Supplemental Consolidating Financial Information | Supplemental Consolidating Financial Information Pursuant to the indentures governing Arch Coal, Inc.’s senior notes, certain wholly-owned subsidiaries of the Company have fully and unconditionally guaranteed the senior notes on a joint and several basis. The Company and the subsidiaries which are guarantors under the senior notes are Debtors in the Chapter 11 Cases. The following tables present condensed consolidating financial information for (i) the Company (Debtor), (ii) the issuer of the senior notes (Debtor), (iii) the guarantors under the senior notes (Debtor), and (iv) the entities which are not guarantors under the senior notes (Arch Receivable Company, LLC and the Company’s subsidiaries outside the United States) (Non-Debtors). These tables provide substantially the same information as would be presented pursuant to the disclosure requirements of ASC 852 with respect to condensed combined financial statements of entities in reorganization proceedings. Arch Coal, Inc. and Subsidiaries (Debtor-in-Possession) Condensed Consolidating Statements of Operations Three Months Ended June 30, 2016 Parent/Issuer Guarantor Subsidiaries Non- Guarantor Subsidiaries Eliminations Consolidated (In thousands) Revenues $ — $ 420,298 $ — $ — $ 420,298 Costs, expenses and other Cost of sales (exclusive of items shown separately below) 3,351 416,239 — (548 ) 419,042 Depreciation, depletion and amortization 738 57,721 — — 58,459 Amortization of acquired sales contracts, net — 1 — — 1 Change in fair value of coal derivatives and coal trading activities, net — 1,158 — — 1,158 Asset impairment and mine closure costs 3,101 40,600 — — 43,701 Selling, general and administrative expenses 12,959 5,268 1,135 (343 ) 19,019 Other operating (income) expense, net (3,455 ) (7,117 ) (880 ) 891 (10,561 ) 16,694 513,870 255 — 530,819 Loss from investment in subsidiaries (78,965 ) — — 78,965 — Loss from operations (95,659 ) (93,572 ) (255 ) 78,965 (110,521 ) Interest expense, net Interest expense (contractual interest of $100,767 for the three months ended June 30, 2016) (66,126 ) (6,607 ) (2,312 ) 29,772 (45,273 ) Interest and investment income 6,924 22,565 1,216 (29,772 ) 933 (59,202 ) 15,958 (1,096 ) — (44,340 ) Expenses related to proposed debt restructuring — — — — — Reorganization items, net (21,271 ) — — — (21,271 ) (21,271 ) — — — (21,271 ) Income (loss) from continuing operations before income taxes (176,132 ) (77,614 ) (1,351 ) 78,965 (176,132 ) Benefit from income taxes (245 ) — — — (245 ) Net loss $ (175,887 ) $ (77,614 ) $ (1,351 ) $ 78,965 $ (175,887 ) Total comprehensive loss $ (178,294 ) $ (80,467 ) $ (1,351 ) $ 81,818 $ (178,294 ) Arch Coal, Inc. and Subsidiaries (Debtor-in-Possession) Condensed Consolidating Statements of Operations Three Months Ended June 30, 2015 Parent/Issuer Guarantor Subsidiaries Non- Guarantor Subsidiaries Eliminations Consolidated (In thousands) Revenues $ — $ 644,462 $ — $ — $ 644,462 Costs, expenses and other Cost of sales (exclusive of items shown separately below) 5,908 561,191 — (847 ) 566,252 Depreciation, depletion and amortization 1,013 96,359 — — 97,372 Amortization of acquired sales contracts, net — (1,644 ) — — (1,644 ) Change in fair value of coal derivatives and coal trading activities, net — 1,211 — — 1,211 Asset impairment and mine closure costs 1,225 17,921 — — 19,146 Selling, general and administrative expenses 17,166 6,270 1,325 (493 ) 24,268 Other operating (income) expense, net (138 ) 7,483 (1,282 ) 1,340 7,403 25,174 688,791 43 — 714,008 Loss from investment in subsidiaries (30,462 ) — — 30,462 — Loss from operations (55,636 ) (44,329 ) (43 ) 30,462 (69,546 ) Interest expense, net Interest expense (119,231 ) (6,576 ) (1,127 ) 27,360 (99,574 ) Interest and investment income 6,675 20,256 1,391 (27,360 ) 962 (112,556 ) 13,680 264 — (98,612 ) Expenses related to debt restructuring (4,016 ) — — — (4,016 ) Income (loss) from continuing operations before income taxes (172,208 ) (30,649 ) 221 30,462 (172,174 ) Provision for (benefit from) income taxes (4,105 ) — 34 — (4,071 ) Net income (loss) $ (168,103 ) $ (30,649 ) $ 187 $ 30,462 $ (168,103 ) Total comprehensive income (loss) $ (167,887 ) $ (30,811 ) $ 187 $ 30,624 $ (167,887 ) Arch Coal, Inc. and Subsidiaries (Debtor-in-Possession) Condensed Consolidating Statements of Operations Six Months Ended June 30, 2016 Parent/Issuer Guarantor Subsidiaries Non- Guarantor Subsidiaries Eliminations Consolidated (In thousands) Revenues $ — $ 848,404 $ — $ — $ 848,404 Costs, expenses and other Cost of sales (exclusive of items shown separately below) 5,537 833,916 — (1,095 ) 838,358 Depreciation, depletion and amortization 1,494 120,664 — — 122,158 Amortization of acquired sales contracts, net — (832 ) — — (832 ) Change in fair value of coal derivatives and coal trading activities, net — 2,368 — — 2,368 Asset impairment and mine closure costs 6,330 122,891 — — 129,221 Selling, general and administrative expenses 26,497 10,651 2,407 (710 ) 38,845 Other operating (income) expense, net (4,552 ) (8,268 ) (1,766 ) 1,805 (12,781 ) 35,306 1,081,390 641 — 1,117,337 Loss from investment in subsidiaries (202,953 ) — — 202,953 — Loss from operations (238,259 ) (232,986 ) (641 ) 202,953 (268,933 ) Interest expense, net Interest expense (contractual interest of $199,332 for the six months ended June 30, 2016) (132,365 ) (12,973 ) (4,541 ) 60,155 (89,724 ) Interest and investment income 14,034 45,858 2,334 (60,155 ) 2,071 (118,331 ) 32,885 (2,207 ) — (87,653 ) Expenses related to proposed debt restructuring (2,213 ) — — — (2,213 ) Reorganization items, net (25,146 ) — — — (25,146 ) (27,359 ) — — — (27,359 ) Loss from continuing operations before income taxes (383,949 ) (200,101 ) (2,848 ) 202,953 (383,945 ) Provision for (benefit from) income taxes (1,360 ) — 4 — (1,356 ) Net loss $ (382,589 ) $ (200,101 ) $ (2,852 ) $ 202,953 $ (382,589 ) Total comprehensive loss $ (384,136 ) $ (203,956 ) $ (2,852 ) $ 206,808 $ (384,136 ) Arch Coal, Inc. and Subsidiaries (Debtor-in-Possession) Condensed Consolidating Statements of Operations Six Months Ended June 30, 2015 Parent/Issuer Guarantor Subsidiaries Non- Guarantor Subsidiaries Eliminations Consolidated (In thousands) Revenues $ — $ 1,321,467 $ — $ — $ 1,321,467 Costs, expenses and other Cost of sales (exclusive of items shown separately below) 13,378 1,116,877 — (1,681 ) 1,128,574 Depreciation, depletion and amortization 2,073 200,171 2 — 202,246 Amortization of acquired sales contracts, net — (5,034 ) — — (5,034 ) Change in fair value of coal derivatives and coal trading activities, net — 2,431 — — 2,431 Asset impairment and mine closure costs 1,225 17,921 — — 19,146 Selling, general and administrative expenses 32,605 12,514 2,773 (1,019 ) 46,873 Other operating (income) expense, net 3,562 12,760 (2,533 ) 2,700 16,489 52,843 1,357,640 242 — 1,410,725 Loss from investment in subsidiaries (9,413 ) — — 9,413 — Loss from operations (62,256 ) (36,173 ) (242 ) 9,413 (89,258 ) Interest expense, net Interest expense (237,286 ) (13,340 ) (2,402 ) 54,202 (198,826 ) Interest and investment income 14,747 40,030 2,760 (54,202 ) 3,335 (222,539 ) 26,690 358 — (195,491 ) Expenses related to debt restructuring (4,016 ) — — — (4,016 ) Income (loss) from continuing operations before income taxes (288,811 ) (9,483 ) 116 9,413 (288,765 ) Provision for (benefit from) income taxes (7,513 ) — 46 — (7,467 ) Net income (loss) $ (281,298 ) $ (9,483 ) $ 70 $ 9,413 $ (281,298 ) Total comprehensive income (loss) $ (277,478 ) $ (6,405 ) $ 70 $ 6,335 $ (277,478 ) Arch Coal, Inc. and Subsidiaries (Debtor-in-Possession) Condensed Consolidating Balance Sheets June 30, 2016 Parent/Issuer Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Consolidated (In thousands) Assets Cash and cash equivalents $ 207,932 $ 50,426 $ 11,456 $ — $ 269,814 Short term investments 203,417 — — — 203,417 Restricted cash — — 102,236 — 102,236 Receivables 11,935 992 136,479 (4,942 ) 144,464 Inventories — 172,698 — — 172,698 Other 22,370 26,502 2,697 — 51,569 Total current assets 445,654 250,618 252,868 (4,942 ) 944,198 Property, plant and equipment, net 6,198 3,486,927 — 428 3,493,553 Investment in subsidiaries 4,648,697 — — (4,648,697 ) — Intercompany receivables — 2,269,237 — (2,269,237 ) — Note receivable from Arch Western 675,000 — — (675,000 ) — Other 42,945 203,399 1,130 — 247,474 Total other assets 5,366,642 2,472,636 1,130 (7,592,934 ) 247,474 Total assets $ 5,818,494 $ 6,210,181 $ 253,998 $ (7,597,448 ) $ 4,685,225 Liabilities and Stockholders’ Deficit Liabilities not subject to compromise Accounts payable $ 28,774 $ 49,237 $ 32 $ — $ 78,043 Accrued expenses and other current liabilities 66,771 90,356 843 (4,942 ) 153,028 Current maturities of debt — — — — — Total current liabilities 95,545 139,593 875 (4,942 ) 231,071 Long-term debt — — — — — Intercompany payables 2,038,697 — 230,540 (2,269,237 ) — Note payable to Arch Coal — 675,000 — (675,000 ) — Asset retirement obligations 1,043 389,591 — — 390,634 Accrued pension benefits 3,795 16,058 — — 19,853 Accrued postretirement benefits other than pension 72,070 15,216 — — 87,286 Accrued workers’ compensation 16,887 102,110 — — 118,997 Other noncurrent liabilities 11,249 22,461 208 — 33,918 Total liabilities not subject to compromise 2,239,286 1,360,029 231,623 (2,949,179 ) 881,759 Liabilities subject to compromise 5,206,626 223,830 5,430,456 Total liabilities 7,445,912 1,583,859 231,623 (2,949,179 ) 6,312,215 Stockholders’ equity (deficit) (1,627,418 ) 4,626,322 22,375 (4,648,269 ) (1,626,990 ) Total liabilities and stockholders’ deficit $ 5,818,494 $ 6,210,181 $ 253,998 $ (7,597,448 ) $ 4,685,225 Arch Coal, Inc. and Subsidiaries (Debtor-in-Possession) Condensed Consolidating Balance Sheets December 31, 2015 Parent/Issuer Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Consolidated (In thousands) Assets Cash and cash equivalents $ 337,646 $ 100,428 $ 12,707 $ — $ 450,781 Short term investments 200,192 — — — 200,192 Restricted cash — — 97,542 — 97,542 Receivables 12,463 3,153 124,581 (4,430 ) 135,767 Inventories — 196,720 — — 196,720 Other 18,160 38,794 969 — 57,923 Total current assets 568,461 339,095 235,799 (4,430 ) 1,138,925 Property, plant and equipment, net 7,747 3,610,869 — 413 3,619,029 Investment in subsidiaries 4,887,905 — — (4,887,905 ) — Intercompany receivables — 2,253,312 — (2,253,312 ) — Note receivable from Arch Western 675,000 — — (675,000 ) — Other 39,302 243,806 819 — 283,927 Total other assets 5,602,207 2,497,118 819 (7,816,217 ) 283,927 Total assets $ 6,178,415 $ 6,447,082 $ 236,618 $ (7,820,234 ) $ 5,041,881 Liabilities and Stockholders’ Deficit Accounts payable $ 8,495 $ 119,633 $ 3 $ — $ 128,131 Accrued expenses and other current liabilities 162,268 170,575 1,037 (4,430 ) 329,450 Current maturities of debt 5,031,603 10,750 — — 5,042,353 Total current liabilities 5,202,366 300,958 1,040 (4,430 ) 5,499,934 Long-term debt — 30,953 — — 30,953 Intercompany payables 2,043,308 — 210,005 (2,253,313 ) — Note payable to Arch Coal — 675,000 — (675,000 ) — Asset retirement obligations 1,005 395,654 — — 396,659 Accrued pension benefits 12,390 14,983 — — 27,373 Accrued postretirement benefits other than pension 79,826 19,984 — — 99,810 Accrued workers’ compensation 24,247 88,023 — — 112,270 Other noncurrent liabilities 59,976 58,847 348 — 119,171 Total liabilities 7,423,118 1,584,402 211,393 (2,932,743 ) 6,286,170 Stockholders’ equity (deficit) (1,244,703 ) 4,862,680 25,225 (4,887,491 ) (1,244,289 ) Total liabilities and stockholders’ deficit $ 6,178,415 $ 6,447,082 $ 236,618 $ (7,820,234 ) $ 5,041,881 Arch Coal, Inc. and Subsidiaries (Debtor-in-Possession) Condensed Consolidating Statements of Cash Flows Six Months Ended June 30, 2016 Parent/Issuer Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Consolidated (In thousands) Cash provided by (used in) operating activities $ (102,998 ) $ 56,656 $ (13,910 ) $ — $ (60,252 ) Investing Activities Capital expenditures (26 ) (74,111 ) — — (74,137 ) Additions to prepaid royalties — (217 ) — — (217 ) Proceeds from (consideration paid for) disposals and divestitures — (3,303 ) — — (3,303 ) Purchases of marketable securities (98,750 ) — — — (98,750 ) Proceeds from sale or maturity of marketable securities and other investments 94,589 — — — 94,589 Investments in and advances to affiliates — (2,890 ) — — (2,890 ) Withdrawals (deposits) of restricted cash — — (4,695 ) — (4,695 ) Cash used in investing activities (4,187 ) (80,521 ) (4,695 ) — (89,403 ) Financing Activities Net payments on other debt (4,372 ) (5,921 ) — — (10,293 ) Expenses related to proposed debt restructuring (2,213 ) — — — (2,213 ) Debt financing costs (15,625 ) — (3,181 ) — (18,806 ) Transactions with affiliates, net (319 ) (20,216 ) 20,535 — — Cash provided by (used in) financing activities (22,529 ) (26,137 ) 17,354 — (31,312 ) Decrease in cash and cash equivalents (129,714 ) (50,002 ) (1,251 ) — (180,967 ) Cash and cash equivalents, beginning of period 337,646 100,428 12,707 — 450,781 Cash and cash equivalents, end of period $ 207,932 $ 50,426 $ 11,456 $ — $ 269,814 Arch Coal, Inc. and Subsidiaries (Debtor-in-Possession) Condensed Consolidating Statements of Cash Flows Six Months Ended June 30, 2015 Parent/Issuer Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Consolidated (In thousands) Cash provided by (used in) operating activities $ (295,792 ) $ 163,345 $ 6,872 $ — $ (125,575 ) Investing Activities Capital expenditures (815 ) (98,546 ) — — (99,361 ) Additions to prepaid royalties — (409 ) — — (409 ) Proceeds from disposals and divestitures — 991 — — 991 Purchases of short term investments (161,336 ) — — — (161,336 ) Proceeds from sales of short term investments 157,729 — — — 157,729 Investments in and advances to affiliates (788 ) (4,350 ) — — (5,138 ) Change in restricted cash — — (37,885 ) — (37,885 ) Cash used in investing activities (5,210 ) (102,314 ) (37,885 ) — (145,409 ) Financing Activities — Payments on term loan (9,750 ) — — — (9,750 ) Net payments on other debt (5,973 ) (3,853 ) — — (9,826 ) Expenses related to debt restructuring (4,016 ) — — — (4,016 ) Transactions with affiliates, net 116,224 (146,968 ) 30,744 — — Cash provided by (used in) financing activities 96,485 (150,821 ) 30,744 — (23,592 ) Decrease in cash and cash equivalents (204,517 ) (89,790 ) (269 ) — (294,576 ) Cash and cash equivalents, beginning of period 572,185 150,358 11,688 — 734,231 Cash and cash equivalents, end of period $ 367,668 $ 60,568 $ 11,419 $ — $ 439,655 |