of September&nbsp;30, 2004, $4,840 of
the outstanding amount is included in current notes and other
receivables and $4,485 is included in other assets.
</FONT>

<P align="center"><FONT size="2">F-14
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">ANR FUND IX HOLDINGS, L.P. AND ALPHA NR
HOLDING, INC. AND SUBSIDIARIES</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</FONT></B>

<DIV align="center">
<B><FONT size="2">Information for the Nine Months Ended
September&nbsp;30, 2003 is Unaudited</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">(In thousands, except percentages and share
and per share data)</FONT></B>
</DIV>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">(4)</FONT></B></TD>
    <TD>
    <B><FONT size="2">Inventories</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Inventories consisted of the following:
</FONT>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="58%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">September&nbsp;30,</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2004</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Raw coal
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,388</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,710</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,690</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Saleable coal
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">43,050</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">23,629</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,997</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Materials and supplies
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,246</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,774</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,871</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total inventories
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">52,684</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">33,113</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16,558</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">(5)</FONT></B></TD>
    <TD>
    <B><FONT size="2">Prepaid Expenses and Other Current
    Assets</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Prepaid expenses and other current assets
consisted of the following:
</FONT>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="60%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">September&nbsp;30,</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2004</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Prepaid insurance
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,032</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15,643</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Advance mining royalties
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,199</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,928</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other prepaid expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,547</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,685</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">428</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total prepaid expenses and other current assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,778</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">19,256</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">428</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">(6)</FONT></B></TD>
    <TD>
    <B><FONT size="2">Property, Plant, and Equipment</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Property, plant, and equipment consisted of the
following:
</FONT>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="57%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">September&nbsp;30,</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2004</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Land
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,096</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,544</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">687</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Mineral rights
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">84,791</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">89,519</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">40,973</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Plant, mining equipment, and mine development
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">186,503</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">125,565</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">27,991</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Office equipment and software
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,299</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,033</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">396</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Construction in progress
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,962</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,694</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">284,651</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">228,355</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">70,047</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Less accumulated depreciation, depletion, and
    amortization
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">67,596</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">30,208</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">149</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Property, plant, and equipment, net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">217,055</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">198,147</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">69,898</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As of September&nbsp;30, 2004, the Company had
commitments to purchase approximately $21,800 of new equipment,
expected to be acquired at various dates through 2005.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">At September&nbsp;30, 2004, the Company had a
contractual commitment for improvements to a preparation plant
in the remaining amount of $732.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Depreciation expense was $36,208, $19,627,
$28,438, and $104 and depletion expense was $1,749 and $1,744,
$2,396, and $45 for the nine months ended September&nbsp;30,
2004 and 2003, the year ended December&nbsp;31, 2003, and the
period from December&nbsp;14, 2002 to December&nbsp;31, 2002,
respectively.
</FONT>

<P align="center"><FONT size="2">F-15
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">ANR FUND IX HOLDINGS, L.P. AND ALPHA NR
HOLDING, INC. AND SUBSIDIARIES</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</FONT></B>

<DIV align="center">
<B><FONT size="2">Information for the Nine Months Ended
September&nbsp;30, 2003 is Unaudited</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">(In thousands, except percentages and share
and per share data)</FONT></B>
</DIV>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">(7)</FONT></B></TD>
    <TD>
    <B><FONT size="2">Goodwill</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The changes in the carrying amount of goodwill
were as follows:
</FONT>

<CENTER>
<TABLE width="60%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="87%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Balance as of December&nbsp;31, 2002
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Acquisition of U.S.&nbsp;AMCI
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">17,121</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Balance as of December&nbsp;31, 2003
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">17,121</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2004 adjustments
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,520</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Balance as of September&nbsp;30, 2004
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">18,641</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The carrying amount of goodwill was increased by
$1,520 during the nine months ended September&nbsp;30, 2004 due
to the final settlement of the amount of working capital
purchased in the U.S.&nbsp;AMCI acquisition. See note&nbsp;20.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">(8)</FONT></B></TD>
    <TD>
    <B><FONT size="2">Other Intangibles</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Other intangible assets consisted of the
following:
</FONT>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="42%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Estimated</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">September&nbsp;30,</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Remaining Life</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2004</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Sales contracts
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3&nbsp;years</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,937</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,937</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,091</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Noncompete agreements
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2&nbsp;years</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">250</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">200</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">13</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,187</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,150</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,091</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Less accumulated amortization
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,636</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,254</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">125</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total other intangibles, net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,551</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,896</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,966</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As of September&nbsp;30, 2004, aggregate annual
future amortization expense associated with other intangible
assets is as follows:
</FONT>

<CENTER>
<TABLE width="60%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="83%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Three months ending December&nbsp;31, 2004
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">170</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Year ending December&nbsp;31:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2005
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">691</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2006
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">450</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2007
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">240</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,551</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Total amortization expense recognized on
intangible assets was $1,395, $4,435, $5,234, and $125 for the
nine months ended September&nbsp;30, 2004 and 2003, the year
ended December&nbsp;31, 2003, and the period from
December&nbsp;14, 2002 to December&nbsp;31, 2002, respectively.
</FONT>

<P align="center"><FONT size="2">F-16
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">ANR FUND IX HOLDINGS, L.P. AND ALPHA NR
HOLDING, INC. AND SUBSIDIARIES</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</FONT></B>

<DIV align="center">
<B><FONT size="2">Information for the Nine Months Ended
September&nbsp;30, 2003 is Unaudited</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">(In thousands, except percentages and share
and per share data)</FONT></B>
</DIV>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">(9)</FONT></B></TD>
    <TD>
    <B><FONT size="2">Other Assets</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Other assets consisted of the following:
</FONT>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="59%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">September&nbsp;30,</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2004</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Advance mining royalties
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,884</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,638</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">335</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Deferred loan costs, net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,711</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,460</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">281</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Note receivable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,485</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Investment in terminaling facility
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,005</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,005</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Investment in Excelven Pty Ltd
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,250</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Virginia tax credit receivable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,265</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,434</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,094</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,814</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">731</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total other assets, net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">33,694</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">18,351</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,347</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD><B><FONT size="2">(10)</FONT></B></TD>
    <TD>
    <B><FONT size="2">Note Payable</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">At September&nbsp;30, 2004 and December&nbsp;31,
2003, the Company has a note payable that financed certain
insurance premiums with a remaining balance of $2,638 and
$14,425, respectively. Interest and principal are due in monthly
installments, with interest at the rate of 3.55%, with the final
payment due November&nbsp;13, 2004. The insurance policies
financed include workers&#146; compensation, black lung, and
property and liability coverages.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD><B><FONT size="2">(11)</FONT></B></TD>
    <TD>
    <B><FONT size="2">Accrued Expenses and Other Current
    Liabilities</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Accrued expenses and other current liabilities
consisted of the following:
</FONT>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="59%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">September&nbsp;30,</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2004</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Wages and employee benefits
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">21,622</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12,770</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,566</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Current portion of asset retirement obligation
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,691</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,820</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,162</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Taxes other than income taxes
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,683</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,243</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">135</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Income taxes payable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,284</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Freight
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,161</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,974</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">834</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Contractor escrow
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,593</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,499</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Deferred gains on sales of property interests
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,303</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">355</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Deferred revenues
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,498</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Current portion of self-insured workers&#146;
    compensation benefits
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,359</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">450</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Workers&#146; compensation insurance premium
    payable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">978</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">773</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Interest payable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,470</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">210</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">144</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Additional consideration on acquisition
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,753</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,222</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,048</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,860</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total accrued expenses and other current
    liabilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">64,617</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">35,142</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,701</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">F-17
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">ANR FUND IX HOLDINGS, L.P. AND ALPHA NR
HOLDING, INC. AND SUBSIDIARIES</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</FONT></B>

<DIV align="center">
<B><FONT size="2">Information for the Nine Months Ended
September&nbsp;30, 2003 is Unaudited</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">(In thousands, except percentages and share
and per share data)</FONT></B>
</DIV>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD><B><FONT size="2">(12)</FONT></B></TD>
    <TD>
    <B><FONT size="2">Long-Term Debt</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Long-term debt consisted of the following:
</FONT>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="55%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">September&nbsp;30,</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2004</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">10%&nbsp;Senior notes due 2012
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">175,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Revolving credit facility
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Variable rate term loan
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">45,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Seller financing (El&nbsp;Paso CGP Company)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">8.75% term notes
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,719</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">4.84% term notes
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,759</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,679</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">8.75% term notes
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">945</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Seller financing (Pittston Coal Company)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25,743</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Capital lease obligation
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,160</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">60</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">196</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total long-term debt
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">182,979</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">70,539</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25,743</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Less current portion
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,723</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">13,329</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,243</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Long-term debt, net of current portion
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">181,256</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">57,210</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14,500</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On May&nbsp;18, 2004, Alpha and its wholly owned
subsidiary, Alpha Natural Resources Capital Corp., issued
$175,000 of 10%&nbsp;senior notes due June 2012 in a private
placement offering under Rule&nbsp;144A of the Securities Act of
1933, as amended, resulting in net proceeds of approximately
$171,500 after fees and other offering costs. The senior notes
are unsecured but are guaranteed fully and unconditionally on a
joint and several basis by all of Alpha&#146;s wholly-owned
domestic restricted subsidiaries. Interest is payable
semi-annually in June and December.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On May&nbsp;28, 2004, Alpha entered into a new
revolving credit facility with a group of lending institutions
led by Citicorp North America, Inc., as administrative agent
(Citicorp Credit Facility). The Citicorp Credit Facility
provides for a revolving line of credit of up to $125,000 and a
funded letter of credit facility of up to $50,000. As of
September&nbsp;30, 2004, for the revolving line of credit, the
Company had $4,000&nbsp;principal amount in borrowings and $441
in letters of credit outstanding, leaving $120,559 available for
borrowing on the line of credit. As of September&nbsp;30, 2004,
the funded letter of credit facility was fully utilized at
$50,000 at an annual fee of 3.1% of the outstanding amount.
Amounts drawn under the revolver 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 revolver was 4.57% as of
September&nbsp;30, 2004. The principal balance of the revolving
credit note is due in May 2009. ANR Holdings and each of the
subsidiaries of Alpha have guaranteed Alpha&#146;s obligations
under the revolving credit facility. The obligations of Alpha,
ANR Holdings and Alpha&#146;s subsidiaries under the Citicorp
Credit Facility are collateralized by all of the assets of
Alpha, ANR Holdings and Alpha&#146;s subsidiaries. The Citicorp
Credit Facility contains various affirmative and negative
covenants which, among others, establish net worth, interest
coverage and leverage ratio requirements. The Company must pay
an annual commitment fee up to a maximum of &nbsp;1/2 of 1% of
the unused portion of the commitment. The Company was in
compliance with its debt covenants under the Citicorp Credit
Facility as of September&nbsp;30, 2004.
</FONT>

<P align="center"><FONT size="2">F-18
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">ANR FUND IX HOLDINGS, L.P. AND ALPHA NR
HOLDING, INC. AND SUBSIDIARIES</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</FONT></B>

<DIV align="center">
<B><FONT size="2">Information for the Nine Months Ended
September&nbsp;30, 2003 is Unaudited</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">(In thousands, except percentages and share
and per share data)</FONT></B>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Prior to May&nbsp;28, 2004, the Company had a
term loan and revolving credit facility with a group of lending
institutions led by PNC Bank (PNC). As of December&nbsp;31,
2003, $45,000&nbsp;principal amount was outstanding under the
term loan. The term note had a variable interest rate (4.39% at
December&nbsp;31, 2003) and was payable in quarterly principal
installments of $2,250 plus interest, with a final balloon
payment due March&nbsp;11, 2006. The PNC credit facility
provided for a revolving line of credit of up to $75,000. As of
December&nbsp;31, 2003, $10,000 principal amount and letters of
credit totaling $24,014 were outstanding. Amounts drawn under
the revolver had a variable interest rate (3.92% at
December&nbsp;31, 2003). The principal balance of the revolving
credit note was due March&nbsp;11, 2006. ANR Holdings and each
of the subsidiaries of the Company had guaranteed Alpha&#146;s
obligations under the credit facility. The Company paid an
annual commitment fee of &nbsp;1/2 of 1% of the unused portion
of the commitment. The PNC term loan and credit facility were
paid in full on May&nbsp;28, 2004.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In conjunction with the purchase of Coastal Coal
Company, LLC, the Company issued a note payable to El&nbsp;Paso
CGP on January&nbsp;31, 2003. The balance of the note at
December&nbsp;31, 2003 was $8,000. The note had a fixed interest
rate of 14% and was due on March&nbsp;11, 2009. This note was
paid in full in May 2004.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In conjunction with the purchase of the
U.S.&nbsp;coal production and marketing operations of AMCI
(U.S.&nbsp;AMCI) on March&nbsp;11, 2003, the Company assumed
term notes payable to Komatsu Financial&nbsp;LP. The balance of
the notes at December&nbsp;31, 2003, was $3,719. The notes had
fixed interest rates with a weighted average of 8.75% at
December&nbsp;31, 2003, and were payable in monthly installments
ranging from $4 to $24, through August&nbsp;1, 2006. These notes
were paid in full in May 2004.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company has term notes payable to The CIT
Group Equipment Financing, Inc. in the amount of $1,759 at
September&nbsp;30, 2004 and $2,679 at December&nbsp;31, 2003.
The term notes bear interest at a weighted average rate of
approximately 4.84% at September&nbsp;30, 2004 and
December&nbsp;31, 2003 and are payable in monthly installments
ranging from $14 to $64, through April&nbsp;2, 2006.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In conjunction with the purchase of
U.S.&nbsp;AMCI, the Company assumed term notes payable to the
Caterpillar Financial Services Corporation. The balance of the
notes at December&nbsp;31, 2003, was $945. The notes had a fixed
interest rate of 8.75% and were payable in monthly installments
ranging from $9 to $25, through October&nbsp;5, 2004. These
notes were paid in full in May 2004.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company issued notes payable to Pittston Coal
Company for the purchase of certain assets of that company on
December&nbsp;13, 2002. The balance of the notes at
December&nbsp;31, 2002, was $25,743. In 2003, the notes were
paid in full.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company entered into a capital lease for
equipment in conjunction with the purchase of substantially all
of the assets of Moravian Run Reclamation Co., Inc. on
April&nbsp;1, 2004. The lease has a term of sixty months with
monthly payments ranging from $20 to $60 with a final balloon
payment of $180 in March 2009. The effective interest rate on
the capital lease is approximately 12.15%. The capitalized cost
of the leased property was $2,160 at September&nbsp;30, 2004.
Amortization expense on capital leases is included with
depreciation expense. Accumulated amortization was $257 at
September&nbsp;30, 2004.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company&#146;s long-term debt is
collateralized by substantially all assets of the Company.
</FONT>

<P align="center"><FONT size="2">F-19
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">ANR FUND IX HOLDINGS, L.P. AND ALPHA NR
HOLDING, INC. AND SUBSIDIARIES</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</FONT></B>

<DIV align="center">
<B><FONT size="2">Information for the Nine Months Ended
September&nbsp;30, 2003 is Unaudited</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">(In thousands, except percentages and share
and per share data)</FONT></B>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Future maturities of long-term debt, including
capital lease obligations, are as follows as of
September&nbsp;30, 2004:
</FONT>

<CENTER>
<TABLE width="60%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="80%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Three months ending December&nbsp;31, 2004
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">470</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Year ending December&nbsp;31:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2005
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,678</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2006
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">736</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2007
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">500</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2008
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">316</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2009
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,279</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Thereafter
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">175,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total long-term debt
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">182,979</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Following is a schedule of future minimum lease
payments under capital lease obligations together with the
present value of the net minimum lease payments as of
September&nbsp;30, 2004:
</FONT>

<CENTER>
<TABLE width="60%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="83%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Three months ending December&nbsp;31, 2004
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">180</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Year ending December&nbsp;31:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2005
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">720</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2006
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">600</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2007
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">600</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2008
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">360</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2009
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">240</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total future minimum lease payments
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,700</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Less amount representing interest
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(540</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Present value of future minimum lease payments
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,160</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Less current portion
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(490</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Long-term capital lease obligation
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,670</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">F-20
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">ANR FUND IX HOLDINGS, L.P. AND ALPHA NR
HOLDING, INC. AND SUBSIDIARIES</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</FONT></B>

<DIV align="center">
<B><FONT size="2">Information for the Nine Months Ended
September&nbsp;30, 2003 is Unaudited</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">(In thousands, except percentages and share
and per share data)</FONT></B>
</DIV>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD><B><FONT size="2">(13)</FONT></B></TD>
    <TD>
    <B><FONT size="2">Asset Retirement Obligation</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">At September&nbsp;30, 2004 and December&nbsp;31,
2003 and 2002, the Company has recorded asset retirement
obligation accruals for mine reclamation and closure costs
totaling $40,624, $40,427, and $15,107, respectively. The
portion of the costs expected to be incurred within a year in
the amount of $6,691, $7,820, and $1,162 at September&nbsp;30,
2004, and December&nbsp;31, 2003 and 2002, respectively, is
included in accrued expenses and other current liabilities.
These regulatory obligations are secured by surety bonds in the
amount of $89,010 at September&nbsp;30, 2004 and $84,512 at
December&nbsp;31, 2003. Changes in the reclamation obligation
were as follows:
</FONT>

<CENTER>
<TABLE width="60%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="84%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Pittston Coal Company acquisition
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15,050</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accretion for 2002
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">57</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total assets retirement obligation at
    December&nbsp;31, 2002
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15,107</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Coastal Coal Company, LLC acquisition
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12,861</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">U.S.&nbsp;AMCI acquisition
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,768</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Mears Enterprises, Inc. acquisition
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,079</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accretion for 2003
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,699</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Sites added in 2003
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,165</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Expenditures in 2003
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,252</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total assets retirement obligation at
    December&nbsp;31, 2003
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">40,427</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accretion for 2004
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,902</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2004 acquisitions
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,189</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Sites added in 2004
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,145</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Revisions in estimated cash flows
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(4,544</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Expenditures in 2004
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,495</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total assets retirement obligation at
    September&nbsp;30, 2004
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">40,624</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD><B><FONT size="2">(14)</FONT></B></TD>
    <TD>
    <B><FONT size="2">Deferred Gains on Sales of Property
    Interests</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In February 2003, the Company sold an overriding
royalty interest in certain mining properties for $11,850. The
gain on this transaction in the amount of $850 was deferred and
is being amortized over the associated remaining term of the
mineral lease. This property interest was acquired from
El&nbsp;Paso CGP Company in the acquisition of the Coastal Coal
properties.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In April 2003, the Company sold mineral
properties for $53,625 in a sale/ leaseback transaction. The
estimated gain on this transaction in the amount of $7,057 was
deferred and is being amortized over the ten-year term of the
lease. Also see note&nbsp;20.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company recognized $690, $412 and $618 of the
above deferred gains for the nine months ended
September&nbsp;30, 2004 and 2003, and for the year ended
December&nbsp;31, 2003, respectively. In addition, for the nine
months ended September&nbsp;30, 2004, the deferred gain was
increased by $3,514 for revisions in estimated cash flows
underlying the asset retirement obligation relating to the
mineral properties which had been sold, increased by $1,480 for
revisions in the estimated contract reclamation liability
assumed in conjunction with the acquisition of the Virginia coal
operations of Pittston Coal Company, and decreased by $3,753
relating to the accrual of additional consideration for the
acquisition of the Virginia coal operations of Pittston Coal
Company.
</FONT>

<P align="center"><FONT size="2">F-21
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">ANR FUND IX HOLDINGS, L.P. AND ALPHA NR
HOLDING, INC. AND SUBSIDIARIES</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</FONT></B>

<DIV align="center">
<B><FONT size="2">Information for the Nine Months Ended
September&nbsp;30, 2003 is Unaudited</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">(In thousands, except percentages and share
and per share data)</FONT></B>
</DIV>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD><B><FONT size="2">(15)</FONT></B></TD>
    <TD>
    <B><FONT size="2">Fair Value of Financial Instruments</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The estimated fair values of financial
instruments under SFAS&nbsp;No.&nbsp;107, <I>Disclosures About
Fair Value of Financial Instruments</I>, are determined based on
relevant market information. These estimates involve uncertainty
and cannot be determined with precision. The following methods
and assumptions are used to estimate the fair value of each
class of financial instrument.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Cash and Cash Equivalents, Trade Accounts
Receivables, Notes Payable, Notes Payable to Affiliate, Bank
Overdraft, Trade Accounts Payable, and Other Current
Liabilities:</FONT></I><FONT size="2"> The carrying amounts
approximate fair value due to the short maturity of these
instruments.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Notes Receivable:</FONT></I><FONT size="2">
The fair value approximates the carrying value as the rates
associated with the receivables are comparable to current market
rates.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Long-term Debt:</FONT></I><FONT size="2"> The
fair value of the 10%&nbsp;Senior notes is based on the trading
value of the notes. The fair value of other long-term debt is
based on the current market rate of interest offered to the
Company for debt of similar maturities. The estimated fair
values of long-term debt were as follows:
</FONT>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="58%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">September&nbsp;30,</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2004</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">10%&nbsp;Senior notes
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">197,651</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Variable rate term loan
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">45,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Revolving credit facility
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">8.75% term notes
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,725</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">4.84% term notes
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,759</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,679</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Seller financing
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,100</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25,743</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Capital lease obligation
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,336</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">60</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">196</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total long-term debt
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">205,806</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">72,700</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25,743</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD><B><FONT size="2">(16)</FONT></B></TD>
    <TD>
    <B><FONT size="2">Employee Benefit Plans</FONT></B></TD>
</TR>

</TABLE>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">The Company</FONT></I></B></TD>
</TR>

</TABLE>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Postretirement
    Benefits Other Than Pensions</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Three of the Company&#146;s subsidiaries assumed
collective bargaining agreements as part of two acquisitions
that require these subsidiaries to provide postretirement
medical benefits to certain employees who retire after the
acquisition closing dates. In each case, however, The
Brink&#146;s Company and AMCI, as sellers, have retained the
obligation to provide postretirement medical benefits to
employees who retired prior to the acquisition closing dates
(December&nbsp;13, 2002 and March&nbsp;11, 2003, respectively)
and to employees who were not retained by these subsidiaries. In
addition, The Brink&#146;s Company retained the obligation to
provide postretirement medical benefits to a significant number
of the employees who have worked for the Company after the
acquisition closing, namely, those employees who met the
eligibility criteria by December&nbsp;31, 2003, even if the
employees will not retire until sometime in the future. These
plans are unfunded and the measurement date is December&nbsp;31
of each year. For purposes of measuring its postretirement
benefit obligation as of September&nbsp;30, 2004, the Company
used a September&nbsp;30, 2004 measurement date.
</FONT>

<P align="center"><FONT size="2">F-22
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">ANR FUND IX HOLDINGS, L.P. AND ALPHA NR
HOLDING, INC. AND SUBSIDIARIES</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</FONT></B>

<DIV align="center">
<B><FONT size="2">Information for the Nine Months Ended
September&nbsp;30, 2003 is Unaudited</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">(In thousands, except percentages and share
and per share data)</FONT></B>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Effective July&nbsp;1, 2004, the Company adopted
a plan offering postretirement medical benefits to active
union-free employees that will pay benefits of $20&nbsp;per
month per year of service for pre-65&nbsp;year old and
$9&nbsp;per month per year of service for post-65&nbsp;year old
retirees. The adoption of this new plan resulted in prior
service cost of $27,122 which will be amortized over the
remaining service of the union-free employees.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The components of the change in accumulated
benefit obligations of the plans for postretirement benefits
other than pensions were as follows:
</FONT>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="37%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Period from</FONT></B></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Nine Months</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;14,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Ended</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Year Ended</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002 to</FONT></B></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">September&nbsp;30,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2004</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Change in benefit obligation:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accumulated benefit obligation&#151; beginning of
    period:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,532</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,951</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Service cost
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,323</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">656</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">19</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Interest cost
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">837</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">580</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">17</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Actuarial gain
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(272</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(15</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Benefits paid
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(13</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Prior service cost
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">27,122</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Postretirement benefits assumed in acquisitions
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,475</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,915</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Change due to discount rate assumption
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">885</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accumulated benefit obligation&#151; end of period
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">40,529</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,532</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,951</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Funded status
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(40,529</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(11,532</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(5,951</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Unrecognized prior service cost
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">26,422</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Unrecognized net actuarial loss
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">617</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">870</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accrued postretirement medical benefits
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(13,490</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(10,662</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(5,951</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table details the components of the
net periodic benefit cost for postretirement benefits other than
pensions:
</FONT>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="50%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Nine Months</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Period from</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Ended</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December 14,</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">September&nbsp;30,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Year Ended</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002 to</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December 31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December 31,</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2004</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Service cost
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,323</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">420</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">656</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">19</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Interest cost
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">837</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">309</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">580</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">17</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Amortization of net (gain) or loss
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(18</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Amortization of prior service cost
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">698</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net periodic benefit cost
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,840</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">729</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,236</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">36</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">F-23
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">ANR FUND IX HOLDINGS, L.P. AND ALPHA NR
HOLDING, INC. AND SUBSIDIARIES</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</FONT></B>

<DIV align="center">
<B><FONT size="2">Information for the Nine Months Ended
September&nbsp;30, 2003 is Unaudited</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">(In thousands, except percentages and share
and per share data)</FONT></B>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The discount rates used in determining the
benefit obligations as of September&nbsp;30, 2004 and
December&nbsp;31, 2003 and 2002 were 6.0%, 6.25%, and 6.75%,
respectively. The discount rates used in determining net
periodic postretirement benefit cost were 6.25%, 6.75% and 6.75%
for the nine months ended September&nbsp;30, 2004, year ended
December&nbsp;31, 2003, and period from December&nbsp;14, 2002
to December&nbsp;31, 2002, respectively.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The weighted average annual rate of increase in
the per capita cost of covered benefits (i.e., health care trend
rate) for medical benefits assumed is 11% for 2004, decreasing
to 5.00% in 2010 and thereafter.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Assumed health care trend rates have a
significant effect on the amounts reported for the health care
plans. A one-percentage-point change in assumed health care
trend rates would have the following effects as of and for the
nine months ended September&nbsp;30, 2004:
</FONT>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="71%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">One</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">One</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Percentage</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Percentage</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Point</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Point</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Increase</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Decrease</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Effect on accumulated postretirement benefit
    obligation
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,174</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,735</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Effect on total service and interest cost
    components
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">215</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(183</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Employer contributions for the nine months ended
September&nbsp;30, 2004 were $13. Employee contributions are not
expected to be made and the plan is unfunded.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Estimated future benefit payments reflecting
expected future service for the fiscal years ending after
December&nbsp;31, 2004 are as follows:
</FONT>

<CENTER>
<TABLE width="60%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="88%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Year ending December&nbsp;31:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2005
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">39</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2006
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">39</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2007
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">79</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2008
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">48</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2009
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">74</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2010-2014
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">421</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">700</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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 heath care benefit plans that provide a
benefit that is at least actuarially equivalent to Medicare
Part&nbsp;D.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">At December&nbsp;31, 2003, in accordance with
FASB Staff Position FAS&nbsp;106-1, <I>Accounting and Disclosure
Requirements related to the Medicare Prescription Drug,
Improvement and Modernization Act of 2003
</I>(&#147;FSP&nbsp;106-1&#148;), the Company elected to defer
recognition of the effects of the Act in any measures of the
benefit obligation or cost.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In May 2004, the FASB issued further guidance
with the release of FASB Staff Position No.&nbsp;FAS&nbsp;106-2,
<I>Accounting and Disclosure Requirements related to the
Medicare Prescription Drug, Improvement and Modernization Act of
2003 </I>(&#147;FSP&nbsp;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. The Company has reflected
the estimated impact of the Act as a $629 reduction in the
present value of the accumulated postretirement benefit
</FONT>

<P align="center"><FONT size="2">F-24
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">ANR FUND IX HOLDINGS, L.P. AND ALPHA NR
HOLDING, INC. AND SUBSIDIARIES</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</FONT></B>

<DIV align="center">
<B><FONT size="2">Information for the Nine Months Ended
September&nbsp;30, 2003 is Unaudited</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">(In thousands, except percentages and share
and per share data)</FONT></B>
</DIV>

<P align="left">
<FONT size="2">obligation as of January&nbsp;1, 2004 and a $85
reduction in the net periodic service cost for the nine months
ended September&nbsp;30, 2004.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Savings
    Plan</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company sponsors a 401(k) Savings-Investment
Plan to assist its eligible employees in providing for
retirement. The Company contributes 3% of compensation for every
employee who is eligible to participate in the plan.
Participants also receive a 50% matching contribution from the
Company of up to 4% of their total compensation. The effective
date of the plan was February&nbsp;1, 2003. Total Company
contributions for the nine months ended September&nbsp;30, 2004
and 2003, and the year ended December&nbsp;31, 2003 were $3,480,
$2,403, and $3,505, respectively.
</FONT>

<DIV align="left">
<FONT size="2">7
</FONT>
</DIV>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">(c)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Self-Insured
    Medical Plan</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company is self-insured for health insurance
coverage provided for all of its employees. During the nine
months ended September&nbsp;30, 2004 and 2003, the year ended
December&nbsp;31, 2003, and the period from December&nbsp;14,
2002 to December&nbsp;31, 2002, total claims expense of $13,488,
$8,364, $12,313, and $355, respectively, was incurred, which
represents claims processed and an estimate for claims incurred
but not reported.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">(d)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Multi-Employer
    Pension Plan</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Three of the Company&#146;s subsidiaries assumed
collective bargaining agreements as part of two acquisitions
that require them to participate in the United Mine Workers of
America (UMWA)&nbsp;1950 and 1974 pension plans. These plans are
multi-employer pension plans whereby the expense is based upon
defined contribution rates. There was no expense under these
plans for the nine months ended September&nbsp;30, 2004 and
2003, the year ended December&nbsp;31, 2003, or for the period
from December&nbsp;14, 2002 to December&nbsp;31, 2002 as no
contributions were required.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Predecessor</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company did not assume the Predecessor&#146;s
obligations under the following employee benefit plans:
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pension
    Plans</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Combined Virginia Entity&#146;s union-free
employees who met certain eligibility requirements participated
in The Brink&#146;s Company&#146;s noncontributory defined
benefit pension plans (the Brink&#146;s Plans). Benefits under
the Brink&#146;s Plans were based on salary (including
commissions, bonuses, overtime, and premium pay) and years of
service.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">For the purpose of preparing the
Predecessor&#146;s combined financial statements, the Combined
Virginia Entity&#146;s projected benefit obligation at
December&nbsp;13, 2002 and December&nbsp;31, 2001 relating to
its participation in the Brink&#146;s Plans was actuarially
estimated based on data, such as years of service, salary, and
age, for employees of companies included in the Combined
Virginia Entity.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The fair value of plan assets and unrecognized
experience loss and prior service cost were allocated to the
Combined Virginia Entity as of December&nbsp;13, 2002 and
December&nbsp;31, 2001 based on the Combined Virginia
Entity&#146;s pro rata share of The Brink&#146;s Company&#146;s
projected benefit obligation. The Brink&#146;s Company&#146;s
policy was to fund at least the minimum actuarially determined
amounts necessary in accordance with applicable regulations.
</FONT>

<P align="center"><FONT size="2">F-25
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">ANR FUND IX HOLDINGS, L.P. AND ALPHA NR
HOLDING, INC. AND SUBSIDIARIES</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</FONT></B>

<DIV align="center">
<B><FONT size="2">Information for the Nine Months Ended
September&nbsp;30, 2003 is Unaudited</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">(In thousands, except percentages and share
and per share data)</FONT></B>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The net pension credit for the period from
January&nbsp;1, 2002 to December&nbsp;13, 2002 and for the year
ended December&nbsp;31, 2001 for all plans was as follows:
</FONT>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="63%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Period from</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">January&nbsp;1,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002 to</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Year Ended</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;13,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Service cost
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,504</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,913</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Interest cost on Projected Benefit Obligation
    (PBO)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,547</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,246</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Return on assets&#151; expected
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(12,617</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(12,799</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other amortization, net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">638</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net pension credit
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(928</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,640</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The assumptions used in determining the net
pension credit and funded status for the Combined Virginia
Entity&#146;s pension plans were as follows:
</FONT>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="66%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Period from</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">January&nbsp;1,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002 to</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Year Ended</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;13,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Discount rate-expense
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7.25</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7.50</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Discount rate-funded status
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6.75</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7.25</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Expected long-term rate of return on assets
    (expense)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10.00</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10.00</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Expected long-term rate of return on assets
    (funded status)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8.75</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10.00</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Average rate of increase in salaries (expense and
    funded status)<SUP>(a)</SUP>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4.00</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4.00</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left">
<HR size="1" width="15%" align="left" noshade>
</DIV>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD><FONT size="2">(a)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Salary scale assumptions varied by age and
    approximated 4%&nbsp;per annum.
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">F-26
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">ANR FUND IX HOLDINGS, L.P. AND ALPHA NR
HOLDING, INC. AND SUBSIDIARIES</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</FONT></B>

<DIV align="center">
<B><FONT size="2">Information for the Nine Months Ended
September&nbsp;30, 2003 is Unaudited</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">(In thousands, except percentages and share
and per share data)</FONT></B>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Reconciliations of the PBO, plan assets, funded
status, and prepaid pension assets at December&nbsp;13, 2002 and
December&nbsp;31, 2001 for the Combined Virginia Entity&#146;s
pension plans are as follows:
</FONT>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="66%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Period from</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">January&nbsp;1,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002 to</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Year Ended</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;13,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">PBO at beginning of period
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">121,760</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">113,659</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Service cost
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,504</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,913</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Interest cost
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,547</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,246</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Benefits paid
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(7,735</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(7,272</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Actuarial loss
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,679</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,214</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">PBO at end of period
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">127,755</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">121,760</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Fair value of plan assets at beginning of period
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">111,438</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">133,380</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Return on assets&#151; actual
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(11,780</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(14,765</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Employer contributions
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,294</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">95</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Benefits paid
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(7,735</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(7,272</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Fair value of plan assets at end of period
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">95,217</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">111,438</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Funded status
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(32,538</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(10,322</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Unrecognized experience loss
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">59,329</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">32,891</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net prepaid pension assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">26,791</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">22,569</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Noncurrent pension liability
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,319</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,232</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Prepaid pension asset
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">28,110</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">23,801</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Selected information for the plans that have PBOs
greater than plan assets are aggregated below. Since the plans
were curtailed during 2000, the accumulated benefit obligations
(ABO)&nbsp;are equal to the PBO at December&nbsp;13, 2002 and
December&nbsp;31, 2001.
</FONT>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="64%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;13,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">PBO and ABO
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">127,775</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">121,760</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Fair value of plan assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">95,217</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">111,438</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Combined Virginia Entity participated in the
United Mine Workers of America (UMWA)&nbsp;1950 and 1974 pension
plans at defined contribution rates. There was no expense under
these plans in 2002 as no contribution was required. Expense
under these plans in 2001 was&nbsp;$2. A multi-employer pension
plan withdrawal liability related to these plans of $28,424 and
$3,150 was accrued as of December&nbsp;13, 2002 and
December&nbsp;31, 2001, respectively, by the Virginia Combined
Entity associated with The Brink&#146;s Company&#146;s planned
exit from the coal business. The estimate was based on the most
recent actuarial estimate of liability for a withdrawal
occurring in the plan year ending June&nbsp;30, 2002. The
withdrawal liability and any subsequent changes in the liability
are the responsibility of The Brink&#146;s Company.
</FONT>

<P align="center"><FONT size="2">F-27
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">ANR FUND IX HOLDINGS, L.P. AND ALPHA NR
HOLDING, INC. AND SUBSIDIARIES</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</FONT></B>

<DIV align="center">
<B><FONT size="2">Information for the Nine Months Ended
September&nbsp;30, 2003 is Unaudited</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">(In thousands, except percentages and share
and per share data)</FONT></B>
</DIV>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)</FONT></I></TD>
    <TD>
    <I><FONT size="2">Savings Plan</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Brink&#146;s Company sponsored a 401(k)
Savings-Investment Plan to assist its eligible
U.S.&nbsp;employees in providing for retirement. Employee
contributions were matched at rates of between 50% to 100% up to
5% of compensation (subject to certain limitations).
Contribution expense for the Combined Virginia Entity under the
plan aggregated $493 for the period from January&nbsp;1, 2002 to
December&nbsp;13, 2002, and $553 for the year ended
December&nbsp;31, 2001.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)</FONT></I></TD>
    <TD>
    <I><FONT size="2">Postretirement Benefits Other Than
    Pensions</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Brink&#146;s Company provided certain
postretirement health care and life insurance benefits for
eligible active and retired employees in the U.S., including
those employed by the Combined Virginia Entity, (The
Brink&#146;s Company sponsored plans). The Brink&#146;s Company
also provided benefits to certain eligible employees of the
Combined Virginia Entity as required by the Health Benefit Act,
discussed below.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">The Brink&#146;s Company Sponsored
Plans.</FONT></I><FONT size="2"> For the purpose of preparing
the combined financial statements of the Combined Virginia
Entity, the unrecognized experience loss was allocated to the
Combined Virginia Entity based on a pro rata share of The
Brink&#146;s Company&#146;s Accumulated Postretirement Benefit
Obligation (APBO)&nbsp;as of December&nbsp;13, 2002. For the
period from January&nbsp;1, 2002 to December&nbsp;13, 2002 and
for the year ended December&nbsp;31, 2001, the components of net
periodic postretirement expense related to The Brink&#146;s
Company sponsored plans for postretirement benefits were as
follows:
</FONT>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="66%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Period from</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">January&nbsp;1,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002 to</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Year Ended</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;13,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Service cost
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">540</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">242</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Interest cost on APBO
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14,888</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,805</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Amortization of loss
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,413</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,646</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net periodic postretirement benefit expense
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">19,841</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">13,693</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">F-28
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">ANR FUND IX HOLDINGS, L.P. AND ALPHA NR
HOLDING, INC. AND SUBSIDIARIES</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</FONT></B>

<DIV align="center">
<B><FONT size="2">Information for the Nine Months Ended
September&nbsp;30, 2003 is Unaudited</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">(In thousands, except percentages and share
and per share data)</FONT></B>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Reconciliations of the APBO, funded status, and
accrued postretirement benefit cost for the Combined Virginia
Entity&#146;s share of The Brink&#146;s Company sponsored plans
at December&nbsp;13, 2002 and December&nbsp;31, 2001 are as
follows:
</FONT>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="66%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Period from</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">January&nbsp;1,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002 to</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Year Ended</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;13,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">APBO at beginning of period
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">211,974</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">163,202</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Service cost
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">540</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">242</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Interest cost
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14,888</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,805</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Benefits paid
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(13,132</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(11,291</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Actuarial loss
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">13,103</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">48,016</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">APBO and funded status at end of period
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">227,373</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">211,974</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Unrecognized experience loss
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(95,542</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(86,852</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accrued postretirement benefit cost at end of
    period
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">131,831</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">125,122</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The APBO was determined using the unit credit
method and an assumed discount rate of 6.75% in 2002 and 7.25%
in 2001. For The Brink&#146;s Company sponsored plans, the
assumed health care cost trend rate used in 2002 was 10% for
2003, declining 1%&nbsp;per year to 5% in 2008 and thereafter.
The assumed Medicare cost trend rate used in 2002 and 2001 was
5%.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">A one percentage point increase (decrease) each
year in the assumed health care cost trend rate used for 2002
would increase (decrease) the aggregate service and interest
components of expense for 2002, and increase (decrease) the APBO
of Company-sponsored plans at December&nbsp;13, 2002 as follows:
</FONT>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="68%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Effect of 1%&nbsp;Change in</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Health Care Trend Rates</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Increase</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Decrease</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Effect on total service and interest cost
    components
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,909</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,582</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Effect on APBO
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">27,652</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(22,916</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Health Benefit Act.</FONT></I><FONT size="2">
In October 1992, the Coal Industry Retiree Health Benefit Act
(the Health Benefit Act) was enacted as part of the Energy
Policy Act of 1992. The Health Benefit Act established rules for
the payment of future health care benefits for thousands of
retired union mine workers and their dependents. The Health
Benefit Act established a trust fund to which &#147;signatory
operators&#148; and &#147;related persons&#148;, including The
Brink&#146;s Company and certain of its subsidiaries, including
some of the subsidiaries included in the Combined Virginia
Entity, are jointly and severally liable to pay annual premiums
for assigned beneficiaries, together with a pro rata share for
certain beneficiaries who never worked for such employers
(unassigned beneficiaries) in amounts determined on the basis
set forth in the Health Benefit Act. In October 1993 and at
various times in subsequent years, The Brink&#146;s Company
received notices from the Social Security Administration (the
SSA) with regard to the assigned beneficiaries for which The
Brink&#146;s Company was responsible under the Health Benefit
Act. In addition, the Health Benefit Act requires The
Brink&#146;s Company to fund, pro rata according to the total
number of assigned beneficiaries, a portion of the health
benefits for unassigned beneficiaries. At this time, the funding
for such health benefits is being provided from another source;
however, the statutory authorization to obtain such funds is
</FONT>

<P align="center"><FONT size="2">F-29
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">ANR FUND IX HOLDINGS, L.P. AND ALPHA NR
HOLDING, INC. AND SUBSIDIARIES</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</FONT></B>

<DIV align="center">
<B><FONT size="2">Information for the Nine Months Ended
September&nbsp;30, 2003 is Unaudited</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">(In thousands, except percentages and share
and per share data)</FONT></B>
</DIV>

<P align="left">
<FONT size="2">currently expected to cease by 2005. In the
determination of The Brink&#146;s Company&#146;s ultimate
obligation under the Health Benefit Act, such funding has been
taken into consideration.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Combined Virginia Entity accounted for their
obligations under the Health Benefit Act as participants in a
multi-employer benefit plan, as provided by Emerging Issues Task
Force (EITF)&nbsp;No.&nbsp;92-13, <I>Accounting for Estimated
Payments in Connection with the Coal Industry Retiree Health
Benefit Act of 1992</I>, and thus, recognized the annual cost of
these obligations on a pay-as-you-go basis. For the period from
January&nbsp;1, 2002 to December&nbsp;13, 2002, and the year
ended December&nbsp;31, 2001, the Combined Virginia
Entity&#146;s pro rata allocated portion of the annual premiums
were $1,302 and $1,234, respectively. The Company has no
liability under this act.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Black Lung.</FONT></I><FONT size="2"> The
Combined Virginia Entity was self-insured with respect to
substantially all black lung (pneumoconiosis)&nbsp;benefits.
Provision was made for estimated benefits based on annual
reports prepared by independent actuaries. Unamortized losses
were amortized over the average remaining life expectancy of
participants (approximately 10&nbsp;years). Assumptions used in
the calculation of the actuarial present value of black lung
benefits were based on actual retirement experience of the
Combined Virginia Entity&#146;s employees, black lung claims
incidence, actual dependent information, industry turnover
rates, actual medical and legal cost experience, and projected
inflation rates. The amount of expense incurred by the Combined
Virginia Entity for black lung benefits was $3,428 for the
period from January&nbsp;1, 2002 to December&nbsp;13, 2002, and
$1,839 for the year ended December&nbsp;31, 2001.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD><B><FONT size="2">(17)</FONT></B></TD>
    <TD>
    <B><FONT size="2">Workers&#146; Compensation Benefits</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company&#146;s operations generally are fully
insured for workers&#146; compensation and black lung claims at
an approximate annual cost of $15,000 for 2004. A portion of the
West Virginia operations of the Company are self-insured for
workers&#146; compensation and state black lung claims. The
liability for these claims is an estimate of the ultimate losses
to be incurred on such claims based on the Company&#146;s
experience and published industry data. Adjustments to the
probable ultimate liability are made annually based on
subsequent developments and experience and are included in
operations as they are determined. The obligations incurred
prior to January&nbsp;31, 2003 are currently secured by surety
bonds of El&nbsp;Paso Corporation, an unrelated entity. Also see
note&nbsp;23.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The liability for self-insured workers
compensation benefits at September&nbsp;30, 2004 and
December&nbsp;31, 2003 was $5,293 and $2,110, respectively,
including a current portion of $1,359 and $450, respectively.
Workers&#146; compensation expense for the nine months ended
September&nbsp;30, 2004 and 2003 and the year ended
December&nbsp;31, 2003 was $5,556, $3,007 and $3,805,
respectively, including fees paid to the State of West Virginia
to be self-insured.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD><B><FONT size="2">(18)</FONT></B></TD>
    <TD>
    <B><FONT size="2">Related Party Transactions</FONT></B></TD>
</TR>

</TABLE>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Company</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As of December&nbsp;31, 2002, the Company had
notes payable in the amount of $23,953 payable to a related
party. These notes along with other notes in the amount of
$20,047 were converted to contributed capital of the Company in
2003. The Company incurred interest expense on the related party
notes of $2,625 and $144 during the year ended December&nbsp;31,
2003 and the period from December&nbsp;14, 2002 to
December&nbsp;31, 2002, respectively.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In conjunction with the purchase of
U.S.&nbsp;AMCI from the AMCI Parties, the Company paid $35,000
for the working capital of U.S.&nbsp;AMCI, as defined in the
contribution agreement, subject to an audit. As of
December&nbsp;31, 2003, the net working capital acquired was
estimated to be $31,569 and the difference of
</FONT>

<P align="center"><FONT size="2">F-30
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">ANR FUND IX HOLDINGS, L.P. AND ALPHA NR
HOLDING, INC. AND SUBSIDIARIES</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</FONT></B>

<DIV align="center">
<B><FONT size="2">Information for the Nine Months Ended
September&nbsp;30, 2003 is Unaudited</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">(In thousands, except percentages and share
and per share data)</FONT></B>
</DIV>

<P align="left">
<FONT size="2">$3,431 was recorded as a receivable. In September
2004, ANR&nbsp;Holdings, First Reserve and the AMCI Parties
agreed that the net working capital actually acquired was
$34,070, and the AMCI&nbsp;Parties paid the difference of $930
to the Company. The parties further agreed that the
AMCI&nbsp;Parties would be entitled to any refund of, and
obligated to make any payment of, all federal black lung excise
taxes of the companies contributed by the AMCI&nbsp;Parties to
ANR&nbsp;Holdings, but only insofar as the taxes related to
pre-closing or straddle periods ending on or prior to the
closing date of the U.S.&nbsp;AMCI acquisition. As a result,
$981 of the previously recorded receivable from AMCI was
reclassified to offset a federal black lung excise tax accrued
liability included in the net working capital acquired. The
remaining $1,520 was recorded as an increase to goodwill.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company records rent on its Latrobe,
Pennsylvania operating facility from a related party. This
arrangement provides for monthly payments of $12 on a
month-to-month basis. Total rent expense and accrued rent
expense was $108 and $114 as of and for the nine months ended
September&nbsp;30, 2004 and for the year ended December&nbsp;31,
2003, respectively.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In conjunction with the acquisition of
U.S.&nbsp;AMCI, ANR Holdings entered into an agreement with
entities affiliated with AMCI that requires the AMCI parties to
pay reclamation and other obligations of one of the former
U.S.&nbsp;AMCI entities acquired by the Company (Solomons Mining
Company). In April 2004, the Company entered into an arrangement
with the former owners of U.S.&nbsp;AMCI (the &#147;AMCI
Parties&#148;) to purchase 0.35&nbsp;million tons of coal from a
third party at a price of $54.50&nbsp;per ton at various times
from April 2004 through November 2005. An amount of $34.50 will
be paid to the producer of that coal, $12.00&nbsp;per ton is
payable to the AMCI Parties and $8.00&nbsp;per ton is retained
by the Company to fund the remaining reclamation obligation of
Solomons Mining Company, a company acquired by the Company in
the U.S.&nbsp;AMCI acquisition. As of September&nbsp;30, 2004,
the Company has retained an aggregate of $1,280 under this
arrangement. After the Company has retained $2,300, the
$8.00&nbsp;per ton will thereafter be paid to the U.S.&nbsp;AMCI
parties.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In connection with our acquisition of the Coastal
Coal Company, we acquired an overriding royalty interest in
certain properties located in Virginia and West Virginia owned
by El&nbsp;Paso CPG Company for $11,000 in cash. Effective
February&nbsp;1, 2003, the Company sold the overriding royalty
interest to affiliates of Natural Resource Partners, L.P.
(NRP)&nbsp;for $11,850 in cash. Effective April&nbsp;1, 2003,
the Company also sold substantially all of its fee-owned
Virginia mineral properties to NRP for $53,600 in cash in a
sale/leaseback transaction. Based on the aggregate of $11,900
and $13,700 that the Company paid to NRP in lease and royalty
payments for the nine months ended September&nbsp;30, 2004 and
the year ended December&nbsp;31, 2003, respectively, NRP is our
largest landlord. In an unrelated transaction in December 2003,
a member of the Company&#146;s board of directors was appointed
as a member of the board of directors of GP&nbsp;Natural
Resource Partners, LLC, the general partner of NRP, and First
Reserve became a substantial equity owner of NRP. The Company
believes the production and minimum royalty rates contained in
leases with NRP are consistent with current market royalty rates.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">One of Alpha Natural Resources, LLC&#146;s
Executive Vice Presidents is a 50%&nbsp;owner of Robindale
Energy Services, Inc. (and its subsidiary)
(&#147;Robindale&#148;). Robindale is engaged in the business of
waste coal sales and related businesses in Pennsylvania. From
time to time, Robindale has sold and purchased coal and related
products to the operations of our AMFIRE regional business unit
in Pennsylvania. During 2003 and the nine months ended
September&nbsp;30, 2004, our subsidiaries Alpha Coal Sales and
AMFIRE Mining Company, LLC paid an aggregate of $172 and $485
respectively to Robindale as payment for trucking services and
waste coal. During the first nine months of 2004, the Company
had sales of $165 to Robindale. The Company has agreed that our
Executive Vice President&#146;s continued relationship with
Robindale will not cause a breach of his employment agreement
with us, and he has agreed that he will
</FONT>

<P align="center"><FONT size="2">F-31
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">ANR FUND IX HOLDINGS, L.P. AND ALPHA NR
HOLDING, INC. AND SUBSIDIARIES</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</FONT></B>

<DIV align="center">
<B><FONT size="2">Information for the Nine Months Ended
September&nbsp;30, 2003 is Unaudited</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">(In thousands, except percentages and share
and per share data)</FONT></B>
</DIV>

<P align="left">
<FONT size="2">not participate in any decisions to enter into
any transactions that might be proposed between Robindale and
Alpha.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In April 2004, we entered into a coal sales
arrangement with AMCI Metall&nbsp;&#38; Kohle AG to sell 750,000
metric tons through March 2005. Two of Alpha&#146;s board
members hold ownership in AMCI Metall&nbsp;&#38; Kohle AG. For
the nine months ended September&nbsp;30, 2004, total sales of
$31,697 have been recorded under this contract. The Company also
had total sales of $15,640 for the first nine months of 2004 to
AMCI Australia Pty&nbsp;Ltd., an entity owned by two of the
Company&#146;s board members. The Company purchased coal in the
amount of $1,409 under various short-term purchase orders during
the nine months ended September&nbsp;30, 2004 from XCoal Energy
and Resources, an entity in which two members of Alpha&#146;s
board of directors each own more than a 10%&nbsp;equity
interest. In addition, American Metals and Coal International,
Inc., an entity owned by two of the Company&#146;s board
members, facilitated a $5,202&nbsp;coal sales transaction with
an international buyer for no compensation or commission.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">One of the Company&#146;s subsidiaries purchased
$1,786 of coal in the ordinary course of our business from
subsidiaries of Foundation Coal Holdings, Inc.
(&#147;Foundation&#148;). Three of the Company&#146;s directors
also serve as directors of Foundation. First Reserve
Fund&nbsp;IX, L.P. and an entity affiliated with AMCI
beneficially own an aggregate of 56.8% of the outstanding shares
of Foundation&#146;s common stock.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Predecessor</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Combined Virginia Entity had receivables and
payables and was a party to certain transactions with affiliated
companies in the normal course of business.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Pittston Coal Management Company
(PCMC)&nbsp;provided executive, legal, engineering, geological,
accounting, and other administrative services to affiliated
companies owned directly or indirectly by Pittston Coal Company,
including companies included in the Combined Virginia Entity.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">PCMC allocated its costs to the various entities
based primarily on production, head count, and asset base.
Intercompany balances among companies included in the Combined
Virginia Entity have been eliminated, and net amounts due from
other affiliated companies are classified in the balance sheet
as a component of shareholders&#146; equity.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Pittston Coal Sales Corporation
(PCSC)&nbsp;provided services to affiliated companies owned by
Pittston Coal Company, including companies included in the
Combined Virginia Entity. PCSC negotiated and entered into coal
sales contracts with customers using its sales staff. A portion
of the cost of PCSC&#146;s sales department was allocated to the
affiliated companies based on relative coal sales volume. Coal
was shipped from affiliated coal production companies, including
companies included in the Combined Virginia Entity, to customers
and PCSC invoiced the customers and recorded a payable to the
affiliated company for the amount of the customer invoice. PCSC
collected the cash on behalf of the affiliate. Intercompany
balances between PCSC and companies included in the Combined
Virginia Entity have been eliminated and receivables and
payables to other affiliated companies were classified as a
component of shareholders&#146; equity.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Cash generated or used by our Predecessor was
ultimately received or provided by The Brink&#146;s Company.
During the period from January&nbsp;1, 2002 to December&nbsp;13,
2002, and the year ended December&nbsp;31, 2001, Pittston Coal
Company contributed $329,964 and $151,956, respectively, of
intercompany amounts owned by its subsidiaries included in the
Combined Virginia Entity to shareholders&#146; equity.
</FONT>

<P align="center"><FONT size="2">F-32
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">ANR FUND IX HOLDINGS, L.P. AND ALPHA NR
HOLDING, INC. AND SUBSIDIARIES</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</FONT></B>

<DIV align="center">
<B><FONT size="2">Information for the Nine Months Ended
September&nbsp;30, 2003 is Unaudited</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">(In thousands, except percentages and share
and per share data)</FONT></B>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our Predecessor was included in the consolidated
U.S.&nbsp;federal income tax return filed by The Brink&#146;s
Company. The Brink&#146;s Company&#146;s consolidated provision
and actual cash payments for U.S.&nbsp;federal income taxes were
allocated between the Predecessor and other affiliates of The
Brink&#146;s Company in accordance with The Brink&#146;s
Company&#146;s tax allocation policy. In general, the
consolidated current tax provision of The Brink&#146;s
Company&#146;s was allocated among the affiliates based
principally upon the financial income, taxable income, credits,
and other amounts directly related to the respective affiliate.
The Brink&#146;s Company gave credit to its subsidiaries for the
tax effect of U.S.&nbsp;federal income tax losses and other
attributes to the extent the attributes were utilized on a
consolidated basis. As a result, the allocated affiliate amounts
of taxes payable or refundable are not necessarily comparable to
those that would have resulted if the affiliate had filed
separate tax returns. Net deferred income tax assets of the
Predecessor are reflected as deferred income tax receivable from
parent and are classified as a component of shareholders&#146;
equity.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD><B><FONT size="2">(19)</FONT></B></TD>
    <TD>
    <B><FONT size="2">Commitments</FONT></B></TD>
</TR>

</TABLE>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Operating Leases</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company leases coal mining and other
equipment under long-term operating leases with varying terms.
In addition, the Company leases coal reserves and surface rights
from land owners under various terms and royalty rates.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As of September&nbsp;30, 2004, aggregate future
minimum lease payments under operating leases and minimum
royalties under coal leases were as follows:
</FONT>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="51%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Equipment</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Coal</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Facility</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">and Other</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Royalties</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Total</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Three months ending December&nbsp;31, 2004
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">134</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">993</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,643</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,770</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Year ending December&nbsp;31:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2005
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">481</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,826</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,200</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">13,507</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2006
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">279</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,767</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,543</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12,589</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2007
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">211</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,206</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,255</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,672</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2008
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">168</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">524</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,248</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,940</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2009
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">77</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,590</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,667</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Thereafter
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">261</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">24,719</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">24,980</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,611</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,316</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">67,198</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">80,125</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The above table includes amounts due under
noncancelable leases with initial or remaining lease terms in
excess of one year.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Net rent expense amounted to $4,713 for the nine
months ended September&nbsp;30, 2004, $4,487 for the nine months
ended September&nbsp;30, 2003, $6,354 for the year ended
December&nbsp;31, 2003, $170 for the period from
December&nbsp;14, 2002 to December&nbsp;31, 2002, $8,262 for the
period from January&nbsp;1, 2002 to December&nbsp;13, 2002, and
$9,216 for the year ended December&nbsp;31, 2001. Coal royalties
expense amounted to $32,747 for the nine months ended
September&nbsp;30, 2004, $20,872 for the nine months ended
September&nbsp;30, 2003, $28,549 for the year ended
December&nbsp;31, 2003, $46 for the period from
December&nbsp;14, 2002 to December&nbsp;31, 2002, $981 for the
period from January&nbsp;1, 2002 to December&nbsp;13, 2002, and
$1,108 for the year ended December&nbsp;31, 2001.
</FONT>

<P align="center"><FONT size="2">F-33
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">ANR FUND IX HOLDINGS, L.P. AND ALPHA NR
HOLDING, INC. AND SUBSIDIARIES</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</FONT></B>

<DIV align="center">
<B><FONT size="2">Information for the Nine Months Ended
September&nbsp;30, 2003 is Unaudited</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">(In thousands, except percentages and share
and per share data)</FONT></B>
</DIV>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Other Commitments</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As of September&nbsp;30, 2004, the Company had
commitments to purchase&nbsp;2.4&nbsp;million, 4.8&nbsp;million,
0.7&nbsp;million, and 0.2&nbsp;million tons of coal at a cost of
$113,560, $257,531, $38,733, and $10,020 in 2004, 2005, 2006,
and 2007, respectively.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD><B><FONT size="2">(20)</FONT></B></TD>
    <TD>
    <B><FONT size="2">Mergers and Acquisitions</FONT></B></TD>
</TR>

</TABLE>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">2002 Acquisition</FONT></I></B></TD>
</TR>

</TABLE>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Pittston Coal Company</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On December&nbsp;13, 2002, the Company acquired
the majority of the Virginia coal assets of Pittston Coal
Company (the Combined Virginia Entity), for a net purchase price
of $62,945. The results of the Combined Virginia Entity&#146;s
operations have been included in the combined financial
statements since that date. The purchase also included Maxxim
Rebuild, a mining equipment and repair business.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The $62,945 purchase price for the Combined
Virginia Entity consisted of a $37,202 cash payment at closing,
and notes payable of $25,743 issued to the seller, $18,500 of
which was in the form of a minimum royalty agreement. Additional
payments of up to $5,000 are payable under the royalty agreement
if certain levels of coal sales prices are achieved. As of
September&nbsp;30, 2004, $3,753 had been accrued for this
additional consideration.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In conjunction with the acquisition, the Company
contracted with the Predecessor to perform reclamation work for
sites retained by the Predecessor. As of September&nbsp;30,
2004, the Company had $2,000 in liabilities related to the
remaining contract reclamation work, including a current portion
of $851.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table summarizes the estimated fair
values, as determined by an independent third-party valuation,
of the assets acquired and liabilities assumed at the date of
acquisition (December&nbsp;13, 2002):
</FONT>

<CENTER>
<TABLE width="60%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="83%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Current assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">17,732</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Property, plant, and equipment
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">69,087</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Intangible assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,091</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total assets acquired
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">90,910</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Asset retirement obligation
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(15,050</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Postretirement medical benefits
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(5,915</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other liabilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(7,000</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total liabilities assumed
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(27,965</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net assets acquired
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">62,945</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">2003 Acquisitions</FONT></I></B></TD>
</TR>

</TABLE>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Coastal Coal Company</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On January&nbsp;31, 2003, the Company acquired
100% of the membership interest of Coastal Coal Company, LLC and
certain other assets. The results of Coastal Coal&#146;s
operations have been included in the combined financial
statements since that date. Coastal Coal Company, LLC is a
producer of thermal and industrial coals in the Appalachian
region.
</FONT>

<P align="center"><FONT size="2">F-34
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">ANR FUND IX HOLDINGS, L.P. AND ALPHA NR
HOLDING, INC. AND SUBSIDIARIES</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</FONT></B>

<DIV align="center">
<B><FONT size="2">Information for the Nine Months Ended
September&nbsp;30, 2003 is Unaudited</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">(In thousands, except percentages and share
and per share data)</FONT></B>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The aggregate net purchase price for the Coastal
Coal membership interest and related assets was $67,772.
Consideration included cash of $44,172 and notes payable issued
to the seller of $23,600.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table summarizes the estimated fair
values, as determined by an independent third-party valuation,
of the assets acquired and liabilities assumed at the date of
acquisition (January&nbsp;31, 2003):
</FONT>

<CENTER>
<TABLE width="60%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="83%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Current assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">31,614</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Property, plant, and equipment
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">40,342</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Intangibles
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,937</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other noncurrent assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">18,269</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total assets acquired
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">94,162</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Current liabilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(11,700</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Asset retirement obligation
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(12,861</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other noncurrent liabilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,431</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Notes payable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(398</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total liabilities assumed
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(26,390</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net assets acquired
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">67,772</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">American Metals and Coal International,
    Inc.</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On March&nbsp;11, 2003, the Company acquired the
majority of the North American operations of American Metals and
Coal International, Inc. (U.S.&nbsp;AMCI). The results of
U.S.&nbsp;AMCI&#146;s operations have been included in the
combined financial statements since that date. U.S.&nbsp;AMCI is
a producer of Appalachian coal and a broker of steam and
metallurgical coals in the United States and abroad.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The aggregate purchase price for the
U.S.&nbsp;AMCI net assets was $121,299. Consideration included
cash of $52,339, and common and preferred membership interests
in ANR Holdings issued, valued at $68,960. The value attributed
to the membership interest was based on the cash contributions
made by the other owners of ANR Holdings.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The goodwill represents the portion of the
purchase price allocated to the U.S.&nbsp;AMCI sales force. The
goodwill is not deductible for federal income tax purposes.
</FONT>

<P align="center"><FONT size="2">F-35
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">ANR FUND IX HOLDINGS, L.P. AND ALPHA NR
HOLDING, INC. AND SUBSIDIARIES</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</FONT></B>

<DIV align="center">
<B><FONT size="2">Information for the Nine Months Ended
September&nbsp;30, 2003 is Unaudited</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">(In thousands, except percentages and share
and per share data)</FONT></B>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table summarizes the estimated fair
values, as determined by an independent third-party valuation,
of the assets acquired and liabilities assumed at the date of
acquisition (March&nbsp;11, 2003):
</FONT>

<CENTER>
<TABLE width="60%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="83%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Current assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">47,005</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Property, plant, and equipment
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">94,732</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Goodwill
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">17,121</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other noncurrent assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">976</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total assets acquired
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">159,834</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Current liabilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(17,307</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Asset retirement obligation
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(8,768</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Postretirement medical benefits
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(3,475</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other noncurrent liabilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,051</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Notes payable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(7,934</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total liabilities assumed
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(38,535</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net assets acquired
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">121,299</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Mears Enterprises, Inc.</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On November&nbsp;17, 2003, the Company acquired
the assets of Mears Enterprises, Inc (Mears Enterprises) and
affiliated companies. The results of Mears Enterprises and
affiliates operations have been included in the combined
financial statements since that date. Mears Enterprises and
affiliates operate six mining complexes and a preparation plant,
all located in Pennsylvania.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The aggregate purchase price for the net assets
of Mears Enterprises and affiliates was $37,977 in cash.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table summarizes the estimated fair
values, as determined by an independent third-party valuation,
of the assets acquired and liabilities assumed at the date of
acquisition (November&nbsp;17, 2003):
</FONT>

<CENTER>
<TABLE width="60%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="84%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Current assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">280</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Property, plant, and equipment
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">39,476</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Intangibles
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">200</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other noncurrent assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">100</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total assets acquired
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">40,056</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Asset retirement obligation
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,079</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net assets acquired
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">37,977</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">2004 Acquisitions</FONT></I></B></TD>
</TR>

</TABLE>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Moravian Run Reclamation Co.</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On April&nbsp;1, 2004, the Company acquired
substantially all of the assets of Moravian Run Reclamation Co.,
Inc. (Moravian Run) for $5 in cash. The Company has agreed to
pay Moravian Run monthly overriding royalty payments for the
next four years in an aggregate amount of $1,000 and monthly
payments for the next five years in respect of leased equipment
in an aggregate amount of $3,100. The Company also assumed
$1,086 of reclamation obligations. The Moravian Run assets
included, as of
</FONT>

<P align="center"><FONT size="2">F-36
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">ANR FUND IX HOLDINGS, L.P. AND ALPHA NR
HOLDING, INC. AND SUBSIDIARIES</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</FONT></B>

<DIV align="center">
<B><FONT size="2">Information for the Nine Months Ended
September&nbsp;30, 2003 is Unaudited</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">(In thousands, except percentages and share
and per share data)</FONT></B>
</DIV>

<P align="left">
<FONT size="2">March&nbsp;31, 2004, four active surface mines
and two additional surface mines under development, operating in
close proximity to and serving many of the same customers as our
AMFIRE business unit located in Pennsylvania.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Cooney Bros. Coal Company</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On May&nbsp;10, 2004, the Company acquired a coal
preparation plant and railroad loading facility located in
Portage, Pennsylvania and related equipment and coal inventory
from Cooney Bros. Coal Company for $2,500 in cash and an
adjacent coal refuse disposal site from a Cooney family trust
for $300 in cash. The Company also assumed approximately $102 of
reclamation obligations in connection with this acquisition.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Moravian Run Reclamation Co. and Cooney Bros.
Coal Company acquisitions are not significant to the
Company&#146;s financial position, results of operations, or
cash flows and, therefore, are not included in the pro forma
information presented below.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Pro Forma Information</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following unaudited pro forma financial
information for the year ended December&nbsp;31, 2003 reflects
the consolidated results of operations of the Company as if the
acquisitions of Coastal Coal Company, LLC, U.S.&nbsp;AMCI, and
Mears Enterprises and affiliates had taken place on
January&nbsp;1, 2003. The pro forma information includes
primarily adjustments for depreciation and depletion on acquired
property, plant, and equipment, and interest expense. The pro
forma financial information is not necessarily indicative of the
results of operations had the transactions been completed on the
assumed date.
</FONT>

<CENTER>
<TABLE width="60%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="86%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Revenues
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">902,766</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,769</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD><B><FONT size="2">(21)</FONT></B></TD>
    <TD>
    <B><FONT size="2">Concentrations and Major Customers</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company markets its coal principally to
electric utilities in the United States and international and
domestic steel producers. As of September&nbsp;30, 2004, and
December&nbsp;31, 2003 and 2002, trade accounts receivable from
electric utilities totaled approximately $39,508, $32,700 and
$2,500, respectively. Credit is extended based on an evaluation
of the customer&#146;s financial condition and collateral is
generally not required. Credit losses are provided for in the
combined financial statements and historically have been
minimal. The Company is committed under long-term contracts to
supply coal that meets certain quality requirements at specified
prices. The prices for some multi-year contracts are adjusted
based on economic indices or the contract may include
year-to-year specified price changes. Quantities sold under some
contracts may vary from year to year within certain limits at
the option of the customer. The Company&#146;s largest customer
in 2003 accounted for less than 10% of total sales for the year
ended December&nbsp;31, 2003. Sales to the Company&#146;s
largest customer were $99,910 for the nine months ended
September&nbsp;30, 2004, which represents 11% of total sales for
the nine months ended September&nbsp;30, 2004.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD><B><FONT size="2">(22)</FONT></B></TD>
    <TD>
    <B><FONT size="2">Industry Segment</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company has one reportable segment, the
extracting, processing and marketing of coal. The Company
markets extracted and brokered coal to customers in the United
States and in foreign markets. Export sales totaled $448,567, or
approximately 48% of total sales for the nine months ended
September&nbsp;30, 2004, $155,945 or approximately 28% of total
sales for the nine months ended September&nbsp;30, 2003 and
$220,818 or approximately 28% of total sales for the year ended
December&nbsp;31, 2003. Export sales in 2003 primarily were to
customers in Canada, Brazil, and various European countries.
</FONT>

<P align="center"><FONT size="2">F-37
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">ANR FUND IX HOLDINGS, L.P. AND ALPHA NR
HOLDING, INC. AND SUBSIDIARIES</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</FONT></B>

<DIV align="center">
<B><FONT size="2">Information for the Nine Months Ended
September&nbsp;30, 2003 is Unaudited</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">(In thousands, except percentages and share
and per share data)</FONT></B>
</DIV>

<P align="left">
<FONT size="2">Export sales in the first nine months of 2004
primarily were to customers in Canada, Brazil, Japan, and
various European countries.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD><B><FONT size="2">(23)</FONT></B></TD>
    <TD>
    <B><FONT size="2">Contingencies</FONT></B></TD>
</TR>

</TABLE>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B><I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)</FONT></I></B></TD>
    <TD>
    <B><I><FONT size="2">Guarantees and Financial Instruments with
    Off-balance Sheet Risk</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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 combined
balance sheets. 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 September&nbsp;30, 2004 is $50,491. The amount of surety
bonds currently outstanding related to the Company&#146;s
reclamation obligations is presented in note&nbsp;13 to the
combined financial statements. The Company has provided
guarantees for equipment financing obtained by certain of its
contract mining operators totaling approximately $1,100. The
estimated fair value of these guarantees is not significant.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Alpha from time to time guarantees the
performance of a subsidiary on short-term sales and purchase
contracts. The subsidiaries of the Company also guarantee
performance on the Company&#146;s outstanding reclamation bonds,
as well as the Company&#146;s obligations under the Citicorp
credit facility and 10%&nbsp;senior notes.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B><I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)</FONT></I></B></TD>
    <TD>
    <B><I><FONT size="2">Litigation</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company is involved in various legal
proceedings from time to time in the normal course of business.
In management&#146;s opinion, the Company is not currently
involved in any legal proceeding which individually or in the
aggregate could have a material effect on the financial
condition, results of operations and/or cash flows of the
Company.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B><I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)</FONT></I></B></TD>
    <TD>
    <B><I><FONT size="2">Other Contingencies</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In connection with the Company&#146;s acquisition
of Coastal Coal Company, the seller, El&nbsp;Paso CGP Company,
has agreed to retain and indemnify the Company for all
workers&#146; compensation and black lung claims incurred prior
to the acquisition date of January&nbsp;31, 2003. The majority
of this liability relates to claims in the state of West
Virginia. If El&nbsp;Paso CGP Company fails to honor its
agreement with the Company, then the Company would be liable for
the payment of those claims, which are estimated to be
approximately $5,369 as of September&nbsp;30, 2004 based on
reported case reserves. El&nbsp;Paso has posted a bond with the
state of West Virginia for $3,722; therefore, the Company&#146;s
exposure is $1,647 for these reported claims.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD><B><FONT size="2">(24)</FONT></B></TD>
    <TD>
    <B><FONT size="2">Asset Impairment Charge</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">One of the Company&#146;s subsidiaries wholly
owns National King Coal, LLC (a mining company) and Gallup
Transportation (a trucking company) (collectively
&#147;NKC&#148;). Since its acquisition by the Company, NKC has
incurred cumulative losses of $2,800. While NKC has not
experienced sales revenue growth comparable to our other
operations of the Company, it has been affected by many of the
same cost increases. As a result, we were required to assess the
recovery of the carrying value of the NKC assets. Based on that
analysis, it was determined that the assets of NKC were
impaired. An impairment charge of $5,100 was recorded in
September 2004 to reduce the carrying value of the assets of NKC
to their estimated fair value. A discounted cashflow model was
used to determine fair value.
</FONT>

<P align="center"><FONT size="2">F-38
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">ANR FUND IX HOLDINGS, L.P. AND ALPHA NR
HOLDING, INC. AND SUBSIDIARIES</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</FONT></B>

<DIV align="center">
<B><FONT size="2">Information for the Nine Months Ended
September&nbsp;30, 2003 is Unaudited</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">(In thousands, except percentages and share
and per share data)</FONT></B>
</DIV>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD><B><FONT size="2">(25)</FONT></B></TD>
    <TD>
    <B><FONT size="2">Supplemental Cash Flow Disclosures</FONT></B></TD>
</TR>

</TABLE>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Company</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Cash paid for interest (net of amounts
capitalized) for the nine months ended September&nbsp;30, 2004
and for the year ended December&nbsp;31, 2003 was $4,198 and
$6,879, respectively. No income taxes have been paid by the
Company through September&nbsp;30, 2004.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Non-cash investing and financing activities are
excluded from the combined statements of cash flows.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Significant non-cash activity for the nine months
ended September&nbsp;30, 2004 includes:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">Increase in asset retirement obligation and fixed
    assets of $3,145 for new sites added in 2004. Decrease in asset
    retirement obligation of $4,544, decrease in fixed assets of
    $1,666, and increase in deferred gains on sales of property
    interests of $3,514 as a result of revisions in estimated cash
    flows underlying the asset retirement obligation.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">Settlement of the net working capital acquired in
    conjunction with the acquisition of U.S.&nbsp;AMCI recorded as
    an increase in goodwill of $1,520, a decrease in due from
    affiliate of $2,501 and a decrease in accrued expenses of $981.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">Increase in deferred gains on sales of property
    interests and decrease in other liabilities of $1,480 for
    revisions in estimated contract reclamation liability assumed in
    conjunction with the acquisition of the Virginia coal operations
    of Pittston Coal Company.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">Decrease in deferred gains on sales of property
    interests of $3,753 as a result of additional consideration
    payable for the acquisition of the Virginia coal operations of
    Pittston Coal Company.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">Construction in progress and other capital
    expenditures of $629 recorded in accounts payable.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Significant non-cash activity for the nine months
ended December&nbsp;31, 2003 includes:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">Increase in asset retirement obligation and fixed
    assets of $1,165 for new sites added in 2003.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">The short-term financing of prepaid insurance
    premiums in the amount of $14,425.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">The conversion of $44,000 of related party notes
    payable to contributed capital.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">Seller financing of acquired entities of $23,600.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">Issuance of membership interests in ANR Holdings,
    LLC of $68,960 for the acquisition of U.S.&nbsp;AMCI.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">Construction in progress of $1,929 recorded in
    accounts payable.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Significant non-cash activity for the period from
December&nbsp;14, 2002 to December&nbsp;31, 2002 includes:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">Seller financing of acquired entities of $25,743.
    </FONT></TD>
</TR>

</TABLE>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Predecessor</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">During the period from January&nbsp;1, 2002 to
December&nbsp;13, 2002 the Pittston Coal Company contributed
$329,964 of intercompany payables from the Combined Virginia
Entity to shareholders&#146; equity. For the year ended
December&nbsp;31, 2001, Pittston Coal Company contributed
$151,956 of intercompany payables from the Combined Virginia
Entity to shareholders&#146; equity.
</FONT>

<P align="center"><FONT size="2">F-39
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">ANR FUND IX HOLDINGS, L.P. AND ALPHA NR
HOLDING, INC. AND SUBSIDIARIES</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</FONT></B>

<DIV align="center">
<B><FONT size="2">Information for the Nine Months Ended
September&nbsp;30, 2003 is Unaudited</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">(In thousands, except percentages and share
and per share data)</FONT></B>
</DIV>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD><B><FONT size="2">(26)</FONT></B></TD>
    <TD>
    <B><FONT size="2">Minority Interest</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On March&nbsp;11, 2003, concurrent with the
acquisition of U.S.&nbsp;AMCI, ANR Holdings issued additional
membership interests in the aggregate amount of 45.3% to the
former owners of U.S. AMCI, Madison Capital Funding, LLC and
Alpha Coal Management, LLC (Alpha Coal Management), which is
owned by certain members of management, in exchange for the net
assets of U.S. AMCI and cash. All members of ANR Holdings, other
than Alpha Coal Management, hold both common and preferred
sharing ratios representing membership interests. Pursuant to
the provisions of the ANR Holdings limited liability company
agreement, the income of ANR Holdings is allocated among its
members as follows:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">First, to the holders of preferred sharing ratios
    on a pro rata basis to the extent of any losses that had been
    allocated to them in prior periods,
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">Second, to the holders of preferred sharing
    ratios on a pro rata basis up to the cumulative unallocated
    preferred yield (based on an annual preferred yield of 12%), and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">Third, to the holders of common sharing ratios on
    a pro rata basis.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">For purposes of allocating income in the year in
which a new member is admitted, ANR Holdings applies a proration
method, which allocates income based on the weighted-average
ownership of its membership interests for the year.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The principal executive officers of Alpha and
other key employees hold the entire membership interest of Alpha
Coal Management, which in turn owns a common membership interest
in ANR Holdings. The interest of Alpha Coal Management in ANR
Holdings entitles Alpha Coal Management to receive approximately
0.32% of the distributions made to the holders of common
membership interests in ANR Holdings (which we refer to as the
management members&#146; &#147;purchased interest&#148;). In
addition, Alpha Coal Management is entitled to receive, subject
to certain conditions, an additional distribution of up to 5% of
any profits (which we refer to as the management members&#146;
&#147;profits interest&#148;) upon the occurrence of a liquidity
event, as defined in the governing documents of ANR Holdings.
Generally, a liquidity event will occur when ANR Holdings is
sold or when it makes a public sale of equity. The provisions of
Alpha Coal Management&#146;s limited liability company agreement
also contains put and call rights for the benefit of the
executive and Alpha, respectively, with respect to the purchased
interests and profits interests if the employment relationship
of the executive is terminated. In general, depending on when
the employment relationship is terminated, the put and call
prices are equal to (1)&nbsp;the sum of the greater of
(a)&nbsp;the member&#146;s original investment minus returns on
that investment or (b)&nbsp;the fair market value, as defined,
of the member&#146;s purchased interest on the date the put is
exercised, plus (2)&nbsp;a percentage of the fair market value,
as defined, of the profits interest on the date the put is
exercised, with the percentage increasing from 50% to 100% as
the length of the employment period increases from two to four
years from the date Alpha Coal Management was formed. For
purposes of the put and call, the agreement requires Alpha to
use the same method of valuation that First Reserve Corporation
uses for purposes of reporting to its limited partners, reduced
by a 25% minority discount.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD><B><FONT size="2">(27)</FONT></B></TD>
    <TD>
    <B><FONT size="2">Investments</FONT></B></TD>
</TR>

</TABLE>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Dominion Terminal Associates</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As part of the Company&#146;s acquisition of the
Combined Virginia Entity, the Company acquired a 32.5% interest
in Dominion Terminal Associates&nbsp;(DTA). DTA is a partnership
with three other companies that operates a leased coal port
terminal in Newport News, Virginia (the Terminal). The Company
</FONT>

<P align="center"><FONT size="2">F-40
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">ANR FUND IX HOLDINGS, L.P. AND ALPHA NR
HOLDING, INC. AND SUBSIDIARIES</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</FONT></B>

<DIV align="center">
<B><FONT size="2">Information for the Nine Months Ended
September&nbsp;30, 2003 is Unaudited</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">(In thousands, except percentages and share
and per share data)</FONT></B>
</DIV>

<P align="left">
<FONT size="2">accounts for this investment under the equity
method for investments. See note&nbsp;2(o). The Company did not
ascribe any value to this partnership interest when it was
acquired.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company has the right to use 32.5% of the
throughput and ground storage capacity of the Terminal and pay
for this right based upon an allocation of costs as determined
by DTA. The Brink&#146;s Company guaranteed bonds of the
partnership in the face amount of $43,160 from the financing
related to the construction of the Terminal. The Brink&#146;s
Company also paid its proportionate share of interest on these
bonds. The Company did not assume any obligations associated
with these bonds.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">For the nine months ended September&nbsp;30,
2004, the nine months ended September&nbsp;30, 2003, the year
ended December&nbsp;31, 2003, and the period from
December&nbsp;14, 2002 to December&nbsp;31, 2002, the Company
made advances to DTA equal to its share of allocated costs of
$2,100, $2,281, $3,348, and $253, respectively. The Company
records its share of losses in DTA equal to the amount of
advances. The Company does not guarantee the obligations of DTA
and is not otherwise committed to provide further financial
support. Accordingly, the Company does not reduce its investment
below zero.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Net losses of $6,082 and $6,120 for the period
from January&nbsp;1, 2002 to December&nbsp;13, 2002 and the year
ended December&nbsp;31, 2001, respectively, were recorded by the
Predecessor relating to this investment.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Excelven Pty Ltd</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In August 2004, Alpha, together with its
affiliate American Metals and Coal International, Inc.
(&#147;AMCI&#148;), entered into a subscription deed with
Excelven Pty Ltd, pursuant to which each party agreed to acquire
a 24.5% interest in Excelven for a purchase price of
$6.5&nbsp;million in cash. Excelven, through its subsidiaries,
owns the rights to the Las Carmelitas mining venture in
Venezuela and the related Palmarejo export port facility on Lake
Maracaibo in Venezuela. Alpha&#146;s first payment of $3,250 was
made in September 2004. The investment is accounted for on the
equity method, and is included in other assets at
September&nbsp;30, 2004.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD><B><FONT size="2">(28)</FONT></B></TD>
    <TD>
    <B><FONT size="2">Income Taxes</FONT></B></TD>
</TR>

</TABLE>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">The Company</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As outlined in the organizational structure in
note&nbsp;1, the minority interest owners and ANR Fund&nbsp;IX
Holdings, L.P. own interests in ANR&nbsp;Holdings, a limited
liability company and pass-through entity for income tax
purposes. As a pass-through entity, ANR&nbsp;Holdings provides
information returns reflecting the allocated income (loss) to
the minority interest owners and ANR Fund&nbsp;IX Holdings, L.P.
based upon their respective ownership percentage and certain
special allocations as provided by the limited liability company
agreement and the Internal Revenue Code. The income tax
consequences of the income (loss) allocated to these owners is
not reflected in the combined financial statements.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The combined financial statements include only
the current and deferred income tax associated with Alpha NR
Holding, Inc., a taxable entity. The primary source of the
income tax impact is derived from the allocated income (loss)
from ANR Holdings, Alpha Natural Resources, LLC and its
operating subsidiaries, all of which are pass-through entities
for tax purposes.
</FONT>

<P align="center"><FONT size="2">F-41
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">ANR FUND IX HOLDINGS, L.P. AND ALPHA NR
HOLDING, INC. AND SUBSIDIARIES</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</FONT></B>

<DIV align="center">
<B><FONT size="2">Information for the Nine Months Ended
September&nbsp;30, 2003 is Unaudited</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">(In thousands, except percentages and share
and per share data)</FONT></B>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Significant components of income tax expense
(benefit) were as follows:
</FONT>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="36%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Period from</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Nine Months Ended</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;14,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">September&nbsp;30,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Year Ended</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002 to</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2004</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">(unaudited)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Current tax expense:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Federal
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,219</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">State
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">65</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,284</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Deferred tax expense (benefit):
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Federal
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,803</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">984</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">665</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(284</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">State
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">645</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(50</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,448</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">988</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">668</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(334</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total income tax expense (benefit):
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Federal
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,022</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">984</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">665</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(284</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">State
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">710</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(50</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,732</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">988</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">668</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(334</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">A reconciliation of the statutory federal income
tax expense (benefit) at 35% to income before income taxes and
minority interest, and the actual income tax expense (benefit)
is as follows:
</FONT>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="43%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Period from</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Nine Months</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;14,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Ended</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Year Ended</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002 to</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">September&nbsp;30,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2004</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Federal statutory income tax expense (benefit)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15,118</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,352</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(339</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Increases (reductions)&nbsp;in taxes due to:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Percentage depletion allowance
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(3,005</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,087</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">State taxes, net of federal tax impact
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">461</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(33</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Change in valuation allowance
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(203</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">815</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Taxes not provided for minority interest
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(7,049</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(501</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Taxes not provided for pass-through entity
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(711</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">73</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">37</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other, net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">121</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Actual income tax expense (benefit)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,732</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">668</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(334</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">F-42
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">ANR FUND IX HOLDINGS, L.P. AND ALPHA NR
HOLDING, INC. AND SUBSIDIARIES</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</FONT></B>

<DIV align="center">
<B><FONT size="2">Information for the Nine Months Ended
September&nbsp;30, 2003 is Unaudited</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">(In thousands, except percentages and share
and per share data)</FONT></B>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Deferred income taxes result from temporary
differences between the reporting of amounts for financial
statement purposes and income tax purposes. The net deferred tax
assets and liabilities included in the combined financial
statements include the following amounts:
</FONT>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="57%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">September&nbsp;30,</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2004</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Deferred tax assets:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net operating loss carryforwards
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,178</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,956</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">334</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Charitable contribution carryforwards
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">90</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">118</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Alternative minimum tax credit carryforward
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,219</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Gross deferred tax assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,487</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,074</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">334</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Less valuation allowance
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(612</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(815</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total net deferred tax assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,875</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,259</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">334</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Deferred tax liabilities:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Investment in limited liability company subsidiary
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(4,010</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(653</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Virginia tax credit
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,647</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(940</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total deferred tax liabilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(5,657</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,593</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net deferred tax asset (liability)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,782</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(334</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">334</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The breakdown of the net deferred tax asset
(liability)&nbsp;is recorded in the accompanying combined
balance sheets as follows:
</FONT>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="60%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">September&nbsp;30,</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2004</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Current asset
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,046</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">489</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Current liability
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net current asset (liability)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,046</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">489</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Noncurrent asset
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,829</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">770</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">334</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Noncurrent liability
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(5,657</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,593</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net noncurrent asset (liability)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(3,828</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(823</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">334</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total net deferred tax asset (liability)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,782</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(334</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">334</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As of September&nbsp;30, 2004, the Company has a
net operating loss carryforward (NOL) for federal income tax
purposes of $3,624, which is available to offset future federal
taxable income, if any, through 2023. In addition, the Company
has an alternative minimum tax (AMT) credit carryforward of
$2,219 which can be carried forward indefinitely to offset
future regular tax in excess of AMT. Due to the likelihood that
the AMT will exceed the regular tax in the future, the Company
has provided a valuation allowance for the portion of deferred
tax assets not expected to be realized. The remaining net
deferred tax liability, net of the valuation allowance, reflects
the AMT expected to be paid on the net taxable temporary
differences.
</FONT>

<P align="center"><FONT size="2">F-43
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">ANR FUND IX HOLDINGS, L.P. AND ALPHA NR
HOLDING, INC. AND SUBSIDIARIES</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</FONT></B>

<DIV align="center">
<B><FONT size="2">Information for the Nine Months Ended
September&nbsp;30, 2003 is Unaudited</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">(In thousands, except percentages and share
and per share data)</FONT></B>
</DIV>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Predecessor</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Combined Virginia Entity was subject to
U.S.&nbsp;federal and state income taxes. The income tax benefit
consisted of the U.S.&nbsp;federal income taxes:
</FONT>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="63%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Period from</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">January&nbsp;1,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002 to</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Year Ended</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;13,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Current
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,175</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,538</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Deferred
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,023</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(41</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">17,198</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,497</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table accounts for the difference
between the actual income tax benefit and the amounts obtained
by applying the statutory U.S.&nbsp;federal income tax rate of
35% to the income (loss) before income taxes.
</FONT>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="57%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Period from</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">January&nbsp;1,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002 to</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Year Ended</FONT></B></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;13,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Tax (benefit) expense computed at statutory rate
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(14,532</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,388</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Increases (reductions) in taxes due to:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Percentage depletion
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,302</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(3,943</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Adjustment resulting from favorable appeal
    relating to prior years
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,678</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Miscellaneous
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">314</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">58</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Actual income tax benefit
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(17,198</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,497</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD><B><FONT size="2">(29)</FONT></B></TD>
    <TD>
    <B><FONT size="2">Federal Black Lung Excise Tax</FONT></B></TD>
</TR>

</TABLE>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Predecessor</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On February&nbsp;10, 1999, the U.S.&nbsp;District
Court of the Eastern District of Virginia entered a final
judgment in favor of certain of The Brink&#146;s Company&#146;s
subsidiaries, including certain of the companies included in the
Combined Virginia Entity, ruling that the Federal Black Lung
Excise Tax (FBLET)&nbsp;is unconstitutional as applied to export
coal sales. The Brink&#146;s Company sought refunds of the FBLET
it paid on export coal sales for all open statutory periods and
received refunds of $2,758 (including interest), of which $2,049
related to the Combined Virginia Entity, during the period from
January&nbsp;1, 2002 to December&nbsp;13, 2002. The Brink&#146;s
Company also received refunds of $23,399 (including interest),
of which $15,358 related to the Combined Virginia Entity, during
2001. In addition, $855 of accrued FBLET liability previously
recorded related to the Combined Virginia Entity was reversed at
the time the refunds were collected in 2001.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD><B><FONT size="2">(30)</FONT></B></TD>
    <TD>
    <B><FONT size="2">Subsequent Events</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On October&nbsp;13, 2004, Amfire Mining Company,
LLC, a wholly owned subsidiary of the Company, entered into a
mineral lease with Pristine Resources, Inc. for the right to
deep mine the Upper Freeport &#147;E&#148; seam of coal in
Pennsylvania. The lease extends until December&nbsp;31, 2021 or
until such earlier time as
</FONT>

<P align="center"><FONT size="2">F-44
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">ANR FUND IX HOLDINGS, L.P. AND ALPHA NR
HOLDING, INC. AND SUBSIDIARIES</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</FONT></B>

<DIV align="center">
<B><FONT size="2">Information for the Nine Months Ended
September&nbsp;30, 2003 is Unaudited</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">(In thousands, except percentages and share
and per share data)</FONT></B>
</DIV>

<P align="left">
<FONT size="2">all mineable and merchantable coal has been mined
and removed. The lease calls for a minimum royalty in the annual
amount of up to $750 commencing in 2007 and continuing until the
end of the lease. A tonnage royalty based on the greater of a
specified minimum amount per ton or a specified percentage of
the gross selling price is applied against the annual minimum
royalties.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In November 2004, Alpha Coal Management adopted
the Alpha Coal Management&nbsp;LLC 2004 Long-Term Incentive Plan
(the &#147;Alpha Coal Management Long-Term Incentive Plan&#148;)
to provide equity incentive compensation to those key employees
and others who make significant contributions to the strategic
and long-term performance objectives and growth of the Company.
On November&nbsp;10, 2004, Alpha Coal Management granted options
to purchase 800,000 units of Alpha Coal Management to
22&nbsp;members of the Company&#146;s management team under the
Alpha Coal Management Long-Term Incentive Plan. These options
vest over a period of five years (with accelerated vesting upon
a change of control) and have a term of ten years. In connection
with this grant of options, ANR&nbsp;Holdings agreed that upon
exercise of awards granted by Alpha Coal Management under the
Alpha Coal Management Long-Term Incentive Plan,
ANR&nbsp;Holdings will issue to Alpha Coal Management additional
common membership interests of ANR&nbsp;Holdings in an aggregate
amount equal to up to 1% of ANR&nbsp;Holdings outstanding common
membership interest as of November&nbsp;10, 2004, provided that
Alpha Coal Management contributes to ANR&nbsp;Holdings the
exercise price received by it for awards exercised.
</FONT>

<P align="center"><FONT size="2">F-45
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="center">
<B><FONT size="2">INDEPENDENT AUDITORS&#146; REPORT</FONT></B>

<P align="left">
<FONT size="2">Alpha Natural Resources, LLC
</FONT>

<DIV align="left">
<FONT size="2">and Board of Directors of
</FONT>
</DIV>

<DIV align="left">
<FONT size="2">Coastal Coal Company, LLC:
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have audited the accompanying consolidated
balance sheet of Coastal Coal Company, LLC and subsidiary (the
Company) as of December&nbsp;31, 2002, and the related
consolidated statements of operations, changes in members&#146;
equity and comprehensive income (loss), and cash flows for the
period from January&nbsp;1, 2003 to January&nbsp;31, 2003 and
the year ended December&nbsp;31, 2002. These consolidated
financial statements are the responsibility of the
Company&#146;s management. Our responsibility is to express an
opinion on these consolidated financial statements based on our
audits.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We conducted our audits 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
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.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In our opinion, the consolidated financial
statements referred to above present fairly, in all material
respects, the financial position of Coastal Coal Company, LLC
and subsidiary as of December&nbsp;31, 2002 and the results of
their operations and their cash flows for the period from
January&nbsp;1, 2003 to January&nbsp;31, 2003 and the year ended
December&nbsp;31, 2002, in conformity with accounting principles
generally accepted in the United States of America.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As discussed in note&nbsp;1 to the consolidated
financial statements, the Company adopted the provisions of FASB
Statement No.&nbsp;143, <I>Accounting for Asset Retirement
Obligations</I>, effective January&nbsp;1, 2003.
</FONT>

<P align="left">
<FONT size="2">/s/ KPMG LLP
</FONT>

<P align="left">
<FONT size="2">KPMG LLP
</FONT>

<P align="left">
<FONT size="2">Roanoke, Virginia
</FONT>

<DIV align="left">
<FONT size="2">April&nbsp;29, 2004
</FONT>
</DIV>

<P align="center"><FONT size="2">F-46
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="center">
<B><FONT size="2">COASTAL COAL COMPANY, LLC</FONT></B>

<P align="center">
<B><FONT size="2">CONSOLIDATED BALANCE SHEET</FONT></B>

<DIV align="center">
<B><FONT size="2">December&nbsp;31, 2002</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">Assets</FONT></B>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="74%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Current assets:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cash and cash equivalents
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">22,250</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accounts receivable, net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">33,012,961</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Inventories
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,904,110</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Prepaid expenses and other current assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,396,419</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total current assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">47,335,740</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Property, plant, and equipment, net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">89,988,270</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other noncurrent assets, net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">13,892,542</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">151,216,552</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="7"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="7" align="center" valign="top">
    <B><FONT size="2">Liabilities and Members&#146; Equity</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Current liabilities:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Bank overdraft
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,744,855</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accounts payable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,975,516</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accrued payroll
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">553,268</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other current liabilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">36,954,376</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total current liabilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">50,228,015</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other noncurrent liabilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">80,074,583</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total liabilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">130,302,598</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Minority interest in subsidiary
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(703,740</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Members&#146; equity:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Capital contributions
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">263,971,698</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Advances to related parties, net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(28,763,662</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accumulated other comprehensive loss
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(17,284,264</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accumulated deficit
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(196,306,078</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total members&#146; equity
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">21,617,694</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Commitments and contingencies
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total liabilities and members&#146; equity
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">151,216,552</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="center">
<FONT size="2">See accompanying notes to consolidated financial
statements.
</FONT>

<P align="center"><FONT size="2">F-47
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="center">
<B><FONT size="2">COASTAL COAL COMPANY, LLC</FONT></B>

<P align="center">
<B><FONT size="2">CONSOLIDATED STATEMENTS OF
OPERATIONS</FONT></B>

<DIV align="center">
<B><FONT size="2">Period from January&nbsp;1, 2003 to
January&nbsp;31, 2003 and</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">Year Ended December&nbsp;31, 2002</FONT></B>
</DIV>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="61%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Period from</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">January&nbsp;1,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003 to</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Year Ended</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">January&nbsp;31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Revenues:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net sales
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">21,501,688</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">269,242,430</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Royalty and other
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">257,335</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14,325,268</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">21,759,023</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">283,567,698</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Costs and expenses:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cost of sales
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">18,159,578</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">270,548,861</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Administrative and general
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,092,602</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,546,250</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Depreciation, depletion and amortization
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,150,516</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15,082,381</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">20,402,696</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">297,177,492</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Income (loss) from operations
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,356,327</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(13,609,794</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Gain (loss) on sale of property, plant, and
    equipment
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(15,459</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,460,840</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Interest income (expense), net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(79,508</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">663,507</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Income (loss) before cumulative effect of
    accounting change and minority interest
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,261,360</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(9,485,447</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cumulative effect of accounting change
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,762,081</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Income (loss) before minority interest
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,023,441</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(9,485,447</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Minority interest
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(32,358</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,454</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net income (loss)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,991,083</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(9,481,993</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="center">
<FONT size="2">See accompanying notes to consolidated financial
statements.
</FONT>

<P align="center"><FONT size="2">F-48
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="center">
<B><FONT size="2">COASTAL COAL COMPANY, LLC</FONT></B>

<P align="center">
<B><FONT size="2">CONSOLIDATED STATEMENTS OF CHANGES</FONT></B>

<DIV align="center">
<B><FONT size="2">IN MEMBERS&#146; EQUITY AND COMPREHENSIVE
INCOME (LOSS)</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">Period from January&nbsp;1, 2003 to
January&nbsp;31, 2003 and</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">year ended December&nbsp;31, 2002</FONT></B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="31%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Accumulated</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Advances to</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Other</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Capital</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">(from) Related</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Comprehensive</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Accumulated</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Contributions</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Parties, Net</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Loss</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Deficit</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Total</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Balances, December&nbsp;31, 2001
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">263,971,698</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">39,114,285</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(186,824,085</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">116,261,898</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Affiliate transactions, net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(67,877,947</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(67,877,947</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net loss
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(9,481,993</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(9,481,993</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Minimum pension liability adjustment
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(17,284,264</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(17,284,264</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Comprehensive loss
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(26,766,257</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Balances, December&nbsp;31, 2002
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">263,971,698</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(28,763,662</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(17,284,264</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(196,306,078</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">21,617,694</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Affiliate transactions, net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16,309,474</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16,309,474</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net income and comprehensive income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,991,083</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,991,083</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Balances, January&nbsp;31, 2003
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">263,971,698</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(12,454,188</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(17,284,264</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(188,314,995</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">45,918,251</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="center">
<FONT size="2">See accompanying notes to consolidated financial
statements.
</FONT>

<P align="center"><FONT size="2">F-49
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="center">
<B><FONT size="2">COASTAL COAL COMPANY, LLC</FONT></B>

<P align="center">
<B><FONT size="2">CONSOLIDATED STATEMENTS OF CASH
FLOWS</FONT></B>

<DIV align="center">
<B><FONT size="2">Period from January&nbsp;1, 2003 to
January&nbsp;31, 2003 and</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">year ended December&nbsp;31, 2002</FONT></B>
</DIV>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="55%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="5"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Period from</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="5"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">January&nbsp;1,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="5"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003 to</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Year Ended</FONT></B></TD>
</TR>

<TR>
    <TD colspan="5"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">January&nbsp;31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="5"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
</TR>

<TR>
    <TD colspan="5"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="5" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cash flows from operating activities:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net income (loss)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,991,083</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(9,481,993</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Adjustments to reconcile net income (loss) to net
    cash provided by (used in) operating activities:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cumulative effect of accounting change
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(6,762,081</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Depreciation, depletion and amortization
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,150,516</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15,082,381</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accretion of asset retirement obligation
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">85,241</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">(Gain) loss on sale of property, plant, and
    equipment
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15,459</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(3,460,840</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Amortization of deferred gain on sale of mineral
    reserves
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(24,686</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(22,336</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Virginia tax credit refundable to parent
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(115,801</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,275,086</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Minority interest
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">32,358</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(3,454</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Increase (decrease) in cash flows from changes in:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accounts receivable, net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,393,076</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,603,307</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Inventories
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(87,800</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,602,775</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Prepaid expenses and other current assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">581,143</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,357,988</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other noncurrent assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,291,346</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,319,539</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accounts payable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,131,362</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(11,194,113</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accrued payroll
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">390,611</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(500,116</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other current liabilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(14,015,463</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">17,913,630</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other noncurrent liabilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,497,539</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,654,774</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net cash provided by (used in) operating
    activities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(14,810,019</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">17,674,930</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="5" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cash flows from investing activities:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Proceeds from sale of property, plant, and
    equipment
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">21,300</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">57,000,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Purchases of property, plant, and equipment
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,982,298</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(5,818,601</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net cash provided by (used in) investing
    activities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,960,998</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">51,181,399</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="5" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cash flows from financing activities:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Advances to related parties, net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16,425,275</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(66,602,861</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Change in bank overdraft
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">345,742</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,253,468</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net cash provided by (used in) financing
    activities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16,771,017</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(68,856,329</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net increase in cash and cash equivalents
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="5" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cash and cash equivalents at beginning of period
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">22,250</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">22,250</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="5" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cash and cash equivalents at end of period
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">22,250</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">22,250</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="5" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Supplemental disclosure of cash flow information:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cash paid during the period for interest
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">135,333</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">64,419</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Noncash investing and financing activities:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Deferred gain on sale of mineral reserves
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,740,245</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Deferred gain on sale of real property
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">776,366</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Minimum pension liability adjustment
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">17,284,264</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center">
<FONT size="2">See accompanying notes to consolidated financial
statements.
</FONT>

<P align="center"><FONT size="2">F-50
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="center">
<B><FONT size="2">COASTAL COAL COMPANY, LLC</FONT></B>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS</FONT></B>

<DIV align="center">
<B><FONT size="2">January&nbsp;31, 2003 and December&nbsp;31,
2002</FONT></B>
</DIV>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">(1)</FONT></B></TD>
    <TD>
    <B><FONT size="2">Summary of Significant Accounting Policies and
    Practices</FONT></B></TD>
</TR>

</TABLE>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">(a)&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;Description
    of Business</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Coastal Coal Company, LLC and its majority owned
subsidiary, Coastal Coal&nbsp;&#151; West Virginia, LLC,
(collectively, the Company) were owned by El&nbsp;Paso CGP
Company and American Natural Resources Company, wholly owned
subsidiaries of El&nbsp;Paso Corporation (El&nbsp;Paso) through
January&nbsp;31, 2003 (see note&nbsp;13). The Company is
organized as a limited liability company under the laws of the
state of Delaware. The Company is engaged in the business of
extracting coal from reserves located in Virginia, West
Virginia, and Kentucky, and leasing land and associated mineral
reserves to coal mining companies. Coal extracted by the Company
is primarily sold to utility companies located in the East and
Southeast regions of the United States of America.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">(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;Principles
    of Consolidation</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The consolidated financial statements include the
following companies.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Companies with coal reserves and production
facilities:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Brooks Run Mining Company
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Enterprise Mining Company
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Virginia Iron, Coal and Coke (VICC)&nbsp;Mining
    Company
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Kingwood Mining Company
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Greenbrier Mining Company (Inactive)
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Companies providing administrative services:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Coastal Coal Administration
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Coastal Coal Sales Company
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Holding companies:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Coastal Coal Company, LLC
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Coastal Coal-West Virginia, LLC
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">All significant intercompany balances and
transactions have been eliminated in consolidation.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">(c)&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;Cash
    and Cash Equivalents</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Cash and cash equivalents consist of cash on
hand, cash in banks, and investments in money market accounts
and are stated at cost, which approximates fair market value.
The Company considers all highly liquid debt instruments with
original maturities of three months or less to be cash
equivalents.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">(d)&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;Accounts
    Receivable and Allowance for Doubtful Accounts</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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 allowance for doubtful accounts
consists of an amount for specifically identified uncollectable
accounts and a general allowance based on historical losses for
all accounts. The Company does not have any off-balance-sheet
credit exposure related to its customers.
</FONT>

<P align="center"><FONT size="2">F-51
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">COASTAL COAL COMPANY, LLC</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</FONT></B>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">(e)&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;Inventories</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Coal inventory is stated at the lower of cost,
with cost determined using the average monthly production costs,
or net realizable value. Purchased coal is stated at purchase
price. Coal inventory at December&nbsp;31, 2002 was comprised of
raw, processed, and purchased coal.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Supplies inventory is stated at the lower of
average cost or net market value.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">(f)&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;Property,
    Plant, and Equipment</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Property, plant, and equipment are stated at
cost. Expenditures for maintenance and repairs, which do not
improve or extend the lives of the related assets, are charged
to expense as incurred while major renewals and betterments are
capitalized. Upon retirement or sale of an asset, its cost and
related accumulated depreciation or amortization are removed
from the property accounts. Depreciation of plant and equipment
for financial reporting purposes is provided using the
straight-line method over the assets&#146; estimated useful
lives.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Mine development costs are capitalized and
amortized using the units of production method over the
assets&#146; estimated useful lives. The cost of mineral rights
owned is depleted on the units of production method over the
properties&#146; estimated recoverable reserves.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">(g)&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;Impairment
    of Long-Lived Assets</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Statement of Financial Accounting Standards
(SFAS)&nbsp;No.&nbsp;144, <I>Accounting for the Impairment or
Disposal of Long-Lived Assets</I>, provides a single accounting
model for long-lived assets to be disposed of.
SFAS&nbsp;No.&nbsp;144 also changes the criteria for classifying
an asset as held for sale; and broadens the scope of businesses
to be disposed of that quality for reporting as discontinued
operations and changes the timing of recognizing losses on such
operations. The Company adopted SFAS&nbsp;No.&nbsp;144 on
January&nbsp;1, 2002.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In accordance with SFAS&nbsp;No.&nbsp;144,
long-lived assets, such as property, plant, and equipment, and
purchased intangibles subject to amortization, are reviewed for
impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable.
Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to estimated
undiscounted future cash flows expected to be generated by the
asset. If the carrying amount of an asset exceeds its estimated
future cash flows, an impairment charge is recognized by the
amount by which the carrying amount of the asset exceeds the
fair value of the asset. Assets to be disposed of would be
separately presented in the balance sheet and reported at the
lower of the carrying amount or fair value less costs to sell,
and are no longer depreciated. The assets and liabilities of a
disposal group classified as held for sale would be presented
separately in the appropriate asset and liability sections of
the balance sheet.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Prior to the adoption of SFAS&nbsp;No.&nbsp;144,
the Company accounted for long-lived assets in accordance with
SFAS&nbsp;No.&nbsp;121, <I>Accounting for Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed
Of</I>.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">(h)&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;Reclamation</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company has future obligations to reclaim
properties disturbed in conjunction with coal operations under
federal and state laws. Reclamation of disturbed acreage is
performed as a normal part of the mining process. The Company
adopted SFAS&nbsp;No.&nbsp;143, <I>Accounting for Asset
Retirement Obligations</I>, on January&nbsp;1, 2003. The
Company&#146;s liability for reclamation at January&nbsp;31,
2003 represents the fair value of its asset retirement
obligation as of this date. The asset retirement obligation will
be adjusted in the future to reflect the passage of time and
changes, if any, in the estimated future cash flows underlying
the
</FONT>

<P align="center"><FONT size="2">F-52
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">COASTAL COAL COMPANY, LLC</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</FONT></B>

<P align="left">
<FONT size="2">initial fair value measurement. Upon adoption,
impacted financial statement line items were property, plant,
and equipment, net; other current liabilities; other noncurrent
liabilities; and the net cumulative effect of the change in
accounting principle. Property, plant, and equipment, net
increased by $2,125,877; other current liabilities decreased by
$2,524,368; other noncurrent liabilities decreased by
$2,111,836; and the cumulative effect of the accounting change
of $6,762,081 was reflected in the consolidated statement of
income for the period from January&nbsp;1, 2003 to
January&nbsp;31, 2003.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Prior to the adoption of SFAS&nbsp;No.&nbsp;143,
expenditures relating to environmental regulatory requirements
and reclamation costs undertaken during mine operations were
charged against earnings as incurred. Estimated site restoration
and post closure reclamation costs were charged against earnings
using the unit-of-production method over the expected economic
life of each mine. Accrued reclamation costs were subject to
review by management on a regular basis and were revised when
appropriate for changes in future estimated costs and/or
regulatory requirements.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">(i)&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;Advance
    Mining Royalties</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Leases, which require minimum annual or advance
payments and are recoverable from future production, are
generally deferred and charged to expense as the coal is
subsequently produced. At December&nbsp;31, 2002, advance mining
royalties totaled approximately $7.8&nbsp;million, of which
approximately $1.7&nbsp;million is included in prepaid expenses
and other current assets. The Company periodically assesses the
recoverability of such prepaid minimum royalties based on
current operating plans, expiration dates of such prepaid
royalties, and the economic environment in the coal industry,
and records a charge to earnings when it is deemed more likely
than not that such amounts will not be recovered.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">(j)&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;Postretirement
    Benefits Other Than Pensions</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Postretirement benefits other than pensions are
accounted for in accordance with SFAS&nbsp;No.&nbsp;106,
<I>Employers&#146; Accounting for Postretirement Benefits Other
Than Pensions</I>. SFAS&nbsp;No.&nbsp;106 requires employers to
accrue the cost of postretirement benefits during the
employees&#146; service and over the average remaining life
expectancy of inactive participants.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">(k)&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;Black
    Lung Benefits</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Coal mining companies are obligated to pay coal
workers&#146; pneumoconiosis (black lung) benefits to eligible
recipients with respect to claims awarded on or after
July&nbsp;1, 1973. The liability and annual expense for these
benefits are based on annual evaluations prepared by the
Company&#146;s independent actuaries.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD><B><I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(l)&nbsp;</FONT></I></B></TD>
    <TD>
    <B><I><FONT size="2">Pension Plan</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company has a noncontributory pension plan
covering substantially all employees. Costs of the plan are
charged to current operations and are based on various actuarial
assumptions.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD><B><I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(m)&nbsp;</FONT></I></B></TD>
    <TD>
    <B><I><FONT size="2">Health Insurance Programs</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company is self-insured, up to specified
limits, for costs of casualty claims and medical claims. The
Company utilizes commercial insurance to cover what it considers
significant or catastrophic casualty and medical claims. Accrued
casualty losses are based on actuarial assumptions, adjusted for
Company specific history and expectations.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD><B><I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(n)&nbsp;</FONT></I></B></TD>
    <TD>
    <B><I><FONT size="2">Revenue Recognition</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company currently derives the majority of its
revenue from the sale of coal and leasing of land and related
mineral reserves to coal mining companies. Revenue derived from
the sale of coal is
</FONT>

<P align="center"><FONT size="2">F-53
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">COASTAL COAL COMPANY, LLC</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</FONT></B>

<P align="left">
<FONT size="2">recognized when the risk of ownership is
transferred, which is typically at the time of shipment. Revenue
derived from the mineral leases are recognized at the time coal
is extracted from the leased premises.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD><B><I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(o)&nbsp;</FONT></I></B></TD>
    <TD>
    <B><I><FONT size="2">Freight Costs</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Shipping and handling costs paid to third-party
carriers are recorded as freight expense and included in cost of
sales.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD><B><I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(p)&nbsp;</FONT></I></B></TD>
    <TD>
    <B><I><FONT size="2">Income Taxes</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company is a limited liability company
organized under the laws of the State of Delaware. Tax
attributes of a limited liability company pass through to the
individual investors. Accordingly, the accompanying consolidated
balance sheet does not include income tax assets or liabilities.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD><B><I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(q)&nbsp;</FONT></I></B></TD>
    <TD>
    <B><I><FONT size="2">Fair Value of Financial
    Instruments</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The carrying amounts reported in the consolidated
balance sheet for cash and cash equivalents, bank overdraft,
accounts receivable, and accounts payable approximate fair value
because of the short maturity of these instruments. See
note&nbsp;10 regarding advances to related parties.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD><B><I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(r)&nbsp;</FONT></I></B></TD>
    <TD>
    <B><I><FONT size="2">Use of Estimates</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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 the disclosure of contingent assets and
liabilities at the balance sheet date, and the reported amounts
of revenues and expenses during the reporting period.
Significant estimates and assumptions made by the Company
include the allowance for doubtful accounts; recoverable mineral
tonnage in the ground; pension and postretirement accruals;
reclamation and mine closure obligations; black lung and
workers&#146; compensation liabilities; and inventory
obsolescence. Actual results could differ from those estimates.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD><B><FONT size="2">(2)&nbsp;</FONT></B></TD>
    <TD>
    <B><FONT size="2">Accounts Receivable</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Accounts receivable, net at December&nbsp;31,
2002 consists of the following:
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="82%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Trade accounts receivable, net of allowance for
    doubtful accounts of $7,772
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">19,544,968</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Land mineral lease royalties
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">485,457</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Black lung excise tax refund receivable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,017,692</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,964,844</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">33,012,961</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Land and mineral lease royalties receivable
represent amounts currently due from third parties for coal
mined from Company reserves. The black lung excise tax refund
receivable represents claims, including interest, due from the
Internal Revenue Service for a refund of excise taxes paid on
export coal shipments made by the Company for the period 1994
through 2000.
</FONT>

<P align="center"><FONT size="2">F-54
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">COASTAL COAL COMPANY, LLC</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</FONT></B>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD><B><FONT size="2">(3)&nbsp;</FONT></B></TD>
    <TD>
    <B><FONT size="2">Inventories</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Inventories at December&nbsp;31, 2002 consists of
the following:
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="82%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Coal
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,284,715</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Mining supplies
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,619,395</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,904,110</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">
<B><FONT size="2">(4)&nbsp;Property, Plant, and
Equipment</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Property, plant, and equipment at
December&nbsp;31, 2002 consists of the following:
</FONT>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="65%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Estimated</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Lives</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Land and mineral rights
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14,463,803</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Plant, equipment, and mine development
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3-30&nbsp;years</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">219,388,767</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Construction in progress
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,037,769</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">240,890,339</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Less accumulated depreciation, depletion, and
    amortization
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">150,902,069</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">89,988,270</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In fiscal 2001, as a result of changes occurring
in the energy industry, the Company assessed the carrying values
of property, plant, and equipment and determined that the
carrying amounts of certain of its assets were impaired. As a
result, the Company reduced historical carrying values of
certain of its property, plant and equipment to their estimated
fair market values. The impairment charge recorded totaled
approximately $127.6&nbsp;million.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD><B><FONT size="2">(5)&nbsp;</FONT></B></TD>
    <TD>
    <B><FONT size="2">Employees&#146; Termination Benefits</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Between March and June of 2002, the Company
approved a plan to terminate approximately 100 coal-mining and
administrative employees located in Virginia and Kentucky. As
compensation for their termination, the Company offered
terminated employees a benefits package based upon the
employees&#146; years of service and levels of income.
Approximately $70,000 and $3.3&nbsp;million of such benefits
expense was incurred for the period from January&nbsp;1, 2003 to
January&nbsp;31, 2003 and the year ended December&nbsp;31, 2002,
respectively. Approximately $528,000 was unpaid at
December&nbsp;31, 2002 and is included in other current
liabilities.
</FONT>

<P align="center"><FONT size="2">F-55
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">COASTAL COAL COMPANY, LLC</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</FONT></B>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD><B><FONT size="2">(6)&nbsp;</FONT></B></TD>
    <TD>
    <B><FONT size="2">Other Current and Noncurrent
    Liabilities</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Other current and noncurrent liabilities at
December&nbsp;31, 2002 comprise the following:
</FONT>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="56%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Current</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Noncurrent</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Total</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Black lung and other workers compensation
    obligations
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,100,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">31,300,182</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">34,400,182</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accrued reclamation costs
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,000,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14,329,905</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15,329,905</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Pension benefits
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,682,134</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,974,419</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,656,553</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Postretirement benefits
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">826,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">13,495,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14,321,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Long-term disability benefits
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,900,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,881,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,781,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Deferred gain on sale of coal reserves
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">324,838</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,393,071</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,717,909</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accrued settlement loss on contract
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16,062,717</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16,062,717</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Black lung excise tax refund liabilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,017,714</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,744,640</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,762,354</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accrued other taxes
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,114,670</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,114,670</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">926,303</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">956,366</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,882,669</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">36,954,376</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">80,074,583</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">117,028,959</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In connection with services rendered in obtaining
the black lung excise tax refund (see note&nbsp;2), the Company
has agreed to pay portions of the refund to certain third
parties. This amount is included in current and noncurrent
liabilities.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Under the Federal Surface Mining Control and
Reclamation Act of 1977 and similar state statutes, mine
property is required to be restored in accordance with regulated
standards. The establishment of the reclamation liability is
based on permit requirements and requires various estimates and
assumptions, principally associated with costs and timing of
expenditures. The Company periodically reviews its entire
environmental liability and makes necessary adjustments,
including permit changes, revisions to costs and timing of
expenditures to reflect current experience.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As described in note&nbsp;1, the Company adopted
the provisions of SFAS&nbsp;No.&nbsp;143 on January&nbsp;1,
2003. The changes in the asset retirement obligation for the
period from January&nbsp;1, 2003 to January&nbsp;31, 2003 are as
follows:
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="80%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Reclamation liability at December&nbsp;31, 2002
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15,329,905</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cumulative effect of accounting change
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(6,762,081</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Asset retirement obligation at January&nbsp;1,
    2003
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,567,824</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accretion from January&nbsp;1, 2003 to
    January&nbsp;31, 2003
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">85,241</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Sites added from January&nbsp;1, 2003 to
    January&nbsp;31, 2003
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">928,861</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Asset retirement obligation at January&nbsp;31,
    2003
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,581,926</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company leases coal properties to independent
third parties under terms requiring periodic minimum royalty
payments. These payments are recorded by the Company as deferred
royalty income when received and are recognized into income
using the units of production method associated with specific
reserves covered under the lease. At December&nbsp;31, 2002, the
Company has approximately $223,000 of deferred royalty income to
be recognized in future periods, which is included in other
current liabilities.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On December&nbsp;4, 2002, the Company sold the
majority of the coal properties of three of its subsidiaries,
Enterprise, Kingwood and VICC, to CSTL, LLC for
$57&nbsp;million. As part of this sale, the
</FONT>

<P align="center"><FONT size="2">F-56
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">COASTAL COAL COMPANY, LLC</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</FONT></B>

<P align="left">
<FONT size="2">Company&#146;s then parent company, El&nbsp;Paso,
received the right to receive an overriding royalty on the coal
produced from the assets sold. The majority of the coal
properties were leased back to the Company. The total gain was
approximately $11.2&nbsp;million. The Company has deferred the
gain on the sale of the coal properties amounting to
approximately $7.7&nbsp;million as of December&nbsp;31, 2002, of
which approximately $325,000 is included in other current
liabilities.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company had a long-term supply contract with
American Electric Power (AEP) at a below market price. The terms
of the contract were for 1.2&nbsp;million tons annually until
June&nbsp;30, 2005. On December&nbsp;9, 2002, the Company
entered into a termination and release agreement, whereby AEP
agreed to terminate its contract with the Company and release
the Company from any further obligations under the supply
agreement in exchange for a settlement payment of approximately
$16.1&nbsp;million. This amount was recorded as a loss during
2002 and is included in other current liabilities in the
consolidated balance sheet as of December&nbsp;31, 2002.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD><B><FONT size="2">(7)&nbsp;</FONT></B></TD>
    <TD>
    <B><FONT size="2">Virginia Coalfield Employment Enhancement Tax
    Credit</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">For tax years 1996 though 2007, Virginia
companies with an economic interest in coal, earn tax credits
based upon tons sold, seam thickness, and employment levels. The
maximum credit earned equals $0.40&nbsp;per ton for surface
mined coal and $1.00 or $2.00&nbsp;per ton for deep mined coal
depending on seam thickness. Credits allowable are deducted from
the maximum amounts if employment levels are not maintained from
the previous year, and no credit is allowed for coal sold to
Virginia utilities. Currently, the cash benefit of the credit is
realized between three and four years after being earned and
either offsets taxes imposed by Virginia at 100% or is
refundable by the state at 85% of the face value to the extent
taxes are not owed. The credits are available or refundable to
El&nbsp;Paso. The Company records the present value of the
credit as a reduction of current year operating costs and as an
adjustment to due from related parties as it is earned. The
reduction to operating costs for the period from January&nbsp;1,
2003 to January&nbsp;31, 2003, and for the year ended
December&nbsp;31, 2002 was approximately $116,000 and
$1.3&nbsp;million, respectively.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD><B><FONT size="2">(8)&nbsp;</FONT></B></TD>
    <TD>
    <B><FONT size="2">Workers&#146; Compensation and Pneumoconiosis
    Benefit Obligations</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Coal mining companies are subject to the Federal
Coal Mine Health and Safety Act of 1969 (the Act), as amended,
and various states&#146; statutes for the payment of medical and
disability benefits to eligible recipients related to coal
worker&#146;s pneumoconiosis (black lung). The Company provides
for these claims principally through a self-insurance program.
The liability for such claims is determined based upon an annual
evaluation prepared by the Company&#146;s independent actuaries.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On December&nbsp;20, 2000, the United States
Department of Labor published revised administrative rules with
respect to the Act. The revised regulations are expected to
increase the cost of benefits paid under the Act by generating
an increase to the approval rate of claims filed under the Act
as well as an increase to the average cost per claim filed under
the Act. The Company&#146;s black lung reserves incorporate an
estimate of the increase in the frequency and severity of black
lung claims due to the Department of Labor&#146;s revised
administrative rules. However, due to lack of historical data
with regards to the effect of the revised administrative rules,
it is possible that actual results may materially differ from
the estimate provided above.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD><B><FONT size="2">(9)&nbsp;</FONT></B></TD>
    <TD>
    <B><FONT size="2">Pension, Postretirement, and Postemployment
    Benefits</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company has a defined benefit pension plan
covering substantially all employees which provides for
retirement benefits based upon an employee&#146;s credited
service at termination and, for salaried employees, compensation
history. Funding for the plan is based upon a review of the
specific requirements and an evaluation of the assets and
liabilities of the plan.
</FONT>

<P align="center"><FONT size="2">F-57
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">COASTAL COAL COMPANY, LLC</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition to the Company&#146;s defined benefit
pension plan, the Company also sponsors a defined benefit health
care plan. The plan provides certain medical, dental and life
insurance benefits to eligible retired employees. Employees of
the Company generally become eligible for retiree health care
benefits by retiring from the Company after reaching
ages&nbsp;50 or 55, depending upon the nature of their service
to the Company, and attaining ten years of service. Generally,
the medical and dental plans pay a stated percentage of most
medical expenses reduced for any deductibles and payments made
by government programs and other group coverage. The
postretirement medical, dental and life insurance plans are
unfunded. The measurement date used to determine pension and
postretirement benefit measures is September&nbsp;30.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The net periodic benefit cost for the period from
January&nbsp;1, 2003 to January&nbsp;31, 2003 is as follows:
</FONT>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="68%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Period from January&nbsp;1,</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">2003 to January&nbsp;31, 2003</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Pension</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Postretirement</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Benefits</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Benefits</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net periodic benefit cost
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">70,572</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">175,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The components of the change in benefit
obligations and net periodic benefit cost for the year ended
December&nbsp;31, 2002 are as follows:
</FONT>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="60%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">December&nbsp;31, 2002</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Pension</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Postretirement</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Benefits</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Benefits</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Change in benefit obligation:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Pension/ Postretirement benefit obligation at
    beginning of year
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">53,555,551</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14,534,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Service cost
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,028,948</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Interest cost
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,922,028</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,371,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Benefits paid
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,682,134</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,584,000</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Actuarial loss
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,633,556</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Benefit obligation&nbsp;&#151; end of year
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">68,457,949</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14,321,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Change in plan assets:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Fair value of plan assets at beginning of year
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">60,153,390</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Return on assets&nbsp;&#151; actual
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(6,350,688</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Benefits paid
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,682,134</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Fair value of plan assets at end of year
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">51,120,568</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">F-58
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">COASTAL COAL COMPANY, LLC</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</FONT></B>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="59%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">December&nbsp;31, 2002</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Pension</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Postretirement</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Benefits</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Benefits</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Actuarial present value of accumulated benefit
    obligation
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(68,457,949</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(14,321,000</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Plan assets at fair value
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">51,120,568</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Unfunded benefit obligation
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(17,337,381</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(14,321,000</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Unrecognized net actuarial (gain)&nbsp;loss
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25,965,092</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Unrecognized prior service cost
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,093,252</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Contributions
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net amount recognized at year end
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,720,963</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(14,321,000</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Amounts included in balance sheet:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accrued benefit cost
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(8,656,553</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(14,321,000</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Intangible asset
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,093,252</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Change in additional minimum liability obligation
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">17,284,264</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net amount recognized at year end
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,720,963</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(14,321,000</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="60%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Year Ended</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">December&nbsp;31, 2002</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Pension</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Postretirement</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Benefits</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Benefits</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Components of net periodic benefit cost:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Service cost
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,028,948</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Interest cost on Projected Benefit Obligation
    (PBO)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,922,028</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,371,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Return on assets&nbsp;&#151; expected
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(5,956,703</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other amortization, net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">75,613</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net periodic benefit cost
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,069,886</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,371,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Weighted average actuarial assumptions at
    December&nbsp;31, 2002:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Discount rate
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6.75</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6.75</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Expected long-term rate of return on plan assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8.80</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Rate of compensation increase
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4.00</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The weighted average annual rate of increase in
the per capita cost of covered benefits (i.e., health care trend
rate) for medical benefits is 9.0% in 2002, decreasing to 6.0%
in 2008 and thereafter.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company also provides long-term disability
benefits for substantially all employees. The Company provides
for these claims principally through a self-insurance program.
The liability for such claims is determined based upon an annual
evaluation by the Company&#146;s independent actuaries. As of
December&nbsp;31, 2002, an accrued benefit liability of
$6,781,000 is recorded for these postemployment benefits.
</FONT>

<P align="center"><FONT size="2">F-59
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">COASTAL COAL COMPANY, LLC</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The measurement date used to determine
postemployment benefit measures is January 1. Assumptions used
by the Company&#146;s independent actuaries in determining the
long-term disability liability for 2002 included the following:
</FONT>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="51%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="46%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Discount rate
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">7.25%
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Mortality&nbsp;&#151; healthy
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">1983 Group Annuity Mortality Table
    </FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Mortality&nbsp;&#151; disabled
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">1987 Commissioner&#146;s Group Long-Term
    Disability Valuation Table
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Annual Health Care Cost Trend Rate
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">9.0% for 2002 declining to 6.0% by 2008
    </FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">El&nbsp;Paso has a defined contribution employee
benefit plan (the Plan) covering substantially all employees of
the Company. The Plan is subject to the provisions of the
Employee Retirement Income Security Act of 1974, as amended. A
participant may elect to make basic contributions from 2% to 15%
of his or her eligible compensation on a before-tax or after-tax
basis. El&nbsp;Paso made matching contributions on behalf of the
Company in cash equal to 75% of a participant&#146;s basic
contribution up to a maximum level of 6% of eligible
compensation. Those contributions were approximately $100,000
for the period from January&nbsp;1, 2003 to January&nbsp;31,
2003 and $1.3&nbsp;million for the year ended December&nbsp;31,
2002.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">(10)&nbsp;</FONT></B></TD>
    <TD>
    <B><FONT size="2">Related Party Transactions</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Affiliates of El&nbsp;Paso perform certain
administrative services for the Company and allocate charges
based on the services performed. Such administrative services
include, but are not limited to, finance, treasury, cash
management, payroll processing, employee benefit administration
and certain accounting functions. El&nbsp;Paso would also
advance cash to the Company, on an as needed basis, to fund the
Company&#146;s payroll, accounts payable and other cash needs,
and would borrow any excess cash generated by the Company. As of
December&nbsp;31, 2002, El&nbsp;Paso and its affiliates owe the
Company approximately $28.8&nbsp;million related to these
matters, the amount being reflected as a component of
member&#146;s equity.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">(11)&nbsp;</FONT></B></TD>
    <TD>
    <B><FONT size="2">Commitments and Contingencies</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company mines coal on properties leased from
independent third parties. Under the terms of the leases, the
Company pays production royalties based on a percentage of the
net sales price of coal produced or based on the actual tonnage
mined from the leased premises. The Company&#146;s mineral
leases require the Company to pay minimum royalties. Some of
such leases have fixed terms and others are effective until
exhaustion of the mineral reserves. Future minimum royalty
payments under mineral lease agreements at December&nbsp;31,
2002 were as follows:
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="79%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">Year Ending</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Royalty</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Commitments</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2003
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,373,138</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2004
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,170,948</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2005
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,661,676</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2006
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,488,176</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2007
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,488,176</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Thereafter
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">17,064,480</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">36,246,594</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company is the subject of, or a party to,
various suits and pending or threatened litigation involving
governmental agencies and private interests. Also, the
Company&#146;s operations are affected by federal, state, and
local laws and regulations regarding environmental matters and
other aspects of its
</FONT>

<P align="center"><FONT size="2">F-60
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">COASTAL COAL COMPANY, LLC</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</FONT></B>

<P align="left">
<FONT size="2">business. The outcome or timing of current legal
or environmental matters or the impact, if any, of pending
legislation or regulatory developments on future operations is
not currently estimable.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In the normal course of operations, the Company
enters into long-term supply contracts for the sale of various
qualities of coal to customers in the energy industry. Under the
terms of these contracts, the Company is obligated to supply
coal to customers at prices ranging from approximately $24 to
$38&nbsp;per ton/, with such prices subject to adjustment in
future periods based upon factors such as the quality of the
coal. All supply contracts entered into as of December&nbsp;31,
2002 will expire through September&nbsp;10, 2010.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">(12)&nbsp;</FONT></B></TD>
    <TD>
    <B><FONT size="2">Risks and Uncertainties</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company is engaged in the production of
high-quality low sulfur steam coal for the electric generating
industry as well as industrial customers. Coal produced from the
Company&#146;s reserves located in Virginia, West Virginia and
Kentucky is primarily sold to energy companies in the eastern
and southeastern United States under long-term supply
agreements. Additional production from Company reserves not
covered under supply contracts is sold on the open market. The
Company is subject to risks and uncertainties related to the
creditworthiness of customers in the energy industry as well as
price, supply, demand, and other volatility associated with coal
commodity markets. Commodities markets and economic conditions
have been volatile in the past and can be expected to be
volatile in the future.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Three of the Company&#146;s largest customers,
Mirant Americas Energy Marketing, LP, South Carolina
Electric&nbsp;&#38; Gas and American Electric Power, account for
approximately 17%, 11% and 11%, respectively, of the
Company&#146;s trade accounts receivable at December&nbsp;31,
2002. The Company has approximately $3.4&nbsp;million,
$2.1&nbsp;million and $2.1&nbsp;million due from Mirant Americas
Energy Marketing, LP, South Carolina Electric&nbsp;&#38; Gas and
American Electric Power, respectively, at December&nbsp;31, 2002.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Three of the Company&#146;s largest customers,
Mirant Americas Energy Marketing, LP, Georgia Power Company, and
Ontario Power Generation account for approximately 20%, 13% and
10%, respectively, which represents approximately
$4.4&nbsp;million, $2.9&nbsp;million and $2.1&nbsp;million,
respectively, of the Company&#146;s net sales for the period
from January&nbsp;1, 2003 to January&nbsp;31, 2003.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Three of the Company&#146;s largest customers,
Georgia Power Company, Ontario Power Generation, and American
Electric Power, account for approximately 16%, 10% and 10%,
respectively, which represents approximately $42.3&nbsp;million,
$27.0&nbsp;million and $27.2&nbsp;million, respectively, of the
Company&#146;s net sales for the year ended December&nbsp;31,
2002.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">(13)&nbsp;</FONT></B></TD>
    <TD>
    <B><FONT size="2">Subsequent Sale of the Company</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On January&nbsp;31, 2003, El&nbsp;Paso
Corporation sold its membership interest in the Company, subject
to certain retained assets and liabilities, to AMFIRE, LLC, a
subsidiary of Alpha Natural Resources, LLC. The retained assets
and liabilities included cash, black lung excise tax
receivables, pension and post-employment obligations, black lung
obligations, and workers&#146; compensation obligations.
</FONT>

<P align="center"><FONT size="2">F-61
</FONT>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="center">
<B><FONT size="2">INDEPENDENT AUDITORS&#146; REPORT</FONT></B>

<P align="left">
<FONT size="2">Alpha Natural Resources, LLC
</FONT>

<DIV align="left">
<FONT size="2">and Stockholders and Board of Directors
</FONT>
</DIV>

<DIV align="left">
<FONT size="2">of North American Division of American Metals
</FONT>
</DIV>

<DIV align="left">
<FONT size="2">and Coal International,&nbsp;Inc. and Affiliates:
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have audited the accompanying combined balance
sheet of the North American Division of American Metals and Coal
International,&nbsp;Inc. and Affiliates as of December&nbsp;31,
2002 and the related combined statements of operations,
stockholders&#146; equity and partners&#146; capital, and cash
flows for the period from January&nbsp;1, 2003 to March&nbsp;11,
2003 and for the year ended December&nbsp;31, 2002. 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 audits.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We conducted our audits 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
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.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In our opinion, the financial statements referred
to above present fairly, in all material respects, the financial
position of the North American Division of American Metals and
Coal International,&nbsp;Inc. and Affiliates as of
December&nbsp;31, 2002 and the results of their operations and
their cash flows for the period from January&nbsp;1, 2003 to
March&nbsp;11, 2003 and the year ended December&nbsp;31, 2002 in
conformity with accounting principles generally accepted in the
United States of America.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As discussed in note&nbsp;2 to the combined
financial statements, the Company adopted the provisions of FASB
Statement No.&nbsp;143, <I>Accounting for Asset Retirement
Obligations,</I> effective January&nbsp;1, 2003.
</FONT>

<P align="left">
<FONT size="2">/s/ KPMG LLP
</FONT>

<P align="left">
<FONT size="2">KPMG LLP
</FONT>

<P align="left">
<FONT size="2">Pittsburgh, Pennsylvania
</FONT>

<DIV align="left">
<FONT size="2">March&nbsp;17, 2004
</FONT>
</DIV>

<P align="center"><FONT size="2">F-62
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="center">
<B><FONT size="2">AMERICAN METALS AND COAL INTERNATIONAL, INC.
AND AFFILIATES</FONT></B>

<DIV align="center">
<B><FONT size="2">(North American Division)</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">COMBINED BALANCE SHEET</FONT></B>

<DIV align="center">
<B><FONT size="2">December&nbsp;31, 2002</FONT></B>
</DIV>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="75%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="7" align="center" valign="top">
    <B><FONT size="2">ASSETS</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Current assets:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cash and cash equivalents
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,410,701</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Trade accounts receivable, net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">26,137,692</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Notes receivable, net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,482,485</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Coal inventory
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">17,748,779</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Materials and supplies inventory
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,636,241</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Prepaid expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,210,446</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Due from affiliates
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,975,555</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other current assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,843,220</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total current assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">65,445,119</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Property, plant, and equipment, net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">51,234,814</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,678,386</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">119,358,319</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="7"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="7" align="center" valign="top">
    <B><FONT size="2">LIABILITIES AND STOCKHOLDERS&#146; EQUITY AND
    PARTNERS&#146; CAPITAL</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Current liabilities:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Revolving credit line
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">13,176,658</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Current portion of long-term debt
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,151,923</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Trade accounts payable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">13,852,853</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accrued expenses and other current liabilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,716,479</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Demand notes payable to stockholder
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,424,229</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Due to affiliates
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,236,701</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total current liabilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">49,558,843</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Long-term liabilities:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Long-term debt
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,982,861</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Reclamation
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,265,130</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other long-term liabilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14,368,216</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total long-term liabilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25,616,207</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total liabilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">75,175,050</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Stockholders&#146; equity and partners&#146;
    capital:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Common stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,800</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Capital in excess of par value
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,250,324</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Retained earnings
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">31,946,314</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total stockholders&#146; equity
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">37,199,438</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Partners&#146; capital
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,983,831</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total stockholders&#146; equity and
    partners&#146; capital
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">44,183,269</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total liabilities and stockholders&#146; equity
    and partners&#146; capital
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">119,358,319</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="center">
<FONT size="2">See accompanying notes to combined financial
statements.
</FONT>

<P align="center"><FONT size="2">F-63
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="center">
<B><FONT size="2">AMERICAN METALS AND COAL INTERNATIONAL, INC.
AND AFFILIATES</FONT></B>

<DIV align="center">
<B><FONT size="2">(North American Division)</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">COMBINED STATEMENTS OF OPERATIONS</FONT></B>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="58%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Period from</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">January&nbsp;1, 2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Year Ended</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">to March&nbsp;11,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Revenues:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Coal sales
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">40,980,996</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">319,445,702</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Coal sales&nbsp;&#151; affiliates
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,771,972</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,486,830</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other revenues
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">311,479</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,128,219</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other revenues&nbsp;&#151; affiliates
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">549,353</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,584,549</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total revenues
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">43,613,800</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">327,645,300</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Costs and expenses:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Coal purchases and operating costs and expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">34,225,178</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">248,757,082</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Coal purchases and operating costs and
    expenses&nbsp;&#151; affiliates
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,049,170</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">47,345,992</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Depreciation, depletion, and amortization
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,791,838</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,577,532</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Selling and administrative expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,406,605</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,471,505</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Selling and administrative expenses&nbsp;&#151;
    affiliates
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">101,290</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">567,317</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,312</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,615,080</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">44,580,393</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">322,334,508</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Operating (loss) income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(966,593</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,310,792</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Interest income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">36,227</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">320,049</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Interest income&nbsp;&#151; affiliates
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">87,559</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">650,646</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Interest expense
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(294,503</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,243,960</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Interest expense&nbsp;&#151; affiliates
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(47,470</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(403,342</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Gain on sale of fixed assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(208,390</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">424,113</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">(Loss) income before income taxes
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,393,170</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,058,298</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Income tax expense
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,877,990</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Loss before cumulative effect of accounting change
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,393,170</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(819,692</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cumulative effect of accounting change
    (note&nbsp;2)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(696,565</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net loss
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,089,735</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(819,692</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="center">
<FONT size="2">See accompanying notes to combined financial
statements.
</FONT>

<P align="center"><FONT size="2">F-64
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="center">
<B><FONT size="2">AMERICAN METALS AND COAL INTERNATIONAL, INC.
AND AFFILIATES</FONT></B>

<DIV align="center">
<B><FONT size="2">(North American Division)</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">COMBINED STATEMENTS OF STOCKHOLDERS&#146;
EQUITY AND PARTNERS&#146; CAPITAL</FONT></B>

<DIV align="center">
<B><FONT size="2">Period from January&nbsp;1, 2003 to
March&nbsp;11, 2003 and</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">year ended December&nbsp;31, 2002</FONT></B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="28%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="19"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="19" align="center" nowrap><B><FONT size="1">Stockholders&#146; equity</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="19" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Capital in</FONT></B></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Partners&#146;</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Common</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Capital</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">excess of</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Retained</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Stockholders&#146;</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">capital</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">shares</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">stock</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">par value</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">earnings</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">equity</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Total</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Balances, January&nbsp;1, 2002
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(138,903</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,800</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,800</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,250,324</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">40,553,323</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">45,806,447</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">45,667,544</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net income (loss)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,633,840</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">814,148</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">814,148</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(819,692</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Distributions to partners
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,560,415</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,560,415</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Dividends to stockholders
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(9,421,157</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(9,421,157</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(9,421,157</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Partnership contributions
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,316,989</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,316,989</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Balances, December&nbsp;31, 2002
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,983,831</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,800</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,800</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,250,324</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">31,946,314</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">37,199,438</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">44,183,269</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net income (loss)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">195,592</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,285,327</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,285,327</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,089,735</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Distributions to partners
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(175,000</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(175,000</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Dividends to stockholders
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(6,600</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(6,600</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(6,600</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Balances, March&nbsp;11, 2003
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,004,423</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,800</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,800</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,250,324</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">29,654,387</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">34,907,511</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">41,911,934</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="center">
<FONT size="2">See accompanying notes to combined financial
statements.
</FONT>

<P align="center"><FONT size="2">F-65
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="center">
<B><FONT size="2">AMERICAN METALS AND COAL INTERNATIONAL, INC.
AND AFFILIATES</FONT></B>

<DIV align="center">
<B><FONT size="2">(North American Division)</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">COMBINED STATEMENTS OF CASH FLOWS</FONT></B>

<DIV align="center">
<B><FONT size="2">Period from January&nbsp;1, 2003 to
March&nbsp;11, 2003 and</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">year ended December&nbsp;31, 2002</FONT></B>
</DIV>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="54%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Period from</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Year Ended</FONT></B></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">January&nbsp;1, 2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">to March&nbsp;11, 2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cash flows from operating activities:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net loss
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,089,735</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(819,692</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Adjustments to reconcile net loss to net cash
    flows (used in) provided by operating activities:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cumulative effect of accounting change
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">696,565</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Depreciation and amortization
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,791,838</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,577,532</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Deferred income taxes
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">552,048</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,409,223</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accretion of asset retirement obligation
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">145,427</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">(Gain) loss on sale of fixed assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">208,390</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(424,113</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Changes in assets and liabilities:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Notes and accounts receivable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,747,583</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25,803,528</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Inventories
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(4,654,738</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(41,475</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Prepaid expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(93,718</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(505,276</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Decrease in amounts due to affiliates
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(3,244,077</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(8,633,419</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other current and noncurrent assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">196,813</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,164,651</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accounts payable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">402,126</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(13,738,315</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accrued expenses and other current liabilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,506,718</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(266,972</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other noncurrent liabilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(913,029</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,796,493</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net cash flows (used in) provided by operating
    activities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(3,761,225</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">19,322,165</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cash flows from investing activities:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Additions to property, plant, and equipment
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,495,166</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(15,086,987</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Proceeds from sale of property and equipment
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">20,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">678,741</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net cash flows used in investing activities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,475,166</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(14,408,246</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cash flows from financing activities:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net borrowings (payments)&nbsp;on lines of credit
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,437,473</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(7,788,294</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Principal payments on long-term debt
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(325,404</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,771,906</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Proceeds from long-term debt
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,532,261</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net increase (decrease) in note payable to
    stockholder
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">23,270</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(437,138</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Dividends and distributions
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(181,600</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(10,981,572</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Capital contributions
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,316,989</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net cash flows provided by (used in) financing
    activities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,953,739</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(4,129,660</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net change in cash and cash equivalents
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(3,282,652</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">784,259</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cash and cash equivalents&nbsp;&#151; beginning
    of period
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,410,701</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,626,442</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cash and cash equivalents&nbsp;&#151; end of
    period
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,128,049</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,410,701</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Supplemental cash flow disclosures:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cash paid for interest
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">343,973</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,647,302</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center">
<FONT size="2">See accompanying notes to combined financial
statements.
</FONT>

<P align="center"><FONT size="2">F-66
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="center">
<B><FONT size="2">AMERICAN METALS AND COAL</FONT></B>

<DIV align="center">
<B><FONT size="2">INTERNATIONAL, INC. AND AFFILIATES</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">(North American Division)</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO COMBINED FINANCIAL
STATEMENTS</FONT></B>

<DIV align="center">
<B><FONT size="2">December&nbsp;31, 2002</FONT></B>
</DIV>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">(1)</FONT></B></TD>
    <TD>
    <B><FONT size="2">Basis of Presentation and
    Organization</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The combined financial statements include the
assets and liabilities and operations of the North American
Division of American Metals and Coal International,&nbsp;Inc.
and certain affiliates (AMCI or the Company).
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">AMCI is a broker and producer of Appalachian
steam and metallurgical coal. Coal is produced from mines in
western Pennsylvania, northern Colorado, and West Virginia with
distribution and sales occurring throughout the United States
and abroad. Principal customers of the group are domestic and
international coke and steel producers, public utilities, and
affiliates of American Metals and Coal International,&nbsp;Inc.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Companies comprising AMCI are the following:
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Surface and Underground Mining:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="20%"></TD>
    <TD width="1%"></TD>
    <TD width="79%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD align="left">
    <FONT size="2">Alpine Development Company <BR>
     Creekside Energy Development Company <BR>
     Dayton Resources Company <BR>
     Dunamis Resources, LLC <BR>
     Madison Mining Company, LLC <BR>
     National King Coal, LLC <BR>
     Newhall Pocahontas Energy,&nbsp;Inc. (subsidiary of Deerfield
    Resources, Inc.) <BR>
     Riverside Energy,&nbsp;Inc. <BR>
     Senate Coal Mines,&nbsp;Inc. and its subsidiary Senate
    Resources,&nbsp;Inc.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Coal Processing:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="20%"></TD>
    <TD width="1%"></TD>
    <TD width="79%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD align="left">
    <FONT size="2">Barkers Ridge Development Company and its
    subsidiary Herndon Processing Company <BR>
     Indian Ridge Development and its subsidiary Virginia Crews Coal
    Company <BR>
     Kepler Processing Company,&nbsp;Inc.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Coal Sales and Brokering:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="20%"></TD>
    <TD width="1%"></TD>
    <TD width="79%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD align="left">
    <FONT size="2">American Metallurgical Coal Sales, LLC <BR>
     Metcoal Sales,&nbsp;Inc. <BR>
     Tanoma Energy,&nbsp;Inc.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Coal Transportation and Transloading:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="20%"></TD>
    <TD width="1%"></TD>
    <TD width="79%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD align="left">
    <FONT size="2">Gallup Transportation and Transloading Company,
    LLC <BR>
     I-22 Processing,&nbsp;Inc.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Mine Acquisition and Development:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="20%"></TD>
    <TD width="1%"></TD>
    <TD width="79%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD align="left">
    <FONT size="2">Deerfield Resources,&nbsp;Inc. and its subsidiary
    Newhall Processing,&nbsp;Inc. <BR>
     Guyandotte Pocahontas,&nbsp;Inc. <BR>
     Laurel Energy, L.P. <BR>
     Laurel Resources, L.P. <BR>
     Open Fork,&nbsp;Inc. <BR>
     Redbank,&nbsp;Inc. <BR>
     Still Run Incorporated <BR>
     Vollow Resources, LLC
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">F-67
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">AMERICAN METALS AND COAL</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">INTERNATIONAL, INC. AND AFFILIATES</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">(North American Division)</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Administrative Support:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="20%"></TD>
    <TD width="1%"></TD>
    <TD width="79%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD align="left">
    <FONT size="2">Consulting and Coal Service,&nbsp;Inc. <BR>
     Laurel Mountain Management,&nbsp;Inc.
    </FONT></TD>
</TR>

</TABLE>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">(2)</FONT></B></TD>
    <TD>
    <B><FONT size="2">Summary of Significant Accounting
    Policies</FONT></B></TD>
</TR>

</TABLE>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">(a)&nbsp;Principles of
    Presentation</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The combined financial statements include all
accounts of the Company. All significant intercompany
transactions and balances have been eliminated.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">(b)&nbsp;Cash and Cash
    Equivalents</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company defines cash and cash equivalents as
highly liquid, short-term investments with a maturity at the
date of acquisition of three months or less.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">(c)&nbsp;Accounts and Notes
    Receivable</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company establishes provisions for losses on
accounts and notes receivable when it is determined probable
that all or part of the outstanding balance will not be
collected. The Company regularly reviews collectibility and
establishes any allowance necessary using the specific
identification method. The allowance for doubtful accounts for
trade receivables at December&nbsp;31, 2002 was approximately
$445,000. The allowance for doubtful accounts for notes
receivable at December&nbsp;31, 2002 was approximately $715,000.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">(d)&nbsp;Materials and Supplies
    Inventory</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Supplies inventory is stated at the lower of
average cost or market. Upon issuance of a supply inventory item
to a project, the item is recorded as a component of property,
plant, and equipment, or expensed as appropriate.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">(e)&nbsp;Coal Inventory</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Coal inventory at December&nbsp;31, 2002 was
comprised of raw and purchased coal. Coal inventory is stated at
the lower of cost, with cost determined using average monthly
production costs per ton, or net realizable value. Purchased
coal is stated at its purchase price, or net realizable value if
lower.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">(f)&nbsp;Property, Plant, Equipment, and
    Mineral Interests</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Property, plant, and equipment are stated at
cost. Major expenditures for property and equipment are
capitalized. Maintenance, repairs, and minor renewals are
expensed as incurred. When assets are retired or otherwise
disposed of, their costs and related accumulated depreciation
are removed from the accounts and resulting gains or losses are
included in income. Property, plant, and equipment are
depreciated using the straight-line method over their estimated
useful lives. For income tax reporting purposes, depreciation is
calculated using applicable accelerated methods.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Costs for mineral rights and mine development
costs incurred as part of the acquisition of mineral rights, to
expand capacity of operating mines or to develop new coal
reserves, are capitalized and charged to operations on the
units-of-production method. Mine development costs include
expenses incurred for site preparation and development at the
mines during the development stage.
</FONT>

<P align="center"><FONT size="2">F-68
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">AMERICAN METALS AND COAL</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">INTERNATIONAL, INC. AND AFFILIATES</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">(North American Division)</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</FONT></B>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD><B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B></TD>
    <TD>
    <B><I><FONT size="2">(g)&nbsp;Impairment of Long-Lived
    Assets</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In accordance with Statement of Financial
Accounting Standards (SFAS) No.&nbsp;144, <I>Accounting for the
Impairment or Disposal of Long-Lived Assets, </I>long-lived
assets, such as property, plant, and equipment, are reviewed for
impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable.
Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to estimated
undiscounted future cash flows expected to be generated by the
asset. If the carrying amount of an asset exceeds its estimated
future cash flows, an impairment charge is recognized in the
amount by which the carrying amount of the asset exceeds the
fair value of the asset.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD><B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B></TD>
    <TD>
    <B><I><FONT size="2">(h)&nbsp;Asset Retirement
    Obligations</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In June 2001, the Financial Accounting Standards
Board (FASB)&nbsp;issued SFAS&nbsp;No.&nbsp;143, <I>Accounting
for Asset Retirement Obligations.</I> SFAS&nbsp;No.&nbsp;143
requires the Company to record the fair value of an asset
retirement obligation as a liability in the period in which it
incurs a legal obligation associated with the retirement of
tangible long-lived assets that result from the acquisition,
construction, development, and/or normal use of the assets. In
addition, the Company records a corresponding asset that is
depreciated over the life of the asset. Subsequent to the
initial measurement of the asset retirement obligation, the
obligation will be adjusted at the end of each period to reflect
the passage of time and changes in the estimated future cash
flows underlying the obligation. The Company adopted
SFAS&nbsp;No.&nbsp;143 effective January&nbsp;1, 2003.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company has future obligations to reclaim
properties disturbed in conjunction with coal operations under
federal and state laws. Reclamation of disturbed acreage is
performed as a normal part of the mining process. The asset
retirement obligation will be adjusted in the future to reflect
the passage of time and changes, if any, in the estimated future
cash flows underlying fair value measurement from the period.
Upon adoption, property, plant, and equipment were increased by
$2,302,689; asset retirement obligations were increased by
$2,999,254; and retained earnings was decreased by the
cumulative effect of the change in accounting principle of
$696,565 as of March&nbsp;11, 2003.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Prior to January&nbsp;1, 2003, the estimated cost
for mine reclamation was provided for using the
units-of-production method over the economic life of the mine.
Estimated reclamation costs were subject to review by management
on a regular basis and revised when appropriate for changes in
future estimated costs and/or regulatory requirements.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD><B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B></TD>
    <TD>
    <B><I><FONT size="2">(i)&nbsp;Advance Mining
    Royalties</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Leases, which require minimum annual or advance
payments and are recoverable from future production, are
generally deferred and charged to expense as the coal is
subsequently produced. At December&nbsp;31, 2002, advance mining
royalties totaling $513,066 are included in prepaid expenses.
The Company periodically assesses the recoverability of such
advance minimum royalties based on current operating plans,
expiration dates of such advance royalties, and the economic
environment in the coal industry and records a charge to
earnings when it is deemed more likely than not that such
amounts will not be recovered.
</FONT>

<P align="center"><FONT size="2">F-69
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">AMERICAN METALS AND COAL</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">INTERNATIONAL, INC. AND AFFILIATES</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">(North American Division)</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</FONT></B>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD><B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B></TD>
    <TD>
    <B><I><FONT size="2">(j)&nbsp;Revenue Recognition</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Revenue derived from the sale of coal is
recognized when the risk of ownership is transferred, typically
at the time of shipment. All intercompany revenue has been
eliminated in the preparation of the combined financial
statements.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">(k)&nbsp;Shipping and Handling
    Costs</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In West Virginia, freight paid by the Company on
behalf of the customer is billed separately. At
December&nbsp;31, 2002, freight included in accounts receivable
totaled $650,730. For mines in Pennsylvania and Colorado,
shipping and handling costs paid to third-party carriers are
recorded as freight expense and included in cost of sales.
Freight charges which are invoiced to coal customers are
included in coal sales.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">(l)&nbsp;Workers Compensation and
    Pneumoconiosis (Black Lung) Benefits</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Coal mining companies are obligated by federal
and state laws to pay coal workers&#146; pneumoconiosis (black
lung) benefits to eligible recipients. The Company is partially
self-insured for workers compensation claims in West Virginia
(note&nbsp;16). The liability for workers compensation claims is
a management estimate based on the ultimate losses to be
incurred on known claims. This probable ultimate liability is
re-determined annually, and resultant adjustments are expensed.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">(m)&nbsp;Insurance Programs</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company is self insured, up to specified
limits, for costs of casualty claims and medical claims. The
Company utilizes commercial insurance to cover what it considers
significant or catastrophic casualty and medical claims. Accrued
casualty losses are based on actuarial assumptions, adjusted for
Company specific history and expectations.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>(n)&nbsp;</I></FONT></B></TD>
    <TD>
    <B><I><FONT size="2">Benefit Plans</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company recognizes the cost of postretirement
benefits, which consist principally of medical benefits, during
employees&#146; periods of active service. Costs of the plan are
charged to current operations and are based on various actuarial
assumptions.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>(o)&nbsp;</I></FONT></B></TD>
    <TD>
    <B><I><FONT size="2">Income Taxes</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The entities included in the combined financial
statements have various ownership structures. Companies included
in the North American Division of American Metals and Coal
International,&nbsp;Inc. and Affiliates are either subchapter S
or C corporations, limited liability companies, or limited
partnerships. Companies filing under an election other than that
of a C corporation have taxable income or losses of the
respective company allocated directly to their respective
stockholders, members and/or partners and included in their
individual tax returns. Therefore, the expense or benefit from
income taxes includes only companies electing C corporation
status.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">For C corporations included in the combined
financial statements, income tax expense has been recognized on
an individual company basis for each of the C corporations
included in the consolidated tax return of their respective
parent company. Deferred tax assets and liabilities are
recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases.
Deferred tax assets and liabilities are measured using enacted
tax rates expected to be applied to taxable income in the years
in which those temporary
</FONT>

<P align="center"><FONT size="2">F-70
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">AMERICAN METALS AND COAL</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">INTERNATIONAL, INC. AND AFFILIATES</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">(North American Division)</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</FONT></B>

<P align="left">
<FONT size="2">differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities for a
change in tax rate is recognized in income in the period in
which the change is enacted.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>(p)&nbsp;</I></FONT></B></TD>
    <TD>
    <B><I><FONT size="2">Risks and Uncertainties</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company is engaged in the production of all
variations of steam and metallurgical coal. Coal produced from
mines in Pennsylvania and Colorado is primarily sold through
long-term supply agreements. Mines located in West Virginia
generally sell coal through one-year contracts. Additional
production from Company reserves not covered under supply
contracts is sold on the open market. The Company is subject to
risks and uncertainties related to the creditworthiness of
customers in the energy industry as well as price, supply,
demand, and other volatility associated with coal commodity
markets. Commodities markets and economic conditions have been
volatile in the past and can be expected to be volatile in the
future.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company had one customer account for 12% of
its sales for the period from January&nbsp;1, 2003 to
March&nbsp;11, 2003 and 15% of its sales for the year ended
December&nbsp;31, 2002, as well as accounting for 12% of trade
accounts receivable at December&nbsp;31, 2002.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>(q)&nbsp;</I></FONT></B></TD>
    <TD>
    <B><I><FONT size="2">Estimates</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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. Actual
results could differ from those estimates.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">(3)</FONT></B></TD>
    <TD>
    <B><FONT size="2">Notes Receivable</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">At December&nbsp;31, 2002, notes receivable
primarily consist of notes from Company contractors. These notes
are payable in semi-monthly installments at varying rates per
ton, depending on the type and grade of coal. Notes receivable
from Company contractors at December&nbsp;31, 2002 amounted to
$1,471,666. Other notes receivable amounted to $10,819 at
December&nbsp;31, 2002.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">(4)</FONT></B></TD>
    <TD>
    <B><FONT size="2">Prepaid Expenses</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Prepaid expenses consisted of the following at
December&nbsp;31, 2002:
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="84%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Insurance
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">573,497</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Advance royalties
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">513,066</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">123,883</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,210,446</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">(5)</FONT></B></TD>
    <TD>
    <B><FONT size="2">Other Current Assets</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Other current assets consisted of the following
at December&nbsp;31, 2002:
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="84%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Receivables from contract miners for equipment
    purchased
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,040,559</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Refundable deposits
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">216,789</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">585,872</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,843,220</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">F-71
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">AMERICAN METALS AND COAL</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">INTERNATIONAL, INC. AND AFFILIATES</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">(North American Division)</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</FONT></B>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">(6)</FONT></B></TD>
    <TD>
    <B><FONT size="2">Property, Plant, and Equipment</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Property, plant, and equipment consisted of the
following at December&nbsp;31, 2002:
</FONT>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="70%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Estimated</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">lives</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">(in years)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Land
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,239,638</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Coal reserves, mineral interests, and mine
    development costs
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">36,426,042</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Construction in progress-mine development
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,653,747</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Buildings and leasehold improvements
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5-30</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,616,111</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Machinery and equipment
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3-10</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">42,533,598</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">89,469,136</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Less accumulated depreciation, depletion, and
    amortization
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(38,234,322</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">51,234,814</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">(7)</FONT></B></TD>
    <TD>
    <B><FONT size="2">Other Assets</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Other noncurrent assets consisted of the
following at December&nbsp;31, 2002:
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="84%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Refundable deposits
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">924,739</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Special benefit trust (note&nbsp;16)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">586,203</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Deferred tax asset (note&nbsp;13)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,167,444</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,678,386</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">(8)</FONT></B></TD>
    <TD>
    <B><FONT size="2">Accrued Expenses and Other Current
    Liabilities</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Accrued expenses consisted of the following at
December&nbsp;31, 2002:
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="84%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Black lung liabilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,685,338</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Reclamation obligations
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">113,580</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Contractor performance obligations
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,102,314</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accrued payroll and related costs
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,400,427</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accrued taxes other than payroll
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">717,883</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accrued royalties
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">822,584</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accrued freight
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">247,866</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">626,487</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,716,479</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">(9)</FONT></B></TD>
    <TD>
    <B><FONT size="2">Demand Notes Payable to Stockholder</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Demand notes payable to stockholder consist of
various advances made to the Company by a stockholder. Interest
of 4.24% is added to the outstanding balance and is compounded
monthly. Approximately $28,000 of interest was added to the note
balance for the period from January&nbsp;1, 2003 to
March&nbsp;11, 2003. The Company made principal repayments of
$5,000 and $588,122 for the period from January&nbsp;1, 2003 to
March&nbsp;11, 2003 and for the year ended December&nbsp;31,
2002, respectively. These notes
</FONT>

<P align="center"><FONT size="2">F-72
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">AMERICAN METALS AND COAL</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">INTERNATIONAL, INC. AND AFFILIATES</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">(North American Division)</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</FONT></B>

<P align="left">
<FONT size="2">are unsecured and are fully subordinate to all
bank claims against the Company. Interest expense for the period
from January&nbsp;1, 2003 to March&nbsp;11, 2003 and for the
year ended December&nbsp;31, 2002 was $47,470 and $403,342,
respectively.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD><B><FONT size="2">(10)</FONT></B></TD>
    <TD>
    <B><FONT size="2">Revolving Credit Commitments</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company maintains lines of credit with PNC
Bank, N.A. and National City Bank (the Banks). The line of
credit utilized by the Company&#146;s operations with Banks in
Western Pennsylvania consist of a revolving credit note, with a
base not to exceed $15,000,000, bearing interest at 4.19% to
4.75%, payable monthly, which is secured by all present and
future contracts and inventory, and the proceeds of the
foregoing. At March&nbsp;11, 2003 and December&nbsp;31, 2002,
the Company had $11,299,488 and $13,076,658, respectively, drawn
on the line, which was due when the line was to expire in August
2003.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company maintains a line of credit with the
Banks for their West Virginia operations. The base credit limit
was reduced from $15,000,000 to $7,500,000 in 2003. At
December&nbsp;31, 2002, the Company had an outstanding balance
drawn on the line of $100,000. Availability under the line is
reduced by four letters of credit outstanding in the amount of
$3,036,891. As a result, the amount available at
December&nbsp;31, 2002 was $11,963,109. This line is secured by
the guarantees of the Company, along with the accounts
receivable and coal inventory that totaled $14,744,404 at
December&nbsp;31, 2002. The line provided for an interest rate
at prime minus &nbsp;1/4% (4% at December&nbsp;31, 2002). In
addition, there is a quarterly commitment fee of &nbsp;1/4% on
the undisbursed balance of the line.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Under loan agreements with PNC Bank, N.A., the
Company is required to maintain at all times a minimum net worth
of $26&nbsp;million, a minimum working capital balance of
$12.5&nbsp;million, a maximum total liability to net worth ratio
of 2.0 to 1.0, and debt service coverage ratio of 4.0 to 1.0.
Other restrictions exist on liens, encumbrances, guarantees,
loans, and dividends (note&nbsp;11). The Company obtained
waivers from PNC Bank, N.A. for all events of noncompliance.
</FONT>

<P align="center"><FONT size="2">F-73
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">AMERICAN METALS AND COAL</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">INTERNATIONAL, INC. AND AFFILIATES</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">(North American Division)</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</FONT></B>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD><B><FONT size="2">(11)</FONT></B></TD>
    <TD>
    <B><FONT size="2">Long-Term Debt</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Long-term debt consisted of the following at
December&nbsp;31, 2002:
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="79%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Settlement Agreement, West Virginia Bureau of
    Employment Programs, Workers&#146; Compensation Division,
    original settlement amount of $6,532,261, bearing interest at
    11%, secured by substantially all assets of the Company, payable
    monthly and maturing March 2012
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,004,819</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Note payable to bank, at 6.99%, payable in
    monthly installments through December 2004, secured by equipment
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,813,276</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Note payable at 7.80% payable in monthly
    installments through June 2004, secured by equipment
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">444,849</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Note payable to bank, at LIBOR (2.90% at
    December&nbsp;31, 2002), payable in monthly installments through
    December 2003, secured by equipment
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">223,850</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Note payable at 8.20%, payable in monthly
    installments through March 2004, secured by equipment
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">195,599</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Note payable at 6.17%, payable in monthly
    installments through September 2004, secured by equipment
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">93,518</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Note payable at 5.49%, payable in monthly
    installments through September 2004, secured by equipment
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">97,662</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Note payable at 8.91% payable in monthly
    installments through February 2004, secured by vehicles
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">109,514</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other notes payable, at various interest rates
    ranging from interest free to 12.0%, due in monthly
    installments, secured by equipment
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">151,697</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total long-term debt
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,134,784</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Less current maturities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,151,923</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Long-term portion
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,982,861</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Future maturities of long-term debt are as
follows:
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="84%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2003
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,151,923</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2004
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,638,659</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2005
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">447,093</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2006
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">460,580</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2007
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">511,477</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2008 and thereafter
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,925,052</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,134,784</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">F-74
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">AMERICAN METALS AND COAL</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">INTERNATIONAL, INC. AND AFFILIATES</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">(North American Division)</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</FONT></B>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD><B><FONT size="2">(12)</FONT></B></TD>
    <TD>
    <B><FONT size="2">Other Long-Term Liabilities</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Other long-term liabilities consisted of the
following at December&nbsp;31, 2002:
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="82%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Post retirement obligation (note&nbsp;17)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,486,985</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Commissions
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,125,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Land lease rights
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,113,375</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Black lung (note&nbsp;16)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">454,999</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Reclamation deposits
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">159,447</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">28,410</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14,368,216</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD><B><FONT size="2">(13)</FONT></B></TD>
    <TD>
    <B><FONT size="2">Income Taxes</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Income tax expense for the period from
January&nbsp;1, 2003 to March&nbsp;11, 2003 and the year ended
December&nbsp;31, 2002 consisted of the following components:
</FONT>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="61%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Period from</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Year</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">January&nbsp;1, 2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">ended</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">to March&nbsp;11,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Current income tax (benefit) expense
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(552,048</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,468,767</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Deferred tax expense
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">552,048</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,409,223</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Income tax expense
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,877,990</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Income tax (benefit) expense before the
cumulative effect of accounting change differs from the expected
(benefit) expense that would result from the application of the
federal tax rate of 34% to pre-tax book (loss) income due to the
following at March&nbsp;11, 2003 and December&nbsp;31, 2002:
</FONT>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="64%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">March&nbsp;11,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Computed expected (benefit) expense from income
    tax
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(473,678</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,379,821</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">State tax, net of federal
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,627</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Percentage depletion
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(306,000</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Income of nontaxable pass through entities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(273,528</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,050,946</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Change in asset valuation allowance
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">739,726</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,849,812</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,480</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,676</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Income tax expense
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,877,990</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">F-75
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">AMERICAN METALS AND COAL</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">INTERNATIONAL, INC. AND AFFILIATES</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">(North American Division)</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The composition of the net deferred tax asset at
December&nbsp;31, 2002 is as follows:
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="77%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Deferred tax assets:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Post retirement medical benefit accrual
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,188,502</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Reclamation reserve
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,319,590</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Federal and state operating loss carryforwards
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,178,560</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">State workers compensation accrual
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,865,514</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Federal alternative minimum tax carryforwards
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,005,028</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Black lung benefit accrual
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">635,452</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Bad debt reserve
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">302,565</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">351,726</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Less valuation allowance
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(5,196,333</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net deferred tax asset
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,650,604</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Deferred tax liabilities:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Difference between book and tax basis of property
    and equipment
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(4,113,820</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Advance minimum royalties
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(369,340</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total deferred tax liability
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(4,483,160</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total net deferred tax asset
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,167,444</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In assessing the realizability of deferred tax
assets, management considers whether it is more likely than not
that some portion or all of the deferred tax assets will not be
realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during
the periods in which those temporary differences become
deductible. Management considers the scheduled reversal of
deferred tax liabilities, projected future taxable income, and
tax planning strategies in making this assessment. As a result
of management&#146;s assessment, the Company has provided a
valuation allowance related to the deferred tax assets at
December&nbsp;31, 2002 of $5,196,333. The increase in the
valuation allowance during the period January&nbsp;1, 2003 to
March&nbsp;11, 2003 and the year ended December&nbsp;31, 2002
was $739,726 and $4,849,812, respectively.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As of December&nbsp;31, 2002, the Company has net
operating loss carryforwards of approximately $2,100,000 that
expire through 2023, and approximately $1,005,000 in alternative
minimum tax credit carryforwards, which do not expire.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Income taxes payable to the parent company at
December&nbsp;31, 2002 were approximately $1,319,000 and are
included in amounts due to affiliates in the accompanying
combined balance sheet.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD><B><FONT size="2">(14)</FONT></B></TD>
    <TD>
    <B><FONT size="2">Leased Coal Reserves</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition to mining coal on Company owned land,
the Company also mines coal on properties leased from
independent third parties. Under the terms of the leases, the
Company pays production royalties based on a percentage of the
net sales price of coal produced or actual tonnage mined from
the leased properties, whichever is greater.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company also leases coal mining and other
equipment under long-term operating leases with varying terms.
</FONT>

<P align="center"><FONT size="2">F-76
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">AMERICAN METALS AND COAL</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">INTERNATIONAL, INC. AND AFFILIATES</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">(North American Division)</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Future minimum operating lease payments for
equipment leases and annual production royalties as of
December&nbsp;31, 2002 are as follows:
</FONT>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="68%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Equipment</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Royalties</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2003
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">643,935</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,164,333</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2004
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">415,367</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,159,933</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2005
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">202,468</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,803,233</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2006
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,704,955</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2007
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,602,855</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2008 and thereafter
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,283,200</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total estimated future payments
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,261,770</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,718,509</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">For the period from January&nbsp;1, 2003 to
March&nbsp;11, 2003, lease expense relating to equipment and
royalties totaled $115,291 and $1,543,613, respectively. For the
year ended December&nbsp;31, 2002, lease expense relating to
equipment and royalties totaled $445,407 and $8,643,497
respectively.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD><B><FONT size="2">(15)</FONT></B></TD>
    <TD>
    <B><FONT size="2">Related Party Transactions</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Amounts due from affiliates include trade and
notes receivable. The Company regularly reviews collectibility
and will establish an allowance necessary based on probable
collectibility using the specific identification method
(note&nbsp;1). Amounts due from affiliates totaled $12,365,277
against which the Company provided an allowance in the amount of
$2,389,722 at December&nbsp;31, 2002.
</FONT>

<P align="center"><FONT size="2">F-77
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">AMERICAN METALS AND COAL</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">INTERNATIONAL, INC. AND AFFILIATES</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">(North American Division)</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company has receivables from and payables to
certain affiliates arising primarily from coal sales and
purchases, coal brokerage sales and commissions, and working
capital advances. Related party receivables and payables
consisted of the following at December&nbsp;31, 2002:
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="77%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Due from affiliates:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Solomons Mining Company
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,940,668</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Solomons Group, Inc.&nbsp;</FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,396,748</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">CME Engineering, Inc.&nbsp;</FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">154,148</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Tanoma Gas and Oil, L.P.&nbsp;</FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">894,428</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">AMCI Konl AG
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">658,903</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Coral Lands Co. Inc.&nbsp;</FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">38,690</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">K-M Investment Corporation
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,060,608</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Anita Mining Company, Inc.&nbsp;</FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">884,631</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other affiliates
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">336,453</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12,365,277</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Less allowance
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,389,722</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,975,555</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Due to affiliates:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">AMCI Export Corporation
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,175,147</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Mercury Trucking, Inc.&nbsp;</FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">679,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">AMCI Energy, LLC
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">497,637</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Unitmix, Inc.&nbsp;</FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">104,716</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Anita Mining Company, Inc.&nbsp;</FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,224,386</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Solomons Mining Company
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,796,091</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">K-M Investment Corporation
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,319,121</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other affiliates
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">440,603</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,236,701</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Coal sales to affiliates are typically based on
cost plus a tonnage commission. Coal purchases and services from
affiliates are at agreed-upon prices. A summary of transactions
with affiliates during the period from January&nbsp;1, 2003 to
March&nbsp;11, 2003 and year ended December&nbsp;31, 2002 is as
follows:
</FONT>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="67%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">March&nbsp;11,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Sales and other revenues
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,321,325</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,071,379</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Coal purchases
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,049,170</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">47,345,992</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Operating costs and expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">101,290</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">567,317</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Interest income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">87,559</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">650,646</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Interest expense
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">47,470</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">403,342</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">F-78
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">AMERICAN METALS AND COAL</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">INTERNATIONAL, INC. AND AFFILIATES</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">(North American Division)</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</FONT></B>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD><B><FONT size="2">(16)</FONT></B></TD>
    <TD>
    <B><FONT size="2">Workers Compensation and Pneumoconiosis (Black
    Lung) Benefits</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Workers&#146; compensation benefits in West
Virginia are currently provided to employees through the West
Virginia Workers&#146; Compensation Fund. Total workers&#146;
compensation premiums payable to the fund for the period from
January&nbsp;1, 2002 to March&nbsp;11, 2003 and the year ended
December&nbsp;31, 2002, were $92,926 and $405,015, respectively.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Prior to July&nbsp;1, 1990, the West Virginia
portion of the Company was self-insured for all Federal Black
Lung benefit claims. A special benefit trust (the Trust) exists
for the payment of these benefit claims (note&nbsp;7). The Trust
assets principally include U.S.&nbsp;Treasury Bills and
commercial paper stated at cost, which approximates fair value.
The balance of the trust at December&nbsp;31, 2002, was
$586,203. In addition, the Company has placed into the Trust a
letter of credit in the amount of $260,000. As of
December&nbsp;31, 2002, the Company had an accrued liability of
$1,685,338 for such claims (note&nbsp;8). Total self-insured
benefit claims paid for the period from January&nbsp;1, 2003 to
March&nbsp;11, 2003 and year ended December&nbsp;31, 2002 was
approximately $4,239 and $44,861, respectively.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD><B><FONT size="2">(17)</FONT></B></TD>
    <TD>
    <B><FONT size="2">Employee Benefit Plans</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">AMCI maintains a profit sharing 401(k) Plan
covering substantially all full-time employees of the Company.
The Company generally contributes 3% to 5% of compensation for
each employee who is eligible to participate in the Plan.
Company contributions to the Plan for the period from
January&nbsp;1, 2003 to March&nbsp;11, 2003 and the year ended
December&nbsp;31, 2002 was $113,329 and $339,685 respectively.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Under the labor contract with the United Mine
Workers of America (UMWA), two West Virginia companies in the
North American Division of AMCI are required to pay amounts,
based on hours worked, into two multi-employer pension plan
trusts. For the period from January&nbsp;1, 2003 to
March&nbsp;11, 2003 and the year ended December&nbsp;31, 2002,
UMWA pension expense was $6,877 and $9,621, respectively.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company provides certain health care benefits
for most retired employees subject to varying age and service
requirements. These benefits are provided through a contract
with an independent insurance company subject to certain cost
sharing provisions on the part of the retired employees.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company has historically obtained actuarial
valuations for purposes of recording expenses related to the
benefits provided to the retired employees. The valuation date
has historically been March&nbsp;31, the Company&#146;s former
fiscal year. Set forth below is information obtained from the
actuarial valuation as of March&nbsp;31, 2002 along with the
related liability balance recorded at December&nbsp;31, 2002 and
the amount of expense recorded in the accompanying statements of
operations for the period from January&nbsp;1, 2003 to
March&nbsp;11, 2003 and the year ended December&nbsp;31, 2002.
</FONT>

<P align="center"><FONT size="2">F-79
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">AMERICAN METALS AND COAL</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">INTERNATIONAL, INC. AND AFFILIATES</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">(North American Division)</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Following is a summary of information obtained
from the actuarial report for the valuation date of
March&nbsp;31, 2002.
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="72%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Change in benefit obligation:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net benefit obligation&nbsp;&#151; beginning of
    plan year
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">18,393,531</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Service cost
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">229,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Interest cost
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,301,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Actuarial (gain)&nbsp;loss
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,532,300</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Benefits paid
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(870,215</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net benefit obligation at March&nbsp;31, 2002
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">22,585,616</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Benefit obligation
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(22,585,616</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Unrecognized net actuarial gain
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,280,688</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Unrecognized net transition obligation
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,166,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Unfunded benefit obligation at March&nbsp;31, 2002
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(9,138,928</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The discount rate used in determining the
postretirement obligations at March&nbsp;31, 2002 was 7%.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Amounts recognized by the Company at
December&nbsp;31, 2002 were as follows:
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="78%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accrued benefit cost
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(9,138,928</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Additional expense accrual offset by payments for
    the period April&nbsp;1, 2002 to December&nbsp;31, 2002
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,348,057</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net amount recognized by the Company
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(10,486,985</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The components of the net periodic cost of the
plan as set forth in the actuarial valuation for the plan year
ended March&nbsp;31, 2002 are as follows:
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="81%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Service cost
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">229,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Interest cost
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,301,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net loss recognition
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">286,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Transition obligation recognition
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">398,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net periodic benefit cost for the plan year ended
    March&nbsp;31, 2002
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,214,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The discount rates used to determine net periodic
benefit costs for the plan years beginning April&nbsp;1, 2002
and 2001 were 7.00% and 7.25%, respectively.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Costs recognized in the accompanying combined
financial statements were $686,655 and $2,613,465 for the period
from January&nbsp;1, 2003 to March&nbsp;11, 2003 and the year
ended December&nbsp;31, 2002, respectively.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The weighted average annual rate of increase in
the per capita cost of covered benefits (i.e., health care trend
rate) for medical benefits is 9.00% in 2003, decreasing to 5.50%
in 2008 and thereafter.
</FONT>

<P align="center"><FONT size="2">F-80
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">AMERICAN METALS AND COAL</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">INTERNATIONAL, INC. AND AFFILIATES</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">(North American Division)</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Assumed health care trend rates have a
significant effect on the amounts reported for the health care
plans. A one-percentage-point change in assumed health care cost
trend rates would have the following effects as of and for the
plan year ended March&nbsp;31, 2002.
</FONT>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="70%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">One</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">One</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">percentage</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">percentage</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">point</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">point</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">increase</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">decrease</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Effect on total service and interest cost
    components
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">313,534</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(251,879</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Effect on postretirement benefit obligation
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,513,788</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,845,362</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

</TABLE>
</CENTER>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD><B><FONT size="2">(18)</FONT></B></TD>
    <TD>
    <B><FONT size="2">Commitments and Contingencies</FONT></B></TD>
</TR>

</TABLE>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>(a)&nbsp;</I></FONT></B></TD>
    <TD>
    <B><I><FONT size="2">Minimum royalties</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company&#146;s mineral leases require the
Company to pay minimum royalties. These leases have fixed terms,
and others are effective until exhaustion of the mineral
reserves. The aggregate annual minimum royalty payments on
mineral leases are approximately $10.3&nbsp;million, assuming no
reduction due to exhaustion of mineral reserves.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>(b)&nbsp;</I></FONT></B></TD>
    <TD>
    <B><I><FONT size="2">Guarantees</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company has guaranteed an $800,000 note,
dated October&nbsp;18, 2001, on behalf of an unrelated contract
miner. The loan was secured by equipment and the guarantee of an
affiliate. The outstanding balance of the note at
December&nbsp;31, 2002 was $478,109. The Company has not accrued
any obligation for this guarantee at December&nbsp;31, 2002.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company guaranteed a $1,000,000 note, dated
December&nbsp;17, 2001, on behalf of an unrelated contract
miner. The loan was secured by the equipment and the guarantee
of an affiliate. The outstanding balance of the note at
December&nbsp;31, 2002 was $743,474. The Company has not accrued
any obligation for this guarantee at December&nbsp;31, 2002.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>(c)&nbsp;</I></FONT></B></TD>
    <TD>
    <B><I><FONT size="2">Litigation</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company is involved in various legal
proceedings from time to time in the normal course of business.
In management&#146;s opinion, the Company is not currently
involved in any legal proceeding, which individually or in the
aggregate could have a material effect on the combined financial
condition, results of operations, or cash flow of the Company.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>(d)&nbsp;</I></FONT></B></TD>
    <TD>
    <B><I><FONT size="2">Supply contracts</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In the normal course of operations, primarily in
Western Pennsylvania and Northern Colorado, the Company enters
into long term supply contracts for the sale of various
quantities of coal to customers in the energy industry. Under
the terms of these contracts, the Company is obligated to supply
coal to customers at prices ranging from approximately $23 to
$66&nbsp;per ton, with such prices subject to adjustment in
future periods based upon existing market conditions and/or the
quality of the coal. All supply contracts at December&nbsp;31,
2003 expire through September&nbsp;10, 2010.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD><B><FONT size="2">(19)</FONT></B></TD>
    <TD>
    <B><FONT size="2">Subsequent Event</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On March&nbsp;11, 2003, the North American
Division of AMCI was sold to subsidiaries of Alpha Natural
Resources, LLC, a wholly owned subsidiary of ANR Holdings, LLC,
subject to certain retained assets and liabilities.
</FONT>

<P align="center"><FONT size="2">F-81
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="center">
<B><FONT size="2">INDEPENDENT AUDITORS&#146; REPORT</FONT></B>

<P align="left">
<FONT size="2">Alpha Natural Resources, LLC
</FONT>

<DIV align="left">
<FONT size="2">and Members, Stockholders, and Partners of
</FONT>
</DIV>

<DIV align="left">
<FONT size="2">Pennsylvania Entities of Mears Enterprises, Inc.:
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have audited the accompanying combined balance
sheets of The Combined Pennsylvania Entities of Mears
Enterprises, Inc. (the Company) as of December&nbsp;31, 2002 and
2001 and the related combined statements of income,
stockholders&#146; equity and partners&#146; capital, and cash
flows for the period January&nbsp;1, 2003 to November&nbsp;17,
2003 and years ended December&nbsp;31, 2002 and 2001. 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 audits.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We conducted our audits 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
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.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In our opinion, the combined financial statements
referred to above present fairly, in all material respects, the
financial position of the Company as of December&nbsp;31, 2002
and 2001 and the results of their operations and cash flows for
the period January&nbsp;1, 2003 to November&nbsp;17, 2003 and
years ended December&nbsp;31, 2002 and 2001 in conformity with
accounting principles generally accepted in the United States of
America.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As discussed in note&nbsp;2 to the combined
financial statements, the Company adopted the provisions of FASB
Statement No.&nbsp;143, <I>Accounting for Asset Retirement
Obligations,</I> effective January&nbsp;1, 2003.
</FONT>

<P align="left">
<FONT size="2">/s/ KPMG LLP
</FONT>

<P align="left">
<FONT size="2">KPMG LLP
</FONT>

<P align="left">
<FONT size="2">Pittsburgh, Pennsylvania
</FONT>

<DIV align="left">
<FONT size="2">March&nbsp;17, 2004
</FONT>
</DIV>

<P align="center"><FONT size="2">F-82
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="center">
<B><FONT size="2">THE COMBINED PENNSYLVANIA ENTITIES
OF</FONT></B>

<DIV align="center">
<B><FONT size="2">MEARS ENTERPRISES, INC.</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">COMBINED BALANCE SHEETS</FONT></B>

<DIV align="center">
<B><FONT size="2">December&nbsp;31, 2002 and 2001</FONT></B>
</DIV>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="64%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="11" align="center" valign="top">
    <B><FONT size="2">ASSETS</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Current assets:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cash and cash equivalents
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16,890,439</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12,454,191</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Trade accounts receivable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,555,181</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,369,221</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Coal inventory
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">426,323</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">687,582</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Prepaid expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">39,813</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">41,248</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Licenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">17,577</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16,750</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total current assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">22,929,333</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">18,568,992</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Property, plant, and equipment, net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,543,343</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,875,673</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">28,472,676</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">23,444,665</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="11"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="11" align="center" valign="top">
    <B><FONT size="2">LIABILITIES AND STOCKHOLDERS&#146; EQUITY AND
    PARTNERS&#146; CAPITAL</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Current liabilities:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Trade accounts payable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,646,494</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,597,430</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accrued expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">792,908</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">754,474</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Due to related parties
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">202,049</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Capital lease obligations&nbsp;&#151; current
    portion
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">374,718</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">234,497</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other current liabilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">180,017</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total current liabilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,196,186</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,586,401</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Long-term liabilities:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Capital lease obligations&nbsp;&#151; long-term
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">60,712</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">165,137</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Asset retirement obligations
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,018,490</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,068,796</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Due to related parties
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">273,735</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other long-term liabilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">28,927</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total liabilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,275,388</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,122,996</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Stockholders&#146; equity and partners&#146;
    capital:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Common stock, no par or stated value; issued and
    outstanding 870&nbsp;shares
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">38,259</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">38,259</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Retained earnings
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,966,562</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,584,170</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Partners&#146; capital
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">20,192,467</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14,699,240</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total stockholders&#146; equity and
    partners&#146; capital
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">24,197,288</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">18,321,669</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total liabilities and stockholders&#146; equity
    and partners&#146; capital
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">28,472,676</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">23,444,665</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="center">
<FONT size="2">See accompanying notes to combined financial
statements.
</FONT>

<P align="center"><FONT size="2">F-83
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="center">
<B><FONT size="2">THE COMBINED PENNSYLVANIA ENTITIES
OF</FONT></B>

<DIV align="center">
<B><FONT size="2">MEARS ENTERPRISES, INC.</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">COMBINED STATEMENTS OF INCOME</FONT></B>

<DIV align="center">
<B><FONT size="2">Period from January&nbsp;1, 2003 to
November&nbsp;17, 2003 and</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">years ended December&nbsp;31, 2002 and
2001</FONT></B>
</DIV>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="48%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Period from</FONT></B></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">January&nbsp;1, 2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Year Ended December&nbsp;31</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">to</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">November&nbsp;17, 2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Revenues:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Coal sales
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">45,829,444</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">44,459,196</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">42,085,943</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Costs and expenses:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cost of sales and other operating expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25,480,439</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">22,322,677</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">23,425,162</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Depreciation, depletion, and amortization
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">872,213</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">737,778</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">549,307</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Selling and administrative expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,831,639</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,175,759</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,753,574</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">30,184,291</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">27,236,214</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">26,728,043</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Operating profit
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15,645,153</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">17,222,982</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15,357,900</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other income (expense):
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Interest income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">194,474</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">214,053</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">171,817</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Interest expense
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(21,705</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(36,110</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(27,375</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Rental income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">598</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">19,216</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">446,050</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">82,071</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,018,035</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total other income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">619,417</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">260,014</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,181,693</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Income before cumulative effect of accounting
    change
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16,264,570</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">17,482,996</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16,539,593</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cumulative effect of accounting change
    (note&nbsp;2)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(310,855</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15,953,715</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">17,482,996</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16,539,593</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="center">
<FONT size="2">See accompanying notes to combined financial
statements.
</FONT>

<P align="center"><FONT size="2">F-84
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="center">
<B><FONT size="2">THE COMBINED PENNSYLVANIA ENTITIES
OF</FONT></B>

<DIV align="center">
<B><FONT size="2">MEARS ENTERPRISES, INC.</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">COMBINED STATEMENTS OF STOCKHOLDERS&#146;
EQUITY AND PARTNERS&#146; CAPITAL</FONT></B>

<DIV align="center">
<B><FONT size="2">Period from January&nbsp;1, 2003 to
November&nbsp;17, 2003 and</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">years ended December&nbsp;31, 2002 and
2001</FONT></B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="35%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="11"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">Stockholders&#146; capital accounts</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Total</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Total</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">stockholders&#146;</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Partners&#146;</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Common</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Retained</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">stockholders&#146;</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">equity and</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">capital</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">stock</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">earnings</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">equity</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">partners&#146; capital</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Balances, January&nbsp;1, 2001
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,097,360</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">38,259</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,225,410</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,263,669</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,361,029</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">13,166,130</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,373,463</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,373,463</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16,539,593</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Distributions
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(6,564,250</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,014,703</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,014,703</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(8,578,953</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Balances, December&nbsp;31, 2001
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14,699,240</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">38,259</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,584,170</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,622,429</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">18,321,669</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16,527,383</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">955,613</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">955,613</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">17,482,996</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Distributions
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(11,034,156</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(573,221</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(573,221</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(11,607,377</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Balances, December&nbsp;31, 2002
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">20,192,467</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">38,259</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,966,562</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,004,821</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">24,197,288</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net income (loss)&nbsp;&#151; January&nbsp;1,
    2003&nbsp;&#151; November&nbsp;17, 2003
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">17,327,699</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,373,984</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,373,984</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15,953,715</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Distributions
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(15,884,156</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(979,631</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(979,631</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(16,863,787</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Balances, November&nbsp;17, 2003
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">21,636,010</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">38,259</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,612,947</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,651,206</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">23,287,216</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="center">
<FONT size="2">See accompanying notes to combined financial
statements.
</FONT>

<P align="center"><FONT size="2">F-85
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="center">
<B><FONT size="2">THE COMBINED PENNSYLVANIA ENTITIES
OF</FONT></B>

<DIV align="center">
<B><FONT size="2">MEARS ENTERPRISES, INC.</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">COMBINED STATEMENTS OF CASH FLOWS</FONT></B>

<DIV align="center">
<B><FONT size="2">Period from January&nbsp;1, 2003 to
November&nbsp;17, 2003 and</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">years ended December&nbsp;31, 2002 and
2001</FONT></B>
</DIV>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="42%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="5"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="5"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Period from</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Year Ended December&nbsp;31</FONT></B></TD>
</TR>

<TR>
    <TD colspan="5"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">January&nbsp;1, 2003 to</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="5"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">November&nbsp;17, 2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
</TR>

<TR>
    <TD colspan="5"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="5" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cash flows from operating activities:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15,953,715</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">17,482,996</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16,539,593</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Adjustments to reconcile net income to net cash
    flows from operating activities:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cumulative effect of accounting change
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">310,855</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Depreciation
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">872,213</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">737,778</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">549,307</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accretion of asset retirement obligation
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">157,089</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Loss on asset disposals
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">990</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">40,381</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">53,968</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Changes in certain assets and liabilities:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Trade accounts receivable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(640,329</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(185,960</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,665,075</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Inventories
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(120,171</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">261,259</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(687,582</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Prepaid expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(63,094</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,435</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(23,012</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(827</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">59,379</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accounts payable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">681,244</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(950,936</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(616,539</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accrued expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">638,396</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">38,434</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(93,095</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other liabilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(180,017</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(50,306</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,068,796</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net cash flows from operating activities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">17,610,891</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">17,374,254</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15,185,740</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="5" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cash flows from investing activities:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Purchases of property, plant, and equipment
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(293,519</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,168,455</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(833,595</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Proceeds from sale of property, plant, and
    equipment
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net cash flows used in investing activities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(293,519</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,143,455</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(833,595</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="5" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cash flows from financing activities:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Payments on leases
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(374,718</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(266,578</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(122,452</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Proceeds from (payments&nbsp;on) due to related
    parties
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(10,000</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">79,404</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">46,160</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Distributions to stockholders
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(16,863,787</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(11,607,377</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(8,578,953</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net cash flows used in financing activities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(17,248,505</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(11,794,551</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(8,655,245</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net change in cash and cash equivalents
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">68,867</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,436,248</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,696,900</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="5" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cash and cash equivalents&nbsp;&#151; beginning
    of year
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16,890,439</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12,454,191</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,757,291</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="5" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cash and cash equivalents&nbsp;&#151; end of year
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16,959,306</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16,890,439</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12,454,191</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="5" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Supplemental cash flow disclosures:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cash paid for interest
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">21,705</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">36,110</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">27,375</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Noncash investing and financing activities:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Reclamation liability for coal reserves
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,474,301</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Acquisition of equipment through capital lease
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">302,374</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">522,086</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center">
<FONT size="2">See accompanying notes to combined financial
statements.
</FONT>

<P align="center"><FONT size="2">F-86
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="center">
<B><FONT size="2">THE COMBINED PENNSYLVANIA ENTITIES
OF</FONT></B>

<DIV align="center">
<B><FONT size="2">MEARS ENTERPRISES, INC.</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO COMBINED FINANCIAL
STATEMENTS</FONT></B>

<DIV align="center">
<B><FONT size="2">December&nbsp;31, 2002 and 2001</FONT></B>
</DIV>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">(1)</FONT></B></TD>
    <TD>
    <B><FONT size="2">Basis of Presentation and
    Organization</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The accompanying combined financial statements
include certain subsidiaries of Mears Enterprises, Inc. which
operate six mining complexes and a preparation plant all located
in Pennsylvania (The Combined Pennsylvania Entities of Mears
Enterprises, Inc., or the Company). The Company is a producer
and broker of bituminous coal, with distribution and sales
occurring primarily in the northeastern part of the United
States. Principal customers of the Company are domestic public
utilities, industrial companies, and related parties.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Companies comprising The Combined Pennsylvania
Entities of Mears Enterprises, Inc., represented by function,
are the following:
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Coal sales and brokering:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="20%"></TD>
    <TD width="1%"></TD>
    <TD width="79%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD align="left">
    <FONT size="2">Mears, Inc. (S-Corporation) <BR>
     DLR Coal Company (General Partnership) <BR>
     S&#38;M Mining (General Partnership)
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Mine acquisition and development:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="20%"></TD>
    <TD width="1%"></TD>
    <TD width="79%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD align="left">
    <FONT size="2">Mears, Inc. (S-Corporation) <BR>
     DLR Mining, Inc. (C-Corporation) <BR>
     S&#38;M Mining, Inc. (S-Corporation)
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Functions performed within this group range from
the very initial stages of surveying land for mining potential,
performing surface mining and deep mining of all grades and
qualities of coal, transferring coal from the mine to storage
facilities, and the selling and brokering coal to both third and
related parties.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">(2)</FONT></B></TD>
    <TD>
    <B><FONT size="2">Summary of Significant Accounting Policies and
    Practices</FONT></B></TD>
</TR>

</TABLE>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">(a)&nbsp;Basis of
    Presentation</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The combined financial statements include the
accounts of The Combined Pennsylvania Entities of Mears
Enterprises, Inc. All significant intercompany transactions and
balances have been eliminated.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">(b)&nbsp;Cash and Cash
    Equivalents</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company defines cash and cash equivalents as
highly liquid, short-term investments with a maturity at the
date of acquisition of three months or less.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">(c)&nbsp;Trade Accounts Receivable and
    Allowance for Doubtful Accounts</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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 allowance for doubtful accounts was
$0 and $4,375 at December&nbsp;31, 2002 and 2001, respectively.
Account balances are charged off against the allowance after all
means of collection have been exhausted and the potential for
recovery is considered remote. The Company does not have any
off-balance-sheet credit exposure related to its customers.
</FONT>

<P align="center"><FONT size="2">F-87
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">THE COMBINED PENNSYLVANIA ENTITIES
OF</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">MEARS ENTERPRISES, INC.</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</FONT></B>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">(d)&nbsp;Coal Inventory</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Coal inventory is stated at the lower of cost,
with cost determined using average monthly production costs, or
market value. Purchased coal is stated at purchase price. Coal
inventory at December&nbsp;31, 2002 and 2001 was comprised of
raw and purchased coal.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">(e)&nbsp;Shipping and Handling
    Costs</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Shipping and handling costs charged to customers
have been included in coal sales. Shipping and handling costs
incurred by the company have been included in cost of sales and
other operating expenses.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">(f)&nbsp;Property, Plant, and
    Equipment</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Costs for mineral rights and mine development
costs, incurred as part of the acquisition of mineral rights, to
expand capacity of operating mines or to develop new coal
reserves, are capitalized and charged to operations on the
units-of-production method. Mine development costs include costs
incurred for site preparation and development at the mines
during the development stage. Mobile mining equipment and other
fixed assets are stated at cost and depreciated on a
straight-line basis over the estimated useful lives ranging from
5 to 30&nbsp;years or on a units-of-production basis. Leasehold
improvements are amortized, using the straight-line method, over
their estimated useful lives or the term of the lease, whichever
is shorter. Major repairs and betterments that significantly
extend original useful lives or improve productivity are
capitalized and depreciated over the period benefited.
Maintenance and repairs are expensed as incurred.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">(g)&nbsp;Asset Retirement
    Obligations</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Minimum standards for mine reclamation have been
established by various regulatory agencies and dictate the
reclamation requirements at the Company&#146;s operations.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In June 2001, the Financial Accounting Standards
Board (FASB)&nbsp;issued Statement of Financial Accounting
Standards (SFAS)&nbsp;No.&nbsp;143, <I>Accounting for Asset
Retirement Obligations.</I> SFAS&nbsp;No.&nbsp;143 requires the
Company to record the fair value of an asset retirement
obligation as a liability in the period in which it incurs a
legal obligation associated with the retirement of tangible
long-lived assets that result from the acquisition,
construction, development, and/or normal use of the assets. The
Company also records a corresponding asset that is depreciated
over the life of the asset. Subsequent to the initial
measurement of the asset retirement obligation, the obligation
will be adjusted at the end of each period to reflect the
passage of time and changes in the estimated future cash flows
underlying the obligation.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company has future obligations to reclaim
properties disturbed in conjunction with coal operations under
federal and state laws. Some reclamation of disturbed acreage is
performed as a normal part of the mining process with the
remainder done at the end of the life of the mine. The Company
adopted SFAS&nbsp;No.&nbsp;143, <I>Accounting for Asset
Retirement Obligations,</I> on January&nbsp;1, 2003. Upon
adoption, property, plant, and equipment (net) were increased by
$2,163,446; asset retirement obligations were increased by
$2,474,301; and the cumulative effect of the accounting change
was $(310,855).
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Prior to January&nbsp;1, 2003, the estimated cost
for mine reclamation was provided for using the units of
production method over the economic life of the mine. Estimated
reclamation costs were subject to review by management on a
regular basis and revised when appropriate for changes in future
estimated costs and/or regulatory requirements.
</FONT>

<P align="center"><FONT size="2">F-88
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">THE COMBINED PENNSYLVANIA ENTITIES
OF</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">MEARS ENTERPRISES, INC.</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</FONT></B>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">(h)&nbsp;Advance Mining
    Royalties</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Rights to leased coal lands are often acquired in
exchange for royalty payments. Advance mining royalties are
advance payments made to lessors under terms of mineral lease
agreements that are recoupable against future production. These
advance payments are deferred and charged to operations as the
coal reserves are mined. In instances where advance payments are
not expected to be offset against future production royalties,
no asset is recognized and the scheduled future minimum payments
are recognized as liabilities.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">(i)&nbsp;Revenue Recognition</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Revenue is recognized on coal sales when title
passes to the customers, in accordance with the terms of the
sales agreement, which generally occurs when the coal is loaded
into transport carriers at the mine for shipment to the customer.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">(j)&nbsp;Impairment of Long-Lived
    Assets</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In accordance with SFAS&nbsp;No.&nbsp;144,
<I>Accounting for the Impairment or Disposal of Long-lived
Assets,</I> long-lived assets, such as property, plant,
equipment, and purchased intangibles subject to amortization,
are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may
not be recoverable. Recoverability of assets to be held and used
is measured by a comparison of the carrying amount of an asset
to estimated undiscounted future cash flows expected to be
generated by the asset. If the carrying amount of an asset
exceeds its estimated future cash flows, an impairment charge is
recognized by the amount by which the carrying amount of the
asset exceeds the fair value of the asset. Assets to be disposed
of would be separately presented in the balance sheet and
reported at the lower of the carrying amount or fair value less
costs to sell and would no longer be depreciated. The assets and
liabilities of a disposal group classified as held for sale
would be presented separately in the appropriate asset and
liability sections of the balance sheet.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">(k)&nbsp;Income Taxes</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">All companies included in The Combined
Pennsylvania Entities of Mears Enterprises, Inc. are either
S&nbsp;corporations or general partnerships except for DLR
Mining, Inc. Under each of these structures, for income tax
purposes the net income or loss of the S&nbsp;corporation and
general partnership is allocated directly to the respective
shareholders and or partners and is included in their individual
tax returns. Therefore, no provision for income tax has been
included in the combined financial statements for these
entities. DLR Mining, Inc. has a net deferred tax asset for
which a valuation allowance has been provided. The significant
components of the net deferred tax asset are net operating loss
carryforwards and certain liabilities which have not yet been
deducted for tax purposes.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>(l)&nbsp;</I></FONT></B></TD>
    <TD>
    <B><I><FONT size="2">Risks and Uncertainties</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company is engaged in the production of steam
and metallurgical coal for the electric generating industry as
well as industrial customers. Coal produced from the
Company&#146;s reserves located in Pennsylvania is sold to
energy companies throughout the northeastern part of the United
States primarily under long-term supply agreements. Additional
production from Company reserves not covered under supply
contracts is sold on the open market. The Company is subject to
risks and uncertainties related to the creditworthiness of
customers in the energy industry as well as price, supply,
demand, and other volatility associated with coal commodity
markets. Commodities markets and economic conditions have been
volatile in the past and can be expected to be volatile in the
future.
</FONT>

<P align="center"><FONT size="2">F-89
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">THE COMBINED PENNSYLVANIA ENTITIES
OF</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">MEARS ENTERPRISES, INC.</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company had three customers that accounted
for approximately 46%, 18%, and 15% of the Company&#146;s net
sales and two customers that accounted for approximately 61% and
17% of the Company&#146;s trade accounts receivable as of and
for the year ended December&nbsp;31, 2002. The Company had one
customer that accounted for approximately 35% of the
Company&#146;s net sales and 35% of the Company&#146;s trade
accounts receivable as of and for the year ended
December&nbsp;31, 2001.
</FONT>

<P align="left">
<B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>(m)&nbsp;Workers
Compensation and Pneumoconiosis (Black Lung)
Benefits</I></FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company is insured for workers compensation
claims.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company is required by federal and state
statutes to provide benefits to employees for awards related to
black lung. The Company is fully insured for this obligation.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>(n)&nbsp;</I></FONT></B></TD>
    <TD>
    <B><I><FONT size="2">Use of Estimates</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The preparation of the consolidated 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 consolidated financial
statements and the reported amounts of revenues and expenses
during the reporting period. The more significant items
requiring the use of management estimates are allowances for
doubtful accounts; mineral reserves; reclamation and mine
closure obligations; employee benefit liabilities; future cash
flows associated with assets; and useful lives for depreciation,
depletion, and amortization. Due to the prospective nature of
these estimates, actual results could differ from those
estimates.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">(3)</FONT></B></TD>
    <TD>
    <B><FONT size="2">Prepaid Expenses</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Prepaid expenses consisted of the following:
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="74%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">December&nbsp;31</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Prepaid capital stock tax
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,955</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,288</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Prepaid royalties
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">17,863</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">24,965</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Prepaid other
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,995</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,995</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total prepaid expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">39,813</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">41,248</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">(4)</FONT></B></TD>
    <TD>
    <B><FONT size="2">Property, Plant, and Equipment</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Property, plant, and equipment consisted of the
following:
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="66%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">December&nbsp;31</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Land
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">655,015</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">655,015</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Coal, mineral interests, and mine development
    costs
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,723,664</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,723,664</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Buildings and improvements
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">148,011</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">94,196</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Machinery and equipment
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,747,978</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,406,777</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,274,668</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,879,652</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Less accumulated depreciation, depletion, and
    amortization
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,731,325</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,003,979</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total property, plant, and equipment
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,543,343</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,875,673</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">F-90
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">THE COMBINED PENNSYLVANIA ENTITIES
OF</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">MEARS ENTERPRISES, INC.</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</FONT></B>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">(5)</FONT></B></TD>
    <TD>
    <B><FONT size="2">Accrued Expenses</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Accrued expenses consisted of the following:
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="75%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">December&nbsp;31</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Wages
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">492,407</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">378,013</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Workers compensation
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">86,803</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">95,019</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Retirement&nbsp;&#151; 401(k) Plan
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">68,632</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">128,141</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Office of Surface Mining and excise tax
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">118,395</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">121,101</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other liabilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">26,671</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">32,200</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">792,908</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">754,474</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">(6)</FONT></B></TD>
    <TD>
    <B><FONT size="2">Capital Lease Obligations</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company leases certain equipment under
capital lease agreements. These agreements have varying monthly
payment amounts and expire on various dates during 2003.
Amortization expense on the capitalized cost of leased property
for the period from January&nbsp;1, 2003 through
November&nbsp;17, 2003 was $21,705.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The capitalized cost of the leased property and
accumulated depreciation at December&nbsp;31, 2002 was $691,411
and $91,717. Amortization expense on the capitalized cost of
leased property for the year ended December&nbsp;31, 2002 was
$19,894.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The capitalized cost of the leased property and
accumulated depreciation at December&nbsp;31, 2001 was $534,036
and $31,383. Amortization expense on the capitalized cost of
leased property for the year ended December&nbsp;31, 2001 was
$10,071.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following is a schedule of future minimum
lease payments under capital lease together with the present
value of the net minimum lease payments as of December&nbsp;31,
2002 and 2001:
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="67%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Future minimum lease payments due in:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2002
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">253,308</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2003
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">400,946</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">170,337</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2004
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">63,982</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total future minimum lease payments
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">464,928</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">423,645</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Less amount representing interest
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(29,498</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(24,011</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Present value of future minimum lease payments
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">435,430</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">399,634</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Less current portion
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(374,718</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(234,497</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Long-term capital lease obligation
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">60,712</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">165,137</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">(7)</FONT></B></TD>
    <TD>
    <B><FONT size="2">Reclamation Liabilities</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Under the Federal Surface Mining Control and
Reclamation Act of 1977 and similar state statutes, mine
property is required to be restored in accordance with regulated
standards. The establishment of the asset retirement obligation
accrual for mine reclamation and mine closure costs is based on
permit requirements and requires various estimates and
assumptions, principally associated with costs, productivi-
</FONT>

<P align="center"><FONT size="2">F-91
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">THE COMBINED PENNSYLVANIA ENTITIES
OF</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">MEARS ENTERPRISES, INC.</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</FONT></B>

<P align="left">
<FONT size="2">ties, and timing of expenditures. The Company
periodically reviews its entire environmental liability and
makes necessary adjustments, including permit changes, revisions
to costs and productivities to reflect current experience, and
accretion related to the liability. At November&nbsp;17, 2003,
the asset retirement obligation was estimated to be $3,649,880.
The activity in the asset retirement obligation consisted of the
following during the period from January&nbsp;1, 2003 through
November&nbsp;17, 2003:
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="84%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Asset retirement obligation&nbsp;&#151;
    January&nbsp;1, 2003
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,492,791</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Obligations settled in current period
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accretion expense&nbsp;&#151; January&nbsp;1,
    2003&nbsp;&#151; November&nbsp;17, 2003
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">157,089</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Asset retirement obligation&nbsp;&#151;
    November&nbsp;17, 2003
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,649,880</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">(8)</FONT></B></TD>
    <TD>
    <B><FONT size="2">Workers Compensation Benefits</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company is insured for workers compensation
claims. The liability for workers compensation claims is a
management estimate of the ultimate losses to be incurred on
such claims based on the Company&#146;s experience and includes
a provision for incurred but not reported losses. Adjustments to
the probable ultimate liability are made annually based on
subsequent developments and experience and are included in
operations as they are determined. These obligations are
currently insured by Rockwood Casualty Insurance, an unrelated
entity.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The liability for workers compensation benefits
at December&nbsp;31, 2002 and 2001 was $86,803 and $95,019,
respectively, which is included in accrued expenses. Workers
compensation expenses for the period from January&nbsp;1, 2003
to November&nbsp;17, 2003 and for the years ended
December&nbsp;31, 2002 and 2001 were $1,550,447, $886,326, and
$735,513, respectively.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">(9)</FONT></B></TD>
    <TD>
    <B><FONT size="2">Retirement Plan</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Mears Enterprises, Inc.&nbsp;&#38; Affiliates
maintains a 401(k) for substantially all full-time employees.
Company contributions to the 401(k)&nbsp;plan, which are made at
the discretion of management, for the period from
January&nbsp;1, 2003 to November&nbsp;17, 2003 and for the years
ended December&nbsp;31, 2002 and 2001 were $166,253, $235,310,
and $368,097, respectively.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD><B><FONT size="2">(10)</FONT></B></TD>
    <TD>
    <B><FONT size="2">Leased Coal Reserves</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition to mining coal on Company owned land,
the Company also mines coal on properties leased from
independent third parties. Under the terms of the leases, the
Company pays minimum royalty payments. The Company also pays
production royalties based on a percentage of the net sales
price of coal produced or based on the actual tonnage mined from
the leased premises. These royalty payments range from
$0.07&nbsp;per ton mined to 10% of sales.
</FONT>

<P align="center"><FONT size="2">F-92
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">THE COMBINED PENNSYLVANIA ENTITIES
OF</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">MEARS ENTERPRISES, INC.</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As of December&nbsp;31, 2002, aggregate future
minimum royalty payments under these leases were as follows:
</FONT>

<CENTER>
<TABLE width="60%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="83%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Amount</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2003
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">17,581</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2004
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">68,581</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2005
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">68,581</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2006
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">68,581</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2007
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">68,581</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Thereafter
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">137,162</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total estimated future payments
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">429,067</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD><B><FONT size="2">(11)</FONT></B></TD>
    <TD>
    <B><FONT size="2">Other Income</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Other income consisted of the following:
</FONT>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="52%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Period from</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">January 1 to</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Year Ended</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Year Ended</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">November&nbsp;17,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Subcontractor income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">447,040</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">122,452</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">611,133</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Sales commission
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">460,870</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Loss on disposal of property, plant, and equipment
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(990</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(40,381</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(53,968</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">446,050</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">82,071</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,018,035</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD><B><FONT size="2">(12)</FONT></B></TD>
    <TD>
    <B><FONT size="2">Sale of the Company</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On November&nbsp;17, 2003, the assets of The
Combined Pennsylvania Entities of Mears Enterprises, Inc. were
sold to AMFIRE Mining Company, LLC, a wholly owned subsidiary of
Alpha Natural Resources, LLC.
</FONT>

<P align="center"><FONT size="2">F-93
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">

</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="54%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="43%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <IMG src="y02933z0293304.gif" alt="LOGO"></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <IMG src="y02933z0293302.gif" alt="LOGO"></TD>
</TR>

<TR>
    <TD align="center" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Erbacon Preparation Plant, WV (Brooks
    Run)</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="bottom">
    <B><FONT size="2">Red Star Mine, KY (Enterprise)</FONT></B></TD>
</TR>

<TR>
    <TD align="right" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <IMG src="y02933z0293309.gif" alt="LOGO"></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <IMG src="y02933z0293310.gif" alt="LOGO"></TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    <B><FONT size="2">Heavy Equipment at Lover&#146;s Gap Surface
    Mine, VA (Paramount)</FONT></B></TD>
</TR>

<TR>
    <TD align="right" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <IMG src="y02933z0293303.gif" alt="LOGO"></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <IMG src="y02933z0293305.gif" alt="LOGO"></TD>
</TR>

<TR>
    <TD align="center" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Tom&#146;s Creek Preparation Plant, VA
    (Paramount)</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="bottom">
    <B><FONT size="2">White Tail Preparation Plant, WV
    (Kingwood)</FONT></B></TD>
</TR>

</TABLE>
</CENTER>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="left">


<DIV align="center">
<IMG src="y02933y0293311.gif" alt="ALPHA LoGO">
</DIV>

<DIV>&nbsp;</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="center">
<B><FONT size="2">PART&nbsp;II</FONT></B>

<P align="center">
<B><FONT size="2">INFORMATION NOT REQUIRED IN
PROSPECTUS</FONT></B>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">Item&nbsp;13.</FONT></B></TD>
    <TD>
    <B><I><FONT size="2">Other Expenses of Issuance and
    Distribution.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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.
</FONT>

<CENTER>
<TABLE width="60%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="86%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Securities and Exchange Commission Registration
    Fee
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">31,675</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">NYSE Listing Fees Printing and Engraving Expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Blue Sky Fees and Expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Legal Fees
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accounting Fees
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Registrar and Transfer Agent Fees
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">NASD Filing Fee
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Miscellaneous Expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left">
<HR size="1" width="15%" align="left" noshade>
</DIV>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">*&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">To be filed by amendment.
    </FONT></TD>
</TR>

</TABLE>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">Item&nbsp;14.</FONT></B></TD>
    <TD>
    <B><I><FONT size="2">Indemnification of Directors and
    Officers.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As permitted by Section&nbsp;102 of the Delaware
General Corporation Law, or the DGCL, our restated certificate
of incorporation to be effective following the closing of this
offering will include a provision that eliminates the personal
liability of our directors for monetary damages for breach of
fiduciary duty as a director.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our restated certificate of incorporation and
amended and restated bylaws will also provide that:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">we must indemnify our directors and officers to
    the fullest extent permitted by Delaware law;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">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
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">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.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">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 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
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">II-1
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD align="left">
    <FONT size="2">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.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The indemnification provisions contained in our
restated certificate of incorporation and amended and restated
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.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">Item&nbsp;15.</FONT></B></TD>
    <TD>
    <B><I><FONT size="2">Recent Sales of Unregistered
    Securities.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The registrant was formed in November 2004 and
has not issued any securities. Prior to the completion of the
offering of the securities being registered hereby and in
connection with our Internal Restructuring (1)&nbsp;the
registrant will issue 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 the registrant&#146;s common stock in exchange for the
contribution of shares of common stock of Alpha NR Holding, Inc.
and interests in ANR Holdings, and (2)&nbsp;outstanding options
held by members of our management to purchase units of Alpha
Coal Management will be converted into options to purchase up
to &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. These issuances will be made in reliance
upon Section&nbsp;4(2) of the Securities Act or under
Rules&nbsp;506 or Rule&nbsp;701 promulgated by the SEC.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">Item&nbsp;16.</FONT></B></TD>
    <TD>
    <B><I><FONT size="2">Exhibits and Financial Statement
    Schedules.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(a)&nbsp;Exhibits
</FONT>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="81%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Exhibit No.</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Description of Exhibit</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">1</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.1*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Form of Underwriting Agreement
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">2</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Asset Purchase Agreement by and between Pittston
    Coal Company and Dickenson-Russell Coal Company, LLC, dated as
    of October&nbsp;29, 2002, as amended
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">2</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Asset Purchase Agreement by and between Pittston
    Coal Company and Paramont Coal Company Virginia, LLC, dated as
    of October&nbsp;29, 2002, as amended
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">2</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Asset Purchase Agreement by and between Pittston
    Coal Company and Alpha Land and Reserves, LLC, dated as of
    October&nbsp;29, 2002, as amended
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">2</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Asset Purchase Agreement by and between Pittston
    Coal Company and Alpha Coal Sales Co., LLC, dated as of
    October&nbsp;29, 2002, as amended
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">2</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Asset Purchase Agreement by and between Pittston
    Coal Company and Alpha Terminal Company, LLC, dated as of
    October&nbsp;29, 2002, as amended
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">2</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Asset Purchase Agreement by and between Pittston
    Coal Company and Maxxim Rebuild Co., LLC, dated as of
    October&nbsp;29, 2002, as amended
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">2</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Purchase and Sale Agreement by and among
    El&nbsp;Paso CGP Company and AMFIRE, LLC dated as of
    November&nbsp;14, 2002, as amended
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">2</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Contribution Agreement among the FRC Parties, the
    AMCI Parties, ANR Holdings, LLC and the Additional Persons
    listed on the signature pages dated as of March&nbsp;11, 2003,
    as amended
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">2</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Purchase and Sale Agreement made and entered into
    as of January&nbsp;31, 2003 by and among Alpha Land and
    Reserves, LLC and CSTL, LLC
    </FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">II-2
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="81%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Exhibit No.</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Description of Exhibit</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">2</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.10</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Purchase and Sale Agreement dated as of
    April&nbsp;9, 2003 by and between Alpha Land and Reserves, LLC
    and CSTL LLC
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">2</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.11</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Purchase and Sale Agreement dated as of
    April&nbsp;9, 2003 by and between Dickenson-Russell Coal
    Company, LLC and WBRD LLC
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">2</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.12</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Letter agreement dated April&nbsp;9, 2003 among
    Alpha Natural Resources, LLC, Dickenson-Russell Company, LLC,
    Alpha Land and Reserves, LLC, CSTL LLC, WBRD LLC, and Natural
    Resources Partners L.P.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">2</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.13</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Asset Purchase Agreement by and among S&#38;M
    Mining, S&#38;M Mining, Inc. and AMFIRE Mining Company, LLC
    dated October&nbsp;29, 2003, as amended
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">2</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.14</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Asset Purchase Agreement by and among DLR Coal
    Co., DLR Mining, Inc. and AMFIRE Mining Company, LLC dated
    October&nbsp;29, 2003, as amended.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">2</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.15</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Asset Purchase Agreement by and between Mears
    Enterprises, Inc. and AMFIRE Mining Company, LLC dated
    October&nbsp;29, 2003, as amended.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">2</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.16*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Form of Internal Restructuring Agreement
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">3</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.1*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Form of Restated Certificate of Incorporation of
    Alpha Natural Resources, Inc.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">3</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.2*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Form of Amended and Restated Bylaws of Alpha
    Natural Resources, Inc.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">4</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.1*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Form of certificate of Alpha Natural Resources,
    Inc. common stock
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">5</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.1*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Opinion of Bartlit Beck Herman
    Palenchar&nbsp;&#38; Scott LLP
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Credit Agreement dated as of May&nbsp;28, 2004,
    among ANR Holdings, LLC, Alpha Natural Resources, LLC, the
    Lenders from time to time party thereto, Citicorp North America,
    Inc., as administrative agent and as collateral agent, Credit
    Suisse First Boston, acting through its Cayman Islands Branch,
    as syndication agent, UBS Securities LLC, as documentation
    agent, Credit Suisse First Boston, acting through its Cayman
    Islands Branch, UBS Securities LLC and Citigroup Global Markets
    Inc., as joint lead arrangers and Credit Suisse First Boston,
    acting through its Cayman Islands Branch, and UBS Securities
    LLC, as joint bookrunners (the &#147;Credit Agreement&#148;)
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">First Amendment, dated as of August&nbsp;6, 2004,
    to Credit Agreement
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Guarantee and Collateral Agreement, dated as of
    May&nbsp;28, 2004, made by Alpha Natural Resources, LLC, ANR
    Holdings, LLC and each of the other Guarantors named therein, in
    favor of Citicorp North America, Inc., as administrative agent
    and as collateral agent (the &#147;Guarantee and Collateral
    Agreement&#148;)
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">First Amendment, dated as of August&nbsp;6, 2004
    to Guarantee and Collateral Agreement
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Indenture dated as of May&nbsp;18, 2004 among
    Alpha Natural Resources, LLC, Alpha Natural Resources Capital
    Corp., the Guarantors named therein and Wells Fargo Bank, N.A.,
    as Trustee
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Employment Agreement between Alpha Natural
    Resources, LLC and Michael J. Quillen dated January&nbsp;1,
    2003, as amended
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Employment Agreement between Alpha Natural
    Resources, LLC and D.&nbsp;Scott Kroh dated January&nbsp;1,
    2003, as amended
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.8*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Form of Stockholder Agreement by and among Alpha
    Natural Resources, Inc., the FRC Parties named therein, the AMCI
    Parties named therein, Madison Capital Funding LLC and the other
    stockholders named therein
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Alpha Natural Resources Annual Incentive Bonus
    (AIB) Plan
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.10*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Amended and Restated Alpha Coal Management LLC
    2004 Long-Term Incentive Plan
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.11*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Alpha Natural Resources, Inc. Long-Term Incentive
    Plan
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.12*&#134;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Coal Mining Lease dated April&nbsp;9, 2003,
    effective as of April&nbsp;1, 2003, by and between CSTL LLC
    (subsequently renamed ACIN LLC) and Alpha Land and Reserves,
    LLC, as amended
    </FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">II-3
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="81%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Exhibit No.</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Description of Exhibit</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.13*&#134;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Coal Mining Lease dated April&nbsp;9, 2003,
    effective as of April&nbsp;1, 2003, by and between WBRD LLC and
    Dickenson-Russell Coal Company, LLC, as amended
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.14*&#134;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Coal Mining Lease dated December&nbsp;4, 2002,
    effective as of December&nbsp;1, 2002, by and between CSTL LLC
    (subsequently renamed ACIN LLC) and Coastal Coal-West Virginia,
    LLC (subsequently renamed Brooks Run Mining Company), and Lease
    Assignment and Assumption Agreement made and entered into as of
    March&nbsp;6, 2003, by and between Brooks Run Mining Company,
    LLC (formerly named Coastal Coal-West Virginia, LLC) and
    Kingwood Mining Company, LLC
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">21</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">List of Subsidiaries
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">23</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.1*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Consent of Bartlit Beck Herman
    Palenchar&nbsp;&#38; Scott LLP (included as part of its opinion
    to be filed as Exhibit&nbsp;5.1 hereto)
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">23</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Consent of Marshall Miller&nbsp;&#38; Associates
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">23</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Consent of KPMG LLP
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">23</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Consent of KPMG LLP
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">23</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Consent of KPMG LLP
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">23</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Consent of KPMG LLP
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">24</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Powers of Attorney (included in signature page of
    this Registration Statement)
    </FONT></TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left">
<HR size="1" width="15%" align="left" noshade>
</DIV>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">*&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">To be filed by amendment.
    </FONT></TD>
</TR>

</TABLE>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&#134;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Confidential treatment will be requested with
    respect to portions of the exhibit. A complete copy of the
    agreement will be filed with the Securities and Exchange
    Commission.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(b)&nbsp;Financial Statement Schedules
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">Item&nbsp;17.</FONT></B></TD>
    <TD>
    <B><I><FONT size="2">Undertakings.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Insofar as indemnification for liabilities
arising under the Securities Act of 1933 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 SEC 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.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The undersigned registrant hereby undertakes that:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(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.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(2)&nbsp;For purposes of determining any
    liability under the Securities Act of 1933, 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.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(3)&nbsp;For purposes of determining any
    liability under the Securities Act of 1933, 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.
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">II-4
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="center">
<B><FONT size="2">SIGNATURES</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Pursuant to the requirements of the Securities
Act of 1933, the registrant has duly caused this registration
statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the city of Abingdon, State of
Virginia, on December&nbsp;6, 2004.
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="40%"></TD>
    <TD width="60%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <B><FONT size="2">ALPHA NATURAL RESOURCES, INC.</FONT></B></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="40%"></TD>
    <TD width="2%"></TD>
    <TD width="58%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">By:&nbsp;</FONT></TD>
    <TD align="center">
    <FONT size="2">/s/ DAVID C. STUEBE
    </FONT></TD>
</TR>

</TABLE>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="40%"></TD>
    <TD width="60%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <HR size="1" align="left" noshade></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">Name: David C. Stuebe
    </FONT></TD>
</TR>

</TABLE>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="40%"></TD>
    <TD width="8%"></TD>
    <TD width="52%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">Title:</FONT></TD>
    <TD align="left">
    <FONT size="2">Vice President and Chief Financial Officer
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We, the undersigned officers and directors of
Alpha Natural Resources, Inc., hereby severally constitute and
appoint David&nbsp;C. Stuebe and Vaughn&nbsp;R. Groves, and each
of them acting alone, our true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution in
each of them for him and in his name, place and stead, and in
any and all capacities, to sign any and all amendments
(including post-effective amendments) to this registration
statement (or any other registration statement for the same
offering that is to be effective upon filing pursuant to
Rule&nbsp;462(b) under the Securities Act of 1933) and to file
the same, with all exhibits thereto and other documents in
connection therewith, with the Securities and Exchange
Commission and any applicable securities exchange or securities
self-regulatory body, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and
perform each and every act and thing requisite or necessary to
be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of
them or their or his substitute or substitutes may lawfully do
or cause to be done by virtue hereof.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Pursuant to the requirements of the Securities
Act of 1933, this registration statement has been signed by the
following persons in the capacities indicated on December 6,
2004.
</FONT>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="40%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="49%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Signature</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Title</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    <FONT size="2">/s/ MICHAEL J. QUILLEN<BR>
    <HR size="1" noshade>Michael J. Quillen
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">President, Chief Executive Officer and
    Director<BR>
    (Principal Executive Officer)
    </FONT></TD>
</TR>

<TR>
    <TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    <FONT size="2">/s/ DAVID C. STUEBE<BR>
    <HR size="1" noshade>David C. Stuebe
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Vice President and Chief Financial Officer<BR>
    (Principal Financial Officer)
    </FONT></TD>
</TR>

<TR>
    <TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    <FONT size="2">/s/ EDDIE W. NEELY<BR>
    <HR size="1" noshade>Eddie W. Neely
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Vice President, Assistant Secretary and
    Controller<BR>
    (Principal Accounting Officer)
    </FONT></TD>
</TR>

<TR>
    <TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    <FONT size="2">/s/ E. LINN DRAPER,&nbsp;JR.<BR>
    <HR size="1" noshade>E. Linn Draper,&nbsp;Jr.
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Director
    </FONT></TD>
</TR>

<TR>
    <TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    <FONT size="2">/s/ JOHN W. FOX,&nbsp;JR.<BR>
    <HR size="1" noshade>John W. Fox,&nbsp;Jr.
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Director
    </FONT></TD>
</TR>

<TR>
    <TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    <FONT size="2">/s/ ALEX T. KRUEGER<BR>
    <HR size="1" noshade>Alex T. Krueger
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Director
    </FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">II-5
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="51%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="36%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Signature</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Title</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    <FONT size="2">/s/ FRITZ R. KUNDRUN<BR>
    <HR size="1" noshade>Fritz R. Kundrun
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Director
    </FONT></TD>
</TR>

<TR>
    <TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    <FONT size="2">/s/ WILLIAM E. MACAULAY<BR>
    <HR size="1" noshade>William E. Macaulay
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Director
    </FONT></TD>
</TR>

<TR>
    <TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    <FONT size="2">/s/ HANS J. MENDE<BR>
    <HR size="1" noshade>Hans J. Mende
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Director
    </FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">II-6
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="center">
<B><FONT size="2">EXHIBIT INDEX</FONT></B>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="81%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Exhibit No.</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Description of Exhibit</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">1</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.1*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Form of Underwriting Agreement
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">2</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Asset Purchase Agreement by and between Pittston
    Coal Company and Dickenson-Russell Coal Company, LLC, dated as
    of October&nbsp;29, 2002, as amended
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">2</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Asset Purchase Agreement by and between Pittston
    Coal Company and Paramont Coal Company Virginia, LLC, dated as
    of October&nbsp;29, 2002, as amended
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">2</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Asset Purchase Agreement by and between Pittston
    Coal Company and Alpha Land and Reserves, LLC, dated as of
    October&nbsp;29, 2002, as amended
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">2</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Asset Purchase Agreement by and between Pittston
    Coal Company and Alpha Coal Sales Co., LLC, dated as of
    October&nbsp;29, 2002, as amended
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">2</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Asset Purchase Agreement by and between Pittston
    Coal Company and Alpha Terminal Company, LLC, dated as of
    October&nbsp;29, 2002, as amended
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">2</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Asset Purchase Agreement by and between Pittston
    Coal Company and Maxxim Rebuild Co., LLC, dated as of
    October&nbsp;29, 2002, as amended
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">2</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Purchase and Sale Agreement by and among
    El&nbsp;Paso CGP Company and AMFIRE, LLC dated as of
    November&nbsp;14, 2002, as amended
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">2</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Contribution Agreement among the FRC Parties, the
    AMCI Parties, ANR Holdings, LLC and the Additional Persons
    listed on the signature pages dated as of March&nbsp;11, 2003,
    as amended
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">2</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Purchase and Sale Agreement made and entered into
    as of January&nbsp;31, 2003 by and among Alpha Land and
    Reserves, LLC and CSTL, LLC
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">2</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.10</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Purchase and Sale Agreement dated as of
    April&nbsp;9, 2003 by and between Alpha Land and Reserves, LLC
    and CSTL LLC
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">2</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.11</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Purchase and Sale Agreement dated as of
    April&nbsp;9, 2003 by and between Dickenson-Russell Coal
    Company, LLC and WBRD LLC
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">2</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.12</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Letter agreement dated April&nbsp;9, 2003 among
    Alpha Natural Resources, LLC, Dickenson-Russell Company, LLC,
    Alpha Land and Reserves, LLC, CSTL LLC, WBRD LLC, and Natural
    Resources Partners L.P.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">2</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.13</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Asset Purchase Agreement by and among S&#38;M
    Mining, S&#38;M Mining, Inc. and AMFIRE Mining Company, LLC
    dated October&nbsp;29, 2003, as amended
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">2</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.14</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Asset Purchase Agreement by and among DLR Coal
    Co., DLR Mining, Inc. and AMFIRE Mining Company, LLC dated
    October&nbsp;29, 2003, as amended.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">2</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.15</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Asset Purchase Agreement by and between Mears
    Enterprises, Inc. and AMFIRE Mining Company, LLC dated
    October&nbsp;29, 2003, as amended.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">2</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.16*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Form of Internal Restructuring Agreement
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">3</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.1*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Form of Restated Certificate of Incorporation of
    Alpha Natural Resources, Inc.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">3</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.2*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Form of Amended and Restated Bylaws of Alpha
    Natural Resources, Inc.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">4</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.1*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Form of certificate of Alpha Natural Resources,
    Inc. common stock
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">5</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.1*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Opinion of Bartlit Beck Herman
    Palenchar&nbsp;&#38; Scott LLP
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Credit Agreement dated as of May&nbsp;28, 2004,
    among ANR Holdings, LLC, Alpha Natural Resources, LLC, the
    Lenders from time to time party thereto, Citicorp North America,
    Inc., as administrative agent and as collateral agent, Credit
    Suisse First Boston, acting through its Cayman Islands Branch,
    as syndication agent, UBS Securities LLC, as documentation
    agent, Credit Suisse First Boston, acting through its Cayman
    Islands Branch, UBS Securities LLC and Citigroup Global Markets
    Inc., as joint lead arrangers and Credit Suisse First Boston,
    acting through its Cayman Islands Branch, and UBS Securities
    LLC, as joint bookrunners (the &#147;Credit Agreement&#148;)
    </FONT></TD>
</TR>

</TABLE>
</CENTER>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="81%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Exhibit No.</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Description of Exhibit</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">First Amendment, dated as of August&nbsp;6, 2004,
    to Credit Agreement
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Guarantee and Collateral Agreement, dated as of
    May&nbsp;28, 2004, made by Alpha Natural Resources, LLC, ANR
    Holdings, LLC and each of the other Guarantors named therein, in
    favor of Citicorp North America, Inc., as administrative agent
    and as collateral agent (the &#147;Guarantee and Collateral
    Agreement&#148;)
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">First Amendment, dated as of August&nbsp;6, 2004
    to Guarantee and Collateral Agreement
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Indenture dated as of May&nbsp;18, 2004 among
    Alpha Natural Resources, LLC, Alpha Natural Resources Capital
    Corp., the Guarantors named therein and Wells Fargo Bank, N.A.,
    as Trustee
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Employment Agreement between Alpha Natural
    Resources, LLC and Michael J. Quillen dated January&nbsp;1,
    2003, as amended
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Employment Agreement between Alpha Natural
    Resources, LLC and D.&nbsp;Scott Kroh dated January&nbsp;1,
    2003, as amended
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.8*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Form of Stockholder Agreement by and among Alpha
    Natural Resources, Inc., the FRC Parties named therein, the AMCI
    Parties named therein, Madison Capital Funding LLC and the other
    stockholders named therein
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Alpha Natural Resources Annual Incentive Bonus
    (AIB) Plan
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.10*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Amended and Restated Alpha Coal Management LLC
    2004 Long-Term Incentive Plan
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.11*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Alpha Natural Resources, Inc. Long-Term Incentive
    Plan
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.12*&#134;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Coal Mining Lease dated April&nbsp;9, 2003,
    effective as of April&nbsp;1, 2003, by and between CSTL LLC
    (subsequently renamed ACIN LLC) and Alpha Land and Reserves,
    LLC, as amended
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.13*&#134;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Coal Mining Lease dated April&nbsp;9, 2003,
    effective as of April&nbsp;1, 2003, by and between WBRD LLC and
    Dickenson-Russell Coal Company, LLC, as amended
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.14*&#134;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Coal Mining Lease dated December&nbsp;4, 2002,
    effective as of December&nbsp;1, 2002, by and between CSTL LLC
    (subsequently renamed ACIN LLC) and Coastal Coal-West Virginia,
    LLC (subsequently renamed Brooks Run Mining Company), and Lease
    Assignment and Assumption Agreement made and entered into as of
    March&nbsp;6, 2003, by and between Brooks Run Mining Company,
    LLC (formerly named Coastal Coal-West Virginia, LLC) and
    Kingwood Mining Company, LLC
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">21</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">List of Subsidiaries
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">23</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.1*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Consent of Bartlit Beck Herman
    Palenchar&nbsp;&#38; Scott LLP (included as part of its opinion
    to be filed as Exhibit&nbsp;5.1 hereto)
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">23</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Consent of Marshall Miller&nbsp;&#38; Associates
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">23</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Consent of KPMG LLP
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">23</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Consent of KPMG LLP
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">23</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Consent of KPMG LLP
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">23</FONT></TD>
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    <FONT size="2">Powers of Attorney (included in signature page of
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    <FONT size="2">To be filed by amendment.
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[{"type": "S-1", "sequence": "1", "filename": "y02933sv1.htm", "description": "FORM S-1", "secsgml_size_bytes": 2748295}]
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FORM S-1
As filed with the Securities and Exchange
Commission on December 6, 2004
Registration
No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
Alpha Natural Resources, Inc.
(Exact Name of Registrant as Specified in its
Charter)
Delaware
1222
02-0733940
(State of Incorporation)
(Primary Standard Industrial
Classification Code Number)
(I.R.S. Employer Identification No.)
406 West Main Street
Abingdon, VA 24210
(276) 619-4410
(Address, including zip code, and telephone
number, including area code, of registrant's principal
executive offices)
Vaughn R. Groves, Esq.
Vice President and General Counsel
Alpha Natural Resources, Inc.
406 West Main Street
Abingdon, VA 24210
(276) 619-4410
(Name, address, including zip code, and
telephone number, including area code, of agent for
service)
With Copies to:
James L. Palenchar, Esq.
Polly S. Swartzfager, Esq.
Bartlit Beck Herman Palenchar & Scott LLP
1899 Wynkoop Street, 8th Floor
Denver, CO 80202
Ph: (303) 592-3100
Fax: (303) 592-3140
Peter M. Labonski, Esq.
Latham & Watkins LLP
885 Third Avenue, Suite 1000
New York, New York 10022-4802
Ph: (212) 906-1200
Fax: (212) 751-4864
Edward P. Tolley III, Esq.
Joshua Ford Bonnie, Esq.
Simpson Thacher & Bartlett LLP
425 Lexington Avenue
New York, New York 10017-3954
Ph: (212) 455-2000
Fax: (212) 455-2502
Approximate date of commencement of proposed
sale to the public:
As soon as
practicable after this Registration Statement is declared
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, check the following
box.
o
CALCULATION OF REGISTRATION FEE
Title of Each Class of
Proposed Maximum Aggregate
Amount of
Securities to be Registered
Offering Price(1)(2)
Registration Fee
Common stock, par value $0.01 per share
$250,000,000
$31,675
(1)
Estimated solely for the purpose of calculating
    the registration fee under Rule 457(o) of the 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.
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 jurisdiction
where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED
DECEMBER 6, 2004
PROSPECTUS
Shares
Alpha Natural Resources, Inc.
Common Stock
This is the initial public offering of shares of
common stock of Alpha Natural Resources, Inc. All of
the                      shares
of common stock are being sold by us. We intend to use all of
the net proceeds from the sale of the shares in this offering to
repay indebtedness to certain of our existing stockholders.
Prior to this offering, there has been no public
market for our common stock. We currently estimate that the
initial public offering price per share will be between
$          and
$          .
We intend to apply to list the common stock on the New York
Stock Exchange under the symbol "ANR."
The underwriters have the option for a period of
30 days after the date of this prospectus to purchase up to
an
additional                      shares
of common stock from us at the initial public offering price
less the underwriting discount to cover over-allotments. We
intend to use the net proceeds we receive from any shares sold
pursuant to the underwriters' over-allotment option to make
distributions to our existing stockholders.
Investing in our common stock involves risks. See "Risk
Factors" beginning on page 12.
Neither the Securities and Exchange Commission
nor any other regulatory body has approved or disapproved these
securities or passed upon the accuracy or adequacy of this
prospectus. Any representation to the contrary is a criminal
offense.
Proceeds,
before
Initial public
expenses, to
offering
Underwriting
Alpha Natural
price
discount
Resources, Inc.
Per Share
$
$
$
Total
$
$
$
The underwriters expect to deliver the shares to
purchasers on or
about                     ,
2005.
Morgan Stanley
Citigroup
UBS Investment Bank
,
2005.
TABLE OF CONTENTS
Page
Prospectus Summary
1
Risk Factors
12
Special Note Regarding
    Forward-Looking Statements
30
Market and Industry Data and
    Forecasts
31
Use of Proceeds
32
Dividend Policy
32
Capitalization
33
Dilution
34
Internal Restructuring
36
Unaudited Pro Forma
    Financial Information
38
Selected Historical
    Financial Data
47
Management's Discussion
    and Analysis of Financial Condition and Results of Operations
49
The Coal Industry
66
Business
73
Environmental and Other
    Regulatory Matters
84
Management
91
Principal Stockholders
101
Certain Relationships and
    Related Party Transactions
103
Description of
    Indebtedness
111
Description of Capital
    Stock
115
Shares Eligible for Future
    Sale
119
Material U.S. Federal
    Income and Estate Tax Consequences to Non-U.S. Holders
122
Underwriting
125
Validity of the Shares
128
Experts— Independent
    Registered Public Accounting Firm
128
Experts— Coal
    Reserves
129
Where You Can Find
    Additional Information
129
Index to Financial
    Statements
F-1
You should rely only on the information
contained in this prospectus. We have not authorized anyone to
provide you with information different from that contained in
this prospectus. We are not making an offer to sell, and are not
seeking offers to buy, shares of our common stock in any
jurisdiction where offers and sales are not permitted. The
information contained in this prospectus is current only as of
the date on the front of this prospectus, regardless of the time
of delivery of this prospectus or of any sale of our common
stock.
No action is being taken in any jurisdiction
outside the United States to permit a public offering of the
common stock or possession or distribution of this prospectus in
that jurisdiction. Persons who come into possession of this
prospectus in jurisdictions outside the United States are
required to inform themselves about and to observe any
restrictions as to this offering and the distribution of this
prospectus applicable to those jurisdictions.
Through and
including                     ,
2005 (the 25th day after the date of this prospectus), all
dealers that effect transactions in these securities, whether or
not participating in this offering, may be required to deliver a
prospectus. This is in addition to the dealers' obligation
to deliver a prospectus when acting as underwriters and with
respect to their unsold allotments or subscriptions.
Unless indicated otherwise, the information
included in this prospectus assumes no exercise by the
underwriters of their over-allotment option to purchase up
to            additional
shares from us and that the shares to be sold in this offering
are sold at
$          per
share, which is the midpoint of the range indicated on the front
cover of this prospectus.
i
PROSPECTUS SUMMARY
This summary does not contain all of the
information you should consider in making your investment
decision. Before investing in our common stock, you should
carefully read this entire document, including our combined
historical and pro forma financial statements and accompanying
notes included elsewhere in this prospectus. You should also
carefully consider, among other things, the matters discussed
under "Risk Factors" and "Management's
Discussion and Analysis of Financial Condition and Results of
Operations."
Unless the context otherwise indicates, as
used in this prospectus, the terms "Alpha,"
"we," "our," "us" and similar
terms refer to: (1) our Predecessor with respect to periods
on and prior to December 13, 2002, (2) ANR
Fund IX Holdings, L.P. and Alpha NR Holding, Inc. and
subsidiaries on a combined basis with respect to periods from
and after December 14, 2002 until the completion of our
Internal Restructuring as defined and described below under
"Internal Restructuring" and (3) Alpha Natural
Resources, Inc. and its consolidated subsidiaries with respect
to periods from and after the completion of our Internal
Restructuring. References to our "Predecessor" refer
to the majority of the Virginia coal operations of Pittston Coal
Company, a subsidiary of The Brink's Company, that we
acquired on December 13, 2002. In this prospectus, we use
the term "ANR Holdings" to refer to ANR Holdings,
LLC, our top tier holding company prior to the completion of our
Internal Restructuring, and the phrase "existing
stockholders" to refer to the members of ANR Holdings
who will receive shares of our common stock pursuant to our
Internal Restructuring.
References to pro forma financial and other
pro forma information reflect (1) for balance sheet data,
the consummation of our Internal Restructuring as if it had
occurred on September 30, 2004 and (2) for statement
of operations and other data, the consummation of our 2003
Acquisitions and 2004 Financings as defined and described below
under "—Summary Historical and Pro Forma Financial
Data," and our Internal Restructuring, in each case as if
these events had occurred on January 1, 2003. See
"Unaudited Pro Forma Financial Information."
Alpha Natural Resources
We are a leading Central Appalachian coal
producer that also has significant operations in Northern
Appalachia. Our reserve base primarily consists of high Btu, low
sulfur steam coal that is currently in high demand in
U.S. coal markets and metallurgical coal that is currently
in high demand in both U.S. and international coal markets. We
produce, process and sell steam and metallurgical coal from
eight regional business units supported by 44 active underground
mines, 20 active surface mines and 11 preparation plants located
throughout Virginia, West Virginia, Kentucky, Pennsylvania and
Colorado. We are also actively involved in the purchase and
resale of coal mined by others, the majority of which we blend
with coal produced from our mines, allowing us to realize a
higher overall margin for the blended product than we would be
able to achieve selling these coals separately.
Steam coal, which is primarily purchased by large
utilities and industrial customers as fuel for electricity
generation, accounted for approximately 63% of our coal sales
volume in the first nine months of 2004 and 73% of our 2003
pro forma coal sales volume. The majority of our steam coal
sales volume in the first nine months of 2004 and during 2003
consisted of high Btu (above 12,500 Btu content per pound), low
sulfur (sulfur content of 1.5% or less) coal, which typically
sells at a premium to lower-Btu, higher-sulfur steam coal.
Metallurgical coal, which is used primarily to
make coke, a key component in the steel making process,
accounted for approximately 37% of our coal sales volume in the
first nine months of 2004 and 27% of our 2003 pro forma coal
sales volume. Metallurgical coal generally sells at a premium
over steam coal because of its higher quality and its value in
the steelmaking process as the raw material for coke. Under
current market conditions, we are able to market a significant
portion of our higher quality steam coal as metallurgical coal.
The majority of our international coal sales in the first nine
months of 2004 and on a pro forma basis in 2003 consisted of
metallurgical coal.
1
During the first nine months of 2004, on a pro
forma basis, we sold a total of 19.4 million tons of steam
and metallurgical coal and generated revenues of
$937.1 million, EBITDA of $96.7 million and net income
of $29.4 million. We define and reconcile EBITDA, and
explain its importance, in note (1) under
"—Summary Historical and Pro Forma Financial
Data." On a pro forma basis in 2003 we sold a total of
25.3 million tons of steam and metallurgical coal and
generated revenues of $902.8 million, EBITDA of
$68.2 million and net income of $0.6 million. Our coal
sales during the first nine months of 2004 and on a pro forma
basis during 2003 included 5.4 million tons and
6.1 million tons, respectively, of purchased coal, of which
approximately 81% and 83%, respectively, was blended with coal
produced from our mines prior to resale. Measured by tons sold,
approximately 32% of our 2004 coal sales for the nine months
ended September 30, 2004 and 20% of our 2003 pro forma coal
sales were made outside the United States, primarily in Canada
and several counties in Europe and, beginning in 2004, also in
Asia.
As of October 15, 2004, we owned or leased
514.4 million tons of proven and probable coal reserves. Of
our total proven and probable reserves, approximately 89% are
low sulfur reserves, with approximately 58% having sulfur
content below 1.0%. Approximately 94% of our total proven and
probable reserves have a high Btu content. We believe that our
total proven and probable reserves will support current
production levels for more than 25 years.
Competitive Strengths
We believe that the combination of the following
competitive strengths distinguishes us from our competitors.
We provide a comprehensive range of steam
and metallurgical coal products that are in high
demand.
Our reserve base enables
us to provide customers with coal products that are in high
demand— including high Btu, low sulfur steam coal, and low,
medium and high volatile metallurgical coal. Steam coal
customers value high Btu coal because it fuels electricity
generation more efficiently than lower energy content coal. In
addition, the demand for clean burning, low sulfur coal has
grown significantly since the implementation of sulfur emission
restrictions mandated by the Clean Air Act. Metallurgical coal
customers require precise coal characteristics to meet their
coke production specifications and generally value low volatile
metallurgical coal more highly than other categories of
metallurgical coal. We believe that we are the only significant
North American producer of all three categories of metallurgical
coal— low, medium and high volatile metallurgical
coal— and that we produced or processed on a pro forma
basis approximately 30% of the low volatile metallurgical coal
consumed in the United States and Canada in 2003.
Our flexible mining operations and
diversified asset base allow us to manage costs while
capitalizing on market
opportunities.
Our 64 active
mines, 11 preparation plants and eight regional business units
are supported by flexible and cost-effective use of our mining
equipment and personnel. Our underground mines use the room and
pillar mining method with continuous mining equipment, and our
surface mines principally use trucks, loaders and dozers. This
equipment is interchangeable and can be redirected easily at a
relatively low cost, providing us more flexibility to respond to
changing geologic, operating and market conditions. The
diversity of our portfolio of mines and preparation plants
allows us to move resources between existing or new operations
to pursue the most attractive market opportunities available to
us. This diversity also limits our mine concentration risk, as
the mine that produced the greatest amount of our coal
contributed only approximately 10% of our production during the
first nine months of 2004.
Our ability to provide customized product
offerings creates valuable market opportunities, strengthens our
customer relationships and improves
profitability.
We have a
"customer-focused" marketing strategy that, combined
with our comprehensive range of coal product offerings and
established marketing network, enables us to customize our coal
deliveries to a customer's precise needs and
specifications. The products we sell to our customers will often
be a blend of internally produced coal and coal we have
purchased from third parties, in contrast to the more
traditional approach of only offering coal produced from captive
mines. Our blending capabilities give us a competitive advantage
in product source and composition. We use spot market coal to
optimize the mix delivered to our customers and to maximize the
profitability of
2
each of our contracts. We believe our commitment
to providing high quality coal products designed to our
customers' specifications enables us to maintain strong
customer relationships while maximizing the value of our coal
reserves.
Our primary operating focus is the
Appalachian region, the region with the most producer-favorable
coal supply and demand dynamics in the United
States.
Our operations are focused
on Central and Northern Appalachia, which accounted for 70% and
27%, respectively, of the coal produced from our mines during
the first nine months of 2004. The Appalachian region has
produced declining supplies of coal in recent years while
regional demand, already the highest in the United States based
on tons consumed, is expected to increase due to growth in
regional demand for electricity. We believe these trends in
Appalachian coal supply and demand, the high quality of
Appalachian coal and the lower transportation costs that result
from the proximity of Appalachian producers and customers create
favorable pricing dynamics that provide us with an advantage
over producers from other regions. According to Platts Research
and Consulting ("Platts"), year-over-year reference
prices as of November 29, 2004 for Central and Northern
Appalachian coal were 83% and 98% higher, respectively, while
they were 13% lower for Powder River Basin coal.
Our Central Appalachian mining expertise
provides us with significant regional growth
opportunities.
Our focus on the
Appalachian region has allowed us to develop expertise in
efficiently mining Central Appalachian reserves. Furthermore, we
have developed both a good understanding of the region's
transportation infrastructure and a favorable reputation with
the region's property owners, coal industry operators and
employee base. Together, these factors allow us to capitalize on
regional growth opportunities that we believe our larger
competitors with less regional expertise are unable or unwilling
to pursue.
Our comparatively low amount of long-term
reclamation and employee-related liabilities provides us with
financial flexibility.
We believe
that our annual expenses for long-term reclamation liabilities
and for employee-related liabilities, such as workers'
compensation, black lung, post-retirement and pension
liabilities, are among the lowest of the publicly-traded
U.S. coal producers, providing us with increased financial
flexibility. As of September 30, 2004, we had total accrued
reclamation liabilities of $40.6 million, self-insured
workers' compensation liabilities of $5.3 million and
post-retirement obligations of $13.5 million, and we had no
pension liabilities and minimal black lung liabilities. In
addition, because over 90% of our approximately 2,500 employees
are employed by our subsidiaries on a union-free basis and
approximately 95% of our pro forma coal production during the
first nine months of 2004 and in 2003 was produced from mines
operated by union-free employees, we are better able to minimize
the types of employee-related liabilities commonly associated
with union-represented mines.
Our safety record and work practices allow
us to keep our costs competitive.
Mine safety is a critical component to controlling costs and
retaining skilled employees. Historically, our operations have
had a lower incident rate (as measured by the U.S. Mine
Safety and Health Administration) than the average incident rate
for underground coal mining operations located in similar areas
of Central and Northern Appalachia. Alpha and its Predecessor
and acquired companies have also received more than 30 safety
awards over the last three years, including the prestigious
Sentinels of Safety and Holmes Safety awards, which have been
awarded to several of our mines.
Our management team has extensive coal
industry experience and has successfully integrated a number of
acquisitions.
Our senior
executives have, on average, more than 20 years of
experience in the coal industry, largely in the Appalachian
region, and they have substantial experience in increasing
productivity, reducing costs, implementing our marketing
strategy and coal blending capabilities, improving safety, and
developing and maintaining strong customer and employee
relationships. In addition to their operating strengths, the
majority of our senior executives have significant experience in
identifying, acquiring and integrating coal companies into
existing organizations.
3
Business Strategy
We believe that we are well-positioned to enhance
stockholder value by continuing to implement our strategy, which
consists of the following key components:
Achieve premium pricing and optimum
efficiency in contract
fulfillment.
We intend to continue
to use our diversified operating strategy, coal blending
capabilities, market knowledge and strong marketing organization
to identify and capitalize on opportunities to generate premium
pricing for our coal and to achieve optimum efficiency in
fulfillment of coal contracts. As of November 10, 2004, we
had contracts to sell 93% of our planned production for 2005 and
44% of our planned production for 2006, which we believe
provides us with significant price certainty in the short-term
while maintaining uncommitted planned production that allows us
to take an opportunistic approach to selling our coal.
Maximize profitability of our mining
operations.
We continuously
reassess our reserves, mines and processing and loading
facilities in an effort to determine the optimum operating
configuration that maximizes our profitability, efficient use of
operating assets and return on invested capital. We intend to
continue to optimize the profitability of our mining operations
through a series of initiatives that include:
•
increasing production levels where we determine
    that such increased production can be profitably achieved;
•
leveraging our product offerings, blending
    capabilities and marketing organization to realize higher
    margins from our sales;
•
deploying our resources against the most
    profitable opportunities available in our asset portfolio;
•
consolidating regional operations and increasing
    the utilization of our existing preparation plants and loading
    facilities;
•
maintaining our focus on safety and implementing
    safety measures designed to keep our workforce injury
    free; and
•
using centralized procurement to negotiate with
    major vendors to provide materials and supplies at lower overall
    cost.
Pursue strategic value-creating
acquisitions.
We have successfully
acquired and integrated businesses into our operations, and we
intend to continue to expand our business and coal reserves
through acquisitions of attractive, strategically positioned
assets. Although we intend to concentrate our efforts in
Appalachia, where we believe there remain attractive acquisition
opportunities, we will continue to evaluate opportunities in
other regions that meet our acquisition criteria. We employ what
we believe is a disciplined acquisition strategy focused on
acquiring coal and coal-related operations and assets at
attractive valuations. Some of the factors that we consider in
evaluating an acquisition candidate include:
•
the candidate's historical and projected
    financial performance;
•
the quality and quantity of the candidate's
    coal reserves, coal processing facilities and other coal
    production assets;
•
the extent to which the geographic location of
    the candidate's coal reserves, processing facilities, and
    access to transportation links and customers provides
    synergistic opportunities with our existing operations and
    assets;
•
the existing liabilities of the candidate, and
    whether the acquisition can be completed in a manner that limits
    our assumption of the candidate's long-term liabilities;
•
in situations where we retain existing
    management, the management's experience and relationship
    with the local community; and
•
the experience, terms of employment and union
    status of the candidate's employees and the terms of the
    candidate's contracts with third-party mine and processing
    facility operators.
4
Continue to maintain a strong safety, labor
relations and environmental
record.
One of our core values is
protecting the health and welfare of our employees by designing
and implementing high safety standards in the workplace.
Similarly, we aim to adhere to high standards in protecting and
preserving the environment in which we operate. Historically, we
have maintained a superior safety record compared to the
industry averages for similarly situated operations as measured
by the U.S. Mine Safety and Health Administration, and we
plan to continue to maintain our strong safety record in the
coal industry. There have been no material work stoppages at any
of our facilities since we were formed in 2002 or at any of our
Predecessor or acquired facilities in the past 10 years. We
aim to preserve the positive relationship we have developed with
our employees. Furthermore, we intend to continue to adhere to
strict environmental and reclamation compliance standards. For
example, in August 2004 we began implementing an environmental
best practices system across all of our subsidiaries'
operations that involves the development of specific
environmental policies and programs, advanced training of our
environmental staff and management, and periodic assessments to
measure the level of our environmental awareness and compliance.
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. For additional risks relating to our business and
this offering, see "Risk Factors" beginning on
page 12 of this prospectus.
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:
•
stronger industrial demand following a recovery
    in the U.S. manufacturing sector, evidenced by the most
    recent estimate of 3.9% real GDP growth in the third quarter of
    2004, as reported by the Bureau of Economic Analysis;
•
relatively low customer stockpiles, estimated by
    the U.S. Energy Information Administration
    ("EIA") to be approximately 114 million tons at
    the end of August 2004, down 13% from the same period in the
    prior year;
•
declining coal production in Central Appalachia,
    including a decline of 0.6% in Central Appalachian coal
    production volume during the first three quarters of 2004 as
    compared to the same period in 2003;
•
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;
•
high current and forward prices for natural gas
    and oil, the primary fuels for electricity generation, with spot
    prices as of November 29, 2004 for natural gas and heating
    oil at $6.86 per million Btu and $1.43 per gallon,
    respectively, as reported by Bloomberg L.P.; and
•
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. The table below describes the percentage
increase in year-over-year average reference prices for coal as
of November 29, 2004, according to Platts, in the regions
where we produce
5
our coal, and the percentage of our produced and
processed coal sales during the first nine months of 2004 by
region:
Percentage of Produced and
Increase in Average
Processed Coal Sales in First
Reference Prices
Nine Months of 2004
Central Appalachia
83
%
71
%
Northern Appalachia
98
%
27
%
Colorado
60
%
2
%
We expect near-term volume growth in
U.S. coal consumption to be driven by greater utilization
at existing coal-fired electricity generating plants, which
operated at an estimated 71% of capacity in 2003, according to
Platts. If existing U.S. coal fueled plants operate at
estimated potential utilization rates of 85%, we believe they
would consume approximately 200 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
("NETL"), an arm of the U.S. Department of Energy
(the "DOE"), projects that 74,000 megawatts of
new coal-fired electric generation capacity will be constructed
in the United States by 2025. The NETL has identified 94
coal-fired plants, representing 62,000 megawatts of
electric generation capacity, that have been proposed and are
currently in various stages of development. The DOE projects
that 58 of these proposed coal-fired plants, representing
38,000 megawatts of electric generation capacity, will be
completed and will begin consuming coal to produce electricity
by the end of 2010.
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. Pricing for
U.S. metallurgical coal has also been supported by reduced
production at several U.S. metallurgical coal mines in
2003. 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, and Asia-Pacific Rim consumption of metallurgical coal
continues to strain supply. For example, BHP Billiton, a major
Australian producer, reported average price settlement increases
of 28% for annually-priced metallurgical coal sales contracts in
2004 as compared to 2003, and Fording Canadian Coal Trust, a
major Canadian producer, reported increases in metallurgical
coal sales prices in the third quarter of 2004 of 22% over the
same period in 2003. The tightening supply of metallurgical coal
in global markets has been due in part to recent supply
disruptions in Australia, the world's largest coal
exporter, and the decision by China, the world's second
largest coal exporter, to restrict its metallurgical coal
exports in order to satisfy domestic demand. Additionally, the
recent weakness of the U.S. dollar has made
U.S. metallurgical coal more competitive in international
markets. The table below describes average sale prices,
according to Platts, for low volatile metallurgical coal at the
Hampton Roads, Virginia export terminals, through which we ship
the great majority of our metallurgical coal exports and which
collectively constitute the highest volume export facility for
U.S. metallurgical coal production, and the percentage increase
in prices year-over-year:
Average Sale Prices
Per Ton for Low
Volatile Metallurgical
Coal at Hampton Roads,
Virginia Export
Terminals
Percentage Increase
2003
2004
from 2003 to 2004
October 6, 2003 and October 4, 2004
$
52.00
$
135.00
163
%
July 7, 2003 and July 5, 2004
$
50.45
$
125.00
168
%
March 31, 2003 and April 5, 2004
$
51.20
$
135.00
161
%
6
Internal Restructuring
Immediately prior to the effectiveness of the
registration statement of which this prospectus is a part, we
will complete a series of internal restructuring transactions,
which we refer to collectively as our "Internal
Restructuring," for the purpose of transitioning from an
organizational structure in which our top-tier holding company
is a limited liability company to a structure in which our
top-tier holding company is a corporation. Our current top-tier
holding company is ANR Holdings. Following the Internal
Restructuring, the current members of ANR Holdings will be
stockholders of our new top-tier holding company, Alpha Natural
Resources, Inc., which is issuing shares of its common stock to
the public in this offering. See "Internal
Restructuring."
7
The Offering
Shares of common stock offered by us:
shares.
Shares of common stock outstanding after this
    offering(1)
shares.
Use of proceeds
We estimate that our net proceeds from the sale
    of the shares in this offering will be approximately
    $          .
    We intend to use all these net proceeds to repay promissory
    notes that we will issue to certain of our existing stockholders
    as part of our Internal Restructuring. We refer to these
    promissory notes as the "Restructuring Notes." We
    intend to use the net proceeds from any shares sold pursuant to
    the underwriters' over-allotment option to make
    distributions to our existing stockholders. See "Use of
    Proceeds" and "Internal Restructuring."
Proposed New York Stock Exchange symbol
ANR.
(1)
Shares outstanding
    includes            shares
    that will be distributed to our existing stockholders to the
    extent the underwriters do not exercise their over-allotment
    option to purchase additional shares from us. See "Dividend
    Policy."
Shares outstanding
excludes            shares
of common stock reserved for issuance under the Alpha Coal
Management Amended and Restated Long-Term Incentive Plan, under
which options to
purchase                      shares
of common stock at a weighted average exercise price of
$          will
be outstanding as of the effectiveness of the registration
statement of which this prospectus is a part,
and            shares
of common stock reserved for issuance under the Alpha Natural
Resources, Inc. Long-Term Incentive Plan, under which options to
purchase                      shares
of common stock at an exercise price equal to the initial public
offering price will be granted to certain key employees upon
consummation of this offering.
Additional Information
Our principal executive offices are located at
406 West Main Street, Abingdon, Virginia 24210 and our
telephone number is (276) 619-4410.
Risk Factors
Investing in our common stock involves
substantial risks. You should carefully consider the information
in the "Risk Factors" section and all other
information included in this prospectus before investing in our
common stock.
8
Summary Historical and Pro Forma Financial
Data
Alpha Natural Resources, Inc. was incorporated on
November 29, 2004 and has not engaged in any business or
other activities except in connection with its formation and the
Internal Restructuring. The following summary historical
financial data as of December 31, 2002 and 2003 and
September 30, 2004, for the period from December 14,
2002 through December 31, 2002, for the year ended
December 31, 2003 and for the nine months ended
September 30, 2004, have been derived from the combined
financial statements of ANR Fund IX Holdings, L.P. and
Alpha NR Holding, Inc. and subsidiaries (the owners of a
majority of the membership interests of ANR Holdings prior to
the Internal Restructuring), and the related notes, included
elsewhere in this prospectus, which have been audited by KPMG
LLP ("KPMG"), an independent registered public
accounting firm. The summary historical financial data for the
nine months ended September 30, 2003 have been derived from
the unaudited combined financial statements of ANR Fund IX
Holdings, L.P. and Alpha NR Holding, Inc. and subsidiaries, and
the related notes, included elsewhere in this prospectus. In the
opinion of management, the financial data for the nine months
ended September 30, 2003 and 2004 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 summary historical financial
data for the year ended December 31, 2001 and the period
from January 1, 2002 through December 13, 2002
(together, the "Predecessor Periods") have been
derived from our Predecessor's combined financial
statements and the related notes, included elsewhere in this
prospectus, which have been audited by KPMG.
On December 13, 2002, we acquired a majority
of the Virginia coal operations of Pittston Coal Company, a
subsidiary of The Brink's Company. The Predecessor Periods
reflect the historical basis of accounting of these operations
and the periods from and after December 14, 2002 reflect
the effects of purchase accounting for the acquisition of these
operations. Accordingly, the results of operations for the
Predecessor Periods are not comparable to the results of
operations for the periods from and after December 14,
2002. On January 31, 2003, we acquired Coastal Coal
Company, LLC ("Coastal Coal Company"), and the results
of operations of Coastal Coal Company are included in our
historical results of operations for periods from and after
February 1, 2003. In addition, on March 11, 2003, we
acquired the U.S. coal production and marketing assets of
American Metals & Coal International, Inc.
("AMCI"), and the results of operations of this
business are included in our historical results of operations
for periods from and after March 12, 2003. We refer to the
U.S. coal production and marketing assets we acquired from AMCI
as "U.S. AMCI". Further, on November 17, 2003, we
acquired Mears Enterprises, Inc. and affiliated entities
(collectively, "Mears"), and the results of operations
of Mears are included in our historical results of operations
for periods from and after November 18, 2003. Our financial
results reflect the effects of purchase accounting for the
acquisitions of Coastal Coal Company, U.S. AMCI and Mears,
which we refer to, collectively, as the "2003
Acquisitions." On May 18, 2004, our subsidiaries,
Alpha Natural Resources, LLC and Alpha Natural Resources Capital
Corp., issued $175.0 million principal amount of
10% senior notes due 2012, and on May 28, 2004, Alpha
Natural Resources, LLC entered into a new $175.0 million
credit facility (together referred to as the "2004
Financings"). We refer to the 2003 Acquisitions, the 2004
Financings and the Internal Restructuring, collectively, as the
"Prior Transactions."
The summary pro forma balance sheet data as of
September 30, 2004 give pro forma effect to the Internal
Restructuring as if it had occurred on September 30, 2004,
as further adjusted to give effect to this offering and the
intended application of the net proceeds therefrom. The summary
pro forma statements of operations data for the year ended
December 31, 2003 and for the nine months ended
September 30, 2004 give pro forma effect to all of the
Prior Transactions as if they were completed on January 1,
2003. The summary pro forma financial data are for informational
purposes only and should not be considered indicative of actual
results that would have been achieved had these events actually
been consummated on the dates indicated and do not purport to
indicate results of operations as of any future date or for any
future period.
The following data should be read in conjunction
with "Unaudited Pro Forma Financial Information,"
"Selected Historical Financial Data,"
"Management's Discussion and Analysis of Financial
Condition and Results of Operations," "Internal
Restructuring" and our combined financial statements, and
the related notes, included elsewhere in this prospectus.
9
ANR Fund IX Holdings, L.P. and
Predecessor
Alpha NR Holding, Inc. and Subsidiaries
Alpha Natural Resources, Inc.
Pro Forma
Period
Period
Nine Months
Nine Months
Pro Forma
Nine Months
Year Ended
January 1 to
December 14 to
Year Ended
Ended
Ended
Year Ended
Ended
December 31,
December 13,
December 31,
December 31,
September 30,
September 30,
December 31,
September 30,
2001
2002
2002
2003
2003
2004
2003
2004
(unaudited)
(unaudited)
(unaudited)
(in thousands, except per share and per ton data)
Statement of Operations Data:
Revenues:
Coal revenues
$
227,237
$
154,715
$
6,260
$
701,262
$
504,660
$
808,655
$
808,798
$
808,655
Freight and handling revenues
25,808
17,001
1,009
73,800
49,803
106,291
75,713
106,291
Other revenues
8,472
6,031
101
17,504
11,244
22,117
18,255
22,117
Total revenues
261,517
177,747
7,370
792,566
565,707
937,063
902,766
937,063
Costs and expenses:
Cost of coal sales
219,545
158,924
6,268
632,979
450,731
677,100
713,503
677,100
Freight and handling costs
25,808
17,001
1,009
73,800
49,803
106,291
75,713
106,291
Cost of other revenues
8,156
7,973
120
16,750
11,532
16,943
16,750
16,943
Depreciation, depletion and amortization
7,866
6,814
274
36,054
25,806
39,352
45,951
39,352
Asset impairment charge
—
—
—
—
—
5,100
—
5,100
Selling, general and administrative expenses
9,370
8,797
471
21,949
16,697
35,786
29,389
35,786
Costs to exit business
3,500
25,274
—
—
—
—
—
—
Total costs and expenses
274,245
224,783
8,142
781,532
554,569
880,572
881,306
880,572
Refund of federal black lung excise tax
16,213
2,049
—
—
—
—
—
—
Gain on sale of fixed assets, net
—
—
—
—
—
342
—
342
Other operating income, net
94
1,430
—
—
—
—
—
—
Income (loss) from operations
3,579
(43,557
)
(772
)
11,034
11,138
56,833
21,460
56,833
Other income (expense):
Interest expense
—
(35
)
(203
)
(7,848
)
(5,964
)
(14,497
)
(22,355
)
(17,100
)
Interest income
1,993
2,072
6
103
91
331
422
331
Miscellaneous income
1,250
—
—
575
451
527
799
527
Total other income (expense), net
3,243
2,037
(197
)
(7,170
)
(5,422
)
(13,639
)
(21,134
)
(16,242
)
Income (loss) before income taxes and minority
    interest
6,822
(41,520
)
(969
)
3,864
5,716
43,194
326
40,591
Income tax expense (benefit)
(1,497
)
(17,198
)
(334
)
668
988
4,732
(321
)
11,176
Minority interest
—
—
—
934
1,750
19,562
—
—
Net income (loss)
$
8,319
$
(24,322
)
$
(635
)
$
2,262
$
2,978
$
18,900
$
647
$
29,415
Statement of Cash Flows Data:
Net cash provided by (used in) operations:
Operating activities
$
10,655
$
(13,816
)
$
(295
)
$
54,104
$
38,149
$
99,247
Investing activities
(9,203
)
(22,054
)
(38,893
)
(100,072
)
(61,133
)
(67,235
)
Financing activities
(1,462
)
35,783
47,632
48,770
33,569
(27,447
)
Capital expenditures
10,218
21,866
960
27,719
27,130
52,984
Other Financial Data:
EBITDA(1)(2)
$
68,210
$
96,712
Operating Data:
Tons sold
6,975
4,283
186
21,930
15,778
19,424
25,329
19,424
Tons produced
6,248
4,508
87
17,532
12,867
14,193
20,442
14,193
Average coal sales realization (per ton)
$
32.58
$
36.12
$
33.66
$
31.98
$
31.99
$
41.63
$
31.93
$
41.63
10
Alpha Natural
ANR Fund IX Holdings, L.P. and
Resources, Inc.
Alpha NR Holding, Inc. and
Predecessor
Subsidiaries
Pro Forma
as Adjusted
As of
As of
As of December 31,
As of
as of
December 31,
December 13,
September 30,
September 30,
2001
2002
2002
2003
2004
2004
(unaudited)
(in thousands)
Balance sheet data:
Cash and cash equivalents
$
175
$
88
$
8,444
$
11,246
$
15,811
$
15,811
Total assets
139,467
156,328
108,442
379,336
457,823
Notes payable and long-term debt, including
    current portion
—
—
25,743
84,964
185,617
185,617
Stockholders' equity and partners'
    capital (deficit)
(136,593
)
(132,997
)
23,384
86,367
44,885
(1)
EBITDA, a measure used by management to measure
    operating performance, is defined as net income plus interest
    expense, income tax expense (benefit) and depreciation,
    depletion and amortization, less interest income. We have
    presented EBITDA because our management believes that it is
    frequently used by securities analysts, investors and other
    interested parties in the evaluation of companies in our
    industry, some of which present EBITDA when reporting their
    results. We regularly evaluate our performance as compared to
    other companies in our industry that have different financing
    and capital structures and/or tax rates by using EBITDA. We
    believe that EBITDA allows for meaningful company-to-company
    performance comparisons by adjusting for factors such as
    interest expense, depreciation, depletion, amortization and
    taxes, which often vary from company to company. In addition, we
    use EBITDA in evaluating acquisition targets. EBITDA is not a
    recognized term under GAAP and does not purport to be an
    alternative to net income, operating income or any other
    performance measures derived in accordance with GAAP or an
    alternative to cash flow from operating activities as a measure
    of operating liquidity. Because not all companies use identical
    calculations, this presentation of EBITDA may not be comparable
    to other similarly titled measures of other companies.
    Additionally, EBITDA is not intended to be a measure of free
    cash flow for management's discretionary use, as it does
    not reflect certain cash requirements such as tax payments,
    interest payments and other debt service requirements. The
    amounts presented for EBITDA differ from the amounts calculated
    under the definition of EBITDA used in our debt covenants. The
    definition of EBITDA used in our debt covenants is further
    adjusted for certain cash and non-cash charges and is used to
    determine compliance with financial covenants and our ability to
    engage in certain activities such as incurring additional debt
    and making certain payments. Adjusted EBITDA as it is used and
    defined in our debt covenants is described and reconciled to net
    income (loss) in "Management's Discussion and Analysis
    of Financial Condition and Results of Operations— Liquidity
    and Capital Resources— Analysis of Material Debt
    Covenants."
EBITDA is calculated and reconciled to net income
in the table below:
Alpha Natural
Resources, Inc.
Pro Forma
Pro Forma Nine
Year Ended
Months Ended
December 31,
September 30,
2003
2004
(unaudited)
(unaudited)
(in thousands)
Net income
$
647
$
29,415
Interest expense
22,355
17,100
Interest income
(422
)
(331
)
Income tax expense (benefit)
(321
)
11,176
Depreciation, depletion and amortization
45,951
39,352
EBITDA
$
68,210
$
96,712
EDITDA was impacted by the following unusual
    items of expense:
Alpha Natural
Resources, Inc.
Pro Forma
Pro Forma Nine
Year Ended
Months Ended
December 31,
September 30,
2003
2004
(unaudited)
(unaudited)
(in thousands)
Adjustment to cost of coal sold for write-up of
    inventory in purchase accounting
$
3,694
$
—
Charges for transition services
2,034
—
Discontinued compensation expense on acquired
    companies
1,865
—
Asset impairment charge
—
5,100
(2)
We have not presented EBITDA for the Predecessor
    Periods or for periods with significant minority interest
    because management does not believe such presentation would be
    meaningful.
11
RISK FACTORS
An investment in our common stock involves
risks. You should carefully consider the risks described below
as well as the other information contained in this prospectus
before investing in our common stock.
Risks Relating to Our Business
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:
•
the supply of and demand for domestic and foreign
    coal;
•
the demand for electricity;
•
domestic and foreign demand for steel and the
    continued financial viability of the domestic and/or foreign
    steel industry;
•
the proximity to, capacity of, and cost of
    transportation facilities;
•
domestic and foreign governmental regulations and
    taxes;
•
air emission standards for coal-fired power
    plants;
•
regulatory, administrative, and judicial
    decisions;
•
the price and availability of alternative fuels,
    including the effects of technological developments; and
•
the effect of worldwide energy conservation
    measures.
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 reduced revenues.
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:
•
our inability to acquire, maintain or renew
    necessary permits or mining or surface rights;
•
changes or variations in geologic conditions,
    such as the thickness of the coal deposits and the amount of
    rock embedded in or overlying the coal deposit;
•
failure of reserve estimates to prove correct;
•
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;
•
mining and processing equipment failures and
    unexpected maintenance problems;
•
interruptions due to transportation delays;
•
adverse weather and natural disasters, such as
    heavy rains and flooding;
•
accidental mine water discharges;
•
the unavailability of qualified labor;
•
strikes and other labor-related interruptions;
12
•
increased or unexpected reclamation costs;
•
the unavailability of required equipment of the
    type and size needed to meet production expectations; and
•
unexpected mine safety accidents, including fires
    and explosions.
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 to 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
steel producers or 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 approximately 63% of our
coal sales volume in the first nine months of 2004 and 73% of
our 2003 pro forma coal sales volume. The majority of our sales
of steam coal in both periods were to U.S. and Canadian 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 coal consumed for U.S. and
Canadian 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 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 they are cheaper to construct
than coal-fired plants and because natural gas is a cleaner
burning fuel. 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 power
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.
We produce metallurgical coal that is used in
both the U.S. and foreign steel industries. Metallurgical coal
represented approximately 37% of our coal sales volume in the
first nine months of 2004 and 27% of our 2003 pro forma coal
sales volume. In recent years, U.S. steel producers have
experienced a substantial decline in the prices received for
their products, due at least in part to a heavy volume of
foreign steel imported into the United States. Although prices
for some U.S. steel products increased moderately after the
Bush administration imposed steel import tariffs and quotas in
March 2002, those tariffs and quotas were lifted in December
2003. Any deterioration in conditions in the U.S. steel
industry would reduce the demand for our metallurgical coal and
impact the collectibility of our accounts receivable from
U.S. steel industry customers. In addition, the
U.S. steel industry increasingly relies on electric arc
furnaces or pulverized coal processes to make steel. These
processes do not use coke. If this trend continues, the amount
of metallurgical coal that we sell and the prices that we
receive for it could decrease, thereby reducing our revenues and
adversely impacting our earnings and the value of our coal
reserves.
Portions of our coal reserves possess quality
characteristics that enable us to market them as either
metallurgical coal or high quality steam coal, depending on the
prevailing conditions in the metallurgical and steam coal
markets. Under current market conditions, we are able to market
a significant portion of our higher quality steam coal as
metallurgical coal. A decline in the metallurgical market
relative to the steam market could result in coal being switched
from the metallurgical market to the steam market. Since
metallurgical coal is generally priced higher than steam coal,
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 we are unable to sell metallurgical coal to the steel
market, these mines may not be economically viable and may be
13
subject to closure. Such closures would lead to
additional reclamation costs as well as reduced revenue and
profitability.
Our business will be adversely affected if we
are unable to develop or acquire additional coal reserves that
are economically recoverable.
Our profitability depends substantially on our
ability to mine coal reserves possessing geological
characteristics that can be cost-effectively mined and processed
by us. We have not yet applied for the permits required or
developed the mines necessary to mine all of our reserves.
Permits are becoming increasingly more difficult and expensive
to obtain and the review process continues to lengthen.
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.
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. If we are unable to replace or increase our coal
reserves on acceptable terms, our production and revenues will
decline as our reserves are depleted. 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
acquire additional coal reserves through acquisitions in the
future also could be limited by restrictions under our existing
or future debt agreements, competition from other coal companies
for attractive properties, or the lack of suitable acquisition
candidates.
Defects in title 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. Title to most of our
leased properties and mineral rights is not thoroughly verified
until a permit to mine the property is obtained, and in some
cases title with respect to leased properties is not verified at
all. Our right to mine some of our reserves may be materially
adversely affected by defects in title or boundaries. 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, which could adversely
affect our profitability.
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 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:
•
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;
•
the potential loss of key customers, management
    and employees of an acquired business;
•
the ability to achieve identified operating and
    financial synergies anticipated to result from an acquisition;
•
problems that could arise from the integration of
    the acquired business; and
•
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
14
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.
The inability of the sellers of our
Predecessor and acquired companies to fulfill their
indemnification obligations to us under our acquisition
agreements could increase our liabilities and adversely affect
our results of operations and financial position.
In the acquisition agreements we entered into
with the sellers of our Predecessor and acquired companies, the
respective sellers and, in some of our acquisitions, their
parent companies, agreed to retain responsibility for and
indemnify us against damages resulting from certain third party
claims or other liabilities, such as workers' compensation
liabilities, black lung liabilities, post-retirement medical
liabilities and certain environmental or mine safety
liabilities. The failure of any seller and, if applicable, its
parent company, to satisfy their obligations with respect to
claims and retained liabilities covered by the acquisition
agreements could have an adverse effect on our results of
operations and financial position if claimants successfully
assert that we are liable for those claims and/or retained
liabilities. The obligations of the sellers and, in some
instances, their parent companies, to indemnify us with respect
to their retained liabilities will continue for a substantial
period of time, and in some cases indefinitely. The
sellers' indemnification obligations with respect to
breaches of their representations and warranties in the
acquisition agreements will terminate upon expiration of the
applicable indemnification period (generally 18-24 months
from the acquisition date for most representations and
warranties, and five years from the acquisition date for
environmental representations and warranties), are subject to
deductible amounts and will not cover damages in excess of the
applicable coverage limit. The assertion of third party claims
after the expiration of the applicable indemnification period or
in excess of the applicable coverage limit, or the failure of
any seller to satisfy its indemnification obligations with
respect to breaches of its representations and warranties, could
have an adverse effect on our results of operations and
financial position. See "—If our assumptions regarding
our likely future expenses related to benefits for non-active
employees are incorrect, then expenditures for these benefits
could be materially higher than we have predicted."
The loss of, or significant reduction in,
purchases by our largest customers could adversely affect our
revenues and profitability.
Our largest customer during the first nine months
of 2004 accounted for approximately 11% of our coal revenues
during the period, and our largest customer during 2003
accounted for approximately 8% of our 2003 pro forma coal
revenues. We derived 44% of our coal revenues for the nine
months ended September 30, 2004 and 51% of our pro forma
2003 coal revenues from sales to our ten largest customers.
These customers may not continue to purchase coal from us under
our current coal supply agreements, or at all. If 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
revenues and profitability could suffer materially.
Changes in purchasing patterns in the coal
industry may make it difficult for us to extend existing supply
contracts or enter into new long-term supply contracts with
customers, 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 are contracts with a
term greater than 12 months. The execution of a
satisfactory long-term coal supply agreement is frequently the
basis on which we undertake the development of coal reserves
required to be supplied under the contract. For the nine months
ended September 30, 2004 and, on a pro forma basis, for the
year ended December 31, 2003, we believe that approximately
70% and 52%, respectively, of our sales volume was sold under
long-term coal supply agreements. At September 30, 2004,
our long-term coal supply agreements had remaining terms ranging
from one to six years and an average remaining term of
approximately two years. When our current contracts with
customers expire or are otherwise renegotiated, our customers
may decide to purchase fewer tons of coal than in the past or on
different terms, including
15
pricing terms less favorable to us. For
additional information relating to these contracts, see
"Business— Marketing, Sales and Customer
Contracts."
As electric utilities continue to adjust to
frequently changing regulations, including the Acid Rain
regulations of the Clean Air Act, the proposed Utility Mercury
Reductions Rule, the proposed Clean Air Interstate Rule and the
possible deregulation of their industry, they are becoming
increasingly less willing to enter into long-term coal supply
contracts and instead are purchasing higher percentages of coal
under short-term supply contracts. The industry shift away from
long-term supply contracts 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. The prices we receive in the spot market may be
less than the contractual price an electric utility is willing
to pay for a committed supply. 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
contracts may reduce the protection these contracts provide us
during adverse economic conditions or may result in economic
penalties upon our failure to meet specifications.
Price adjustment, "price reopener" and
other similar provisions in long-term supply contracts may
reduce the protection from short-term coal price volatility
traditionally provided by these contracts. Price reopener
provisions are particularly common in international
metallurgical coal sales contracts. Some of our coal supply
contracts contain provisions that allow for the price to be
renegotiated at periodic intervals. 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 pre-set "floor" and
"ceiling." 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
renegotiation leading to a significantly lower contract price
could 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 the customer 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,
grindability and ash fusion temperature. Failure to meet these
specifications could result in economic penalties, including
price adjustments, the rejection of deliveries or termination of
the contracts. Moreover, some of these agreements permit the
customer to terminate the contract if transportation costs,
which our customers typically bear, increase substantially. In
addition, some of these contracts allow our customers to
terminate their contracts in the event of changes in regulations
affecting our industry that increase the price of coal beyond
specified limits.
Due to the risks mentioned above with respect to
long-term supply contracts, we may not achieve the revenue or
profit we expect to achieve from these sales commitments.
Disruption in supplies of coal produced by
contractors and other third parties could temporarily impair our
ability to fill customers' orders or increase our
costs.
In addition to marketing coal that is produced by
our subsidiaries' employees, we utilize contractors to
operate some of our mines. Operational difficulties at
contractor-operated mines, changes in demand for contract miners
from other coal producers, and other factors beyond our control
could affect the availability, pricing, and quality of coal
produced for us by contractors. To meet customer specifications
and increase efficiency in fulfillment of coal contracts, we
also purchase and resell coal produced by third parties from
their controlled reserves. The majority of the coal that we
purchase from third parties is blended with coal produced from
our mines prior to resale and we also process (which includes
washing, crushing or blending coal at one of our preparation
plants or loading facilities) a portion of the coal that we
purchase from third parties prior to resale. We sold
5.4 million and 6.1 million tons, respectively, of
16
coal purchased from third parties during the
first nine months of 2004 and on a pro forma basis in 2003,
representing 28% and 24%, respectively, of our total sales
during the respective periods. Of our tons sold during the first
nine months of 2004 and on a pro forma basis in 2003, we believe
that approximately 23% and 20%, respectively, consisted of coal
purchased from third parties that we blended with coal produced
from our mines prior to resale, and approximately 3% and 6%,
respectively, consisted of coal purchased from third parties
that we processed before resale. The availability of specified
qualities of this third party coal may decrease and prices may
increase as a result of, among other things, changes in overall
coal supply and demand levels, consolidation in the coal
industry and new laws or regulations. Disruption in our supply
of contractor-produced coal and 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 contractor-produced coal or third party coal could
increase our costs and therefore lower our earnings.
Competition within the coal industry may
adversely affect our ability to sell coal, and excess production
capacity in the industry could put downward pressure on coal
prices.
We compete with numerous other coal producers in
various regions of the United States for domestic and
international sales. During the mid-1970s and early 1980s,
increased demand for coal attracted new investors to the coal
industry, spurred the development of new mines and resulted in
additional production capacity throughout the industry, all of
which led to increased competition and lower coal prices. Recent
increases in coal prices could encourage the development of
expanded capacity by new or existing coal producers. Any
resulting overcapacity could reduce coal prices and therefore
reduce our revenues.
Coal with lower production costs shipped east
from western coal mines and from offshore sources has resulted
in increased competition for coal sales in the Appalachian
region. This competition could result in a decrease in our
market share in this region and a decrease in our revenues.
Demand for our low sulfur coal and the prices
that we can obtain for it are also affected by, among other
things, the price of emissions allowances. Decreases in the
prices of these emissions allowances could make low sulfur coal
less attractive to our customers. In addition, more widespread
installation by electric utilities of technology that reduces
sulfur emissions (which could be accelerated by increases in the
prices of emissions allowances), may make high sulfur coal more
competitive with our low sulfur coal. This competition could
adversely affect our business and results of operations.
We also compete in international markets against
coal produced in other countries. Measured by tons sold, exports
accounted for approximately 32% of our sales in the first nine
months of 2004 and 20% of our 2003 pro forma sales. 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, 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. For example, if the value of the
U.S. dollar were to rise against other currencies in the
future, our coal would become relatively more expensive and less
competitive in international markets, which could reduce our
foreign sales and negatively impact our revenues and net income.
In addition, if the amount of coal exported from the United
States 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.
Fluctuations in transportation costs and the
availability or reliability of transportation could affect the
demand for our coal or temporarily impair our ability to supply
coal to our customers.
Transportation costs represent a significant
portion of the total cost of coal for our customers. 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
17
shipments, terrain and labor issues all 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. Historically, high
coal transportation rates from the western coal producing areas
into Central Appalachian markets limited the use of western coal
in those markets. More recently, however, lower rail rates from
the western coal producing areas to markets served by eastern
U.S. producers have created major competitive challenges
for eastern producers. This increased competition could have a
material adverse effect on our business, financial condition and
results of operations.
We depend upon railroads, trucks, beltlines,
ocean vessels and barges to deliver coal to our customers.
Disruption 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, resulting in
decreased shipments. Decreased performance levels over longer
periods of time could cause our customers to look to other
sources for their coal needs, negatively affecting our revenues
and profitability.
In 2003, 78.8% of our pro forma produced and
processed coal volume was transported from the preparation plant
to the customer by rail. If there are disruptions of the
transportation services provided by the railroad companies we
use and we are unable to find alternative transportation
providers to ship our coal, our business could be adversely
affected.
We have investments in mines, loading facilities,
and ports that in most cases are serviced by a single rail
carrier. Our operations that are serviced by a single rail
carrier are particularly at risk to disruptions in the
transportation services provided by that rail carrier, due to
the difficulty in arranging alternative transportation. If a
single rail carrier servicing our operations does not provide
sufficient capacity, revenue from these operations and our
return on investment could be adversely impacted.
The states of West Virginia and Kentucky have
recently increased enforcement of weight limits on coal trucks
on their public roads. It is possible that other states in which
our coal is transported by truck could undertake similar actions
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 on a profit-making basis and could therefore
adversely affect revenues and earnings.
We face numerous uncertainties in estimating
our recoverable coal reserves, and inaccuracies in our estimates
could result in decreased profitability from lower than expected
revenues or higher than expected costs.
Forecasts of our future performance are based on,
among other things, estimates of our recoverable coal reserves.
We base our estimates of reserve information on engineering,
economic and geological data assembled and analyzed by our
internal engineers and which is periodically reviewed by third
party consultants. There are numerous uncertainties inherent in
estimating the 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, any one of which may, if incorrect, result in an
estimate that varies considerably from actual results. These
factors and assumptions include:
•
future coal prices, operating costs, capital
    expenditures, severance and excise taxes, royalties and
    development and reclamation costs;
•
future mining technology improvements;
•
the effects of regulation by governmental
    agencies; and
•
geologic and mining conditions, which may not be
    fully identified by available exploration data and may differ
    from our experiences in areas we currently mine.
As a result, actual coal tonnage recovered from
identified reserve areas or properties, and costs associated
with our mining operations, may vary from estimates. Any
inaccuracy in our estimates related
18
to our reserves could result in decreased
profitability from lower than expected revenues or higher than
expected costs.
Mining in Central and Northern Appalachia is
more complex and involves more regulatory constraints than
mining in other areas of the United States, which could affect
the mining operations and cost structures of these
areas.
The geological characteristics of Central and
Northern 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 other
regions, 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 our
customers' ability to use coal produced by, our mines in
Central and Northern Appalachia.
Our work force could become increasingly
unionized in the future, which could adversely affect the
stability of our production and reduce our
profitability.
Approximately 95% of our coal production in the
first nine months of 2004 and our 2003 pro forma coal production
came from mines operated by union-free employees. As of
September 30, 2004, over 90% of our subsidiaries'
approximately 2,500 employees are union-free. However, our
subsidiaries' employees have the right at any time under
the National Labor Relations Act to form or affiliate with a
union. Any further unionization of our subsidiaries'
employees, or the employees of third party contractors who mine
coal for us, could adversely affect the stability of our
production and reduce our profitability.
Our unionized work force could strike in the
future, which could disrupt production and shipments of our coal
and increase costs.
A negotiated wage agreement between one of our
subsidiaries and the United Mine Workers of America
("UMWA") covering 117 employees has expired, and
a successor agreement is currently being renegotiated for these
affected employees. That same subsidiary has another negotiated
wage agreement with the UMWA covering 77 employees that
will expire in March 2005. Two of our other subsidiaries have
negotiated wage agreements with the UMWA covering an aggregate
of 30 employees that will expire in December 2006. Some or
all of the affected employees at each location could strike,
which would adversely affect our productivity, increase our
costs, and disrupt shipments of coal to our customers.
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. During the first nine months of 2004 and in 2003, we
had $298,000 and $68,000, respectively, of bad debt expense. 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 2003, the creditworthiness of the
energy trading and brokering companies with which we do business
declined, increasing the risk that we may not be able to collect
payment for all coal sold and delivered to or on behalf of these
energy trading and brokering companies.
19
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:
•
employee health and safety;
•
mandated benefits for retired coal miners;
•
mine permitting and licensing requirements;
•
reclamation and restoration of mining properties
    after mining is completed;
•
air quality standards;
•
water pollution;
•
plant and wildlife protection;
•
the discharge of materials into the environment;
•
surface subsidence from underground
    mining; and
•
the effects of mining on groundwater quality and
    availability.
The costs, liabilities and requirements
associated with these 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. 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.
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 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.
Various new and proposed laws and regulations may
require further reductions in emissions from coal-fired
utilities. For example, under the proposed Interstate Air
Quality Rule (now known as the Clean Air Interstate Rule) issued
in January 2004, the U.S. Environmental Protection Agency
(the "EPA") would further regulate sulfur dioxide and
nitrogen oxides from coal-fired power plants. Among other
things, this proposed rule seeks to cut regional sulfur dioxide
emissions by approximately 40% below 2002 levels in 2010, and by
approximately 70% below 2002 levels in 2015. The stringency of
this cap may require many
20
coal-fired sources to install additional
pollution control equipment, such as wet scrubbers, to comply.
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 addition, under the Clean Air Act, coal-fired power plants
will be required to control hazardous air pollution emissions by
no later than 2009, which likely will require significant new
investment in pollution-control devices by power plant
operators. Further, in January 2004, the EPA proposed the
Utility Mercury Reductions Rule for controlling 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 standards and
future standards could have the effect of making coal-fired
plants unprofitable, 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 proposals in Congress,
including the Clear Skies Initiative, that are designed to
further reduce emissions of sulfur dioxide, nitrogen oxides and
mercury from power 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. In November
2004, Russia ratified the Kyoto Protocol to the 1992 Framework
Convention on Global Climate Change (the "Protocol"),
which establishes a binding set of emission targets for
greenhouse gases. With Russia's accedence, the Protocol now
has sufficient support and will become binding on all those
countries that have ratified it on February 16, 2005. Four
industrialized nations have refused to ratify the Protocol—
Australia, Liechtenstein, Monaco, and the United States.
Although the targets vary from country to country, if the United
States were to ratify the 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. Canada, which
accounted for 5.9% of our sales volume in the first nine months
of 2004 and 8.3% of our pro forma sales volume in 2003, ratified
the Protocol in 2002. Under the Protocol, Canada will be
required to cut greenhouse gas emissions to 6% below 1990 levels
in a series of phased reductions from 2008 to 2012, either in
direct reductions in emissions or by obtaining credits through
the Protocol's market mechanisms. This could result in
reduced demand for coal by Canadian electric power generators.
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
reduction targets 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 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.
21
Our operations may impact the environment or
cause exposure to hazardous substances, and our properties may
have environmental contamination, which could result in material
liabilities to us.
Our operations currently use hazardous materials
and generate limited quantities of hazardous wastes from time to
time. Our Predecessor and acquired companies also utilized
certain hazardous materials and generated similar wastes. 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 for the investigation and clean up
of soil, surface water, groundwater, and other media. Such
claims may arise, for example, out of current or former
conditions at sites that we own or operate currently, as well as
at sites that we or our Predecessor and acquired companies 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 contamination or
other damages, or even for the entire share. We have not been
subject to claims arising out of contamination at our
facilities, but may incur such liabilities in the future.
We maintain extensive coal slurry impoundments at
a number of our mines. Such impoundments are subject to
extensive 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. 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 similar unforeseen impacts that
our operations may have on the environment, as well as exposures
to hazardous substances or wastes associated with our
operations, could result in costs and liabilities that could
materially and adversely affect us.
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.
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, valley
fills or other mining activities. The Army Corps of Engineers
(the "COE") 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
the COE in the U.S. District Court for the Southern
District of West Virginia seeking to invalidate
"nationwide" permits utilized by the COE 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
22
"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. Although we had no operations that were
immediately impacted or interrupted, this decision may require
us to convert certain current and planned applications for
Nationwide 21 permits to applications for individual
permits.
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 and the other operations 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, 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, 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,
segregation of duties, timely reconciliation of accounts, review
of transactions and 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 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.
We will incur incremental costs 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 ability to operate our company effectively
could be impaired if we fail to attract and retain key
personnel.
Our ability to operate our business and implement
our strategies depends, in part, on the efforts of our executive
officers and other key employees. In addition, our future
success will depend on, among other factors, our ability to
attract and retain other qualified personnel. The loss of the
services of any of our executive officers or other key employees
or the inability to attract or retain other qualified personnel
in the future could have a material adverse effect on our
business or business prospects.
We have entered into employment agreements with
two of our executive officers— Michael J. Quillen, our
Chief Executive Officer, and D. Scott Kroh, one of our
Executive Vice Presidents. Each of our other executive officers
are employed on an at-will basis. Unless extended, our
employment agreements with Messrs. Quillen and Kroh
terminate on March 11, 2006 and 2005, respectively. When
the terms of these agreements expire, we may not be able to
renew or extend these employment agreements on terms acceptable
to us.
Our significant indebtedness could harm our
business by limiting our available cash and our access to
additional capital and could force us to sell material assets or
take other actions to attempt to reduce our
indebtedness.
We are a highly leveraged company. Our financial
performance could be affected by our significant indebtedness.
At September 30, 2004, we had approximately
$185.6 million of indebtedness outstanding.
23
In addition, under our credit facility we had
$50.4 million of letters of credit outstanding and
additional borrowings available under the revolving portion of
our credit facility of $120.6 million. On a pro forma basis
giving effect to the Prior Transactions, this offering and the
application of the proceeds from this offering as described
under "Use of Proceeds" as if they had occurred on
September 30, 2004, our ratio of total indebtedness to
stockholders' equity at September 30, 2004 would have
been      to 1. We may also incur
additional indebtedness in the future.
This level of indebtedness could have important
consequences to our business. For example, it could:
•
increase our vulnerability to general adverse
    economic and industry conditions;
•
make it more difficult to self-insure and obtain
    surety bonds or letters of credit;
•
limit our ability to enter into new long-term
    sales contracts;
•
make it more difficult for us to pay interest and
    satisfy our debt obligations;
•
require us to dedicate a substantial portion of
    our cash flow from operations to payments on our indebtedness,
    thereby reducing the availability of our cash flow to fund
    working capital, capital expenditures, acquisitions and other
    general corporate activities;
•
limit our ability to obtain additional financing
    to fund future working capital, capital expenditures, research
    and development, debt service requirements or other general
    corporate requirements;
•
limit our flexibility in planning for, or
    reacting to, changes in our business and in the coal industry;
•
place us at a competitive disadvantage compared
    to less leveraged competitors; and
•
limit our ability to borrow additional funds.
If our cash flows and capital resources are
insufficient to fund our debt service obligations or our
requirements under our other long term liabilities, we may be
forced to sell assets, seek additional capital or seek to
restructure or refinance our indebtedness. These alternative
measures may not be successful and may not permit us to meet our
scheduled debt service obligations or our requirements under our
other long term liabilities. In the absence of such operating
results and resources, we could face substantial liquidity
problems and might be required to sell material assets or
operations to attempt to meet our debt service and other
obligations. Our credit facility and the indenture under which
our senior notes were issued restrict our ability to sell assets
and use the proceeds from the sales. We may not be able to
consummate those sales or to obtain the proceeds which we could
realize from them and these proceeds may not be adequate to meet
any debt service obligations then due. Furthermore,
substantially all of our material assets secure our indebtedness
under our credit facility.
Despite our current leverage, we may still be
able to incur substantially more debt. This could further
exacerbate the risks associated with our significant
indebtedness.
We may be able to incur substantial additional
indebtedness in the future. The terms of our credit facility and
the indenture governing our senior notes do not prohibit us from
doing so. Our credit facility provides for a revolving line of
credit of up to $125.0 million, of which
$120.6 million was available as of September 30, 2004.
If new debt is added to our current debt levels, the related
risks that we now face could increase.
The covenants in our credit facility and the
indenture governing our senior notes impose restrictions that
may limit our operating and financial flexibility.
Our credit facility and the indenture governing
our senior notes contain a number of significant restrictions
and covenants that limit our ability and our subsidiaries'
ability to, among other things, incur additional indebtedness or
enter into sale and leaseback transactions, pay dividends, make
redemptions and repurchases of certain capital stock, make loans
and investments, create liens, engage in transactions with
affiliates and merge or consolidate with other companies or sell
substantially all of our assets.
24
These covenants could adversely affect our
ability to finance our future operations or capital needs or to
execute preferred business strategies. In addition, if we
violate these covenants and are unable to obtain waivers from
our lenders, our debt under these agreements would be in default
and could be accelerated by our lenders. 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.
Failure to obtain or renew surety bonds 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
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:
•
lack of availability, higher expense or
    unfavorable market terms of new bonds;
•
restrictions on availability of collateral for
    current and future third-party surety bond issuers under the
    terms of our credit facility or the indenture governing our
    senior notes; and
•
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 available borrowing capacity
under our credit facility, limit our ability to obtain or renew
surety bonds and negatively impact our ability to obtain
additional financing to fund future working capital, capital
expenditure or other general corporate requirements.
At September 30, 2004, we had
$50.5 million of letters of credit in place, of which
$50.0 million serve as collateral for reclamation surety
bonds and $0.5 million secure miscellaneous obligations.
Our credit facility provides for commitments of up to
$175.0 million, consisting of a funded letter of credit
facility of up to $50.0 million and a $125.0 million
revolving credit facility, of which $50.0 million can be
used to issue additional letters of credit. As of
September 30, 2004, our entire $50.0 million funded
letter of credit facility has been committed and we have an
additional $0.4 million of letters of credit outstanding
under the revolving credit facility and $0.1 million
supported by a cash deposit. Obligations secured by letters of
credit may increase in the future. Any such increase would limit
our available borrowing capacity under the revolving credit
facility and could negatively impact our ability to obtain
additional financing to fund future working capital, capital
expenditure or other general corporate requirements. Moreover,
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.
If our assumptions regarding our likely future
expenses related to benefits for non-active employees are
incorrect, then expenditures for these benefits could be
materially higher than we have predicted.
At the times that we acquired the assets of our
Predecessor and acquired companies, the Predecessor and acquired
operations were subject to long-term liabilities under a variety
of benefit plans and other arrangements with active and inactive
employees. We assumed a portion of these long-term obligations.
The current and non-current accrued portions of these long-term
obligations, as reflected in our combined financial statements
as of September 30, 2004, included $13.5 million of
post-retirement obligations and $5.3 million of
self-insured workers' compensation obligations, and our
accumulated post-retirement benefit
25
obligation at September 30, 2004 is
$40.5 million. These obligations have been estimated based
on assumptions that are described in the notes to our combined
financial statements included elsewhere in this prospectus.
However, if our assumptions are incorrect, we could be required
to expend greater amounts than anticipated.
Several states in which we operate consider
changes in workers' compensation laws from time to time,
which, if enacted, could adversely affect us. In addition, if
any of the sellers from whom we acquired our operations fail to
satisfy their indemnification obligations to us with respect to
post-retirement claims and retained liabilities, then we could
be required to expend greater amounts than anticipated. See
"—The inability of the sellers of our Predecessor and
acquired companies to fulfill their indemnification obligations
to us under our acquisition agreements could increase our
liabilities and adversely affect our results of
operations." Moreover, under certain acquisition
agreements, we agreed to permit responsibility for black lung
claims related to the sellers' former employees who are
employed by us for less than one year after the acquisition to
be determined in accordance with law (rather than specifically
assigned to one party or the other in the agreements). We
believe that the sellers remain liable as a matter of law for
black lung benefits for their former employees who work for us
for less than one year; however, an adverse ruling on this issue
could increase our exposure to black lung benefit liabilities.
A shortage of skilled labor in the Appalachian
region could pose a risk to achieving improved labor
productivity and competitive costs and 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
recent years, a shortage of trained coal miners in the
Appalachian region has caused us to operate certain units
without full staff, which decreases our productivity and
increases our costs. If the shortage of experienced labor
continues or worsens, it could have an adverse impact on our
labor productivity and costs and our ability to expand
production in the event there is an increase in the demand for
our coal, which could adversely affect our profitability.
Demand for our coal changes seasonally and
could have an adverse effect on the timing of our cash flows and
our ability to service our existing and future
indebtedness.
Our business is seasonal, with operating results
varying from quarter to quarter. We have historically
experienced lower sales during winter months primarily due to
the freezing of lakes that we use to transport coal to some of
our customers. As a result, our first quarter cash flow and
profits have been, and may continue to be, negatively impacted.
Lower than expected sales by us during this period could have a
material adverse effect on the timing of our cash flows and
therefore our ability to service our obligations with respect to
our existing and future indebtedness.
We may record a net loss for the fiscal
quarter
ending                     ,
2005 as a result of the issuance of shares of our common stock
to members of our management as part of our Internal
Restructuring.
As part of our Internal Restructuring, our
executive officers and certain other key employees will receive
shares of our common stock in exchange for their interest in ANR
Holdings. As a result, we will record compensation expense and
deferred compensation equal to the fair value of the shares
issued of
$          .
We will record
$          of
compensation expense at the time of this offering equal to the
vested portion of the shares issued. The remaining
$          of
compensation will be recorded as deferred stock based
compensation and amortized over the two-year vesting period of
the unvested shares. As a result of this non-cash compensation
expense, we expect that our operating expenses for the quarter
ending                     ,
2005 will be higher than in prior periods and that we may record
a net loss for this quarter. In addition, the amortization of
the deferred stock-based compensation over the two-year vesting
period will result in a non-cash amortization expense in these
future periods, thereby reducing our earnings in those periods.
26
Our Sponsors may have significant influence on
our company, including control over decisions that require the
approval of our stockholders, whether or not these decisions are
believed by our other stockholders to be in their own best
interest.
After the consummation of this offering, First
Reserve Fund IX, L.P. and ANR Fund IX Holdings, L.P.
(the "First Reserve Stockholders" and, together with
First Reserve Corporation and its affiliates, "First
Reserve") and persons affiliated with AMCI will
beneficially own approximately      %
of our common stock, or
approximately        % of our
common stock if the underwriters exercise their over-allotment
option in full. As a result, First Reserve and AMCI and its
affiliates will continue to have the ability to prevent any
transaction that requires the approval of stockholders
regardless of whether or not other stockholders believe that any
such transaction is in their own best interests. We refer to
First Reserve and to AMCI and its affiliates, collectively, as
our "Sponsors."
Our Sponsors may have conflicts of interest
with us or you in the future.
Our Sponsors are in the business of making
investments in companies and may from time to time acquire and
hold interests in businesses that compete directly or indirectly
with us, including, for example, our Sponsors' combined
56.8% ownership interest in Foundation Coal Holdings, Inc.
These other investments may create competing financial demands
on our Sponsors, potential conflicts of interest and require
efforts consistent with applicable law to keep the other
businesses separate from our operations. Our Sponsors may also
pursue acquisition opportunities that may be complementary to
our business, and as a result, those acquisition opportunities
may not be available to us. Additionally, our amended and
restated certificate of incorporation will provide that our
Sponsors may compete with us. Their designees on our board of
directors will not be required to offer corporate opportunities
to us and may take any such opportunities for themselves, other
than any opportunities offered to the designees solely in their
capacity as one of our directors. See "Description of
Capital Stock — Corporate Opportunities." So long
as our Sponsors continue to own a significant amount of our
equity, even if such amount is less than 50%, they will continue
to be able to strongly influence or effectively control our
decisions. For example, our Sponsors could cause us to make
acquisitions that increase our amount of indebtedness or sell
revenue-generating assets.
Our status as a "controlled company"
under the New York Stock Exchange rules exempts us from certain
New York Stock Exchange corporate governance standards and you
will not have the same protections afforded to stockholders of
companies that are subject to all of the New York Stock Exchange
corporate governance requirements.
Upon completion of the offering, our Sponsors as
a group will continue to control a majority of our outstanding
common stock. As a result, we are a "controlled
company" within the meaning of the New York Stock Exchange
corporate governance standards. Under the New York Stock
Exchange rules, a company of which more than 50% of the voting
power is held by another company is a "controlled
company" and may elect not to comply with certain New York
Stock Exchange corporate governance requirements, including
(1) the requirement that a majority of the board of
directors consist of independent directors, (2) the
requirement that the nominating committee be composed entirely
of independent directors with a written charter addressing the
committee's purpose and responsibilities, (3) the
requirement that the compensation committee be composed entirely
of independent directors with a written charter addressing the
committee's purpose and responsibilities, and (4) the
requirement for an annual performance evaluation of the
nominating and corporate governance and compensation committees.
Following this offering, we intend to avail ourselves of these
exemptions. As a result, we may not have a majority of
independent directors and our nominating and compensation
committees may not consist entirely of independent directors.
Accordingly, you may not have the same protections afforded to
stockholders of companies that are subject to all of the New
York Stock Exchange corporate governance requirements.
27
Terrorist attacks and threats, escalation of
military activity in response to such attacks or acts of war may
negatively affect our business, financial condition and results
of operations.
Terrorist attacks and threats, escalation of
military activity in response to such attacks or acts of war may
negatively affect our business, financial condition, and results
of operations. Our business is affected by general economic
conditions, fluctuations in consumer confidence and spending,
and market liquidity, which can decline as a result of numerous
factors outside of our control, such as terrorist attacks and
acts of war. Future terrorist attacks against U.S. targets,
rumors or threats of war, actual conflicts involving the United
States or its allies, or military or trade disruptions affecting
our customers may materially adversely affect our operations and
those of our customers. As a result, there could be delays or
losses in transportation and deliveries of coal to our
customers, decreased sales of our coal and extension of time for
payment of accounts receivable from our customers. Strategic
targets such as energy-related assets may be at greater risk of
future terrorist attacks than other targets in the United
States. In addition, disruption or significant increases in
energy prices could result in government-imposed price controls.
It is possible that any of these occurrences, or a combination
of them, could have a material adverse effect on our business,
financial condition and results of operations.
Risks Related to this Offering
There is no existing market for our common
stock, and if one does not develop, you may not have adequate
liquidity.
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 a trading market
on the New York Stock Exchange or otherwise or how liquid that
market might become. The initial public offering price for the
shares will be determined by negotiations between us and the
representatives of the underwriters and may not be indicative of
prices that will prevail in the open market following this
offering.
Future sales of our shares could depress the
market price of our common stock.
The market price of our common stock could
decline as a result of sales of a large number of shares of
common stock in the market after the offering or the perception
that such sales could occur. These sales, or the possibility
that these sales may occur, also might make it more difficult
for us to sell equity securities in the future at a time and at
a price that we deem appropriate. See "Shares Eligible for
Future Sale."
Alpha Natural Resources, Inc. and its directors,
executive officers and existing stockholders have agreed with
the underwriters not to sell, dispose of or hedge any of their
common stock or securities convertible into or exchangeable for
shares of our common stock, subject to specified exceptions,
during the period from the date of this prospectus continuing
through the date that is 180 days after the date of this
prospectus, except with the prior written consent of Morgan
Stanley & Co. Incorporated and Citigroup Global Markets
Inc.
Because all of the proceeds from this offering
will be used to repay the Restructuring Notes, none of the
proceeds will be used to further invest in our
business.
We estimate that the net proceeds from the sale
by us of the shares of common stock being offered hereby, after
deducting underwriting discounts and estimated offering
expenses, will be approximately
$      million, assuming an
initial public offering price per share of
$          (the
midpoint of the price range on the cover of this prospectus).
All of this amount will be used to repay in full the
Restructuring Notes. See "Internal Restructuring."
Accordingly, none of the proceeds will be available to further
invest in and grow our business.
28
The market price of our common stock may be
volatile, which could cause the value of your investment to
decline.
Securities markets worldwide experience
significant price and volume fluctuations. This market
volatility, as well as general economic, market or potential
conditions, could reduce market price of our common stock in
spite of our operating performance. In addition, our operating
results could be below the expectations of public market
analysts and investors, and in response, the market price of our
common stock could decrease significantly. You may be unable to
resell your shares of our common stock at or above the initial
public offering price.
The book value of shares of common stock
purchased in the offering will be immediately diluted.
Investors who purchase common stock in the
offering will suffer immediate dilution of
$           per
share in the pro forma net tangible book value per share. We
also have outstanding stock options granted to members of
management entitling them to purchase our common stock with
exercise prices that are below the estimated initial public
offering price of the common stock. To the extent that these
options are exercised, there will be further dilution.
Provisions in our certificate of incorporation
and bylaws may discourage a takeover attempt even if doing so
might be beneficial to our stockholders.
Provisions contained in our certificate of
incorporation and bylaws could impose impediments to the ability
of a third party to acquire us even if a change of control would
be beneficial to our existing shareholders. Provisions of our
certificate of incorporation and bylaws impose various
procedural and other requirements, which could make it more
difficult for stockholders to effect certain corporate actions.
For example, our certificate of incorporation authorizes our
board of directors to determine the rights, preferences,
privileges and restrictions of unissued series of preferred
stock, without any vote or action by our stockholders. Thus, our
board of directors can authorize and issue shares of preferred
stock with voting or conversion rights that could adversely
affect the voting or other rights of holders of our common
stock. These rights may have the effect of delaying or deterring
a change of control of our company, and could limit the price
that certain investors might be willing to pay in the future for
shares of our common stock. See "Description of Capital
Stock."
29
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. These statements
relate to analyses and other information that are based on
forecasts of future results and estimates of amounts not yet
determinable. These statements may also relate to our future
prospects, developments and business strategies.
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.
We do not undertake any responsibility to release
publicly any revisions to these forward-looking statements to
take into account events or circumstances that occur after the
date of this prospectus. Additionally, we do not undertake any
responsibility to update you on the occurrence of any
unanticipated events which may cause actual results to differ
from those expressed or implied by the forward-looking
statements contained in this prospectus.
The following factors are among those that may
cause actual results to differ materially from our
forward-looking statements:
•
market demand for coal, electricity and steel;
•
future economic or capital market conditions;
•
weather conditions or catastrophic
    weather-related damage;
•
our production capabilities;
•
the consummation of financing, acquisition or
    disposition transactions and the effect thereof on our business;
•
our plans and objectives for future operations
    and expansion or consolidation;
•
our relationships with, and other conditions
    affecting, our customers;
•
timing of reductions in customer coal inventories;
•
long-term coal supply arrangements;
•
inherent risks of coal mining beyond our control;
•
environmental laws, including those directly
    affecting our coal mining and production, and those affecting
    our customers' coal usage;
•
competition in coal markets;
•
railroad and other transportation performance and
    costs;
•
our assumptions concerning economically
    recoverable coal reserve estimates;
•
employee workforce factors;
•
regulatory and court decisions;
•
future legislation and changes in regulations,
    governmental policies or taxes;
•
changes in post-retirement benefit obligations;
•
our liquidity, results of operations and
    financial condition; and
•
other factors, including those discussed in
    "Risk Factors."
30
MARKET AND INDUSTRY DATA AND
FORECASTS
In this prospectus, we refer to publicly
available information regarding the coal industry in the United
States and internationally from the World Coal Institute, the
U.S. Department of Energy, the National Energy Technology
Laboratory, the U.S. Energy Information Administration,
Platts Research and Consulting, the International Iron and Steel
Institute, Bloomberg L.P., the Bureau of Economic Analysis and
BP Statistical Review. 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.
31
USE OF PROCEEDS
We estimate that we will receive net proceeds of
approximately
$           million
from the sale of shares in this offering after deducting
underwriting discounts and estimated offering expenses.
We intend to use the net proceeds from this
offering to repay in full the Restructuring Notes we will issue
to our Sponsors and Madison Capital Funding LLC in connection
with the Internal Restructuring. The Restructuring Notes will
bear interest at a rate equal to the short-term applicable
federal rate (AFR) for federal income tax purposes, which is
currently        % per
annum. The Restructuring Notes and accrued interest thereon will
be repayable upon demand in an aggregate amount equal to the
estimated net proceeds from this offering. See "Internal
Restructuring." If the underwriters exercise their
over-allotment option, we intend to use the net proceeds to make
distributions to our existing stockholders.
DIVIDEND POLICY
In connection with our Internal Restructuring, we
will agree to make the following three types of distributions.
•
We will assume the obligation of ANR Holdings to
    make distributions to our Sponsors (the "Sponsor
    Distributions") in the aggregate amount of approximately
    $10.5 million, representing certain tax consequences and
    tax attributes conveyed as a result of the Internal
    Restructuring. The Sponsor Distributions will be payable in cash
    or, to the extent we are not permitted by the terms of our
    credit facility or the indenture governing our senior notes to
    pay the Sponsor Distributions in cash, in shares of our common
    stock.
•
We will agree to make a distribution to our
    existing stockholders in an aggregate amount equal to the net
    proceeds, if any, we receive upon an exercise by the
    underwriters of their over-allotment option.
•
We will agree to make a distribution of shares of
    our common stock to our existing stockholders in an aggregate
    amount equal to the number of additional shares the underwriters
    have the option to purchase minus the actual number of shares
    the underwriters purchase from us pursuant to their
    over-allotment option.
For additional information regarding our Internal
Restructuring, see "Internal Restructuring."
Any future decision to declare and pay cash
dividends following this offering will be made at the discretion
of our board of directors and will depend on, among other things
(1) our results of operations and the amount of our surplus
available to be distributed, (2) dividend availability and
restrictions under our credit facility and indenture,
(3) the dividend rate being paid by comparable companies in
the coal industry, (4) our liquidity needs and financial
condition and (5) other factors that our board of directors
may deem relevant. Currently, the terms of our credit facility
and our senior notes restrict our ability to pay dividends to
our stockholders. See "Risk Factors— The covenants in
our credit facility and the indenture governing our senior notes
impose restrictions that may limit our operating and financial
flexibility."
32
CAPITALIZATION
The following table sets forth our cash and cash
equivalents and capitalization as of September 30, 2004
(1) on an actual basis for ANR Fund IX Holdings, L.P.
and Alpha NR Holding, Inc. and subsidiaries combined,
(2) on a pro forma basis for Alpha Natural Resources, Inc.,
giving effect to the Internal Restructuring and (3) on a
pro forma, as adjusted basis for Alpha Natural Resources, Inc.,
as adjusted to reflect:
•
the sale by us
    of                      shares
    of common stock in this offering at an assumed initial public
    offering price of
    $          ,
    the mid-point of the estimated price range shown on the cover
    page of this prospectus, after deducting underwriting discounts
    and estimated offering expenses of
    $                    ;
•
the application of the estimated net proceeds of
    this offering to repay the Restructuring Notes, as described
    under "Use of Proceeds"; and
•
the distribution
    of                 shares
    of common stock to our existing stockholders that we will make
    to the extent the underwriters do not exercise their
    over-allotment option as described under "Dividend
    Policy."
You should read the information in this table in
conjunction with "Unaudited Pro Forma Financial
Information," "Internal Restructuring,"
"Management's Discussion and Analysis of Financial
Condition and Results of Operations" and our combined
financial statements included elsewhere in this prospectus.
As of September 30, 2004
Pro Forma,
Actual
Pro Forma
as Adjusted
($ in millions)
Cash and cash equivalents
$
15.8
$
15.8
$
15.8
Debt:
Revolving credit facility
(1)
$
4.0
$
4.0
$
4.0
Notes payable to affiliates
(2)
—
—
Other debt
(3)
6.6
6.6
6.6
10% senior notes due 2012
175.0
175.0
175.0
Total debt
185.6
185.6
Stockholders' Equity and Partners'
    Capital:
Alpha Natural Resources, Inc.:
Preferred stock— par value
    $0.01,        shares
    authorized, no shares issued
—
—
—
Common stock— par value
    $0.01,      shares
    authorized,        shares
    issued pro forma
    and        shares issued
    pro forma as adjusted
—
—
—
Additional paid-in capital
—
—
Deferred stock-based compensation
—
—
(4
)
Accumulated deficit
—
—
(5
)
Alpha NR Holding, Inc.:
Preferred stock— par value $0.01,
    1,000 shares authorized, no shares issued
—
—
—
Common stock— par value $0.01,
    1,000 shares authorized, 100 shares issued
—
—
—
Additional paid-in capital
22.2
—
—
Deficit capital account
—
—
Retained earnings
17.7
—
—
Total stockholders' equity
34.9
—
ANR Fund IX Holdings, L.P.:
Partners' capital
5.0
—
Total stockholder's equity and
    partners' capital
39.9
Total capitalization
$
230.5
$
$
(1)
The credit facility provides for a funded letter
    of credit facility of $50.0 million and a revolving credit
    facility of up to $125.0 million (under which
    $50.0 million is available for additional letters of
    credit). As of September 30, 2004, we had $4.0 million
    of indebtedness and $50.4 million of letters of credit
    outstanding under the credit facilities, resulting in
    availability under the revolving credit facility of
    $120.6 million.
(2)
Represents the Restructuring Notes. All of the
    net proceeds from this offering will be used to repay the
    Restructuring Notes in full.
(3)
Includes $2.2 million of capital lease
    obligations.
(4)
Reflects the issuance of unvested shares of
    common stock to members of our management in connection with the
    Internal Restructuring.
(5)
Reflects the effect on accumulated deficit of the
    non-cash compensation expense associated with the issuance of
    certain vested shares of common stock to members of our
    management in connection with the Internal Restructuring.
33
DILUTION
Dilution is the amount by which the offering
price paid by the purchasers of the common stock to be sold in
this offering will exceed the net tangible book value per share
of common stock after the offering. The net tangible book value
per share presented below is equal to the amount of our total
tangible assets (total assets less intangible assets) less total
liabilities as of September 30, 2004, divided by the number
of shares of our common stock that would have been held by our
existing stockholders as of September 30, 2004, had the
Internal Restructuring been completed and had we effected the
distribution
of                      shares
of common stock to our existing stockholders that we will make
if and to the extent the underwriters do not exercise their
over-allotment option as described under "Dividend
Policy." On a pro forma basis, after giving effect to
(1) the Internal Restructuring and (2) the sale by us
of            shares
of common stock in this offering at an assumed initial public
offering price of
$           per
share, the mid-point of the price range on the cover of this
prospectus, after deducting underwriting discounts and estimated
offering expenses and the application of the estimated net
proceeds of this offering as described under "Use of
Proceeds," our pro forma net tangible book value as of
September 30, 2004 would have been
$           million,
or
$           per
share of common stock. This represents an immediate increase in
net tangible book value (or a decrease in net tangible book
deficit) of
$           per
share to the existing stockholders and an immediate dilution in
net tangible book value of
$           per
share to new investors.
The following table illustrates this dilution on
a per share basis:
Assumed initial public offering price per share
$
Pro forma net tangible book value per share as of
    September 30, 2004
$
Increase in net tangible book value per share
    attributable to new investors
Pro forma net tangible book value per share after
    giving effect to the offering
Dilution in net tangible book value per share to
    new investors
$
We will reduce the number of shares that we will
issue to our existing stockholders in the stock distribution
described above by the number of shares sold to the
underwriters, if any, pursuant to their over-allotment option.
We will also make a cash distribution to our existing
stockholders equal to the net proceeds we receive from the sale
of our shares in the over-allotment option. Accordingly, our pro
forma net tangible book value will not be affected by the
underwriters' exercise of their over-allotment option.
The following table summarizes, on a
pro forma basis as of September 30, 2004 after giving
effect to the transactions described above, the total 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 purchasing shares
in this offering:
Shares Purchased
Total Consideration
Average Price
Number
Percent
Amount
Percent
Per Share
Existing stockholders(1)
%
%
$
New investors
%
%
Total
%
%
(1)
Total consideration and average price per share
    paid by existing stockholders does not give effect to
    (1) the $110.0 million distribution made to holders of
    common membership interests of ANR Holdings in
    May 2004 using proceeds from the senior notes offering or
    (2) the repayment of the Restructuring Notes using the net
    proceeds from this offering. If the table were adjusted to give
    effect to these payments, total consideration for shares of
    existing stockholders would be
    $          ,
    with an average share price of
    $          .
34
The table and calculations above assume no
exercise of outstanding options. After giving effect to the
Internal Restructuring, there will
be                      shares
of our common stock reserved for issuance upon exercise of
outstanding options at a weighted average exercise price per
share of
$          .
The earliest date upon which the options will vest and become
exercisable is November 10, 2005. We also plan to issue
additional options to
purchase                      shares
of our common stock at the initial public offering price to
certain of our key employees upon consummation of this offering.
There could be further dilution to investors in the event we are
required to make the Sponsor Distributions in shares of our
common stock. See "Management— Long-Term Incentive
Plans," "Shares Eligible For Future Sale— Stock
Options" and "Internal Restructuring."
35
INTERNAL RESTRUCTURING
We have been controlled by the First Reserve
Stockholders through their combined ownership of 54.7% of the
common membership interests of our current top-tier holding
company, ANR Holdings. Immediately prior to the effectiveness of
the registration statement of which this prospectus is a part,
we will complete a series of transactions for the purpose of
transitioning from an organizational structure in which our
top-tier holding company is a limited liability company to a
structure in which our top-tier holding company is a
corporation, which we refer to collectively as our
"Internal Restructuring". Following the Internal
Restructuring, the current members of ANR Holdings will be
stockholders of our new top-tier holding company Alpha Natural
Resources, Inc., which is issuing shares of its common stock to
the public in this offering. The principal Internal
Restructuring transactions, to be effected pursuant to the terms
of our Internal Restructuring Agreement, are summarized below:
•
Alpha Coal Management, LLC ("Alpha Coal
    Management"), the entity through which our executive
    officers and certain other key employees hold their interests in
    ANR Holdings prior to the Internal Restructuring, will be
    dissolved and liquidated, after which (1) the interests in
    ANR Holdings previously held by Alpha Coal Management will be
    distributed to and held directly by these officers and employees
    and (2) outstanding options granted by Alpha Coal
    Management to certain of our executive officers and other key
    employees under the Alpha Coal Management 2004 Long-Term
    Incentive Plan will automatically convert into options to
    purchase up
    to                      shares
    of our common stock at a weighted average exercise price of
    $          ,
    and we will assume the obligations of Alpha Coal Management
    under that plan.
•
ANR Holdings will declare distributions
    ("the Sponsor Distributions") to (1) affiliates
    of AMCI in an aggregate amount of $6.0 million,
    representing the approximate incremental tax resulting from the
    recognition of additional tax liability resulting from the
    Internal Restructuring and (2) First Reserve Fund IX,
    L.P. in an aggregate amount of approximately $4.5 million,
    representing the approximate value of tax attributes conveyed as
    a result of the Internal Restructuring. The Sponsor
    Distributions to AMCI will be paid in five equal installments on
    the dates for which estimated income tax payments are due in
    each of April 2005, June 2005, September 2005, January 2006 and
    April 2006. The Sponsor Distributions to First Reserve
    Fund IX, L.P. will be paid in three installments on
    December 15, 2007, 2008 and 2009. In connection with the
    Internal Restructuring, we will assume the obligations of ANR
    Holdings to make the Sponsor Distributions. The Sponsor
    Distributions will be payable in cash or, to the extent we are
    not permitted by the terms of our credit facility or the
    indenture governing our senior notes to pay the Sponsor
    Distributions in cash, in shares of our common stock.
•
First Reserve Fund IX, L.P., the direct
    parent of Alpha NR Holding, Inc., will contribute all of the
    outstanding common stock of Alpha NR Holding, Inc. to us in
    exchange for shares of our common stock and Restructuring Notes
    in an aggregate principal amount of
    $           million.
•
Affiliates of AMCI and other members of ANR
    Holdings (excluding Alpha NR Holding, Inc. and the members of
    our management who are the successors to Alpha Coal Management)
    will contribute all of their membership interests in ANR
    Holdings to us in exchange for shares of our common stock and
    Restructuring Notes in an aggregate principal amount of
    $           million.
•
The officers and employees who are the members of
    Alpha Coal Management will contribute all of their interests in
    ANR Holdings to us in exchange for shares of our common stock.
•
We will agree to make a pro rata distribution to
    our existing stockholders in an aggregate amount equal to the
    net proceeds, if any, we receive upon an exercise by the
    underwriters of their over-allotment option.
•
We will agree to make a pro rata distribution of
    shares of our common stock to our existing stockholders in an
    aggregate amount equal to the number of additional shares the
    underwriters have the option to purchase, minus the actual
    number of shares the underwriters purchase from us pursuant to
    their over- allotment option.
36
•
We and our Sponsors will amend certain of the
    post-closing arrangements we entered into as part of our
    acquisition of U.S. AMCI.
•
On the closing date of this offering, we will use
    the net proceeds from this offering to repay the Restructuring
    Notes in full. The aggregate principal amount of the
    Restructuring Notes and accrued interest thereon will be equal
    to the estimated net proceeds from this offering.
•
Following the closing of this offering, we intend
    to contribute the membership interests in ANR Holdings we hold
    to Alpha NR Holding, Inc. and another of our indirect
    wholly-owned subsidiaries.
The following diagram depicts our corporate
structure following the completion of the Internal Restructuring
transactions described above and this offering:
37
UNAUDITED PRO FORMA FINANCIAL
INFORMATION
The following unaudited pro forma financial
information has been derived by application of pro forma
adjustments to the historical combined financial statements of
ANR Fund IX Holdings, L.P. and Alpha NR Holding, Inc. and
subsidiaries included elsewhere in this prospectus.
The unaudited pro forma balance sheet as of
September 30, 2004 gives effect to the Internal
Restructuring as if it had occurred on September 30, 2004.
See "Internal Restructuring." The unaudited pro forma
statements of operations for the year ended December 31,
2003 and the nine months ended September 30, 2004 give
effect to:
•
our acquisitions of Coastal Coal Company, U.S.
    AMCI and Mears, which we refer to collectively as the "2003
    Acquisitions," as if these acquisitions were completed on
    January 1, 2003;
•
the issuance of $175.0 million principal
    amount of 10% senior notes due 2012 by our subsidiary Alpha
    Natural Resources, LLC and entry into a $175.0 million
    credit facility, which we refer to together as the "2004
    Financings," as if we had issued the senior notes and
    entered into the credit facility on January 1, 2003; and
•
the Internal Restructuring, as if it had occurred
    on January 1, 2003.
The pro forma adjustments, which are based upon
available information and upon assumptions that management
believes to be reasonable, are described in the accompanying
notes.
The unaudited pro forma financial information
does not give effect to this offering or our use of the proceeds
from this offering. In addition, the unaudited pro forma
financial information does not reflect the issuance to our
executive officers and certain other key employees of shares of
our common stock in exchange for their interest in
ANR Holdings as part of our Internal Restructuring. We will
record compensation expense and deferred compensation equal to
the fair value of the shares issued of
$                    .
We will record
$                    compensation
expense at the time of this offering equal to the vested portion
of the shares issued. The remaining
$                    will
be recorded as deferred stock based compensation and amortized
over the two-year vesting period of the unvested shares.
The unaudited pro forma financial information is
for informational purposes only, 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 be indicative of results of
operations or financial position as of any future date or for
any future period. The pro forma financial information should be
read in conjunction with "Selected Historical Financial
Data," "Management's Discussion and Analysis of
Financial Condition and Results of Operations,"
"Internal Restructuring," and our combined financial
statements and the related notes included elsewhere in this
prospectus.
38
Alpha Natural Resources, Inc.
Unaudited Pro Forma Balance Sheet
Data
September 30, 2004
Internal
Restructuring
Pro Forma
Historical
Adjustments
Pro Forma
(in thousands)
Assets
Current assets:
Cash and cash equivalents
$
15,811
$
$
15,811
Trade accounts receivable, net
97,475
97,475
Notes and other receivables
9,765
9,765
Inventories
52,684
52,684
Due from affiliate
323
323
Deferred income taxes
1,046
1,046
Prepaid expenses and other current assets
9,778
9,778
Total current assets
186,882
186,882
Property, plant, and equipment, net
217,055
217,055
Goodwill
18,641
18,641
Other intangibles, net
1,551
1,551
Deferred income taxes
—
(6)
Other assets
33,694
33,694
Total assets
$
457,823
$
$
Liabilities and Stockholders' Equity and
    Partners' Capital
Current liabilities:
Current portion of long-term debt
$
1,723
$
$
1,723
Note payable
2,638
2,638
Bank overdraft
6,250
6,250
Notes payable to affiliates
—
(1)
Trade accounts payable
60,803
60,803
Accrued expenses and other current liabilities
64,617
—
64,617
Total current liabilities
136,031
Long-term debt, net of current portion
181,256
181,256
Workers' compensation benefits
3,934
3,934
Postretirement medical benefits
13,490
13,490
Asset retirement obligation
33,933
33,933
Deferred gains on sales of property interests
6,536
6,536
Deferred income taxes
3,828
(6)
Other liabilities
5,009
10,500
(2)
15,509
Total liabilities
384,017
Minority interest
28,921
(28,921
)
(5)
—
Stockholders' Equity and Partners'
    Capital:
Alpha Natural Resources, Inc.:
Preferred stock—$0.01 par
    value,        shares
    authorized, no shares issued
—
Common stock—$0.01 par
    value,        shares
    authorized,        shares
    issued pro forma
—
(3)
Additional paid-in capital
Alpha NR Holding, Inc.:
Preferred stock—par value $0.01,
    1,000 shares authorized, none issued
—
Common stock—par value $0.01,
    1,000 shares authorized, 100 shares issued and
    outstanding
—
Additional paid-in capital
22,153
(1)
(6)
28,921
(5)
4,981
(4)
(10,500
)
(2)
Deficit capital account
—
(1)
Retained earnings
17,751
(1)
Total stockholders' equity
39,904
ANR Fund IX Holdings, L.P.:
Partners' capital
4,981
(4,981
)
(4)
—
Total stockholders' equity and
    partners' capital
44,885
Total liabilities and stockholders' equity
    and partners' capital
$
457,823
$
$
See accompanying notes to unaudited pro forma
balance sheet.
39
Alpha Natural Resources, Inc.
Notes to Unaudited Pro Forma Balance
Sheet
September 30, 2004
(1)
Reflects the Restructuring Notes. The aggregate
    principal amount of the Restructuring Notes and accrued interest
    thereon will be equal to the net proceeds from this offering.
    All of the net proceeds from this offering will be used to repay
    the Restructuring Notes in full. See "Internal
    Restructuring."
(2)
Reflects the aggregate amount of Sponsor
    Distributions payable in connection with the Internal
    Restructuring. The distributions to AMCI, in the aggregate
    amount of $6.0 million, will be paid in five equal
    installments in each of April 2005, June 2005, September 2005,
    January 2006 and April 2006. The distributions to First Reserve
    Fund IX, L.P. will be in an aggregate amount equal to
    $4.5 million, and will be payable in three installments on
    December 15, 2007, 2008 and 2009, respectively. The Sponsor
    Distributions are payable in cash or, to the extent we are not
    permitted by the terms of our credit facility or the indenture
    governing our senior notes to pay the Sponsor Distributions in
    cash, in shares of our common stock.
(3)
Reflects the exchange of all of the common shares
    of Alpha NR Holding, Inc., which are held by First Reserve
    Fund IX, L.P., for shares of common stock of Alpha Natural
    Resources, Inc. in connection with the Internal Restructuring.
(4)
Reflects the exchange of ANR Fund IX
    Holdings, L.P.'s interest in ANR Holdings, LLC for shares
    of common stock of Alpha Natural Resources, Inc. in connection
    with the Internal Restructuring.
(5)
Reflects the acquisition of the minority interest
    in ANR Holdings, LLC in exchange for shares of common stock
    of Alpha Natural Resources, Inc. in connection with the Internal
    Restructuring. The acquisition of the minority interest in
    ANR Holdings, LLC was accounted for at predecessor cost
    since a change in ownership has not taken place.
(6)
Represents the increase in deferred tax asset
    (estimated at
    $       million) recognized
    upon consummation of the Internal Restructuring related to the
    excess of the tax basis of our investment in ANR Holdings, LLC
    over the financial statement carrying amount upon consumation of
    the Internal Restructuring.
40
Alpha Natural Resources, Inc.
Unaudited Pro Forma Statement of Operations
Data
For the Nine Months Ended September 30,
2004
2004
Financings
and Internal
Restructuring
Pro Forma
Historical
(1)
Adjustments
Pro Forma
(in thousands)
Total revenues
$
937,063
$
$
937,063
Operating expenses
(2)
800,334
800,334
Depreciation, depletion and amortization
39,352
39,352
Asset impairment charge
5,100
5,100
Selling, general and administrative expenses
35,786
35,786
Gain on sale of fixed assets
342
342
Income from operations
56,833
—
56,833
Interest expense
(14,497
)
(2,603
)
(3)
(17,100
)
Interest income
331
331
Miscellaneous income
527
527
Income tax expense
(4,732
)
(6,444
)
(4)
(11,176
)
Minority interest
(19,562
)
19,562
(5)
—
Net income
$
18,900
$
10,515
$
29,415
See accompanying notes to unaudited
pro forma statement of operations data.
41
Alpha Natural Resources, Inc.
Notes to Unaudited Pro Forma Statement of
Operations Data
For the Nine Months Ended September 30,
2004
(1)
Reflects the combined results of operations of
    ANR Fund IX Holdings, L.P. and Alpha NR Holding, Inc.
    and subsidiaries for the nine months ended September 30,
    2004.
(2)
Operating expenses include cost of coal sales,
    freight and handling costs, and cost of other revenues.
(3)
Represents pro forma interest expense
    resulting from our 2004 Financings as shown in the table below:
(in thousands)
Note payable
(a)
$
214
Equipment financing
(b)
80
Senior notes
(c)
13,125
Funded revolver
(d)
833
Letter of credit fees
(e)
1,172
Commitment fees
(f)
371
Total cash interest expense
15,795
Amortization of deferred financing
    costs
(g)
1,305
Total pro forma interest expense
17,100
Less historical interest expense
(14,497
)
Adjustment to interest expense
$
2,603
(a)
Reflects pro forma interest expense at a fixed
    rate of 3.55% on an estimated average balance of
    $8.7 million.
(b)
Reflects pro forma interest expense at a fixed
    rate of 4.79% on an estimated average balance of
    $0.9 million.
(c)
Reflects pro forma interest expense on our senior
    notes at a fixed rate of 10%.
(d)
Reflects pro forma interest expense at an assumed
    LIBOR rate of 1.52% plus an applicable margin of 2.75% on an
    estimated average balance of $26.0 million.
(e)
Reflects fees at the fixed rate of 3.1% on
    $50.0 million of letters of credit outstanding under our
    funded letter of credit facility.
(f)
Reflects commitment fees of 0.50% on an estimated
    $99.0 million average available balance.
(g)
Reflects deferred financing costs of
    $11.7 million amortized over approximately 7 years.
(4)
Reflects the tax effect of the pro forma
    adjustments calculated at the estimated combined federal and
    state statutory rate of 38%.
(5)
Reflects the elimination of the minority interest
    as a result of our Internal Restructuring.
42
Alpha Natural Resources, Inc.
Unaudited Pro Forma Statement of Operations
Data
For the Year Ended December 31,
2003
2004 Financings
Pro Forma
and Internal
2003
Restructuring
Coastal
U.S.
Acquisitions
Pro Forma
Historical
Coal
(1)
AMCI
(2)
Mears
(3)
Pro Forma
Adjustments
Pro Forma
(in thousands)
Total revenues
$
792,566
$
21,759
$
42,612
$
45,829
$
902,766
$
$
902,766
Operating expenses
(4)
723,529
17,914
39,043
25,480
805,966
805,966
Depreciation, depletion and amortization
36,054
888
2,223
6,786
45,951
45,951
Selling, general and administrative expenses
21,949
1,093
2,515
3,832
29,389
29,389
Income (loss) from operations
11,034
1,864
(1,169
)
9,731
21,460
21,460
Interest expense
(7,848
)
(202
)
(721
)
(1,119
)
(9,890
)
(12,465
)
(5)
(22,355
)
Interest income
103
—
124
195
422
422
Miscellaneous income (expense), net
575
(15
)
(208
)
447
799
799
Income tax (expense) benefit
(668
)
(397
)
475
(2,229
)
(2,819
)
3,140
(6)
321
Minority interest
(934
)
(603
)
723
(3,389
)
(4,203
)
4,203
(7)
—
Net income (loss)
$
2,262
$
647
$
(776
)
$
3,636
$
5,769
$
(5,122
)
$
647
See accompanying notes to unaudited pro forma
statement of operations data.
43
Alpha Natural Resources, Inc.
Notes to Unaudited Pro Forma Statement of
Operations Data
For the Year Ended December 31,
2003
(1)
The pro forma results of operations include the
    period from January 1, 2003 through the consummation of the
    Coastal Coal acquisition on January 31, 2003.
Coastal Coal
Pro Forma
Coastal Coal
Historical
(a)
Adjustments
Pro Forma
(in thousands)
Total revenues
$
21,759
$
$
21,759
Operating expenses
18,159
(245
)
(b)
17,914
Depreciation, depletion and amortization
1,151
(263
)
(c)
888
Selling, general and administrative expenses
1,093
1,093
Income from operations
1,356
508
1,864
Interest expense
(80
)
(122
)
(d)
(202
)
Miscellaneous income (expense)
(15
)
(15
)
Income tax expense
—
(397
)
(e)
(397
)
Minority interest
—
(603
)
(f)
(603
)
Net income
$
1,261
$
(614
)
$
647
(a)
Reflects the historical results of operations
    from January 1, 2003, through the consummation of the
    Coastal Coal acquisition on January 31, 2003.
(b)
Reflects the adjustment to operating expenses to
    eliminate the expense relating to employee post-retirement
    benefit plan obligations that were not assumed in the
    acquisition.
(c)
The pro forma adjustment to depreciation,
    depletion and amortization is based on the portion of the
    acquisition cost allocated to long-lived assets.
(d)
Reflects pro forma interest expense associated
    with the debt incurred in connection with the transaction.
(e)
Reflects the tax effect of the pro forma
    adjustments calculated at the estimated combined federal and
    state statutory rate of 38%.
(f)
Reflects pro forma minority interest for the
    period from January 1, 2003 to January 31, 2003.
(2)
The pro forma results of operations include
    the period from January 1, 2003 through the consummation of
    the U.S. AMCI acquisition on March 11, 2003.
U.S. AMCI
Pro Forma
U.S. AMCI
Historical
(a)
Adjustments
Pro Forma
(in thousands)
Total revenues
$
43,614
$
(1,002
)
(b)
$
42,612
Operating expenses
40,274
(1,231
)
(b)(c)
39,043
Depreciation, depletion and amortization
1,792
431
(d)
2,223
Selling, general and administrative expenses
2,515
2,515
Loss from operations
(967
)
(202
)
(1,169
)
Interest expense
(342
)
(379
)
(e)
(721
)
Interest income
124
124
Miscellaneous income (expense)
(208
)
(208
)
Income tax benefit
—
475
(f)
475
Minority interest
—
723
(g)
723
Net loss
$
(1,393
)
$
(617
)
$
(776
)
(a)
Reflects the historical results of operations
    from January 1, 2003, through the consummation of the
    U.S. AMCI acquisition on March 11, 2003.
44
(b)
Reflects the adjustment to operating expenses to
    eliminate the sales and purchases between AMCI and us prior to
    the acquisition.
(c)
Reflects the adjustment to operating expenses to
    eliminate expenses relating to obligations for post-retirement
    medical costs not assumed in the acquisition.
(d)
The pro forma adjustment to depreciation,
    depletion and amortization is based on the portion of the
    acquisition cost allocated to long-lived assets.
(e)
Reflects pro forma interest expense associated
    with the debt incurred in connection with the transaction.
(f)
Reflects the tax effect of the pro forma
    adjustments calculated at the estimated combined federal and
    state statutory rate of 38%.
(g)
Reflects pro forma minority interest for the
    period from January 1, 2003 to March 11, 2003.
(3)
The pro forma results of operations include
    the period from January 1, 2003 through the consummation of
    the Mears acquisition on November 17, 2003.
Mears
Pro Forma
Mears
Historical
(a)
Adjustments
Pro Forma
(in thousands)
Total revenues
$
45,829
$
45,829
Operating expenses
25,480
25,480
Depreciation, depletion and amortization
872
5,914
(b)
6,786
Selling, general and administrative expenses
3,832
3,832
Income (loss) from operations
15,645
(5,914
)
9,731
Interest expense
(22
)
(1,097
)
(c)
(1,119
)
Interest income
195
195
Miscellaneous income (expense)
447
447
Income tax expense
—
(2,229
)
(d)
(2,229
)
Minority interest
—
(3,389
)
(e)
(3,389
)
Net income
$
16,265
$
(12,629
)
$
3,636
(a)
Reflects the historical results of operations
    from January 1, 2003, through the consummation of the Mears
    acquisition on November 17, 2003.
(b)
The pro forma adjustment to depreciation,
    depletion and amortization is based on the portion of the
    acquisition cost allocated to long-lived assets.
(c)
Reflects pro forma interest expense associated
    with the debt incurred in connection with the transaction.
(d)
Reflects the tax effect of the pro forma
    adjustments calculated at the estimated combined federal and
    state statutory rate of 38%.
(e)
Reflects pro forma minority interest for the
    period from January 1, 2003 to November 17, 2003.
(4)
Operating costs and expenses include cost of coal
    sales, freight and handling costs, and cost of other revenues.
45
(5)
Represents pro forma interest expense resulting
    from our 2004 Financings as shown in the table below:
(in thousands)
Note payable
(a)
$
227
Equipment financing
(b)
87
Senior notes
(c)
17,500
Funded revolver
(d)
800
Letter of credit fees
(e)
1,462
Commitment fees
(f)
539
Total cash interest expense
20,615
Amortization of deferred loan costs
(g)
1,740
Total pro forma interest expense
22,355
Less 2003 Acquisition pro forma interest expense
(9,890
)
Adjustment to interest expense
$
12,465
(a) Reflects pro forma interest expense at a
    fixed rate of 3.55% on an estimated average balance of
    $7.2 million.
(b)
Reflects pro forma interest expense at a fixed
    rate of 4.79% on an estimated average balance of
    $2.8 million.
(c)
Reflects pro forma interest on our senior note at
    a fixed rate of 10%.
(d)
Reflects pro forma interest expense at an assumed
    LIBOR rate of 1.25% plus an applicable margin of 2.75% on an
    estimated average balance of $20.0 million.
(e)
Reflects fees at the fixed rate of 3.1% on
    $47.0 million of letters of credit outstanding.
(f)
Reflects commitment fees of 0.50% on an estimated
    $105.0 million average available balance under our
    revolving line of credit.
(g)
Reflects deferred financing costs of
    $11.7 million amortized over approximately 82 months.
(6)
Reflects the tax effect of the pro forma
    adjustments calculated at the estimated combined federal and
    state statutory rate of 38%.
(7)
Reflects the elimination of the minority interest
    as a result of our Internal Restructuring.
46
SELECTED HISTORICAL FINANCIAL DATA
The selected historical financial data as of
December 31, 2002 and 2003 and September 30, 2004, for
the period from December 14, 2002 through December 31,
2002, for the year ended December 31, 2003 and for the nine
months ended September 30, 2004, have been derived from the
combined financial statements of ANR Fund IX Holdings, L.P.
and Alpha NR Holding, Inc. and subsidiaries and the related
notes, included elsewhere in this prospectus, which have been
audited by KPMG. The summary historical financial data for the
nine months ended September 30, 2003 have been derived from
the unaudited combined financial statements of ANR Fund IX
Holdings, L.P. and Alpha NR Holding, Inc. and subsidiaries, and
the related notes, included elsewhere in this prospectus. In the
opinion of management, the financial data for the nine months
ended September 30, 2003 and 2004 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 selected historical
financial data for the Predecessor Periods have been derived
from our Predecessor's combined financial statements
included elsewhere in this prospectus, which have been audited
by KPMG. The selected historical financial data as of December
2000 and 2001, and for the year ended December 31, 2000
have been derived from our Predecessor's audited combined
financial statements not included in this prospectus. The
selected historical financial data as of and for the year ended
December 31, 1999 have been derived from our
Predecessor's unaudited combined financial statements. The
following data should be read in conjunction with
"Unaudited Pro Forma Financial Information,"
"Management's Discussion and Analysis of Financial
Condition and Results of Operations" and our
Predecessor's financial statements and the related notes
included elsewhere in this prospectus.
47
ANR Fund IX Holdings, L.P. and
Predecessor
Alpha NR Holding, Inc. and Subsidiaries
January 1,
December 14,
Nine Month
Nine Month
Year Ended
Year Ended
Year Ended
2002 to
2002 to
Year Ended
Period Ended
Period Ended
December 31,
December 31,
December 31,
December 13,
December 31,
December 31,
September 30,
September 30,
1999
2000
2001
2002
2002
2003
2003
2004
(unaudited)
(unaudited)
(in thousands, except per share data)
Statement of Operations Data:
Revenues:
Coal revenues
$
231,264
$
226,653
$
227,237
$
154,715
$
6,260
$
701,262
$
504,660
$
808,655
Freight and handling revenues
33,910
25,470
25,808
17,001
1,009
73,800
49,803
106,291
Other revenues
—
5,601
8,472
6,031
101
17,504
11,244
22,117
Total revenues
265,174
257,724
261,517
177,747
7,370
792,566
565,707
937,063
Costs and expenses:
Cost of coal sales
201,537
224,230
219,545
158,924
6,268
632,979
450,731
677,100
Freight and handling costs
33,910
25,470
25,808
17,001
1,009
73,800
49,803
106,291
Costs of other revenues
—
4,721
8,156
7,973
120
16,750
11,532
16,943
Depreciation, depletion and amortization
12,910
7,890
7,866
6,814
274
36,054
25,806
39,352
Asset impairment charge
—
—
—
—
—
—
—
5,100
Selling, general and administrative expenses
7,399
8,543
9,370
8,797
471
21,949
16,697
35,786
Costs to exit business
—
26,937
3,500
25,274
—
—
—
—
Total costs and expenses
255,756
297,791
274,245
224,783
8,142
781,532
554,569
880,572
Refund of federal black lung excise tax
—
—
16,213
2,049
—
—
—
—
Gain on sale of fixed assets, net
—
—
—
—
—
—
—
342
Other operating income, net
1,337
57
94
1,430
—
—
—
—
Income (loss) from operations
10,755
(40,010
)
3,579
(43,557
)
(772
)
11,034
11,138
56,833
Other income (expense):
Interest expense
—
—
—
(35
)
(203
)
(7,848
)
(5,964
)
(14,497
)
Interest income
785
2,263
1,993
2,072
6
103
91
331
Miscellaneous income
—
4,215
1,250
—
—
575
451
527
Total other income (expense), net
785
6,478
3,243
2,037
(197
)
(7,170
)
(5,422
)
(13,639
)
Income (loss) before income taxes
11,540
(33,532
)
6,822
(41,520
)
(969
)
3,864
5,716
43,194
Income tax expense (benefit)
—
(13,545
)
(1,497
)
(17,198
)
(334
)
668
988
4,732
Minority interest
—
—
—
—
—
934
1,750
19,562
Net income (loss)
$
11,540
$
(19,987
)
$
8,319
$
(24,322
)
$
(635
)
$
2,262
$
2,978
$
18,900
Statement of cash flows data:
Net cash provided by (used in):
Operating activities
—
$
20,659
$
10,655
$
(13,816
)
$
(295
)
$
54,104
$
38,149
$
99,247
Investing activities
—
(8,564
)
(9,203
)
(22,054
)
(38,893
)
(100,072
)
(61,133
)
(67,235
)
Financing activities
—
(12,106
)
(1,462
)
35,783
47,632
48,770
33,569
(27,447
)
Capital expenditures
6,120
9,127
10,218
21,866
960
27,719
27,130
52,984
ANR Fund IX Holdings, L.P. and
Predecessor
Alpha NR Holding, Inc. and Subsidiaries
As of December 31,
As of
As of December 31,
As of
December 13,
September 30,
1999
2000
2001
2002
2002
2003
2004
Balance sheet data:
Cash and cash equivalents
$
185
$
175
$
88
$
8,444
$
11,246
$
15,811
Total assets
130,608
139,467
156,328
108,442
379,336
457,823
Notes payable and long- term debt, including
    current portion
—
—
—
25,743
84,964
185,617
Stockholder's equity and partners capital
    (deficit)
(142,067
)
(136,593
)
(132,997
)
23,384
86,367
44,885
48
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion and
analysis in conjunction with our combined financial statements
and related notes, our "Unaudited Pro Forma Financial
Information," and our "Selected Historical Financial
Data" included elsewhere in this prospectus. The historical
financial information discussed below is for ANR Fund IX
Holdings, L.P. and Alpha NR Holding, Inc. and subsidiaries,
which prior to the completion of our Internal Restructuring are
the owners of a majority of the membership interests of
ANR Holdings, our top-tier holding company prior to our
Internal Restructuring. References to pro forma financial and
other pro forma information, unless otherwise indicated, reflect
(1) for balance sheet data, the consummation of the
Internal Restructuring as if it had occurred on
September 30, 2004, and (2) for statement of
operations and other data, the Prior Transactions as if they had
occurred on January 1, 2003.
Overview
We produce, process and sell steam and
metallurgical coal from eight regional business units, which, as
of September 30, 2004, are supported by 44 active
underground mines, 20 active surface mines and
11 preparation plants located throughout Virginia, West
Virginia, Kentucky, Pennsylvania and Colorado. As of
October 15, 2004, we controlled 514.4 million tons of
proven and probable coal reserves. More than 98% of our coal
reserves are located in Central and Northern Appalachia.
We primarily generate revenues from the sale of
steam and metallurgical coal. Metallurgical coal generally sells
at a premium over steam coal because of its higher quality and
its value in the steelmaking process as the raw material for
coke. For the first nine months of 2004, sales of steam coal
accounted for approximately 63% and sales of metallurgical coal
accounted for approximately 37% of our coal sales volume. Our
sales of steam coal were made primarily to large utilities and
industrial customers in the Eastern region of the United States,
and our sales of metallurgical coal were made primarily to steel
companies in the Northeastern and Midwestern regions of the
United States and in several countries in Europe and Asia.
Measured by tons sold, approximately 32% of our coal sales
during the first nine months of 2004 were made outside the
United States, primarily in Canada and several countries in
Europe and Asia.
In addition to selling coal produced from our
mines, we also sell steam and metallurgical coal produced by
others, some of which we blend and/or process prior to resale.
We blend the majority of the coal we purchase from third parties
by mixing it with coal produced from our mines, which provides
us with a higher overall margin for the blended coal product
than we would otherwise be able to achieve selling these coals
separately. We consider purchased coal to be processed by us if
we wash, crush or blend it at one of our preparation plants or
loading facilities prior to resale.
In addition, we generate other revenues from
equipment repair and sales income, rentals, royalties,
commissions, coal handling, terminal and processing fees, and
coal analysis 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.
Our business is seasonal, with operating results
varying from quarter to quarter. We generally experience lower
sales and hence build coal inventory during the winter months
primarily due to the freezing of lakes that we use to transport
coal to some of our customers.
Our primary expenses are wages and benefits,
repair and maintenance expenditures, cost of purchased coal,
royalties, freight and handling costs, and taxes incurred in
selling our coal. Historically, our cost of coal sales per ton
are lower for sales of our produced and processed coal than for
sales of purchased coal that we do not process prior to resale.
Predecessor and 2003
Acquisitions.
On December 13,
2002, we acquired our Predecessor, the majority of the Virginia
coal operations of Pittston Coal Company, from The Brink's
Company (formerly
49
known as The Pittston Company), for
$62.9 million. We paid $37.2 million in cash at
closing which included transaction costs of $1.2 million,
with the remaining purchase price represented by
$25.7 million of seller financing. We accounted for this
acquisition under the purchase method of accounting with the
total consideration allocated to the fair value of assets
acquired and liabilities assumed. The allocation resulted in a
write-down from fair value of certain assets of the Predecessor,
primarily property and equipment and mineral rights. Our
combined historical results of operations for the Predecessor
Periods reflect the historical basis of accounting of these
Virginia coal operations by our Predecessor, and the periods
from and after December 14, 2002 reflect purchase
accounting adjustments.
On January 31, 2003, we acquired Coastal
Coal Company for $67.8 million. We paid $44.2 million
in cash at closing which included transaction costs of
$2.5 million, with the remaining purchase price represented
by $23.6 million of seller financing. We accounted for this
acquisition under the purchase method of accounting with the
total consideration allocated to the fair value of assets
acquired and liabilities assumed. The allocation resulted in a
write-down from fair value of certain assets, primarily property
and equipment and mineral rights. The results of operations of
Coastal Coal Company are included in our historical results of
operations for periods from and after February 1, 2003. In
connection with our acquisition of the Coastal Coal Company, we
acquired an overriding royalty interest in certain properties
located in Virginia and West Virginia owned by El Paso
CPG Company for $11.0 million in cash. Effective
February 1, 2003, we sold the overriding royalty interest
to Natural Resource Partners, L.P. ("NRP") for
$11.8 million in cash. Effective April 1, 2003, we
also sold substantially all of our fee-owned Virginia mineral
properties to NRP for approximately $53.6 million in cash
in a sale/leaseback transaction.
On March 11, 2003, we acquired
U.S. AMCI for $121.3 million. Including transaction
costs of $4.4 million, we paid $52.3 million in cash
at closing, with the remaining $69.0 million provided in
the form of a 44% membership interest in ANR Holdings. We
accounted for this acquisition under the purchase method of
accounting with the total consideration allocated to the fair
value of assets acquired and liabilities assumed, including
$17.1 million to goodwill. The results of operations of
U.S. AMCI are included in our historical results of
operations for periods from and after March 12, 2003.
On November 17, 2003, we acquired the assets
of Mears for $38.0 million in cash, including transaction
costs of $0.1 million. We accounted for this acquisition
under the purchase method of accounting with the total
consideration allocated to the fair value of assets acquired and
liabilities assumed. The results of operations of Mears are
included in our historical results of operations for periods
from and after November 18, 2003.
Internal Restructuring and Offering.
Immediately prior to the effectiveness
of the registration statement of which this prospectus is a
part, we will complete a series of transactions in connection
with our Internal Restructuring for the purpose of transitioning
our top-tier holding company from a limited liability company to
a corporation. See "Internal Restructuring." As a
result of this offering and our Internal Restructuring, we will
incur additional expenses that we have not incurred in the past,
including expenses associated with compliance with corporate
governance and periodic financial reporting requirements for
public companies. Moreover, all of our income will be subject to
income tax.
As part of our Internal Restructuring, our
executive officers and certain other key employees will receive
shares of our common stock in exchange for their interest in ANR
Holdings. As a result, we will record compensation expense and
deferred compensation equal to the fair value of the shares
issued of
$          .
We will record
$          of
compensation expense at the time of this offering equal to the
vested portion of the shares issued. The remaining
$          of
compensation will be recorded as deferred stock-based
compensation and amortized over the two-year vesting period of
the unvested shares. As a result of this non-cash compensation
expense, we expect that our operating expenses for the quarter
ending           ,
2005 will be higher than in prior periods and that we may record
a net loss for this quarter. In addition, the amortization of
the deferred stock-based compensation over the two-year vesting
period will result in a non-cash amortization expense in these
future periods, thereby reducing our earnings in those periods.
Coal Pricing Trends and Uncertainties.
During the first nine months of 2004,
prices for our coal increased significantly due to a combination
of conditions in the United States and internationally,
50
including an improving U.S. economy,
relatively low customer stockpiles, capacity constraints of
U.S. nuclear-powered electricity generators, high current
and forward prices for natural gas and oil, and increased
international demand for U.S. coal. This strong coal
pricing environment has contributed to our growth in revenues
and net income during the nine months ended September 30,
2004. There is uncertainty as to whether and for how long this
strong coal pricing environment will continue. We are also
experiencing increased costs for purchased coal which have risen
with coal prices generally, and increased operating costs for
steel equipment and employee wages and salaries.
The U.S. dollar has weakened over the last
two years, which has made U.S. coal relatively less
expensive and therefore more competitive in foreign markets. We
believe that the weakening of the U.S. dollar has enabled
us to export more metallurgical coal at higher prices than would
otherwise have been the case during 2003 and the first nine
months of 2004, and this trend has contributed to our growth in
revenues and income during those periods. There is uncertainty
as to whether and for how long the dollar will continue to
weaken against foreign currencies, and we believe that a
strengthening of the U.S. dollar would adversely affect our
exports.
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."
Results of Operations
For purposes of the following discussion and
analysis of our operating results, the revenues and costs and
expenses of ANR Fund IX Holdings, L.P. and Alpha
NR Holding, Inc. and subsidiaries for the period from
December 14, 2002 through December 31, 2002 have been
combined with the revenues and costs and expenses of our
Predecessor for the period from January 1, 2002 through
December 13, 2002. Our operating results from and after
December 14, 2002, including our recorded depreciation,
depletion and amortization expense, are not comparable to the
Predecessor Periods as a result of the application of purchase
accounting. The combining of the Predecessor and successor
accounting periods in the year ended December 31, 2002 is
not permitted by U.S. generally accepted accounting principles.
The 2003 Acquisitions also affect comparability
with the Predecessor Periods and, therefore, the results of
operations for the Predecessor Periods are not comparable to the
results of operations for the periods from and after
December 14, 2002. In addition, the results of operations
for the nine months ended September 30, 2004 are not
directly comparable to the same period in 2003 due to the 2003
Acquisitions. Our business consists of one reportable
segment— the extracting, processing and marketing of coal.
Nine Months Ended September 30, 2004
    Compared to Nine Months Ended September 30,
    2003
Revenues
Nine Months Ended
Increase
September 30,
(Decrease)
2003
2004
$ or Tons
%
(in thousands, except per ton data)
Coal revenues
$
504,660
$
808,655
$
303,995
60%
Freight and handling revenues
49,803
106,291
56,488
113%
Other revenues
11,244
22,117
10,873
97%
Total revenues
$
565,707
$
937,063
$
371,356
66%
Tons sold
15,778
19,424
3,646
23%
Coal sales realization per ton sold
$
31.99
$
41.63
$
9.64
30%
Coal Revenues.
Coal
revenues increased in the first nine months of 2004 by
$304.0 million or 60%, to $808.7 million, as compared
to the first nine months of 2003. This increase was due
primarily to the
51
$9.64 per ton increase in the average sales
price of our coal and to additional tons sold 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 and to our ability to take advantage of the
exceptionally high metallurgical coal sale prices by processing
and marketing as metallurgical coal some coal qualities that
would traditionally have been marketed as steam coal.
Approximately 63% and 37% of our tons sold in the first nine
months of 2004 were steam coal and metallurgical coal,
respectively, as compared to 71% and 29% during the same period
in 2003. Our tons sold in the first nine months of 2004
increased by 3.6 million, or 23%, to 19.4 million,
primarily due to the effect of our 2003 Acquisitions.
Freight and Handling
Revenues.
Freight and handling
revenues increased to $106.3 million for the period ended
September 30, 2004, an increase of $56.5 million
compared to the period ended September 30, 2003 due to
increased export shipments.
Other Revenues.
Other revenues increased for the first nine months of 2004 by
$10.9 million, or 97%, to $22.1 million, as compared
to the first nine months of 2003 primarily due to higher
equipment sales, coal handling and processing fees, and sales
commissions, partially offset by reduced trucking revenue. Other
revenues for the first nine months of 2004 include a gain of
$1.2 million on the satisfaction of an obligation to
reclaim certain properties retained by the seller in the
Pittston acquisition.
Costs and Expenses
Nine Months Ended
Increase
September 30,
(Decrease)
2003
2004
$
%
(in thousands, except per ton data)
Cost of coal sales
$
450,731
$
677,100
$
226,369
50%
Freight and handling costs
49,803
106,291
56,488
113%
Cost of other revenues
11,532
16,943
5,411
47%
Depreciation, depletion and amortization
25,806
39,352
13,546
52%
Asset impairment charge
—
5,100
5,100
Selling, general and administrative expenses
16,697
35,786
19,089
114%
Total costs and expenses
$
554,569
$
880,572
$
326,003
59%
Cost of coal sales per ton sold
$
28.57
$
34.86
$
6.29
22%
Cost of Coal Sales.
In the first nine months of 2004, our
cost of coal sales increased $226.4 million, or 50%, to
$677.1 million compared to the first nine months of 2003.
The increase in our cost of coal sold was principally the result
of our 2003 Acquisitions. Our cost of coal sales also increased
as a result of increased prices for steel-related mine supplies
and contract mining services, higher prices for purchased coal,
and increased variable sales-related costs, such as royalties
and severance taxes. The average cost per ton sold increased 22%
from $28.57 per ton in the first nine months of 2003 to
$34.86 per ton in the first nine months of 2004. Our cost
of coal sales as a percentage of coal revenues decreased from
89% in the first nine months of 2003 to 84% in the first nine
months of 2004. For the nine months ended September 30,
2004 our average cost per ton for our produced or processed coal
sales was $31.96 and our average cost per ton for coal that we
purchased from third parties and resold without processing was
$43.79.
Freight and Handling Costs.
Freight and handling costs increased
$56.5 million to $106.3 million during the first nine
months of 2004 as compared to the first nine months of 2003,
mainly due to increased export shipments where we initially pay
the freight and handling cost and are then reimbursed by the
customer.
Cost of Other Revenues.
Cost of other revenues increased
$5.4 million, or 47%, to $16.9 million for the first
nine months of 2004 as compared to the first nine months of 2003
due to a higher volume of equipment sales and higher processing
and handling fees as a result of increased volumes.
52
Depreciation, Depletion and Amortization.
Depreciation, depletion, and
amortization increased $13.5 million, or 52%, to
$39.4 million for the first nine months of 2004 as compared
to the first nine months of 2003 due to capital additions during
the first nine months of 2004, as well as the impact of the 2003
Acquisitions. Depreciation, depletion and amortization per ton
increased from $1.64 per ton in the first nine months of
2003 to $2.03 per ton in the first nine months of 2004
principally due to 2004 capital additions.
Asset Impairment Charge.
We own National King Coal, LLC (a
mining company) and Gallup Transportation and Transloading
Company, LLC (a trucking company) (collectively
"NKC"). Since the acquisition of NKC, it has incurred
cumulative losses of $2.8 million. While NKC has not
experienced sales revenue growth comparable to our other
operations, it has been affected by many of the same cost
increases. As a result, we were required to assess the recovery
of the carrying value of the NKC assets. Based upon that
analysis it was determined that the assets of NKC were impaired.
An impairment charge of $5.1 million was recorded in
September 2004 to reduce the carrying value of the assets of NKC
to their estimated fair value. A discounted present value cash
flow model was used to determine fair value.
Selling, General and Administrative Expenses.
Selling, general and administrative
expenses increased $19.1 million, or 114%, to
$35.8 million in the first nine months of 2004 compared to
the same period in 2003. The increase is attributed to higher
staffing levels and resulting payroll costs, incentive bonus
payments and accruals, a contract buyout of $3.1 million,
and professional fees incurred in documenting, assessing, and
improving our controls and procedures in anticipation of the
requirements of the Sarbanes-Oxley Act once we are a public
company. Our selling, general and administrative expenses as a
percentage of total revenues increased from 3.0% in the first
nine months of 2003 to 3.8% in the first nine months of 2004.
Interest
Expense
Interest expense increased $8.5 million to
$14.5 million during the first nine months of 2004 compared
to the same period in 2003. The increase was mainly due to the
additional interest expense of $6.4 million related to our
10% senior notes issued in May 2004 and the write-off of
deferred financing costs in the amount of $2.8 million
related to our previous credit facility.
Interest Income
Interest income increased from $0.1 million
to $0.3 million as a result of interest received on notes
receivable issued in the first nine months of 2004.
Income Tax Expense
Income tax expense increased $3.7 million to
$4.7 million for the nine months ended September 30,
2004 as compared to the nine months ended September 30,
2003. Our effective tax rates for the nine months ended
September 30, 2004 and 2003 were 11.0% and 17.3%,
respectively. The effective tax rates are lower than the
statutory tax rate since we are not subject to tax with respect
to the portion of our income before taxes which is attributable
to ANR Fund IX Holdings, L.P.'s portion of our earnings and
the minority interest's share in the earnings of ANR
Holdings. In addition, our taxable income is reduced by
percentage depletion allowances which reduce our effective tax
rate. These reductions in our effective tax rates are offset by
(or reduced by) the effect of increases (decreases) in our
valuation allowance for deferred tax assets of
$(0.2) million and $0.8 million recorded in the nine
months ended September 30, 2004 and 2003, respectively.
53
Year Ended December 31, 2003 Compared
    to Year Ended December 31, 2002
Revenues
Year Ended
Increase
December 31,
(Decrease)
2002*
2003
$ or Tons
%
(in thousands, except per ton data)
Coal revenues
$
160,975
$
701,262
$
540,287
336
%
Freight and handling revenues
18,010
73,800
55,790
310
%
Other revenues
6,132
17,504
11,372
185
%
Total revenues
$
185,117
$
792,566
$
607,449
328
%
Tons sold
4,469
21,930
17,461
391
%
Coal sales realization per ton sold
$
36.02
$
31.98
$
(4.04
)
(11
)%
*
Reflects the combination of the Predecessor and
    successor accounting periods in the year ended December 31,
    2002.
Coal Revenues.
Coal
revenues increased $540.3 million, or 336%, to
$701.3 million for the year ended December 31, 2003,
from $161.0 million for the year ended December 31,
2002. The increase was primarily due to the 2003 Acquisitions,
partially offset by a reduction in the average sales price per
ton. Tons sold increased from 4.5 million tons in 2002 to
21.9 million tons in 2003. The 2003 Acquisitions accounted
for 16.0 million of the 17.5 million ton increase in
coals sales from 2002 to 2003. Our average sales price per ton
decreased 11% from $36.02 per ton in 2002 to
$31.98 per ton in 2003, mainly due to our lower percentage
of metallurgical coal sales in 2003 as compared to sales of our
Predecessor in 2002. Approximately 71% and 29% of our tons sold
in the 2003 were steam coal and metallurgical coal,
respectively, as compared to 45% and 55% during 2002.
Freight and Handling
Revenues.
Freight and handling
revenues increased $55.8 million from $18.0 million in
2002 primarily due to increased volumes resulting from the 2003
Acquisitions.
Other Revenues.
Other revenues, principally sales commissions, equipment repair
and sales, and coal handling, terminalling and processing fees
increased $11.4 million to $17.5 for 2003, mainly due to
the 2003 Acquisitions and increased volume in equipment repair
and sales. Other revenues for 2002 include only equipment repair
and sales income.
Costs and Expenses
Year Ended
Increase
December 31,
(Decrease)
2002*
2003
$
%
(in thousands, except per ton data)
Cost of coal sales
$
165,192
$
632,979
$
467,787
283
%
Freight and handling costs
18,010
73,800
55,790
310
%
Cost of other revenues
8,093
16,750
8,657
107
%
Depreciation, depletion and amortization
7,088
36,054
28,966
409
%
Selling, general and administrative expenses
9,268
21,949
12,681
137
%
Costs to exit business
25,274
—
(25,274
)
Total costs and expenses
$
232,925
$
781,532
$
548,607
236
%
Cost of coal sales per ton sold
$
36.96
$
28.86
$
(8.10
)
(22
)%
*
Reflects the combination of the Predecessor and
    successor accounting periods in the year ended December 31,
    2002.
Cost of Coal Sales.
Our cost of coal sales increased $467.8 million, or 283%,
to $633.0 million for the year ended December 31,
2003, from $165.2 million for the year ended
December 31, 2002. The
54
increase in our cost of coal sold was primarily
the result of our 2003 Acquisitions. The 2003 Acquisitions
accounted for 93% of the 12.9 million ton increase in our
produced and processed coal sales for 2003. The average cost per
ton sold decreased 22% from $36.96 per ton in 2002 to
$28.86 per ton in 2003 as a result of increased production,
which reduced our fixed costs per ton, as well as lower costs of
coal produced from mines acquired in the 2003 Acquisitions. Our
cost of coal sales as a percentage of coal revenues decreased
from 103% in 2002 to 90% in 2003.
Freight and Handling Costs.
Freight and handling costs increased
$55.8 million to $73.8 million for the year ended
December 31, 2003 as compared to the prior period,
primarily due to increased sales volumes resulting from the 2003
Acquisitions.
Cost of Other Revenues.
Cost of other revenues increased
$8.7 million, or 107%, to $16.8 million for 2003 as
compared to 2002 as a result of the 2003 Acquisitions, in which
we acquired trucking and coal processing operations, as the cost
for 2002 includes only those related to equipment repair and
sales income.
Depreciation, Depletion and
Amortization.
Depreciation, depletion
and amortization expense for the year ended December 31,
2003 was $36.1 million, an increase of $29.0 million
from the prior year. The increase in expense is attributable to
the 2003 Acquisitions, as depreciation, depletion and
amortization expense per ton showed only a slight increase from
$1.59 per ton in 2002 to $1.64 per ton in 2003.
Selling, General and Administrative
Expenses.
Selling, general and
administrative expenses increased by $12.7 million to
$21.9 million, but decreased from $2.07 per ton sold
to $1.00 per ton sold from 2002 to 2003, primarily due to a
significant increase in tons sold, partially offset by
additional expenses associated with transition services provided
by the selling companies. Our selling, general and
administrative expenses as a percentage of total revenues
decreased from 5.0% in 2002 to 2.8% in 2003.
Costs to Exit
Business.
For the year ended
December 31, 2002, our Predecessor recorded a charge of
$25.3 million for a pension plan early withdrawal penalty.
The early withdrawal penalty was incurred when our Predecessor
withdrew from a multi-employer pension plan when we purchased
their operations.
Interest
Expense
Interest expense increased to $7.8 million
for the year ended December 31, 2003 from less than
$0.1 million for the period from January 1, 2002 to
December 13, 2002. The increase is due to interest on loans
to finance the 2003 Acquisitions.
Interest
Income
Interest income decreased from $2.1 million
for the period from January 1 to December 13, 2002 to
$0.1 million in 2003. Interest income for the period from
January 1, 2002 to December 13, 2002 was attributable
to interest earned on Virginia tax credits and an employee
benefit trust. We did not acquire the assets of the employee
benefit trust or the receivable for the Virginia tax credits.
Income Tax Expense (Benefit)
Income taxes increased $17.9 million from a
benefit of $17.2 million for the period from
January 1, 2002 to December 13, 2002 to an expense of
$0.7 million for the year ended December 31, 2003.
This increase in income taxes was attributable primarily to the
increase in pre-tax income. The effective tax rate for the
period from January 1, 2002 to December 13, 2002 and
for the year ended December 31, 2003 was 41.4% and 17.3%,
respectively. In 2003, tax was not provided on ANR Fund IX
Holdings, L.P.'s portion of our earnings and the minority
interest owners' share in the earnings of ANR Holdings. In
addition, in periods when a pre-tax loss is reported, percentage
depletion increases the effective tax rate (increases the tax
benefit) whereas in periods when pre-tax income is reported,
percentage depletion decreases the effective tax rate (decreases
the tax expense).
55
Year Ended December 31, 2002 Compared
    to Year Ended December 31, 2001
Revenues
Year Ended
Increase
December 31,
(Decrease)
2001
2002*
$ or Tons
%
(in thousands, except per ton data)
Coal revenues
$
227,237
$
160,975
$
(66,262
)
(29
)%
Freight and handling revenues
25,808
18,010
(7,798
)
(30
)%
Other revenues
8,472
6,132
(2,340
)
(28
)%
Total revenues
$
261,517
$
185,117
$
(76,400
)
(29
)%
Tons sold
6,975
4,469
(2,506
)
(36
)%
Coal sales realization per ton sold
$
32.58
$
36.02
$
3.44
11
%
*
Reflects the combination of the Predecessor and
    successor accounting periods in the year ended December 31,
    2002.
Coal Revenues.
Coal
revenues for the year ended December 31, 2002 decreased
$66.3 million, to $161.0 million, a 29% decrease from
the prior year. The decrease in revenue is primarily due to a
decrease in tons sold of 2.5 million tons, partially offset
by an increase in the average selling price of $3.44 per
ton, from $32.58 per ton in 2001 to $36.02 per ton in
2002. Approximately 45% and 55% of our tons sold in the 2002
were steam coal and metallurgical coal, respectively, as
compared to 58% and 42% during 2001.
Freight and Handling
Revenues.
Freight and handling
revenues decreased $7.8 million, or 30%, from
$25.8 million in 2001 primarily due to the decrease in tons
sold.
Other Revenues.
Other revenues decreased by 28% due to a decrease in equipment
repair revenues.
Costs and Expenses
Year Ended
Increase
December 31,
(Decrease)
2001
2002*
$
%
(in thousands, except per ton data)
Cost of coal sales
$
219,545
$
165,192
$
(54,353
)
(25
)%
Freight and handling costs
25,808
18,010
(7,798
)
(30
)%
Cost of other revenues
8,156
8,093
(63
)
(1
)%
Depreciation, depletion and amortization
7,866
7,088
(778
)
(10
)%
Selling, general and administrative expenses
9,370
9,268
(102
)
(1
)%
Costs to exit business
3,500
25,274
21,774
622
%
Total costs and expenses
$
274,245
$
232,925
$
(41,320
)
(15
)%
Cost of coal sales per ton sold
$
31.48
$
36.96
$
5.48
17
%
*
Reflects the combination of the Predecessor and
    successor accounting periods in the year ended December 31,
    2002.
Cost of Coal Sales.
Cost of coal sales for the year ended December 31, 2002
decreased $54.4 million, to $165.2 million, a 25%
decrease from the prior year, due to a decrease in tons of coal
purchased and a decrease in tons of coal produced. Average cost
per ton increased by $5.48, from $31.48 per ton in 2001 to
$36.96 per ton in 2002, due to decreased production which
increased fixed costs per ton. Our cost of coal sales as a
percentage of coal revenues increased from 97% in 2001 to 103%
in 2002 as the increase in our cost per ton in 2002 exceeded the
increase in our revenue per ton.
Freight and Handling
Costs.
Freight and handling costs
decreased $7.8 million to $18.0 million primarily due
to a decrease in export sales volumes.
56
Cost of Other
Revenues.
Cost of other revenues
remained flat from 2001 to 2002. A decrease in costs related to
decreased repairs and maintenance revenues was offset by a
litigation settlement recorded in 2002.
Depreciation, Depletion and
Amortization.
Depreciation, depletion
and amortization expense reported for the year ended
December 31, 2002 was $7.1 million, a
$0.8 million decrease from the prior year. Depreciation,
depletion and amortization expense per ton increased from
$1.13 per ton in 2001 to $1.59 per ton in 2002 due to
the decrease in sales volume which increased the per ton amount
of depreciation expense.
Selling, General and Administrative
Expenses.
Selling, general and
administrative expenses decreased $0.1 million for the year
ended December 31, 2002 to $9.3 million. Selling,
general and administrative expenses as a percentage of total
revenues increased from 3.6% in 2001 to 5.0% in 2002 because of
the decrease in tons sold in 2002, while staffing levels and
overhead costs were relatively unchanged from 2001.
Costs to Exit
Business.
This expense increased
$21.8 million for the year ended December 31, 2002 to
$25.3 million due to the recognition of a
$25.3 million multi-employer pension plan early withdrawal
penalty in 2002. The early withdrawal penalty was incurred when
our Predecessor withdrew from a multi-employer pension plan when
we purchased its operations. The expense of $3.5 million in
2001 relates primarily to an early multi-employer pension plan
withdrawal penalty expected to be incurred when our Predecessor
decided to exit the coal business.
Interest Income
Interest income increased $0.1 million for
the period ended December 13, 2002 to $2.1 million.
Interest income in both periods was attributable to interest
earned on Virginia coal tax credits and an employee benefit
trust of our Predecessor.
Income Tax Benefit
For the period from January 1, 2002 to
December 13, 2002, our Predecessor reported an income tax
benefit of $17.2 million on a loss before income taxes of
$41.5 million compared to an income tax benefit of
$1.5 million on income before taxes of $6.8 million in
the prior year. The decrease in income taxes was attributable
primarily to the decrease in pre-tax income. The difference in
the effective tax rate results primarily from the benefits of
percentage depletion and an adjustment resulting from a
favorable appeal in 2002.
Liquidity and Capital Resources
Our primary liquidity and capital resource
requirements are to finance the cost of our coal production and
purchases, to make capital expenditures, and to service our debt
and reclamation obligations. Historically we have made
significant distributions to our equity holders, and in
connection with our Internal Restructuring we have agreed to pay
the Sponsor Distributions totaling $10.5 million in cash
or, to the extent we are not permitted by the terms of our
credit facility or the indenture governing our senior notes to
pay the Sponsor Distributions in cash, in shares of our common
stock. Our primary sources of liquidity are cash flow from sales
of our produced and purchased coal, other income and borrowings
under our senior credit facility.
At September 30, 2004, our available
liquidity was $136.4 million, including cash of
$15.8 million and $120.6 million available under our
credit facility. Total debt represented 72% of our total
capitalization at September 30, 2004.
We currently project cash capital spending for
the fourth quarter of 2004 of $20 million to
$25 million. These budgeted expenditures are to be used to
develop new mines and replace or add equipment. We believe that
cash generated from our operations and borrowings under our
credit facility
57
will be sufficient to meet our working capital
requirements, anticipated capital expenditures and debt service
requirements for at least the next twelve months.
Cash Flows
Cash provided by operating activities was
$99.2 million for the first nine months of 2004, an
increase of $61.1 million from the same period in 2003.
Cash provided by operations for the first nine months of 2004
benefitted from the effects of our 2003 Acquisitions and the
strength of the coal markets during the period. This increase is
attributable to an increase in net income of $15.9 million
for the first nine months of 2004 over the same period last
year, an increase in non-cash charges included in net income of
$43.3 million and the effects of a $1.9 million
reduction in net operating assets and liabilities.
Net cash used in investing activities was
$67.2 million during the first nine months of 2004,
$6.1 million more than the first nine months of 2003.
Capital expenditures increased $25.9 million, to
$53.0 million during the first nine months of 2004. The
increase in capital expenditures was primarily due to the
replacement of equipment, new mine development and upgrades to a
preparation plant. In the second quarter of 2003, we sold our
interest in certain coal properties acquired in the purchase of
our Predecessor, and a royalty interest acquired in our Coastal
Coal Company acquisition for an aggregate of $65.2 million.
We also paid $95.8 million for the Coastal Coal Company and
U.S. AMCI acquisitions in the first nine months of 2003. As
part of a coal supply agreement, we loaned an unrelated coal
supplier $10.0 million in June 2004 at a variable rate
to be repaid in installments over a two-year period beginning in
August 2004. The loan is secured by the assets of the
debtor and personally guaranteed by the debtor's owner. The
related coal supply agreement with the debtor should provide us
with approximately 40,000 tons of coal per month through
March of 2006. In September 2004, we also acquired an equity
interest for $3.3 million in a company which is developing
a mining property in Venezuela.
Net cash used in financing activities during the
nine months ended September 30, 2004 was $27.4 million
compared with net cash provided by financing activities of
$33.6 million in the prior period. Net cash provided by
financing activities included the net proceeds of
$171.5 million received as a result of the issuance of our
$175 million 10% senior notes in May 2004.
Net cash used in financing activities included
distributions made to our equity owners of $115.6 million
during the first nine months of 2004 and $10.6 million paid
for debt issuance costs. We received $15.2 million for
common stock issued and we received advances from affiliates of
$20.0 million during the nine month period ended
September 30, 2003.
Our operations provided us cash of
$54.1 million for the year ended December 31, 2003,
while the operations of our Predecessor used cash of
$13.8 million. Our net income increased $26.6 million
to $2.3 million when compared to our Predecessor's net
loss of $24.3 million. Our non-cash charges increased by
$40.0 million mainly due to increased depreciation,
depletion and amortization charges associated with the 2003
Acquisitions. Net changes in operating assets and liabilities
increased our operating cash flow by $12.6 million in 2003
while net changes in operating assets and liabilities increased
cash flow from operations by $11.3 million for the period
from January 1, 2002 to December 13, 2002.
Our Predecessor's cash provided by
operations decreased from the year ended December 31, 2001
to the period from January 1, 2002 to December 13, 2002 by
$24.5 million mainly due to the effect of black lung tax
refunds received in 2001 and payments made in the period from
January 1, 2002 to December 13, 2002 to exit the coal
business.
Net cash used in investing activities was
$100.1 million for the year ended December 31, 2003.
Cash used in investing activities includes $133.8 million
for the acquisitions of Coastal Coal Company, U.S. AMCI,
and Mears and capital expenditures of $27.7 million. The
2003 period includes proceeds of $65.2 million received
from the sales of coal reserves and mineral interests acquired
in the Pittston and Coastal Coal Company acquisitions. The
investing activities of our Predecessor in 2002 and 2001
consisted primarily of capital expenditures.
58
Net cash provided by financing activities was
$48.8 million and $35.8 million for the year ended
December 31, 2003 and the period from January 1, 2002
to December 13, 2002, respectively. In 2003, we entered
into a credit facility which provided for a $45.0 million
term loan and a $75.0 million revolving credit line.
Proceeds from borrowings under this credit
facility were $58.5 million in 2003. Repayments of notes
payable and long-term debt totaled $45.7 million. We
received $15.2 million for common stock issued and we
received advances from affiliates of $20.0 million during
the year ended December 31, 2003. Cash provided by
financing activities of our Predecessor in the period from
January 1, 2002 to December 13, 2002 consisted of
advances from affiliates. Cash used by financing activities was
$1.5 million for the year ended December 31, 2001
representing net repayments of notes payable.
Credit Facility and Long-term Debt
As of September 30, 2004, our total
long-term indebtedness, including capital lease obligations,
consisted of the following (in thousands):
September 30,
2004
10% senior notes due 2012
$
175,000
Revolving credit facility
4,000
4.84% term notes
1,759
Capital lease obligation
2,160
Other
60
Total long-term debt
182,979
Less current portion
(1,723
)
Long-term debt, net of current portion
$
181,256
On May 18, 2004, our subsidiaries Alpha
Natural Resources, LLC and Alpha Natural Resources Capital Corp.
issued $175.0 million of 10% senior notes due June
2012 in a private placement offering under Rule 144A of the
Securities Act of 1933, resulting in net proceeds of
approximately $171.5 million after fees and other offering
costs. The senior notes are unsecured but are guaranteed fully
and unconditionally on a joint and several basis by all of Alpha
Natural Resources, LLC's wholly-owned domestic restricted
subsidiaries. Interest is payable semi-annually in June and
December.
On May 28, 2004, Alpha Natural Resources,
LLC entered into a credit facility with a group of lending
institutions. The credit facility provides for a revolving line
of credit of up to $125.0 million and a funded letter of
credit facility of up to $50.0 million. As of
September 30, 2004, $4.0 million principal amount in
borrowings and letters of credit totaling $0.4 million were
outstanding under the revolving line of credit, leaving
$120.6 million available for borrowing on the line of
credit. As of September 30, 2004, the funded letter of
credit facility was fully utilized at $50.0 million at an
annual fee of 3.1% of the outstanding amount. Amounts drawn
under the revolver 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 revolver was 4.57% as of September 30, 2004. The
principal balance of the revolving credit note is due in May
2009. ANR Holdings and each of the subsidiaries of Alpha Natural
Resources, LLC have guaranteed Alpha Natural Resources
LLC's obligations under the revolving credit facility. The
obligations of ANR Holdings, Alpha Natural Resources, LLC and
its subsidiaries under the credit facility are collateralized by
the assets of the subsidiaries of those entities. We must pay an
annual commitment fee up to a maximum of  1/2 of 1% of the
unused portion of the commitment. We were in compliance with our
debt covenants under the credit facility as of
September 30, 2004.
59
The credit facility and the indenture governing
the senior notes each impose 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 meet or exceed certain interest coverage ratios and must
not exceed certain leverage ratios.
At September 30, 2004, we had
$50.5 million in letters of credit outstanding, of which
$50.0 million are supported by our $50.0 million
funded letter of credit facility, $0.4 million is supported
by the revolving line of credit under our credit facility and
$0.1 million is supported by a cash deposit. We have a
contingent liability for these letters of credit.
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.
Analysis of Material Debt Covenants
We were in compliance with all covenants under
our credit facility and the indenture governing our senior notes
as of September 30, 2004.
The financial covenants in our credit facility
require, among other things, that:
•
Alpha Natural Resources, LLC must maintain a
    leverage ratio, defined as the ratio of total debt to adjusted
    EBITDA (as defined in the credit agreement), of less than 3.85
    at September 30, 2004, declining to 3.75 at
    December 31, 2004, 3.50 at March 31 and June 30,
    2005, 3.25 at September 30 and December 31, 2005, 3.15
    at March 31, June 30, September 30 and
    December 31, 2006 and 3.00 at March 31, 2007 (and
    thereafter), respectively, with adjusted EBITDA being computed
    using the most recent four quarters; and
•
Alpha Natural Resources, LLC must maintain an
    interest coverage ratio, defined as the ratio of adjusted EBITDA
    (as defined in the credit agreement), to cash interest expense
    (defined as the sum of cash interest expense plus cash letter of
    credit fees and commissions), of greater than 2.50 at
    September 30, 2004 and at each quarter end thereafter.
Based upon adjusted EBITDA (as defined in the
credit agreement), Alpha Natural Resources, LLC's leverage
ratio and interest coverage ratio for the twelve months ended
September 30, 2004 were 1.5 (maximum of 3.85) and
6.1 (minimum of 2.50), respectively.
Adjusted EBITDA, as defined in the credit
agreement, is used to determine compliance with many of the
covenants under the credit facility. The breach of covenants in
the credit facility that are tied to ratios based on adjusted
EBITDA could result in a default under the credit facility and
the lenders could elect to declare all amounts borrowed due and
payable. Any acceleration would also result in a default under
our indenture.
Because the covenants in our credit facility
relate to Alpha Natural Resources, LLC, EBITDA as presented in
the table below reflects adjustments for minority interest
necessary to reconcile our net
60
income to Alpha Natural Resources, LLC's
EBITDA. Adjusted EBITDA is defined as EBITDA further adjusted to
exclude non-recurring items, non-cash items and other
adjustments permitted in calculating covenant compliance under
our credit facility, as shown in the table below. We believe
that the inclusion of supplementary adjustments to EBITDA
applied in presenting adjusted EBITDA is appropriate to provide
additional information to investors to demonstrate compliance
with our financial covenants.
Three
Three
Twelve
Three Months
Months
Months
Months
Ended
Ended
Three Months
Ended
Ended
December 31,
March 31,
Ended June 30,
September 30,
September 30,
2003
2004
2004
2004
2004
(In thousands)
Net income
$
$
$
12,088
$
5,342
$
Minority interest
(1)
12,872
5,688
Interest expense, net
6,711
5,449
Income tax expense
3,022
1,335
Depreciation, depletion and amortization expenses
13,111
14,312
EBITDA
47,804
32,126
Asset impairment charge
(2)
—
5,100
Adjusted EBITDA
$
19,000
(3
)
$
16,800
(3
)
$
47,804
$
37,226
$
120,830
Leverage ratio
(4)
1.5
x
Interest coverage ratio
(5)
6.1
x
(1)
Because our credit facility and our senior notes
    are issued by our subsidiaries, we are required to adjust our
    EBITDA for our minority interest which does not exist at the
    subsidiary level.
(2)
We are required to adjust EBITDA under our credit
    facility for the asset impairment charge related to our NKC
    operations.
(3)
Our credit facility deems adjusted EBITDA to be
    equal to $19.0 million for the three months ended
    December 31, 2003, and $16.8 million for the three
    months ended March 31, 2004.
(4)
Leverage ratio is defined in our credit facility
    as total debt divided by adjusted EBITDA.
(5)
Interest coverage ratio is defined in our credit
    facility as adjusted EBITDA divided by cash interest expense.
Contractual Obligations
At September 30, 2004, we had contractual
commitments for equipment purchases of $21.8 million and a
contractual commitment for improvements to a preparation plant
for which the remaining payment was $0.7 million. The
following is a summary of our significant contractual
obligations as of September 30, 2004 (in thousands):
2004
2005-2006
2007-2008
After 2008
Total
Long-term debt and capital leases
(1)
$
470
$
2,414
$
816
$
179,279
$
182,979
Equipment purchases and plant improvements
732
21,800
—
—
22,532
Operating leases
1,127
8,353
3,109
338
12,927
Minimum royalties
1,643
17,743
15,503
32,309
67,198
Coal purchases
113,560
296,264
10,020
—
419,844
Total
$
117,532
$
346,574
$
29,448
$
211,926
$
705,480
(1)
Long-term debt and capital leases include
    principal amounts due in the years shown. Interest payable on
    these obligations, assuming a rate of 4.57% on our variable rate
    loan, would be approximately $4.5 million in 2004, $35.8 million
    in 2005 to 2006, $35.5 million in 2007 to 2008, and $59.8
    million after 2008.
61
Borrowings under our credit facility will be
subject to mandatory prepayment (1) with 100% of the net
cash proceeds received from asset sales or other dispositions of
property by ANR Holdings and its subsidiaries (including
insurance and other condemnation proceedings), subject to
certain exceptions and reinvestment provisions, (2) with
100% of the net cash proceeds received by ANR Holdings and its
subsidiaries from the issuance of debt securities or other
incurrence of debt, excluding certain indebtedness, and
(3) 50% (or 25%, if our leverage ratio is less than or
equal to 2.00 to 1.00 but greater than 1.00, or 0% if our
leverage ratio is less than or equal to 1.00) of the net cash
proceeds of equity issuances of ANR Holdings and its
subsidiaries.
Additionally, we have long-term liabilities
relating to mine reclamation and end-of-mine closure costs, and
all of our operating and management-services subsidiaries have
long-term liabilities relating to retiree health care
(post-retirement benefits).
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.
We use surety bonds to secure our reclamation
obligations. As of September 30, 2004, we had outstanding
surety bonds with third parties for post-mining reclamation
totaling $89.0 million plus $7.8 million for
miscellaneous purposes. 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 obligations with
letters of credit, cash deposits or other suitable forms of
collateral.
We maintained letters of credit as of
September 30, 2004 totaling $50.5 million to secure
reclamation and other obligations.
In connection with our acquisition of Coastal
Coal Company, the seller, El Paso CGP Company, has
agreed to retain and indemnify us for all workers'
compensation and black lung claims incurred prior to the
acquisition date of January 31, 2003. The majority of this
liability relates to claims in the state of West Virginia. If
El Paso CGP Company fails to honor its agreement with
us, then we would be liable for the payment of those claims,
which are estimated to be approximately $5.4 million as of
September 30, 2004 based on reported cash reserves. El Paso
CGP Company has posted a bond with the state of West
Virginia for approximately $3.7 million; therefore, our
exposure is approximately $1.7 million for these reported
claims.
Critical Accounting Estimates and
Assumptions
Our discussion and analysis of our financial
condition, results of operations, liquidity and capital
resources is based upon our combined financial statements, which
have been prepared in accordance with U.S. generally
accepted accounting principles ("GAAP"). GAAP require
that we make estimates and judgments that affect the reported
amounts of assets, liabilities, revenues and expenses, and
related disclosure of contingent assets and liabilities. On an
ongoing basis, we evaluate our estimates. We base our estimates
on historical experience and on various other assumptions that
we believe are reasonable under the circumstances, the results
of which form the basis for making judgments about the carrying
values of assets and liabilities that are not readily apparent
from other sources. Actual results may differ from these
estimates.
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
62
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:
•
Discount Rate.
SFAS No. 143 required 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.
•
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 September 30, 2004, we had recorded asset
retirement obligation liabilities of $40.6 million,
including amounts reported as current. While the precise amount
of these future costs cannot be determined with certainty, as of
September 30, 2004, we estimate that the aggregate
undiscounted cost of final mine closure is approximately
$60.4 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. Some of the factors and assumptions that
impact economically recoverable reserve estimates include:
•
geological conditions;
•
historical production from the area compared with
    production from other producing areas;
•
the assumed effects of regulations and taxes by
    governmental agencies;
•
assumptions governing future prices; and
•
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.
63
Postretirement Medical Benefits.
Three of our subsidiaries have
long-term liabilities for postretirement benefit cost
obligations. Detailed information related to these liabilities
is included in the notes to our combined financial statements
included elsewhere in this prospectus. Liabilities for
postretirement benefit costs 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 postretirement benefit
costs. 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
postretirement benefits other than pensions was 6.25% for the
nine months ended September 30, 2004 and 6.75 for the year
ended December 31, 2003. 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 we incur could differ materially
from our current estimates. Moreover, regulatory changes could
increase our requirement to satisfy these or additional
obligations.
Effective July 1, 2004, we began offering
postretirement medical benefits to active, union-free employees
that will pay benefits equal to $20 per month per year of
service for pre-65 year-old retirees, and $9 per month
per year of service for post-65-year old retirees. This new plan
resulted in prior service cost of $27.1 million which will
be amortized over the remaining service lives of the union-free
employees. This amortization of prior service cost is expected
to be approximately $2.8 million per year.
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 a self-insurance program,
participation 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.
Coal Workers' Pneumoconiosis.
We are responsible under various
federal statutes, including the Coal Mine Health and Safety Act
of 1969, 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.
64
Quantitative and Qualitative Disclosures About
Market Risk
In addition to risks inherent in operations, we
are exposed to market risks. The following discussion provides
additional detail regarding our exposure to the risks of
changing coal prices, interest rates and customer credit.
We are exposed to market price risk in the normal
course of selling coal. As of November 10, 2004,
approximately 7% and 56% of our estimated 2005 and 2006 tonnage,
respectively, was uncommitted. We are entering into fixed price
and index price long-term contracts to help lessen our market
price risk.
All of our borrowings under the revolving credit
facility are at a variable rate, so we are exposed to rising
interest rates in the United States. A one percentage point
increase in interest rates would result in an annualized
increase to interest expense of less than $0.1 million
based on our variable rate borrowings as of September 30,
2004.
Our concentration of credit risk is substantially
with electric utilities, producers of steel and foreign
customers. Our policy is to independently evaluate a
customer's creditworthiness prior to entering into
transactions and to constantly monitor the credit extended.
Discussion of Seasonality Impacts on
Operations
Our sales to certain customers are curtailed
during the winter months due to weather conditions. During those
months, our operations build coal inventory that negatively
impacts our profits and cash flow in the first quarter.
65
THE COAL INDUSTRY
Coal is a major contributor to the world energy
supply. In 2003, coal represented approximately 26% of the
world's primary energy consumption and was also the fastest
growing energy source in the world, according to BP Statistical
Review. The primary use for coal is to fuel electric power
generation. In 2003, coal generated 53% of the electricity
produced in the United States, according to the EIA.
The United States is the second largest coal
producer in the world, exceeded only by China, according to BP
Statistical Review. Other leading coal producers include
Australia, India, South Africa and Russia. According to BP
Statistical Review, the United States is the largest holder of
coal reserves in the world, with over 250 years of supply
at current production rates. U.S. coal reserves are more
plentiful than oil or natural gas, with coal representing more
than 95% of the nation's fossil fuel reserves on a
Btu-comparable basis according to data collected by BP
Statistical Review.
U.S. Coal Production Regions
According to the EIA, U.S. coal production
has increased by 79% during the last 30 years. In 2003,
total U.S. coal production, according to the EIA, was
1.07 billion tons. The Powder River Basin accounted for 37%
of the total volume of U.S. coal production in 2003, with
Central Appalachia accounting for 21%, the Midwest accounting
for 14%, the West (other than the Powder River Basin) accounting
for 14%, Northern Appalachia accounting for 12% and Southern
Appalachia accounting for 2%, according to Platts. Almost all of
our coal production comes from the Central and Northern
Appalachian regions.
Central Appalachia, including eastern Kentucky,
Virginia and southern West Virginia, is the second largest coal
producing region in the United States (21% of 2003 production).
Coal 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 2003, according
to Platts, the Central Appalachian region experienced a decline
in production from 263 million tons to 228 million
tons, or a 13% decline, primarily as a result of the depletion
of economically attractive reserves, permitting issues and
increasing costs of production, which was partially offset by
production increases in Southern West Virginia due to the
expansion of more economically attractive surface mines. Platts
estimates that Central Appalachian operators marketed
approximately 67% of their 2003 coal sales to electric
generators, principally in the southeastern U.S., with the
remainder serving steel producers in the U.S. and
internationally. Central Appalachia is the primary source of
U.S. coal exports. We operate or have the right to receive
production from 42 mines in this region producing primarily high
Btu, low sulfur steam and metallurgical coal.
Northern Appalachia, including Maryland, Ohio,
Pennsylvania and northern West Virginia, is the other major coal
producing region in the eastern U.S. (12% of 2003
U.S. production). Coal from this region generally has a
high heat content of between 12,000 and 14,000 Btus per pound
with typical sulfur content ranging from 1.0% to 4.5%. From 2000
to 2003, according to Platts, the Northern Appalachian region
experienced a decline in production from 140 million tons
to 126 million tons, or a 10% decline, primarily as a
result of production problems at longwall mining operations in
southern Pennsylvania and northern West Virginia. Northern
Appalachian operators market the vast majority of their coal to
electric generators. Despite its sulfur content, which is
considered medium sulfur coal, coal from Northern Appalachia is
generally considered attractive to electricity generators
because of its high average heat content of approximately 13,000
Btus per pound. We operate or have the right to receive
production from 21 mines in this region producing primarily
steam and metallurgical coal with a sulfur content of greater
than 1.5% that has an average heat content of approximately
12,350 Btus per pound.
The Four Corners, including southeastern
Colorado, northwestern New Mexico, northeastern Arizona and
southwestern Utah, is a minor producing region in the western
U.S. Coal from this region generally has a low heat content
of between 9,000 and 10,000 Btus per pound and a low sulfur
content ranging from 0.75% to 1.0%. Four Corners operators
market the majority of their coal to electric generators,
principally in the Four Corners region, and industrial
customers. We operate one mine in this region producing low
sulfur steam coal for industrial customers that has an average
heat content greater than 12,500 Btus per pound.
66
We do not currently operate any mines in the
Powder River Basin, the Midwest region or Southern Appalachia.
Demand for U.S. Coal Production
Coal produced in the United States is primarily
consumed domestically 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. 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 terminals. The
breakdown of 2003 U.S. coal consumption by end user, as
estimated by the EIA, is as follows:
End Use
Tons
% of Total
(In millions)
Electrical generation
1,000.6
88
%
Industrial, residential & commercial
65.6
6
%
Steel making
24.2
2
%
Total domestic
(1)
1,090.4
96
%
Exports
43.0
4
%
Total
1,133.4
100
%
(1)
Includes consumption of 25.0 million tons of
    coal imported into the United States in 2003.
As reflected in the above table, the dominant use
for coal in the United States is for electricity generation.
Coal used as fuel to generate electricity and for use by
industrial consumers is commonly referred to as "steam
coal," and it accounted for approximately 63% of our coal
sales volume during the first nine months of 2004. Coal has long
been favored as an electricity generating fuel by regulated
utilities because of its low cost compared to other fuels. The
largest cost component in electricity generation is fuel. This
fuel cost is typically lower for coal than competing
hydrocarbon-based fuels such as oil and natural gas on a
Btu-comparable basis. Platts has recently estimated the average
total production costs of electricity, using coal and competing
generation alternatives in the first five months of 2004 as
follows:
Cost per
Megawatt
Electrical Generation Type
Hour
Natural Gas
$
57.48
Oil
51.35
Coal
18.30
Nuclear
17.01
Hydroelectric
5.35
67
According to Platts, excluding hydroelectric
plants, 21 of the 25 lowest operating cost utility power plants
in the United States during 2003 were primarily fueled by coal.
Factors other than fuel cost that influence each utility's
choice of the type of electricity generation include, among
others, facility construction cost, access to fuel
transportation infrastructure and environmental restrictions.
The breakdown of U.S. electricity generation by fuel source
in 2003, according to EIA, is as follows:
% of Total
Electricity
Electricity Generation Source
Generation
Coal
53
%
Nuclear
21
%
Natural Gas
15
%
Hydro
7
%
Oil and Other
4
%
Total
100
%
Platts 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, which are the
minimum amounts of electric power delivered or required over a
given period of time at a steady rate, 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.
Based on estimates compiled by the EIA, coal consumption is
expected to grow 1.7% per year until 2025.
The other major market for our coal is the steel
industry. The type of coal used in steel making is referred to
as "metallurgical coal," and it accounted for
approximately 37% of our coal sales volume during the first nine
months of 2004. When making steel in an integrated steel mill,
two of the key raw ingredients are iron ore and coke. Coke is
the substance formed when metallurgical coal is heated in a
coking oven to a very high temperature in the absence of air. In
the blast furnace of an integrated steel mill, coke is primarily
used to (i) generate the heat required to convert iron ore
into molten iron; (ii) generate the reducing gas necessary
to chemically convert iron oxides into hot metal; and
(iii) create a permeable bed to allow the molten iron to
drip down and the reducing gases to rise up. Generally, 1.5 tons
of metallurgical coal produces approximately 1 ton of coke,
which in turn is needed to produce approximately 2 tons of steel.
Blast furnaces are designed to use specific
grades of cokes, and as a result, coking ovens are designed to
use metallurgical coals with specific qualities. Metallurgical
coal 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 can alternatively be used by utilities as fuel for
electricity generation. Consequently, metallurgical coal
producers have the opportunity to select the market that
provides maximum revenue. The premium price offered for
metallurgical coal by steel makers for its coke-making
attributes is typically higher than the price offered by utility
coal buyers that typically value only the heat and sulfur
content of steam coal. U.S. metallurgical coal reserves are
predominately concentrated in the Central Appalachian region.
The EIA estimates that the Central Appalachian region supplied
77% of U.S. export metallurgical coal during 2003.
In the first nine months of 2004, approximately
3.4% of our coal sales were made to industrial consumers, all of
which was steam coal. Industrial users of coal typically
purchase high Btu products with the same type of quality focus
as utility coal buyers. The primary goal is to maximize heat
content, with other specifications like ash content, sulfur
content, and size varying considerably among different
customers. Because most industrial coal consumers use
considerably less tonnage than electric generating stations,
they typically prefer to purchase coal that is screened and
sized to specifications that streamline
68
coal handling processes. Due to the more
stringent size and quality specifications, industrial customers
often pay a premium above utility coal pricing.
Coal produced in the United States that is
shipped for North American consumption is typically sold at the
mine loading facility with transportation costs being borne by
the purchaser. Offshore export shipments are normally sold at
the ship-loading terminal, with the producer paying for the
transportation costs to the port and the purchaser paying the
ocean freight.
While delivery to coal consumers often involves
more than one mode of transportation, according to the EIA,
approximately two-thirds of U.S. coal production is shipped
via railroads. In addition, coal is also shipped via trucks,
barges, overland conveyors, and ocean vessels loaded at export
terminals.
The United States ranked sixth among worldwide
exporters of coal in 2002, according to estimates by the World
Coal Institute. Australia was the largest exporter, with other
major exporters including China, Indonesia, South Africa, and
Russia. According to the EIA, the United States continues to be
a swing supplier of coal in the world market. The EIA's
most recent estimates indicate that U.S. exports in 2003
decreased by over 40% since 1994 as a result of increased
international competition, the U.S. dollar's strength
over time in comparison to foreign currencies and the depletion
of reserves in regions of the United States that have
traditionally sold into the export market. According to the EIA,
the United States exported 43 million tons of coal in 2003,
of which 49% was used for electricity generation and 51% was
used for steel making. U.S. coal exports were shipped to
more than 25 countries in 2003. According to the EIA, the
largest purchaser of both exported steam coal and exported
metallurgical coal from the United States in 2003 was Canada,
which imported 17 million tons, or 82%, of total steam coal
exports and 4 million tons, or 16%, of total metallurgical
coal exports.
Industry Trends
In recent years, the U.S. coal industry has
experienced several significant trends including:
Growth in Coal Consumption.
According to the EIA, from 1990 to
2003 coal consumption in the United States increased from
904 million tons to 1,090 million tons, or 21%. The
largest driver of increased coal consumption during this period
was increased demand for electricity, as electricity production
by domestic electric power producers increased 27% and coal
consumption by electric power producers increased 28%. As coal
remains one of the lowest cost fuel sources for domestic
electric power producers, we believe coal consumption should
continue to expand as demand for electricity continues to
increase.
Increased Utilization of Excess Capacity at
Existing Coal-Fired Power Plants.
We believe that existing coal-fired plants will supply much of
the near-term projected increase in the demand for electricity
because they possess excess capacity that can be utilized at low
incremental costs. In 2003, the estimated average utilization of
the existing coal-fired power plant fleet was 71%, significantly
below the estimated potential utilization rate of 85%. If
U.S. coal fueled plants operate at utilization rates of
85%, we believe they would consume approximately
200 million additional tons of coal per year, which
represents an increase of approximately 18% over current coal
consumption. In comparison, in 2003, the average utilization of
the existing nuclear-fired power plant fleet was estimated by
Platts to be 89%.
Construction of New Coal-Fired Power
Plants.
The NETL projects that
74,000 megawatts of new coal-fired electric generation capacity
will be constructed by 2025. The NETL has identified 94
coal-fired plants, representing 62,000 megawatts of electric
generation capacity, which have been proposed and are currently
in various stages of development. The DOE projects that 58 of
these proposed coal-fired plants, representing 38,000 megawatts
of electric generation capacity, will be completed and begin
consuming coal to produce electricity by the end of 2010.
Industry Consolidation.
The U.S. coal industry has
experienced significant consolidation over the last
15 years. In 2003, the five largest coal producers
controlled over 47% of coal produced in the United States,
compared to just 35% in 1995 and 22% in 1990, according to
Platts. Weaker coal prices in the late 1990s forced many smaller
operators to sell or shut down their operations. In addition, a
number of large
69
international oil and gas companies decided to
exit the domestic coal industry. Despite increased
consolidation, the industry still remains relatively fragmented
with more than 675 coal producers in the United States in 2003,
according to Platts.
Increasingly Stringent Air Quality Laws.
The coal industry has witnessed a
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's Acid Rain regulations 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 tightened
these sulfur dioxide restrictions further to 1.2 pounds of
sulfur dioxide per million Btu. Sulfur dioxide and other
emissions may be restricted even further by some currently
proposed laws and regulations. Currently, electric power
generators operating coal-fired plants can comply with these
requirements by:
•
burning lower sulfur coal, either exclusively or
    mixed with higher sulfur coal;
•
installing pollution control devices, such as
    scrubbers, that reduce the emissions from high sulfur coal;
•
reducing electricity generating levels; or
•
purchasing or trading emission credits to allow
    them to comply with the sulfur dioxide emission compliance
    requirements.
Additional current and proposed air emission
requirements are discussed in "Environmental and Other
Regulatory Matters."
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 each of
our coal production markets. We believe that the current strong
fundamentals in the U.S. coal industry result primarily
from:
•
stronger industrial demand following a recovery
    in the U.S. manufacturing sector, evidenced by the most
    recent estimate of 3.9% real GDP growth in the third quarter of
    2004, as reported by the Bureau of Economic Analysis;
•
relatively low customer stockpiles, estimated by
    the U.S. Energy Information Administration
    ("EIA") to be approximately 114 million tons at
    the end of August 2004, down 13% from the same period in the
    prior year;
•
declining coal production in Central Appalachia,
    including a decline of 0.6% in Central Appalachian coal
    production volume during the first three quarters of 2004 as
    compared to the same period in 2003;
•
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;
•
high current and forward prices for natural gas
    and oil, the primary fuels for electricity generation, with spot
    prices as of November 29, 2004 for natural gas and heating
    oil at $6.86 per million Btu and $1.43 per gallon,
    respectively, as reported by Bloomberg L.P.; and
•
increased international demand for U.S. coal
    for steelmaking, driven by global economic growth, high ocean
    freight rates and the weak U.S. dollar.
Steam Coal
Pricing.
U.S. spot steam coal
prices have experienced significant volatility over the past few
years. Starting in late 2000 and continuing through mid-2001,
U.S. spot steam coal prices began to rise as a result of
reduced supply, higher demand from utility and industrial
consumers, and rising natural gas and oil prices. Beginning in
the middle of 2001, U.S. spot steam coal prices declined
due to the weakening domestic economy, higher utility consumer
inventories and increases in supply as the coal
70
production market reacted to the stronger prices
during the late 2000/early 2001 period. Spot prices for
U.S. steam coal remained relatively low through the end of
2001 and during all of 2002.
U.S. spot steam coal prices have steadily
increased since mid-2003, particularly for coals sourced in the
eastern United States. The table below describes the percentage
increase in year-over-year average reference prices for coal as
of November 29, 2004, according to Platts, in the regions
where we produce our coal, and the percentage of our produced
and processed coal sales during the first nine months of 2004 by
region:
Percentage of Produced and
Increase in Average
Processed Coal Sales in
Reference Prices
First Nine Months of 2004
Central Appalachia
83
%
71
%
Northern Appalachia
98
%
27
%
Colorado
60
%
2
%
The following chart sets forth historical steam
coal prices in various U.S. markets computed on an average
monthly basis for the period from January 1, 1999 to
November 29, 2004.
Metallurgical Coal Pricing.
Metallurgical coal prices in both
the domestic and seaborne export markets have increased
significantly over the past two years due to tight supply and
strong global steel production. The price increase in the
U.S. metallurgical coal market is due in part to improved
stability in the U.S. steel industry, which has increased
domestic demand for metallurgical coal. The
U.S. flat-rolled steel industry has experienced several
mergers and acquisitions involving a number of companies
emerging from, and assets sold out of, Chapter 11
bankruptcy protection. Many of the companies or assets
previously in Chapter 11 have reduced or eliminated certain
of their costs and obligations associated with their steel
operations, including environmental, employee and retiree
benefit and other obligations. This reduction in industry
liabilities, together with the recent weakening of the
U.S. dollar, has helped U.S. steel companies become
more competitive with foreign steel producers. The price
increase in the U.S. metallurgical coal market has also
been supported by tightening supply, due to operating
disruptions that have reduced production at several
U.S. metallurgical coal mines.
71
Prices for U.S. metallurgical coal in
foreign markets have been supported by significant increases in
demand for metallurgical coal by foreign steel producers, driven
by higher steel production in Asia and the Pacific Rim,
particularly in China. According to the International Iron and
Steel Institute, Chinese steel consumption increased 25% in
2003. Additionally, the recent weakness of the U.S. dollar
has made U.S. metallurgical coal more competitive in
international markets. Increased prices have also been supported
by circumstances affecting the coal export industry in China and
Australia, the world's two largest coal exporters. In
Australia, the world's largest coal exporter, metallurgical
coal exports have been reduced by operating disruptions at
certain Australian metallurgical coal mines and capacity
constraints at major Australian shipping ports. China's
contribution to the world metallurgical coal export market has
been reduced by restrictions on its metallurgical coal exports
announced in late 2003 in order to satisfy domestic demand.
Asia-Pacific Rim consumption of metallurgical coal continues to
strain supply, with an Australian producer reporting average
price settlement increases of 28% for annually-priced
metallurgical coal sales contracts in 2004 as compared to 2003,
and a Canadian producer reporting increases in metallurgical
coal sales prices in the third quarter of 2004 of 22% over the
same period in 2003. The table below describes average sale
prices, according to Platts, for low volatile metallurgical coal
at the Hampton Roads, Virginia export terminals, through which
we ship the great majority of our metallurgical coal exports and
which collectively constitute the highest volume export facility
for U.S. metallurgical coal production, and the percentage
increase in prices year-over-year:
Average Sale Prices
Per Ton for Low
Volatile Metallurgical
Coal at Hampton Roads,
Virginia Export
Terminals
Percentage Increase
2003
2004
from 2003 to 2004
October 6, 2003 and October 4, 2004
$
52.00
$
135.00
163
%
July 7, 2003 and July 5, 2004
$
50.45
$
125.00
168
%
March 31, 2003 and April 5, 2004
$
51.20
$
135.00
161
%
72
BUSINESS
Overview
We are a leading Central Appalachian coal
producer that also has significant operations in Northern
Appalachia. Our reserve base primarily consists of high Btu, low
sulfur steam coal that is currently in high demand in
U.S. coal markets and metallurgical coal that is currently
in high demand in both U.S. and international coal markets. We
produce, process and sell steam and metallurgical coal from
eight regional business units supported by 44 active underground
mines, 20 active surface mines and 11 preparation plants located
throughout Virginia, West Virginia, Kentucky, Pennsylvania and
Colorado. We are also actively involved in the purchase and
resale of coal mined by others, the majority of which we blend
with coal produced from our mines, allowing us to realize a
higher overall margin for the blended product than we would be
able to achieve selling these coals separately.
Steam coal, which is primarily purchased by large
utilities and industrial customers as fuel for electricity
generation, accounted for approximately 63% of our coal sales
volume in the first nine months of 2004 and 73% of our 2003 pro
forma coal sales volume. Metallurgical coal, which is used
primarily to make coke, a key component in the steel making
process, accounted for approximately 37% of our coal sales
volume in the first nine months of 2004 and 27% of our 2003 pro
forma coal sales volume.
History
On December 13, 2002, the First Reserve
Stockholders, who together then owned 100% of the membership
interests of ANR Holdings, acquired the majority of the Virginia
coal operations of our Predecessor through wholly owned
subsidiaries of ANR Holdings for $62.9 million.
On January 31, 2003, wholly owned
subsidiaries of ANR Holdings acquired Coastal Coal Company for
$67.8 million, and on March 11, 2003, ANR Holdings and
its subsidiaries acquired the U.S. coal production and
marketing operations of AMCI for $121.3 million. Of the
consideration for the U.S. AMCI acquisition,
$69.0 million was provided in the form of an approximate
44% membership interest in ANR Holdings issued to the owners of
AMCI, which together with issuances of an approximate 1%
membership interest to Madison Capital Funding LLC and
Alpha Coal Management reduced the First Reserve
Stockholders' ownership interest in ANR Holdings to
approximately 55%. On November 17, 2003, we acquired the
assets of Mears for $38.00 million.
On April 1, 2004, we acquired substantially
all of the assets of Moravian Run Reclamation Co., Inc. for five
thousand dollars in cash and the assumption by us of certain
liabilities, including four active surface mines and two
additional surface mines under development, operating in close
proximity to and serving many of the same customers as our
AMFIRE business unit located in Pennsylvania. On May 10,
2004, we acquired a coal preparation plant and railroad loading
facility located in Portage, Pennsylvania and related equipment
and coal inventory from Cooney Bros. Coal Company for
$2.5 million in cash and an adjacent coal refuse disposal
site from a Cooney family trust for $0.3 million in cash.
On October 13, 2004, our AMFIRE business unit entered into
a coal mining lease with Pristine Resources, Inc., a subsidiary
of International Steel Group Inc., for the right to deep mine a
substantial area of the Upper Freeport Seam in Pennsylvania.
Competitive Strengths
We believe that the combination of the following
competitive strengths distinguishes us from our competitors.
We provide a comprehensive range of steam
and metallurgical coal products that are in high
demand.
Our reserve base enables
us to provide customers with coal products that are in high
demand— including high Btu, low sulfur steam coal, and low,
medium and high volatile metallurgical coal. Steam coal
customers value high Btu coal because it fuels electricity
generation more efficiently than lower energy content coal. In
addition, the demand for clean burning, low sulfur coal has
grown significantly since the
73
implementation of sulfur emission restrictions
mandated by the Clean Air Act. Metallurgical coal customers
require precise coal characteristics to meet their coke
production specifications and generally value low volatile
metallurgical coal more highly than other categories of
metallurgical coal. We believe that we are the only significant
North American producer of all three categories of metallurgical
coal— low, medium and high volatile metallurgical
coal— and that we produced or processed on a pro forma
basis approximately 30% of the low volatile metallurgical coal
consumed in the United States and Canada in 2003.
Our flexible mining operations and
diversified asset base allow us to manage costs while
capitalizing on market
opportunities.
Our 64 active
mines, 11 preparation plants and eight regional business units
are supported by flexible and cost-effective use of our mining
equipment and personnel. Our underground mines use the room and
pillar mining method with continuous mining equipment, and our
surface mines principally use trucks, loaders and dozers. This
equipment is interchangeable and can be redirected easily at a
relatively low cost, providing us more flexibility to respond to
changing geologic, operating and market conditions. The
diversity of our portfolio of mines and preparation plants
allows us to move resources between existing or new operations
to pursue the most attractive market opportunities available to
us. This diversity also limits our mine concentration risk, as
the mine that produced the greatest amount of our coal
contributed only approximately 10% of our production during the
first nine months of 2004.
Our ability to provide customized product
offerings creates valuable market opportunities, strengthens our
customer relationships and improves
profitability.
We have a
"customer-focused" marketing strategy that, combined
with our comprehensive range of coal product offerings and
established marketing network, enables us to customize our coal
deliveries to a customer's precise needs and
specifications. The products we sell to our customers will often
be a blend of internally produced coal and coal we have
purchased from third parties, in contrast to the more
traditional approach of only offering coal produced from captive
mines. Our blending capabilities give us a competitive advantage
in product source and composition. We use spot market coal to
optimize the mix delivered to our customers and to maximize the
profitability of each of our contracts. We believe our
commitment to providing high quality coal products designed to
our customers' specifications enables us to maintain strong
customer relationships while maximizing the value of our coal
reserves.
Our primary operating focus is the
Appalachian region, the region with the most producer-favorable
coal supply and demand dynamics in the United
States.
Our operations are focused
on Central and Northern Appalachia, which accounted for 70% and
27%, respectively, of the coal produced from our mines during
the first nine months of 2004. The Appalachian region has
produced declining supplies of coal in recent years while
regional demand, already the highest in the United States based
on tons consumed, is expected to increase due to growth in
regional demand for electricity. We believe these trends in
Appalachian coal supply and demand, the high quality of
Appalachian coal and the lower transportation costs that result
from the proximity of Appalachian producers and customers create
favorable pricing dynamics that provide us with an advantage
over producers from other regions. According to Platts,
year-over-year reference prices at November 29, 2004 for
Central and Northern Appalachian coal were 83% and 48% higher,
respectively, while they were 13% lower for Powder River Basin
coal.
Our Central Appalachian mining expertise
provides us with significant regional growth
opportunities.
Our focus on the
Appalachian region has allowed us to develop expertise in
efficiently mining Central Appalachian reserves. Furthermore, we
have developed both a good understanding of the region's
transportation infrastructure and a favorable reputation with
the region's property owners, coal industry operators and
employee base. Together, these factors allow us to capitalize on
regional growth opportunities that we believe our larger
competitors with less regional expertise are unable or unwilling
to pursue.
Our comparatively low amount of long-term
reclamation and employee-related liabilities provides us with
financial flexibility.
We believe
that our annual expenses for long-term reclamation and
employee-related liabilities, such as workers'
compensation, black lung, post-retirement and pension
liabilities, is among the lowest of the publicly-traded
U.S. coal producers, providing us with increased financial
74
flexibility. As of September 30, 2004, we
had total accrued reclamation liabilities of $40.6 million,
self-insured workers' compensation liabilities of
$5.3 million and post-retirement obligations of
$13.5 million, and we had no pension liabilities and
minimal black lung liabilities. In addition, because over 90% of
our approximately 2,500 employees are employed by our
subsidiaries on a union-free basis and approximately 95% of our
pro forma coal production during the first nine months of 2004
and in 2003 was produced from mines operated by union-free
employees, we are better able to minimize the types of
employee-related liabilities commonly associated with
union-represented mines.
Our safety record and work practices allow
us to keep our costs competitive.
Mine safety is a critical component to controlling costs and
retaining skilled employees. Historically, our operations have
had a lower incident rate (as measured by the U.S. Mine
Safety and Health Administration) than the average incident rate
for underground coal mining operations located in similar areas
of Central and Northern Appalachia. Alpha and its Predecessor
and acquired companies have also received more than 30 safety
awards over the last three years, including the prestigious
Sentinels of Safety and Holmes Safety Awards, which have been
awarded to several of our mines.
Our management team has extensive coal
industry experience and has successfully integrated a number of
acquisitions.
Our senior
executives have, on average, more than 20 years of
experience in the coal industry, largely in the Appalachian
region, and they have substantial experience in increasing
productivity, reducing costs, implementing our marketing
strategy and coal blending capabilities, improving safety, and
developing and maintaining strong customer and employee
relationships. In addition to their operating strengths, the
majority of our senior executives have significant experience in
identifying, acquiring and integrating coal companies into
existing organizations.
Business Strategy
We believe that we are well-positioned to enhance
stockholder value by continuing to implement our strategy, which
consists of the following key components:
Achieve premium pricing and optimum
efficiency in contract
fulfillment.
We intend to continue
to use our diversified operating strategy, coal blending
capabilities, market knowledge and strong marketing organization
to identify and capitalize on opportunities to generate premium
pricing for our coal and to achieve optimum efficiency in
fulfillment of coal contracts. As of November 10, 2004, we
had contracts to sell 93% of our planned production for 2005 and
44% of our planned production for 2006, which we believe
provides us with significant price certainty in the short-term
while maintaining uncommitted planned production that allows us
to take an opportunistic approach to selling our coal.
Maximize profitability of our mining
operations.
We continuously
reassess our reserves, mines and processing and loading
facilities in an effort to determine the optimum operating
configuration that maximizes our profitability, efficient use of
operating assets and return on invested capital. We intend to
continue to optimize the profitability of our mining operations
through a series of initiatives that include:
•
increasing production levels where we determine
    that such increased production can be profitably achieved;
•
leveraging our product offerings, blending
    capabilities and marketing organization to realize higher
    margins from our sales;
•
deploying our resources against the most
    profitable opportunities available in our asset portfolio;
•
consolidating regional operations and increasing
    the utilization of our existing preparation plants and loading
    facilities;
•
maintaining our focus on safety and implementing
    safety measures designed to keep our workforce injury
    free; and
•
utilizing centralized procurement to negotiate
    with major vendors to provide materials and supplies at lower
    overall cost.
75
Pursue strategic value-creating
acquisitions.
We have successfully
acquired and integrated businesses into our operations, and we
intend to continue to expand our business and coal reserves
through acquisitions of attractive, strategically positioned
assets. Although we intend to concentrate our efforts in
Appalachia, where we believe there remain attractive acquisition
opportunities, we will continue to evaluate opportunities in
other regions that meet our acquisition criteria. We employ what
we believe is a disciplined acquisition strategy focused on
acquiring coal and coal-related operations and assets at
attractive valuations. Some of the factors that we consider in
evaluating an acquisition candidate include:
•
the candidate's historical and projected
    financial performance;
•
the quality and quantity of the candidate's
    coal reserves, coal processing facilities and other coal
    production assets;
•
the extent to which the geographic location of
    the candidate's coal reserves, processing facilities, and
    access to transportation links and customers provides
    synergistic opportunities with our existing operations and
    assets;
•
the existing liabilities of the candidate, and
    whether the acquisition can be completed in a manner that limits
    our assumption of the candidate's long-term liabilities;
•
in situations where we retain existing
    management, the management's experience and relationship
    with the local community; and
•
the experience, terms of employment and union
    status of the candidate's employees and the terms of the
    candidate's contracts with third-party mine and processing
    facility operators.
Continue to maintain a strong safety, labor
relations and environmental
record.
One of our core values is
protecting the health and welfare of our employees by designing
and implementing high safety standards in the workplace.
Similarly, we aim to adhere to high standards in protecting and
preserving the environment in which we operate. Historically, we
have maintained a superior safety record compared to the
industry averages for similarly situated operations as measured
by the U.S. Mine Safety and Health Administration, and we
plan to continue to maintain our strong safety record in the
coal industry. There have been no material work stoppages at any
of our facilities since we were formed in 2002 or at any of our
Predecessor or acquired facilities in the past 10 years. We
aim to preserve the positive relationship we have developed with
our employees. Furthermore, we intend to continue to adhere to
strict environmental and reclamation compliance standards. For
example, in August 2004 we began implementing an environmental
best practices system across all of our subsidiaries'
operations that involves the development of specific
environmental policies and programs, advanced training of our
environmental staff and management, and periodic assessments to
measure the level of our environmental awareness and compliance.
Mining Methods
We produce coal using two mining methods:
underground room and pillar mining using continuous 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
    methods: room and pillar mining or longwall mining. In 2003,
    approximately 81% of our pro forma produced and processed coal
    volume came from underground mining operations using the room
    and pillar method with continuous mining equipment. In room and
    pillar mining, rooms are cut into the coal bed 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
76
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 thin seams, and 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 3.5 tons per employee per hour, according
    to the EIA.
The other underground mining method commonly used
    in the United States is the longwall mining method, which we do
    not currently use at any of our mines. 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. Our Central Appalachian reserves often
    include non-contiguous seams of coal that can be extracted at a
    lower cost using continuous mining as opposed to the more
    capital intensive longwall method.
Surface Mining.
Surface mining is used when coal
    is found close to the surface. In 2003, approximately 19% of our
    pro forma 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 90% or
    more. Productivity depends on equipment, geological composition
    and mining ratios and averages 4.8 tons per employee per
    hour in eastern regions of the United States, according to the
    EIA.
Mining Operations
We currently have eight regional business units,
including two in Virginia, three in West Virginia, one in
Pennsylvania, one in Kentucky and one in Colorado. As of
September 30, 2004, these business units include 11
preparation plants, each of which receive, blend, process and
ship coal that is produced from one or more of our 64 active
mines (some of which are operated by third parties under
contracts with us), using two mining methods, underground room
and pillar and surface mining. During the first nine months of
2004 and in 2003, most of our preparation plants also processed
coal that we purchased from third party producers before
reselling it to our customers. Within each regional business
unit, mines have been developed at strategic locations in close
proximity to our preparation plants and rail shipping
facilities, with the exception of the National King Coal mine in
Colorado, which does not have access to a preparation plant due
to water restrictions, and therefore ships products raw. Coal is
transported from our regional business units to customers by
means of railroads, trucks, barge lines and ocean-going vessels
from terminal facilities. The following table provides location
and summary information regarding our eight
77
regional business units and the preparation
plants and active mines associated with these business units as
of September 30, 2004:
Regional Business Units
Production of
Number and Type of
Saleable Tons
Mines as of
(in 000's)
(1)
September 30, 2004
Pro
First Nine
Preparation plant(s) as of
Under-
Forma
Months of
Regional Business Unit
Location
September 30, 2004
ground
Surface
Total
Railroad
2003
2004
Paramont
Virginia
Toms Creek
10
4
14
NS
6,186
4,456
Dickenson-Russell
Virginia
McClure River and Moss #3
7
1
8
CSX, NS
2,018
1,500
Kingwood
West Virginia
Whitetail
1
0
1
CSX
2,409
1,516
Brooks Run
West Virginia
Erbacon
3
0
3
CSX
2,274
1,541
Welch
West Virginia
Litwar, Kepler and Herndon
13
0
13
NS
2,712
1,867
AMFIRE
Pennsylvania
Clymer and Portage
6
14
20
NS
2,914
2,524
Enterprise
Kentucky
Roxana
3
1
4
CSX
1,536
1,114
National King Coal
Colorado
N/A
1
0
1
BN,UP
393
346
Totals
44
20
64
20,442
14,864
(1)
Includes coal purchased from third party
    producers that was processed at our subsidiaries'
    preparation plants in 2003 and the first nine months of 2004.
CSX = CSX Railroad
NS = Norfolk Southern Railroad
BN = Burlington Northern Santa Fe Railroad
UP = Union Pacific Railroad
Coal Characteristics
In general, coal of all geological compositions
is characterized by end use as either steam coal or
metallurgical coal. Heat value, sulfur and ash content, and
volatility in the case of metallurgical coal, are the most
important variables in the profitable marketing and
transportation of coal. These characteristics determine the best
end use of a particular type of coal. We mine, process, market
and transport bituminous coal, characteristics of which are
described below.
Heat Value.
The heat value of coal is commonly
measured in British thermal units, or "Btus." A Btu is
the amount of heat needed to raise the temperature of one pound
of water by one degree Fahrenheit. All of our coal is bituminous
coal, a "soft" black coal with a heat content that
ranges from 9,500 to 15,000 Btus per pound. This coal is located
primarily in Appalachia, Arizona, the Midwest, Colorado and Utah
and is the type most commonly used for electric power generation
in the United States. Bituminous coal is also used for
metallurgical and industrial steam purposes. Of our
514.4 million tons of proven and probable reserves,
approximately 94% has a heat content above 12,500 Btus per pound.
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. Low sulfur coals are coals which include a sulfur content
of 1.5% or less. Demand for low sulfur coal has increased, and
is expected to continue to increase, as generators of
electricity strive to reduce sulfur dioxide emissions to comply
with increasingly stringent emission standards in environmental
laws and regulations. Approximately 89% of our proven and
probable reserves are low sulfur coal.
High sulfur coal can be burned in plants equipped
with sulfur-reduction technology, such as scrubbers, which can
reduce sulfur dioxide emissions by 50% 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, allowing the user to emit a predetermined amount of
sulfur dioxide. Some older coal-fired plants have been
retrofitted with scrubbers, although most have shifted to lower
sulfur coals as their principal
78
strategy for complying with Phase II of the
Clean Air Act's Acid Rain regulations. We expect that any
new coal-fired generation plant built in the United States will
use clean coal-burning technology.
Ash & Moisture Content.
Ash is the inorganic residue
remaining after the combustion of coal. As with sulfur content,
ash content varies from seam to seam. Ash content is an
important characteristic of coal because electric generating
plants must handle and dispose of ash following combustion. The
absence of ash is also important to the process by which
metallurgical coal is transformed into coke for use in steel
production. 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
and increases the weight of the coal, thereby making it more
expensive to transport. Moisture content in coal, as sold, can
range from approximately 5% to 30% of the coal's weight.
Volatility.
Volatile matter is the percentage
of coal that turns to gases when it is transformed into coke.
The volatility of metallurgical coal determines the percentage
of feed coal that actually becomes coke, known as coke yield.
The lower the volatile matter, the higher the coke yield.
Volatile matter is measured on a dry mineral matter-free-basis.
On this basis, metallurgical coal is typically classified as low
volatile coal (14-22%), medium volatile coal (22-31%) or high
volatile coal (31% or greater). All other metallurgical
characteristics being equal, low volatile metallurgical coal is
the most highly valued type of metallurgical coal. We produce
all three types of metallurgical coal, and we estimate that, on
a pro forma basis, we produced or processed approximately 30% of
the low volatile metallurgical coal consumed by U.S. and
Canadian integrated steel companies and merchant coke producers
in 2003.
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.
In August 2004, we asked Marshall
Miller & Associates, Inc. ("MM&A") to
prepare a detailed study of our reserves based on all of our
geologic information, including our updated drilling and mining
data. The coal reserve study conducted by MM&A was planned
and performed to obtain reasonable assurance of our proven and
probable reserves. In connection with the study, MM&A
prepared reserve maps and had certified professional geologists
develop estimates based on data supplied by us and using
standards accepted by government and industry.
After reviewing the maps and information we
supplied, MM&A prepared an independent mapping and estimate
of our demonstrated reserves using methodology outlined in
U.S. Geological Survey Circular 891. MM&A in
conjunction with our internal engineers and geologists developed
reserve estimation criteria to assure that the basic geologic
characteristics of the reserves (e.g., minimum coal thickness
and wash recovery, interval between deep mineable seams,
mineable area tonnage for economic extraction, etc.) are in
reasonable conformity with present and recent mine operation
capabilities on our various properties.
MM&A completed their report in November 2004.
As a result of this report, we increased our reserve estimate
from 326.5 million tons as of January 1, 2004 to
514.4 million tons as of October 15, 2004.
We expect to periodically update our reserve
estimates to reflect past coal production, new drilling
information and other geological or mining data, and
acquisitions or sales of coal properties. We also
79
expect to periodically retain outside experts to
independently verify our coal reserve base. In updating
estimates of our reserves, we expect to categorize coal tonnages
according to coal quality, mining method, permit status,
mineability and location relative to existing mines and
infrastructure. Further scrutiny will be applied using
geological criteria and other factors related to profitable
extraction of the coal. These criteria include seam height, roof
and floor conditions, yield and marketability.
As with most coal-producing companies in
Appalachia, the majority of our coal reserves are subject to
leases from third-party landowners. 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. A small portion of our reserve
holdings are owned and require no royalty or per-ton payment to
other parties. The average royalties paid by us for coal
reserves from our producing properties was $3.51 per ton in the
first nine months of 2004 and $1.75 per ton for 2003,
representing approximately 4% of our coal sales revenue during
the first nine months of 2004 and during 2003.
Our total proven and probable reserves will
support current production levels for more than 25 years.
The following table provides the "quality" (sulfur
content and average Btu content per pound) of our coal reserves
as of October 15, 2004.
Recoverable
Sulfur Content
Average Btu
Reserves Proven &
(in millions of tons)
(in millions of tons)
Probable
(1)
Regional Business Unit
State
(in millions of tons)
<1%
1.0%-1.5%
>1.5%
>12,500
<12,500
Paramont/ Alpha Land and Reserves
(2)
Virginia
155.9
111.4
32.2
12.3
154.4
1.5
Dickenson-Russell
Virginia
33.2
33.2
0
0
33.2
0
Kingwood
West Virginia
31.8
0
19.1
12.7
31.8
0
Brooks Run
West Virginia
26.2
7.9
18.3
0
10.8
15.4
Welch
West Virginia
96.0
96.0
0
0
96.0
0
AMFIRE
Pennsylvania
94.4
14.2
49.4
30.8
84.7
9.7
Enterprise
Kentucky
66.6
26.5
38.5
1.6
64.3
2.3
National King Coal
Colorado
10.3
9.2
1.1
0
10.3
0
Totals
514.4
298.4
158.6
57.4
485.6
28.8
Percentages
58
%
31
%
11
%
94
%
6
%
(1)
Recoverable reserves represent the amount of
    proven and probable reserves that can actually be recovered from
    the reserve base 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 the
    table exclude reserves for which we have leased our mining
    rights to third parties. Reserve information reflects a moisture
    factor of 6.5%. This moisture factor represents the average
    moisture present on our delivered coal.
(2)
Includes proven and probable reserves in the
    state of Virginia controlled by our subsidiary Alpha Land and
    Reserves, LLC as of October 15, 2004. Alpha Land and
    Reserves, LLC subleases a portion of the mining rights to its
    proven probable reserves in the state of Virginia to our
    subsidiary Paramont Coal Company Virginia, LLC.
Marketing, Sales and Customer
Contracts
Our marketing and sales force, which is
principally based in Latrobe, Pennsylvania, included an
aggregate of 26 employees as of September 30, 2004, and
consists of sales managers, distribution/ traffic managers and
administrative personnel. In addition to selling coal produced
in our eight regional business units, we are also actively
involved in the purchase and resale of coal mined by others, the
majority of which we blend with coal produced from our mines. We
have coal supply commitments with a wide range of electric
utilities, steel manufacturers, industrial customers and energy
traders and brokers. Our overall sales philosophy is to focus
first on the customer's individual needs and
specifications, as opposed to simply selling our production
inventory. By offering coal of both steam and metallurgical
grades blended to provide specific qualities of heat content,
sulfur and ash and other characteristics relevant to our
customers, we are able to serve a diverse customer base. This
diversity allows us to adjust to changing
80
market conditions and provides us with the
ability to sustain high sales volumes and sales prices for our
coal. Many of our larger customers are well-established public
utilities who have been customers of ours or our Predecessor and
acquired companies for decades.
For the nine months ended September 30,
2004, we sold a total of 19.4 million tons of coal,
including 5.4 million tons of purchased coal. Approximately
4.4 million tons of our purchased coal sales in the first
nine months of 2004 were blended prior to resale, meaning the
coal was mixed with coal produced from our mines prior to
resale, which generally allows us to realize a higher overall
margin for the blended product than we would be able to achieve
selling these coals separately. Approximately 0.7 million
tons of our purchased coal sales in the first nine months of
2004 were processed by us, meaning we washed, crushed or blended
the coal at one of our preparation plants or loading facilities
prior to resale. For the year ended December 31, 2003, we
sold a total of 25.3 million tons of coal on a pro forma
basis, including 6.1 million tons of purchased coal, of
which 5.0 million tons were blended with coal produced from
our mines and 1.6 million tons were processed at our
preparation plants prior to resale. The breakdown of tons sold
by market served for the first nine months of 2004 and on a pro
forma basis for 2003 is set forth in the table below:
Percentage of Coal Sales
Steam Coal
Metallurgical
Utilities
Industrial
Total Steam
Coal
Nine Months Ended September 30, 2004
59.2
%
3.4
%
62.6
%
37.4
%
Pro Forma 2003
68.4
%
4.8
%
73.2
%
26.8
%
We sold coal to over 100 different customers
in the first nine months of 2004 and over 140 customers on
a pro forma basis during 2003. Our top ten customers in the
first nine months of 2004 and on a pro forma basis in 2003
accounted for 44% and 51%, respectively, of our coal revenues
during those periods. Export shipments (including Canada)
represented approximately 32% of coal sales for the first nine
months of 2004 and 20% of 2003 pro forma coal sales and (in each
case, measured by tons sold). Our export shipments during the
first nine months of 2004 and during 2003 on a pro forma basis
serviced customers in 18 and 12 countries, respectively, across
North America, Europe, South America, Asia and Africa. During
the first nine months of 2004, Japan was our largest export
market, with sales to Japan accounting for 19% of our export
volume and 6% of our total overall sales. On a pro forma basis
in 2003, Canada was our largest export market, with sales to
Canada accounting for 42% of our export volume and 8.3% of our
overall sales volume. All of our sales are made in
U.S. dollars, which reduces foreign currency risk. Our
sales are subject to seasonal fluctuation, with sales to certain
customers being curtailed during the winter months due to the
freezing of lakes that we use to transport coal to those
customers.
As is customary in the coal industry, when market
conditions are appropriate and particularly in the steam coal
market, we enter into long-term contracts (exceeding one year in
duration) with many of our customers. These arrangements allow
customers to secure a supply for their future needs and provide
us with greater predictability of sales volume and sales prices.
Almost all of our contracts to supply steam coal are long-term.
During 2003, most of our contracts to supply metallurgical coal
were entered into on a one-year rolling basis or on a current
market or spot basis. However, due to current market conditions,
the majority of the metallurgical coal sales contracts we have
entered into during the first nine months of 2004 have been
long-term contracts. For the year ended December 31, 2003,
approximately 65% and 18% of our pro forma steam and
metallurgical coal sales volume, respectively, was delivered
pursuant to long-term contracts.
As of November 10, 2004, we had contracts to
sell 93% of planned 2005 production, including sales commitments
for approximately 19.8 million tons, of which
12.3 million tons are steam coal and 7.5 million tons
are metallurgical coal, and contracts to sell 44% of planned
2006 production, including sales commitments for approximately
9.9 million tons, of which 6.7 million tons are steam
coal and 3.2 million tons are metallurgical coal. As of
November 10, 2004, we had commitments to
purchase 3.5 million tons of coal during 2005 and
1.0 million tons in 2006.
81
The terms of our contracts result from bidding
and negotiations with customers. Consequently, the terms of
these contracts typically vary significantly in many respects,
including price adjustment features, provisions permitting
renegotiation or modification of coal sale prices, coal quality
requirements, quantity parameters, flexibility and adjustment
mechanisms, permitted sources of supply, treatment of
environmental constraints, options to extend and force majeure,
suspension, termination and assignment provisions, and
provisions regarding the allocation between the parties of the
cost of complying with future governmental regulations.
Distribution
We employ transportation specialists who
negotiate freight and terminal agreements with various
providers, including railroads, trucks, barge lines, and
terminal facilities. Transportation specialists also coordinate
with customers, mining facilities and transportation providers
to establish shipping schedules that meet the customer's
needs. Our coal sales of 19.4 million tons during the first
nine months of 2004 and our 2003 pro forma sales of
25.3 million tons were loaded from our 11 preparation
plants and in certain cases directly from our mines and, in the
case of purchased coal, in some cases directly from mines and
preparation plants operated by third parties or from an export
terminal. Virtually all of our coal is transported from the mine
to our preparation plants by truck or rail, and then from the
preparation plant to the customer by railroad or truck. Rail
shipments constituted 78.8% of total pro forma shipments of
captive produced and processed coal volume from the preparation
plant to the customer in 2003, with 39.3% loaded on CSX trains,
38.2% loaded on Norfolk Southern trains and 1.3% loaded on
Burlington Northern trains. Although our National King Coal mine
has access to Union Pacific trains, none of our coal was shipped
on Union Pacific trains during 2003 and during the first nine
months of 2004. The balance was shipped from our preparation
plants or loadout facilities via truck. In 2003, 10.2% of our
pro forma coal sales was ultimately delivered to customers
through transport on the Great Lakes, 10.8% was moved through
the Norfolk Southern export facility at Norfolk, Virginia, 0.5%
was moved through the coal export terminal at Newport News,
Virginia operated by Dominion Terminal Associates, and 0.1% was
moved through the export terminal at Baltimore, Maryland. We own
a 32.5% interest in the coal export terminal at Newport News,
Virginia operated by Dominion Terminal Associates. See
"— Other Related Operations."
Competition
With respect to our U.S. customers, we
compete with numerous coal producers in the Appalachian region
and with a large number of western coal producers in the markets
that we serve. Competition from coal with lower production costs
shipped east from western coal mines has resulted in increased
competition for coal sales in the Appalachian region. We face
limited competition from imports for our domestic customers. In
2003, only two percent of total U.S. coal consumption was
imported. Excess industry capacity, which has occurred in the
past, tends to result in reduced prices for our coal. The most
important factors on which we compete are coal price at the
mine, coal quality and characteristics, transportation costs
from the mine to the customer 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 91% of domestic coal consumption over the last
five years. These coal consumption patterns are influenced by
factors beyond our control, including the demand for
electricity, which is significantly dependent upon summer and
winter temperatures in the United States, environmental and
other government regulations, technological developments and 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. Demand for our low
sulfur coal and the prices that we will be able to obtain for it
will also be affected by the price and availability of high
sulfur coal, which can be marketed in tandem with emissions
allowances in order to meet Clean Air Act requirements.
Demand for our metallurgical coal and the prices
that we will be able to obtain for metallurgical coal will
depend to a large extent on the demand for U.S. and
international steel, which is influenced by factors
82
beyond our control, including overall economic
activity and the availability and relative cost of substitute
materials. In the export metallurgical market, we largely
compete with producers from Australia, South Africa, Canada,
Russia and other international producers of metallurgical coal.
In addition to competition for coal sales in the
United States and internationally, we compete with other coal
producers, particularly in the Appalachian region, for the
services of experienced coal industry employees at all levels of
our mining operations.
Other Related Operations
We have other related operations and activities
in addition to our normal coal production and sales business,
including:
Maxxim Rebuild Company.
We own Maxxim Rebuild Company,
    LLC, a mining equipment company with facilities in Kentucky and
    Virginia. This business largely consists of repairing equipment
    used in surface mining and to support preparation plant
    operations. Maxxim Rebuild had revenues of $14.2 million
    and $12.8 million for the nine months ended
    September 30, 2004 and, on a pro forma basis, the year
    ended December 31, 2003, respectively, of which 27% and
    39%, respectively, was generated by services provided to our
    other subsidiaries.
Dominion Terminal Associates.
Through our subsidiary Alpha
    Terminal Company, LLC, we hold a 32.5% interest in Dominion
    Terminal Associates, a 22 million-ton annual capacity coal
    export terminal located in Newport News, Virginia. The terminal,
    constructed in 1982, provides the advantages of state of the art
    unloading/transloading equipment with ground storage capability,
    providing producers with the ability to custom blend export
    products without disrupting mining operations. We make periodic
    cash payments in respect of the terminal for operating expenses,
    which are offset by payments we receive for transportation
    incentive payments and for renting our unused storage space in
    the terminal to third parties. Our cash payments for expenses
    for the terminal in the nine month period ended
    September 30, 2004 and in 2003 were $2.1 million and
    $2.3 million, respectively, partially offset by payments
    received of $1.4 million and $1.0 million during the
    respective periods. The terminal is held in a partnership with
    subsidiaries of three other companies, Dominion Energy (20%),
    Arch Coal (17.5%) and Peabody Energy (30%).
Miscellaneous.
We also engage in the sale of certain non-strategic assets such
    as timber, gas and oil rights as well as the sale of
    non-strategic surface properties and reserves.
Employee and Labor Relations
Approximately 95% of our coal production in the
first nine months of 2004 and our 2003 pro forma coal production
came from mines operated by union-free employees, and as of
September 30, 2004, over 90% of our subsidiaries'
approximately 2,500 employees were union-free. We believe
our employee relations are good and there have been no material
work stoppages at any of our subsidiaries' properties in
the past ten years.
Legal Proceedings
From time to time, we are involved in litigation
and administrative proceedings which arise in the ordinary
course of our business. Management does not believe that any of
the litigation or proceedings in which we are currently
involved, either individually or in the aggregate, are likely to
have a material adverse effect on our business, financial
condition, operating results or cash flows.
83
ENVIRONMENTAL AND OTHER REGULATORY
MATTERS
Federal, state and local authorities regulate the
U.S. coal mining industry with respect to matters such as
employee health and safety, permitting and licensing
requirements, 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 regulations and legislation have
had, and will continue to have, a significant effect on our
production costs and our competitive position. Future
legislation, regulations or orders, as well as future
interpretations and more rigorous enforcement of existing laws,
regulations or orders, 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. We intend to respond to these regulatory requirements
at the appropriate time by implementing necessary modifications
to facilities or operating procedures. Future legislation,
regulations or orders may also cause coal to become a less
attractive fuel source, thereby reducing coal's share of
the market for fuels used to generate electricity. As a result,
future legislation, regulations or orders may adversely affect
our mining operations, cost structure or the ability of our
customers to use coal.
We endeavor to conduct our mining operations in
compliance with all applicable federal, state, and local laws
and regulations. However, because of extensive and comprehensive
regulatory requirements, violations occur from time to time.
None of the violations or the monetary penalties assessed upon
us since our inception in 2002 have been material. Nonetheless,
we expect that future liability under or compliance with
environmental and safety requirements could have a material
effect on our operations or competitive position. Under some
circumstances, substantial fines and penalties, including
revocation or suspension of mining permits, may be imposed under
the laws described below. Monetary sanctions and, in severe
circumstances, criminal sanctions may be imposed for failure to
comply with these laws.
As of September 30, 2004, we had accrued
$40.6 million for reclamation liabilities and mine
closures, including $6.7 million of current liabilities.
Mining Permits and Approvals.
Numerous governmental permits or
approvals are required for mining operations. When we apply for
these permits and approvals, we may be required to present data
to federal, state or local authorities 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, including us,
must submit a reclamation plan for restoring, upon the
completion of mining operations, the mined property to its prior
or better condition, productive use or other permitted
condition. Typically, we submit our necessary permit
applications several months, or even years, before we plan to
begin mining a new area. In our experience, permits generally
are approved several months after a completed application is
submitted. In the past, we have generally obtained our mining
permits without significant delay. However, we cannot be sure
that we will not experience difficulty in obtaining mining
permits in the future.
Surface Mining Control and Reclamation Act.
The Surface Mining Control and
Reclamation Act of 1977 ("SMCRA"), which is
administered by the Office of Surface Mining Reclamation and
Enforcement ("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 applicable state agency. Where state regulatory agencies
have adopted federal mining programs under SMCRA, the state
becomes the regulatory authority. States in
84
which we have active mining operations have
achieved primary control of enforcement through federal
authorization.
SMCRA permit provisions include a complex set of
requirements which include: 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
re-vegetation.
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 and historical 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 we will mine. We develop mining
and reclamation plans by utilizing this geologic data and
incorporating elements of the environmental data. The mining and
reclamation plan incorporates the provisions of SMCRA, the state
programs, and the complementary environmental programs that
affect 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 of 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 of the
proposed permit is given that also provides for a comment period
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 and other
agencies have 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
SMCRA's adoption in 1977. The current fee is $0.35 per
ton on surface-mined coal and $0.15 per ton on deep-mined
coal, but tax rate revisions are currently pending.
SMCRA stipulates compliance with many other major
environmental statutes, including: the Clean Air Act; Clean
Water Act; Resource Conservation and Recovery Act
("RCRA") and Comprehensive Environmental Response,
Compensation and Liability Act ("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 surety bonds have
generally become more unfavorable. In addition, the number of
companies willing to issue surety bonds has decreased. We have a
committed bonding facility with Travelers Casualty and Surety
Company of America, pursuant to which it has agreed, subject to
certain conditions, to issue surety bonds on our behalf in a
maximum amount of $125.0 million. As of September 30,
2004, we have posted an aggregate of $89.0 million in
reclamation bonds and $7.8 million of other types of bonds
under this facility.
Clean Air Act.
The Clean Air Act and comparable
state laws that regulate air emissions affect coal mining
operations both directly and indirectly. Direct impacts on coal
mining and processing operations may occur through Clean Air Act
permitting requirements and/or emission control requirements
relating to particulate matter, such as fugitive dust, including
future regulation of 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
85
emitted by coal-fired electricity generating
plants. The general effect of this extensive regulation of
emissions from coal-fired power plants could be to reduce demand
for coal.
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 applies to all
    coal-fired power plants generating 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 ("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 that 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 ("PM10"),
    and adding a new standard for fine particulate matter with an
    aerodynamic diameter less than or equal to 2.5 microns
    ("PM2.5"). State fine particulate non-attainment
    designations were due on February 15, 2004, and
    18 states and the District of Columbia recommended counties
    to be classified as non-attainment areas. The EPA has indicated
    it will propose the implementation rule in late 2004 and
    finalize it in early 2005. 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
    "non-attainment" areas.
•
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 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 program, which became effective June 21, 2004, 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.
86
•
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.
    Congress has also considered several competing bills. It is
    currently not possible to predict what, if any, new regulatory
    requirements will ultimately evolve out of this initiative and
    no action is anticipated until sometime in 2005.
•
Clean Air Interstate
    Rule.
On January 30, 2004, the
    EPA proposed new rules for reducing emissions of sulfur dioxide,
    nitrogen oxides, and mercury. The proposed 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 proposal suggests that states regulate
    power plants 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, to comply. This
    increased sulfur emission removal capability caused by the
    proposed 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 proposed rule would cut regional sulfur dioxide emissions by
    50% in 2010, and by approximately 67% in 2015. The comment
    deadline on the rule closed on June 29, 2004, and the EPA
    has announced plans to finalize this rule by the end of 2004.
•
Utility Mercury Reductions
    Rule.
On January 30, 2004, the
    EPA also proposed the Utility Mercury Reductions Rule for
    controlling mercury emissions from power plants. The proposal
    seeks comments on two approaches for reducing the estimated 48
    tons of mercury currently emitted each year by coal-fired power
    plants in the United States. The comment period ended on
    June 29, 2004. One approach would require coal-fired power
    plants to install pollution controls known as "maximum
    achievable control technologies," or "MACT" under
    section 112 of the Clean Air Act. If implemented in its
    current form, this proposal would reduce nationwide emissions of
    mercury by 14 tons (29 percent) by the end of 2007.
    The second approach would set a mandatory, declining cap on the
    total mercury emissions allowed from coal-fired power plants
    nationwide. This approach, which allows emissions trading, would
    reduce mercury emissions by nearly 70 percent from current
    levels once facilities reach a final mercury cap which takes
    effect in 2018. The final rule has been delayed until
    March 15, 2005, due to issues raised as a result of
    numerous public comments submitted to the EPA regarding the rule.
•
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 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.
    To date, no decision has been rendered in this case, although
    both sides have submitted arguments to the court.
•
Regional Emissions
    Trading:
Eleven Northeast and
    Mid-Atlantic states are working cooperatively to develop a
    regional cap and trade program that would initially cover carbon
    dioxide emissions from power plants in the region. The states
    intend to develop a model rule by April 2005. There are a number
    of uncertainties regarding this initiative, including the
    applicable baseline of emissions to be permitted, initial
    allocations, required emissions reductions, availability of
    offsets, the extent to which states will adopt the program,
    whether it will be linked with programs in other states or in
    Canadian provinces, and the timing for implementation of the
    program. There can be no assurance at this time that a carbon
    dioxide cap and trade program, if
87
implemented by the states where our customers
    operate, will not affect the future market for coal in this
    region.
•
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 Clean Water Act of 1972 (the
"CWA") and corresponding state laws affect coal mining
operations by imposing restrictions on 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 ("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, mining disturbances are prohibited
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.
The Army Corps of Engineers (the "COE")
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 the COE in the U.S. District
Court for the Southern District of West Virginia seeking to
invalidate "nationwide" permits utilized by the COE
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 and rescinded certain listed permits
where construction of valley fills and surface impoundments had
not commenced. On August 13, 2004, the court extended the
ruling to all Nationwide 21 permits within the Southern
District of West Virginia. Although Alpha had no operations that
were immediately impacted or interrupted, this decision may
require us to convert certain current and planned applications
for Nationwide 21 permits to applications for individual
permits.
Total Maximum Daily Load ("TMDL")
regulations established a process by which states designate
stream segments as impaired (not meeting present water quality
standards). Industrial dischargers, including coal mines, will
be required to meet new TMDL effluent standards for these stream
segments. Some of our operations currently discharge effluents
into stream segments that have been designated as impaired. The
adoption of new TMDL related effluent limitations for our coal
mines could require more costly water treatment and could
adversely affect our coal production.
Under the CWA, 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
88
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, our 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
deep-mined 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 $12.56 million of expense
related to this excise tax.
Coal Industry Retiree Health Benefit Act of
1992.
Unlike many companies in the
coal business, we do not have any liability 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. See
"Risk Factors— The inability of the sellers of our
Predecessor and acquired companies to fulfill their
indemnification obligations to us under our acquisition
agreements could increase our liabilities and adversely affect
our results of operations and financial position."
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.
Resource Conservation and Recovery Act.
The 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 made a determination on
whether the wastes should be regulated as hazardous. In a 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. In
May 2000, the EPA concluded that coal combustion wastes do not
warrant regulation as hazardous under RCRA. The EPA is retaining
the hazardous waste exemption for these wastes. However, the EPA
has determined that national non-hazardous waste regulations
under RCRA Subtitle D
89
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
hazardous wastes would increase our customers' operating
costs and potentially reduce their ability to purchase coal. 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,
we have used some ash as mine fill. The ash we use 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. Under Superfund, joint and several
liabilities may be imposed on waste generators, site owners or
operators and others regardless of fault. In addition, mining
operations may have reporting obligations under the Emergency
Planning and Community Right to Know Act and the Superfund
Amendments and Reauthorization Act.
Climate Change.
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. In
November 2004, Russia ratified the Kyoto Protocol to the 1992
Framework Convention on Global Climate Change (the
"Protocol"), which establishes a binding set of
emission targets for greenhouse gases. With Russia's
accedence, the Protocol now has sufficient support and will
become binding on all those countries that have ratified it on
February 16, 2005. Four industrialized nations have refused
to ratify the Protocol— Australia, Liechtenstein, Monaco,
and the United States. Although the targets vary from country to
country, if the United States were to ratify the Protocol our
nation would be required to reduce greenhouse gas emissions to
93% of 1990 levels from 2008 to 2012. Canada, which accounted
for 5.9% of our sales volume in the first nine months of 2004
and 8.3% of our pro forma sales volume in 2003, ratified the
Protocol in 2002. Under the Protocol, Canada will be required to
cut greenhouse gas emissions to 6% below 1990 levels in 2008 to
2012, either in direct reductions in emissions or by obtaining
credits through the Protocol's market mechanisms. This
could result in reduced demand for coal by Canadian electric
power generators.
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
reduction targets 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 Protocol by the U.S., could result in
reduced demand for coal.
90
MANAGEMENT
Directors and Executive Officers
The following table sets forth the names, ages
and titles of our directors and executive officers.
Name
Age
Position
Michael J. Quillen
56
President, Chief Executive Officer and Director
Kevin S. Crutchfield
43
Executive Vice President
D. Scott Kroh
54
Executive Vice President
David C. Stuebe
64
Vice President and Chief Financial Officer
Michael D. Brown
43
Vice President
Vaughn R. Groves
48
Vice President and General Counsel
E. Linn Draper, Jr.
62
Director
John W. Fox, Jr.
57
Director
Alex T. Krueger
30
Director
Fritz R. Kundrun
68
Director
William E. Macaulay
59
Director
Hans J. Mende
60
Director and Chairman of the Board
Each 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.
Set forth below is a description of the
background of the persons named above.
Michael J. Quillen
has served as our President and Chief Executive Officer and a
member of our board of directors since our formation in November
2004. Mr. Quillen joined the Alpha management team as
President and the sole manager of Alpha Natural Resources, LLC,
our top-tier operating subsidiary, in August 2002, and has
served as Chief Executive Officer of Alpha Natural Resources,
LLC since January 2003. He has also served as the President and
a member of the board of directors of ANR Holdings since
December 2002, and as the Chief Executive Officer of ANR
Holdings since March 2003. From September 1998 to December 2002,
Mr. Quillen was Executive Vice President— Operations
of AMCI. While at AMCI, he was also responsible for the
development of AMCI's Australian properties.
Mr. Quillen has over 30 years of experience in the
coal industry starting as an engineer. He has held senior
executive positions in the coal industry throughout his career,
including as Vice President— Operations of Pittston Coal
Company, President of Pittston Coal Sales Company, Vice
President of AMVEST Corporation, Vice President— Operations
of NERCO Coal Corporation, President and Chief Executive Officer
of Addington, Inc. and Manager of Mid-Vol Leasing, Inc.
Kevin S. Crutchfield
has served as our Executive Vice President since our formation
in November 2004. Mr. Crutchfield joined the Alpha
management team as the Executive Vice President of Alpha Natural
Resources, LLC and Vice President of ANR Holdings in March
2003, and has served as the Executive Vice President of
ANR Holdings since November 2003. From June 2001 through
January 2003, he was President of Coastal Coal Company and Vice
President of El Paso Corporation. Prior to joining
El Paso, he served as President of AMVEST Corporation, a
coal and gas producer and provider of related products and
services, and held executive positions at AEI Resources,
Inc., most recently as President and Chief Executive Officer.
Before joining AEI Resources, Inc., he served as the
Chairman, President and Chief Executive Officer of Cyprus
Australia Coal Company and held executive operating management
positions with Cyprus in the U.S. before being relocated to
Sydney, Australia in 1997. He worked for Pittston Coal Company
in various operating and executive management positions from
1986 to 1995 serving most recently as Vice President Operations
prior to joining Cyprus Amax Coal Company.
D. Scott Kroh
has
served as our Executive Vice President since our formation in
November 2004. Mr. Kroh joined the Alpha management team as
the Executive Vice President of Alpha Natural
91
Resources, LLC in March 2003, and has also served
as the Executive Vice President of ANR Holdings since November
2003. From June 1989 through February 2003 he served as
President of Tanoma Energy's sales and mining company, an
AMCI affiliate located in Latrobe, Pennsylvania. Mr. Kroh
also served as Vice President of AMCI Export from January 1992
until February 2003. Prior to founding Tanoma Energy he served
as Vice President of Sales for Amerikohl Mining Company of
Butler, Pennsylvania from 1980 until May 1989. Mr. Kroh
began his career in the coal business in 1978 as a salesman for
Ringgold Mining Company of Kittanning, Pennsylvania.
David C. Stuebe
has
served as our Vice President and Chief Financial Officer since
our formation in November 2004. Mr. Stuebe joined the Alpha
management team as the Vice President and Chief Financial
Officer of Alpha Natural Resources, LLC in October 2003, and has
also served as the Vice President and Chief Financial Officer of
ANR Holdings since November 2003. Mr. Stuebe served from
March 2000 to July 2003 as Senior Vice President-Finance and
Administration of Hearth and Home Technologies, Inc., a
wholly-owned subsidiary of HON INDUSTRIES Inc., a leading
manufacturer of office systems and hearth products, and from
October 1994 to March 2000 as Vice President and Chief Financial
Officer of the parent, HON INDUSTRIES Inc. Prior to joining HON,
he served as President, Chief Executive Officer and Director of
United Recycling Industries, Inc., a metals broker, precious
metals recycler and non-ferrous metals producer from 1990 to
1994, as President, Chief Executive Officer and Director of Auto
Specialties Manufacturing, Inc., a manufacturer of O.E.M. truck
and construction equipment components from 1988 to 1990, and as
Chairman, President and Chief Executive and Chief Financial
Officer of MSL Industries, Inc., a manufacturer and distributor
of fasteners, tubing, roll-form shapes, electric motors,
components for electric utilities and missile components from
1981 to 1987. Mr. Stuebe's business background also
includes significant general and financial management positions
with Carpetland U.S.A. and the Scholl Products Group of
Schering-Plough, as well as 13 years of audit experience
with an international public accounting firm.
Michael D. Brown
has
served as our Vice President since our formation in November
2004. Mr. Brown joined the Alpha management team as Vice
President of Alpha Natural Resources, LLC in March 2003, and has
also served as Vice President of ANR Holdings since November
2003. From 2000 through March 2003, he served as Vice
President— Development and Technical Resources for Pittston
Coal Company. Prior to this he served as Pittston's Group
Vice President of Metallurgical Operations, which included all
Pittston properties acquired by Alpha. Mr. Brown served in
numerous other executive and financial positions within Pittston
Coal Company including a two year period as the chief operating
officer for Pittston's affiliated gas and timber companies.
Mr. Brown was affiliated with Pittston Coal from June 1984
until his employment at Alpha.
Vaughn R. Groves
has
served as our Vice President and General Counsel since our
formation in November 2004. Mr. Groves joined the Alpha
management team as the Vice President and General Counsel of
Alpha Natural Resources, LLC in October 2003, and has also
served as the Vice President and General Counsel of ANR Holdings
since November 2003. Prior to that time, he served as Vice
President and General Counsel of Pittston Coal Company from 1996
until joining Alpha, and as Associate General Counsel of
Pittston Coal Company from 1991 until 1996. Before joining
Pittston Coal, he was associated with the law firm of Jackson
Kelly PLLC, one of the leading mineral law firms in the
Appalachian region. He is also a mining engineer and before
obtaining his law degree, he worked as an underground section
foreman, construction foreman and mining engineer for Monterey
Coal Company.
E. Linn
Draper, Jr.
has been a member of
our board of directors since our formation in November 2004 and
a member of the board of directors of ANR Holdings since August
2004. Mr. Draper joined American Electric Power (AEP), an
electric utility company, as President in 1992, and served as
the Chairman, President and Chief Executive Officer of AEP from
1993 until his retirement in April 2004. Prior to joining AEP,
Mr. Draper worked for Gulf States Utility Company, an
electric utility company, from 1979 to 1992, serving as the
company's Chairman of the Board, President and Chairman
from 1987 to 1992. He serves as a director of Sprint, a
telecommunications company, and Temple Inland, a holding company
with subsidiaries operating in the corrugated packaging, forest
products and financial services sectors. Mr. Draper is also
a non-executive chairman of NorthWestern Corporation, an
electric utility.
92
John W.
Fox, Jr.
has been a member of our
board of directors since our formation in November 2004 and a
member of the board of directors of ANR Holdings since August
2004. Mr. Fox served as Senior Vice President, Coal
Services for Norfolk Southern Company, a railroad operator, from
April 2001 until his retirement in November 2003, and as Senior
Vice President Coal Marketing from December 1999 to April 2001.
Mr. Fox began his career with a predecessor of Norfolk
Western Railroad Company in 1969.
Alex T. Krueger
has
been a member of our board of directors since our formation in
November 2004 and a member of the board of directors of ANR
Holdings since March 2003. He joined First Reserve Corporation,
a private equity firm, in 1999 and is currently a director of
First Reserve Corporation focused on investment efforts in the
coal and energy infrastructure sectors. Mr. Krueger also
serves on the board of GP Natural Resource Partners LLC, the
general partner of NRP, our largest landlord in 2003 based on
lease and royalty payments, as well as the board of Foundation
Coal Holdings, Inc., a coal company. Prior to joining First
Reserve, Mr. Krueger worked in the Energy Group of
Donaldson, Lukfin & Jenrette.
Fritz R. Kundrun
has
been a member of our board of directors since our formation in
November 2004 and a member of the board of directors of ANR
Holdings since March 2003. Mr. Kundrun is currently
Chairman and Chief Executive Officer of AMCI, a mining and
marketing company, positions he has held since he co-founded
AMCI in 1986. Prior to founding AMCI, Mr. Kundrun was
employed for 26 years by the Thyssen Group, one of the
largest German multinational companies with interests in steel
making and general heavy industrial production. There he served
as Executive Vice President of Thyssen, Inc., and President of
Thyssen Carbometal where his responsibilities included
overseeing the international trading activities of Thyssen in
the Western Hemisphere, Asia and certain markets in Europe. He
also served as Thyssen's chief delegate in Pakistan, Iran
and Iraq.
William E. Macaulay
has been a member of our board of
directors since our formation in November 2004 and a member of
the board of directors of ANR Holdings since March 2003. He is
the Chairman and Chief Executive Officer of First Reserve
Corporation, a private equity firm, which he joined in 1983.
Mr. Macaulay serves as Chairman of Pride International,
Inc., a contract drilling and related services company,
Dresser-Rand Group, Inc., a supplier of rotating equipment
solutions to the energy industry and Foundation Coal Holdings,
Inc., a coal company. He also serves as a director of Dresser,
Inc., an equipment and services company serving the energy
industry and of Weatherford International, Inc. and National
Oilwell, Inc., both of which are oilfield service companies.
Hans J. Mende
has
been Chairman of our board of directors since our formation in
November 2004. He joined the board of directors of
ANR Holdings in March 2003, and has served as Chairman of
the board of directors of ANR Holdings since June 2003. He
is currently President and Chief Operating Officer of AMCI, a
mining and marketing company, positions he has held since he
co-founded AMCI in 1986. Prior to founding AMCI, Mr. Mende
was employed by the Thyssen Group in various senior executive
positions. At the time of his departure from Thyssen Group,
Mr. Mende was President of its international trading
company. Mr. Mende also serves on the board of Foundation
Coal Holdings, Inc., a coal company.
Board of Directors
Our board of directors currently consists of
seven members. All of our directors serve one-year terms, with
all directors elected each year. Our board has reviewed the
independence of the members of our board, in accordance with the
guidelines set out in our Corporate Governance Guidelines and
Section 303A of the Listed Company Manual of the New York
Stock Exchange and has affirmatively determined that
Messrs. Draper and Fox are independent as so defined. We
expect to add an additional independent director within
12 months after the date of this offering. Based on the
fact that our Sponsors, First Reserve and entities affiliated
with AMCI, will constitute a group holding more than 50% of our
voting power following this offering, our board of directors has
determined that we are a "controlled" company, as
defined in Section 303A, and therefore eligible for
exemptions from certain provisions of the NYSE rules, including
the requirements that we have a majority of independent
directors and nominating/corporate governance and compensation
committees composed entirely of independent
93
directors. We have elected to take advantage of
these exemptions. In the event that we cease to be a controlled
company within the meaning of the NYSE rules, we will be
required to comply with these provisions after the specified
transition periods.
Committees of the Board of Directors After
this Offering
After this offering, our board of directors will
have an audit, compensation and executive, governance and
nominating committee.
Audit Committee.
After this offering, our audit committee is expected to consist
of Messrs. Draper, Krueger and Kundrun, with
Mr. Krueger serving as chairman. Mr. Draper will be
our audit committee "financial expert" as that term is
defined in Item 401(h) of Regulation S-K. Of these
individuals, only Mr. Draper currently qualifies as an
"independent" member of the audit committee as defined
in the SEC's rules setting forth independence requirements
for public company audit committees. We are required by SEC
rules to have an audit committee composed of a majority of
independent directors within 90 days of the date of the
effectiveness of the registration statement of which this
prospectus is a part, and an audit committee composed entirely
of independent directors within one year from that date. We
intend to comply with these requirements regarding the
independence of our audit committee.
The audit committee will provide assistance to
our board of directors in monitoring the reliability and
integrity of our accounting policies and financial statements,
overseeing our compliance with legal and regulatory requirements
and reviewing the independence, qualifications and performance
of our independent auditor. The audit committee will also be
responsible for (1) the appointment, compensation, and
oversight of our independent auditor, (2) approving the
overall scope of the audit and approving any non-audit services
to be performed by the independent auditor, (3) annually
reviewing a report by the independent auditor describing the
firm's internal quality control procedures, any material
issues raised by the most recent internal quality control
review, or peer review, of the auditing firm, and all
relationships between us and the independent auditor,
(4) discussing the annual audited and quarterly financial
statements with management and the independent auditor,
(5) discussing the company's press releases, as well
as financial information and earnings guidance provided to
analysts and rating agencies, (6) reviewing and discussing
risk assessment and risk management policies as well as
procedures management has established to monitor compliance with
our Code of Business Ethics, (7) meeting periodically, but
separately, with the independent auditor, internal auditors and
management, (8) reviewing with the independent auditor any
audit problems or difficulties and management's response,
(9) preparing an audit committee report as required by the
SEC to be included in our annual proxy statement,
(10) establishing policies regarding the company's
hiring of employees or former employees of the independent
auditor, (11) annually reviewing and reassessing the
adequacy of audit committee's written charter and
recommending any proposed changes to the board of directors,
(12) reporting regularly to the full board of directors,
(13) conducting an annual performance evaluation of the
audit committee, and (14) handling other matters that are
specifically delegated to the audit committee by the board of
directors from time to time. Prior to consummation of this
offering, the audit committee will approve the Code of Business
Ethics for all directors, officers and employees.
Compensation
Committee.
After this offering, we
expect that the members of the compensation committee will be
Messrs. Draper, Fox, Krueger and Mende, with
Mr. Krueger serving as chairman of the committee. The
compensation committee will be responsible for
(1) reviewing and approving the compensation, including
salary, bonuses and benefits, of our chief executive officer and
other executive officers, (2) reviewing and approving
corporate goals and objectives relevant to the compensation of
executive officers and evaluating their performance in light of
these goals and objectives, (3) reviewing and recommending
to the board of directors executive compensation policies and
practices for our and our subsidiaries' executive officers
generally, (4) reviewing director compensation and
recommending any proposed changes the board of directors,
(5) reviewing and recommending to the board of directors
any employment contract or similar agreement for any executive
officer, (6) reviewing and consulting with the chief
executive officer regarding matters of key personnel selection,
(7) reviewing and making recommendations to the board of
directors with respect to incentive compensation plans and
equity-based
94
plans, and administering the plans,
(8) monitoring compliance with applicable laws relating to
compensation of executive officers, (9) producing a
compensation committee report on executive compensation as
required by the SEC to be included in the company's annual
proxy statement or annual report on Form 10-K filed with
the SEC, (10) reporting regularly to the full board of
directors, (11) conducting an annual performance evaluation
of the compensation committee, and (12) handling other
matters that are specifically delegated to the compensation
committee by the board of directors from time to time.
Executive, Governance and Nominating
Committee.
After this offering, we
expect that our executive, governance and nominating committee
will consist of Messrs. Krueger, Mende and Quillen,
with  serving as chairman of the committee. The executive,
governance and nominating committee will assist the board of
directors in identifying individuals qualified to become
executive officers and board members and recommend nominees for
election to the board of directors and its committees. The
executive, governance and nominating committee will also be
responsible for (1) developing and recommending governance
policies and procedures to the board of directors,
(2) reviewing conflicts of interest that may affect
directors, (3) monitoring our compliance with corporate
governance practices and policies, (4) leading the board of
directors in its annual review of the board's performance,
and (5) acting on behalf of the board of directors from
time to time between regularly scheduled meetings.
Compensation of Our Directors
Directors who are also full-time officers or
employees of our company or officers or employees of our
Sponsors will receive no additional compensation for serving as
directors. All other directors will receive (1) $30,000 as
an annual retainer, (2) a $2,000 per-meeting fee for
attendance at board meetings, (3) a $2,000 per-meeting fee
for in-person attendance at committee meetings and a $1,000
per-meeting fee for telephonic attendance at committee meetings
and (4) a $10,000 annual retainer for service as the
chairman of the audit committee and a $2,000 annual retainer for
service as the chairman of any other board committee. Each of
our directors is entitled to be reimbursed for reasonable
out-of-pocket expenses incurred in connection with attendance at
board of directors meetings or any committee thereof, and
customary directors' indemnification. We are considering
adopting a restricted stock program for our directors as well.
95
Executive Compensation
The following summary compensation table sets
forth information concerning the compensation by us of Michael
J. Quillen, our Chief Executive Officer and President, and our
other four most highly compensated executive officers in 2003.
Summary Compensation Table
Annual Compensation
All Other
Name and Principal Position
Year
Salary($)
Bonus($)
Compensation ($)
(1)
Michael J. Quillen
2003
420,468
115,000
17,742
Chief Executive Officer and
    President
(2)
2002
—
—
—
Kevin Crutchfield
2003
311,295
100,000
144,522
Executive Vice President
(3)
2002
—
—
—
D. Scott Kroh
2003
287,332
100,000
8,503
Executive Vice President
(3)
2002
—
—
—
Michael D. Brown
2003
169,091
100,000
6,224
Vice President
(3)
2002
—
—
—
David C. Stuebe
2003
84,620
30,000
28,375
Vice President and Chief Financial
    Officer
(3)
2002
—
—
—
(1)
Amounts shown in this column represent our
    contributions under our 401(k) Plan and (a) in the case of
    Mr. Crutchfield, $126,495 of relocation expenses reimbursed
    by us and tax gross-up payments paid by us in connection with
    the expense reimbursement and (b) in the case of
    Mr. Stuebe, $25,836 of relocation expenses reimbursed by us.
(2)
Mr. Quillen did not receive any compensation
    from us during 2002.
(3)
Messrs. Crutchfield, Kroh, Brown and Stuebe
    joined us on varying dates in 2003 and the respective
    compensation is reported only from the start date to year end.
Compensation Committee Interlocks and Insider
Participation
Mr. Krueger, a member of our compensation
committee, is a director of First Reserve Corporation.
Affiliates of First Reserve Corporation have engaged in certain
transactions with us and our subsidiaries since our inception,
as described more fully in "Certain Relationships and
Related Party Transactions." Mr. Krueger also serves
on the board of GP Natural Resource Partners LLC, the general
partner of NRP, our largest landlord in 2003 based on lease and
royalty payments.
Mr. Mende, a member of our compensation
committee, is affiliated with AMCI. AMCI is one of our Sponsors,
and AMCI and certain entities affiliated with AMCI have engaged
in certain transactions with us and our subsidiaries since our
acquisition of U.S. AMCI, as described more fully in
"Certain Relationships and Related Party Transactions."
Employment Agreements
Michael J. Quillen.
On January 1, 2003, Alpha Natural Resources, LLC entered
into an employment agreement with Michael J. Quillen to serve as
our Chief Executive Officer. On December 31, 2003, this
agreement was assigned to our indirect wholly-owned subsidiary,
Alpha Natural Resources Services, LLC ("Alpha
Services"). Pursuant to the employment agreement,
Mr. Quillen receives a base salary of $420,000 per
annum, subject to any increase as determined by the compensation
committee of our board of directors. In addition,
Mr. Quillen is entitled to receive an annual bonus ranging
between 50% and 200% of his then current base salary, based upon
achievement of certain performance and other goals, a portion of
which Mr. Quillen waived with regard to 2003.
Mr. Quillen is also entitled to participate in our benefit
plans.
The initial term of Mr. Quillen's
employment agreement, as amended, ends on March 11, 2006,
and the agreement renews for successive annual terms unless
terminated by Mr. Quillen or us in advance of
96
the end of the initial term or any renewal term.
Alpha Services may terminate Mr. Quillen's employment
at any time and for any reason and Mr. Quillen may resign
at any time and for any reason. Under his employment agreement,
Mr. Quillen agreed to certain non-competition provisions.
In consideration for this non-competition agreement, Alpha
Services has agreed to make payments to Mr. Quillen
following the termination of his employment. If
Mr. Quillen's employment is terminated without cause,
or Mr. Quillen resigns for "employee cause" (as
defined in the agreement), Alpha Services will be required to
pay Mr. Quillen his earned but unpaid salary through the
date of termination, and to continue to pay his then current
base salary for the following twelve months. In addition,
Mr. Quillen would be entitled to receive any bonuses
payable for prior years, plus the pro rata bonus payable for the
current year, at the same time as bonuses are paid to similarly
situated employees. Pursuant to the employment agreement, a
resignation by Mr. Quillen "for employee cause"
includes, among others, (i) a substantial diminution of his
status or responsibilities, and (ii) his resignation during
the period beginning three months, and ending nine months
following the liquidation or sale by First Reserve of more than
75% of its ownership in ANR Holdings and affiliates.
D. Scott Kroh.
On January 1, 2003, Alpha Natural Resources, LLC also
entered into an employment agreement with D. Scott Kroh to serve
as our Executive Vice President. On December 31, 2003, this
agreement was assigned to our wholly-owned subsidiary, Alpha
Coal Sales Co., LLC ("Alpha Coal Sales"). Pursuant to
the employment agreement, Mr. Kroh receives a base salary
of $360,000 per annum, subject to any increase as
determined by the compensation committee of our board of
directors. In addition, Mr. Kroh is entitled to receive an
annual bonus ranging between 50% and 200% of his then current
base salary, based upon achievement of certain performance and
other goals, a portion of which Mr. Kroh waived with regard
to 2003. Mr. Kroh is also entitled to participate in our
benefit plans.
The initial term of Mr. Kroh's
employment agreement, as amended, ends on March 11, 2005,
and the agreement renews for successive annual terms unless
terminated by Mr. Kroh or us in advance of the end of the
initial term or any renewal term. Alpha Coal Sales may terminate
Mr. Kroh's employment at any time and for any reason
and Mr. Kroh may resign at any time and for any reason.
Under his employment agreement, Mr. Kroh agreed to certain
non-competition provisions. In consideration for this
non-competition agreement, Alpha Coal Sales has agreed to make
payments to Mr. Kroh following the termination of his
employment. If Mr. Kroh's employment is terminated
without cause, or Mr. Kroh resigns for "employee
cause" (as defined in the agreement), Alpha Coal Sales will
be required to pay Mr. Kroh his earned but unpaid salary
through the date of termination, and to continue to pay his then
current base salary for the following twelve months. In
addition, Mr. Kroh would be entitled to receive any bonuses
payable for prior years, plus the pro rata bonus payable for the
current year, at the same time as bonuses are paid to similarly
situated employees. Pursuant to the employment agreement, a
resignation by Mr. Kroh "for employee cause"
includes, among others, (i) a substantial diminution of his
status or responsibilities, and (ii) his resignation during
the period beginning three months and ending nine months
following the liquidation or sale by First Reserve of more than
75% of its ownership in ANR Holdings and affiliates.
Incentive Cash Bonus Plan
In connection with our Internal Restructuring,
our board of directors will adopt, and our stockholders will
approve, our Annual Incentive Bonus Plan (the "Bonus
Plan") which was originally adopted by ANR Holdings in
November 2004. The Bonus Plan is a performance-based incentive
bonus plan under which our designated executive officers and key
employees are eligible to receive cash bonus payments with
respect to a specific performance period (for example, our
fiscal year). Bonuses of up to 200% of a participant's base
salary are payable under the Bonus Plan upon the achievement of
certain pre-established performance goals. Performance goals
include operational goals such as safety, productivity, other
strategic objectives and individual performance goals, plus
financial measures. Financial measures that form the basis for
performance goals may include any of the following with respect
to us or any of our subsidiaries, divisions or business units:
earnings, operating earnings, earnings per share, operating
earnings per share, earnings before interest taxes depreciation
and amortization, revenues, stockholders' equity, return on
97
equity, return on assets, return on invested
capital, economic value added, operating margins, cash flow,
total stockholder return, expenses, dept-to-capital ratio or
market share.
The Bonus Plan is intended to provide an
incentive for business performance, reward contributions towards
goals consistent with our business strategy and enable us to
attract and retain highly qualified executive officers and key
employees. The Bonus Plan will generally be administered by our
compensation committee, whose determination on all matters
relating to the Bonus Plan will be final and binding. Each year,
the compensation committee will select the eligible participants
in the Bonus Plan, establish the performance goals for that year
for a participant or group of participants, determine target
incentive bonuses for the participants and certify that the
performance goals have been met with respect to the given
performance period. The compensation committee or our board of
directors may amend, suspend or terminate the Bonus Plan at any
time in its sole discretion.
Management Stock
Pursuant to the Internal Restructuring, a portion
of the shares that each management member of Alpha Coal
Management receives in respect of Alpha Coal Management's
interest in ANR Holdings, or an aggregate
of                      shares,
will initially be unvested, and will vest over time dependent on
the executive's continued employment with us. The
stockholder agreement that the existing stockholders will enter
into will provide that an executive holding unvested shares
whose employment is terminated by us for cause, as defined in
the stockholder agreement, or who voluntarily terminates his
employment will forfeit all of the unvested shares if the
termination is prior to December 31, 2005 and one half of
the unvested shares if the termination is after
December 31, 2005 and prior to December 31, 2006. The
stockholder agreement will also provide that an executive
holding unvested shares whose employment is terminated by us
without cause, or due to retirement, death or disability, will
become vested upon termination in a percentage of the total
shares initially subject to vesting equal to the number of full
calendar months then elapsed since December 31, 2004
divided by 24. The stockholder agreement will further provide
that vesting of all unvested shares will accelerate upon a
change of control, as defined in the stockholder agreement.
Long-Term Incentive Plans
Alpha Coal Management Amended and Restated
    Long-Term Incentive Plan
In November 2004, the board of directors of Alpha
Coal Management adopted, and its members approved, the Alpha
Coal Management LLC 2004 Long-Term Incentive Plan (the
"Alpha Coal Management Long-Term Incentive Plan") to
provide equity incentive compensation to those key employees and
others who make significant contributions to the strategic and
long-term performance objectives and growth of Alpha. On
November 10, 2004, Alpha Coal Management granted options to
purchase 800,000 units of Alpha Coal Management to 22
members of Alpha's management team under the Alpha Coal
Management Long-Term Incentive Plan. These options vest over a
period of five years (with accelerated vesting upon a change of
control) and have a term of ten years. In connection with this
grant of options, Alpha Coal Management entered into a letter
agreement with ANR Holdings pursuant to which ANR Holdings
agreed to issue to Alpha Coal Management additional membership
interests representing common sharing ratios in an aggregate
amount equal to 1% upon exercise of awards granted by Alpha Coal
Management under the Alpha Coal Management Long-Term Incentive
Plan. Pursuant to the terms of the Internal Restructuring
Agreement, this Plan will be amended and restated, the
outstanding options to purchase units of Alpha Coal Management
will automatically be converted into options to purchase shares
of our common stock and we will assume the obligations of Alpha
Coal Management pursuant to this Plan. At such time, there will
be outstanding under the Plan options to purchase an aggregate
of shares of our common stock (the maximum number of shares
currently available for awards under the Plan) at a weighted
average exercise price of
$          per
share. No additional options or other awards will be granted
under the Plan. The number of shares of our common stock
reserved pursuant to the Plan will be subject, at the discretion
of our board of directors (or the committee if so
98
empowered), to adjustment as a result of stock
splits, stock dividends and similar changes in our common stock.
Following our assumption of the Alpha Coal
Management Long-Term Incentive Plan in connection with the
Internal Restructuring, the Plan will be administered on the
same basis and subject to the same regulation as our Long-Term
Incentive Plan as described under "Alpha Natural Resources,
Inc. Long-Term Incentive Plan."
Alpha Natural Resources, Inc. Long-Term
    Incentive Plan
In connection with the Internal Restructuring, we
expect to adopt the Alpha Natural Resources, Inc. Long-Term
Incentive Plan (the "Long-Term Incentive Plan"). The
principal purpose of the Long-Term Incentive Plan is to attract,
motivate, reward and retain selected employees, consultants and
directors through the granting of stock-based compensation
awards. The Long-Term Incentive Plan will provide for a variety
of awards, including non-qualified stock options, incentive
stock options (within the meaning of Section 422 of the
Code), stock appreciation rights, restricted stock awards,
dividend equivalents, performance-based awards and other
stock-based awards.
Administration.
The
Long-Term Incentive Plan is expected to be administered by our
board of directors, unless and until the board delegates
administration to the compensation committee or other applicable
committee of the board. The board or the committee may delegate
administration of the plan to one or more of Alpha's
officers. The board of directors or the committee, if so
empowered, has the power to interpret the Long-Term Incentive
Plan and to adopt rules for the administration, interpretation
and application of the plan according to its terms.
Grant of Awards; Shares Available for
Awards.
Certain employees, consultants
and directors are eligible to be granted awards under the plan.
The board of directors, or the committee if so empowered, will
determine who will receive awards under the plan, as well as the
form of the awards, the number of shares underlying the awards,
and the terms and conditions of the awards consistent with the
terms of the plan.
The total numbers of shares of our common stock
initially available for issuance or delivery under our Long-Term
Incentive Plan will be shares. We intend to grant certain of our
officers and key employees options to purchase an aggregate
of                      shares
of our common stock at the initial public offering price upon
consummation of this offering. The number of shares of our
common stock issued or reserved pursuant to the Long-Term
Incentive Plan will be subject, at the discretion of the board
of directors (or the committee if so empowered), to adjustment
as a result of stock splits, stock dividends and similar changes
in our common stock.
Stock Options.
The
Long-Term Incentive Plan will permit the board of directors, or
the committee if so empowered, to grant participants incentive
stock options, which qualify for special tax treatment in the
United States, as well as non-qualified stock options. The
board, or the committee if so empowered, will establish the
duration of each option at the time it is granted, with a
maximum ten-year duration for incentive stock options, and may
also establish vesting and performance requirements that must be
met prior to the exercise of options.
Stock option grants may include provisions that
permit the option holder to exercise all or part of the
holder's vested options, or to satisfy withholding tax
liabilities, by tendering shares of common stock already owned
by the option holder for at least six months (or another period
consistent with the applicable accounting rules) with a fair
market value equal to the exercise price.
Stock Appreciation
Rights.
The board of directors, or the
committee if so empowered, may also grant stock appreciation
rights, either alone or in tandem with underlying stock options
or other awards, which will be exercisable upon the occurrence
of certain contingent events. Stock appreciation rights entitle
the holder upon exercise to receive an amount in any combination
of cash, shares of our common stock (as determined by the
committee) equal in value to the excess of the fair market value
of the shares covered by the right over the grant price, or
other securities or property of Alpha.
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Other Equity Awards.
In addition to stock options, the board of directors, or the
committee if so empowered, may also grant to certain employees,
consultants and directors shares of restricted stock, restricted
stock rights, dividend equivalents, performance-based awards or
other stock-based awards, with terms and conditions as the board
of directors (or, if applicable, the committee) may, pursuant to
the terms of the Long-Term Incentive Plan, establish.
Change-in-Control
Provisions.
In connection with the
grant of an award, the board of directors, or if so empowered
the committee, may provide that, in the event of a change in
control, any outstanding awards that are unexercisable or
otherwise unvested will become fully vested and immediately
exercisable. In addition, the committee may, in its sole
discretion, provide for the termination of an award upon the
consummation of the change in control and the payment of a cash
amount in exchange for the cancellation of an award, and/or the
issuance of substitute awards that will substantially preserve
the otherwise applicable terms of any affected award.
Amendment and
Termination.
Our board of directors,
or the committee if so empowered, may adopt, amend and rescind
rules relating to the administration of the Long-Term Incentive
Plan, and amend, suspend or terminate the Long-Term Incentive
Plan,
provided
that no amendment will be made that
adversely affects in a material manner any rights of the holder
of any award without the holder's consent. We have
attempted to structure the Long-Term Incentive Plan so that
remuneration attributable to stock options and other awards will
not be subject to a deduction limitation contained in
Section 162(m) of the Code. However, we generally will be
required to obtain approval of our stockholders (1) to
increase the number of shares of our common stock that may be
issued under the Long-Term Incentive Plan, (2) to extend
the limit on the period during which options may be granted, or
(3) to the extent required by applicable law, rule or
regulation (including New York Stock Exchange rules).
100
PRINCIPAL STOCKHOLDERS
The following table and accompanying footnotes
show information regarding the beneficial ownership of our
common stock before and after this offering, for:
•
each person who is known by us to own
    beneficially more than 5% of our common stock;
•
each member of our board of directors and each of
    our named executive officers; and
•
all members of our board of directors and our
    executive officers as a group.
The number of shares outstanding and percentage
of beneficial ownership before the offering set forth below is
based on the number of shares of our common stock to be issued
and outstanding immediately prior to the effectiveness of the
registration statement of which this prospectus is a part, after
giving effect to our Internal Restructuring. The number of
shares and percentage of beneficial ownership after the offering
set forth below is based on shares of our common stock to be
issued and outstanding immediately after this offering.
Shares Beneficially Owned
After this Offering
Assuming the
Assuming the
Underwriters'
Underwriters'
Shares Beneficially
Over-allotment
Over-allotment
Owned Prior to
Option is
Option is
this Offering
Not Exercised
Exercised in Full
Name and Address of
Beneficial Owner
(1)
Number
Percent
Number
Percent
Number
Percent
First Reserve GP IX, Inc.
(2)
First Reserve Fund IX, L.P.
(2)
ANR Fund IX Holdings, L.P.
(2)
Fritz R. Kundrun
(3)
Hans J. Mende
(3)
Tanoma Energy, Inc.
(4)
Michael J. Quillen
(5)
Kevin S. Crutchfield
(6)
D. Scott Kroh
(7)
Michael D. Brown
(8)
David C. Stuebe
(9)
E. Linn Draper, Jr.
(10)
John W. Fox, Jr.
(10)
Alex T. Krueger
(11)
William E. Macaulay
(11)
All executive officers and directors as a group
    (11 persons)
(1)
The shares of our common stock beneficially owned
    are reported on the basis of regulations of the SEC governing
    the determination of beneficial ownership of securities. Under
    the rules of the SEC, a person is deemed to be a
    "beneficial owner" of a security if that person has or
    shares voting power, which includes the power to vote or direct
    the voting of such security, or investment power, which includes
    the power to dispose of or to direct the disposition of such
    security. A person is also deemed to be a beneficial owner of
    any securities of which that person has a right to acquire
    beneficial ownership within 60 days. Securities that can be
    so acquired are deemed to be outstanding for purposes of
    computing such person's ownership percentage, but not for
    purposes of computing any other person's percentage. Under
    these rules, more than one person may be deemed beneficial owner
    of the same securities and a person may be deemed to be a
    beneficial owner of securities as to which such person has no
    economic interest. Except as otherwise indicated in these
    footnotes, each of the beneficial owners has, to our knowledge,
    sole voting and investment power with respect to the indicated
    shares of common stock. In accordance with the beneficial
    ownership rules of the SEC, the table does not reflect
    (1) an aggregate
    of                  shares
    of common stock reserved for issuance upon the exercise of
    outstanding options under the Alpha Coal Management Amended and
    Restated Long-Term Incentive Plan that we will assume in
    connection with the Internal Restructuring and (2) an
    aggregate of shares of
101
common stock reserved for issuance under our
    Long-Term Incentive Plan, of which an aggregate
    of                  shares
    of our common stock will be subject to outstanding options under
    our Long-Term Incentive Plan upon completion of this offering.
(2)
The shares of our common stock shown for First
    Reserve GP IX, Inc. consist of shares beneficially owned by
    First Reserve Fund IX, L.P. and by ANR Fund IX
    Holdings, L.P. First Reserve GP IX, L.P. is the general
    partner of each of First Reserve Fund IX, L.P. and ANR
    Fund IX Holdings, L.P. First Reserve GP IX, Inc. is
    the general partner of First Reserve GP IX, L.P. The
    address of First Reserve GP IX, Inc., First Reserve
    GP IX, L.P. First Reserve Fund IX, L.P. and ANR
    Fund IX Holdings, L.P. is One Lafayette Place, Greenwich,
    CT 06830.
(3)
Reflects beneficial ownership through shared
    voting and investment power over shares of our common stock held
    by the following entities affiliated with the owners of AMCI:
    Beta Resources, LLC, Creekside Energy Development Company,
    Dunamis Resources, Inc., I-22 Processing, Inc., Laurel Energy,
    L.P., Laurel Resources, L.P., Madison Mining Company LLC,
    Newhall Pocahontas Energy, Inc., Redbank, Inc., REI, Inc., RRD,
    Inc., SCM, Inc., Still Run Coal Company, Inc., Tanoma Energy,
    Inc., and Vollow Resources LLC. The address for each of the
    above entities and Messrs. Mende and Kundrun is
    c/o American Metals & Coal International, Inc.,
    475 Steamboat Road, 2nd Floor, Greenwich,
    CT 06830, Attention: Hans J. Mende, President.
(4)
The address for Tanoma Energy, Inc. is
    c/o American Metals & Coal International, Inc.,
    475 Steamboat Road, 2nd Floor, Greenwich,
    CT 06830, Attention: Hans J. Mende, President.
(5)
Includes beneficial ownership
    of                  unvested
    shares as described under "Management— Management
    Stock." The address for Mr. Quillen is c/o Alpha
    Natural Resources, Inc., 406 West Main Street, Abingdon,
    Virginia 24210.
(6)
Includes beneficial ownership
    of                  unvested
    shares as described under "Management— Management
    Stock." The address for Mr. Crutchfield is
    c/o Alpha Natural Resources, Inc., 406 West Main
    Street, Abingdon, Virginia 24210.
(7)
Includes beneficial ownership
    of                  unvested
    shares as described under "Management— Management
    Stock." Also includes beneficial ownership of one-third of
    the shares of common stock held directly by each of Dunamis
    Resources, Inc., I-22 Processing, Inc., Madison Mining Company
    LLC and Tanoma Energy, Inc. and 44.3% of the shares held
    directly by each of Laurel Energy, L.P. and Laurel Resources,
    L.P. through Mr. Kroh's investment power over these
    shares. Mr. Kroh disclaims beneficial ownership of all
    other shares of common stock held by the entities listed in the
    previous sentence. The address for Mr. Kroh is
    c/o Alpha Natural Resources, Inc., 406 West Main
    Street, Abingdon, Virginia 24210.
(8)
Includes beneficial ownership
    of                  unvested
    shares as described under "Management— Management
    Stock." The address for Mr. Brown is c/o Alpha
    Natural Resources, Inc., 406 West Main Street, Abingdon,
    Virginia 24210.
(9)
Includes beneficial ownership
    of                  unvested
    shares as described under "Management— Management
    Stock." The address for Mr. Stuebe is c/o Alpha
    Natural Resources, Inc., 406 West Main Street, Abingdon,
    Virginia 24210.
(10)
The address for Messrs. Draper and Fox is
    c/o Alpha Natural Resources, Inc., 406 West Main Street,
    Abingdon, Virginia 24210.
(11)
Mr. Krueger is an executive officer of First
    Reserve G.P. IX, Inc. and disclaims beneficial ownership of
    any shares owned by such entity or its affiliates.
    Mr. Macaulay is the Chief Executive Officer and a member of
    the board of directors of First Reserve Corporation and
    disclaims beneficial ownership of any shares owned by such
    entity or its affiliates. The address of Messrs. Krueger
    and Macaulay is c/o First Reserve Corporation, One Lafayette
    Place, Greenwich, CT 06830.
102
CERTAIN RELATIONSHIPS AND RELATED PARTY
TRANSACTIONS
Transactions Prior to 2003
Acquisitions
In connection with the formation of Alpha NR
Holding, Inc. (formerly named Alpha Natural Resources, Inc.) in
April 2002, the formation of Alpha Natural Resources, LLC in
August 2002, and the formation of ANR Holdings and our
acquisition of our Predecessor in December 2002, we entered into
the following transactions with First Reserve:
•
Alpha NR Holding, Inc. issued 100 shares of
    its common stock, representing all of the issued and outstanding
    capital stock of the company, to First Reserve Fund IX,
    L.P. for $100.00 in April, 2002;
•
Alpha Natural Resources, LLC issued one
    membership unit, representing all of its then-outstanding
    membership interests, to Alpha NR Holding, Inc. for $1,000.00 in
    August 2002;
•
ANR Holdings issued all of its membership
    interests to Alpha NR Holding, Inc. and ANR Fund IX
    Holdings, L.P. for an aggregate of $24.0 million in cash
    and the single outstanding membership interest in Alpha Natural
    Resources, LLC; and
•
First Reserve loaned an aggregate of
    $24.0 million in cash to Alpha NR Holding, Inc., Alpha
    Natural Resources, LLC and ANR Holdings during 2002, for which
    First Reserve was paid an aggregate of $0.3 million in
    fees; we recorded interest expense in connection with these
    loans of $0.1 million during 2002.
Transactions in Connection with 2003
Acquisitions
In connection with our acquisition of
U.S. AMCI, ANR Holdings entered into a contribution
agreement with certain affiliates of AMCI (the "AMCI
Parties") and First Reserve, pursuant to which the AMCI
Parties agreed to contribute certain assets to, and to cause the
merger of certain AMCI-affiliated entities with, certain
subsidiaries of Alpha Natural Resources, LLC, in exchange for:
(i) the assumption by subsidiaries of Alpha Natural
Resources, LLC of certain liabilities, (ii) the payment of
an aggregate of $52.9 million in cash to certain of the
AMCI Parties and (iii) the issuance to certain of the AMCI
Parties of common membership interests constituting 44.3473% of
the common sharing ratios, and preferred membership interests
constituting 44.4903% of the preferred sharing ratios, of ANR
Holdings. Hans J. Mende and Fritz R. Kundrun, who are members of
our board of directors, and D. Scott Kroh, our executive vice
president, control the AMCI Parties. The AMCI Parties, First
Reserve and ANR Holdings agreed in the contribution agreement to
indemnify each other in connection with the representations,
warranties and covenants made in the contribution agreement.
These indemnification arrangements permit, under certain
circumstances, the transfer by certain of the AMCI Parties to
First Reserve of membership interests in ANR Holdings (shares of
our common stock after giving effect to the Internal
Restructuring) to compensate for indemnified losses. In
connection with the consummation of the transactions
contemplated by the contribution agreement, the following
agreements were entered into by Alpha Natural Resources, LLC
and/or its subsidiaries:
•
Various subsidiaries of Alpha Natural Resources,
    LLC entered into and received certain agreements and instruments
    with and from the AMCI Parties to effect the conveyance to those
    subsidiaries of the assets and companies constituting
    U.S. AMCI;
•
In connection with the assumption by certain of
    the subsidiaries of Alpha Natural Resources, LLC of contracts
    between certain AMCI Parties and third parties, Alpha Natural
    Resources, LLC entered into certain agreements under which Alpha
    Natural Resources, LLC guaranteed to the third parties its
    subsidiaries' performance of their obligations under the
    assumed contracts;
•
Alpha Natural Resources, LLC entered into a
    cooperation agreement with the AMCI Parties, pursuant to which
    Alpha Natural Resources, LLC and the AMCI Parties established
    certain administrative procedures with regard to their
    respective obligations under the contribution agreement relating
    to certain retained liabilities and assets of the AMCI Parties;
103
•
First Reserve entered into an escrow agreement
    with K-M Investment Corporation ("K-M"), a company
    owned by Messrs. Mende and Kundrun, and National City Bank
    of Pennsylvania, as escrow agent, relating to the deposit into
    escrow of $2.8 million of cash for purposes of satisfying
    certain indemnification and other obligations of K-M under the
    Contribution Agreement, which escrow agreement will be
    terminated in connection with the Internal
    Restructuring; and
•
First Reserve, the AMCI Parties, Alpha Coal
    Management and Madison Capital Funding LLC entered into a member
    agreement with ANR Holdings in order to, among other things,
    (i) set forth certain understandings with respect to the
    election of directors and specified actions by ANR Holdings
    requiring board or member consent, (ii) provide demand
    registration rights to First Reserve and the AMCI Parties and
    piggyback registration rights to all members of ANR Holdings,
    and (iii) provide First Reserve the right to purchase from
    certain AMCI Parties additional ANR Holdings membership
    interests having a fair market value of up to $7.5 million,
    at a purchase price equal to 75% of the fair market value, in
    the event payments are required to be made under the escrow
    agreement to satisfy K-M's indemnification obligations
    under the contribution agreement to discharge certain retiree
    medical liabilities retained by the AMCI Parties. This right to
    purchase will be terminated in connection with the Internal
    Restructuring.
In conjunction with our acquisition of
U.S. AMCI, First Reserve entered into a pledge agreement
with certain affiliates of AMCI pursuant to which these persons
pledged to First Reserve all of their membership interests in
ANR Holdings to secure their obligation under the contribution
agreement to discharge certain retiree medical liabilities
retained by the AMCI Parties. This pledge agreement will be
terminated in connection with the Internal Restructuring.
In conjunction with our acquisition of
U.S. AMCI, ANR Holdings agreed with the AMCI Parties to
operate Solomons Mining Company ("Solomons"), one of
the companies included in U.S. AMCI, for the account of the
AMCI Parties until the time Solomons could be sold, and the AMCI
parties agreed to indemnify ANR Holdings and certain of its
related parties for all liabilities associated with the
operation of Solomons. ANR Holdings also agreed that, upon the
disposition of Solomons, it would pay to the AMCI Parties the
sum of $5.0 million in cash, plus the net proceeds of the
sale of Solomons, plus the cumulative profits or less the
cumulative operating losses of Solomons from the date of our
acquisition of U.S. AMCI to the date of sale of Solomons,
less the actual costs incurred by ANR Holdings in managing
Solomons. On September 2, 2003, substantially all of the
assets of Solomons were transferred to the lessor of
Solomons' mining properties in Kentucky in connection with
the settlement of a lease dispute with the lessor. At that time,
ANR Holdings, First Reserve and the AMCI Parties agreed that
Solomons would advance to the lessor for the account of the AMCI
Parties an aggregate of $3.1 million in cash in
installments, by applying a portion of the funds available to
fund Solomons' operating losses and a portion of the tax
distributions that ANR Holdings would otherwise have made to the
AMCI parties under the ANR Holdings company agreement. The AMCI
Parties also agreed to provide an additional $1.0 million
to be used by ANR Holdings to pay expenses, obligations and
liabilities incurred in satisfying the reclamation and other
liabilities related to Solomons. This agreement, also provides
that should the AMCI Parties fail to perform any of their
payment obligations agreed to on September 2, 2003, then
First Reserve would have the right (but not the obligation) to
purchase membership interests in ANR Holdings held by the AMCI
Parties having a fair market value, as of March 11, 2003,
equal to the payment the AMCI Parties failed to make. This right
to purchase will be terminated in connection with the Internal
Restructuring.
As part of the arrangement to operate Solomons
for the account of the AMCI Parties, a subsidiary of Alpha
Natural Resources, LLC entered into an agreement to purchase
from a third party and for the account of the AMCI Parties
350,000 tons of coal at various times from April 2004 through
November 2005 (the "Coal Supply Agreement"). On
April 22, 2004, ANR Holdings, First Reserve and the AMCI
Parties entered into an agreement (the "April 2004
Agreement"), under which Alpha Natural Resources, LLC will
take the coal to be delivered under the Coal Supply Agreement
and will pay to the AMCI Parties the difference (the "Net
Proceeds") between the agreed fair market value of the coal
as of the date of the April 2004 Agreement ($54.50 per
ton), and the price to be paid to the third party under the
104
Coal Supply Agreement ($34.50 per ton). We
will withhold up to 40% of the net proceeds (up to
$2.3 million) to fund Solomons' reclamation
obligations under the settlement agreement referred to above and
any other Solomons' liabilities for which the AMCI Parties
agreed to provide indemnification. With the exception of
reclamation obligations and any future claims by the lessor
referred to above, the amounts withheld will be ANR
Holdings' exclusive recourse against the AMCI Parties for
this indemnification. The AMCI Parties will not be obligated to
fund certain of the payments that could otherwise be due to ANR
Holdings under the September 2, 2003 agreement with ANR
Holdings and First Reserve for so long as the third party under
the Coal Supply Agreement performs its obligations under the
Coal Supply Agreement according to its terms.
Effective upon the contribution of U.S. AMCI
to us, K-M entered into an agreement with Michael J. Quillen, a
member of our board of directors and our President and Chief
Executive Officer, under which K-M has paid or will pay
Mr. Quillen compensation deferred from his prior employment
with U.S. AMCI in the amounts of $194,000 paid in 2003,
$250,000 to be paid in 2004 and $250,000 to be paid in 2005. K-M
and Mr. Quillen entered into this agreement in part to
recognize Mr. Quillen's efforts in connection with the
contribution of U.S. AMCI.
Effective upon the contribution of U.S. AMCI
to us, in order to recognize Mr. Quillen's efforts in
connection with the development and growth of U.S. AMCI over the
previous five years and the contribution of U.S. AMCI to us,
Messrs. Mende and Kundrun and Mr. D. Scott Kroh, our
Executive Vice President, who were and are the owners of certain
of the AMCI Parties (the "AMCI Owners") that held
approximately 44% of the membership interests of ANR Holdings
(the "AMCI Member Interests") entered into an
agreement, as amended, with Mr. Quillen under which the
AMCI Owners will compensate Mr. Quillen upon:
(a)
the sale, transfer, assignment or disposition of
    any AMCI Member Interests not otherwise covered in (b) through
    (d) below,
(b)
our consolidation or merger with a third party,
(c)
the sale of all or substantially all of our
    assets to a party or parties that are not affiliated with us,
(d)
the sale of the AMCI Member Interests, in whole
    or in part, pursuant to a registration under the Securities Act
    of 1933; or
(e)
the repayment of certain indebtedness to the AMCI
    Owners in connection with our Internal Restructuring as
    described under "Use of Proceeds."
The contemplated payment is to equal 5% of the
net amount, if any, by which the value of the consideration
received by the AMCI Owners in any transaction exceeds the
agreed upon value of the AMCI Member Interests at the time of
the U.S. AMCI acquisition less all prior distributions and
is estimated to be
$                    ,
based upon the midpoint of the price range on the cover of this
prospectus. Mr. Quillen will be obligated to reimburse the
AMCI Owners 5% of certain of their expenses associated with the
transaction for which Mr. Quillen is paid. The agreement
terminates on the earlier to occur of March 11, 2010 and
one year after the date Mr. Quillen ceases to be an officer
or employee of ANR Holdings or any of its subsidiary or
affiliated companies. In the event that not all of the AMCI
Member Interests have been transferred in one or more
transactions of the type listed above by March 11, 2010,
the AMCI Owners have agreed to pay Mr. Quillen
consideration equal to 5% of the amount by which the agreed or
appraised fair market value of the AMCI Member Interests on that
date exceeds the agreed upon value referred to above.
On March 11, 2003, in connection with the
acquisition of U.S. AMCI, ANR Holdings entered into an
agreement with AMCI under which AMCI granted ANR Holdings a
right of first negotiation as well as a right of first refusal
with respect to the sale of all or a portion of the assets or
equity (each, an "Interest") of AMCI's wholly
owned subsidiary, AMCI Export Corporation, an export trading
company ("AMCI Export"). These rights expired on
September 11, 2004.
105
On March 11, 2003, in connection with the
acquisition of U.S. AMCI, ANR Holdings entered into an
agreement (the "PEV Agreement") with Ernie L.
Thrasher, Mr. Mende, Mr. Kundrun and Mr. Kroh
(each, a "PEV Seller"), and K-M to purchase from the
PEV Sellers all (but not less than all) the outstanding
membership interests of Provincial Energy Venture Limited, LLC,
a company that owns and operates an ocean going port in Nova
Scotia ("PEV"). The aggregate purchase price payable
by ANR Holdings upon exercise of this option is
$2.0 million plus the aggregate amount of capital
investments made in PEV after the date of the agreement and
prior to the date ANR Holdings provides notice of its exercise
of the option. The purchase price is payable in ANR
Holdings' membership interests (shares of our common stock
after giving effect to the Internal Restructuring) having an
equivalent fair market value. In addition, if the PEV Sellers
receive and propose to accept an offer from a third party to
purchase their PEV membership interests, they must first provide
notice and a copy of the offer to ANR Holdings, whereupon ANR
Holdings will have a right of first refusal. ANR Holdings'
option expires on the earlier of (w) March 11, 2005,
(x) the 90th day following receipt by ANR Holdings of a
compliance notice and related legal opinion (as described
below), (y) the date on which ANR Holdings acquires the PEV
membership interests through exercise of its right of first
refusal, and (z) the date on which ANR Holdings notifies
the PEV Sellers that it is not electing to exercise its right of
first refusal (provided the PEV Sellers sell their membership
interests on the same terms within 120 days thereafter).
The notice described in clause (x) above is to be delivered
to ANR Holdings upon receipt by the PEV Sellers of a legal
opinion from a Nova Scotian official to the effect that the
Government of the Province of Nova Scotia is legally obligated
to satisfy certain environmental clean up and other obligations
for the benefit of PEV. ANR Holdings' right of first
refusal expires on March 11, 2008. We will succeed to the
rights and become subject to the obligations of ANR Holdings
under the PEV Agreement in connection with our Internal
Restructuring.
In conjunction with the AMCI transaction, Alpha
paid $35.0 million for the working capital of
U.S. AMCI, as defined in the contribution agreement,
subject to an audit. Pursuant to a letter agreement dated
September 13, 2004, ANR Holdings, First Reserve and the
AMCI Parties agreed that the net working capital actually
acquired was approximately $34.1 million and the AMCI
Parties paid the difference of $0.9 million to ANR
Holdings. The parties further agreed that the AMCI Parties would
be entitled to any refund of, and obligated to make any payment
of, all federal black lung excise taxes of the companies
contributed by the AMCI Parties to ANR Holdings, but only
insofar as the taxes related to pre-closing or straddle periods
ending on or prior to the closing date of the U.S. AMCI
acquisition.
In connection with our acquisition of the Coastal
Coal Company, we acquired an overriding royalty interest in
certain properties located in Virginia and West Virginia owned
by El Paso CPG Company for $11.0 million in cash.
Effective February 1, 2003, we sold the overriding royalty
interest to affiliates of Natural Resource Partners, L.P.
("NRP") for approximately $11.9 million in cash.
Effective April 1, 2003, we also sold substantially all our
fee-owned Virginia mineral properties to NRP for
$53.6 million in cash in a sale/ leaseback transaction. NRP
is our largest landlord based on the aggregate of
$13.7 million and $11.9 million that we paid it in
lease and royalty payments for the nine months ended
September 30, 2004 and the year ended December 31,
2003, respectively. In an unrelated transaction, in December
2003, Alex Krueger, a member of our board of directors, was
appointed as a member of the board of directors of GP Natural
Resource Partners, LLC, the general partner of NRP, and First
Reserve became a substantial equity owner of NRP. We believe the
production and minimum royalty rates contained in our leases
with NRP are consistent with current market royalty rates.
During 2003, we reimbursed AMCI $2.0 million
in transaction costs related to the acquisitions of our
Predecessor and Coastal Coal Company.
As of December 31, 2002, we had notes
payable in the amount of approximately $24.0 million
payable to First Reserve. The notes, along with other notes,
were converted to contributed capital in 2003. We incurred
interest expense on the related party notes of $2.6 million
and $144,000 during 2003 and 2002, respectively.
106
On November 17, 2003, we issued
14% senior subordinated notes in an aggregate principal
amount of $30.0 million to First Reserve Fund IX, L.P.
and Alpha NR Holding, Inc., to fund the purchase price of the
Mears acquisition. We repaid all outstanding principal and
interest on these notes during December 2003.
Investment in Excelven Pty Ltd
In August 2004, Alpha Natural Resources, LLC,
together with AMCI, entered into a subscription deed with
Excelven Pty Ltd, pursuant to which Alpha Natural Resources, LLC
agreed to acquire a 24.5% interest in Excelven for a purchase
price of $5.0 million in cash, and AMCI agreed to acquire a
24.5% interest in Excelven for a purchase price of
$5.0 million in cash, for an aggregate investment by Alpha
Natural Resources, LLC and AMCI of a 49% interest in Excelven
for an aggregate purchase price of $10.0 million. Excelven,
through its subsidiaries, owns the rights to the Las Carmelitas
mining venture in Venezuela and the related Palmarejo export
port facility on Lake Maracaibo in Venezuela. Each of Alpha
Natural Resources, LLC and AMCI funded $3.25 million of
their respective subscription obligations in September 2004. The
Las Carmelitas mine, which is not yet in operation, is currently
expected to produce approximately two million tons of low sulfur
thermal coal per year over a 15-year mine life. The project is
currently in the developmental stage, with preliminary
governmental mining and environmental approvals having been
obtained. Final governmental approval of the project, which is
subject to the submission of a detailed mine plan, is currently
expected in 2005 with mining to commence in 2007. Alpha Natural
Resources, LLC and AMCI are also in preliminary negotiations
with Excelven to provide promotion, marketing, sales and
distribution services to Excelven for all coal extracted from
the Las Carmelitas mine.
Distributions to Members of ANR Holdings and
Our Stockholders
Since its formation in December 2002, ANR
Holdings has made periodic distributions to its members,
including First Reserve, entities affiliated with AMCI, and
Alpha Coal Management, on dates and in amounts calculated in
accordance with its governing documents, sufficient to enable
the members to pay their estimated income tax liability
associated with their holdings in ANR Holdings. The amounts of
these distributions totaled $5.3 million in 2003 and
$14.0 million during the first nine months of 2004.
On May 28, 2004, in connection with the
closing under our credit agreement and the receipt by Alpha
Natural Resources, LLC of the proceeds from the sale of its
senior notes, ANR Holdings distributed an aggregate of
$110.0 million to its members, including First Reserve,
entities affiliated with AMCI, and Alpha Coal Management, in
proportion to their common sharing ratios in ANR Holdings.
In connection with our Internal Restructuring,
ANR Holdings will agree to make the Sponsor Distributions to
First Reserve Fund IX, L.P. and entities affiliated
with AMCI, in an aggregate amount of approximately
$10.5 million. The distributions to affiliates of AMCI will
be in the amount of $6.0 million, representing the
approximate incremental tax resulting from the recognition of
additional tax liability resulting from the Internal
Restructuring. The Sponsor Distributions to AMCI will be paid in
five equal installments on the dates for which estimated income
tax payments are due in each of April 2005, June 2005, September
2005, January 2006 and April 2006. The distributions to First
Reserve Fund IX, L.P. will be in an aggregate amount equal
to approximately $4.5 million, the approximate value of
certain tax attributes conveyed as a result of the Internal
Restructuring, and will be payable in installments of
$2.1 million, $2.1 million and $0.2 million on
December 15, 2007, 2008 and 2009, respectively. Pursuant to
the terms of the Internal Restructuring Agreement, we will
assume ANR Holdings' obligations with respect to the
Sponsor Distributions, which will be payable, at our option, in
cash or shares of our common stock.
Transactions in Connection with Internal
Restructuring
Immediately prior to the effectiveness of the
registration statement of which this prospectus is a part, we
will complete a series of transactions in connection with our
Internal Restructuring. The principal
107
Internal Restructuring transactions, to be
effective pursuant to the terms of our Internal Restructuring
Agreement, are summarized below:
•
Alpha Coal Management, LLC, the entity through
    which our executive officers and certain other key employees
    hold their interests in ANR Holdings prior to the Internal
    Restructuring, will be dissolved and liquidated, after which
    (1) the interests in ANR Holdings previously held by Alpha
    Coal Management will be distributed to and held directly by
    these officers and employees and (2) outstanding options
    granted by Alpha Coal Management to certain of our executive
    officers and other key employees under the Alpha Coal Management
    2004 Long-Term Incentive Plan will automatically convert into
    options to purchase up
    to            shares
    of our common stock at a weighted average exercise price of
    $          and
    we will assume the obligations of Alpha Coal Management under
    that plan.
•
ANR Holdings will declare the Sponsor
    Distributions described above and, in connection with the
    Internal Restructuring, we will assume the obligations of ANR
    Holdings to make the Sponsor Distributions. The Sponsor
    Distributions will be payable in cash or, to the extent we are
    not permitted by the terms of our credit facility or the
    indenture governing our senior notes to pay the Sponsor
    Distributions in cash, in shares of our common stock.
•
First Reserve Fund IX, L.P., the direct
    parent of Alpha NR Holding, Inc., will contribute all of the
    outstanding common stock of Alpha NR Holding, Inc. to us in
    exchange for shares of our common stock and a promissory note to
    be issued by us in a principal amount of
    $           million.
•
Affiliates of AMCI and other members of ANR
    Holdings (excluding Alpha NR Holding, Inc. and the members of
    our management who are the successors to Alpha Coal Management)
    will contribute all of their membership interests in ANR
    Holdings to us in exchange for shares of our common stock and
    promissory notes to be issued by us in an aggregate principal
    amount of
    $           million.
•
The officers and employees who are the members of
    Alpha Coal Management will contribute all of their interests in
    ANR Holdings to us in exchange for shares of our common stock.
•
We will declare a pro rata distribution to our
    existing stockholders in an aggregate amount equal to the net
    proceeds, if any, we receive upon an exercise by the
    underwriters of that option to purchase additional shares. We
    will also declare a pro rata distribution to our existing
    stockholders of shares of our common stock in an aggregate
    amount equal to (x) the number of additional shares the
    underwriters have the option to purchase minus (y) the
    actual number of shares the underwriters purchase from us
    pursuant to their over-allotment option.
•
On the closing date of this offering, we will use
    the net proceeds from this offering to repay the Restructuring
    Notes in full. The aggregate principal amount of the promissory
    notes and accrued interest thereon will be equal to the
    estimated net proceeds from this offering.
•
Following the closing of this offering, we intend
    to contribute the membership interests in ANR Holdings we
    directly hold to Alpha NR Holding, Inc. and another of our
    wholly-owned subsidiaries.
As part of the Internal Restructuring, we and our
Sponsors will amend certain of the post-closing arrangements
that are part of our acquisition of U.S. AMCI. Affiliates
of AMCI will post for our benefit a letter of credit or other
financial instrument satisfactory to us that will provide, for a
period of ten years, financial assurances supporting the
obligations of the AMCI parties to indemnify us under the
contribution agreement for the acquisition of U.S. AMCI in
respect of certain retiree medical liabilities. The letter of
credit or other financial instrument shall initially be in the
amount of $6.8 million, declining to $3.8 million in
the sixth and seventh years, and further declining to
$1.8 million in the eighth through tenth years. The escrow
and pledge agreements with the AMCI Parties and all of the First
Reserve purchase right arrangements described in
"— Transactions in Connection with 2003
Acquisitions" will be terminated.
108
The transactions described above will be effected
pursuant to an Internal Restructuring Agreement to be dated as
of                     ,
2005 among us, ANR Holdings and its members, and Alpha Coal
Management and its members. The Internal Restructuring Agreement
will be approved by our Board of Directors and the Boards of
Directors of ANR Holdings, Alpha Coal Management and the
governing bodies of the other parties to the agreement prior to
the consummation of the Internal Reorganization. Prior to such
time, our board of directors will also approve the issuances of
shares of our common stock pursuant to the terms of the
agreement.
Consummation of the transactions contemplated in
the Internal Restructuring Agreement is a condition to the
closing of this offering. The closing under the Internal
Restructuring is conditioned upon, among others, (1) the
approval of our lenders to amend our credit facility to permit
the Internal Restructuring, including the Sponsor Distributions,
(2) the expiration or termination of any applicable waiting
period under The Hart-Scott-Rodino Antitrust Improvements
Act of 1976, and (3) the absence of any law, regulation,
injunction or order prohibiting the consummation of the Internal
Restructuring.
The Internal Restructuring Agreement will provide
that each ANR Holdings member (including the management members)
who will receive shares of our common stock as a result of the
Internal Restructuring has agreed to release us and our past,
present and future affiliates from any and all claims such
member may have against ANR Holdings relating to events
occurring prior to the closing. We, in turn, will agree to
indemnify the members of ANR Holdings (including the management
members) with respect to any action which may be brought against
any member by reason of the fact that the member was a member,
managing member, executive committee member or officer of ANR
Holdings prior to the closing of the Internal Restructuring,
other than with respect to any acts committed in bad faith or
that were the result of active and deliberate dishonesty or from
which the member gained financial profit or another advantage to
which the member was not legally entitled.
The Internal Restructuring Agreement also will
require First Reserve Fund IX, L.P. to indemnify us against
certain pre-closing liabilities, including tax liabilities,
associated with Alpha NR Holding, Inc. in an amount not to
exceed $15.0 million for the first two years following
consummation of the agreement, at which time the amount for
which First Reserve will be obligated to indemnify will decline
to $10.0 million for two additional years.
Stockholder Agreement
We plan to enter into a stockholder agreement
with the First Reserve Stockholders, the AMCI Parties, Madison
Capital Funding LLC and our management stockholders that will
become effective upon consummation of the Internal Restructuring
and replace the current member agreement among these parties and
ANR Holdings.
Election of
Directors.
The stockholder agreement
will provide that our board of directors will consist of seven
members upon consummation of this offering. The board may be
subsequently expanded to include additional independent
directors as may be required by the rules of any exchange on
which shares of our common stock are traded. Each of the First
Reserve Stockholders and the AMCI Parties will designate two
nominees for election (initially, Messrs. Macaulay and
Krueger, as to the First Reserve Stockholders, and
Messrs. Kundrun and Mende as to the AMCI Parties). Our
board of directors will designate as directors our chief
executive officer (Mr. Quillen) and two other nominees who
must be "independent" as that term is defined by the
NYSE rules (initially Messrs. Draper and Fox), but the
independent nominees must be reasonably acceptable to both the
First Reserve Stockholders and the AMCI Parties. If at any time,
either the First Reserve Stockholders or the AMCI Parties and
their affiliates as a group beneficially own less than 5% of the
outstanding shares of our common stock, then the applicable
Sponsor will no longer be entitled to designate directors
pursuant to the stockholder agreement.
Registration Rights.
The stockholder agreement will provide that each of the First
Reserve Stockholders and the AMCI Parties will have the right in
certain circumstances after consummation of this offering to
require us to register their shares of common stock in
connection with a public offering and sale. In addition, in
connection with other registered offerings by us, existing
holders of shares of our
109
common stock will have the ability to exercise
certain piggyback registration rights with respect to the shares.
Other.
The
stockholder agreement also will contain certain limitations on
the transfers of our shares of common stock held by our existing
stockholders and the vesting provisions related to our
management's unvested shares described under
"Management Compensation— Management Stock."
Other Transactions
Mr. Kroh is a 50% owner of Robindale Energy
Services, Inc. (and its subsidiary) ("Robindale"),
which is engaged in the business of waste coal sales and related
businesses in Pennsylvania. From time to time, Robindale has
sold and purchased and may in the future sell or purchase waste
coal and related products to the operations of our AMFIRE
regional business unit in Pennsylvania. During 2003 and the nine
months ended September 30, 2004, our subsidiaries Alpha
Coal Sales and AMFIRE Mining, LLC paid an aggregate of $172,000
and $485,000, respectively, to Robindale as payment for trucking
services and waste coal. During the first nine months of 2004,
we had sales of $165,000 to Robindale. We have agreed that
Mr. Kroh's continued relationship with Robindale will
not cause a breach of his employment agreement with us, and
Mr. Kroh has agreed that he will not participate in any
decisions to enter into any transactions that might be proposed
between Robindale and Alpha.
Three of Alpha's subsidiaries lease office
space in Latrobe Pennsylvania from the KMKT Partnership, which
is 25% owned by Mr. Kroh. This arrangement is currently on
a month to month basis with rental payments accrued at
$12,000 per month. Negotiations are ongoing as to a term
lease for the office space; as yet, no agreement has been
finalized.
In connection with the hiring in October 2003 of
David Stuebe, our Vice President and Chief Financial Officer, we
extended to Mr. Stuebe a $100,000 relocation loan bearing
interest at a rate of 6%. Mr. Stuebe repaid all outstanding
principal and interest on this loan on March 31, 2004. In
connection with the hiring in February 2003 of Kevin
Crutchfield, our Executive Vice President, we extended to
Mr. Crutchfield a $79,600 relocation loan bearing interest
at a rate of 6.25%. Mr. Crutchfield repaid all outstanding
principal and interest on this loan during 2003.
On October 26, 2004, one of our subsidiaries
contracted in the ordinary course of our business to purchase an
aggregate of 500,000 tons of coal from subsidiaries of
Foundation Coal Holdings, Inc. ("Foundation"), with an
option to purchase up to 25,000 tons more upon agreement of the
parties. The coal is deliverable in monthly installments during
the period from January, 2005 through March, 2006.
Messrs. Mende, Krueger and Macaulay are members of our
board of directors who also serve as directors of Foundation.
First Reserve and AMCI beneficially own an aggregate combined of
56.8% of the outstanding shares of Foundation's common
stock.
During 2003 and during the first nine months of
2004, we purchased and sold coal from entities affiliated with
AMCI in the ordinary course of our business in transactions
valued at approximately $14.8 million and
$53.9 million, respectively. We are obligated to deliver
300,000 firm tons and 200,000 optional tons of coal during April
of 2005 through March 2006 to AMCI Metall & Kohle AG, a
company owned by Mr. Mende and Mr. Kundrun, under an
arrangement whereby we sell coal to AMCI Metall & Kohle
AG at a price that is $1.00 per metric ton less than the
price at which AMCI Metall & Kohle AG resells the
coal to an international customer. Other than this arrangement
with AMCI Metall & Kohle AG for coal shipped
during April 2005 through March 2006, since our acquisition of
U.S. AMCI we have not paid or agreed to pay any commission
or fee to Mr. Mende or Mr. Kundrun or any entities
affiliated with AMCI in connection with our coal transactions
with entities affiliated with AMCI.
110
DESCRIPTION OF INDEBTEDNESS
Senior Secured Credit Facility
General
In May 2004, Alpha Natural Resources, LLC, as the
borrower, and ANR Holdings, as parent guarantor, entered into a
senior secured credit facility with Citicorp North America,
Inc., as administrative agent, Citigroup Global Markets Inc. as
joint lead arranger, Credit Suisse First Boston as syndication
agent and joint lead arranger and UBS Securities LLC, as
documentation agent and joint lead arranger, and each lender
party thereto. The credit facility provides for
$175.0 million in senior secured financing, consisting of a
$125.0 million revolving credit facility and a funded
letter of credit facility of up to $50.0 million. The
revolving credit facility includes $20.0 million of
availability for borrowings on same-day notice, referred to as
swingline loans. The revolving credit facility commitment will
terminate in May 2009. In connection with this offering,
the credit facility will be amended to permit this offering and
the transactions contemplated by our Internal Restructuring.
As of September 30, 2004, we had
$4.0 million of indebtedness and $50.4 million of
letters of credit outstanding under our credit facility,
resulting in availability of $120.6 million.
Interest Rate and Fees
All borrowings under our credit facility bear
interest, at our option, at either: (A) an "alternate
base rate" equal to, for any day, the higher of:
(i) 0.50% per year above the overnight federal funds
effective rate, as published by the Board of Governors of the
Federal Reserve System, as in effect from time to time; and
(ii) the annual rate of interest in effect for that day
announced by the administrative agent as its "base
rate"
plus
a rate dependent on our leverage ratio,
ranging from 2.00% to 1.25% per year, or (B) a
"LIBO rate" expected to be equal to the rate (adjusted
for statutory reserve requirements for eurocurrency liabilities)
at which eurodollar deposits for the relevant interest period
(which will be one, two, three or six months, as selected by us)
are offered in the interbank eurodollar market, as determined by
the administrative agent,
plus
a rate dependent on our
leverage ratio, ranging from 3.00% to 2.25% per year. The
rates that depend on our leverage ratio range from the high rate
specified if the ratio is greater than or equal to 3.00 to 1.0
to the low rate specified if the ratio is less than 1.50 to 1.0.
In addition to paying interest on outstanding
principal under the revolving credit facility, we are required
to pay a usage-dependent commitment fee on the available unused
commitment under the revolving credit facility. The fee is equal
to: (a) 0.25% per year, in the event that the usage of
the revolving credit facility is at least 66.67%,
(b) 0.375% per year, in the event that the usage of
the revolving credit facility is at least 33.33% but less than
66.67%, and (c) 0.50% per year, in the event that the
usage of the revolving credit facility is less then 33.33%. For
purposes of calculating the commitment fee, swingline loans will
not be considered usage of the revolving credit facility. The
fee accrues quarterly.
We are also required to pay a letter of credit
fee calculated at a rate equal to the spread over the "LIBO
rate" under the credit facility per annum of the face
amount of each letter of credit and a fronting fee equal to a
percentage per annum, to be agreed with the issuing bank, of the
face amount of each letter of credit. In addition, we will pay
customary transaction charges in connection with any letters of
credit.
Prepayments
We are required to prepay borrowings under our
credit facility: (1) with 100% of the net cash proceeds
received by us from asset sales or other dispositions of
property (including insurance and other condemnation
proceedings), subject to certain exceptions and reinvestment
provisions, (2) with 100% of the net cash proceeds received
by us from the issuance of debt securities or other incurrences
of debt, excluding the senior notes of Alpha Natural Resources,
LLC and certain other indebtedness, and (3) 50% (or 25%, if
our leverage ratio is less than or equal to 2.00 to 1.00 but
greater than 1.00 to 1.00, or 0% if
111
our leverage ratio is less than or equal to 1.00
to 1.00) of the net cash proceeds of our equity issuances other
than this offering.
Guarantee and Security
Our obligations under our credit facility are
secured by a lien on the material assets of ANR Holdings and
Alpha Natural Resources, LLC and its domestic subsidiaries,
including: (1) a pledge by ANR Holdings of its membership
interests in Alpha Natural Resources, LLC, (2) a
pledge by Alpha Natural Resources, LLC and its direct and
indirect domestic subsidiaries of all of the capital stock (or
other ownership interests) of their respective domestic
subsidiaries and 65% of the capital stock of any of their
first-tier foreign subsidiaries, (3) material coal
reserves, mineral rights, leasehold interests and other material
real property and all related as-extracted collateral of ANR
Holdings and Alpha Natural Resources, LLC and its domestic
subsidiaries, (4) coal supply agreements and other material
contracts to which ANR Holdings and Alpha Natural Resources, LLC
and its domestic subsidiaries are a party and
(5) substantially all of the other personal property of ANR
Holdings and Alpha Natural Resources, LLC and its direct and
indirect subsidiaries, subject to certain exceptions in cases
where the cost of obtaining the liens exceeds the benefits
thereof. In addition, indebtedness under our credit facility is
guaranteed by ANR Holdings and the domestic subsidiaries of
Alpha Natural Resources, LLC.
Certain Covenants and Events of
    Default
Our credit facility contains a number of
covenants that restrict, among other things and subject to
certain exceptions, 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
•
declare distributions from subsidiaries.
112
The credit facility also includes customary
affirmative covenants and events of default. In addition, the
credit facility requires us to maintain the following financial
covenants:
•
we must maintain a leverage ratio, defined as the
    ratio of total debt to EBITDA (as defined in the credit
    agreement);
•
we must maintain an interest coverage ratio,
    defined as the ratio of EBITDA (as defined in the credit
    agreement), to cash interest expense (defined as the sum of cash
    interest expense plus cash letter of credit fees and
    commissions); and
•
a limitation on our capital expenditures.
10% Senior Notes due 2012
General
In May 2004, Alpha Natural Resources, LLC and its
wholly owned subsidiary Alpha Natural Resources Capital Corp.
(the "Issuers") issued $175.0 million
aggregate principal amount of 10% senior notes due
June 1, 2012. The Issuers issued the senior notes in
transactions exempt from or not subject to registration under
the Securities Act, pursuant to Rule 144A and
Regulation S under the Securities Act. Interest on the
senior notes accrues at the rate of 10% per annum and is
payable semi-annually on June 1 and December 1.
Ranking
The senior notes are the Issuers' senior
unsecured obligations and rank equally in right of payment to
all of the Issuers' existing and future senior unsecured
indebtedness; rank senior in right of payment to any future
senior subordinated indebtedness and subordinated indebtedness
of the Issuers; and are effectively subordinated in right of
payment to the Issuers' secured indebtedness (including
obligations under our credit facility) to the extent of the
value of the assets securing the indebtedness, and all
obligations of each of the Issuers' future subsidiaries
that are not guarantors.
Subsidiary Guarantees
The Issuers' obligations under the senior
notes are jointly and severally guaranteed on a senior unsecured
basis by all of Alpha Natural Resources, LLC's existing and
future domestic restricted subsidiaries.
Optional Redemption
The Issuers may redeem any of the senior notes at
any time on or after June 1, 2008, in whole or in part, in
cash at the redemption prices described in the indenture
governing the senior notes, plus accrued and unpaid interest to
the date of redemption. In addition, on or before June 1,
2007, the Issuers may redeem up to 35% of the aggregate
principal amount of senior notes at a redemption price equal to
110% of the principal amount of senior notes with the net
proceeds of certain underwritten equity offerings. The Issuers
may make that redemption only if it occurs within 180 days
of the consummation of the underwritten equity offering and if,
after the redemption, at least 65% of the aggregate
principal amount of senior notes remains outstanding. The
Issuers' may redeem any of the senior notes at any time
before June 1, 2008 in cash at 100% of the principal amount
plus accrued and unpaid interest to the date of redemption and a
make-whole premium.
Change of Control
Upon a change of control, we may be required to
make an offer to purchase each holder's senior notes at a
price equal to 101% of the principal amount thereof, plus
accrued and unpaid interest, if any, to the date of purchase.
113
Covenants
The indenture governing the senior notes contains
covenants that, among other things, limit our ability and the
ability of our restricted subsidiaries to:
•
incur additional indebtedness;
•
pay dividends on or make other distributions or
    repurchase the capital stock of the Issuers or their restricted
    subsidiaries;
•
make certain investments;
•
enter into certain types of transactions with
    affiliates;
•
create or permit to exist any limit on the
    ability of the Issuers' restricted subsidiaries to pay
    dividends or make other payments to the Issuers or their
    restricted subsidiaries, other than pursuant to the credit
    facility and the senior notes indenture;
•
use assets as security in other
    transactions; and
•
sell certain assets or merge with or into other
    companies.
These limitations are subject to a number of
important qualifications and exceptions as described in the
indenture governing the senior notes.
Events of Default
The indenture governing the senior notes also
provides for events of default which, if any of them occurs,
would permit or require the principal of and accrued interest on
the senior notes to become or to be declared due and payable. As
of September 30, 2004, we were in compliance in all
material respects with all covenants and provisions contained
under the indenture governing the senior notes.
Surety Bonds
Federal and state laws require surety bonds to
secure our obligations to reclaim lands disturbed for mining, to
pay federal and state workers' compensation and to satisfy
other miscellaneous obligations. The amount of these bonds
varies constantly, depending upon the amount of acreage
disturbed and the degree to which each property has been
reclaimed. Under federal law, partial bond release is provided
as mined lands (1) are backfilled and graded to approximate
original contour, (2) are re-vegetated and (3) achieve
pre-mining vegetative productivity levels on a sustained basis
for a period of five to 10 years.
We have a committed bonding facility with
Travelers Casualty and Surety Company of America, pursuant to
which Travelers has agreed, subject to certain conditions, to
issue certain surety bonds on behalf of us and our subsidiaries
in a maximum amount of $125.0 million. The bonding facility
is supported by letters of credit in an amount up to 50% of the
aggregate bond liability. As of September 30, 2004, we had
outstanding surety bonds with Travelers totaling
$89.0 million for post-mining reclamation and
$7.8 million for miscellaneous purposes, with no
self-bonding obligations.
114
DESCRIPTION OF CAPITAL STOCK
The following is a description of the material
terms of our restated certificate of incorporation and amended
and restated bylaws as each will be in effect as of the closing
of this offering. We refer you to our restated certificate of
incorporation and amended and restated bylaws, copies of which
will be filed as exhibits to the registration statement of which
this prospectus forms a part.
Authorized Capitalization
Our authorized capital stock consists of
(i) shares of common stock, par value $0.01 per share,
of
which                      shares
will be issued and outstanding immediately prior to the
effectiveness of the registration statement of which this
prospectus is a part and prior to the consummation of this
offering, and (ii) shares of preferred stock, par value
$0.01 per share, of which no shares will be issued and
outstanding. Immediately following the completion of this
offering, there are expected to
be                      shares
of common stock, shares of common stock if the underwriters
exercise in full their option to purchase additional shares, and
no shares of preferred stock, outstanding.
Common Stock
Voting Rights.
Holders of common stock are entitled to one vote per share on
all matters to be voted upon by the stockholders. The holders of
common stock do not have cumulative voting rights in the
election of directors.
Dividend Rights.
Subject to applicable law and rights, if any, of the holders of
any outstanding series of preferred stock or any class or series
of stock having a preference over the common stock with respect
to the payment of dividends, dividends may be declared and paid
on the common stock from time to time and in amounts as our
board of directors may determine. Our credit facility and the
indenture governing our senior notes impose restrictions on our
ability to declare dividends with respect to our common stock.
Liquidation Rights.
Upon any dissolution, liquidation or winding up, subject to any
rights of any outstanding series of preferred stock or any class
or series of stock having a preference over the common stock
with respect to the distribution of assets, our remaining assets
and funds will be distributed ratably to the holders of common
stock.
Other Matters.
The
common stock has no preemptive or conversion rights and is not
subject to further calls or assessment by us. There are no
redemption or sinking fund provisions applicable to the common
stock. All outstanding shares of our common stock, including the
common stock offered in this offering, are fully paid and
non-assessable.
Preferred Stock
Our restated certificate of incorporation
authorizes our board of directors to establish one or more
series of preferred stock and to determine, with respect to any
series of preferred stock, the terms and rights of that series,
including:
•
the designation of the series;
•
the number of shares of the series, which our
    board may, except where otherwise provided in the preferred
    stock designation, increase or decrease, but not below the
    number of shares then outstanding;
•
whether dividends, if any, will be cumulative or
    non-cumulative and the dividend rate of the series;
•
the dates at which dividends, if any, will be
    payable;
•
the redemption rights and price or prices, if
    any, for shares of the series;
115
•
the terms and amounts of any sinking fund
    provided for the purchase or redemption of shares of the series;
•
the amounts payable on shares of the series in
    the event of any voluntary or involuntary liquidation,
    dissolution or winding-up of the affairs of our company;
•
whether the shares of the series will be
    convertible into shares of any other class or series, or any
    other security, of our company or any other corporation, and, if
    so, the specification of the other class or series or other
    security, the conversion price or prices or rate or rates, any
    rate adjustments, the date or dates as of which the shares will
    be convertible and all other terms and conditions upon which the
    conversion may be made;
•
restrictions on the issuance of shares of the
    same series or of any other class or series; and
•
the voting rights, if any, of the holders of the
    series.
Anti-takeover Effects of Certain Provisions of
Our Amended and Restated Certificate of Incorporation and
Bylaws
Certain provisions of our restated certificate of
incorporation and amended and restated bylaws, which are
summarized in the following paragraphs, may have an
anti-takeover effect and may delay, defer or prevent a tender
offer or takeover attempt that a stockholder might consider in
its best interest, including those attempts that might result in
a premium over the market price for the shares held by
stockholders.
Removal of Directors; Vacancies
Our amended and restated bylaws provide that
directors may be removed with or without cause upon the
affirmative vote of holders of at least a majority of the shares
of stock entitled to vote generally in the election of
directors, voting together as a single class. In addition, our
amended and restated bylaws also provide that except as
otherwise provided in the stockholders agreement, any vacancies
on our board of directors and newly created directorships will
be filled only by the affirmative vote of a majority of the
remaining directors, although less than a quorum.
No Cumulative Voting
The DGCL provides that stockholders are not
entitled to the right to cumulate votes in the election of
directors unless our restated certificate of incorporation
provides otherwise. Our restated certificate of incorporation
prohibits cumulative voting.
Calling of Special Meetings of
Stockholders
Our amended and restated bylaws provide that
special meetings of our stockholders may be called only by the
chairman of our board, our President or by resolution of our
board of directors and shall be called by our President or
Secretary upon the written request of at least 10% in interest
of the stockholders entitled to vote at the meeting.
Stockholder Action by Written
Consent
Our amended and restated bylaws permit
stockholder action by written consent.
Advance Notice Requirements for Stockholder
Proposals and Director Nominations
Our amended and restated bylaws provide that
stockholders seeking to nominate candidates for election as
directors or to bring business before an annual meeting of
stockholders must provide timely notice of their proposal in
writing to the corporate secretary.
Generally, to be timely, a stockholder's
notice must be received at our principal executive offices not
less than 90 days nor more than 120 days prior to the
first anniversary date of the date on which the
116
company first mailed its proxy materials for the
previous year's annual meeting. Our amended and restated
bylaws also specify requirements as to the form and content of a
stockholder's notice. These provisions may impede
stockholders' ability to bring matters before an annual
meeting of stockholders or make nominations for directors at an
annual meeting of stockholders.
Amendments to Our Amended and Restated
Bylaws
Our restated certificate of incorporation grants
our board of directors the authority to amend and repeal our
bylaws without a stockholder vote in any manner not inconsistent
with the laws of the State of Delaware.
Limitations on Liability and Indemnification
of Officers and Directors
The DGCL authorizes corporations to limit or
eliminate the personal liability of directors to corporations
and their stockholders for monetary damages for breaches of
directors' fiduciary duties. Our restated certificate of
incorporation includes a provision that eliminates the personal
liability of directors for monetary damages for actions taken as
a director, except for liability:
•
for breach of duty of loyalty;
•
for acts or omissions not in good faith or
    involving intentional misconduct or knowing violation of law;
•
under Section 174 of the DGCL (unlawful
    dividends); or
•
for transactions from which the director derived
    improper personal benefit.
Our restated certificate of incorporation and
amended and restated bylaws provide that we must indemnify our
directors and officers to the fullest extent authorized by the
DGCL. We are also expressly authorized to carry directors'
and officers' insurance providing indemnification for our
directors, officers, employees and agents for some liabilities.
We believe that these indemnification provisions and insurance
are useful to attract and retain qualified directors and
executive officers.
The limitation of liability and indemnification
provisions in our restated certificate of incorporation and
amended and restated bylaws may discourage stockholders from
bringing a lawsuit against directors for breach of their
fiduciary duty. These provisions may also have the effect of
reducing the likelihood of derivative litigation against
directors and officers, even though a derivative action, if
successful, might otherwise benefit us and our stockholders. In
addition, your investment may be adversely affected to the
extent we pay the costs of settlement and damage awards against
directors and officers pursuant to these indemnification
provisions.
There is currently no pending material litigation
or proceeding involving any of our directors, officers,
employees or agents for which indemnification is sought.
Corporate Opportunities
Our restated certificate of incorporation will
provide for the allocation of certain corporate opportunities
between us, on the one hand, and the First Reserve Stockholders,
the AMCI Parties, and their affiliates, on the other hand.
Specifically:
•
None of the First Reserve Stockholders, the AMCI
    Parties, or the funds or other entities controlled by them (each
    a "Control Stockholder," and collectively, the
    "Control Stockholders") or any director, officer,
    member, partner, stockholder or employee of a Control
    Stockholder (each a "Specified Party") will have any
    duty to refrain from engaging directly or indirectly in the same
    or similar business activities or lines of business as we do.
•
Except as noted below, we renounce any interest
    or expectancy that we may have in any potential transaction
    which may be a corporate opportunity for any Control Stockholder
    or Specified Party, as applicable, on the one hand, and us, on
    the other hand, and therefore, none of the Control
117
Stockholders or Specified Parties will have any
    duty to communicate or offer any such corporate opportunity to
    us, and will be entitled to pursue or acquire such opportunity
    for itself, and we will have no right in or to any such
    opportunity. Notwithstanding the prior sentence, we are not
    renouncing any interest or expectancy in any such corporate
    opportunity that is offered to any Control Stockholder or
    Specified Party that is also one of our directors, officers, or
    employees, if (i) such opportunity is expressly offered to
    such Control Stockholder or Specified Party solely in, and as a
    direct result of, his or her capacity as our director, officer
    or employee; (ii) we would be permitted to undertake the
    opportunity under our amended and restated certificate of
    incorporation, and (iii) we have sufficient financial
    resources and are in a line of business to undertake the
    opportunity.
Delaware Anti-Takeover Statute
We have opted out of Section 203 of the
DGCL. Subject to specified exceptions, Section 203
prohibits a publicly held Delaware corporation from engaging in
a "business combination" with an "interested
stockholder" for a period of three years after the date of
the transaction in which the person became an interested
stockholder. "Business combinations" include mergers,
asset sales and other transactions resulting in a financial
benefit to the "interested stockholder." Subject to
various exceptions, an "interested stockholder" is a
person who together with his or her affiliates and associates,
owns, or within three years did own, 15% or more of the
corporation's outstanding voting stock. These restrictions
generally prohibit or delay the accomplishment of mergers or
other takeover or change-in-control attempts.
Transfer Agent and Registrar
is
the transfer agent and registrar for our common stock.
Listing
We intend to apply to list our common stock on
the New York Stock Exchange under the symbol "ANR."
Authorized but Unissued Capital
Stock
The DGCL does not require stockholder approval
for any issuance of authorized shares. However, the listing
requirements of the New York Stock Exchange, which would apply
so long as our common stock is listed on the New York Stock
Exchange, require stockholder approval of certain issuances
equal to or exceeding 20% of the then-outstanding voting power
or then outstanding number of shares of common stock. These
additional shares may be used for a variety of corporate
purposes, including future public offerings, to raise additional
capital or to facilitate acquisitions.
One of the effects of the existence of unissued
and unreserved common stock may be to enable our board of
directors to issue shares to persons friendly to current
management, which issuance could render more difficult or
discourage an attempt to obtain control of our company by means
of a merger, tender offer, proxy contest or otherwise, and
thereby protect the continuity of our management and possibly
deprive the stockholders of opportunities to sell their shares
of common stock at prices higher than prevailing market prices.
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SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has not been any
public market for our common stock, and we cannot predict what
effect, if any, market sales of shares of common stock or the
availability of shares of common stock for sale will have on the
market price of our common stock. Nevertheless, sales of
substantial amounts of common stock in the public market, or the
perception that such sales could occur, could materially and
adversely affect the market price of our common stock and could
impair our future ability to raise capital through the sale of
our equity or equity-related securities at a time and price that
we deem appropriate.
Upon the closing of this offering, we will have
outstanding an aggregate of
approximately            million
shares of common stock. Of the outstanding shares, the shares
sold in this offering 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 be sold in the
public market only if registered or if they qualify for an
exemption from registration under Rule 144 or 144(k) under
the Securities Act, which are summarized below.
Subject to the lock-up agreements described below
and the provisions of Rules 144 and 144(k), additional
shares of our common stock will be available for sale in the
public market under exemptions from registration requirements as
follows:
Number of Shares
Date
After    days from the date of
    this prospectus (subject to volume limitations and other
    conditions under Rule 144)
At various times
    after     days from the date of this
    prospectus (Rule 144(k))
Rule 144
In general, under Rule 144 as currently in
effect, a person (or persons whose shares are required to be
aggregated), including an affiliate, who has beneficially owned
shares of our common stock for at least one year is entitled to
sell in any three-month period a number of shares that does not
exceed the greater of:
•
1% of the then-outstanding shares of common stock
    or approximately million shares assuming no exercise by the
    underwriters of their option to purchase additional
    shares; and
•
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
manner of sale provisions and notice requirements and to the
availability of current public information about us.
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.
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Lock-Up Agreements
We, our stockholders existing prior to this
offering and our directors and executive officers have agreed
with the underwriters not to sell, dispose of or hedge any of
their common stock or securities convertible into or
exchangeable for shares of common stock during the period,
subject to certain exceptions, from the date of this prospectus
continuing through the date 180 days after the date of this
prospectus, except with the prior written consent of Morgan
Stanley & Co. Incorporated and Citigroup Global Markets
Inc.
The restrictions described in the previous
sentence do not apply to:
•
the issuance of shares of common stock in
    connection with the Internal Restructuring;
•
the sale of shares of common stock to the
    underwriters pursuant to this offering;
•
the issuance by us of shares of common stock
    pursuant to the exercise of an option, warrant or similar
    security;
•
the grant of options or stock under our benefit
    plans;
•
transactions by any person other than us relating
    to shares of our common stock acquired in open market
    transactions after completion of this offering; or
•
the issuance of common stock in connection with
    the acquisition of, or joint venture with, another company.
Certain of our executive officers have advised us
that they intend to sell shares of our common stock over a
period of time, subject to the foregoing restrictions. We
anticipate that these sales will be effected under trading plans
in accordance with Rule 10b5-1 under the Securities
Exchange Act of 1934.
Registration Rights
In connection with the Internal Restructuring,
current members of ANR Holdings will become stockholders of
Alpha Natural Resources, Inc. and will enter into a stockholder
agreement with Alpha Natural Resources, Inc. The stockholder
agreement will provide that existing holders of 10% or more of
the outstanding shares of our common stock, including the First
Reserve Stockholders and the AMCI Parties, will have the right
in certain circumstances after we have registered a class of our
equity securities to require us to register their shares of
common stock in connection with a public offering and sale. In
addition, in connection with other registered offerings by us,
existing holders of shares of our common stock will have the
ability to exercise certain piggyback registration rights with
respect to such shares.
Stock Options
In accordance with the terms of the Alpha Coal
Management Long-Term Incentive Plan and our Internal
Restructuring Agreement, the options held by our executive
officers and key employees in Alpha Coal Management will be
automatically converted in connection with the Internal
Restructuring into options to purchase our common stock having
substantially the same vesting, expiration and other terms, and
we will assume the obligations of Alpha Coal Management under
the Alpha Coal Management Long-Term Incentive Plan. Immediately
prior to the effectiveness of the registration statement of
which this prospectus is a part, there will be outstanding under
the Alpha Coal Management Long-Term Incentive Plan options to
purchase an aggregate
of              shares
of our common stock (the maximum number of shares currently
available for awards under the plan) at a weighted average
exercise price of
$           per
share. These options will vest over a period of five years and
expire on November 10, 2014.
We may also grant options to purchase shares of
our common stock under our Long Term Incentive Plan. The total
numbers of shares of our common stock initially available for
issuance or delivery under our Long-Term Incentive Plan will
be                      shares.
Upon consummation of this offering, we will grant options to
members of senior management and key employees under our Long
Term Incentive Plan to
120
purchase an aggregate of
approximately                      shares
of our common stock at an exercise price equal to the price per
share at which shares are sold to the public in this offering.
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 and otherwise
reserved for issuance under the Alpha Coal Management Long-term
Incentive Plan and the Long Term Incentive Plan, and to register
the resale of our common stock issued to members of our
management as part of the Internal Restructuring. 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.
121
MATERIAL U.S. FEDERAL INCOME AND ESTATE
TAX CONSEQUENCES
TO NON-U.S. HOLDERS
The following is a summary of certain 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:
•
an individual citizen or resident of the United
    States;
•
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;
•
an estate the income of which is subject to
    United States federal income taxation regardless of its
    source; or
•
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," or corporation that
accumulates earnings to avoid United States federal income tax).
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
In the event that we pay dividends, 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 (and, where a
tax treaty applies, are attributable to a United States
permanent establishment of the non-U.S. holder) are not
subject to the withholding tax, provided certain certification
and disclosure requirements are satisfied. Instead, such
dividends are 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.
122
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:
•
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;
•
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
•
we are or have been a "United States real
    property holding corporation" for United States federal
    income tax purposes.
An individual 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 generally 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 is
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 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 or our common stock was 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 held 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.
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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 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.
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.
124
UNDERWRITING
Alpha Natural Resources, Inc. and the
underwriters named below have entered into an underwriting
agreement with respect to the shares being offered. Subject to
certain conditions, each underwriter has severally agreed to
purchase the number of shares indicated in the following table.
Morgan Stanley & Co. Incorporated and Citigroup Global
Markets Inc. are acting as joint book-running managers and
representatives of the underwriters.
Underwriters
Number of Shares
Morgan Stanley & Co. Incorporated
Citigroup Global Markets Inc.
UBS Securities LLC
Total
The underwriters are committed to take and pay
for all of the shares of common stock being offered, if any are
taken, other than the shares of common stock covered by the
option described below unless and until this option is exercised.
If the underwriters sell more shares of common
stock than the total number set forth in the table above, the
underwriters have an option to buy up to an
additional                      shares
of common stock from Alpha Natural Resources, Inc. They may
exercise that option for 30 days. If any shares of common
stock are purchased pursuant to this option, the underwriters
will severally purchase shares of common stock in approximately
the same proportion as set forth in the table above.
The following table shows the per share and total
underwriting discount to be paid to the underwriters by Alpha
Natural Resources, Inc. Such amounts are shown assuming both no
exercise and full exercise of the underwriters'
over-allotment option to
purchase                     additional
shares of common stock from us.
Paid by Alpha Natural Resources, Inc.
No Exercise
Full Exercise
Per Share
$
$
Total
$
$
Shares of common stock sold by the underwriters
to the public will initially be offered at the initial public
offering price set forth on the cover of this prospectus. Any
shares of common stock sold by the underwriters to securities
dealers may be sold at a discount of up to
$           per
share from the initial public offering price. Any such
securities dealers may resell any shares of common stock
purchased from the underwriters to certain other brokers or
dealers at a discount of up to
$           per
share from the initial public offering price. If all the shares
of common stock are not sold at the initial public offering
price, the representatives may change the offering price and the
other selling terms.
Alpha Natural Resources, Inc. and its directors,
executive officers and stockholders existing prior to this
offering have agreed with the underwriters not to sell, dispose
of or hedge any of their common stock or securities convertible
into or exchangeable for shares of common stock, subject to
certain exceptions, during the period from the date of this
prospectus continuing through the date that is 180 days
after the date of this prospectus, except with the prior written
consent of Morgan Stanley & Co. Incorporated and
Citigroup Global Markets Inc.
Prior to this offering, there has been no public
market for the common stock. The initial public offering price
was determined by negotiations between us and the
representatives of the underwriters. Among the factors
considered in determining the initial public offering price were
our future prospects and those of our industry in general, our
sales, earnings and certain other financial and operating
information in recent periods, and the price-earnings ratios,
price-book value ratios, market prices of securities and certain
financial and operating information of companies engaged in
activities similar to ours.
125
We intend to list our common stock on the New
York Stock Exchange under the symbol "ANR." In order
to meet one of the requirements for listing the common stock on
the New York Stock Exchange, the underwriters have undertaken to
sell lots of 100 or more shares of common stock to a minimum of
2,000 beneficial holders.
In connection with the offering, the underwriters
may purchase and sell shares of common stock in the open market.
These transactions may include short sales, stabilizing
transactions and purchases to cover positions created by short
sales. Short sales involve the sale by the underwriters of a
greater number of shares of common stock than they are required
to purchase in the offering. "Covered" short sales are
sales made in an amount not greater than the underwriters'
option to purchase additional shares of common stock from Alpha
Natural Resources, Inc. The underwriters may close out any
covered short position by either exercising their option to
purchase additional shares of common stock or purchasing shares
of common stock in the open market. In determining the source of
shares to close out the covered short position, 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 additional shares of common stock
pursuant to the option granted to them. "Naked" short
sales are any sales in excess of such option. The underwriters
must close out any naked short position by purchasing shares of
common stock 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 after pricing that could adversely affect
investors who purchase in the offering. Stabilizing transactions
consist of various bids for or purchases of common stock made by
the underwriters in the open market prior to the completion of
the offering.
The underwriters may also 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 of common
stock sold by or for the account of such underwriter in
stabilizing or short covering transactions.
Purchases to cover a short position and
stabilizing transactions may have the effect of preventing or
retarding a decline in the market price of Alpha Natural
Resources, Inc.'s stock, and together with the imposition
of the penalty bid, may stabilize, maintain or otherwise affect
the market price of the common stock. As a result, the price of
the 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 at any time. These
transactions may be effected on the New York Stock Exchange, in
the over-the-counter market or otherwise.
Each underwriter has represented, warranted and
agreed that: (i) it has not offered or sold and, prior to
the expiry of a period of six months from the closing of the
offering, will not offer or sell any shares of common stock to
persons in the United Kingdom except to persons whose ordinary
activities involve them in acquiring, holding, managing or
disposing of investments (as principal or agent) for the
purposes of their businesses or otherwise in circumstances which
have not resulted and will not result in an offer to the public
in the United Kingdom within the meaning of the Public Offers of
Securities Regulations 1995; (ii) it has only communicated
or caused to be communicated and will only communicate or cause
to be communicated any invitation or inducement to engage in
investment activity (within the meaning of section 21 of
the Financial Services and Markets Act 2000 ("FSMA"))
received by it in connection with the issue or sale of any
shares in circumstances in which section 21(1) of the FSMA
does not apply to Alpha Natural Resources, Inc.; and
(iii) it has complied and will comply with all applicable
provisions of the FSMA with respect to anything done by it in
relation to the shares in, from or otherwise involving the
United Kingdom.
The shares may not be offered or sold,
transferred or delivered, as part of their initial distribution
or at any time thereafter, directly or indirectly, to any
individual or legal entity in the Netherlands other than to
individuals or legal entities who or which trade or invest in
securities in the conduct of their profession or trade, which
includes banks, securities intermediaries, insurance companies,
pension funds, other
126
institutional investors and commercial
enterprises which, as an ancillary activity, regularly trade or
invest in securities.
The underwriters do not expect sales to
discretionary accounts to exceed five percent of the total
number of shares of common stock offered.
Alpha Natural Resources, Inc. estimates that the
total expenses of the offering, excluding underwriting discounts
and commissions, will be approximately
$          .
Alpha Natural Resources, Inc. has agreed to
indemnify the several underwriters against certain liabilities,
including liabilities under the Securities Act of 1933 or to
contribute to payments the underwriters may be required to make
because of any of these liabilities.
At our request, the underwriters have
reserved                               shares
of common stock to be issued by us and offered by this
prospectus for sale, at the initial public offering price, to
directors, officers, employees, business associates and related
persons of Alpha Natural Resources, Inc. The number of shares of
common stock available for sale to the general public will be
reduced to the extent these individuals purchase the reserved
shares. Any reserved shares that are not so purchased will be
offered by the underwriters to the general public on the same
basis as the other shares offered by this prospectus.
The underwriters and their affiliates have from
time to time provided, and expect to provide in the future,
investment banking, commercial banking and other financial
services to us and our affiliates for which they have received
and may continue to receive customary fees and commissions.
Morgan Stanley & Co. Incorporated, Citigroup Global
Markets Inc. and UBS Securities LLC were initial purchasers in
connection with the offering of our subsidiaries', Alpha
Natural Resources, LLC and Alpha Natural Resources Capital Corp,
10% senior notes due 2012. UBS Securities LLC and Citigroup
Global Markets Inc. were also joint-lead arrangers of Alpha
Natural Resources, LLC's credit facility. In addition, UBS
Securities LLC and Citicorp North America, Inc., an affiliate of
Citigroup Global Markets Inc., are lenders under the credit
facility and act as the documentation agent and the
administrative agent, respectively, under the credit facility.
Morgan Stanley Senior Funding, Inc. and UBS Loan Finance
LLC, affiliates of Morgan Stanley & Co. Incorporated
and UBS Securities, LLC, respectively, and Citicorp North
America, Inc., are also lenders under the credit facility. An
affiliate of Morgan Stanley & Co. Incorporated holds less
than a one percent interest in First Reserve Fund IX, L.P.,
one of the First Reserve Stockholders.
A prospectus in electronic format may be made
available on the websites maintained by one or more of the
underwriters. The representatives may agree to allocate a number
of shares to underwriters for sale to their online brokerage
account holders. The representatives will allocate shares to
underwriters that may make Internet distributions on the same
basis as other allocations. In addition, shares may be sold by
the underwriters to securities dealers who resell shares to
online brokerage account holders.
127
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 Bartlit Beck Herman Palenchar & Scott LLP,
Denver, Colorado. Certain matters of New York law will be
passed upon for us by Simpson Thacher & Bartlett LLP,
New York, New York. Latham & Watkins LLP, New York, New
York will act as counsel to the underwriters.
EXPERTS—INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
The combined financial statements of ANR
Fund IX Holdings, L.P. and Alpha NR Holding, Inc. and
subsidiaries (the "Company" or "Successor")
as of September 30, 2004, and December 31, 2003 and
2002, and for the nine months ended September 30, 2004, the
year ended December 31, 2003 and the period from
December 14, 2002 to December 31, 2002 (the
"Successor Periods"), and the combined financial
statements for the period from January 1, 2002 to
December 13, 2002 and the year ended December 31, 2001
("Predecessor Periods"), have been included herein and
in the registration statement of which this prospectus forms a
part in reliance upon the report of KPMG LLP, independent
registered public accounting firm, appearing elsewhere herein,
and upon the authority of said firm as experts in accounting and
auditing. The audit report covering the combined financial
statements contains an explanatory paragraph that states that
effective December 13, 2002, the Company acquired the
majority of the Virginia coal operations of Pittston Coal
Company, a subsidiary of The Brink's Company (formerly
known as The Pittston Company), in a business combination
accounted for as a purchase. As a result of the acquisition, the
combined financial information for the period after the
acquisition is presented on a different cost basis than that for
the periods before the acquisition and, therefore, is not
comparable.
The consolidated financial statements of Coastal
Coal Company, LLC and subsidiary as of December 31, 2002,
and for the period from January 1, 2003 to January 31,
2003 and the year ended December 31, 2002, have been
included herein and in the registration statement of which this
prospectus forms a part in reliance upon the report of KPMG LLP,
independent accountants, appearing elsewhere herein, and upon
the authority of said firm as experts in accounting and
auditing. The audit report covering the consolidated financial
statements refers to the adoption by Coastal Coal Company, LLC
and subsidiary of the provisions of FASB Statement No. 143,
Accounting for Asset Retirement Obligations
, effective
January 1, 2003.
The combined financial statements of the North
American Division of American Metals and Coal International,
Inc. and Affiliates as of December 31, 2002, and for the
period from January 1, 2003 to March 11, 2003 and the
year ended December 31, 2002, have been included herein and
in the registration statement of which this prospectus forms a
part in reliance upon the report of KPMG LLP, independent
accountants, appearing elsewhere herein, and upon the authority
of said firm as experts in accounting and auditing. The audit
report covering the combined financial statements refers to the
adoption by the North American Division of American Metals and
Coal International, Inc. and Affiliates of the provisions of
FASB Statement No. 143,
Accounting for Asset Retirement
Obligations
, effective January 1, 2003.
The combined financial statements of The Combined
Pennsylvania Entities of Mears Enterprises, Inc. as of
December 31, 2002 and 2001, and for the period from
January 1, 2003 to November 17, 2003 and the years
ended December 31, 2002 and 2001, have been included herein
and in the registration statement of which this prospectus forms
a part in reliance upon the report of KPMG LLP, independent
accountants, appearing elsewhere herein, and upon the authority
of said firm as experts in accounting and auditing. The audit
report covering the combined financial statements refers to the
adoption by The Combined Pennsylvania Entities of Mears
Enterprises, Inc. of the provisions of FASB Statement
No. 143,
Accounting for Asset Retirement
Obligations
, effective January 1, 2003.
128
EXPERTS—COAL RESERVES
The information appearing in this prospectus
concerning estimates of our proven and probable coal reserves
was prepared by Marshall Miller & Associates, Inc. and
has been included herein upon the authority of this firm as an
expert.
WHERE YOU CAN FIND ADDITIONAL
INFORMATION
We have filed with the Securities and Exchange
Commission (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 hereby.
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 Securities Exchange Act of
1934 (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. Such materials may also be accessed
electronically by means of the SEC's home page on the
Internet (http://www.sec.gov).
129
INDEX TO FINANCIAL STATEMENTS
ANR Fund IX Holdings, L.P. and Alpha NR
    Holding, Inc. and Subsidiaries
Report of Independent Registered Public
    Accounting Firm
F-2
Combined Balance Sheets, September 30, 2004
    and December 31, 2003 and 2002
F-3
Combined Statements of Operations, nine months
    ended September 30, 2004 and 2003 (unaudited), year ended
    December 31, 2003 and period from December 14, 2002 to
    December 31, 2002 (Successor Periods), and period from
    January 1, 2002 to December 13, 2002 and year ended
    December 31, 2001 (Predecessor Periods)
F-4
Combined Statements of Stockholder's Equity
    and Partners' Capital, nine months ended September 30,
    2004 and year ended December 31, 2003 and period from
    December 14, 2002 to December 31, 2002 (Successor
    Periods), and period from January 1, 2002 to
    December 13, 2002 and year ended December 31, 2001
    (Predecessor Periods)
F-5
Combined Statements of Cash Flows, nine months
    ended September 30, 2004 and 2003 (unaudited), year ended
    December 31, 2003 and period from December 14, 2002 to
    December 31, 2002 (Successor Periods), and period from
    January 1, 2002 to December 13, 2002 and year ended
    December 31, 2001 (Predecessor Periods)
F-6
Notes to Combined Financial Statements
F-8
Coastal Coal Company, LLC and
    Subsidiary
Independent Auditors' Report
F-46
Consolidated Balance Sheet, December 31, 2002
F-47
Consolidated Statements of Operations, period
    from January 1, 2003 to January 31, 2003 and year
    ended December 31, 2002
F-48
Consolidated Statements of Changes in
    Members' Equity and Comprehensive Income (Loss), period
    from January 1, 2003 to January 31, 2003 and year
    ended December 31, 2002
F-49
Consolidated Statements of Cash Flows, period
    from January 1, 2003 to January 31, 2003 and year
    ended December 31, 2002
F-50
Notes to Consolidated Financial Statements
F-51
North American Division of American Metals and
    Coal International, Inc. and Affiliates
Independent Auditors' Report
F-62
Combined Balance Sheet, December 31, 2002
F-63
Combined Statements of Operations, period from
    January 1, 2003 to March 11, 2003 and year ended
    December 31, 2002
F-64
Combined Statements of Stockholders' Equity
    and Partners' Capital, period from January 1, 2003 to
    March 11, 2003 and year ended December 31, 2002
F-65
Combined Statements of Cash Flows, period from
    January 1, 2003 to March 11, 2003 and year ended
    December 31, 2002
F-66
Notes to Combined Financial Statements
F-67
The Combined Pennsylvania Entities of Mears
    Enterprises, Inc.
Independent Auditors' Report
F-82
Combined Balance Sheets, December 31, 2002
    and 2001
F-83
Combined Statements of Income, period from
    January 1, 2003 to November 17, 2003 and years ended
    December 31, 2002 and 2001
F-84
Combined Statements of Stockholders' Equity
    and Partners' Capital, period from January 1, 2003 to
    November 17, 2003 and years ended December 31, 2002
    and 2001
F-85
Combined Statements of Cash Flows, period from
    January 1, 2003 to November 17, 2003 and years ended
    December 31, 2002 and 2001
F-86
Notes to Combined Financial Statements
F-87
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
The Board of Directors
ANR Holdings, LLC:
We have audited the accompanying combined balance
sheets of ANR Fund IX Holdings, L.P. and Alpha NR Holding, Inc.
and subsidiaries (the Company or Successor) as of
September 30, 2004, and December 31, 2003 and 2002,
and the related combined statements of operations,
stockholder's equity and partners' capital, and cash
flows for the nine months ended September 30, 2004, the
year ended December 31, 2003, and the period from
December 14, 2002 to December 31, 2002 (Successor
Periods), and the combined statements of operations,
shareholder's equity, and cash flows for the period from
January 1, 2002 to December 13, 2002, and the year
ended December 31, 2001 (Predecessor Periods). These
combined financial statements are the responsibility of the
Company's management. Our responsibility is to express an
opinion on these combined 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 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.
In our opinion, the aforementioned Successor
combined financial statements present fairly, in all material
respects, the financial position of ANR Fund IX Holdings,
L.P. and Alpha NR Holding, Inc. and subsidiaries as of
September 30, 2004, and December 31, 2003 and 2002,
and the results of their operations and their cash flows for the
Successor Periods, in conformity with U.S. generally accepted
accounting principles. Further, in our opinion, the
aforementioned Predecessor combined financial statements present
fairly, in all material respects, the results of their
operations and their cash flows for the Predecessor Periods, in
conformity with U.S. generally accepted accounting principles.
As discussed in note 1 to the combined
financial statements, effective December 13, 2002, the
Company acquired the majority of the Virginia coal operations of
Pittston Coal Company, a subsidiary of The Brink's Company
(formerly known as The Pittston Company), in a business
combination accounted for as a purchase. As a result of the
acquisition, the combined financial information for the periods
after the acquisition is presented on a different cost basis
than that for the periods before the acquisition and, therefore,
is not comparable.
/s/ KPMG LLP
KPMG LLP
Roanoke, Virginia
November 19, 2004
F-2
ANR FUND IX HOLDINGS, L.P. AND ALPHA NR
HOLDING, INC. AND SUBSIDIARIES
COMBINED BALANCE SHEETS
(In thousands, except share and per share
data)
December 31,
September 30,
2004
2003
2002
Assets
Current assets:
Cash and cash equivalents
$
15,811
$
11,246
$
8,444
Trade accounts receivable, net
97,475
70,205
7,467
Notes and other receivables
9,765
4,742
—
Inventories
52,684
33,113
16,558
Due from affiliate
323
3,770
—
Deferred income taxes
1,046
489
—
Prepaid expenses and other current assets
9,778
19,256
428
Total current assets
186,882
142,821
32,897
Property, plant, and equipment, net
217,055
198,147
69,898
Goodwill
18,641
17,121
—
Other intangibles, net
1,551
2,896
3,966
Deferred income taxes
—
—
334
Other assets
33,694
18,351
1,347
Total assets
$
457,823
$
379,336
$
108,442
Liabilities and Stockholder's Equity and
    Partners' Capital
Current liabilities:
Current portion of long-term debt
$
1,723
$
13,329
$
11,243
Note payable
2,638
14,425
—
Notes payable to affiliate
—
—
23,953
Bank overdraft
6,250
5,854
—
Trade accounts payable
60,803
41,357
3,223
Accrued expenses and other current liabilities
64,617
35,142
6,701
Total current liabilities
136,031
110,107
45,120
Long-term debt, net of current portion
181,256
57,210
14,500
Workers' compensation benefits
3,934
1,660
—
Postretirement medical benefits
13,490
10,662
5,951
Asset retirement obligation
33,933
32,607
13,945
Deferred gains on sales of property interests
6,536
6,934
—
Deferred income taxes
3,828
823
—
Other liabilities
5,009
6,486
5,542
Total liabilities
384,017
226,489
85,058
Minority interest
28,921
66,480
—
Stockholder's Equity and Partners'
    Capital:
Alpha NR Holding, Inc.:
Preferred stock— par value $0.01,
    1,000 shares authorized, none issued
—
—
—
Common stock— par value $0.01,
    1,000 shares authorized, 100 shares issued and
    outstanding
—
—
—
Additional paid-in capital
22,153
75,710
21,384
Retained earnings (accumulated deficit)
17,751
1,442
(529
)
Total Alpha NR Holding, Inc. stockholder's
    equity
39,904
77,152
20,855
ANR Fund IX Holdings, L.P.:
Partners' capital
4,981
9,215
2,529
Total stockholder's equity and
    partners' capital
44,885
86,367
23,384
Total liabilities and stockholder's equity
    and partners' capital
$
457,823
$
379,336
$
108,442
See accompanying notes to combined financial
statements.
F-3
ANR FUND IX HOLDINGS, L.P. AND ALPHA NR
HOLDING, INC. AND SUBSIDIARIES
COMBINED STATEMENTS OF OPERATIONS
(In thousands)
Company
Predecessor
Period from
Period from
Nine Months Ended
December 14,
January 1,
September 30,
Year Ended
2002 to
2002 to
Year Ended
December 31,
December 31,
December 13,
December 31,
2004
2003
2003
2002
2002
2001
(unaudited)
Revenues:
Coal revenues
$
808,655
$
504,660
$
701,262
$
6,260
$
154,715
$
227,237
Freight and handling revenues
106,291
49,803
73,800
1,009
17,001
25,808
Other revenues
22,117
11,244
17,504
101
6,031
8,472
Total revenues
937,063
565,707
792,566
7,370
177,747
261,517
Costs and expenses:
Cost of coal sales
677,100
450,731
632,979
6,268
158,924
219,545
Freight and handling costs
106,291
49,803
73,800
1,009
17,001
25,808
Cost of other revenues
16,943
11,532
16,750
120
7,973
8,156
Depreciation, depletion and amortization
39,352
25,806
36,054
274
6,814
7,866
Asset impairment charge
5,100
—
—
—
—
—
Selling, general and administrative expenses
35,786
16,697
21,949
471
8,797
9,370
Costs to exit business
—
—
—
—
25,274
3,500
Total costs and expenses
880,572
554,569
781,532
8,142
224,783
274,245
Refund of federal black lung excise tax
—
—
—
—
2,049
16,213
Gain on sale of fixed assets, net
342
—
—
—
—
—
Other operating income, net
—
—
—
—
1,430
94
Income (loss) from operations
56,833
11,138
11,034
(772
)
(43,557
)
3,579
Other income (expense):
Interest expense
(14,497
)
(5,964
)
(7,848
)
(203
)
(35
)
—
Interest income
331
91
103
6
2,072
1,993
Miscellaneous income
527
451
575
—
—
1,250
Total other income (expense), net
(13,639
)
(5,422
)
(7,170
)
(197
)
2,037
3,243
Income (loss) before income taxes and minority
    interest
43,194
5,716
3,864
(969
)
(41,520
)
6,822
Income tax expense (benefit)
4,732
988
668
(334
)
(17,198
)
(1,497
)
Income (loss) before minority interest
38,462
4,728
3,196
(635
)
(24,322
)
8,319
Minority interest
19,562
1,750
934
—
—
—
Net income (loss)
$
18,900
$
2,978
$
2,262
$
(635
)
$
(24,322
)
$
8,319
See accompanying notes to combined financial
statements.
F-4
ANR FUND IX HOLDINGS, L.P. AND ALPHA NR
HOLDING, INC. AND SUBSIDIARIES
COMBINED STATEMENTS OF STOCKHOLDER'S
EQUITY AND PARTNERS' CAPITAL
(In thousands)
Retained
Net
Deferred
Earnings
Receivables
Taxes
Capital
(Accumulated
Company
from
Receivable
Predecessor
Contributions
Deficit)
Equity
Affiliates
from Parent
Total
Balances, December 31, 2000
$
—
$
—
$
51,034
$
(124,525
)
$
(68,576
)
$
(142,067
)
Net income
—
—
8,319
—
—
8,319
Capital contribution
—
—
151,956
(151,956
)
—
—
Affiliate transactions, net
—
—
—
(2,893
)
41
(2,852
)
Other
—
—
4
—
3
7
Balances, December 31, 2001
—
—
211,313
(279,374
)
(68,532
)
(136,593
)
Net loss
—
—
(24,322
)
—
—
(24,322
)
Capital contribution
—
—
329,964
(329,964
)
—
—
Affiliate transactions, net
—
—
—
35,937
—
35,937
Deferred taxes receivable from parent
—
—
—
—
(8,023
)
(8,023
)
Other
—
—
—
—
4
4
Balances, December 13, 2002
$
—
$
—
$
516,955
$
(573,401
)
$
(76,551
)
$
(132,997
)
Total
Retained
Total Alpha
Stockholder's
Additional
Earnings
NR Holding, Inc.
Equity and
Common
Paid-In
(Accumulated
Stockholder's
Partners'
Partners'
Company
Stock
Capital
Deficit)
Equity
Capital
Capital
Balances, December 14, 2002
$
—
$
—
$
—
$
—
$
—
$
—
Net loss
—
—
(529
)
(529
)
(106
)
(635
)
Contributed capital
—
—
—
—
2,635
2,635
Issuance of common stock
—
21,384
—
21,384
—
21,384
Balances, December 31, 2002
—
21,384
(529
)
20,855
2,529
23,384
Net income
—
—
1,971
1,971
291
2,262
Contributed capital
—
15,153
—
15,153
1,868
17,021
Notes payable to affiliate contributed to capital
—
39,173
—
39,173
4,827
44,000
Noncash distribution of Virginia Tax Credit
—
—
—
—
(300
)
(300
)
Balances, December 31, 2003
—
75,710
1,442
77,152
9,215
86,367
Net income
—
—
16,309
16,309
2,591
18,900
Noncash distribution of Virginia Tax Credit
—
—
—
—
(225
)
(225
)
Distributions
—
(53,557
)
—
(53,557
)
(6,600
)
(60,157
)
Balances, September 30, 2004
$
—
$
22,153
$
17,751
$
39,904
$
4,981
$
44,885
See accompanying notes to combined financial
statements.
F-5
ANR FUND IX HOLDINGS, L.P. AND ALPHA NR
HOLDING, INC. AND SUBSIDIARIES
COMBINED STATEMENTS OF CASH FLOWS
(In thousands)
Company
Predecessor
Period from
Period from
Nine Months Ended
December 14,
January 1,
September 30,
Year Ended
2002 to
2002 to
Year Ended
December 31,
December 31,
December 13,
December 31,
2004
2003
2003
2002
2002
2001
(unaudited)
Operating activities:
Net income (loss)
$
18,900
$
2,978
$
2,262
$
(635
)
$
(24,322
)
$
8,319
Adjustments to reconcile net income (loss) to net
    cash provided by (used in) operating activities:
Depreciation, depletion and amortization
39,352
25,806
36,054
274
6,814
7,866
Amortization and write-off of debt issuance costs
4,039
892
1,276
59
—
—
Minority interest
19,562
1,750
934
—
—
—
Accretion of asset retirement obligation
2,902
1,563
2,699
57
—
—
Virginia tax credit
(1,930
)
(1,414
)
(1,879
)
—
—
—
Bad debt provision
298
45
68
5
1,296
—
Net pension credit
—
—
—
—
(928
)
(2,640
)
Loss on settlement of asset retirement obligation
636
—
—
—
—
—
Asset impairment charge
5,100
—
—
—
—
—
Write-off of advance royalties
1,099
—
—
—
—
—
Amortization of deferred gains on sales of
    property interests
(690
)
(412
)
(618
)
—
—
—
Gain on sale of fixed assets, net
(342
)
—
—
—
—
—
Deferred income taxes
2,448
988
668
(334
)
(8,023
)
41
Other, net
—
—
—
—
11
(795
)
Changes in operating assets and liabilities:
Trade accounts receivable
(27,568
)
(32,102
)
(21,056
)
(7,472
)
5,244
(1,561
)
Notes and other receivables
(183
)
(959
)
(2,358
)
—
—
—
Inventories
(19,841
)
5,736
13,014
549
—
—
Prepaid expenses and other current assets
9,478
(5,478
)
793
(138
)
(5,418
)
(3,405
)
Other assets
(1,497
)
(1,455
)
(5,485
)
—
(1,850
)
(2,328
)
Trade accounts payable
18,534
23,077
12,234
4,057
(3,925
)
1,257
Accrued expenses and other current liabilities
26,341
20,348
16,392
4,706
(15,115
)
(473
)
Workers' compensation benefits
2,274
1,681
1,660
—
1,879
(1,140
)
Postretirement medical benefits
2,828
727
1,236
36
6,710
845
Asset retirement obligation expenditures
(2,495
)
(1,308
)
(2,252
)
(1
)
(1,270
)
1,466
Other liabilities
2
(4,314
)
(1,538
)
(1,458
)
25,081
3,203
Net cash provided by (used in) operating
    activities
99,247
38,149
54,104
(295
)
(13,816
)
10,655
F-6
ANR FUND IX HOLDINGS, L.P. AND ALPHA NR
HOLDING, INC. AND SUBSIDIARIES
COMBINED STATEMENTS OF CASH FLOWS—
(Continued)
(In thousands)
Company
Predecessor
Period from
Period from
Nine Months Ended
December 14,
January 1,
September 30,
Year Ended
2002 to
2002 to
Year Ended
December 31,
December 31,
December 13,
December 31,
2004
2003
2003
2002
2002
2001
(unaudited)
Investing activities:
Capital expenditures
$
(52,984
)
$
(27,130
)
$
(27,719
)
$
(960
)
$
(21,866
)
$
(10,218
)
Proceeds from disposition of property, plant, and
    equipment
595
65,174
65,174
—
76
403
Purchase of net assets of acquired companies
(2,891
)
(95,780
)
(133,757
)
(37,202
)
—
—
Purchase of equity investment
(3,250
)
—
—
—
—
—
Issuance of note receivable to coal supplier, net
    of collections of $675
(9,325
)
—
—
—
—
—
Deferred acquisition costs
—
—
—
(731
)
—
—
Decrease (increase) in due from affiliate
620
(3,397
)
(3,770
)
—
—
—
Other, net
—
—
—
—
(264
)
612
Net cash used in investing activities
(67,235
)
(61,133
)
(100,072
)
(38,893
)
(22,054
)
(9,203
)
Financing activities:
Net repayments of notes payable
(11,787
)
(13,878
)
(15,600
)
—
—
(1,920
)
Proceeds from issuance of long-term debt
175,000
38,518
58,518
—
—
—
Repayments on long-term debt
(64,920
)
(28,956
)
(30,054
)
—
—
—
Increase in bank overdraft
396
5,807
5,854
—
—
—
Debt issuance costs
(10,563
)
(3,563
)
(4,454
)
(340
)
—
—
Deferred offering costs
—
(670
)
(727
)
—
—
—
Advances from affiliates
—
20,047
20,047
23,953
35,783
—
Capital contributions
—
3,118
3,118
2,635
—
—
Issuance of common stock
—
15,153
15,153
21,384
—
—
Distributions to owners
(60,157
)
—
—
—
—
—
Distributions to minority interest
(55,416
)
(2,007
)
(3,085
)
—
Other
—
—
—
—
—
458
Net cash provided by (used in) financing
    activities
(27,447
)
33,569
48,770
47,632
35,783
(1,462
)
Net increase (decrease) in cash and cash
    equivalents
4,565
10,585
2,802
8,444
(87
)
(10
)
Cash and cash equivalents at beginning of period
11,246
8,444
8,444
—
175
185
Cash and cash equivalents at end of period
$
15,811
$
19,029
$
11,246
$
8,444
$
88
$
175
See accompanying notes to combined financial
statements.
F-7
ANR FUND IX HOLDINGS, L.P. AND ALPHA NR
HOLDING, INC. AND SUBSIDIARIES
COMBINED STATEMENTS OF CASH FLOWS—
(Continued)
(In thousands)
ANR FUND IX HOLDINGS, L.P. AND ALPHA NR
HOLDING, INC. AND SUBSIDIARIES
NOTES TO COMBINED FINANCIAL
STATEMENTS
Information for the Nine Months Ended
September 30, 2003 is Unaudited
(In thousands, except percentages and share
and per share data)
(1)
Business and Basis of Presentation
Organization and Business
ANR Fund IX Holdings, L.P. and Alpha NR
Holding, Inc., formerly named Alpha Natural Resources, Inc.,
(together, the FR Affiliates) are entities under the common
control of First Reserve Fund IX, L.P. and were formed in
2002 to acquire coal mining assets in the Appalachian region of
the United States. In December 2002, ANR Fund IX Holdings,
L.P. and Alpha NR Holding, Inc. formed ANR Holdings, LLC (ANR
Holdings) and acquired membership interests of approximately 11%
and 89%, respectively. ANR Holdings is the parent of Alpha
Natural Resources, LLC (Alpha) and the latter entity and its
subsidiaries acquired our Predecessor, the majority of the
Virginia coal operations of Pittston Coal Company, a subsidiary
of The Brink's Company (formerly known as The Pittston
Company), on December 13, 2002 (described in note 20).
The acquisition of Coastal Coal Company
(described in note 20) was completed on
January 31, 2003 by subsidiaries of ANR Holdings. The
acquisition of U.S. AMCI (described in note 20) was
completed on March 11, 2003. Concurrent with the
acquisition of U.S. AMCI, ANR Holdings issued additional
membership interests in the aggregate amount of 45.3% to the
former owners of U.S. AMCI, Madison Capital Funding, LLC
and members of management in exchange for the net assets of
U.S. AMCI and cash. After completion of this transaction,
the FR Affiliates owned 54.7% of ANR Holdings.
The acquisition of Mears Enterprises, Inc. and
affiliated entities (described in note 20) was completed on
November 17, 2003.
The financial statements for the period from
December 14, 2002 to December 31, 2002, the year ended
December 31, 2003 and the nine month periods ended
September 30, 2004 and 2003 are presented on a combined
basis. The entities included in the combined financial
statements, except our Predecessor, are collectively referred to
as "the Company".
The Company and its operating subsidiaries are
engaged in the business of extracting, processing and marketing
coal from deep and surface mines, principally located in the
Eastern and Southeastern regions of the United States, for sale
to utility and steel companies in the United States and in
international markets.
Operating Subsidiaries of Alpha Natural
    Resources, LLC:
Companies with coal reserves and/or production
facilities:
•
Paramont Coal Company Virginia, LLC
•
Dickenson-Russell Coal Company, LLC
•
Alpha Terminal Company, LLC
•
Alpha Land and Reserves, LLC
•
AMFIRE, LLC and Subsidiaries
•
McDowell Wyoming Coal Company, LLC and
    Subsidiaries
Companies providing administrative, sales and
other services:
•
Alpha Coal Sales Co., LLC
•
Alpha Natural Resources Capital Corp.
F-8
ANR FUND IX HOLDINGS, L.P. AND ALPHA NR
HOLDING, INC. AND SUBSIDIARIES
NOTES TO COMBINED FINANCIAL
STATEMENTS — (Continued)
Information for the Nine Months Ended
September 30, 2003 is Unaudited
(In thousands, except percentages and share
and per share data)
•
Alpha Natural Resources Services, LLC
•
Maxxim Rebuild Co., LLC
•
Maxxim Shared Services, LLC
•
Alpha Energy Global Marketing, LLC
Holding companies:
•
Maxxim Carbon Resources, LLC
•
Esperanza Coal Co., LLC
Principles of Combination
The accompanying combined financial statements
include the accounts of the Company described above. All
significant intercompany accounts and transactions have been
eliminated.
Predecessor
Prior to December 13, 2002, the Company had
no operations. On December 13, 2002, the Company acquired
the majority of the Virginia coal operations of Pittston Coal
Company (the Combined Virginia Entity or Predecessor) through a
number of asset acquisitions by the Company's subsidiaries.
The Combined Virginia Entity is considered the Predecessor to
the Company. As such, the historical financial statements of the
Combined Virginia Entity are included in the accompanying
combined financial statements, including the combined statements
of operations, cash flows, and shareholders' equity, for
the period from January 1, 2002 to December 13, 2002
and for the year ended December 31, 2001 (the
"Predecessor combined financial statements"). The
Predecessor combined financial statements are not necessarily
indicative of the future financial position or results of
operations of the Company.
The Predecessor's combined financial
statements have not been adjusted to give effect to the
acquisition. For this reason, the combined financial statements
of the Company after the acquisition are not comparable to the
Predecessor's combined financial statements prior to the
acquisition.
The Company
The accompanying combined balance sheets as of
September 30, 2004 and December 31, 2003 and 2002, and
the combined statements of operations, cash flows, and
stockholder's equity and partners' capital for the
nine months ended September 30, 2004 and 2003, the year
ended December 31, 2003 and the period from
December 14, 2002 to December 31, 2002, reflect the
combined financial position, results of operations and cash
flows of the Company from the date of acquisition of the
Predecessor. See also note 20.
Unaudited Interim Financial
    Information
The accompanying unaudited interim financial
statements for the nine months ended September 30, 2003
have been prepared in accordance with U.S. generally
accepted accounting principles for interim financial
information. The combined statements of operations and cash
flows for the nine months ended September 30, 2003 are
unaudited but include all adjustments (consisting of normal
recurring adjustments) which the Company considers necessary for
a fair presentation of the operating results and cash flows for
the period presented. The results of operations for any interim
period are not necessarily indicative of the results to be
expected for the full year.
F-9
ANR FUND IX HOLDINGS, L.P. AND ALPHA NR
HOLDING, INC. AND SUBSIDIARIES
NOTES TO COMBINED FINANCIAL
STATEMENTS — (Continued)
Information for the Nine Months Ended
September 30, 2003 is Unaudited
(In thousands, except percentages and share
and per share data)
(2)
Summary of Significant Accounting Policies and
    Practices
(a)
Cash and Cash Equivalents
Cash and cash equivalents consist of cash and
highly liquid, short-term investments. Cash and cash equivalents
are stated at cost, which approximates fair market value. For
purposes of the combined statements of cash flows, the Company
considers all highly liquid debt instruments with original
maturities of three months or less to be cash equivalents.
(b)
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. Account balances are charged off against
the allowance after all means of collection have been exhausted
and the potential for recovery is considered remote. The Company
does not have any off-balance-sheet credit exposure related to
its customers.
The changes in the allowance for doubtful
accounts were as follows:
Bad debt provision
$
5
Balance as of December 31, 2002
5
Bad debt provision
68
Balance as of December 31, 2003
73
Bad debt provision
298
Bad debt write-offs
(114
)
Balance as of September 30, 2004
$
257
(c)
Inventories
Coal inventories are stated at the lower of cost
or market. The cost of coal inventories is determined based on
average cost of production, which includes all costs incurred to
extract, transport and process the coal. Coal is classified as
inventory at the point in time the coal is extracted from the
mine and weighed at a loading facility.
Material and supplies inventories are valued at
average cost, less an allowance for obsolete and surplus items.
(d)
Property, Plant, and
    Equipment
Costs for mineral properties, mineral rights, and
mine development incurred to expand capacity of operating mines
or to develop new mines are capitalized and charged to
operations on the units-of-production method over the estimated
proven and probable reserve tons. Mine development costs include
costs incurred for site preparation and development of the mines
during the development stage. Mobile mining equipment and other
fixed assets are stated at cost and depreciated on a
straight-line basis over estimated useful lives ranging from 2
to 20 years. Leasehold improvements are amortized, using
the straight-line method, over their estimated useful lives or
the term of the lease, whichever is shorter. Major
F-10
ANR FUND IX HOLDINGS, L.P. AND ALPHA NR
HOLDING, INC. AND SUBSIDIARIES
NOTES TO COMBINED FINANCIAL
STATEMENTS — (Continued)
Information for the Nine Months Ended
September 30, 2003 is Unaudited
(In thousands, except percentages and share
and per share data)
repairs and betterments that significantly extend
original useful lives or improve productivity are capitalized
and depreciated over the period benefited. Maintenance and
repairs are expensed as incurred.
(e)
Impairment of Long-Lived
    Assets
In accordance with SFAS No. 144,
Accounting for the Impairment or Disposal of Long-lived
Assets
, long-lived assets, such as property, plant,
equipment, and purchased intangibles subject to amortization,
are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may
not be recoverable. Recoverability of assets to be held and used
is measured by a comparison of the carrying amount of an asset
to estimated undiscounted future cash flows expected to be
generated by the asset. If the carrying amount of an asset
exceeds its estimated future cash flows, an impairment charge is
recognized by the amount by which the carrying amount of the
asset exceeds the fair value of the asset. Assets to be disposed
of would be separately presented in the balance sheet and
reported at the lower of the carrying amount or fair value less
costs to sell, and would no longer be depreciated. The assets
and liabilities of a disposal group classified as held for sale
would be presented separately in the appropriate asset and
liability sections of the balance sheet.
(f)
Goodwill and Other Intangible
    Assets
Goodwill represents the excess of costs over fair
value of net assets of 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 August of each year. SFAS No. 142 also
requires that intangible assets with estimable useful lives be
amortized over their respective estimated useful lives to their
estimated residual values, and reviewed for impairment in
accordance with SFAS No. 144. The impairment review in
August 2004 supported the carrying value of goodwill.
(g)
Health Insurance Programs
The Company is principally self-insured for costs
of health and medical claims. The Company utilizes commercial
insurance to cover specific claims in excess of $250.
(h)
Income Taxes
The Company and the Predecessor account for
income taxes in accordance with SFAS No. 109,
Accounting for Income Taxes
, which requires recognition
of deferred tax assets and liabilities for the expected future
tax consequences of events that have been included in the
financial statements or tax returns. Under this method, deferred
tax assets and liabilities are determined based on the
difference between the financial statement and tax bases of
assets and liabilities using enacted tax rates in effect for the
year in which those items are expected to reverse.
(i)
Asset Retirement Obligation
Minimum standards for mine reclamation have been
established by various regulatory agencies and dictate the
reclamation requirements at the Company's operations. The
Company records these reclamation obligations under the
provisions of SFAS No. 143,
Accounting for Asset
Retirement Obligations
. SFAS No. 143 requires the
fair value of a liability for an asset retirement obligation to
be recognized in the period in which the legal obligation
associated with the retirement of the long-lived asset is
incurred. When the liability is initially recorded, the offset
is capitalized by increasing the carrying
F-11
ANR FUND IX HOLDINGS, L.P. AND ALPHA NR
HOLDING, INC. AND SUBSIDIARIES
NOTES TO COMBINED FINANCIAL
STATEMENTS — (Continued)
Information for the Nine Months Ended
September 30, 2003 is Unaudited
(In thousands, except percentages and share
and per share data)
amount of the related long-lived asset. Over
time, the liability is accreted to its present value each
period, and the capitalized cost is depreciated over the useful
life of the related asset. To settle the liability, the
obligation is paid, and to the extent there is a difference
between the liability and the amount of cash paid, a gain or
loss upon settlement is recorded. The Company annually reviews
its estimated future cash flows for its asset retirement
obligation.
In connection with the business acquisitions
described in note 20, the Company recorded the fair value
of the reclamation liabilities assumed as part of the
acquisitions in accordance with SFAS No. 143.
The Predecessor charged expenditures relating to
environmental regulatory requirements and reclamation costs
undertaken during mine operations against earnings as incurred.
Estimated site restoration and post-closure reclamation costs
were charged against earnings using the units-of-production
method over the expected economic life of each mine. Accrued
reclamation costs were subject to review by our
Predecessor's management on a regular basis and were
revised when appropriate for changes in future estimated costs
and/or regulatory requirements.
(j)
Royalties
Lease rights to coal lands are often acquired in
exchange for royalty payments. Advance mining royalties are
advance payments made to lessors under terms of mineral lease
agreements that are recoupable against future production. These
advance payments are deferred and charged to operations as the
coal reserves are mined. In instances where advance payments are
not expected to be offset against future production royalties,
no asset is recognized and the scheduled future minimum payments
are expensed and recognized as liabilities.
(k)
Revenue Recognition
The Company recognizes revenue on coal sales when
title passes to the customer in accordance with the terms of the
sales agreement, which generally occurs when the coal is loaded
into transport carriers at the mine for shipment to the
customer. Revenue from international coal sales is recorded at
the time coal is loaded onto the shipping vessel. In the event
that new contracts are negotiated with a customer and shipments
commence before the old contract is complete, the Company
recognizes as revenue the lower of the cumulative amount billed
or an amount based on the weighted average price of the new and
old contracts applied to the tons sold.
Freight and handling costs paid 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, trucking services for unrelated
parties, royalties, commissions on coal trades, and rental
income. These revenues are recognized in the period earned or
when the service is completed.
(l)
Deferred Financing Costs
In connection with obtaining financing, the
Company incurred deferred financing costs totaling $10,563,
$3,563, $4,454, and $340 during the nine months ended
September 30, 2004 and 2003, the year ended
December 31, 2003, and the period from December 14,
2002 to December 31, 2002, respectively. These financing
costs have been deferred and are included in other assets in the
accompanying combined balance sheets. Also see note 12.
These deferred financing costs are being amortized to interest
expense using the straight-line method over the life of the
related indebtedness or credit facility. Amortization
F-12
ANR FUND IX HOLDINGS, L.P. AND ALPHA NR
HOLDING, INC. AND SUBSIDIARIES
NOTES TO COMBINED FINANCIAL
STATEMENTS — (Continued)
Information for the Nine Months Ended
September 30, 2003 is Unaudited
(In thousands, except percentages and share
and per share data)
expense for the nine months ended
September 30, 2004 and 2003, the year ended
December 31, 2003, and the period from December 14,
2002 to December 31, 2002 totaled $4,039, $892, $1,276, and
$59, respectively. Due to the termination of a prior credit
facility, amortization expense for the nine months ended
September 30, 2004 includes a $2,819 write-off of deferred
financing costs.
(m)
Virginia Coalfield Employment Enhancement
    Tax Credit
For tax years 1996 through 2007, Virginia
companies with an economic interest in coal earn tax credits
based upon tons sold, seam thickness, and employment levels. The
maximum credit earned equals $0.40 per ton for surface
mined coal and $1.00 or $2.00 per ton for deep mined coal
depending on seam thickness. Credits allowable are reduced from
the maximum amounts if employment levels are not maintained from
the previous year, and no credit is allowed for coal sold to
Virginia utilities. Currently, the cash benefit of the credit is
realized three years after being earned and either offsets taxes
imposed by Virginia at 100% or is refundable by the state at 85%
of the face value to the extent taxes are not owed. The Company
records the present value of the portion of the credit that is
refundable as a reduction of operating costs as it is earned.
The Company records the portion of the credit that is allocated
to Alpha NR Holding, Inc. as an other asset. The Company records
the portion of the credit that is allocated to ANR Fund IX
Holdings, L.P. and minority interest owners as noncash
distributions.
(n)
Workers' Compensation and
    Pneumoconiosis (Black Lung) Benefits
Workers' Compensation
The Company is self-insured for workers'
compensation claims at certain of its operations in West
Virginia. Workers' compensation at all other locations in
West Virginia is insured through the West Virginia state
insurance program. Workers' compensation claims at
locations in all other states where the Company operates are
covered by a third party insurance provider.
The liabilities for workers' compensation
claims that are self-insured are estimates of the ultimate
losses incurred based on the Company's experience, and
include a provision for incurred but not reported losses.
Adjustments to the probable ultimate liabilities are made
annually based on an actuarial study and adjustments to the
liability are recorded based on the results of these studies.
Black Lung Benefits
The Company is required by federal and state
statutes to provide benefits to employees for awards related to
black lung. These claims are covered by a third party insurance
provider in all locations where the Company operates with the
exception of West Virginia. The Company is self-insured for
state black lung related claims at certain locations in West
Virginia.
The liabilities for state black lung related
claims in West Virginia that are self-insured are estimates of
the ultimate losses incurred based on the Company's
experience, and include a provision for incurred but not
reported losses. Estimates of the liabilities are made annually
based on an actuarial study and adjustments to the liability are
recorded based on the results of these studies.
The Company did not assume any responsibility for
workers' compensation or black lung claims incurred by any
of its subsidiaries prior to their acquisition. Also see
note 20.
F-13
ANR FUND IX HOLDINGS, L.P. AND ALPHA NR
HOLDING, INC. AND SUBSIDIARIES
NOTES TO COMBINED FINANCIAL
STATEMENTS — (Continued)
Information for the Nine Months Ended
September 30, 2003 is Unaudited
(In thousands, except percentages and share
and per share data)
(o)
Postretirement Benefits Other Than
    Pensions
The Company accounts for health care and life
insurance benefits provided for current and certain 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.
(p)
Equity Investments
The accompanying combined financial statements
include the accounts of the Company and its majority owned
subsidiaries. Investments in unconsolidated subsidiaries
representing ownership of at least 20% but less than 50% are
accounted for under the equity method. Under the equity method
of accounting, the Company's proportionate share of the
investment company's income is included in the
Company's net income or loss with a corresponding increase
or decrease in the carrying value of the investment.
(q)
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 reserves; 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.
(3)
Notes and Other Receivables
Notes and other receivables consisted of the
following:
December 31,
September 30,
2004
2003
2002
Notes receivable
$
5,283
$
577
$
—
Other receivables
4,482
4,165
—
Total notes and other receivable
$
9,765
$
4,742
$
—
As part of a coal purchase agreement, the Company
loaned an unrelated coal supplier $10,000 on June 10, 2004
at a variable interest rate to be repaid in installments over a
two-year period beginning in August 2004. The loan is secured by
the assets of the company and personally guaranteed by the
company's owner. As of September 30, 2004, $4,840 of
the outstanding amount is included in current notes and other
receivables and $4,485 is included in other assets.
F-14
ANR FUND IX HOLDINGS, L.P. AND ALPHA NR
HOLDING, INC. AND SUBSIDIARIES
NOTES TO COMBINED FINANCIAL
STATEMENTS — (Continued)
Information for the Nine Months Ended
September 30, 2003 is Unaudited
(In thousands, except percentages and share
and per share data)
(4)
Inventories
Inventories consisted of the following:
December 31,
September 30,
2004
2003
2002
Raw coal
$
3,388
$
4,710
$
3,690
Saleable coal
43,050
23,629
9,997
Materials and supplies
6,246
4,774
2,871
Total inventories
$
52,684
$
33,113
$
16,558
(5)
Prepaid Expenses and Other Current
    Assets
Prepaid expenses and other current assets
consisted of the following:
December 31,
September 30,
2004
2003
2002
Prepaid insurance
$
3,032
$
15,643
$
—
Advance mining royalties
4,199
1,928
—
Other prepaid expenses
2,547
1,685
428
Total prepaid expenses and other current assets
$
9,778
$
19,256
$
428
(6)
Property, Plant, and Equipment
Property, plant, and equipment consisted of the
following:
December 31,
September 30,
2004
2003
2002
Land
$
5,096
$
4,544
$
687
Mineral rights
84,791
89,519
40,973
Plant, mining equipment, and mine development
186,503
125,565
27,991
Office equipment and software
6,299
6,033
396
Construction in progress
1,962
2,694
—
284,651
228,355
70,047
Less accumulated depreciation, depletion, and
    amortization
67,596
30,208
149
Property, plant, and equipment, net
$
217,055
$
198,147
$
69,898
As of September 30, 2004, the Company had
commitments to purchase approximately $21,800 of new equipment,
expected to be acquired at various dates through 2005.
At September 30, 2004, the Company had a
contractual commitment for improvements to a preparation plant
in the remaining amount of $732.
Depreciation expense was $36,208, $19,627,
$28,438, and $104 and depletion expense was $1,749 and $1,744,
$2,396, and $45 for the nine months ended September 30,
2004 and 2003, the year ended December 31, 2003, and the
period from December 14, 2002 to December 31, 2002,
respectively.
F-15
ANR FUND IX HOLDINGS, L.P. AND ALPHA NR
HOLDING, INC. AND SUBSIDIARIES
NOTES TO COMBINED FINANCIAL
STATEMENTS — (Continued)
Information for the Nine Months Ended
September 30, 2003 is Unaudited
(In thousands, except percentages and share
and per share data)
(7)
Goodwill
The changes in the carrying amount of goodwill
were as follows:
Balance as of December 31, 2002
$
—
Acquisition of U.S. AMCI
17,121
Balance as of December 31, 2003
17,121
2004 adjustments
1,520
Balance as of September 30, 2004
$
18,641
The carrying amount of goodwill was increased by
$1,520 during the nine months ended September 30, 2004 due
to the final settlement of the amount of working capital
purchased in the U.S. AMCI acquisition. See note 20.
(8)
Other Intangibles
Other intangible assets consisted of the
following:
December 31,
Estimated
September 30,
Remaining Life
2004
2003
2002
Sales contracts
3 years
$
3,937
$
3,937
$
4,091
Noncompete agreements
2 years
250
200
—
Other
—
—
13
—
4,187
4,150
4,091
Less accumulated amortization
2,636
1,254
125
Total other intangibles, net
$
1,551
$
2,896
$
3,966
As of September 30, 2004, aggregate annual
future amortization expense associated with other intangible
assets is as follows:
Three months ending December 31, 2004
$
170
Year ending December 31:
2005
691
2006
450
2007
240
Total
$
1,551
Total amortization expense recognized on
intangible assets was $1,395, $4,435, $5,234, and $125 for the
nine months ended September 30, 2004 and 2003, the year
ended December 31, 2003, and the period from
December 14, 2002 to December 31, 2002, respectively.
F-16
ANR FUND IX HOLDINGS, L.P. AND ALPHA NR
HOLDING, INC. AND SUBSIDIARIES
NOTES TO COMBINED FINANCIAL
STATEMENTS — (Continued)
Information for the Nine Months Ended
September 30, 2003 is Unaudited
(In thousands, except percentages and share
and per share data)
(9)
Other Assets
Other assets consisted of the following:
December 31,
September 30,
2004
2003
2002
Advance mining royalties
$
8,884
$
9,638
$
335
Deferred loan costs, net
10,711
3,460
281
Note receivable
4,485
—
—
Investment in terminaling facility
1,005
1,005
—
Investment in Excelven Pty Ltd
3,250
—
—
Virginia tax credit receivable
4,265
2,434
—
Other
1,094
1,814
731
Total other assets, net
$
33,694
$
18,351
$
1,347
(10)
Note Payable
At September 30, 2004 and December 31,
2003, the Company has a note payable that financed certain
insurance premiums with a remaining balance of $2,638 and
$14,425, respectively. Interest and principal are due in monthly
installments, with interest at the rate of 3.55%, with the final
payment due November 13, 2004. The insurance policies
financed include workers' compensation, black lung, and
property and liability coverages.
(11)
Accrued Expenses and Other Current
    Liabilities
Accrued expenses and other current liabilities
consisted of the following:
December 31,
September 30,
2004
2003
2002
Wages and employee benefits
$
21,622
$
12,770
$
1,566
Current portion of asset retirement obligation
6,691
7,820
1,162
Taxes other than income taxes
6,683
6,243
135
Income taxes payable
2,284
—
—
Freight
5,161
1,974
834
Contractor escrow
1,593
1,499
—
Deferred gains on sales of property interests
1,303
355
—
Deferred revenues
2,498
—
—
Current portion of self-insured workers'
    compensation benefits
1,359
450
—
Workers' compensation insurance premium
    payable
978
773
—
Interest payable
6,470
210
144
Additional consideration on acquisition
3,753
—
—
Other
4,222
3,048
2,860
Total accrued expenses and other current
    liabilities
$
64,617
$
35,142
$
6,701
F-17
ANR FUND IX HOLDINGS, L.P. AND ALPHA NR
HOLDING, INC. AND SUBSIDIARIES
NOTES TO COMBINED FINANCIAL
STATEMENTS — (Continued)
Information for the Nine Months Ended
September 30, 2003 is Unaudited
(In thousands, except percentages and share
and per share data)
(12)
Long-Term Debt
Long-term debt consisted of the following:
December 31,
September 30,
2004
2003
2002
10% Senior notes due 2012
$
175,000
$
—
$
—
Revolving credit facility
4,000
10,000
—
Variable rate term loan
—
45,000
—
Seller financing (El Paso CGP Company)
—
8,000
—
8.75% term notes
—
3,719
—
4.84% term notes
1,759
2,679
—
8.75% term notes
—
945
—
Seller financing (Pittston Coal Company)
—
—
25,743
Capital lease obligation
2,160
—
—
Other
60
196
—
Total long-term debt
182,979
70,539
25,743
Less current portion
1,723
13,329
11,243
Long-term debt, net of current portion
$
181,256
$
57,210
$
14,500
On May 18, 2004, Alpha and its wholly owned
subsidiary, Alpha Natural Resources Capital Corp., issued
$175,000 of 10% senior notes due June 2012 in a private
placement offering under Rule 144A of the Securities Act of
1933, as amended, resulting in net proceeds of approximately
$171,500 after fees and other offering costs. The senior notes
are unsecured but are guaranteed fully and unconditionally on a
joint and several basis by all of Alpha's wholly-owned
domestic restricted subsidiaries. Interest is payable
semi-annually in June and December.
On May 28, 2004, Alpha entered into a new
revolving credit facility with a group of lending institutions
led by Citicorp North America, Inc., as administrative agent
(Citicorp Credit Facility). The Citicorp Credit Facility
provides for a revolving line of credit of up to $125,000 and a
funded letter of credit facility of up to $50,000. As of
September 30, 2004, for the revolving line of credit, the
Company had $4,000 principal amount in borrowings and $441
in letters of credit outstanding, leaving $120,559 available for
borrowing on the line of credit. As of September 30, 2004,
the funded letter of credit facility was fully utilized at
$50,000 at an annual fee of 3.1% of the outstanding amount.
Amounts drawn under the revolver 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 revolver was 4.57% as of
September 30, 2004. The principal balance of the revolving
credit note is due in May 2009. ANR Holdings and each of the
subsidiaries of Alpha have guaranteed Alpha's obligations
under the revolving credit facility. The obligations of Alpha,
ANR Holdings and Alpha's subsidiaries under the Citicorp
Credit Facility are collateralized by all of the assets of
Alpha, ANR Holdings and Alpha's subsidiaries. The Citicorp
Credit Facility contains various affirmative and negative
covenants which, among others, establish net worth, interest
coverage and leverage ratio requirements. The Company must pay
an annual commitment fee up to a maximum of  1/2 of 1% of
the unused portion of the commitment. The Company was in
compliance with its debt covenants under the Citicorp Credit
Facility as of September 30, 2004.
F-18
ANR FUND IX HOLDINGS, L.P. AND ALPHA NR
HOLDING, INC. AND SUBSIDIARIES
NOTES TO COMBINED FINANCIAL
STATEMENTS — (Continued)
Information for the Nine Months Ended
September 30, 2003 is Unaudited
(In thousands, except percentages and share
and per share data)
Prior to May 28, 2004, the Company had a
term loan and revolving credit facility with a group of lending
institutions led by PNC Bank (PNC). As of December 31,
2003, $45,000 principal amount was outstanding under the
term loan. The term note had a variable interest rate (4.39% at
December 31, 2003) and was payable in quarterly principal
installments of $2,250 plus interest, with a final balloon
payment due March 11, 2006. The PNC credit facility
provided for a revolving line of credit of up to $75,000. As of
December 31, 2003, $10,000 principal amount and letters of
credit totaling $24,014 were outstanding. Amounts drawn under
the revolver had a variable interest rate (3.92% at
December 31, 2003). The principal balance of the revolving
credit note was due March 11, 2006. ANR Holdings and each
of the subsidiaries of the Company had guaranteed Alpha's
obligations under the credit facility. The Company paid an
annual commitment fee of  1/2 of 1% of the unused portion
of the commitment. The PNC term loan and credit facility were
paid in full on May 28, 2004.
In conjunction with the purchase of Coastal Coal
Company, LLC, the Company issued a note payable to El Paso
CGP on January 31, 2003. The balance of the note at
December 31, 2003 was $8,000. The note had a fixed interest
rate of 14% and was due on March 11, 2009. This note was
paid in full in May 2004.
In conjunction with the purchase of the
U.S. coal production and marketing operations of AMCI
(U.S. AMCI) on March 11, 2003, the Company assumed
term notes payable to Komatsu Financial LP. The balance of
the notes at December 31, 2003, was $3,719. The notes had
fixed interest rates with a weighted average of 8.75% at
December 31, 2003, and were payable in monthly installments
ranging from $4 to $24, through August 1, 2006. These notes
were paid in full in May 2004.
The Company has term notes payable to The CIT
Group Equipment Financing, Inc. in the amount of $1,759 at
September 30, 2004 and $2,679 at December 31, 2003.
The term notes bear interest at a weighted average rate of
approximately 4.84% at September 30, 2004 and
December 31, 2003 and are payable in monthly installments
ranging from $14 to $64, through April 2, 2006.
In conjunction with the purchase of
U.S. AMCI, the Company assumed term notes payable to the
Caterpillar Financial Services Corporation. The balance of the
notes at December 31, 2003, was $945. The notes had a fixed
interest rate of 8.75% and were payable in monthly installments
ranging from $9 to $25, through October 5, 2004. These
notes were paid in full in May 2004.
The Company issued notes payable to Pittston Coal
Company for the purchase of certain assets of that company on
December 13, 2002. The balance of the notes at
December 31, 2002, was $25,743. In 2003, the notes were
paid in full.
The Company entered into a capital lease for
equipment in conjunction with the purchase of substantially all
of the assets of Moravian Run Reclamation Co., Inc. on
April 1, 2004. The lease has a term of sixty months with
monthly payments ranging from $20 to $60 with a final balloon
payment of $180 in March 2009. The effective interest rate on
the capital lease is approximately 12.15%. The capitalized cost
of the leased property was $2,160 at September 30, 2004.
Amortization expense on capital leases is included with
depreciation expense. Accumulated amortization was $257 at
September 30, 2004.
The Company's long-term debt is
collateralized by substantially all assets of the Company.
F-19
ANR FUND IX HOLDINGS, L.P. AND ALPHA NR
HOLDING, INC. AND SUBSIDIARIES
NOTES TO COMBINED FINANCIAL
STATEMENTS — (Continued)
Information for the Nine Months Ended
September 30, 2003 is Unaudited
(In thousands, except percentages and share
and per share data)
Future maturities of long-term debt, including
capital lease obligations, are as follows as of
September 30, 2004:
Three months ending December 31, 2004
$
470
Year ending December 31:
2005
1,678
2006
736
2007
500
2008
316
2009
4,279
Thereafter
175,000
Total long-term debt
$
182,979
Following is a schedule of future minimum lease
payments under capital lease obligations together with the
present value of the net minimum lease payments as of
September 30, 2004:
Three months ending December 31, 2004
$
180
Year ending December 31:
2005
720
2006
600
2007
600
2008
360
2009
240
Total future minimum lease payments
2,700
Less amount representing interest
(540
)
Present value of future minimum lease payments
2,160
Less current portion
(490
)
Long-term capital lease obligation
$
1,670
F-20
ANR FUND IX HOLDINGS, L.P. AND ALPHA NR
HOLDING, INC. AND SUBSIDIARIES
NOTES TO COMBINED FINANCIAL
STATEMENTS — (Continued)
Information for the Nine Months Ended
September 30, 2003 is Unaudited
(In thousands, except percentages and share
and per share data)
(13)
Asset Retirement Obligation
At September 30, 2004 and December 31,
2003 and 2002, the Company has recorded asset retirement
obligation accruals for mine reclamation and closure costs
totaling $40,624, $40,427, and $15,107, respectively. The
portion of the costs expected to be incurred within a year in
the amount of $6,691, $7,820, and $1,162 at September 30,
2004, and December 31, 2003 and 2002, respectively, is
included in accrued expenses and other current liabilities.
These regulatory obligations are secured by surety bonds in the
amount of $89,010 at September 30, 2004 and $84,512 at
December 31, 2003. Changes in the reclamation obligation
were as follows:
Pittston Coal Company acquisition
$
15,050
Accretion for 2002
57
Total assets retirement obligation at
    December 31, 2002
15,107
Coastal Coal Company, LLC acquisition
12,861
U.S. AMCI acquisition
8,768
Mears Enterprises, Inc. acquisition
2,079
Accretion for 2003
2,699
Sites added in 2003
1,165
Expenditures in 2003
(2,252
)
Total assets retirement obligation at
    December 31, 2003
40,427
Accretion for 2004
2,902
2004 acquisitions
1,189
Sites added in 2004
3,145
Revisions in estimated cash flows
(4,544
)
Expenditures in 2004
(2,495
)
Total assets retirement obligation at
    September 30, 2004
$
40,624
(14)
Deferred Gains on Sales of Property
    Interests
In February 2003, the Company sold an overriding
royalty interest in certain mining properties for $11,850. The
gain on this transaction in the amount of $850 was deferred and
is being amortized over the associated remaining term of the
mineral lease. This property interest was acquired from
El Paso CGP Company in the acquisition of the Coastal Coal
properties.
In April 2003, the Company sold mineral
properties for $53,625 in a sale/ leaseback transaction. The
estimated gain on this transaction in the amount of $7,057 was
deferred and is being amortized over the ten-year term of the
lease. Also see note 20.
The Company recognized $690, $412 and $618 of the
above deferred gains for the nine months ended
September 30, 2004 and 2003, and for the year ended
December 31, 2003, respectively. In addition, for the nine
months ended September 30, 2004, the deferred gain was
increased by $3,514 for revisions in estimated cash flows
underlying the asset retirement obligation relating to the
mineral properties which had been sold, increased by $1,480 for
revisions in the estimated contract reclamation liability
assumed in conjunction with the acquisition of the Virginia coal
operations of Pittston Coal Company, and decreased by $3,753
relating to the accrual of additional consideration for the
acquisition of the Virginia coal operations of Pittston Coal
Company.
F-21
ANR FUND IX HOLDINGS, L.P. AND ALPHA NR
HOLDING, INC. AND SUBSIDIARIES
NOTES TO COMBINED FINANCIAL
STATEMENTS — (Continued)
Information for the Nine Months Ended
September 30, 2003 is Unaudited
(In thousands, except percentages and share
and per share data)
(15)
Fair Value of Financial Instruments
The estimated fair values of financial
instruments under SFAS No. 107,
Disclosures About
Fair Value of Financial Instruments
, are determined based on
relevant market information. These estimates involve uncertainty
and cannot be determined with precision. The following methods
and assumptions are used to estimate the fair value of each
class of financial instrument.
Cash and Cash Equivalents, Trade Accounts
Receivables, Notes Payable, Notes Payable to Affiliate, Bank
Overdraft, Trade Accounts Payable, and Other Current
Liabilities:
The carrying amounts
approximate fair value due to the short maturity of these
instruments.
Notes Receivable:
The fair value approximates the carrying value as the rates
associated with the receivables are comparable to current market
rates.
Long-term Debt:
The
fair value of the 10% Senior notes is based on the trading
value of the notes. The fair value of other long-term debt is
based on the current market rate of interest offered to the
Company for debt of similar maturities. The estimated fair
values of long-term debt were as follows:
December 31,
September 30,
2004
2003
2002
10% Senior notes
$
197,651
$
—
$
—
Variable rate term loan
—
45,000
—
Revolving credit facility
4,000
10,000
—
8.75% term notes
—
4,725
—
4.84% term notes
1,759
2,679
—
Seller financing
—
10,100
25,743
Capital lease obligation
2,336
—
—
Other
60
196
—
Total long-term debt
$
205,806
$
72,700
$
25,743
(16)
Employee Benefit Plans
The Company
(a)     Postretirement
    Benefits Other Than Pensions
Three of the Company's subsidiaries assumed
collective bargaining agreements as part of two acquisitions
that require these subsidiaries to provide postretirement
medical benefits to certain employees who retire after the
acquisition closing dates. In each case, however, The
Brink's Company and AMCI, as sellers, have retained the
obligation to provide postretirement medical benefits to
employees who retired prior to the acquisition closing dates
(December 13, 2002 and March 11, 2003, respectively)
and to employees who were not retained by these subsidiaries. In
addition, The Brink's Company retained the obligation to
provide postretirement medical benefits to a significant number
of the employees who have worked for the Company after the
acquisition closing, namely, those employees who met the
eligibility criteria by December 31, 2003, even if the
employees will not retire until sometime in the future. These
plans are unfunded and the measurement date is December 31
of each year. For purposes of measuring its postretirement
benefit obligation as of September 30, 2004, the Company
used a September 30, 2004 measurement date.
F-22
ANR FUND IX HOLDINGS, L.P. AND ALPHA NR
HOLDING, INC. AND SUBSIDIARIES
NOTES TO COMBINED FINANCIAL
STATEMENTS — (Continued)
Information for the Nine Months Ended
September 30, 2003 is Unaudited
(In thousands, except percentages and share
and per share data)
Effective July 1, 2004, the Company adopted
a plan offering postretirement medical benefits to active
union-free employees that will pay benefits of $20 per
month per year of service for pre-65 year old and
$9 per month per year of service for post-65 year old
retirees. The adoption of this new plan resulted in prior
service cost of $27,122 which will be amortized over the
remaining service of the union-free employees.
The components of the change in accumulated
benefit obligations of the plans for postretirement benefits
other than pensions were as follows:
Period from
Nine Months
December 14,
Ended
Year Ended
2002 to
September 30,
December 31,
December 31,
2004
2003
2002
Change in benefit obligation:
Accumulated benefit obligation— beginning of
    period:
$
11,532
$
5,951
$
—
Service cost
1,323
656
19
Interest cost
837
580
17
Actuarial gain
(272
)
(15
)
—
Benefits paid
(13
)
—
—
Prior service cost
27,122
—
—
Postretirement benefits assumed in acquisitions
—
3,475
5,915
Change due to discount rate assumption
—
885
—
Accumulated benefit obligation— end of period
$
40,529
$
11,532
$
5,951
Funded status
$
(40,529
)
$
(11,532
)
$
(5,951
)
Unrecognized prior service cost
26,422
—
—
Unrecognized net actuarial loss
617
870
—
Accrued postretirement medical benefits
$
(13,490
)
$
(10,662
)
$
(5,951
)
The following table details the components of the
net periodic benefit cost for postretirement benefits other than
pensions:
Nine Months
Period from
Ended
December 14,
September 30,
Year Ended
2002 to
December 31,
December 31,
2004
2003
2003
2002
Service cost
$
1,323
$
420
$
656
$
19
Interest cost
837
309
580
17
Amortization of net (gain) or loss
(18
)
—
—
—
Amortization of prior service cost
698
—
—
—
Net periodic benefit cost
$
2,840
$
729
$
1,236
$
36
F-23
ANR FUND IX HOLDINGS, L.P. AND ALPHA NR
HOLDING, INC. AND SUBSIDIARIES
NOTES TO COMBINED FINANCIAL
STATEMENTS — (Continued)
Information for the Nine Months Ended
September 30, 2003 is Unaudited
(In thousands, except percentages and share
and per share data)
The discount rates used in determining the
benefit obligations as of September 30, 2004 and
December 31, 2003 and 2002 were 6.0%, 6.25%, and 6.75%,
respectively. The discount rates used in determining net
periodic postretirement benefit cost were 6.25%, 6.75% and 6.75%
for the nine months ended September 30, 2004, year ended
December 31, 2003, and period from December 14, 2002
to December 31, 2002, respectively.
The weighted average annual rate of increase in
the per capita cost of covered benefits (i.e., health care trend
rate) for medical benefits assumed is 11% for 2004, decreasing
to 5.00% in 2010 and thereafter.
Assumed health care trend rates have a
significant effect on the amounts reported for the health care
plans. A one-percentage-point change in assumed health care
trend rates would have the following effects as of and for the
nine months ended September 30, 2004:
One
One
Percentage
Percentage
Point
Point
Increase
Decrease
Effect on accumulated postretirement benefit
    obligation
$
2,174
$
(1,735
)
Effect on total service and interest cost
    components
215
(183
)
Employer contributions for the nine months ended
September 30, 2004 were $13. Employee contributions are not
expected to be made and the plan is unfunded.
Estimated future benefit payments reflecting
expected future service for the fiscal years ending after
December 31, 2004 are as follows:
Year ending December 31:
2005
$
39
2006
39
2007
79
2008
48
2009
74
2010-2014
421
Total
$
700
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 heath care benefit plans that provide a
benefit that is at least actuarially equivalent to Medicare
Part D.
At December 31, 2003, in accordance with
FASB Staff Position FAS 106-1,
Accounting and Disclosure
Requirements related to the Medicare Prescription Drug,
Improvement and Modernization Act of 2003
("FSP 106-1"), the Company elected to defer
recognition of the effects of the Act in any measures of the
benefit obligation or cost.
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. The Company has reflected
the estimated impact of the Act as a $629 reduction in the
present value of the accumulated postretirement benefit
F-24
ANR FUND IX HOLDINGS, L.P. AND ALPHA NR
HOLDING, INC. AND SUBSIDIARIES
NOTES TO COMBINED FINANCIAL
STATEMENTS — (Continued)
Information for the Nine Months Ended
September 30, 2003 is Unaudited
(In thousands, except percentages and share
and per share data)
obligation as of January 1, 2004 and a $85
reduction in the net periodic service cost for the nine months
ended September 30, 2004.
(b)     Savings
    Plan
The Company sponsors a 401(k) Savings-Investment
Plan to assist its eligible employees in providing for
retirement. The Company contributes 3% of compensation for every
employee who is eligible to participate in the plan.
Participants also receive a 50% matching contribution from the
Company of up to 4% of their total compensation. The effective
date of the plan was February 1, 2003. Total Company
contributions for the nine months ended September 30, 2004
and 2003, and the year ended December 31, 2003 were $3,480,
$2,403, and $3,505, respectively.
7
(c)     Self-Insured
    Medical Plan
The Company is self-insured for health insurance
coverage provided for all of its employees. During the nine
months ended September 30, 2004 and 2003, the year ended
December 31, 2003, and the period from December 14,
2002 to December 31, 2002, total claims expense of $13,488,
$8,364, $12,313, and $355, respectively, was incurred, which
represents claims processed and an estimate for claims incurred
but not reported.
(d)     Multi-Employer
    Pension Plan
Three of the Company's subsidiaries assumed
collective bargaining agreements as part of two acquisitions
that require them to participate in the United Mine Workers of
America (UMWA) 1950 and 1974 pension plans. These plans are
multi-employer pension plans whereby the expense is based upon
defined contribution rates. There was no expense under these
plans for the nine months ended September 30, 2004 and
2003, the year ended December 31, 2003, or for the period
from December 14, 2002 to December 31, 2002 as no
contributions were required.
Predecessor
The Company did not assume the Predecessor's
obligations under the following employee benefit plans:
(a)     Pension
    Plans
The Combined Virginia Entity's union-free
employees who met certain eligibility requirements participated
in The Brink's Company's noncontributory defined
benefit pension plans (the Brink's Plans). Benefits under
the Brink's Plans were based on salary (including
commissions, bonuses, overtime, and premium pay) and years of
service.
For the purpose of preparing the
Predecessor's combined financial statements, the Combined
Virginia Entity's projected benefit obligation at
December 13, 2002 and December 31, 2001 relating to
its participation in the Brink's Plans was actuarially
estimated based on data, such as years of service, salary, and
age, for employees of companies included in the Combined
Virginia Entity.
The fair value of plan assets and unrecognized
experience loss and prior service cost were allocated to the
Combined Virginia Entity as of December 13, 2002 and
December 31, 2001 based on the Combined Virginia
Entity's pro rata share of The Brink's Company's
projected benefit obligation. The Brink's Company's
policy was to fund at least the minimum actuarially determined
amounts necessary in accordance with applicable regulations.
F-25
ANR FUND IX HOLDINGS, L.P. AND ALPHA NR
HOLDING, INC. AND SUBSIDIARIES
NOTES TO COMBINED FINANCIAL
STATEMENTS — (Continued)
Information for the Nine Months Ended
September 30, 2003 is Unaudited
(In thousands, except percentages and share
and per share data)
The net pension credit for the period from
January 1, 2002 to December 13, 2002 and for the year
ended December 31, 2001 for all plans was as follows:
Period from
January 1,
2002 to
Year Ended
December 13,
December 31,
2002
2001
Service cost
$
2,504
$
1,913
Interest cost on Projected Benefit Obligation
    (PBO)
8,547
8,246
Return on assets— expected
(12,617
)
(12,799
)
Other amortization, net
638
—
Net pension credit
$
(928
)
$
(2,640
)
The assumptions used in determining the net
pension credit and funded status for the Combined Virginia
Entity's pension plans were as follows:
Period from
January 1,
2002 to
Year Ended
December 13,
December 31,
2002
2001
Discount rate-expense
7.25
%
7.50
%
Discount rate-funded status
6.75
%
7.25
%
Expected long-term rate of return on assets
    (expense)
10.00
%
10.00
%
Expected long-term rate of return on assets
    (funded status)
8.75
%
10.00
%
Average rate of increase in salaries (expense and
    funded status)
(a)
4.00
%
4.00
%
(a)
Salary scale assumptions varied by age and
    approximated 4% per annum.
F-26
ANR FUND IX HOLDINGS, L.P. AND ALPHA NR
HOLDING, INC. AND SUBSIDIARIES
NOTES TO COMBINED FINANCIAL
STATEMENTS — (Continued)
Information for the Nine Months Ended
September 30, 2003 is Unaudited
(In thousands, except percentages and share
and per share data)
Reconciliations of the PBO, plan assets, funded
status, and prepaid pension assets at December 13, 2002 and
December 31, 2001 for the Combined Virginia Entity's
pension plans are as follows:
Period from
January 1,
2002 to
Year Ended
December 13,
December 31,
2002
2001
PBO at beginning of period
$
121,760
$
113,659
Service cost
2,504
1,913
Interest cost
8,547
8,246
Benefits paid
(7,735
)
(7,272
)
Actuarial loss
2,679
5,214
PBO at end of period
$
127,755
$
121,760
Fair value of plan assets at beginning of period
$
111,438
$
133,380
Return on assets— actual
(11,780
)
(14,765
)
Employer contributions
3,294
95
Benefits paid
(7,735
)
(7,272
)
Fair value of plan assets at end of period
$
95,217
$
111,438
Funded status
$
(32,538
)
$
(10,322
)
Unrecognized experience loss
59,329
32,891
Net prepaid pension assets
26,791
22,569
Noncurrent pension liability
1,319
1,232
Prepaid pension asset
$
28,110
$
23,801
Selected information for the plans that have PBOs
greater than plan assets are aggregated below. Since the plans
were curtailed during 2000, the accumulated benefit obligations
(ABO) are equal to the PBO at December 13, 2002 and
December 31, 2001.
December 13,
December 31,
2002
2001
PBO and ABO
$
127,775
$
121,760
Fair value of plan assets
95,217
111,438
The Combined Virginia Entity participated in the
United Mine Workers of America (UMWA) 1950 and 1974 pension
plans at defined contribution rates. There was no expense under
these plans in 2002 as no contribution was required. Expense
under these plans in 2001 was $2. A multi-employer pension
plan withdrawal liability related to these plans of $28,424 and
$3,150 was accrued as of December 13, 2002 and
December 31, 2001, respectively, by the Virginia Combined
Entity associated with The Brink's Company's planned
exit from the coal business. The estimate was based on the most
recent actuarial estimate of liability for a withdrawal
occurring in the plan year ending June 30, 2002. The
withdrawal liability and any subsequent changes in the liability
are the responsibility of The Brink's Company.
F-27
ANR FUND IX HOLDINGS, L.P. AND ALPHA NR
HOLDING, INC. AND SUBSIDIARIES
NOTES TO COMBINED FINANCIAL
STATEMENTS — (Continued)
Information for the Nine Months Ended
September 30, 2003 is Unaudited
(In thousands, except percentages and share
and per share data)
(b)
Savings Plan
The Brink's Company sponsored a 401(k)
Savings-Investment Plan to assist its eligible
U.S. employees in providing for retirement. Employee
contributions were matched at rates of between 50% to 100% up to
5% of compensation (subject to certain limitations).
Contribution expense for the Combined Virginia Entity under the
plan aggregated $493 for the period from January 1, 2002 to
December 13, 2002, and $553 for the year ended
December 31, 2001.
(c)
Postretirement Benefits Other Than
    Pensions
The Brink's Company provided certain
postretirement health care and life insurance benefits for
eligible active and retired employees in the U.S., including
those employed by the Combined Virginia Entity, (The
Brink's Company sponsored plans). The Brink's Company
also provided benefits to certain eligible employees of the
Combined Virginia Entity as required by the Health Benefit Act,
discussed below.
The Brink's Company Sponsored
Plans.
For the purpose of preparing
the combined financial statements of the Combined Virginia
Entity, the unrecognized experience loss was allocated to the
Combined Virginia Entity based on a pro rata share of The
Brink's Company's Accumulated Postretirement Benefit
Obligation (APBO) as of December 13, 2002. For the
period from January 1, 2002 to December 13, 2002 and
for the year ended December 31, 2001, the components of net
periodic postretirement expense related to The Brink's
Company sponsored plans for postretirement benefits were as
follows:
Period from
January 1,
2002 to
Year Ended
December 13,
December 31,
2002
2001
Service cost
$
540
$
242
Interest cost on APBO
14,888
11,805
Amortization of loss
4,413
1,646
Net periodic postretirement benefit expense
$
19,841
$
13,693
F-28
ANR FUND IX HOLDINGS, L.P. AND ALPHA NR
HOLDING, INC. AND SUBSIDIARIES
NOTES TO COMBINED FINANCIAL
STATEMENTS — (Continued)
Information for the Nine Months Ended
September 30, 2003 is Unaudited
(In thousands, except percentages and share
and per share data)
Reconciliations of the APBO, funded status, and
accrued postretirement benefit cost for the Combined Virginia
Entity's share of The Brink's Company sponsored plans
at December 13, 2002 and December 31, 2001 are as
follows:
Period from
January 1,
2002 to
Year Ended
December 13,
December 31,
2002
2001
APBO at beginning of period
$
211,974
$
163,202
Service cost
540
242
Interest cost
14,888
11,805
Benefits paid
(13,132
)
(11,291
)
Actuarial loss
13,103
48,016
APBO and funded status at end of period
227,373
211,974
Unrecognized experience loss
(95,542
)
(86,852
)
Accrued postretirement benefit cost at end of
    period
$
131,831
$
125,122
The APBO was determined using the unit credit
method and an assumed discount rate of 6.75% in 2002 and 7.25%
in 2001. For The Brink's Company sponsored plans, the
assumed health care cost trend rate used in 2002 was 10% for
2003, declining 1% per year to 5% in 2008 and thereafter.
The assumed Medicare cost trend rate used in 2002 and 2001 was
5%.
A one percentage point increase (decrease) each
year in the assumed health care cost trend rate used for 2002
would increase (decrease) the aggregate service and interest
components of expense for 2002, and increase (decrease) the APBO
of Company-sponsored plans at December 13, 2002 as follows:
Effect of 1% Change in
Health Care Trend Rates
Increase
Decrease
Effect on total service and interest cost
    components
$
1,909
$
(1,582
)
Effect on APBO
27,652
(22,916
)
Health Benefit Act.
In October 1992, the Coal Industry Retiree Health Benefit Act
(the Health Benefit Act) was enacted as part of the Energy
Policy Act of 1992. The Health Benefit Act established rules for
the payment of future health care benefits for thousands of
retired union mine workers and their dependents. The Health
Benefit Act established a trust fund to which "signatory
operators" and "related persons", including The
Brink's Company and certain of its subsidiaries, including
some of the subsidiaries included in the Combined Virginia
Entity, are jointly and severally liable to pay annual premiums
for assigned beneficiaries, together with a pro rata share for
certain beneficiaries who never worked for such employers
(unassigned beneficiaries) in amounts determined on the basis
set forth in the Health Benefit Act. In October 1993 and at
various times in subsequent years, The Brink's Company
received notices from the Social Security Administration (the
SSA) with regard to the assigned beneficiaries for which The
Brink's Company was responsible under the Health Benefit
Act. In addition, the Health Benefit Act requires The
Brink's Company to fund, pro rata according to the total
number of assigned beneficiaries, a portion of the health
benefits for unassigned beneficiaries. At this time, the funding
for such health benefits is being provided from another source;
however, the statutory authorization to obtain such funds is
F-29
ANR FUND IX HOLDINGS, L.P. AND ALPHA NR
HOLDING, INC. AND SUBSIDIARIES
NOTES TO COMBINED FINANCIAL
STATEMENTS — (Continued)
Information for the Nine Months Ended
September 30, 2003 is Unaudited
(In thousands, except percentages and share
and per share data)
currently expected to cease by 2005. In the
determination of The Brink's Company's ultimate
obligation under the Health Benefit Act, such funding has been
taken into consideration.
The Combined Virginia Entity accounted for their
obligations under the Health Benefit Act as participants in a
multi-employer benefit plan, as provided by Emerging Issues Task
Force (EITF) No. 92-13,
Accounting for Estimated
Payments in Connection with the Coal Industry Retiree Health
Benefit Act of 1992
, and thus, recognized the annual cost of
these obligations on a pay-as-you-go basis. For the period from
January 1, 2002 to December 13, 2002, and the year
ended December 31, 2001, the Combined Virginia
Entity's pro rata allocated portion of the annual premiums
were $1,302 and $1,234, respectively. The Company has no
liability under this act.
Black Lung.
The
Combined Virginia Entity was self-insured with respect to
substantially all black lung (pneumoconiosis) benefits.
Provision was made for estimated benefits based on annual
reports prepared by independent actuaries. Unamortized losses
were amortized over the average remaining life expectancy of
participants (approximately 10 years). Assumptions used in
the calculation of the actuarial present value of black lung
benefits were based on actual retirement experience of the
Combined Virginia Entity's employees, black lung claims
incidence, actual dependent information, industry turnover
rates, actual medical and legal cost experience, and projected
inflation rates. The amount of expense incurred by the Combined
Virginia Entity for black lung benefits was $3,428 for the
period from January 1, 2002 to December 13, 2002, and
$1,839 for the year ended December 31, 2001.
(17)
Workers' Compensation Benefits
The Company's operations generally are fully
insured for workers' compensation and black lung claims at
an approximate annual cost of $15,000 for 2004. A portion of the
West Virginia operations of the Company are self-insured for
workers' compensation and state black lung claims. The
liability for these claims is an estimate of the ultimate losses
to be incurred on such claims based on the Company's
experience and published industry data. Adjustments to the
probable ultimate liability are made annually based on
subsequent developments and experience and are included in
operations as they are determined. The obligations incurred
prior to January 31, 2003 are currently secured by surety
bonds of El Paso Corporation, an unrelated entity. Also see
note 23.
The liability for self-insured workers
compensation benefits at September 30, 2004 and
December 31, 2003 was $5,293 and $2,110, respectively,
including a current portion of $1,359 and $450, respectively.
Workers' compensation expense for the nine months ended
September 30, 2004 and 2003 and the year ended
December 31, 2003 was $5,556, $3,007 and $3,805,
respectively, including fees paid to the State of West Virginia
to be self-insured.
(18)
Related Party Transactions
Company
As of December 31, 2002, the Company had
notes payable in the amount of $23,953 payable to a related
party. These notes along with other notes in the amount of
$20,047 were converted to contributed capital of the Company in
2003. The Company incurred interest expense on the related party
notes of $2,625 and $144 during the year ended December 31,
2003 and the period from December 14, 2002 to
December 31, 2002, respectively.
In conjunction with the purchase of
U.S. AMCI from the AMCI Parties, the Company paid $35,000
for the working capital of U.S. AMCI, as defined in the
contribution agreement, subject to an audit. As of
December 31, 2003, the net working capital acquired was
estimated to be $31,569 and the difference of
F-30
ANR FUND IX HOLDINGS, L.P. AND ALPHA NR
HOLDING, INC. AND SUBSIDIARIES
NOTES TO COMBINED FINANCIAL
STATEMENTS — (Continued)
Information for the Nine Months Ended
September 30, 2003 is Unaudited
(In thousands, except percentages and share
and per share data)
$3,431 was recorded as a receivable. In September
2004, ANR Holdings, First Reserve and the AMCI Parties
agreed that the net working capital actually acquired was
$34,070, and the AMCI Parties paid the difference of $930
to the Company. The parties further agreed that the
AMCI Parties would be entitled to any refund of, and
obligated to make any payment of, all federal black lung excise
taxes of the companies contributed by the AMCI Parties to
ANR Holdings, but only insofar as the taxes related to
pre-closing or straddle periods ending on or prior to the
closing date of the U.S. AMCI acquisition. As a result,
$981 of the previously recorded receivable from AMCI was
reclassified to offset a federal black lung excise tax accrued
liability included in the net working capital acquired. The
remaining $1,520 was recorded as an increase to goodwill.
The Company records rent on its Latrobe,
Pennsylvania operating facility from a related party. This
arrangement provides for monthly payments of $12 on a
month-to-month basis. Total rent expense and accrued rent
expense was $108 and $114 as of and for the nine months ended
September 30, 2004 and for the year ended December 31,
2003, respectively.
In conjunction with the acquisition of
U.S. AMCI, ANR Holdings entered into an agreement with
entities affiliated with AMCI that requires the AMCI parties to
pay reclamation and other obligations of one of the former
U.S. AMCI entities acquired by the Company (Solomons Mining
Company). In April 2004, the Company entered into an arrangement
with the former owners of U.S. AMCI (the "AMCI
Parties") to purchase 0.35 million tons of coal from a
third party at a price of $54.50 per ton at various times
from April 2004 through November 2005. An amount of $34.50 will
be paid to the producer of that coal, $12.00 per ton is
payable to the AMCI Parties and $8.00 per ton is retained
by the Company to fund the remaining reclamation obligation of
Solomons Mining Company, a company acquired by the Company in
the U.S. AMCI acquisition. As of September 30, 2004,
the Company has retained an aggregate of $1,280 under this
arrangement. After the Company has retained $2,300, the
$8.00 per ton will thereafter be paid to the U.S. AMCI
parties.
In connection with our acquisition of the Coastal
Coal Company, we acquired an overriding royalty interest in
certain properties located in Virginia and West Virginia owned
by El Paso CPG Company for $11,000 in cash. Effective
February 1, 2003, the Company sold the overriding royalty
interest to affiliates of Natural Resource Partners, L.P.
(NRP) for $11,850 in cash. Effective April 1, 2003,
the Company also sold substantially all of its fee-owned
Virginia mineral properties to NRP for $53,600 in cash in a
sale/leaseback transaction. Based on the aggregate of $11,900
and $13,700 that the Company paid to NRP in lease and royalty
payments for the nine months ended September 30, 2004 and
the year ended December 31, 2003, respectively, NRP is our
largest landlord. In an unrelated transaction in December 2003,
a member of the Company's board of directors was appointed
as a member of the board of directors of GP Natural
Resource Partners, LLC, the general partner of NRP, and First
Reserve became a substantial equity owner of NRP. The Company
believes the production and minimum royalty rates contained in
leases with NRP are consistent with current market royalty rates.
One of Alpha Natural Resources, LLC's
Executive Vice Presidents is a 50% owner of Robindale
Energy Services, Inc. (and its subsidiary)
("Robindale"). Robindale is engaged in the business of
waste coal sales and related businesses in Pennsylvania. From
time to time, Robindale has sold and purchased coal and related
products to the operations of our AMFIRE regional business unit
in Pennsylvania. During 2003 and the nine months ended
September 30, 2004, our subsidiaries Alpha Coal Sales and
AMFIRE Mining Company, LLC paid an aggregate of $172 and $485
respectively to Robindale as payment for trucking services and
waste coal. During the first nine months of 2004, the Company
had sales of $165 to Robindale. The Company has agreed that our
Executive Vice President's continued relationship with
Robindale will not cause a breach of his employment agreement
with us, and he has agreed that he will
F-31
ANR FUND IX HOLDINGS, L.P. AND ALPHA NR
HOLDING, INC. AND SUBSIDIARIES
NOTES TO COMBINED FINANCIAL
STATEMENTS — (Continued)
Information for the Nine Months Ended
September 30, 2003 is Unaudited
(In thousands, except percentages and share
and per share data)
not participate in any decisions to enter into
any transactions that might be proposed between Robindale and
Alpha.
In April 2004, we entered into a coal sales
arrangement with AMCI Metall & Kohle AG to sell 750,000
metric tons through March 2005. Two of Alpha's board
members hold ownership in AMCI Metall & Kohle AG. For
the nine months ended September 30, 2004, total sales of
$31,697 have been recorded under this contract. The Company also
had total sales of $15,640 for the first nine months of 2004 to
AMCI Australia Pty Ltd., an entity owned by two of the
Company's board members. The Company purchased coal in the
amount of $1,409 under various short-term purchase orders during
the nine months ended September 30, 2004 from XCoal Energy
and Resources, an entity in which two members of Alpha's
board of directors each own more than a 10% equity
interest. In addition, American Metals and Coal International,
Inc., an entity owned by two of the Company's board
members, facilitated a $5,202 coal sales transaction with
an international buyer for no compensation or commission.
One of the Company's subsidiaries purchased
$1,786 of coal in the ordinary course of our business from
subsidiaries of Foundation Coal Holdings, Inc.
("Foundation"). Three of the Company's directors
also serve as directors of Foundation. First Reserve
Fund IX, L.P. and an entity affiliated with AMCI
beneficially own an aggregate of 56.8% of the outstanding shares
of Foundation's common stock.
Predecessor
The Combined Virginia Entity had receivables and
payables and was a party to certain transactions with affiliated
companies in the normal course of business.
Pittston Coal Management Company
(PCMC) provided executive, legal, engineering, geological,
accounting, and other administrative services to affiliated
companies owned directly or indirectly by Pittston Coal Company,
including companies included in the Combined Virginia Entity.
PCMC allocated its costs to the various entities
based primarily on production, head count, and asset base.
Intercompany balances among companies included in the Combined
Virginia Entity have been eliminated, and net amounts due from
other affiliated companies are classified in the balance sheet
as a component of shareholders' equity.
Pittston Coal Sales Corporation
(PCSC) provided services to affiliated companies owned by
Pittston Coal Company, including companies included in the
Combined Virginia Entity. PCSC negotiated and entered into coal
sales contracts with customers using its sales staff. A portion
of the cost of PCSC's sales department was allocated to the
affiliated companies based on relative coal sales volume. Coal
was shipped from affiliated coal production companies, including
companies included in the Combined Virginia Entity, to customers
and PCSC invoiced the customers and recorded a payable to the
affiliated company for the amount of the customer invoice. PCSC
collected the cash on behalf of the affiliate. Intercompany
balances between PCSC and companies included in the Combined
Virginia Entity have been eliminated and receivables and
payables to other affiliated companies were classified as a
component of shareholders' equity.
Cash generated or used by our Predecessor was
ultimately received or provided by The Brink's Company.
During the period from January 1, 2002 to December 13,
2002, and the year ended December 31, 2001, Pittston Coal
Company contributed $329,964 and $151,956, respectively, of
intercompany amounts owned by its subsidiaries included in the
Combined Virginia Entity to shareholders' equity.
F-32
ANR FUND IX HOLDINGS, L.P. AND ALPHA NR
HOLDING, INC. AND SUBSIDIARIES
NOTES TO COMBINED FINANCIAL
STATEMENTS — (Continued)
Information for the Nine Months Ended
September 30, 2003 is Unaudited
(In thousands, except percentages and share
and per share data)
Our Predecessor was included in the consolidated
U.S. federal income tax return filed by The Brink's
Company. The Brink's Company's consolidated provision
and actual cash payments for U.S. federal income taxes were
allocated between the Predecessor and other affiliates of The
Brink's Company in accordance with The Brink's
Company's tax allocation policy. In general, the
consolidated current tax provision of The Brink's
Company's was allocated among the affiliates based
principally upon the financial income, taxable income, credits,
and other amounts directly related to the respective affiliate.
The Brink's Company gave credit to its subsidiaries for the
tax effect of U.S. federal income tax losses and other
attributes to the extent the attributes were utilized on a
consolidated basis. As a result, the allocated affiliate amounts
of taxes payable or refundable are not necessarily comparable to
those that would have resulted if the affiliate had filed
separate tax returns. Net deferred income tax assets of the
Predecessor are reflected as deferred income tax receivable from
parent and are classified as a component of shareholders'
equity.
(19)
Commitments
Operating Leases
The Company leases coal mining and other
equipment under long-term operating leases with varying terms.
In addition, the Company leases coal reserves and surface rights
from land owners under various terms and royalty rates.
As of September 30, 2004, aggregate future
minimum lease payments under operating leases and minimum
royalties under coal leases were as follows:
Equipment
Coal
Facility
and Other
Royalties
Total
Three months ending December 31, 2004
$
134
$
993
$
1,643
$
2,770
Year ending December 31:
2005
481
3,826
9,200
13,507
2006
279
3,767
8,543
12,589
2007
211
2,206
8,255
10,672
2008
168
524
7,248
7,940
2009
77
—
7,590
7,667
Thereafter
261
—
24,719
24,980
Total
$
1,611
$
11,316
$
67,198
$
80,125
The above table includes amounts due under
noncancelable leases with initial or remaining lease terms in
excess of one year.
Net rent expense amounted to $4,713 for the nine
months ended September 30, 2004, $4,487 for the nine months
ended September 30, 2003, $6,354 for the year ended
December 31, 2003, $170 for the period from
December 14, 2002 to December 31, 2002, $8,262 for the
period from January 1, 2002 to December 13, 2002, and
$9,216 for the year ended December 31, 2001. Coal royalties
expense amounted to $32,747 for the nine months ended
September 30, 2004, $20,872 for the nine months ended
September 30, 2003, $28,549 for the year ended
December 31, 2003, $46 for the period from
December 14, 2002 to December 31, 2002, $981 for the
period from January 1, 2002 to December 13, 2002, and
$1,108 for the year ended December 31, 2001.
F-33
ANR FUND IX HOLDINGS, L.P. AND ALPHA NR
HOLDING, INC. AND SUBSIDIARIES
NOTES TO COMBINED FINANCIAL
STATEMENTS — (Continued)
Information for the Nine Months Ended
September 30, 2003 is Unaudited
(In thousands, except percentages and share
and per share data)
Other Commitments
As of September 30, 2004, the Company had
commitments to purchase 2.4 million, 4.8 million,
0.7 million, and 0.2 million tons of coal at a cost of
$113,560, $257,531, $38,733, and $10,020 in 2004, 2005, 2006,
and 2007, respectively.
(20)
Mergers and Acquisitions
2002 Acquisition
Pittston Coal Company
On December 13, 2002, the Company acquired
the majority of the Virginia coal assets of Pittston Coal
Company (the Combined Virginia Entity), for a net purchase price
of $62,945. The results of the Combined Virginia Entity's
operations have been included in the combined financial
statements since that date. The purchase also included Maxxim
Rebuild, a mining equipment and repair business.
The $62,945 purchase price for the Combined
Virginia Entity consisted of a $37,202 cash payment at closing,
and notes payable of $25,743 issued to the seller, $18,500 of
which was in the form of a minimum royalty agreement. Additional
payments of up to $5,000 are payable under the royalty agreement
if certain levels of coal sales prices are achieved. As of
September 30, 2004, $3,753 had been accrued for this
additional consideration.
In conjunction with the acquisition, the Company
contracted with the Predecessor to perform reclamation work for
sites retained by the Predecessor. As of September 30,
2004, the Company had $2,000 in liabilities related to the
remaining contract reclamation work, including a current portion
of $851.
The following table summarizes the estimated fair
values, as determined by an independent third-party valuation,
of the assets acquired and liabilities assumed at the date of
acquisition (December 13, 2002):
Current assets
$
17,732
Property, plant, and equipment
69,087
Intangible assets
4,091
Total assets acquired
90,910
Asset retirement obligation
(15,050
)
Postretirement medical benefits
(5,915
)
Other liabilities
(7,000
)
Total liabilities assumed
(27,965
)
Net assets acquired
$
62,945
2003 Acquisitions
Coastal Coal Company
On January 31, 2003, the Company acquired
100% of the membership interest of Coastal Coal Company, LLC and
certain other assets. The results of Coastal Coal's
operations have been included in the combined financial
statements since that date. Coastal Coal Company, LLC is a
producer of thermal and industrial coals in the Appalachian
region.
F-34
ANR FUND IX HOLDINGS, L.P. AND ALPHA NR
HOLDING, INC. AND SUBSIDIARIES
NOTES TO COMBINED FINANCIAL
STATEMENTS — (Continued)
Information for the Nine Months Ended
September 30, 2003 is Unaudited
(In thousands, except percentages and share
and per share data)
The aggregate net purchase price for the Coastal
Coal membership interest and related assets was $67,772.
Consideration included cash of $44,172 and notes payable issued
to the seller of $23,600.
The following table summarizes the estimated fair
values, as determined by an independent third-party valuation,
of the assets acquired and liabilities assumed at the date of
acquisition (January 31, 2003):
Current assets
$
31,614
Property, plant, and equipment
40,342
Intangibles
3,937
Other noncurrent assets
18,269
Total assets acquired
94,162
Current liabilities
(11,700
)
Asset retirement obligation
(12,861
)
Other noncurrent liabilities
(1,431
)
Notes payable
(398
)
Total liabilities assumed
(26,390
)
Net assets acquired
$
67,772
American Metals and Coal International,
    Inc.
On March 11, 2003, the Company acquired the
majority of the North American operations of American Metals and
Coal International, Inc. (U.S. AMCI). The results of
U.S. AMCI's operations have been included in the
combined financial statements since that date. U.S. AMCI is
a producer of Appalachian coal and a broker of steam and
metallurgical coals in the United States and abroad.
The aggregate purchase price for the
U.S. AMCI net assets was $121,299. Consideration included
cash of $52,339, and common and preferred membership interests
in ANR Holdings issued, valued at $68,960. The value attributed
to the membership interest was based on the cash contributions
made by the other owners of ANR Holdings.
The goodwill represents the portion of the
purchase price allocated to the U.S. AMCI sales force. The
goodwill is not deductible for federal income tax purposes.
F-35
ANR FUND IX HOLDINGS, L.P. AND ALPHA NR
HOLDING, INC. AND SUBSIDIARIES
NOTES TO COMBINED FINANCIAL
STATEMENTS — (Continued)
Information for the Nine Months Ended
September 30, 2003 is Unaudited
(In thousands, except percentages and share
and per share data)
The following table summarizes the estimated fair
values, as determined by an independent third-party valuation,
of the assets acquired and liabilities assumed at the date of
acquisition (March 11, 2003):
Current assets
$
47,005
Property, plant, and equipment
94,732
Goodwill
17,121
Other noncurrent assets
976
Total assets acquired
159,834
Current liabilities
(17,307
)
Asset retirement obligation
(8,768
)
Postretirement medical benefits
(3,475
)
Other noncurrent liabilities
(1,051
)
Notes payable
(7,934
)
Total liabilities assumed
(38,535
)
Net assets acquired
$
121,299
Mears Enterprises, Inc.
On November 17, 2003, the Company acquired
the assets of Mears Enterprises, Inc (Mears Enterprises) and
affiliated companies. The results of Mears Enterprises and
affiliates operations have been included in the combined
financial statements since that date. Mears Enterprises and
affiliates operate six mining complexes and a preparation plant,
all located in Pennsylvania.
The aggregate purchase price for the net assets
of Mears Enterprises and affiliates was $37,977 in cash.
The following table summarizes the estimated fair
values, as determined by an independent third-party valuation,
of the assets acquired and liabilities assumed at the date of
acquisition (November 17, 2003):
Current assets
$
280
Property, plant, and equipment
39,476
Intangibles
200
Other noncurrent assets
100
Total assets acquired
40,056
Asset retirement obligation
(2,079
)
Net assets acquired
$
37,977
2004 Acquisitions
Moravian Run Reclamation Co.
On April 1, 2004, the Company acquired
substantially all of the assets of Moravian Run Reclamation Co.,
Inc. (Moravian Run) for $5 in cash. The Company has agreed to
pay Moravian Run monthly overriding royalty payments for the
next four years in an aggregate amount of $1,000 and monthly
payments for the next five years in respect of leased equipment
in an aggregate amount of $3,100. The Company also assumed
$1,086 of reclamation obligations. The Moravian Run assets
included, as of
F-36
ANR FUND IX HOLDINGS, L.P. AND ALPHA NR
HOLDING, INC. AND SUBSIDIARIES
NOTES TO COMBINED FINANCIAL
STATEMENTS — (Continued)
Information for the Nine Months Ended
September 30, 2003 is Unaudited
(In thousands, except percentages and share
and per share data)
March 31, 2004, four active surface mines
and two additional surface mines under development, operating in
close proximity to and serving many of the same customers as our
AMFIRE business unit located in Pennsylvania.
Cooney Bros. Coal Company
On May 10, 2004, the Company acquired a coal
preparation plant and railroad loading facility located in
Portage, Pennsylvania and related equipment and coal inventory
from Cooney Bros. Coal Company for $2,500 in cash and an
adjacent coal refuse disposal site from a Cooney family trust
for $300 in cash. The Company also assumed approximately $102 of
reclamation obligations in connection with this acquisition.
The Moravian Run Reclamation Co. and Cooney Bros.
Coal Company acquisitions are not significant to the
Company's financial position, results of operations, or
cash flows and, therefore, are not included in the pro forma
information presented below.
Pro Forma Information
The following unaudited pro forma financial
information for the year ended December 31, 2003 reflects
the consolidated results of operations of the Company as if the
acquisitions of Coastal Coal Company, LLC, U.S. AMCI, and
Mears Enterprises and affiliates had taken place on
January 1, 2003. The pro forma information includes
primarily adjustments for depreciation and depletion on acquired
property, plant, and equipment, and interest expense. The pro
forma financial information is not necessarily indicative of the
results of operations had the transactions been completed on the
assumed date.
Revenues
$
902,766
Net income
$
5,769
(21)
Concentrations and Major Customers
The Company markets its coal principally to
electric utilities in the United States and international and
domestic steel producers. As of September 30, 2004, and
December 31, 2003 and 2002, trade accounts receivable from
electric utilities totaled approximately $39,508, $32,700 and
$2,500, respectively. Credit is extended based on an evaluation
of the customer's financial condition and collateral is
generally not required. Credit losses are provided for in the
combined financial statements and historically have been
minimal. The Company is committed under long-term contracts to
supply coal that meets certain quality requirements at specified
prices. The prices for some multi-year contracts are adjusted
based on economic indices or the contract may include
year-to-year specified price changes. Quantities sold under some
contracts may vary from year to year within certain limits at
the option of the customer. The Company's largest customer
in 2003 accounted for less than 10% of total sales for the year
ended December 31, 2003. Sales to the Company's
largest customer were $99,910 for the nine months ended
September 30, 2004, which represents 11% of total sales for
the nine months ended September 30, 2004.
(22)
Industry Segment
The Company has one reportable segment, the
extracting, processing and marketing of coal. The Company
markets extracted and brokered coal to customers in the United
States and in foreign markets. Export sales totaled $448,567, or
approximately 48% of total sales for the nine months ended
September 30, 2004, $155,945 or approximately 28% of total
sales for the nine months ended September 30, 2003 and
$220,818 or approximately 28% of total sales for the year ended
December 31, 2003. Export sales in 2003 primarily were to
customers in Canada, Brazil, and various European countries.
F-37
ANR FUND IX HOLDINGS, L.P. AND ALPHA NR
HOLDING, INC. AND SUBSIDIARIES
NOTES TO COMBINED FINANCIAL
STATEMENTS — (Continued)
Information for the Nine Months Ended
September 30, 2003 is Unaudited
(In thousands, except percentages and share
and per share data)
Export sales in the first nine months of 2004
primarily were to customers in Canada, Brazil, Japan, and
various European countries.
(23)
Contingencies
(a)
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 combined
balance sheets. 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 September 30, 2004 is $50,491. The amount of surety
bonds currently outstanding related to the Company's
reclamation obligations is presented in note 13 to the
combined financial statements. The Company has provided
guarantees for equipment financing obtained by certain of its
contract mining operators totaling approximately $1,100. The
estimated fair value of these guarantees is not significant.
Alpha from time to time guarantees the
performance of a subsidiary on short-term sales and purchase
contracts. The subsidiaries of the Company also guarantee
performance on the Company's outstanding reclamation bonds,
as well as the Company's obligations under the Citicorp
credit facility and 10% senior notes.
(b)
Litigation
The Company is involved in various legal
proceedings from time to time in the normal course of business.
In management's opinion, the Company is not currently
involved in any legal proceeding which individually or in the
aggregate could have a material effect on the financial
condition, results of operations and/or cash flows of the
Company.
(c)
Other Contingencies
In connection with the Company's acquisition
of Coastal Coal Company, the seller, El Paso CGP Company,
has agreed to retain and indemnify the Company for all
workers' compensation and black lung claims incurred prior
to the acquisition date of January 31, 2003. The majority
of this liability relates to claims in the state of West
Virginia. If El Paso CGP Company fails to honor its
agreement with the Company, then the Company would be liable for
the payment of those claims, which are estimated to be
approximately $5,369 as of September 30, 2004 based on
reported case reserves. El Paso has posted a bond with the
state of West Virginia for $3,722; therefore, the Company's
exposure is $1,647 for these reported claims.
(24)
Asset Impairment Charge
One of the Company's subsidiaries wholly
owns National King Coal, LLC (a mining company) and Gallup
Transportation (a trucking company) (collectively
"NKC"). Since its acquisition by the Company, NKC has
incurred cumulative losses of $2,800. While NKC has not
experienced sales revenue growth comparable to our other
operations of the Company, it has been affected by many of the
same cost increases. As a result, we were required to assess the
recovery of the carrying value of the NKC assets. Based on that
analysis, it was determined that the assets of NKC were
impaired. An impairment charge of $5,100 was recorded in
September 2004 to reduce the carrying value of the assets of NKC
to their estimated fair value. A discounted cashflow model was
used to determine fair value.
F-38
ANR FUND IX HOLDINGS, L.P. AND ALPHA NR
HOLDING, INC. AND SUBSIDIARIES
NOTES TO COMBINED FINANCIAL
STATEMENTS — (Continued)
Information for the Nine Months Ended
September 30, 2003 is Unaudited
(In thousands, except percentages and share
and per share data)
(25)
Supplemental Cash Flow Disclosures
Company
Cash paid for interest (net of amounts
capitalized) for the nine months ended September 30, 2004
and for the year ended December 31, 2003 was $4,198 and
$6,879, respectively. No income taxes have been paid by the
Company through September 30, 2004.
Non-cash investing and financing activities are
excluded from the combined statements of cash flows.
Significant non-cash activity for the nine months
ended September 30, 2004 includes:
•
Increase in asset retirement obligation and fixed
    assets of $3,145 for new sites added in 2004. Decrease in asset
    retirement obligation of $4,544, decrease in fixed assets of
    $1,666, and increase in deferred gains on sales of property
    interests of $3,514 as a result of revisions in estimated cash
    flows underlying the asset retirement obligation.
•
Settlement of the net working capital acquired in
    conjunction with the acquisition of U.S. AMCI recorded as
    an increase in goodwill of $1,520, a decrease in due from
    affiliate of $2,501 and a decrease in accrued expenses of $981.
•
Increase in deferred gains on sales of property
    interests and decrease in other liabilities of $1,480 for
    revisions in estimated contract reclamation liability assumed in
    conjunction with the acquisition of the Virginia coal operations
    of Pittston Coal Company.
•
Decrease in deferred gains on sales of property
    interests of $3,753 as a result of additional consideration
    payable for the acquisition of the Virginia coal operations of
    Pittston Coal Company.
•
Construction in progress and other capital
    expenditures of $629 recorded in accounts payable.
Significant non-cash activity for the nine months
ended December 31, 2003 includes:
•
Increase in asset retirement obligation and fixed
    assets of $1,165 for new sites added in 2003.
•
The short-term financing of prepaid insurance
    premiums in the amount of $14,425.
•
The conversion of $44,000 of related party notes
    payable to contributed capital.
•
Seller financing of acquired entities of $23,600.
•
Issuance of membership interests in ANR Holdings,
    LLC of $68,960 for the acquisition of U.S. AMCI.
•
Construction in progress of $1,929 recorded in
    accounts payable.
Significant non-cash activity for the period from
December 14, 2002 to December 31, 2002 includes:
•
Seller financing of acquired entities of $25,743.
Predecessor
During the period from January 1, 2002 to
December 13, 2002 the Pittston Coal Company contributed
$329,964 of intercompany payables from the Combined Virginia
Entity to shareholders' equity. For the year ended
December 31, 2001, Pittston Coal Company contributed
$151,956 of intercompany payables from the Combined Virginia
Entity to shareholders' equity.
F-39
ANR FUND IX HOLDINGS, L.P. AND ALPHA NR
HOLDING, INC. AND SUBSIDIARIES
NOTES TO COMBINED FINANCIAL
STATEMENTS — (Continued)
Information for the Nine Months Ended
September 30, 2003 is Unaudited
(In thousands, except percentages and share
and per share data)
(26)
Minority Interest
On March 11, 2003, concurrent with the
acquisition of U.S. AMCI, ANR Holdings issued additional
membership interests in the aggregate amount of 45.3% to the
former owners of U.S. AMCI, Madison Capital Funding, LLC and
Alpha Coal Management, LLC (Alpha Coal Management), which is
owned by certain members of management, in exchange for the net
assets of U.S. AMCI and cash. All members of ANR Holdings, other
than Alpha Coal Management, hold both common and preferred
sharing ratios representing membership interests. Pursuant to
the provisions of the ANR Holdings limited liability company
agreement, the income of ANR Holdings is allocated among its
members as follows:
•
First, to the holders of preferred sharing ratios
    on a pro rata basis to the extent of any losses that had been
    allocated to them in prior periods,
•
Second, to the holders of preferred sharing
    ratios on a pro rata basis up to the cumulative unallocated
    preferred yield (based on an annual preferred yield of 12%), and
•
Third, to the holders of common sharing ratios on
    a pro rata basis.
For purposes of allocating income in the year in
which a new member is admitted, ANR Holdings applies a proration
method, which allocates income based on the weighted-average
ownership of its membership interests for the year.
The principal executive officers of Alpha and
other key employees hold the entire membership interest of Alpha
Coal Management, which in turn owns a common membership interest
in ANR Holdings. The interest of Alpha Coal Management in ANR
Holdings entitles Alpha Coal Management to receive approximately
0.32% of the distributions made to the holders of common
membership interests in ANR Holdings (which we refer to as the
management members' "purchased interest"). In
addition, Alpha Coal Management is entitled to receive, subject
to certain conditions, an additional distribution of up to 5% of
any profits (which we refer to as the management members'
"profits interest") upon the occurrence of a liquidity
event, as defined in the governing documents of ANR Holdings.
Generally, a liquidity event will occur when ANR Holdings is
sold or when it makes a public sale of equity. The provisions of
Alpha Coal Management's limited liability company agreement
also contains put and call rights for the benefit of the
executive and Alpha, respectively, with respect to the purchased
interests and profits interests if the employment relationship
of the executive is terminated. In general, depending on when
the employment relationship is terminated, the put and call
prices are equal to (1) the sum of the greater of
(a) the member's original investment minus returns on
that investment or (b) the fair market value, as defined,
of the member's purchased interest on the date the put is
exercised, plus (2) a percentage of the fair market value,
as defined, of the profits interest on the date the put is
exercised, with the percentage increasing from 50% to 100% as
the length of the employment period increases from two to four
years from the date Alpha Coal Management was formed. For
purposes of the put and call, the agreement requires Alpha to
use the same method of valuation that First Reserve Corporation
uses for purposes of reporting to its limited partners, reduced
by a 25% minority discount.
(27)
Investments
Dominion Terminal Associates
As part of the Company's acquisition of the
Combined Virginia Entity, the Company acquired a 32.5% interest
in Dominion Terminal Associates (DTA). DTA is a partnership
with three other companies that operates a leased coal port
terminal in Newport News, Virginia (the Terminal). The Company
F-40
ANR FUND IX HOLDINGS, L.P. AND ALPHA NR
HOLDING, INC. AND SUBSIDIARIES
NOTES TO COMBINED FINANCIAL
STATEMENTS — (Continued)
Information for the Nine Months Ended
September 30, 2003 is Unaudited
(In thousands, except percentages and share
and per share data)
accounts for this investment under the equity
method for investments. See note 2(o). The Company did not
ascribe any value to this partnership interest when it was
acquired.
The Company has the right to use 32.5% of the
throughput and ground storage capacity of the Terminal and pay
for this right based upon an allocation of costs as determined
by DTA. The Brink's Company guaranteed bonds of the
partnership in the face amount of $43,160 from the financing
related to the construction of the Terminal. The Brink's
Company also paid its proportionate share of interest on these
bonds. The Company did not assume any obligations associated
with these bonds.
For the nine months ended September 30,
2004, the nine months ended September 30, 2003, the year
ended December 31, 2003, and the period from
December 14, 2002 to December 31, 2002, the Company
made advances to DTA equal to its share of allocated costs of
$2,100, $2,281, $3,348, and $253, respectively. The Company
records its share of losses in DTA equal to the amount of
advances. The Company does not guarantee the obligations of DTA
and is not otherwise committed to provide further financial
support. Accordingly, the Company does not reduce its investment
below zero.
Net losses of $6,082 and $6,120 for the period
from January 1, 2002 to December 13, 2002 and the year
ended December 31, 2001, respectively, were recorded by the
Predecessor relating to this investment.
Excelven Pty Ltd
In August 2004, Alpha, together with its
affiliate American Metals and Coal International, Inc.
("AMCI"), entered into a subscription deed with
Excelven Pty Ltd, pursuant to which each party agreed to acquire
a 24.5% interest in Excelven for a purchase price of
$6.5 million in cash. Excelven, through its subsidiaries,
owns the rights to the Las Carmelitas mining venture in
Venezuela and the related Palmarejo export port facility on Lake
Maracaibo in Venezuela. Alpha's first payment of $3,250 was
made in September 2004. The investment is accounted for on the
equity method, and is included in other assets at
September 30, 2004.
(28)
Income Taxes
The Company
As outlined in the organizational structure in
note 1, the minority interest owners and ANR Fund IX
Holdings, L.P. own interests in ANR Holdings, a limited
liability company and pass-through entity for income tax
purposes. As a pass-through entity, ANR Holdings provides
information returns reflecting the allocated income (loss) to
the minority interest owners and ANR Fund IX Holdings, L.P.
based upon their respective ownership percentage and certain
special allocations as provided by the limited liability company
agreement and the Internal Revenue Code. The income tax
consequences of the income (loss) allocated to these owners is
not reflected in the combined financial statements.
The combined financial statements include only
the current and deferred income tax associated with Alpha NR
Holding, Inc., a taxable entity. The primary source of the
income tax impact is derived from the allocated income (loss)
from ANR Holdings, Alpha Natural Resources, LLC and its
operating subsidiaries, all of which are pass-through entities
for tax purposes.
F-41
ANR FUND IX HOLDINGS, L.P. AND ALPHA NR
HOLDING, INC. AND SUBSIDIARIES
NOTES TO COMBINED FINANCIAL
STATEMENTS — (Continued)
Information for the Nine Months Ended
September 30, 2003 is Unaudited
(In thousands, except percentages and share
and per share data)
Significant components of income tax expense
(benefit) were as follows:
Period from
Nine Months Ended
December 14,
September 30,
Year Ended
2002 to
December 31,
December 31,
2004
2003
2003
2002
(unaudited)
Current tax expense:
Federal
$
2,219
—
—
—
State
65
—
—
—
2,284
—
—
—
Deferred tax expense (benefit):
Federal
1,803
984
665
(284
)
State
645
4
3
(50
)
2,448
988
668
(334
)
Total income tax expense (benefit):
Federal
4,022
984
665
(284
)
State
710
4
3
(50
)
$
4,732
$
988
$
668
$
(334
)
A reconciliation of the statutory federal income
tax expense (benefit) at 35% to income before income taxes and
minority interest, and the actual income tax expense (benefit)
is as follows:
Period from
Nine Months
December 14,
Ended
Year Ended
2002 to
September 30,
December 31,
December 31,
2004
2003
2002
Federal statutory income tax expense (benefit)
$
15,118
$
1,352
$
(339
)
Increases (reductions) in taxes due to:
Percentage depletion allowance
(3,005
)
(1,087
)
—
State taxes, net of federal tax impact
461
2
(33
)
Change in valuation allowance
(203
)
815
—
Taxes not provided for minority interest
(7,049
)
(501
)
—
Taxes not provided for pass-through entity
(711
)
73
37
Other, net
121
14
1
Actual income tax expense (benefit)
$
4,732
$
668
$
(334
)
F-42
ANR FUND IX HOLDINGS, L.P. AND ALPHA NR
HOLDING, INC. AND SUBSIDIARIES
NOTES TO COMBINED FINANCIAL
STATEMENTS — (Continued)
Information for the Nine Months Ended
September 30, 2003 is Unaudited
(In thousands, except percentages and share
and per share data)
Deferred income taxes result from temporary
differences between the reporting of amounts for financial
statement purposes and income tax purposes. The net deferred tax
assets and liabilities included in the combined financial
statements include the following amounts:
December 31,
September 30,
2004
2003
2002
Deferred tax assets:
Net operating loss carryforwards
$
1,178
$
1,956
$
334
Charitable contribution carryforwards
90
118
—
Alternative minimum tax credit carryforward
2,219
—
—
Gross deferred tax assets
3,487
2,074
334
Less valuation allowance
(612
)
(815
)
—
Total net deferred tax assets
2,875
1,259
334
Deferred tax liabilities:
Investment in limited liability company subsidiary
(4,010
)
(653
)
—
Virginia tax credit
(1,647
)
(940
)
—
Total deferred tax liabilities
(5,657
)
(1,593
)
—
Net deferred tax asset (liability)
$
(2,782
)
$
(334
)
$
334
The breakdown of the net deferred tax asset
(liability) is recorded in the accompanying combined
balance sheets as follows:
December 31,
September 30,
2004
2003
2002
Current asset
$
1,046
$
489
$
—
Current liability
—
—
—
Net current asset (liability)
1,046
489
—
Noncurrent asset
1,829
770
334
Noncurrent liability
(5,657
)
(1,593
)
—
Net noncurrent asset (liability)
(3,828
)
(823
)
334
Total net deferred tax asset (liability)
$
(2,782
)
$
(334
)
$
334
As of September 30, 2004, the Company has a
net operating loss carryforward (NOL) for federal income tax
purposes of $3,624, which is available to offset future federal
taxable income, if any, through 2023. In addition, the Company
has an alternative minimum tax (AMT) credit carryforward of
$2,219 which can be carried forward indefinitely to offset
future regular tax in excess of AMT. Due to the likelihood that
the AMT will exceed the regular tax in the future, the Company
has provided a valuation allowance for the portion of deferred
tax assets not expected to be realized. The remaining net
deferred tax liability, net of the valuation allowance, reflects
the AMT expected to be paid on the net taxable temporary
differences.
F-43
ANR FUND IX HOLDINGS, L.P. AND ALPHA NR
HOLDING, INC. AND SUBSIDIARIES
NOTES TO COMBINED FINANCIAL
STATEMENTS — (Continued)
Information for the Nine Months Ended
September 30, 2003 is Unaudited
(In thousands, except percentages and share
and per share data)
Predecessor
The Combined Virginia Entity was subject to
U.S. federal and state income taxes. The income tax benefit
consisted of the U.S. federal income taxes:
Period from
January 1,
2002 to
Year Ended
December 13,
December 31,
2002
2001
Current
$
9,175
$
1,538
Deferred
8,023
(41
)
Total
$
17,198
$
1,497
The following table accounts for the difference
between the actual income tax benefit and the amounts obtained
by applying the statutory U.S. federal income tax rate of
35% to the income (loss) before income taxes.
Period from
January 1,
2002 to
Year Ended
December 13,
December 31,
2002
2001
Tax (benefit) expense computed at statutory rate
$
(14,532
)
$
2,388
Increases (reductions) in taxes due to:
Percentage depletion
(1,302
)
(3,943
)
Adjustment resulting from favorable appeal
    relating to prior years
(1,678
)
—
Miscellaneous
314
58
Actual income tax benefit
$
(17,198
)
$
(1,497
)
(29)
Federal Black Lung Excise Tax
Predecessor
On February 10, 1999, the U.S. District
Court of the Eastern District of Virginia entered a final
judgment in favor of certain of The Brink's Company's
subsidiaries, including certain of the companies included in the
Combined Virginia Entity, ruling that the Federal Black Lung
Excise Tax (FBLET) is unconstitutional as applied to export
coal sales. The Brink's Company sought refunds of the FBLET
it paid on export coal sales for all open statutory periods and
received refunds of $2,758 (including interest), of which $2,049
related to the Combined Virginia Entity, during the period from
January 1, 2002 to December 13, 2002. The Brink's
Company also received refunds of $23,399 (including interest),
of which $15,358 related to the Combined Virginia Entity, during
2001. In addition, $855 of accrued FBLET liability previously
recorded related to the Combined Virginia Entity was reversed at
the time the refunds were collected in 2001.
(30)
Subsequent Events
On October 13, 2004, Amfire Mining Company,
LLC, a wholly owned subsidiary of the Company, entered into a
mineral lease with Pristine Resources, Inc. for the right to
deep mine the Upper Freeport "E" seam of coal in
Pennsylvania. The lease extends until December 31, 2021 or
until such earlier time as
F-44
ANR FUND IX HOLDINGS, L.P. AND ALPHA NR
HOLDING, INC. AND SUBSIDIARIES
NOTES TO COMBINED FINANCIAL
STATEMENTS — (Continued)
Information for the Nine Months Ended
September 30, 2003 is Unaudited
(In thousands, except percentages and share
and per share data)
all mineable and merchantable coal has been mined
and removed. The lease calls for a minimum royalty in the annual
amount of up to $750 commencing in 2007 and continuing until the
end of the lease. A tonnage royalty based on the greater of a
specified minimum amount per ton or a specified percentage of
the gross selling price is applied against the annual minimum
royalties.
In November 2004, Alpha Coal Management adopted
the Alpha Coal Management LLC 2004 Long-Term Incentive Plan
(the "Alpha Coal Management Long-Term Incentive Plan")
to provide equity incentive compensation to those key employees
and others who make significant contributions to the strategic
and long-term performance objectives and growth of the Company.
On November 10, 2004, Alpha Coal Management granted options
to purchase 800,000 units of Alpha Coal Management to
22 members of the Company's management team under the
Alpha Coal Management Long-Term Incentive Plan. These options
vest over a period of five years (with accelerated vesting upon
a change of control) and have a term of ten years. In connection
with this grant of options, ANR Holdings agreed that upon
exercise of awards granted by Alpha Coal Management under the
Alpha Coal Management Long-Term Incentive Plan,
ANR Holdings will issue to Alpha Coal Management additional
common membership interests of ANR Holdings in an aggregate
amount equal to up to 1% of ANR Holdings outstanding common
membership interest as of November 10, 2004, provided that
Alpha Coal Management contributes to ANR Holdings the
exercise price received by it for awards exercised.
F-45
INDEPENDENT AUDITORS' REPORT
Alpha Natural Resources, LLC
and Board of Directors of
Coastal Coal Company, LLC:
We have audited the accompanying consolidated
balance sheet of Coastal Coal Company, LLC and subsidiary (the
Company) as of December 31, 2002, and the related
consolidated statements of operations, changes in members'
equity and comprehensive income (loss), and cash flows for the
period from January 1, 2003 to January 31, 2003 and
the year ended December 31, 2002. These consolidated
financial statements are the responsibility of the
Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our
audits.
We conducted our audits 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
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.
In our opinion, the consolidated financial
statements referred to above present fairly, in all material
respects, the financial position of Coastal Coal Company, LLC
and subsidiary as of December 31, 2002 and the results of
their operations and their cash flows for the period from
January 1, 2003 to January 31, 2003 and the year ended
December 31, 2002, in conformity with accounting principles
generally accepted in the United States of America.
As discussed in note 1 to the consolidated
financial statements, the Company adopted the provisions of FASB
Statement No. 143,
Accounting for Asset Retirement
Obligations
, effective January 1, 2003.
/s/ KPMG LLP
KPMG LLP
Roanoke, Virginia
April 29, 2004
F-46
COASTAL COAL COMPANY, LLC
CONSOLIDATED BALANCE SHEET
December 31, 2002
Assets
Current assets:
Cash and cash equivalents
$
22,250
Accounts receivable, net
33,012,961
Inventories
11,904,110
Prepaid expenses and other current assets
2,396,419
Total current assets
47,335,740
Property, plant, and equipment, net
89,988,270
Other noncurrent assets, net
13,892,542
Total assets
$
151,216,552
Liabilities and Members' Equity
Current liabilities:
Bank overdraft
$
2,744,855
Accounts payable
9,975,516
Accrued payroll
553,268
Other current liabilities
36,954,376
Total current liabilities
50,228,015
Other noncurrent liabilities
80,074,583
Total liabilities
130,302,598
Minority interest in subsidiary
(703,740
)
Members' equity:
Capital contributions
263,971,698
Advances to related parties, net
(28,763,662
)
Accumulated other comprehensive loss
(17,284,264
)
Accumulated deficit
(196,306,078
)
Total members' equity
21,617,694
Commitments and contingencies
Total liabilities and members' equity
$
151,216,552
See accompanying notes to consolidated financial
statements.
F-47
COASTAL COAL COMPANY, LLC
CONSOLIDATED STATEMENTS OF
OPERATIONS
Period from January 1, 2003 to
January 31, 2003 and
Year Ended December 31, 2002
Period from
January 1,
2003 to
Year Ended
January 31,
December 31,
2003
2002
Revenues:
Net sales
$
21,501,688
269,242,430
Royalty and other
257,335
14,325,268
21,759,023
283,567,698
Costs and expenses:
Cost of sales
18,159,578
270,548,861
Administrative and general
1,092,602
11,546,250
Depreciation, depletion and amortization
1,150,516
15,082,381
20,402,696
297,177,492
Income (loss) from operations
1,356,327
(13,609,794
)
Gain (loss) on sale of property, plant, and
    equipment
(15,459
)
3,460,840
Interest income (expense), net
(79,508
)
663,507
Income (loss) before cumulative effect of
    accounting change and minority interest
1,261,360
(9,485,447
)
Cumulative effect of accounting change
6,762,081
—
Income (loss) before minority interest
8,023,441
(9,485,447
)
Minority interest
(32,358
)
3,454
Net income (loss)
$
7,991,083
(9,481,993
)
See accompanying notes to consolidated financial
statements.
F-48
COASTAL COAL COMPANY, LLC
CONSOLIDATED STATEMENTS OF CHANGES
IN MEMBERS' EQUITY AND COMPREHENSIVE
INCOME (LOSS)
Period from January 1, 2003 to
January 31, 2003 and
year ended December 31, 2002
Accumulated
Advances to
Other
Capital
(from) Related
Comprehensive
Accumulated
Contributions
Parties, Net
Loss
Deficit
Total
Balances, December 31, 2001
$
263,971,698
39,114,285
—
(186,824,085
)
116,261,898
Affiliate transactions, net
—
(67,877,947
)
—
—
(67,877,947
)
Net loss
—
—
—
(9,481,993
)
(9,481,993
)
Minimum pension liability adjustment
—
—
(17,284,264
)
—
(17,284,264
)
Comprehensive loss
(26,766,257
)
Balances, December 31, 2002
263,971,698
(28,763,662
)
(17,284,264
)
(196,306,078
)
21,617,694
Affiliate transactions, net
—
16,309,474
—
—
16,309,474
Net income and comprehensive income
—
—
—
7,991,083
7,991,083
Balances, January 31, 2003
$
263,971,698
(12,454,188
)
(17,284,264
)
(188,314,995
)
45,918,251
See accompanying notes to consolidated financial
statements.
F-49
COASTAL COAL COMPANY, LLC
CONSOLIDATED STATEMENTS OF CASH
FLOWS
Period from January 1, 2003 to
January 31, 2003 and
year ended December 31, 2002
Period from
January 1,
2003 to
Year Ended
January 31,
December 31,
2003
2002
Cash flows from operating activities:
Net income (loss)
$
7,991,083
(9,481,993
)
Adjustments to reconcile net income (loss) to net
    cash provided by (used in) operating activities:
Cumulative effect of accounting change
(6,762,081
)
—
Depreciation, depletion and amortization
1,150,516
15,082,381
Accretion of asset retirement obligation
85,241
—
(Gain) loss on sale of property, plant, and
    equipment
15,459
(3,460,840
)
Amortization of deferred gain on sale of mineral
    reserves
(24,686
)
(22,336
)
Virginia tax credit refundable to parent
(115,801
)
(1,275,086
)
Minority interest
32,358
(3,454
)
Increase (decrease) in cash flows from changes in:
Accounts receivable, net
(2,393,076
)
4,603,307
Inventories
(87,800
)
(1,602,775
)
Prepaid expenses and other current assets
581,143
(2,357,988
)
Other noncurrent assets
(1,291,346
)
1,319,539
Accounts payable
1,131,362
(11,194,113
)
Accrued payroll
390,611
(500,116
)
Other current liabilities
(14,015,463
)
17,913,630
Other noncurrent liabilities
(1,497,539
)
8,654,774
Net cash provided by (used in) operating
    activities
(14,810,019
)
17,674,930
Cash flows from investing activities:
Proceeds from sale of property, plant, and
    equipment
21,300
57,000,000
Purchases of property, plant, and equipment
(1,982,298
)
(5,818,601
)
Net cash provided by (used in) investing
    activities
(1,960,998
)
51,181,399
Cash flows from financing activities:
Advances to related parties, net
16,425,275
(66,602,861
)
Change in bank overdraft
345,742
(2,253,468
)
Net cash provided by (used in) financing
    activities
16,771,017
(68,856,329
)
Net increase in cash and cash equivalents
—
—
Cash and cash equivalents at beginning of period
22,250
22,250
Cash and cash equivalents at end of period
$
22,250
22,250
Supplemental disclosure of cash flow information:
Cash paid during the period for interest
$
135,333
64,419
Noncash investing and financing activities:
Deferred gain on sale of mineral reserves
—
7,740,245
Deferred gain on sale of real property
—
776,366
Minimum pension liability adjustment
—
17,284,264
See accompanying notes to consolidated financial
statements.
F-50
COASTAL COAL COMPANY, LLC
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
January 31, 2003 and December 31,
2002
(1)
Summary of Significant Accounting Policies and
    Practices
(a)                         Description
    of Business
Coastal Coal Company, LLC and its majority owned
subsidiary, Coastal Coal — West Virginia, LLC,
(collectively, the Company) were owned by El Paso CGP
Company and American Natural Resources Company, wholly owned
subsidiaries of El Paso Corporation (El Paso) through
January 31, 2003 (see note 13). The Company is
organized as a limited liability company under the laws of the
state of Delaware. The Company is engaged in the business of
extracting coal from reserves located in Virginia, West
Virginia, and Kentucky, and leasing land and associated mineral
reserves to coal mining companies. Coal extracted by the Company
is primarily sold to utility companies located in the East and
Southeast regions of the United States of America.
(b)                         Principles
    of Consolidation
The consolidated financial statements include the
following companies.
Companies with coal reserves and production
facilities:
•
Brooks Run Mining Company
•
Enterprise Mining Company
•
Virginia Iron, Coal and Coke (VICC) Mining
    Company
•
Kingwood Mining Company
•
Greenbrier Mining Company (Inactive)
Companies providing administrative services:
•
Coastal Coal Administration
•
Coastal Coal Sales Company
Holding companies:
•
Coastal Coal Company, LLC
•
Coastal Coal-West Virginia, LLC
All significant intercompany balances and
transactions have been eliminated in consolidation.
(c)                         Cash
    and Cash Equivalents
Cash and cash equivalents consist of cash on
hand, cash in banks, and investments in money market accounts
and are stated at cost, which approximates fair market value.
The Company considers all highly liquid debt instruments with
original maturities of three months or less to be cash
equivalents.
(d)                         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 allowance for doubtful accounts
consists of an amount for specifically identified uncollectable
accounts and a general allowance based on historical losses for
all accounts. The Company does not have any off-balance-sheet
credit exposure related to its customers.
F-51
COASTAL COAL COMPANY, LLC
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
(e)                         Inventories
Coal inventory is stated at the lower of cost,
with cost determined using the average monthly production costs,
or net realizable value. Purchased coal is stated at purchase
price. Coal inventory at December 31, 2002 was comprised of
raw, processed, and purchased coal.
Supplies inventory is stated at the lower of
average cost or net market value.
(f)                         Property,
    Plant, and Equipment
Property, plant, and equipment are stated at
cost. Expenditures for maintenance and repairs, which do not
improve or extend the lives of the related assets, are charged
to expense as incurred while major renewals and betterments are
capitalized. Upon retirement or sale of an asset, its cost and
related accumulated depreciation or amortization are removed
from the property accounts. Depreciation of plant and equipment
for financial reporting purposes is provided using the
straight-line method over the assets' estimated useful
lives.
Mine development costs are capitalized and
amortized using the units of production method over the
assets' estimated useful lives. The cost of mineral rights
owned is depleted on the units of production method over the
properties' estimated recoverable reserves.
(g)                         Impairment
    of Long-Lived Assets
Statement of Financial Accounting Standards
(SFAS) No. 144,
Accounting for the Impairment or
Disposal of Long-Lived Assets
, provides a single accounting
model for long-lived assets to be disposed of.
SFAS No. 144 also changes the criteria for classifying
an asset as held for sale; and broadens the scope of businesses
to be disposed of that quality for reporting as discontinued
operations and changes the timing of recognizing losses on such
operations. The Company adopted SFAS No. 144 on
January 1, 2002.
In accordance with SFAS No. 144,
long-lived assets, such as property, plant, and equipment, and
purchased intangibles subject to amortization, are reviewed for
impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable.
Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to estimated
undiscounted future cash flows expected to be generated by the
asset. If the carrying amount of an asset exceeds its estimated
future cash flows, an impairment charge is recognized by the
amount by which the carrying amount of the asset exceeds the
fair value of the asset. Assets to be disposed of would be
separately presented in the balance sheet and reported at the
lower of the carrying amount or fair value less costs to sell,
and are no longer depreciated. The assets and liabilities of a
disposal group classified as held for sale would be presented
separately in the appropriate asset and liability sections of
the balance sheet.
Prior to the adoption of SFAS No. 144,
the Company accounted for long-lived assets in accordance with
SFAS No. 121,
Accounting for Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed
Of
.
(h)                         Reclamation
The Company has future obligations to reclaim
properties disturbed in conjunction with coal operations under
federal and state laws. Reclamation of disturbed acreage is
performed as a normal part of the mining process. The Company
adopted SFAS No. 143,
Accounting for Asset
Retirement Obligations
, on January 1, 2003. The
Company's liability for reclamation at January 31,
2003 represents the fair value of its asset retirement
obligation as of this date. The asset retirement obligation will
be adjusted in the future to reflect the passage of time and
changes, if any, in the estimated future cash flows underlying
the
F-52
COASTAL COAL COMPANY, LLC
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
initial fair value measurement. Upon adoption,
impacted financial statement line items were property, plant,
and equipment, net; other current liabilities; other noncurrent
liabilities; and the net cumulative effect of the change in
accounting principle. Property, plant, and equipment, net
increased by $2,125,877; other current liabilities decreased by
$2,524,368; other noncurrent liabilities decreased by
$2,111,836; and the cumulative effect of the accounting change
of $6,762,081 was reflected in the consolidated statement of
income for the period from January 1, 2003 to
January 31, 2003.
Prior to the adoption of SFAS No. 143,
expenditures relating to environmental regulatory requirements
and reclamation costs undertaken during mine operations were
charged against earnings as incurred. Estimated site restoration
and post closure reclamation costs were charged against earnings
using the unit-of-production method over the expected economic
life of each mine. Accrued reclamation costs were subject to
review by management on a regular basis and were revised when
appropriate for changes in future estimated costs and/or
regulatory requirements.
(i)                         Advance
    Mining Royalties
Leases, which require minimum annual or advance
payments and are recoverable from future production, are
generally deferred and charged to expense as the coal is
subsequently produced. At December 31, 2002, advance mining
royalties totaled approximately $7.8 million, of which
approximately $1.7 million is included in prepaid expenses
and other current assets. The Company periodically assesses the
recoverability of such prepaid minimum royalties based on
current operating plans, expiration dates of such prepaid
royalties, and the economic environment in the coal industry,
and records a charge to earnings when it is deemed more likely
than not that such amounts will not be recovered.
(j)                         Postretirement
    Benefits Other Than Pensions
Postretirement benefits other than pensions are
accounted for in accordance with SFAS No. 106,
Employers' Accounting for Postretirement Benefits Other
Than Pensions
. SFAS No. 106 requires employers to
accrue the cost of postretirement benefits during the
employees' service and over the average remaining life
expectancy of inactive participants.
(k)                         Black
    Lung Benefits
Coal mining companies are obligated to pay coal
workers' pneumoconiosis (black lung) benefits to eligible
recipients with respect to claims awarded on or after
July 1, 1973. The liability and annual expense for these
benefits are based on annual evaluations prepared by the
Company's independent actuaries.
(l)
Pension Plan
The Company has a noncontributory pension plan
covering substantially all employees. Costs of the plan are
charged to current operations and are based on various actuarial
assumptions.
(m)
Health Insurance Programs
The Company is self-insured, up to specified
limits, for costs of casualty claims and medical claims. The
Company utilizes commercial insurance to cover what it considers
significant or catastrophic casualty and medical claims. Accrued
casualty losses are based on actuarial assumptions, adjusted for
Company specific history and expectations.
(n)
Revenue Recognition
The Company currently derives the majority of its
revenue from the sale of coal and leasing of land and related
mineral reserves to coal mining companies. Revenue derived from
the sale of coal is
F-53
COASTAL COAL COMPANY, LLC
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
recognized when the risk of ownership is
transferred, which is typically at the time of shipment. Revenue
derived from the mineral leases are recognized at the time coal
is extracted from the leased premises.
(o)
Freight Costs
Shipping and handling costs paid to third-party
carriers are recorded as freight expense and included in cost of
sales.
(p)
Income Taxes
The Company is a limited liability company
organized under the laws of the State of Delaware. Tax
attributes of a limited liability company pass through to the
individual investors. Accordingly, the accompanying consolidated
balance sheet does not include income tax assets or liabilities.
(q)
Fair Value of Financial
    Instruments
The carrying amounts reported in the consolidated
balance sheet for cash and cash equivalents, bank overdraft,
accounts receivable, and accounts payable approximate fair value
because of the short maturity of these instruments. See
note 10 regarding advances to related parties.
(r)
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 the disclosure of contingent assets and
liabilities at the balance sheet date, and the reported amounts
of revenues and expenses during the reporting period.
Significant estimates and assumptions made by the Company
include the allowance for doubtful accounts; recoverable mineral
tonnage in the ground; pension and postretirement accruals;
reclamation and mine closure obligations; black lung and
workers' compensation liabilities; and inventory
obsolescence. Actual results could differ from those estimates.
(2)
Accounts Receivable
Accounts receivable, net at December 31,
2002 consists of the following:
Trade accounts receivable, net of allowance for
    doubtful accounts of $7,772
$
19,544,968
Land mineral lease royalties
485,457
Black lung excise tax refund receivable
10,017,692
Other
2,964,844
$
33,012,961
Land and mineral lease royalties receivable
represent amounts currently due from third parties for coal
mined from Company reserves. The black lung excise tax refund
receivable represents claims, including interest, due from the
Internal Revenue Service for a refund of excise taxes paid on
export coal shipments made by the Company for the period 1994
through 2000.
F-54
COASTAL COAL COMPANY, LLC
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
(3)
Inventories
Inventories at December 31, 2002 consists of
the following:
Coal
$
8,284,715
Mining supplies
3,619,395
$
11,904,110
(4) Property, Plant, and
Equipment
Property, plant, and equipment at
December 31, 2002 consists of the following:
Estimated
Lives
Land and mineral rights
$
14,463,803
Plant, equipment, and mine development
3-30 years
219,388,767
Construction in progress
7,037,769
240,890,339
Less accumulated depreciation, depletion, and
    amortization
150,902,069
$
89,988,270
In fiscal 2001, as a result of changes occurring
in the energy industry, the Company assessed the carrying values
of property, plant, and equipment and determined that the
carrying amounts of certain of its assets were impaired. As a
result, the Company reduced historical carrying values of
certain of its property, plant and equipment to their estimated
fair market values. The impairment charge recorded totaled
approximately $127.6 million.
(5)
Employees' Termination Benefits
Between March and June of 2002, the Company
approved a plan to terminate approximately 100 coal-mining and
administrative employees located in Virginia and Kentucky. As
compensation for their termination, the Company offered
terminated employees a benefits package based upon the
employees' years of service and levels of income.
Approximately $70,000 and $3.3 million of such benefits
expense was incurred for the period from January 1, 2003 to
January 31, 2003 and the year ended December 31, 2002,
respectively. Approximately $528,000 was unpaid at
December 31, 2002 and is included in other current
liabilities.
F-55
COASTAL COAL COMPANY, LLC
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
(6)
Other Current and Noncurrent
    Liabilities
Other current and noncurrent liabilities at
December 31, 2002 comprise the following:
Current
Noncurrent
Total
Black lung and other workers compensation
    obligations
$
3,100,000
31,300,182
34,400,182
Accrued reclamation costs
1,000,000
14,329,905
15,329,905
Pension benefits
2,682,134
5,974,419
8,656,553
Postretirement benefits
826,000
13,495,000
14,321,000
Long-term disability benefits
1,900,000
4,881,000
6,781,000
Deferred gain on sale of coal reserves
324,838
7,393,071
7,717,909
Accrued settlement loss on contract
16,062,717
—
16,062,717
Black lung excise tax refund liabilities
6,017,714
1,744,640
7,762,354
Accrued other taxes
4,114,670
—
4,114,670
Other
926,303
956,366
1,882,669
$
36,954,376
80,074,583
117,028,959
In connection with services rendered in obtaining
the black lung excise tax refund (see note 2), the Company
has agreed to pay portions of the refund to certain third
parties. This amount is included in current and noncurrent
liabilities.
Under the Federal Surface Mining Control and
Reclamation Act of 1977 and similar state statutes, mine
property is required to be restored in accordance with regulated
standards. The establishment of the reclamation liability is
based on permit requirements and requires various estimates and
assumptions, principally associated with costs and timing of
expenditures. The Company periodically reviews its entire
environmental liability and makes necessary adjustments,
including permit changes, revisions to costs and timing of
expenditures to reflect current experience.
As described in note 1, the Company adopted
the provisions of SFAS No. 143 on January 1,
2003. The changes in the asset retirement obligation for the
period from January 1, 2003 to January 31, 2003 are as
follows:
Reclamation liability at December 31, 2002
$
15,329,905
Cumulative effect of accounting change
(6,762,081
)
Asset retirement obligation at January 1,
    2003
8,567,824
Accretion from January 1, 2003 to
    January 31, 2003
85,241
Sites added from January 1, 2003 to
    January 31, 2003
928,861
Asset retirement obligation at January 31,
    2003
$
9,581,926
The Company leases coal properties to independent
third parties under terms requiring periodic minimum royalty
payments. These payments are recorded by the Company as deferred
royalty income when received and are recognized into income
using the units of production method associated with specific
reserves covered under the lease. At December 31, 2002, the
Company has approximately $223,000 of deferred royalty income to
be recognized in future periods, which is included in other
current liabilities.
On December 4, 2002, the Company sold the
majority of the coal properties of three of its subsidiaries,
Enterprise, Kingwood and VICC, to CSTL, LLC for
$57 million. As part of this sale, the
F-56
COASTAL COAL COMPANY, LLC
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
Company's then parent company, El Paso,
received the right to receive an overriding royalty on the coal
produced from the assets sold. The majority of the coal
properties were leased back to the Company. The total gain was
approximately $11.2 million. The Company has deferred the
gain on the sale of the coal properties amounting to
approximately $7.7 million as of December 31, 2002, of
which approximately $325,000 is included in other current
liabilities.
The Company had a long-term supply contract with
American Electric Power (AEP) at a below market price. The terms
of the contract were for 1.2 million tons annually until
June 30, 2005. On December 9, 2002, the Company
entered into a termination and release agreement, whereby AEP
agreed to terminate its contract with the Company and release
the Company from any further obligations under the supply
agreement in exchange for a settlement payment of approximately
$16.1 million. This amount was recorded as a loss during
2002 and is included in other current liabilities in the
consolidated balance sheet as of December 31, 2002.
(7)
Virginia Coalfield Employment Enhancement Tax
    Credit
For tax years 1996 though 2007, Virginia
companies with an economic interest in coal, earn tax credits
based upon tons sold, seam thickness, and employment levels. The
maximum credit earned equals $0.40 per ton for surface
mined coal and $1.00 or $2.00 per ton for deep mined coal
depending on seam thickness. Credits allowable are deducted from
the maximum amounts if employment levels are not maintained from
the previous year, and no credit is allowed for coal sold to
Virginia utilities. Currently, the cash benefit of the credit is
realized between three and four years after being earned and
either offsets taxes imposed by Virginia at 100% or is
refundable by the state at 85% of the face value to the extent
taxes are not owed. The credits are available or refundable to
El Paso. The Company records the present value of the
credit as a reduction of current year operating costs and as an
adjustment to due from related parties as it is earned. The
reduction to operating costs for the period from January 1,
2003 to January 31, 2003, and for the year ended
December 31, 2002 was approximately $116,000 and
$1.3 million, respectively.
(8)
Workers' Compensation and Pneumoconiosis
    Benefit Obligations
Coal mining companies are subject to the Federal
Coal Mine Health and Safety Act of 1969 (the Act), as amended,
and various states' statutes for the payment of medical and
disability benefits to eligible recipients related to coal
worker's pneumoconiosis (black lung). The Company provides
for these claims principally through a self-insurance program.
The liability for such claims is determined based upon an annual
evaluation prepared by the Company's independent actuaries.
On December 20, 2000, the United States
Department of Labor published revised administrative rules with
respect to the Act. The revised regulations are expected to
increase the cost of benefits paid under the Act by generating
an increase to the approval rate of claims filed under the Act
as well as an increase to the average cost per claim filed under
the Act. The Company's black lung reserves incorporate an
estimate of the increase in the frequency and severity of black
lung claims due to the Department of Labor's revised
administrative rules. However, due to lack of historical data
with regards to the effect of the revised administrative rules,
it is possible that actual results may materially differ from
the estimate provided above.
(9)
Pension, Postretirement, and Postemployment
    Benefits
The Company has a defined benefit pension plan
covering substantially all employees which provides for
retirement benefits based upon an employee's credited
service at termination and, for salaried employees, compensation
history. Funding for the plan is based upon a review of the
specific requirements and an evaluation of the assets and
liabilities of the plan.
F-57
COASTAL COAL COMPANY, LLC
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
In addition to the Company's defined benefit
pension plan, the Company also sponsors a defined benefit health
care plan. The plan provides certain medical, dental and life
insurance benefits to eligible retired employees. Employees of
the Company generally become eligible for retiree health care
benefits by retiring from the Company after reaching
ages 50 or 55, depending upon the nature of their service
to the Company, and attaining ten years of service. Generally,
the medical and dental plans pay a stated percentage of most
medical expenses reduced for any deductibles and payments made
by government programs and other group coverage. The
postretirement medical, dental and life insurance plans are
unfunded. The measurement date used to determine pension and
postretirement benefit measures is September 30.
The net periodic benefit cost for the period from
January 1, 2003 to January 31, 2003 is as follows:
Period from January 1,
2003 to January 31, 2003
Pension
Postretirement
Benefits
Benefits
Net periodic benefit cost
$
70,572
175,000
The components of the change in benefit
obligations and net periodic benefit cost for the year ended
December 31, 2002 are as follows:
December 31, 2002
Pension
Postretirement
Benefits
Benefits
Change in benefit obligation:
Pension/ Postretirement benefit obligation at
    beginning of year
$
53,555,551
14,534,000
Service cost
3,028,948
—
Interest cost
3,922,028
1,371,000
Benefits paid
(2,682,134
)
(1,584,000
)
Actuarial loss
10,633,556
—
Benefit obligation — end of year
$
68,457,949
14,321,000
Change in plan assets:
Fair value of plan assets at beginning of year
$
60,153,390
—
Return on assets — actual
(6,350,688
)
—
Benefits paid
(2,682,134
)
—
Fair value of plan assets at end of year
$
51,120,568
—
F-58
COASTAL COAL COMPANY, LLC
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
December 31, 2002
Pension
Postretirement
Benefits
Benefits
Actuarial present value of accumulated benefit
    obligation
$
(68,457,949
)
(14,321,000
)
Plan assets at fair value
51,120,568
—
Unfunded benefit obligation
(17,337,381
)
(14,321,000
)
Unrecognized net actuarial (gain) loss
25,965,092
—
Unrecognized prior service cost
1,093,252
—
Contributions
—
—
Net amount recognized at year end
$
9,720,963
(14,321,000
)
Amounts included in balance sheet:
Accrued benefit cost
$
(8,656,553
)
(14,321,000
)
Intangible asset
1,093,252
—
Change in additional minimum liability obligation
17,284,264
—
Net amount recognized at year end
$
9,720,963
(14,321,000
)
Year Ended
December 31, 2002
Pension
Postretirement
Benefits
Benefits
Components of net periodic benefit cost:
Service cost
$
3,028,948
—
Interest cost on Projected Benefit Obligation
    (PBO)
3,922,028
1,371,000
Return on assets — expected
(5,956,703
)
—
Other amortization, net
75,613
—
Net periodic benefit cost
$
1,069,886
1,371,000
Weighted average actuarial assumptions at
    December 31, 2002:
Discount rate
6.75
%
6.75
%
Expected long-term rate of return on plan assets
8.80
%
—
Rate of compensation increase
4.00
%
—
The weighted average annual rate of increase in
the per capita cost of covered benefits (i.e., health care trend
rate) for medical benefits is 9.0% in 2002, decreasing to 6.0%
in 2008 and thereafter.
The Company also provides long-term disability
benefits for substantially all employees. The Company provides
for these claims principally through a self-insurance program.
The liability for such claims is determined based upon an annual
evaluation by the Company's independent actuaries. As of
December 31, 2002, an accrued benefit liability of
$6,781,000 is recorded for these postemployment benefits.
F-59
COASTAL COAL COMPANY, LLC
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
The measurement date used to determine
postemployment benefit measures is January 1. Assumptions used
by the Company's independent actuaries in determining the
long-term disability liability for 2002 included the following:
Discount rate
7.25%
Mortality — healthy
1983 Group Annuity Mortality Table
Mortality — disabled
1987 Commissioner's Group Long-Term
    Disability Valuation Table
Annual Health Care Cost Trend Rate
9.0% for 2002 declining to 6.0% by 2008
El Paso has a defined contribution employee
benefit plan (the Plan) covering substantially all employees of
the Company. The Plan is subject to the provisions of the
Employee Retirement Income Security Act of 1974, as amended. A
participant may elect to make basic contributions from 2% to 15%
of his or her eligible compensation on a before-tax or after-tax
basis. El Paso made matching contributions on behalf of the
Company in cash equal to 75% of a participant's basic
contribution up to a maximum level of 6% of eligible
compensation. Those contributions were approximately $100,000
for the period from January 1, 2003 to January 31,
2003 and $1.3 million for the year ended December 31,
2002.
(10)
Related Party Transactions
Affiliates of El Paso perform certain
administrative services for the Company and allocate charges
based on the services performed. Such administrative services
include, but are not limited to, finance, treasury, cash
management, payroll processing, employee benefit administration
and certain accounting functions. El Paso would also
advance cash to the Company, on an as needed basis, to fund the
Company's payroll, accounts payable and other cash needs,
and would borrow any excess cash generated by the Company. As of
December 31, 2002, El Paso and its affiliates owe the
Company approximately $28.8 million related to these
matters, the amount being reflected as a component of
member's equity.
(11)
Commitments and Contingencies
The Company mines coal on properties leased from
independent third parties. Under the terms of the leases, the
Company pays production royalties based on a percentage of the
net sales price of coal produced or based on the actual tonnage
mined from the leased premises. The Company's mineral
leases require the Company to pay minimum royalties. Some of
such leases have fixed terms and others are effective until
exhaustion of the mineral reserves. Future minimum royalty
payments under mineral lease agreements at December 31,
2002 were as follows:
Year Ending
Royalty
December 31,
Commitments
2003
$
4,373,138
2004
4,170,948
2005
3,661,676
2006
3,488,176
2007
3,488,176
Thereafter
17,064,480
Total
$
36,246,594
The Company is the subject of, or a party to,
various suits and pending or threatened litigation involving
governmental agencies and private interests. Also, the
Company's operations are affected by federal, state, and
local laws and regulations regarding environmental matters and
other aspects of its
F-60
COASTAL COAL COMPANY, LLC
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
business. The outcome or timing of current legal
or environmental matters or the impact, if any, of pending
legislation or regulatory developments on future operations is
not currently estimable.
In the normal course of operations, the Company
enters into long-term supply contracts for the sale of various
qualities of coal to customers in the energy industry. Under the
terms of these contracts, the Company is obligated to supply
coal to customers at prices ranging from approximately $24 to
$38 per ton/, with such prices subject to adjustment in
future periods based upon factors such as the quality of the
coal. All supply contracts entered into as of December 31,
2002 will expire through September 10, 2010.
(12)
Risks and Uncertainties
The Company is engaged in the production of
high-quality low sulfur steam coal for the electric generating
industry as well as industrial customers. Coal produced from the
Company's reserves located in Virginia, West Virginia and
Kentucky is primarily sold to energy companies in the eastern
and southeastern United States under long-term supply
agreements. Additional production from Company reserves not
covered under supply contracts is sold on the open market. The
Company is subject to risks and uncertainties related to the
creditworthiness of customers in the energy industry as well as
price, supply, demand, and other volatility associated with coal
commodity markets. Commodities markets and economic conditions
have been volatile in the past and can be expected to be
volatile in the future.
Three of the Company's largest customers,
Mirant Americas Energy Marketing, LP, South Carolina
Electric & Gas and American Electric Power, account for
approximately 17%, 11% and 11%, respectively, of the
Company's trade accounts receivable at December 31,
2002. The Company has approximately $3.4 million,
$2.1 million and $2.1 million due from Mirant Americas
Energy Marketing, LP, South Carolina Electric & Gas and
American Electric Power, respectively, at December 31, 2002.
Three of the Company's largest customers,
Mirant Americas Energy Marketing, LP, Georgia Power Company, and
Ontario Power Generation account for approximately 20%, 13% and
10%, respectively, which represents approximately
$4.4 million, $2.9 million and $2.1 million,
respectively, of the Company's net sales for the period
from January 1, 2003 to January 31, 2003.
Three of the Company's largest customers,
Georgia Power Company, Ontario Power Generation, and American
Electric Power, account for approximately 16%, 10% and 10%,
respectively, which represents approximately $42.3 million,
$27.0 million and $27.2 million, respectively, of the
Company's net sales for the year ended December 31,
2002.
(13)
Subsequent Sale of the Company
On January 31, 2003, El Paso
Corporation sold its membership interest in the Company, subject
to certain retained assets and liabilities, to AMFIRE, LLC, a
subsidiary of Alpha Natural Resources, LLC. The retained assets
and liabilities included cash, black lung excise tax
receivables, pension and post-employment obligations, black lung
obligations, and workers' compensation obligations.
F-61
INDEPENDENT AUDITORS' REPORT
Alpha Natural Resources, LLC
and Stockholders and Board of Directors
of North American Division of American Metals
and Coal International, Inc. and Affiliates:
We have audited the accompanying combined balance
sheet of the North American Division of American Metals and Coal
International, Inc. and Affiliates as of December 31,
2002 and the related combined statements of operations,
stockholders' equity and partners' capital, and cash
flows for the period from January 1, 2003 to March 11,
2003 and for the year ended December 31, 2002. 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 audits.
We conducted our audits 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
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.
In our opinion, the financial statements referred
to above present fairly, in all material respects, the financial
position of the North American Division of American Metals and
Coal International, Inc. and Affiliates as of
December 31, 2002 and the results of their operations and
their cash flows for the period from January 1, 2003 to
March 11, 2003 and the year ended December 31, 2002 in
conformity with accounting principles generally accepted in the
United States of America.
As discussed in note 2 to the combined
financial statements, the Company adopted the provisions of FASB
Statement No. 143,
Accounting for Asset Retirement
Obligations,
effective January 1, 2003.
/s/ KPMG LLP
KPMG LLP
Pittsburgh, Pennsylvania
March 17, 2004
F-62
AMERICAN METALS AND COAL INTERNATIONAL, INC.
AND AFFILIATES
(North American Division)
COMBINED BALANCE SHEET
December 31, 2002
ASSETS
Current assets:
Cash and cash equivalents
$
5,410,701
Trade accounts receivable, net
26,137,692
Notes receivable, net
1,482,485
Coal inventory
17,748,779
Materials and supplies inventory
1,636,241
Prepaid expenses
1,210,446
Due from affiliates
9,975,555
Other current assets
1,843,220
Total current assets
65,445,119
Property, plant, and equipment, net
51,234,814
Other assets
2,678,386
Total assets
$
119,358,319
LIABILITIES AND STOCKHOLDERS' EQUITY AND
    PARTNERS' CAPITAL
Current liabilities:
Revolving credit line
$
13,176,658
Current portion of long-term debt
2,151,923
Trade accounts payable
13,852,853
Accrued expenses and other current liabilities
7,716,479
Demand notes payable to stockholder
3,424,229
Due to affiliates
9,236,701
Total current liabilities
49,558,843
Long-term liabilities:
Long-term debt
5,982,861
Reclamation
5,265,130
Other long-term liabilities
14,368,216
Total long-term liabilities
25,616,207
Total liabilities
75,175,050
Stockholders' equity and partners'
    capital:
Common stock
2,800
Capital in excess of par value
5,250,324
Retained earnings
31,946,314
Total stockholders' equity
37,199,438
Partners' capital
6,983,831
Total stockholders' equity and
    partners' capital
44,183,269
Total liabilities and stockholders' equity
    and partners' capital
$
119,358,319
See accompanying notes to combined financial
statements.
F-63
AMERICAN METALS AND COAL INTERNATIONAL, INC.
AND AFFILIATES
(North American Division)
COMBINED STATEMENTS OF OPERATIONS
Period from
January 1, 2003
Year Ended
to March 11,
December 31,
2003
2002
Revenues:
Coal sales
$
40,980,996
$
319,445,702
Coal sales — affiliates
1,771,972
3,486,830
Other revenues
311,479
2,128,219
Other revenues — affiliates
549,353
2,584,549
Total revenues
43,613,800
327,645,300
Costs and expenses:
Coal purchases and operating costs and expenses
34,225,178
248,757,082
Coal purchases and operating costs and
    expenses — affiliates
6,049,170
47,345,992
Depreciation, depletion, and amortization
1,791,838
8,577,532
Selling and administrative expenses
2,406,605
11,471,505
Selling and administrative expenses —
    affiliates
101,290
567,317
Other expenses
6,312
5,615,080
Total expenses
44,580,393
322,334,508
Operating (loss) income
(966,593
)
5,310,792
Interest income
36,227
320,049
Interest income — affiliates
87,559
650,646
Interest expense
(294,503
)
(2,243,960
)
Interest expense — affiliates
(47,470
)
(403,342
)
Gain on sale of fixed assets
(208,390
)
424,113
(Loss) income before income taxes
(1,393,170
)
4,058,298
Income tax expense
—
4,877,990
Loss before cumulative effect of accounting change
(1,393,170
)
(819,692
)
Cumulative effect of accounting change
    (note 2)
(696,565
)
—
Net loss
$
(2,089,735
)
$
(819,692
)
See accompanying notes to combined financial
statements.
F-64
AMERICAN METALS AND COAL INTERNATIONAL, INC.
AND AFFILIATES
(North American Division)
COMBINED STATEMENTS OF STOCKHOLDERS'
EQUITY AND PARTNERS' CAPITAL
Period from January 1, 2003 to
March 11, 2003 and
year ended December 31, 2002
Stockholders' equity
Capital in
Partners'
Common
Capital
excess of
Retained
Stockholders'
capital
shares
stock
par value
earnings
equity
Total
Balances, January 1, 2002
$
(138,903
)
2,800
$
2,800
5,250,324
40,553,323
45,806,447
45,667,544
Net income (loss)
(1,633,840
)
—
—
—
814,148
814,148
(819,692
)
Distributions to partners
(1,560,415
)
—
—
—
—
—
(1,560,415
)
Dividends to stockholders
—
—
—
—
(9,421,157
)
(9,421,157
)
(9,421,157
)
Partnership contributions
10,316,989
—
—
—
—
—
10,316,989
Balances, December 31, 2002
6,983,831
2,800
2,800
5,250,324
31,946,314
37,199,438
44,183,269
Net income (loss)
195,592
—
—
—
(2,285,327
)
(2,285,327
)
(2,089,735
)
Distributions to partners
(175,000
)
—
—
—
—
—
(175,000
)
Dividends to stockholders
—
—
—
—
(6,600
)
(6,600
)
(6,600
)
Balances, March 11, 2003
$
7,004,423
2,800
$
2,800
5,250,324
29,654,387
34,907,511
41,911,934
See accompanying notes to combined financial
statements.
F-65
AMERICAN METALS AND COAL INTERNATIONAL, INC.
AND AFFILIATES
(North American Division)
COMBINED STATEMENTS OF CASH FLOWS
Period from January 1, 2003 to
March 11, 2003 and
year ended December 31, 2002
Period from
Year Ended
January 1, 2003
December 31,
to March 11, 2003
2002
Cash flows from operating activities:
Net loss
$
(2,089,735
)
(819,692
)
Adjustments to reconcile net loss to net cash
    flows (used in) provided by operating activities:
Cumulative effect of accounting change
696,565
—
Depreciation and amortization
1,791,838
8,577,532
Deferred income taxes
552,048
3,409,223
Accretion of asset retirement obligation
145,427
—
(Gain) loss on sale of fixed assets
208,390
(424,113
)
Changes in assets and liabilities:
Notes and accounts receivable
4,747,583
25,803,528
Inventories
(4,654,738
)
(41,475
)
Prepaid expenses
(93,718
)
(505,276
)
Decrease in amounts due to affiliates
(3,244,077
)
(8,633,419
)
Other current and noncurrent assets
196,813
1,164,651
Accounts payable
402,126
(13,738,315
)
Accrued expenses and other current liabilities
(1,506,718
)
(266,972
)
Other noncurrent liabilities
(913,029
)
4,796,493
Net cash flows (used in) provided by operating
    activities
(3,761,225
)
19,322,165
Cash flows from investing activities:
Additions to property, plant, and equipment
(1,495,166
)
(15,086,987
)
Proceeds from sale of property and equipment
20,000
678,741
Net cash flows used in investing activities
(1,475,166
)
(14,408,246
)
Cash flows from financing activities:
Net borrowings (payments) on lines of credit
2,437,473
(7,788,294
)
Principal payments on long-term debt
(325,404
)
(1,771,906
)
Proceeds from long-term debt
—
6,532,261
Net increase (decrease) in note payable to
    stockholder
23,270
(437,138
)
Dividends and distributions
(181,600
)
(10,981,572
)
Capital contributions
—
10,316,989
Net cash flows provided by (used in) financing
    activities
1,953,739
(4,129,660
)
Net change in cash and cash equivalents
(3,282,652
)
784,259
Cash and cash equivalents — beginning
    of period
5,410,701
4,626,442
Cash and cash equivalents — end of
    period
$
2,128,049
5,410,701
Supplemental cash flow disclosures:
Cash paid for interest
$
343,973
2,647,302
See accompanying notes to combined financial
statements.
F-66
AMERICAN METALS AND COAL
INTERNATIONAL, INC. AND AFFILIATES
(North American Division)
NOTES TO COMBINED FINANCIAL
STATEMENTS
December 31, 2002
(1)
Basis of Presentation and
    Organization
The combined financial statements include the
assets and liabilities and operations of the North American
Division of American Metals and Coal International, Inc.
and certain affiliates (AMCI or the Company).
AMCI is a broker and producer of Appalachian
steam and metallurgical coal. Coal is produced from mines in
western Pennsylvania, northern Colorado, and West Virginia with
distribution and sales occurring throughout the United States
and abroad. Principal customers of the group are domestic and
international coke and steel producers, public utilities, and
affiliates of American Metals and Coal International, Inc.
Companies comprising AMCI are the following:
Surface and Underground Mining:
Alpine Development Company
Creekside Energy Development Company
Dayton Resources Company
Dunamis Resources, LLC
Madison Mining Company, LLC
National King Coal, LLC
Newhall Pocahontas Energy, Inc. (subsidiary of Deerfield
    Resources, Inc.)
Riverside Energy, Inc.
Senate Coal Mines, Inc. and its subsidiary Senate
    Resources, Inc.
Coal Processing:
Barkers Ridge Development Company and its
    subsidiary Herndon Processing Company
Indian Ridge Development and its subsidiary Virginia Crews Coal
    Company
Kepler Processing Company, Inc.
Coal Sales and Brokering:
American Metallurgical Coal Sales, LLC
Metcoal Sales, Inc.
Tanoma Energy, Inc.
Coal Transportation and Transloading:
Gallup Transportation and Transloading Company,
    LLC
I-22 Processing, Inc.
Mine Acquisition and Development:
Deerfield Resources, Inc. and its subsidiary
    Newhall Processing, Inc.
Guyandotte Pocahontas, Inc.
Laurel Energy, L.P.
Laurel Resources, L.P.
Open Fork, Inc.
Redbank, Inc.
Still Run Incorporated
Vollow Resources, LLC
F-67
AMERICAN METALS AND COAL
INTERNATIONAL, INC. AND AFFILIATES
(North American Division)
NOTES TO COMBINED FINANCIAL
STATEMENTS — (Continued)
Administrative Support:
Consulting and Coal Service, Inc.
Laurel Mountain Management, Inc.
(2)
Summary of Significant Accounting
    Policies
(a) Principles of
    Presentation
The combined financial statements include all
accounts of the Company. All significant intercompany
transactions and balances have been eliminated.
(b) Cash and Cash
    Equivalents
The Company defines cash and cash equivalents as
highly liquid, short-term investments with a maturity at the
date of acquisition of three months or less.
(c) Accounts and Notes
    Receivable
The Company establishes provisions for losses on
accounts and notes receivable when it is determined probable
that all or part of the outstanding balance will not be
collected. The Company regularly reviews collectibility and
establishes any allowance necessary using the specific
identification method. The allowance for doubtful accounts for
trade receivables at December 31, 2002 was approximately
$445,000. The allowance for doubtful accounts for notes
receivable at December 31, 2002 was approximately $715,000.
(d) Materials and Supplies
    Inventory
Supplies inventory is stated at the lower of
average cost or market. Upon issuance of a supply inventory item
to a project, the item is recorded as a component of property,
plant, and equipment, or expensed as appropriate.
(e) Coal Inventory
Coal inventory at December 31, 2002 was
comprised of raw and purchased coal. Coal inventory is stated at
the lower of cost, with cost determined using average monthly
production costs per ton, or net realizable value. Purchased
coal is stated at its purchase price, or net realizable value if
lower.
(f) Property, Plant, Equipment, and
    Mineral Interests
Property, plant, and equipment are stated at
cost. Major expenditures for property and equipment are
capitalized. Maintenance, repairs, and minor renewals are
expensed as incurred. When assets are retired or otherwise
disposed of, their costs and related accumulated depreciation
are removed from the accounts and resulting gains or losses are
included in income. Property, plant, and equipment are
depreciated using the straight-line method over their estimated
useful lives. For income tax reporting purposes, depreciation is
calculated using applicable accelerated methods.
Costs for mineral rights and mine development
costs incurred as part of the acquisition of mineral rights, to
expand capacity of operating mines or to develop new coal
reserves, are capitalized and charged to operations on the
units-of-production method. Mine development costs include
expenses incurred for site preparation and development at the
mines during the development stage.
F-68
AMERICAN METALS AND COAL
INTERNATIONAL, INC. AND AFFILIATES
(North American Division)
NOTES TO COMBINED FINANCIAL
STATEMENTS — (Continued)
(g) Impairment of Long-Lived
    Assets
In accordance with Statement of Financial
Accounting Standards (SFAS) No. 144,
Accounting for the
Impairment or Disposal of Long-Lived Assets,
long-lived
assets, such as property, plant, and equipment, are reviewed for
impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable.
Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to estimated
undiscounted future cash flows expected to be generated by the
asset. If the carrying amount of an asset exceeds its estimated
future cash flows, an impairment charge is recognized in the
amount by which the carrying amount of the asset exceeds the
fair value of the asset.
(h) Asset Retirement
    Obligations
In June 2001, the Financial Accounting Standards
Board (FASB) issued SFAS No. 143,
Accounting
for Asset Retirement Obligations.
SFAS No. 143
requires the Company to record the fair value of an asset
retirement obligation as a liability in the period in which it
incurs a legal obligation associated with the retirement of
tangible long-lived assets that result from the acquisition,
construction, development, and/or normal use of the assets. In
addition, the Company records a corresponding asset that is
depreciated over the life of the asset. Subsequent to the
initial measurement of the asset retirement obligation, the
obligation will be adjusted at the end of each period to reflect
the passage of time and changes in the estimated future cash
flows underlying the obligation. The Company adopted
SFAS No. 143 effective January 1, 2003.
The Company has future obligations to reclaim
properties disturbed in conjunction with coal operations under
federal and state laws. Reclamation of disturbed acreage is
performed as a normal part of the mining process. The asset
retirement obligation will be adjusted in the future to reflect
the passage of time and changes, if any, in the estimated future
cash flows underlying fair value measurement from the period.
Upon adoption, property, plant, and equipment were increased by
$2,302,689; asset retirement obligations were increased by
$2,999,254; and retained earnings was decreased by the
cumulative effect of the change in accounting principle of
$696,565 as of March 11, 2003.
Prior to January 1, 2003, the estimated cost
for mine reclamation was provided for using the
units-of-production method over the economic life of the mine.
Estimated reclamation costs were subject to review by management
on a regular basis and revised when appropriate for changes in
future estimated costs and/or regulatory requirements.
(i) Advance Mining
    Royalties
Leases, which require minimum annual or advance
payments and are recoverable from future production, are
generally deferred and charged to expense as the coal is
subsequently produced. At December 31, 2002, advance mining
royalties totaling $513,066 are included in prepaid expenses.
The Company periodically assesses the recoverability of such
advance minimum royalties based on current operating plans,
expiration dates of such advance royalties, and the economic
environment in the coal industry and records a charge to
earnings when it is deemed more likely than not that such
amounts will not be recovered.
F-69
AMERICAN METALS AND COAL
INTERNATIONAL, INC. AND AFFILIATES
(North American Division)
NOTES TO COMBINED FINANCIAL
STATEMENTS — (Continued)
(j) Revenue Recognition
Revenue derived from the sale of coal is
recognized when the risk of ownership is transferred, typically
at the time of shipment. All intercompany revenue has been
eliminated in the preparation of the combined financial
statements.
(k) Shipping and Handling
    Costs
In West Virginia, freight paid by the Company on
behalf of the customer is billed separately. At
December 31, 2002, freight included in accounts receivable
totaled $650,730. For mines in Pennsylvania and Colorado,
shipping and handling costs paid to third-party carriers are
recorded as freight expense and included in cost of sales.
Freight charges which are invoiced to coal customers are
included in coal sales.
(l) Workers Compensation and
    Pneumoconiosis (Black Lung) Benefits
Coal mining companies are obligated by federal
and state laws to pay coal workers' pneumoconiosis (black
lung) benefits to eligible recipients. The Company is partially
self-insured for workers compensation claims in West Virginia
(note 16). The liability for workers compensation claims is
a management estimate based on the ultimate losses to be
incurred on known claims. This probable ultimate liability is
re-determined annually, and resultant adjustments are expensed.
(m) Insurance Programs
The Company is self insured, up to specified
limits, for costs of casualty claims and medical claims. The
Company utilizes commercial insurance to cover what it considers
significant or catastrophic casualty and medical claims. Accrued
casualty losses are based on actuarial assumptions, adjusted for
Company specific history and expectations.
(n)
Benefit Plans
The Company recognizes the cost of postretirement
benefits, which consist principally of medical benefits, during
employees' periods of active service. Costs of the plan are
charged to current operations and are based on various actuarial
assumptions.
(o)
Income Taxes
The entities included in the combined financial
statements have various ownership structures. Companies included
in the North American Division of American Metals and Coal
International, Inc. and Affiliates are either subchapter S
or C corporations, limited liability companies, or limited
partnerships. Companies filing under an election other than that
of a C corporation have taxable income or losses of the
respective company allocated directly to their respective
stockholders, members and/or partners and included in their
individual tax returns. Therefore, the expense or benefit from
income taxes includes only companies electing C corporation
status.
For C corporations included in the combined
financial statements, income tax expense has been recognized on
an individual company basis for each of the C corporations
included in the consolidated tax return of their respective
parent company. Deferred tax assets and liabilities are
recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases.
Deferred tax assets and liabilities are measured using enacted
tax rates expected to be applied to taxable income in the years
in which those temporary
F-70
AMERICAN METALS AND COAL
INTERNATIONAL, INC. AND AFFILIATES
(North American Division)
NOTES TO COMBINED FINANCIAL
STATEMENTS — (Continued)
differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities for a
change in tax rate is recognized in income in the period in
which the change is enacted.
(p)
Risks and Uncertainties
The Company is engaged in the production of all
variations of steam and metallurgical coal. Coal produced from
mines in Pennsylvania and Colorado is primarily sold through
long-term supply agreements. Mines located in West Virginia
generally sell coal through one-year contracts. Additional
production from Company reserves not covered under supply
contracts is sold on the open market. The Company is subject to
risks and uncertainties related to the creditworthiness of
customers in the energy industry as well as price, supply,
demand, and other volatility associated with coal commodity
markets. Commodities markets and economic conditions have been
volatile in the past and can be expected to be volatile in the
future.
The Company had one customer account for 12% of
its sales for the period from January 1, 2003 to
March 11, 2003 and 15% of its sales for the year ended
December 31, 2002, as well as accounting for 12% of trade
accounts receivable at December 31, 2002.
(q)
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. Actual
results could differ from those estimates.
(3)
Notes Receivable
At December 31, 2002, notes receivable
primarily consist of notes from Company contractors. These notes
are payable in semi-monthly installments at varying rates per
ton, depending on the type and grade of coal. Notes receivable
from Company contractors at December 31, 2002 amounted to
$1,471,666. Other notes receivable amounted to $10,819 at
December 31, 2002.
(4)
Prepaid Expenses
Prepaid expenses consisted of the following at
December 31, 2002:
Insurance
$
573,497
Advance royalties
513,066
Other
123,883
$
1,210,446
(5)
Other Current Assets
Other current assets consisted of the following
at December 31, 2002:
Receivables from contract miners for equipment
    purchased
$
1,040,559
Refundable deposits
216,789
Other
585,872
$
1,843,220
F-71
AMERICAN METALS AND COAL
INTERNATIONAL, INC. AND AFFILIATES
(North American Division)
NOTES TO COMBINED FINANCIAL
STATEMENTS — (Continued)
(6)
Property, Plant, and Equipment
Property, plant, and equipment consisted of the
following at December 31, 2002:
Estimated
lives
(in years)
Land
$
2,239,638
Coal reserves, mineral interests, and mine
    development costs
36,426,042
Construction in progress-mine development
3,653,747
Buildings and leasehold improvements
5-30
4,616,111
Machinery and equipment
3-10
42,533,598
89,469,136
Less accumulated depreciation, depletion, and
    amortization
(38,234,322
)
$
51,234,814
(7)
Other Assets
Other noncurrent assets consisted of the
following at December 31, 2002:
Refundable deposits
$
924,739
Special benefit trust (note 16)
586,203
Deferred tax asset (note 13)
1,167,444
$
2,678,386
(8)
Accrued Expenses and Other Current
    Liabilities
Accrued expenses consisted of the following at
December 31, 2002:
Black lung liabilities
$
1,685,338
Reclamation obligations
113,580
Contractor performance obligations
1,102,314
Accrued payroll and related costs
2,400,427
Accrued taxes other than payroll
717,883
Accrued royalties
822,584
Accrued freight
247,866
Other
626,487
$
7,716,479
(9)
Demand Notes Payable to Stockholder
Demand notes payable to stockholder consist of
various advances made to the Company by a stockholder. Interest
of 4.24% is added to the outstanding balance and is compounded
monthly. Approximately $28,000 of interest was added to the note
balance for the period from January 1, 2003 to
March 11, 2003. The Company made principal repayments of
$5,000 and $588,122 for the period from January 1, 2003 to
March 11, 2003 and for the year ended December 31,
2002, respectively. These notes
F-72
AMERICAN METALS AND COAL
INTERNATIONAL, INC. AND AFFILIATES
(North American Division)
NOTES TO COMBINED FINANCIAL
STATEMENTS — (Continued)
are unsecured and are fully subordinate to all
bank claims against the Company. Interest expense for the period
from January 1, 2003 to March 11, 2003 and for the
year ended December 31, 2002 was $47,470 and $403,342,
respectively.
(10)
Revolving Credit Commitments
The Company maintains lines of credit with PNC
Bank, N.A. and National City Bank (the Banks). The line of
credit utilized by the Company's operations with Banks in
Western Pennsylvania consist of a revolving credit note, with a
base not to exceed $15,000,000, bearing interest at 4.19% to
4.75%, payable monthly, which is secured by all present and
future contracts and inventory, and the proceeds of the
foregoing. At March 11, 2003 and December 31, 2002,
the Company had $11,299,488 and $13,076,658, respectively, drawn
on the line, which was due when the line was to expire in August
2003.
The Company maintains a line of credit with the
Banks for their West Virginia operations. The base credit limit
was reduced from $15,000,000 to $7,500,000 in 2003. At
December 31, 2002, the Company had an outstanding balance
drawn on the line of $100,000. Availability under the line is
reduced by four letters of credit outstanding in the amount of
$3,036,891. As a result, the amount available at
December 31, 2002 was $11,963,109. This line is secured by
the guarantees of the Company, along with the accounts
receivable and coal inventory that totaled $14,744,404 at
December 31, 2002. The line provided for an interest rate
at prime minus  1/4% (4% at December 31, 2002). In
addition, there is a quarterly commitment fee of  1/4% on
the undisbursed balance of the line.
Under loan agreements with PNC Bank, N.A., the
Company is required to maintain at all times a minimum net worth
of $26 million, a minimum working capital balance of
$12.5 million, a maximum total liability to net worth ratio
of 2.0 to 1.0, and debt service coverage ratio of 4.0 to 1.0.
Other restrictions exist on liens, encumbrances, guarantees,
loans, and dividends (note 11). The Company obtained
waivers from PNC Bank, N.A. for all events of noncompliance.
F-73
AMERICAN METALS AND COAL
INTERNATIONAL, INC. AND AFFILIATES
(North American Division)
NOTES TO COMBINED FINANCIAL
STATEMENTS — (Continued)
(11)
Long-Term Debt
Long-term debt consisted of the following at
December 31, 2002:
Settlement Agreement, West Virginia Bureau of
    Employment Programs, Workers' Compensation Division,
    original settlement amount of $6,532,261, bearing interest at
    11%, secured by substantially all assets of the Company, payable
    monthly and maturing March 2012
$
5,004,819
Note payable to bank, at 6.99%, payable in
    monthly installments through December 2004, secured by equipment
1,813,276
Note payable at 7.80% payable in monthly
    installments through June 2004, secured by equipment
444,849
Note payable to bank, at LIBOR (2.90% at
    December 31, 2002), payable in monthly installments through
    December 2003, secured by equipment
223,850
Note payable at 8.20%, payable in monthly
    installments through March 2004, secured by equipment
195,599
Note payable at 6.17%, payable in monthly
    installments through September 2004, secured by equipment
93,518
Note payable at 5.49%, payable in monthly
    installments through September 2004, secured by equipment
97,662
Note payable at 8.91% payable in monthly
    installments through February 2004, secured by vehicles
109,514
Other notes payable, at various interest rates
    ranging from interest free to 12.0%, due in monthly
    installments, secured by equipment
151,697
Total long-term debt
8,134,784
Less current maturities
(2,151,923
)
Long-term portion
$
5,982,861
Future maturities of long-term debt are as
follows:
2003
$
2,151,923
2004
1,638,659
2005
447,093
2006
460,580
2007
511,477
2008 and thereafter
2,925,052
$
8,134,784
F-74
AMERICAN METALS AND COAL
INTERNATIONAL, INC. AND AFFILIATES
(North American Division)
NOTES TO COMBINED FINANCIAL
STATEMENTS — (Continued)
(12)
Other Long-Term Liabilities
Other long-term liabilities consisted of the
following at December 31, 2002:
Post retirement obligation (note 17)
$
10,486,985
Commissions
2,125,000
Land lease rights
1,113,375
Black lung (note 16)
454,999
Reclamation deposits
159,447
Other
28,410
$
14,368,216
(13)
Income Taxes
Income tax expense for the period from
January 1, 2003 to March 11, 2003 and the year ended
December 31, 2002 consisted of the following components:
Period from
Year
January 1, 2003
ended
to March 11,
December 31,
2003
2002
Current income tax (benefit) expense
$
(552,048
)
$
1,468,767
Deferred tax expense
552,048
3,409,223
Income tax expense
$
—
$
4,877,990
Income tax (benefit) expense before the
cumulative effect of accounting change differs from the expected
(benefit) expense that would result from the application of the
federal tax rate of 34% to pre-tax book (loss) income due to the
following at March 11, 2003 and December 31, 2002:
March 11,
December 31,
2003
2002
Computed expected (benefit) expense from income
    tax
$
(473,678
)
$
1,379,821
State tax, net of federal
—
2,627
Percentage depletion
—
(306,000
)
Income of nontaxable pass through entities
(273,528
)
(1,050,946
)
Change in asset valuation allowance
739,726
4,849,812
Other
7,480
2,676
Income tax expense
$
—
$
4,877,990
F-75
AMERICAN METALS AND COAL
INTERNATIONAL, INC. AND AFFILIATES
(North American Division)
NOTES TO COMBINED FINANCIAL
STATEMENTS — (Continued)
The composition of the net deferred tax asset at
December 31, 2002 is as follows:
Deferred tax assets:
Post retirement medical benefit accrual
$
4,188,502
Reclamation reserve
1,319,590
Federal and state operating loss carryforwards
1,178,560
State workers compensation accrual
1,865,514
Federal alternative minimum tax carryforwards
1,005,028
Black lung benefit accrual
635,452
Bad debt reserve
302,565
Other
351,726
Less valuation allowance
(5,196,333
)
Net deferred tax asset
5,650,604
Deferred tax liabilities:
Difference between book and tax basis of property
    and equipment
(4,113,820
)
Advance minimum royalties
(369,340
)
Total deferred tax liability
(4,483,160
)
Total net deferred tax asset
$
1,167,444
In assessing the realizability of deferred tax
assets, management considers whether it is more likely than not
that some portion or all of the deferred tax assets will not be
realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during
the periods in which those temporary differences become
deductible. Management considers the scheduled reversal of
deferred tax liabilities, projected future taxable income, and
tax planning strategies in making this assessment. As a result
of management's assessment, the Company has provided a
valuation allowance related to the deferred tax assets at
December 31, 2002 of $5,196,333. The increase in the
valuation allowance during the period January 1, 2003 to
March 11, 2003 and the year ended December 31, 2002
was $739,726 and $4,849,812, respectively.
As of December 31, 2002, the Company has net
operating loss carryforwards of approximately $2,100,000 that
expire through 2023, and approximately $1,005,000 in alternative
minimum tax credit carryforwards, which do not expire.
Income taxes payable to the parent company at
December 31, 2002 were approximately $1,319,000 and are
included in amounts due to affiliates in the accompanying
combined balance sheet.
(14)
Leased Coal Reserves
In addition to mining coal on Company owned land,
the Company also mines coal on properties leased from
independent third parties. Under the terms of the leases, the
Company pays production royalties based on a percentage of the
net sales price of coal produced or actual tonnage mined from
the leased properties, whichever is greater.
The Company also leases coal mining and other
equipment under long-term operating leases with varying terms.
F-76
AMERICAN METALS AND COAL
INTERNATIONAL, INC. AND AFFILIATES
(North American Division)
NOTES TO COMBINED FINANCIAL
STATEMENTS — (Continued)
Future minimum operating lease payments for
equipment leases and annual production royalties as of
December 31, 2002 are as follows:
Equipment
Royalties
2003
$
643,935
2,164,333
2004
415,367
2,159,933
2005
202,468
1,803,233
2006
—
1,704,955
2007
—
1,602,855
2008 and thereafter
—
1,283,200
Total estimated future payments
$
1,261,770
10,718,509
For the period from January 1, 2003 to
March 11, 2003, lease expense relating to equipment and
royalties totaled $115,291 and $1,543,613, respectively. For the
year ended December 31, 2002, lease expense relating to
equipment and royalties totaled $445,407 and $8,643,497
respectively.
(15)
Related Party Transactions
Amounts due from affiliates include trade and
notes receivable. The Company regularly reviews collectibility
and will establish an allowance necessary based on probable
collectibility using the specific identification method
(note 1). Amounts due from affiliates totaled $12,365,277
against which the Company provided an allowance in the amount of
$2,389,722 at December 31, 2002.
F-77
AMERICAN METALS AND COAL
INTERNATIONAL, INC. AND AFFILIATES
(North American Division)
NOTES TO COMBINED FINANCIAL
STATEMENTS — (Continued)
The Company has receivables from and payables to
certain affiliates arising primarily from coal sales and
purchases, coal brokerage sales and commissions, and working
capital advances. Related party receivables and payables
consisted of the following at December 31, 2002:
Due from affiliates:
Solomons Mining Company
$
6,940,668
Solomons Group, Inc.
1,396,748
CME Engineering, Inc.
154,148
Tanoma Gas and Oil, L.P.
894,428
AMCI Konl AG
658,903
Coral Lands Co. Inc.
38,690
K-M Investment Corporation
1,060,608
Anita Mining Company, Inc.
884,631
Other affiliates
336,453
12,365,277
Less allowance
(2,389,722
)
$
9,975,555
Due to affiliates:
AMCI Export Corporation
$
2,175,147
Mercury Trucking, Inc.
679,000
AMCI Energy, LLC
497,637
Unitmix, Inc.
104,716
Anita Mining Company, Inc.
1,224,386
Solomons Mining Company
2,796,091
K-M Investment Corporation
1,319,121
Other affiliates
440,603
$
9,236,701
Coal sales to affiliates are typically based on
cost plus a tonnage commission. Coal purchases and services from
affiliates are at agreed-upon prices. A summary of transactions
with affiliates during the period from January 1, 2003 to
March 11, 2003 and year ended December 31, 2002 is as
follows:
March 11,
December 31,
2003
2002
Sales and other revenues
$
2,321,325
6,071,379
Coal purchases
6,049,170
47,345,992
Operating costs and expenses
101,290
567,317
Interest income
87,559
650,646
Interest expense
47,470
403,342
F-78
AMERICAN METALS AND COAL
INTERNATIONAL, INC. AND AFFILIATES
(North American Division)
NOTES TO COMBINED FINANCIAL
STATEMENTS — (Continued)
(16)
Workers Compensation and Pneumoconiosis (Black
    Lung) Benefits
Workers' compensation benefits in West
Virginia are currently provided to employees through the West
Virginia Workers' Compensation Fund. Total workers'
compensation premiums payable to the fund for the period from
January 1, 2002 to March 11, 2003 and the year ended
December 31, 2002, were $92,926 and $405,015, respectively.
Prior to July 1, 1990, the West Virginia
portion of the Company was self-insured for all Federal Black
Lung benefit claims. A special benefit trust (the Trust) exists
for the payment of these benefit claims (note 7). The Trust
assets principally include U.S. Treasury Bills and
commercial paper stated at cost, which approximates fair value.
The balance of the trust at December 31, 2002, was
$586,203. In addition, the Company has placed into the Trust a
letter of credit in the amount of $260,000. As of
December 31, 2002, the Company had an accrued liability of
$1,685,338 for such claims (note 8). Total self-insured
benefit claims paid for the period from January 1, 2003 to
March 11, 2003 and year ended December 31, 2002 was
approximately $4,239 and $44,861, respectively.
(17)
Employee Benefit Plans
AMCI maintains a profit sharing 401(k) Plan
covering substantially all full-time employees of the Company.
The Company generally contributes 3% to 5% of compensation for
each employee who is eligible to participate in the Plan.
Company contributions to the Plan for the period from
January 1, 2003 to March 11, 2003 and the year ended
December 31, 2002 was $113,329 and $339,685 respectively.
Under the labor contract with the United Mine
Workers of America (UMWA), two West Virginia companies in the
North American Division of AMCI are required to pay amounts,
based on hours worked, into two multi-employer pension plan
trusts. For the period from January 1, 2003 to
March 11, 2003 and the year ended December 31, 2002,
UMWA pension expense was $6,877 and $9,621, respectively.
The Company provides certain health care benefits
for most retired employees subject to varying age and service
requirements. These benefits are provided through a contract
with an independent insurance company subject to certain cost
sharing provisions on the part of the retired employees.
The Company has historically obtained actuarial
valuations for purposes of recording expenses related to the
benefits provided to the retired employees. The valuation date
has historically been March 31, the Company's former
fiscal year. Set forth below is information obtained from the
actuarial valuation as of March 31, 2002 along with the
related liability balance recorded at December 31, 2002 and
the amount of expense recorded in the accompanying statements of
operations for the period from January 1, 2003 to
March 11, 2003 and the year ended December 31, 2002.
F-79
AMERICAN METALS AND COAL
INTERNATIONAL, INC. AND AFFILIATES
(North American Division)
NOTES TO COMBINED FINANCIAL
STATEMENTS — (Continued)
Following is a summary of information obtained
from the actuarial report for the valuation date of
March 31, 2002.
Change in benefit obligation:
Net benefit obligation — beginning of
    plan year
18,393,531
Service cost
229,000
Interest cost
1,301,000
Actuarial (gain) loss
3,532,300
Benefits paid
(870,215
)
Net benefit obligation at March 31, 2002
22,585,616
Benefit obligation
(22,585,616
)
Unrecognized net actuarial gain
8,280,688
Unrecognized net transition obligation
5,166,000
Unfunded benefit obligation at March 31, 2002
(9,138,928
)
The discount rate used in determining the
postretirement obligations at March 31, 2002 was 7%.
Amounts recognized by the Company at
December 31, 2002 were as follows:
Accrued benefit cost
(9,138,928
)
Additional expense accrual offset by payments for
    the period April 1, 2002 to December 31, 2002
(1,348,057
)
Net amount recognized by the Company
(10,486,985
)
The components of the net periodic cost of the
plan as set forth in the actuarial valuation for the plan year
ended March 31, 2002 are as follows:
Service cost
$
229,000
Interest cost
1,301,000
Net loss recognition
286,000
Transition obligation recognition
398,000
Net periodic benefit cost for the plan year ended
    March 31, 2002
$
2,214,000
The discount rates used to determine net periodic
benefit costs for the plan years beginning April 1, 2002
and 2001 were 7.00% and 7.25%, respectively.
Costs recognized in the accompanying combined
financial statements were $686,655 and $2,613,465 for the period
from January 1, 2003 to March 11, 2003 and the year
ended December 31, 2002, respectively.
The weighted average annual rate of increase in
the per capita cost of covered benefits (i.e., health care trend
rate) for medical benefits is 9.00% in 2003, decreasing to 5.50%
in 2008 and thereafter.
F-80
AMERICAN METALS AND COAL
INTERNATIONAL, INC. AND AFFILIATES
(North American Division)
NOTES TO COMBINED FINANCIAL
STATEMENTS — (Continued)
Assumed health care trend rates have a
significant effect on the amounts reported for the health care
plans. A one-percentage-point change in assumed health care cost
trend rates would have the following effects as of and for the
plan year ended March 31, 2002.
One
One
percentage
percentage
point
point
increase
decrease
Effect on total service and interest cost
    components
$
313,534
$
(251,879
)
Effect on postretirement benefit obligation
3,513,788
(2,845,362
)
(18)
Commitments and Contingencies
(a)
Minimum royalties
The Company's mineral leases require the
Company to pay minimum royalties. These leases have fixed terms,
and others are effective until exhaustion of the mineral
reserves. The aggregate annual minimum royalty payments on
mineral leases are approximately $10.3 million, assuming no
reduction due to exhaustion of mineral reserves.
(b)
Guarantees
The Company has guaranteed an $800,000 note,
dated October 18, 2001, on behalf of an unrelated contract
miner. The loan was secured by equipment and the guarantee of an
affiliate. The outstanding balance of the note at
December 31, 2002 was $478,109. The Company has not accrued
any obligation for this guarantee at December 31, 2002.
The Company guaranteed a $1,000,000 note, dated
December 17, 2001, on behalf of an unrelated contract
miner. The loan was secured by the equipment and the guarantee
of an affiliate. The outstanding balance of the note at
December 31, 2002 was $743,474. The Company has not accrued
any obligation for this guarantee at December 31, 2002.
(c)
Litigation
The Company is involved in various legal
proceedings from time to time in the normal course of business.
In management's opinion, the Company is not currently
involved in any legal proceeding, which individually or in the
aggregate could have a material effect on the combined financial
condition, results of operations, or cash flow of the Company.
(d)
Supply contracts
In the normal course of operations, primarily in
Western Pennsylvania and Northern Colorado, the Company enters
into long term supply contracts for the sale of various
quantities of coal to customers in the energy industry. Under
the terms of these contracts, the Company is obligated to supply
coal to customers at prices ranging from approximately $23 to
$66 per ton, with such prices subject to adjustment in
future periods based upon existing market conditions and/or the
quality of the coal. All supply contracts at December 31,
2003 expire through September 10, 2010.
(19)
Subsequent Event
On March 11, 2003, the North American
Division of AMCI was sold to subsidiaries of Alpha Natural
Resources, LLC, a wholly owned subsidiary of ANR Holdings, LLC,
subject to certain retained assets and liabilities.
F-81
INDEPENDENT AUDITORS' REPORT
Alpha Natural Resources, LLC
and Members, Stockholders, and Partners of
Pennsylvania Entities of Mears Enterprises, Inc.:
We have audited the accompanying combined balance
sheets of The Combined Pennsylvania Entities of Mears
Enterprises, Inc. (the Company) as of December 31, 2002 and
2001 and the related combined statements of income,
stockholders' equity and partners' capital, and cash
flows for the period January 1, 2003 to November 17,
2003 and years ended December 31, 2002 and 2001. 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 audits.
We conducted our audits 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
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.
In our opinion, the combined financial statements
referred to above present fairly, in all material respects, the
financial position of the Company as of December 31, 2002
and 2001 and the results of their operations and cash flows for
the period January 1, 2003 to November 17, 2003 and
years ended December 31, 2002 and 2001 in conformity with
accounting principles generally accepted in the United States of
America.
As discussed in note 2 to the combined
financial statements, the Company adopted the provisions of FASB
Statement No. 143,
Accounting for Asset Retirement
Obligations,
effective January 1, 2003.
/s/ KPMG LLP
KPMG LLP
Pittsburgh, Pennsylvania
March 17, 2004
F-82
THE COMBINED PENNSYLVANIA ENTITIES
OF
MEARS ENTERPRISES, INC.
COMBINED BALANCE SHEETS
December 31, 2002 and 2001
2002
2001
ASSETS
Current assets:
Cash and cash equivalents
$
16,890,439
12,454,191
Trade accounts receivable
5,555,181
5,369,221
Coal inventory
426,323
687,582
Prepaid expenses
39,813
41,248
Licenses
17,577
16,750
Total current assets
22,929,333
18,568,992
Property, plant, and equipment, net
5,543,343
4,875,673
Total assets
$
28,472,676
23,444,665
LIABILITIES AND STOCKHOLDERS' EQUITY AND
    PARTNERS' CAPITAL
Current liabilities:
Trade accounts payable
$
1,646,494
2,597,430
Accrued expenses
792,908
754,474
Due to related parties
202,049
—
Capital lease obligations — current
    portion
374,718
234,497
Other current liabilities
180,017
—
Total current liabilities
3,196,186
3,586,401
Long-term liabilities:
Capital lease obligations — long-term
60,712
165,137
Asset retirement obligations
1,018,490
1,068,796
Due to related parties
—
273,735
Other long-term liabilities
—
28,927
Total liabilities
4,275,388
5,122,996
Stockholders' equity and partners'
    capital:
Common stock, no par or stated value; issued and
    outstanding 870 shares
38,259
38,259
Retained earnings
3,966,562
3,584,170
Partners' capital
20,192,467
14,699,240
Total stockholders' equity and
    partners' capital
24,197,288
18,321,669
Total liabilities and stockholders' equity
    and partners' capital
$
28,472,676
23,444,665
See accompanying notes to combined financial
statements.
F-83
THE COMBINED PENNSYLVANIA ENTITIES
OF
MEARS ENTERPRISES, INC.
COMBINED STATEMENTS OF INCOME
Period from January 1, 2003 to
November 17, 2003 and
years ended December 31, 2002 and
2001
Period from
January 1, 2003
Year Ended December 31
to
November 17, 2003
2002
2001
Revenues:
Coal sales
$
45,829,444
$
44,459,196
$
42,085,943
Costs and expenses:
Cost of sales and other operating expenses
25,480,439
22,322,677
23,425,162
Depreciation, depletion, and amortization
872,213
737,778
549,307
Selling and administrative expenses
3,831,639
4,175,759
2,753,574
Total expenses
30,184,291
27,236,214
26,728,043
Operating profit
15,645,153
17,222,982
15,357,900
Other income (expense):
Interest income
194,474
214,053
171,817
Interest expense
(21,705
)
(36,110
)
(27,375
)
Rental income
598
—
19,216
Other income
446,050
82,071
1,018,035
Total other income
619,417
260,014
1,181,693
Income before cumulative effect of accounting
    change
16,264,570
17,482,996
16,539,593
Cumulative effect of accounting change
    (note 2)
(310,855
)
—
—
Net income
$
15,953,715
$
17,482,996
$
16,539,593
See accompanying notes to combined financial
statements.
F-84
THE COMBINED PENNSYLVANIA ENTITIES
OF
MEARS ENTERPRISES, INC.
COMBINED STATEMENTS OF STOCKHOLDERS'
EQUITY AND PARTNERS' CAPITAL
Period from January 1, 2003 to
November 17, 2003 and
years ended December 31, 2002 and
2001
Stockholders' capital accounts
Total
Total
stockholders'
Partners'
Common
Retained
stockholders'
equity and
capital
stock
earnings
equity
partners' capital
Balances, January 1, 2001
$
8,097,360
38,259
2,225,410
2,263,669
10,361,029
Net income
13,166,130
—
3,373,463
3,373,463
16,539,593
Distributions
(6,564,250
)
—
(2,014,703
)
(2,014,703
)
(8,578,953
)
Balances, December 31, 2001
14,699,240
38,259
3,584,170
3,622,429
18,321,669
Net income
16,527,383
—
955,613
955,613
17,482,996
Distributions
(11,034,156
)
—
(573,221
)
(573,221
)
(11,607,377
)
Balances, December 31, 2002
20,192,467
38,259
3,966,562
4,004,821
24,197,288
Net income (loss) — January 1,
    2003 — November 17, 2003
17,327,699
—
(1,373,984
)
(1,373,984
)
15,953,715
Distributions
(15,884,156
)
—
(979,631
)
(979,631
)
(16,863,787
)
Balances, November 17, 2003
$
21,636,010
38,259
1,612,947
1,651,206
23,287,216
See accompanying notes to combined financial
statements.
F-85
THE COMBINED PENNSYLVANIA ENTITIES
OF
MEARS ENTERPRISES, INC.
COMBINED STATEMENTS OF CASH FLOWS
Period from January 1, 2003 to
November 17, 2003 and
years ended December 31, 2002 and
2001
Period from
Year Ended December 31
January 1, 2003 to
November 17, 2003
2002
2001
Cash flows from operating activities:
Net income
$
15,953,715
17,482,996
16,539,593
Adjustments to reconcile net income to net cash
    flows from operating activities:
Cumulative effect of accounting change
310,855
—
—
Depreciation
872,213
737,778
549,307
Accretion of asset retirement obligation
157,089
—
—
Loss on asset disposals
990
40,381
53,968
Changes in certain assets and liabilities:
Trade accounts receivable
(640,329
)
(185,960
)
(1,665,075
)
Inventories
(120,171
)
261,259
(687,582
)
Prepaid expenses
(63,094
)
1,435
(23,012
)
Other assets
—
(827
)
59,379
Accounts payable
681,244
(950,936
)
(616,539
)
Accrued expenses
638,396
38,434
(93,095
)
Other liabilities
(180,017
)
(50,306
)
1,068,796
Net cash flows from operating activities
17,610,891
17,374,254
15,185,740
Cash flows from investing activities:
Purchases of property, plant, and equipment
(293,519
)
(1,168,455
)
(833,595
)
Proceeds from sale of property, plant, and
    equipment
—
25,000
—
Net cash flows used in investing activities
(293,519
)
(1,143,455
)
(833,595
)
Cash flows from financing activities:
Payments on leases
(374,718
)
(266,578
)
(122,452
)
Proceeds from (payments on) due to related
    parties
(10,000
)
79,404
46,160
Distributions to stockholders
(16,863,787
)
(11,607,377
)
(8,578,953
)
Net cash flows used in financing activities
(17,248,505
)
(11,794,551
)
(8,655,245
)
Net change in cash and cash equivalents
68,867
4,436,248
5,696,900
Cash and cash equivalents — beginning
    of year
16,890,439
12,454,191
6,757,291
Cash and cash equivalents — end of year
$
16,959,306
16,890,439
12,454,191
Supplemental cash flow disclosures:
Cash paid for interest
$
21,705
36,110
27,375
Noncash investing and financing activities:
Reclamation liability for coal reserves
(2,474,301
)
—
—
Acquisition of equipment through capital lease
—
302,374
522,086
See accompanying notes to combined financial
statements.
F-86
THE COMBINED PENNSYLVANIA ENTITIES
OF
MEARS ENTERPRISES, INC.
NOTES TO COMBINED FINANCIAL
STATEMENTS
December 31, 2002 and 2001
(1)
Basis of Presentation and
    Organization
The accompanying combined financial statements
include certain subsidiaries of Mears Enterprises, Inc. which
operate six mining complexes and a preparation plant all located
in Pennsylvania (The Combined Pennsylvania Entities of Mears
Enterprises, Inc., or the Company). The Company is a producer
and broker of bituminous coal, with distribution and sales
occurring primarily in the northeastern part of the United
States. Principal customers of the Company are domestic public
utilities, industrial companies, and related parties.
Companies comprising The Combined Pennsylvania
Entities of Mears Enterprises, Inc., represented by function,
are the following:
Coal sales and brokering:
Mears, Inc. (S-Corporation)
DLR Coal Company (General Partnership)
S&M Mining (General Partnership)
Mine acquisition and development:
Mears, Inc. (S-Corporation)
DLR Mining, Inc. (C-Corporation)
S&M Mining, Inc. (S-Corporation)
Functions performed within this group range from
the very initial stages of surveying land for mining potential,
performing surface mining and deep mining of all grades and
qualities of coal, transferring coal from the mine to storage
facilities, and the selling and brokering coal to both third and
related parties.
(2)
Summary of Significant Accounting Policies and
    Practices
(a) Basis of
    Presentation
The combined financial statements include the
accounts of The Combined Pennsylvania Entities of Mears
Enterprises, Inc. All significant intercompany transactions and
balances have been eliminated.
(b) Cash and Cash
    Equivalents
The Company defines cash and cash equivalents as
highly liquid, short-term investments with a maturity at the
date of acquisition of three months or less.
(c) 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 allowance for doubtful accounts was
$0 and $4,375 at December 31, 2002 and 2001, respectively.
Account balances are charged off against the allowance after all
means of collection have been exhausted and the potential for
recovery is considered remote. The Company does not have any
off-balance-sheet credit exposure related to its customers.
F-87
THE COMBINED PENNSYLVANIA ENTITIES
OF
MEARS ENTERPRISES, INC.
NOTES TO COMBINED FINANCIAL
STATEMENTS — (Continued)
(d) Coal Inventory
Coal inventory is stated at the lower of cost,
with cost determined using average monthly production costs, or
market value. Purchased coal is stated at purchase price. Coal
inventory at December 31, 2002 and 2001 was comprised of
raw and purchased coal.
(e) Shipping and Handling
    Costs
Shipping and handling costs charged to customers
have been included in coal sales. Shipping and handling costs
incurred by the company have been included in cost of sales and
other operating expenses.
(f) Property, Plant, and
    Equipment
Costs for mineral rights and mine development
costs, incurred as part of the acquisition of mineral rights, to
expand capacity of operating mines or to develop new coal
reserves, are capitalized and charged to operations on the
units-of-production method. Mine development costs include costs
incurred for site preparation and development at the mines
during the development stage. Mobile mining equipment and other
fixed assets are stated at cost and depreciated on a
straight-line basis over the estimated useful lives ranging from
5 to 30 years or on a units-of-production basis. Leasehold
improvements are amortized, using the straight-line method, over
their estimated useful lives or the term of the lease, whichever
is shorter. Major repairs and betterments that significantly
extend original useful lives or improve productivity are
capitalized and depreciated over the period benefited.
Maintenance and repairs are expensed as incurred.
(g) Asset Retirement
    Obligations
Minimum standards for mine reclamation have been
established by various regulatory agencies and dictate the
reclamation requirements at the Company's operations.
In June 2001, the Financial Accounting Standards
Board (FASB) issued Statement of Financial Accounting
Standards (SFAS) No. 143,
Accounting for Asset
Retirement Obligations.
SFAS No. 143 requires the
Company to record the fair value of an asset retirement
obligation as a liability in the period in which it incurs a
legal obligation associated with the retirement of tangible
long-lived assets that result from the acquisition,
construction, development, and/or normal use of the assets. The
Company also records a corresponding asset that is depreciated
over the life of the asset. Subsequent to the initial
measurement of the asset retirement obligation, the obligation
will be adjusted at the end of each period to reflect the
passage of time and changes in the estimated future cash flows
underlying the obligation.
The Company has future obligations to reclaim
properties disturbed in conjunction with coal operations under
federal and state laws. Some reclamation of disturbed acreage is
performed as a normal part of the mining process with the
remainder done at the end of the life of the mine. The Company
adopted SFAS No. 143,
Accounting for Asset
Retirement Obligations,
on January 1, 2003. Upon
adoption, property, plant, and equipment (net) were increased by
$2,163,446; asset retirement obligations were increased by
$2,474,301; and the cumulative effect of the accounting change
was $(310,855).
Prior to January 1, 2003, the estimated cost
for mine reclamation was provided for using the units of
production method over the economic life of the mine. Estimated
reclamation costs were subject to review by management on a
regular basis and revised when appropriate for changes in future
estimated costs and/or regulatory requirements.
F-88
THE COMBINED PENNSYLVANIA ENTITIES
OF
MEARS ENTERPRISES, INC.
NOTES TO COMBINED FINANCIAL
STATEMENTS — (Continued)
(h) Advance Mining
    Royalties
Rights to leased coal lands are often acquired in
exchange for royalty payments. Advance mining royalties are
advance payments made to lessors under terms of mineral lease
agreements that are recoupable against future production. These
advance payments are deferred and charged to operations as the
coal reserves are mined. In instances where advance payments are
not expected to be offset against future production royalties,
no asset is recognized and the scheduled future minimum payments
are recognized as liabilities.
(i) Revenue Recognition
Revenue is recognized on coal sales when title
passes to the customers, in accordance with the terms of the
sales agreement, which generally occurs when the coal is loaded
into transport carriers at the mine for shipment to the customer.
(j) Impairment of Long-Lived
    Assets
In accordance with SFAS No. 144,
Accounting for the Impairment or Disposal of Long-lived
Assets,
long-lived assets, such as property, plant,
equipment, and purchased intangibles subject to amortization,
are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may
not be recoverable. Recoverability of assets to be held and used
is measured by a comparison of the carrying amount of an asset
to estimated undiscounted future cash flows expected to be
generated by the asset. If the carrying amount of an asset
exceeds its estimated future cash flows, an impairment charge is
recognized by the amount by which the carrying amount of the
asset exceeds the fair value of the asset. Assets to be disposed
of would be separately presented in the balance sheet and
reported at the lower of the carrying amount or fair value less
costs to sell and would no longer be depreciated. The assets and
liabilities of a disposal group classified as held for sale
would be presented separately in the appropriate asset and
liability sections of the balance sheet.
(k) Income Taxes
All companies included in The Combined
Pennsylvania Entities of Mears Enterprises, Inc. are either
S corporations or general partnerships except for DLR
Mining, Inc. Under each of these structures, for income tax
purposes the net income or loss of the S corporation and
general partnership is allocated directly to the respective
shareholders and or partners and is included in their individual
tax returns. Therefore, no provision for income tax has been
included in the combined financial statements for these
entities. DLR Mining, Inc. has a net deferred tax asset for
which a valuation allowance has been provided. The significant
components of the net deferred tax asset are net operating loss
carryforwards and certain liabilities which have not yet been
deducted for tax purposes.
(l)
Risks and Uncertainties
The Company is engaged in the production of steam
and metallurgical coal for the electric generating industry as
well as industrial customers. Coal produced from the
Company's reserves located in Pennsylvania is sold to
energy companies throughout the northeastern part of the United
States primarily under long-term supply agreements. Additional
production from Company reserves not covered under supply
contracts is sold on the open market. The Company is subject to
risks and uncertainties related to the creditworthiness of
customers in the energy industry as well as price, supply,
demand, and other volatility associated with coal commodity
markets. Commodities markets and economic conditions have been
volatile in the past and can be expected to be volatile in the
future.
F-89
THE COMBINED PENNSYLVANIA ENTITIES
OF
MEARS ENTERPRISES, INC.
NOTES TO COMBINED FINANCIAL
STATEMENTS — (Continued)
The Company had three customers that accounted
for approximately 46%, 18%, and 15% of the Company's net
sales and two customers that accounted for approximately 61% and
17% of the Company's trade accounts receivable as of and
for the year ended December 31, 2002. The Company had one
customer that accounted for approximately 35% of the
Company's net sales and 35% of the Company's trade
accounts receivable as of and for the year ended
December 31, 2001.
(m) Workers
Compensation and Pneumoconiosis (Black Lung)
Benefits
The Company is insured for workers compensation
claims.
The Company is required by federal and state
statutes to provide benefits to employees for awards related to
black lung. The Company is fully insured for this obligation.
(n)
Use of Estimates
The preparation of the consolidated 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 consolidated financial
statements and the reported amounts of revenues and expenses
during the reporting period. The more significant items
requiring the use of management estimates are allowances for
doubtful accounts; mineral reserves; reclamation and mine
closure obligations; employee benefit liabilities; future cash
flows associated with assets; and useful lives for depreciation,
depletion, and amortization. Due to the prospective nature of
these estimates, actual results could differ from those
estimates.
(3)
Prepaid Expenses
Prepaid expenses consisted of the following:
December 31
2002
2001
Prepaid capital stock tax
$
10,955
$
5,288
Prepaid royalties
17,863
24,965
Prepaid other
10,995
10,995
Total prepaid expenses
$
39,813
$
41,248
(4)
Property, Plant, and Equipment
Property, plant, and equipment consisted of the
following:
December 31
2002
2001
Land
$
655,015
$
655,015
Coal, mineral interests, and mine development
    costs
1,723,664
1,723,664
Buildings and improvements
148,011
94,196
Machinery and equipment
5,747,978
4,406,777
8,274,668
6,879,652
Less accumulated depreciation, depletion, and
    amortization
(2,731,325
)
(2,003,979
)
Total property, plant, and equipment
$
5,543,343
$
4,875,673
F-90
THE COMBINED PENNSYLVANIA ENTITIES
OF
MEARS ENTERPRISES, INC.
NOTES TO COMBINED FINANCIAL
STATEMENTS — (Continued)
(5)
Accrued Expenses
Accrued expenses consisted of the following:
December 31
2002
2001
Wages
$
492,407
$
378,013
Workers compensation
86,803
95,019
Retirement — 401(k) Plan
68,632
128,141
Office of Surface Mining and excise tax
118,395
121,101
Other liabilities
26,671
32,200
$
792,908
$
754,474
(6)
Capital Lease Obligations
The Company leases certain equipment under
capital lease agreements. These agreements have varying monthly
payment amounts and expire on various dates during 2003.
Amortization expense on the capitalized cost of leased property
for the period from January 1, 2003 through
November 17, 2003 was $21,705.
The capitalized cost of the leased property and
accumulated depreciation at December 31, 2002 was $691,411
and $91,717. Amortization expense on the capitalized cost of
leased property for the year ended December 31, 2002 was
$19,894.
The capitalized cost of the leased property and
accumulated depreciation at December 31, 2001 was $534,036
and $31,383. Amortization expense on the capitalized cost of
leased property for the year ended December 31, 2001 was
$10,071.
The following is a schedule of future minimum
lease payments under capital lease together with the present
value of the net minimum lease payments as of December 31,
2002 and 2001:
2002
2001
Future minimum lease payments due in:
2002
$
—
253,308
2003
400,946
170,337
2004
63,982
—
Total future minimum lease payments
464,928
423,645
Less amount representing interest
(29,498
)
(24,011
)
Present value of future minimum lease payments
435,430
399,634
Less current portion
(374,718
)
(234,497
)
Long-term capital lease obligation
$
60,712
165,137
(7)
Reclamation Liabilities
Under the Federal Surface Mining Control and
Reclamation Act of 1977 and similar state statutes, mine
property is required to be restored in accordance with regulated
standards. The establishment of the asset retirement obligation
accrual for mine reclamation and mine closure costs is based on
permit requirements and requires various estimates and
assumptions, principally associated with costs, productivi-
F-91
THE COMBINED PENNSYLVANIA ENTITIES
OF
MEARS ENTERPRISES, INC.
NOTES TO COMBINED FINANCIAL
STATEMENTS — (Continued)
ties, and timing of expenditures. The Company
periodically reviews its entire environmental liability and
makes necessary adjustments, including permit changes, revisions
to costs and productivities to reflect current experience, and
accretion related to the liability. At November 17, 2003,
the asset retirement obligation was estimated to be $3,649,880.
The activity in the asset retirement obligation consisted of the
following during the period from January 1, 2003 through
November 17, 2003:
Asset retirement obligation —
    January 1, 2003
$
3,492,791
Obligations settled in current period
—
Accretion expense — January 1,
    2003 — November 17, 2003
157,089
Asset retirement obligation —
    November 17, 2003
$
3,649,880
(8)
Workers Compensation Benefits
The Company is insured for workers compensation
claims. The liability for workers compensation claims is a
management estimate of the ultimate losses to be incurred on
such claims based on the Company's experience and includes
a provision for incurred but not reported losses. Adjustments to
the probable ultimate liability are made annually based on
subsequent developments and experience and are included in
operations as they are determined. These obligations are
currently insured by Rockwood Casualty Insurance, an unrelated
entity.
The liability for workers compensation benefits
at December 31, 2002 and 2001 was $86,803 and $95,019,
respectively, which is included in accrued expenses. Workers
compensation expenses for the period from January 1, 2003
to November 17, 2003 and for the years ended
December 31, 2002 and 2001 were $1,550,447, $886,326, and
$735,513, respectively.
(9)
Retirement Plan
Mears Enterprises, Inc. & Affiliates
maintains a 401(k) for substantially all full-time employees.
Company contributions to the 401(k) plan, which are made at
the discretion of management, for the period from
January 1, 2003 to November 17, 2003 and for the years
ended December 31, 2002 and 2001 were $166,253, $235,310,
and $368,097, respectively.
(10)
Leased Coal Reserves
In addition to mining coal on Company owned land,
the Company also mines coal on properties leased from
independent third parties. Under the terms of the leases, the
Company pays minimum royalty payments. The Company also pays
production royalties based on a percentage of the net sales
price of coal produced or based on the actual tonnage mined from
the leased premises. These royalty payments range from
$0.07 per ton mined to 10% of sales.
F-92
THE COMBINED PENNSYLVANIA ENTITIES
OF
MEARS ENTERPRISES, INC.
NOTES TO COMBINED FINANCIAL
STATEMENTS — (Continued)
As of December 31, 2002, aggregate future
minimum royalty payments under these leases were as follows:
Amount
2003
$
17,581
2004
68,581
2005
68,581
2006
68,581
2007
68,581
Thereafter
137,162
Total estimated future payments
$
429,067
(11)
Other Income
Other income consisted of the following:
Period from
January 1 to
Year Ended
Year Ended
November 17,
December 31,
December 31,
2003
2002
2001
Subcontractor income
$
447,040
122,452
611,133
Sales commission
—
—
460,870
Loss on disposal of property, plant, and equipment
(990
)
(40,381
)
(53,968
)
$
446,050
82,071
1,018,035
(12)
Sale of the Company
On November 17, 2003, the assets of The
Combined Pennsylvania Entities of Mears Enterprises, Inc. were
sold to AMFIRE Mining Company, LLC, a wholly owned subsidiary of
Alpha Natural Resources, LLC.
F-93
Erbacon Preparation Plant, WV (Brooks
    Run)
Red Star Mine, KY (Enterprise)
Heavy Equipment at Lover's Gap Surface
    Mine, VA (Paramount)
Tom's Creek Preparation Plant, VA
    (Paramount)
White Tail Preparation Plant, WV
    (Kingwood)
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
$
31,675
NYSE Listing Fees Printing and Engraving Expenses
*
Blue Sky Fees and Expenses
*
Legal Fees
*
Accounting Fees
*
Registrar and Transfer Agent Fees
*
NASD Filing Fee
*
Miscellaneous Expenses
*
*
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 restated certificate
of incorporation to be effective following the closing of this
offering will include a provision that eliminates the personal
liability of our directors for monetary damages for breach of
fiduciary duty as a director.
Our restated certificate of incorporation and
amended and restated bylaws will also provide that:
•
we must indemnify our directors and officers to
    the fullest extent permitted by Delaware law;
•
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
•
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 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
II-1
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
restated certificate of incorporation and amended and restated
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.
The registrant was formed in November 2004 and
has not issued any securities. Prior to the completion of the
offering of the securities being registered hereby and in
connection with our Internal Restructuring (1) the
registrant will issue an aggregate
of                      shares
of the registrant's common stock in exchange for the
contribution of shares of common stock of Alpha NR Holding, Inc.
and interests in ANR Holdings, and (2) outstanding options
held by members of our management to purchase units of Alpha
Coal Management will be converted into options to purchase up
to                      shares
of our common stock. These issuances will be made in reliance
upon Section 4(2) of the Securities Act or under
Rules 506 or Rule 701 promulgated by the SEC.
Item 16.
Exhibits and Financial Statement
    Schedules.
(a) Exhibits
Exhibit No.
Description of Exhibit
1
.1*
Form of Underwriting Agreement
2
.1
Asset Purchase Agreement by and between Pittston
    Coal Company and Dickenson-Russell Coal Company, LLC, dated as
    of October 29, 2002, as amended
2
.2
Asset Purchase Agreement by and between Pittston
    Coal Company and Paramont Coal Company Virginia, LLC, dated as
    of October 29, 2002, as amended
2
.3
Asset Purchase Agreement by and between Pittston
    Coal Company and Alpha Land and Reserves, LLC, dated as of
    October 29, 2002, as amended
2
.4
Asset Purchase Agreement by and between Pittston
    Coal Company and Alpha Coal Sales Co., LLC, dated as of
    October 29, 2002, as amended
2
.5
Asset Purchase Agreement by and between Pittston
    Coal Company and Alpha Terminal Company, LLC, dated as of
    October 29, 2002, as amended
2
.6
Asset Purchase Agreement by and between Pittston
    Coal Company and Maxxim Rebuild Co., LLC, dated as of
    October 29, 2002, as amended
2
.7
Purchase and Sale Agreement by and among
    El Paso CGP Company and AMFIRE, LLC dated as of
    November 14, 2002, as amended
2
.8
Contribution Agreement among the FRC Parties, the
    AMCI Parties, ANR Holdings, LLC and the Additional Persons
    listed on the signature pages dated as of March 11, 2003,
    as amended
2
.9
Purchase and Sale Agreement made and entered into
    as of January 31, 2003 by and among Alpha Land and
    Reserves, LLC and CSTL, LLC
II-2
Exhibit No.
Description of Exhibit
2
.10
Purchase and Sale Agreement dated as of
    April 9, 2003 by and between Alpha Land and Reserves, LLC
    and CSTL LLC
2
.11
Purchase and Sale Agreement dated as of
    April 9, 2003 by and between Dickenson-Russell Coal
    Company, LLC and WBRD LLC
2
.12
Letter agreement dated April 9, 2003 among
    Alpha Natural Resources, LLC, Dickenson-Russell Company, LLC,
    Alpha Land and Reserves, LLC, CSTL LLC, WBRD LLC, and Natural
    Resources Partners L.P.
2
.13
Asset Purchase Agreement by and among S&M
    Mining, S&M Mining, Inc. and AMFIRE Mining Company, LLC
    dated October 29, 2003, as amended
2
.14
Asset Purchase Agreement by and among DLR Coal
    Co., DLR Mining, Inc. and AMFIRE Mining Company, LLC dated
    October 29, 2003, as amended.
2
.15
Asset Purchase Agreement by and between Mears
    Enterprises, Inc. and AMFIRE Mining Company, LLC dated
    October 29, 2003, as amended.
2
.16*
Form of Internal Restructuring Agreement
3
.1*
Form of Restated Certificate of Incorporation of
    Alpha Natural Resources, Inc.
3
.2*
Form of Amended and Restated Bylaws of Alpha
    Natural Resources, Inc.
4
.1*
Form of certificate of Alpha Natural Resources,
    Inc. common stock
5
.1*
Opinion of Bartlit Beck Herman
    Palenchar & Scott LLP
10
.1
Credit Agreement dated as of May 28, 2004,
    among ANR Holdings, LLC, Alpha Natural Resources, LLC, the
    Lenders from time to time party thereto, Citicorp North America,
    Inc., as administrative agent and as collateral agent, Credit
    Suisse First Boston, acting through its Cayman Islands Branch,
    as syndication agent, UBS Securities LLC, as documentation
    agent, Credit Suisse First Boston, acting through its Cayman
    Islands Branch, UBS Securities LLC and Citigroup Global Markets
    Inc., as joint lead arrangers and Credit Suisse First Boston,
    acting through its Cayman Islands Branch, and UBS Securities
    LLC, as joint bookrunners (the "Credit Agreement")
10
.2
First Amendment, dated as of August 6, 2004,
    to Credit Agreement
10
.3
Guarantee and Collateral Agreement, dated as of
    May 28, 2004, made by Alpha Natural Resources, LLC, ANR
    Holdings, LLC and each of the other Guarantors named therein, in
    favor of Citicorp North America, Inc., as administrative agent
    and as collateral agent (the "Guarantee and Collateral
    Agreement")
10
.4
First Amendment, dated as of August 6, 2004
    to Guarantee and Collateral Agreement
10
.5
Indenture dated as of May 18, 2004 among
    Alpha Natural Resources, LLC, Alpha Natural Resources Capital
    Corp., the Guarantors named therein and Wells Fargo Bank, N.A.,
    as Trustee
10
.6
Employment Agreement between Alpha Natural
    Resources, LLC and Michael J. Quillen dated January 1,
    2003, as amended
10
.7
Employment Agreement between Alpha Natural
    Resources, LLC and D. Scott Kroh dated January 1,
    2003, as amended
10
.8*
Form of Stockholder Agreement by and among Alpha
    Natural Resources, Inc., the FRC Parties named therein, the AMCI
    Parties named therein, Madison Capital Funding LLC and the other
    stockholders named therein
10
.9
Alpha Natural Resources Annual Incentive Bonus
    (AIB) Plan
10
.10*
Amended and Restated Alpha Coal Management LLC
    2004 Long-Term Incentive Plan
10
.11*
Alpha Natural Resources, Inc. Long-Term Incentive
    Plan
10
.12*†
Coal Mining Lease dated April 9, 2003,
    effective as of April 1, 2003, by and between CSTL LLC
    (subsequently renamed ACIN LLC) and Alpha Land and Reserves,
    LLC, as amended
II-3
Exhibit No.
Description of Exhibit
10
.13*†
Coal Mining Lease dated April 9, 2003,
    effective as of April 1, 2003, by and between WBRD LLC and
    Dickenson-Russell Coal Company, LLC, as amended
10
.14*†
Coal Mining Lease dated December 4, 2002,
    effective as of December 1, 2002, by and between CSTL LLC
    (subsequently renamed ACIN LLC) and Coastal Coal-West Virginia,
    LLC (subsequently renamed Brooks Run Mining Company), and Lease
    Assignment and Assumption Agreement made and entered into as of
    March 6, 2003, by and between Brooks Run Mining Company,
    LLC (formerly named Coastal Coal-West Virginia, LLC) and
    Kingwood Mining Company, LLC
21
.1
List of Subsidiaries
23
.1*
Consent of Bartlit Beck Herman
    Palenchar & Scott LLP (included as part of its opinion
    to be filed as Exhibit 5.1 hereto)
23
.2
Consent of Marshall Miller & Associates
23
.3
Consent of KPMG LLP
23
.4
Consent of KPMG LLP
23
.5
Consent of KPMG LLP
23
.6
Consent of KPMG LLP
24
Powers of Attorney (included in signature page of
    this Registration Statement)
*
To be filed by amendment.
†
Confidential treatment will be requested with
    respect to portions of the exhibit. A complete copy of the
    agreement will be filed with the Securities and Exchange
    Commission.
(b) Financial Statement Schedules
Item 17.
Undertakings.
Insofar as indemnification for liabilities
arising under the Securities Act of 1933 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 SEC 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 of 1933, 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 of 1933, 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-4
SIGNATURES
Pursuant to the requirements of the Securities
Act of 1933, the registrant has duly caused this registration
statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the city of Abingdon, State of
Virginia, on December 6, 2004.
ALPHA NATURAL RESOURCES, INC.
By:
/s/ DAVID C. STUEBE
Name: David C. Stuebe
Title:
Vice President and Chief Financial Officer
We, the undersigned officers and directors of
Alpha Natural Resources, Inc., hereby severally constitute and
appoint David C. Stuebe and Vaughn R. Groves, and each
of them acting alone, our true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution in
each of them for him and in his name, place and stead, and in
any and all capacities, to sign any and all amendments
(including post-effective amendments) to this registration
statement (or any other registration statement for the same
offering that is to be effective upon filing pursuant to
Rule 462(b) under the Securities Act of 1933) and to file
the same, with all exhibits thereto and other documents in
connection therewith, with the Securities and Exchange
Commission and any applicable securities exchange or securities
self-regulatory body, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and
perform each and every act and thing requisite or necessary to
be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of
them or their or his substitute or substitutes may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities
Act of 1933, this registration statement has been signed by the
following persons in the capacities indicated on December 6,
2004.
Signature
Title
/s/ MICHAEL J. QUILLEN
Michael J. Quillen
President, Chief Executive Officer and
    Director
(Principal Executive Officer)
/s/ DAVID C. STUEBE
David C. Stuebe
Vice President and Chief Financial Officer
(Principal Financial Officer)
/s/ EDDIE W. NEELY
Eddie W. Neely
Vice President, Assistant Secretary and
    Controller
(Principal Accounting Officer)
/s/ E. LINN DRAPER, JR.
E. Linn Draper, Jr.
Director
/s/ JOHN W. FOX, JR.
John W. Fox, Jr.
Director
/s/ ALEX T. KRUEGER
Alex T. Krueger
Director
II-5
Signature
Title
/s/ FRITZ R. KUNDRUN
Fritz R. Kundrun
Director
/s/ WILLIAM E. MACAULAY
William E. Macaulay
Director
/s/ HANS J. MENDE
Hans J. Mende
Director
II-6
EXHIBIT INDEX
Exhibit No.
Description of Exhibit
1
.1*
Form of Underwriting Agreement
2
.1
Asset Purchase Agreement by and between Pittston
    Coal Company and Dickenson-Russell Coal Company, LLC, dated as
    of October 29, 2002, as amended
2
.2
Asset Purchase Agreement by and between Pittston
    Coal Company and Paramont Coal Company Virginia, LLC, dated as
    of October 29, 2002, as amended
2
.3
Asset Purchase Agreement by and between Pittston
    Coal Company and Alpha Land and Reserves, LLC, dated as of
    October 29, 2002, as amended
2
.4
Asset Purchase Agreement by and between Pittston
    Coal Company and Alpha Coal Sales Co., LLC, dated as of
    October 29, 2002, as amended
2
.5
Asset Purchase Agreement by and between Pittston
    Coal Company and Alpha Terminal Company, LLC, dated as of
    October 29, 2002, as amended
2
.6
Asset Purchase Agreement by and between Pittston
    Coal Company and Maxxim Rebuild Co., LLC, dated as of
    October 29, 2002, as amended
2
.7
Purchase and Sale Agreement by and among
    El Paso CGP Company and AMFIRE, LLC dated as of
    November 14, 2002, as amended
2
.8
Contribution Agreement among the FRC Parties, the
    AMCI Parties, ANR Holdings, LLC and the Additional Persons
    listed on the signature pages dated as of March 11, 2003,
    as amended
2
.9
Purchase and Sale Agreement made and entered into
    as of January 31, 2003 by and among Alpha Land and
    Reserves, LLC and CSTL, LLC
2
.10
Purchase and Sale Agreement dated as of
    April 9, 2003 by and between Alpha Land and Reserves, LLC
    and CSTL LLC
2
.11
Purchase and Sale Agreement dated as of
    April 9, 2003 by and between Dickenson-Russell Coal
    Company, LLC and WBRD LLC
2
.12
Letter agreement dated April 9, 2003 among
    Alpha Natural Resources, LLC, Dickenson-Russell Company, LLC,
    Alpha Land and Reserves, LLC, CSTL LLC, WBRD LLC, and Natural
    Resources Partners L.P.
2
.13
Asset Purchase Agreement by and among S&M
    Mining, S&M Mining, Inc. and AMFIRE Mining Company, LLC
    dated October 29, 2003, as amended
2
.14
Asset Purchase Agreement by and among DLR Coal
    Co., DLR Mining, Inc. and AMFIRE Mining Company, LLC dated
    October 29, 2003, as amended.
2
.15
Asset Purchase Agreement by and between Mears
    Enterprises, Inc. and AMFIRE Mining Company, LLC dated
    October 29, 2003, as amended.
2
.16*
Form of Internal Restructuring Agreement
3
.1*
Form of Restated Certificate of Incorporation of
    Alpha Natural Resources, Inc.
3
.2*
Form of Amended and Restated Bylaws of Alpha
    Natural Resources, Inc.
4
.1*
Form of certificate of Alpha Natural Resources,
    Inc. common stock
5
.1*
Opinion of Bartlit Beck Herman
    Palenchar & Scott LLP
10
.1
Credit Agreement dated as of May 28, 2004,
    among ANR Holdings, LLC, Alpha Natural Resources, LLC, the
    Lenders from time to time party thereto, Citicorp North America,
    Inc., as administrative agent and as collateral agent, Credit
    Suisse First Boston, acting through its Cayman Islands Branch,
    as syndication agent, UBS Securities LLC, as documentation
    agent, Credit Suisse First Boston, acting through its Cayman
    Islands Branch, UBS Securities LLC and Citigroup Global Markets
    Inc., as joint lead arrangers and Credit Suisse First Boston,
    acting through its Cayman Islands Branch, and UBS Securities
    LLC, as joint bookrunners (the "Credit Agreement")
Exhibit No.
Description of Exhibit
10
.2
First Amendment, dated as of August 6, 2004,
    to Credit Agreement
10
.3
Guarantee and Collateral Agreement, dated as of
    May 28, 2004, made by Alpha Natural Resources, LLC, ANR
    Holdings, LLC and each of the other Guarantors named therein, in
    favor of Citicorp North America, Inc., as administrative agent
    and as collateral agent (the "Guarantee and Collateral
    Agreement")
10
.4
First Amendment, dated as of August 6, 2004
    to Guarantee and Collateral Agreement
10
.5
Indenture dated as of May 18, 2004 among
    Alpha Natural Resources, LLC, Alpha Natural Resources Capital
    Corp., the Guarantors named therein and Wells Fargo Bank, N.A.,
    as Trustee
10
.6
Employment Agreement between Alpha Natural
    Resources, LLC and Michael J. Quillen dated January 1,
    2003, as amended
10
.7
Employment Agreement between Alpha Natural
    Resources, LLC and D. Scott Kroh dated January 1,
    2003, as amended
10
.8*
Form of Stockholder Agreement by and among Alpha
    Natural Resources, Inc., the FRC Parties named therein, the AMCI
    Parties named therein, Madison Capital Funding LLC and the other
    stockholders named therein
10
.9
Alpha Natural Resources Annual Incentive Bonus
    (AIB) Plan
10
.10*
Amended and Restated Alpha Coal Management LLC
    2004 Long-Term Incentive Plan
10
.11*
Alpha Natural Resources, Inc. Long-Term Incentive
    Plan
10
.12*†
Coal Mining Lease dated April 9, 2003,
    effective as of April 1, 2003, by and between CSTL LLC
    (subsequently renamed ACIN LLC) and Alpha Land and Reserves,
    LLC, as amended
10
.13*†
Coal Mining Lease dated April 9, 2003,
    effective as of April 1, 2003, by and between WBRD LLC and
    Dickenson-Russell Coal Company, LLC, as amended
10
.14*†
Coal Mining Lease dated December 4, 2002,
    effective as of December 1, 2002, by and between CSTL LLC
    (subsequently renamed ACIN LLC) and Coastal Coal-West Virginia,
    LLC (subsequently renamed Brooks Run Mining Company), and Lease
    Assignment and Assumption Agreement made and entered into as of
    March 6, 2003, by and between Brooks Run Mining Company,
    LLC (formerly named Coastal Coal-West Virginia, LLC) and
    Kingwood Mining Company, LLC
21
.1
List of Subsidiaries
23
.1*
Consent of Bartlit Beck Herman
    Palenchar & Scott LLP (included as part of its opinion
    to be filed as Exhibit 5.1 hereto)
23
.2
Consent of Marshall Miller & Associates
23
.3
Consent of KPMG LLP
23
.4
Consent of KPMG LLP
23
.5
Consent of KPMG LLP
23
.6
Consent of KPMG LLP
24
Powers of Attorney (included in signature page of
    this Registration Statement)
*
To be filed by amendment.
†
Confidential treatment will be requested with
    respect to portions of the exhibit. A complete copy of the
    agreement will be filed with the Securities and Exchange
    Commission.